Dear Voodoo Child -----

So, an assumption is the invisible bridge, the link, between the evidence and the conclusion. Here, we have:

Evidence: Workers at Facsum Inc. have threatened to strike if management does not meet their demands for an immediate 5% pay raise and a paid lunch break.
Evidence: Further, workers are insisting that the company rehire 12 employees who were laid off for complaining about substandard wages and working conditions.
Evidence: It is well-known that Facsum reported that negative profits in 3 of its previous 4 quarterly earnings reports.
Conclusion: We believe a strike is inevitable.

Let's take a business-oriented look at this argument. In business, the #1 priority is the bottom line. That third sentence of evidence is, in business terms, screaming loud. A giant alarm should go off in your head when you read that sentence When I read that, I immediately thought -- no wonder there are complaints about higher wages! Facsum can't afford a dime more for anything if they have been operating in the red! That business-minded sense (which, I point out, will be hugely important in any MBA program!) leads directly to the OA.

Why is (B) wrong? Well, first of all, the argument says nothing about how willing or unwilling to negotiate Facsum is. We get no evidence in that direction at all --- no statements about workers asked for negotiations and Facsum refused, no statements from Facsum about unwillingness to negotiate. It's easy to imagine a scenario in which Facsum management is perfectly willing to negotiate --- each week, they sit down with union representatives and say, "So, we have no money because the entire company is under water, and therefore we can't afford spending a single penny more than we spend now. In fact, we will have to make significant cuts soon. Given that constraint, we are more than happy to discuss any possibilities. What would you like to see?" They could be 100% willing to negotiate ---within the crushingly tight constraints --- and it still wouldn't avert a strike.

Admittedly, the piece of evidence about firing worker who complained suggests that management-labor relationships aren't the very best, so yes, it is probably the case that, in addition to the other problems, the management is also unwilling to negotiate. That is probably true.

The thing is --- they have no money. They can't afford any raises because they have no money. That is 100% definitely true. That's why the OA is much much stronger than (B).

Does all this make sense?

Mike
_________________

Mike McGarry
Magoosh Test Prep

Well, on the GMAT, anything inferred (like an unstated assumption) is going to stick very close to the text. When they tell us "Facsum reported that negative profits in 3 of its previous 4 quarterly earnings reports", they are definitely telling us that cash-flow is a problem at Facsum. To say from there, "Facsum likely does not have sufficient cash flow or cash reserves to support increased expenses" --- this is an assumption --- it's almost the same, it's almost an unavoidable conclusion, but it is slightly different. In particular, we know they were in the red for 3 of 4 quarters, which by definition is a cash-flow problem, but technically we have no information about their cash-reserves ---- technically, they could have lousy cash-flow but robust cash-reserves. Now, in practice, of course, that would never happen --- any real-world company would draw from any available cash-reserves to offset a cash-flow shortfall, so it didn't have to report a quarterly loss to the SEC. Reporting even quarterly loss is disastrous in the stock market, and multiple quarterly losses are the kiss of death. Stocks can lose more than 90% of their value because of such news. So, yes, in just about any real world company, multiply quarterly losses would suggest not only a cash-flow problem but also a lack of sufficient cash-reserves, which otherwise would have allowed the company to mask the problem. In practice, the evidence statement in the text is just about the same as (E), but again, that's often the case on the GMAT, on CR and RC --- what you need to infer is only a micro-separation away from what is stated in black-and-white. It's never wrong for being too close.

I think that the whole "restatement of the premise" idea is going to hurt you more than it will help you. Many assumptions on GMAT CR are going to look very much like the premise, and times, might be virtually indistinguishable from a premise. The only time a statement that sounds a lot like one of the premises would not be the assumption would be if it doesn't really provide any meaningful link between that premise and the conclusion. Here, the way (E) is phrased makes it abundantly clear that it is part of the causal sequence --- cash-flow problems ---> no cash for raises ---> no raises ---> strike is inevitable. Be extremely suspicious of the CR strategy of rejecting possible assumptions because they sound like restatements of the premise. In fact, if you completely blot that strategy out of your mind, on average, you will probably be much better off.

Does that make sense?

Mike
_________________

Mike McGarry
Magoosh Test Prep

voodoochild
First of all, I don't know what you're reading, but I must say, I am suspicious about it. There are many substandard GMAT prep books out there. On the GMAT, anything you are asked to infer (including the assumption of an argument) is going to stick relatively close to the black-and-white text of the argument. I would say --- never automatically reject a possible assumption just because it looks like an evidence booster. If an answer choice seems to strengthen a piece of evidence, then the next test is to negate the answer choice and see if that cripples the argument. If you can negate the statement, and the argument still survives, then what you have is not an assumption. That's the real test of an assumption. In one of the above entries, I did that with (B) to demonstrate that it doesn't necessarily destroy the argument --- that's proof that (B) is not an assumption.

You said: "In real world, strikes happen when the parties are unwilling to negotiate" --- or, when folks are willing to negotiate but, because of dire financial constraints, they come to the negotiation table with nothing to offer. Either can lead to a strike. So consider the two scenarios:

I) Facsum management would love to negotiate, but they have no money, nothing to offer the workers that the workers want

II) Facsum management are greedy self-centered moneygrubbers and simply don't want to negotiate with the workers

It's completely true --- either one of these would lead directly to a strike. The question is: which is supported by the text of the argument? The argument gives us concrete evidence that Facsum is running out of money, which supports (I). On the other hand, we have absolutely no indication of how willing or unwilling they are to negotiate ---- (II) could be true, but we have no basis for saying so. If two assumption choices do about the same thing to the argument, but one is anchored in the text and one isn't, always choose the one with a textual anchor.

Also, I'll say: be careful. You said, "I am still not following because negative profits automatically mean insufficient reserves to support expenses." What the argument literally says is: "Facsum reported that negative profits in 3 of its previous 4 quarterly earnings reports." Literally, they had more money going out, for costs, than coming in, as revenues. Yes, in all likelihood, that also means insufficient reserves. If I were a betting man, I would bet that this statement implies insufficient reserves. But technically --- profits could be off because, say, of a temporary increase in the cost of resources, or an odd fluctuation in the market as a whole, or some unusual thing like that. Technically, they could have a big pile of money in the bank as they simply watch their quarterly profits bounce up and down. As I indicated above, in the real world, any company experiencing a temporary dip in profits, for any reason, probably would yank some money out of reserves to mask that loss. The fact that Facsum had a loss that it couldn't mask certainly suggests that it doesn't have any financial reserves from which to draw. Quite likely, it's true, but technically, we don't know that Facsum has no money in the bank. That was not stated in black-and-white. It seems an ineluctable consequence of what is stated, but right there, we are getting into the stuff of GMAT inference --- what's not actually stated in black-and-white, but has a direct connection to what is stated? That's why (E) can be an assumption and not simply a restatement --- it's not identical to the information we have in black-and-white. This is a hugely important distinction. Again:

a) what is literally stated in black-and-white --- that can only be a restatement, never an assumption or inference

b) what is a virtually unavoidable consequence of what is literally stated in black-and-white --- this is the realm where inferences and assumptions live

It's tempting to conflate statements from (a) with statements from (b), but I hope you see, it's a vitally important distinction.

Does all this make sense?
_________________

Mike McGarry
Magoosh Test Prep

Yes, that one is a big old softball lobbed at us --- very easy to spot. I don't know about the LSAT, but at least on the GMAT, I would still say: this is a tricky issue. If it's identical to what the evidence says in black-and-white, it could be a premise booster. Here, it definitely leaves us with the feeling, "Duh!, We knew that!" BUT, if it's a shade off, one logical peg beyond what's explicitly stated, then that's no longer a premise booster. And again, a HUGE point --- the big test for an assumption is what happens when you negate it. If negating a statement obliterates the argument, that statement is an assumption.



When stupid people act in large numbers, anything is possible --- the constraints of logical justification do not apply. You're quite correct --- if Facsum is running out of money, then a worker strike would be utterly pointless --- but that doesn't mean workers wouldn't strike. It's more or less universal for workers who ask for higher wages to hear from management that there's not enough money, regardless of whether management is rolling in dough or running on empty. It would surprise me if a large number of these unskilled workers, with no paid lunch break and substandard working conditions, were diligent aficionados of, say, the WSJ or Bloomberg Business Week. There's a good chance that the workers don't have the full picture about Facsum's real financial state. They know their own needs, and they don't know how much money Facsum has --- depending on the past interactions, they may not trust one iota of what Facsum's management tells them about Facsum's financial state. Workers under this condition would be liable to strike, even though from where we sit, we can see that will be completely feckless. In fact, there have been a large number of strikes in Greece in the past year(!!) --- again, more objective observers in the international community can say --- "What in tarnation are you people thinking?! That's not going to accomplish squat!" We can see that, but it doesn't stop the Greeks from striking. Don't fall into the trap of believing the general public is always logical or always makes sound rational decisions: among other things, that assumption is an express route to losing money in the business world.



To the best of my knowledge, the term "premise booster" does not even appear in the OG or its explanations. So far as I can tell, it's not a term GMAC considers at all. I could believe that it's a much bigger deal on the LSAT than it is on the GMAT. Not only am I not aware of an official find-the-assumption question in which the answer is a premise booster, but also, in my mind, the distinction between those two is so vast that I simply cannot imagine any well-written problem having such a solution. I think the above problem, the Fascum question, is a perfectly good GMAT CR question with an unambiguously clear answer -- our extended debate not withstanding --- a question in every respect representative of those on the GMAT. MGMAT tends to produce very high quality material.

Thank you for your kind words of appreciation. I am genuinely glad I am able to help you.

Mike
_________________

Mike McGarry
Magoosh Test Prep

So, let's briefly consider four hypothetical scenarios. In all these cases, we'll assume everything stated in the prompt is true --- some malcontent workers already fired, losses in 3 of 4 quarters, etc.

Case A = Facsum has cash reserves and is willing to negotiate
Case B = Facsum has cash reserves and is not willing to negotiate
Case C = Facsum has no cash reserves and is willing to negotiate
Case D = Facsum has no cash reserves and is not willing to negotiate

In Case A, there would be no reason for a strike --- the company has the money and is willing to negioate.

In Cases B & D, clearly there would be reason for strike --- the company doesn't want to negotiate, so the worker's only recourse would be to strike.

I think Case C is the case about which you have doubts. I would argue that a strike is also inevitable in Case C. Let's think about this.

In Case C, Facsum management is genuinely willing to negotiate. They come to the table and say, with complete honesty, "We have absolutely no money to give you. We can discuss any changes at all you want to make in your working conditions, as long as they don't involve one additional dime." Now, keep in mind, in Case B, management probably would come to the table and say exactly the same thing, only in Case B, it would not be honest at all --- it would be a bald-faced lie. That's how "not willing to negotiate" often plays out --- it's not that they never come to the table at all, but rather they come and stonewall. Now, the workers and their representatives --- these are folks who, in all likelihood, do not peruse the income statement of the company. They don't get the quarterly reports that go to stockholders. They don't comb through the WSJ every day. They are not well appraised of Facsum's true financial situation. Management is telling them it doesn't have a single dime to help them, and all they know is --- we're working hard, money is coming in, and those fat cats are still getting their big salaries and bonuses --- they must have money! When they hear management's completely honest statement that there's no money, they don't know whether it's truly honest or they are being stonewalled. They may even have some inkling that it's honest, but they're hopping mad and don't like their situation one bit. Even in that case, they may well strike. Again, it's not necessary about whether, from the view of a rational objective observer, the strike is likely to achieve what they want to achieve: sometimes, it's just a way to express frustration --- the workers (like the crazy Greeks) might think they are going to get somewhere by striking, but we who can see the larger picture know that the strike will be fruitless. ---- The bigger issue is: from the view the workers get at the negotiating table, Cases B & C & D may all look more or less the same --- plain and simple, in all three cases management will not give them anything of what they want --- so they will respond equally in all three cases.

So my argument is: in Case A, the workers most likely would not strike, but in Cases B-D, there would be a strike. That's largely because --- in Case A, the workers get some or all of their demands met, but in Cases B - D, the common denominator is: they get none of their demands met.

One of two assumptions would lead to those strike-causing cases:
(B) Facsum is unwilling to negotiate with the workers.
(E) Facsum likely does not have sufficient cash flow or cash reserves to support increased expenses.

(B) is a good answer, but (E) is a better answer. (E) is better because it has textual support.

Nothing, absolutely nothing, in the prompt gives us any information about how willing or unwilling Facsum management is to negotiate.

By contrast, we are told explicitly: "It is well-known that Facsum reported that negative profits in 3 of its previous 4 quarterly earnings reports." Holy schnikies! Financially, this company is in deep doo-doo. We know it has a cash flow problem, and it would not be a major stretch to infer that it also lacks cash reserves --- I would bet that 95% of companies that report negative profits in 3 quarters of 4 in a single year period have little to no cash reserves either. Yes, there will be some odd exceptions to the rule, but as I pointed out before --- multiple quarterly losses is the kiss of death in the stock market. Most of a CEO's wealth is tied up in the company's stock, so if the stock takes a big hit, his personal bank account also takes a big hit. Therefore, CEOs have both professional and personal interest in covering up quarterly losses if they can. If they have cash reserves, they can just scoop a little of that, stir it into the quarterly operating budget, and voila! no more quarterly loss. In practice, if a company is reporting one quarterly loss after and other, and taking the hit after hit that such reports would entail, it means they simply have no reserves from which draw cash to offset those losses. They are showing losses because they have no way to hide it.

BTW, the Goldman example is somewhat exceptional, because Goldman is a financial institution. That might be an example of a company that would rather risk exposing themselves to revealing a quarterly loss, and take the hits in the market, rather than pulling money out of reserves, because those reserves are in the stock & bond markets where they are making money. That's Goldman's bread-and-butter ---using money to make money. If they used to the money in their reserves to cover a single quarterly loss, they would have that much less money in the market where it can make money ---- it would be short term win and long term loss. That's the unique position of a financial institution. Whatever Facsum is, it's definitely not a financial institution. We are talking blue-collar workers, probably a factory of some kind. They would follow the rule, not the exception.

Thus, (B) has absolutely no textual support, but (E) has cogent textual support. That makes (E) much better.

What do you think now, my friend?

Mike
_________________

Mike McGarry
Magoosh Test Prep

Well, a company often shares its financial results with intelligent and educated employees. I'm going to guess that all the jobs you had were of a more white-collar professional kind, rather than, say, a factory laborer. Many factory workers have reading levels well below high school level, some at grammar school level, and some are just illiterate. It's easy for highly educated folks to forget this. Educated & highly literate people often have a panoply of employment options, but illiterate folks can avail themselves of very few employment options, so those are the jobs where you will find them. The management (most of whom are educated and literate and typically of a different socioeconomic class from the workers) often look down on the workers ---- often there are palpable social stigmas separating them. This is all profoundly different from a white collar working environment. So, the management may share little or no financial information with workers whom they think will not understand. Or, perhaps they publish a report, and only a few workers can actually read & understand it fully. It's also true --- companies are quite happy to broadcast their financial results when business is booming, but when the company is in the red, they are not quite as eager to discuss that situation: the intelligent professional workers of a white-collar environment usually will ask probing question and management will be forced to discuss the details, but the poor financial situation would add yet another barrier of communication between management and factory workers.

So, your experience notwithstanding, maybe the factory workers are somewhat in the dark about Facsum's financial situation. Or, again, maybe they understand completely, but they are frustrated, and they strike anyway, just as an expression of frustration --- they are dissatisfied, and they don't know what to do to improve their situation, but striking is one thing they can control. Yes, again, we who can see the gestalt will look at that and say: hmm, a strike is not actually going to accomplish anything positive. But this cool-headed perspective is not necessarily anything that would prevent angry workers from striking.

If we go back to the original prompt, we read: "Workers at Facsum Inc. have threatened to strike if management does not meet their demands for an immediate 5% pay raise and a paid lunch break." Do those sound like workers well-appraised of Facsum's bleak financial situation? They are asking for a lot more money --- a 5% pay raise for all workers is a gigantic sum. Either, the workers are completely clueless about the financial problems, or they are totally unrealistic. Clueless and/or unrealistic people tend to take dramatic steps that are not optimal in terms of improving their objective situation --- for example, going on strike in this situation. Also, notice, if Facsum management, perfectly willing to negotiate, comes to the table and says, in all honesty, "we can't meet any of your demands because we have no money," a position like that will not be well-received by frustrated folks who are clueless and/or unrealistic. Do you see what I mean?



Let's be clear --- I am not "discarding" (B). If (E) didn't exist, (B) would be the clear answer to the question. Necessary assumptions don't require textual support, but an assumption with textual support is a stronger choice than an assumption without textual support. That's the comparison here. (B) is not at all bad, but (E) is better. GMAT CR, like all other GMAT Verbal questions, is about choosing the best answer. Don't forget that. Don't get stuck on "But (B) is a good answer too." Yes, it absolutely is, but (E) is better.

Mike
_________________

Mike McGarry
Magoosh Test Prep

I know this is a MGMAT question, and their material is usually excellent, but it's true --- one pretty good answer, but another better answer tops it --- that's a pattern I don't believe I have ever seen on OG CR questions. Usually MGMAT is an excellent representative of what's on the test, but in this particular instance, this particular aspect of this question might not be so representative. Throughout the Verbal section, GMAC seems quite committed to the pattern of one clear correct answer and four other choices, each of which has a clearly discernible flaw.

GMAC does maintain incredibly standards, and few prep sources consistently match those standards. MGMAT is certainly one of the finest, and I would argue that Magoosh is as well.

Mike
_________________

Mike McGarry
Magoosh Test Prep