september 2024

Episode #509: The Gap In GAAP — Accounting’s Deteriorating Paradigm

NEW SHOW FEATURE: If you want to ask Ron or Ed a question and be featured on the show, please submit a voice recording from any device at https://thesoulofenterprise.com/questions

SHOW SUMMARY: Since Luca Pacioli’s 1494 invention of double-entry bookkeeping, accounting has seen little innovation. GAAP, designed for an industrial economy, is outdated in a world where intellectual capital drive business success. Dr. Margaret Blair’s research shows that by 1998, only 30% of a company’s value could be attributed to tangible assets, leaving 70% unaccounted for in GAAP financial statements. We’ll dive into the deteriorating paradigm of accounting and examine audit failures through the lens of a system that has become obsolete.

SHOW NOTES

Segment one

  • Since Ed has known Ron, it has been clear that Ron views accounting as an identity equation. it's not a theory. GAAP is its principles.

  • Debits equal credits factors into the zero sum mentality of people because in the world of accounting, somebody's debit is somebody else's credit. It's all gotta balance to zero therefore, how can how can wealth be created? 

  • Ron told a great story today about Peter Drucker's last talk at a conference in Seattle. Drucker walks out on stage and he says, “No one in your company knows less about your business than your CFO.”

  • “Knowledge is about the past. Entrepreneurship is about the future.” —George Gilder 

  • If the gap in GAAP (today’s topic on air) is interesting to you, check out Baruch Lev’s interview with us this link https://www.thesoulofenterprise.com/tsoe/baruch-lev-interview 

Segment two

  • This is true of GAAP today, “As the paradigm gets more and more complex, the less and less it explains.” Nobody is making investments today by looking at financial statements.

  • Long before the SEC was even created, 90% of New York Stock Exchange companies were audited. Why? Because the investors demanded it. It was driven by the market and need. 

  • The GAAP balance sheet, the income statement, the cash flow statement: they are referred to as the three blind mice and have been for 40 years now because they don't explain everything.

  • “The most important case against conventional accounting has become open and shut. It's incontrovertibly true that present financial and management accounting does not give investors directors the public or management the information they need to make informed decisions.” —Thomas Stewart, HBR

Segment three

  • The Professional Pricing Society has an incredible educational conference coming up in Vegas. Ron will be a keynote speaker and would love to meet you. More at this link: https://www.pricingsociety.com/ppsvegas24

  • Thank you Michael B from South Dakota for submitting a question. We played it on air today and answered his question about waitlists. Do you want to submit a question to Ron and Ed to be read and answered on air? Use this link from any device https://www.thesoulofenterprise.com/questions 

  • What does Jonah Goldberg always say…complexity equals…..subsidy! And in the case of Enron and SOX, we're subsidizing the auditors who blew it.

  • “Disruption from the outside is a real danger for the accounting profession. We’re already starting to see that with the environmental audits, and even intellectual capital management.” —Ron Baker

Segment four

  • What does Ron mean when he says he wants accounting to innovate? More financial planning and analysis, more modeling, using theories to develop leading indicators about things that could be predictive of future performance

  • Ron’s idea for not losing accounting to the “outsiders” —> The best way to do that is to relinquish the monopoly on the audit and give it back to the stock exchanges

  • “But as long as we have a government mandated monopoly, then it will continue to stifle innovation. It's crazy, the revolving door between the SEC and the Big Four and the IRS and the Big Four.” —Ron Baker

  • Ron and Ed referenced a book by Baruch Lev called “The End of Accounting“ several times today. Check it out here: http://www.amazon.com/Accounting-Forward-Investors-Managers-Finance/dp/1119191092?SubscriptionId=0ENGV10E9K9QDNSJ5C82&tag=verainst-20

  • Ron also mentioned these two books at the end of the show with a disclaimer that they are both wonky but good: Corporate Aftershock and After Enron.

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #508: Taming Technology Policy — Interview with Jennifer Huddleston

NEW SHOW FEATURE: If you want to ask Ron or Ed a question and be featured on the show, please submit a voice recording from any device at https://thesoulofenterprise.com/questions

SHOW SUMMARY: Ron and Ed welcome another CATO Institute scholar, Jennifer Huddleston, to the show to discuss the effects of technology policy on innovation and economic growth. Jennifer will also share her insights about the anti-trust case against Google as well and the effects of technology regulation at the state, federal, and even international level.

SHOW NOTES

Segment one

  • Just in the last week, we have seen questions related to online speech and various questions related to antitrust which could extend beyond technology, as well as questions related to AI and the exciting developments. Jennifer has been busy! 

  • Re: the TikTok oral arguments this past week, Jennifer is watching the standard of review that the court will apply. Is it going to be intermediate scrutiny or is it going to be strict scrutiny. 

  • When we talk about the Tick Tock case, it's important to recognize you had two separate arguments brought by the plaintiffs. You have a case being brought by TikTok itself and then you have a case being brought by a group of content creators who are American citizens.

  • When thinking about the TikTok case, it's important to remember that this is much bigger than one particular app. This is really teeing up some key questions around the potential of the government to intervene in online speech

Segment two

  • Is AI our final invention? “I don't think so. I think it's a very exciting invention. […] I actually am very excited about AI and it's been around a lot longer than we realize.” —Jennifer Huddleston

  • TIL about several AI medical applications from Jennifer: AI is being used in the medical field as an additional tool for a doctor to identify really personalized medicine for cancer patients and to help stroke victims get their voices back.

  • “I’m a millennial, and I think for many of us AI is the first real disruption in technology that we've experienced because we were still young when the internet came about. We were just emerging as adults or as college students when smartphones came about.” —Jennifer Huddleston

  • Jennifer wrote a GREAT article in August called “Is a State AI Patchwork Next? AI Legislation at a State Level in 2024”. Here is the link: https://www.cato.org/blog/state-ai-patchwork-next-ai-legislation-state-level-2024 

Segment three

  • “Traditionally, the US has had a very light touch approach to innovation. But in part for various reasons, we are seeing the question of what we need in an AI framework and do we need some sort of AI framework at a federal level.” —Jennifer Huddleston

  • One of the examples that's often pointed to is the ATM. There was a lot of fear when ATMs first came about and what would this mean for teller jobs. So is this the kind of end of the bank teller job? There are now more bank tellers than there were before ATMs

  • Jennifer introduced me to the “Brussels effect” today. The idea that when Europe acts — because of the size of their market — for many large companies, it's easier to apply one standard globally. https://en.wikipedia.org/wiki/Brussels_effect 

  • I love the techno-optimism! “Oftentimes we're hearing only the negative when it comes to technology and we're not hearing as much about the benefits about the positive use cases.” —Jennifer Huddleston

Segment four

  • “When we're talking about the use of AI, I always hate the question, “How often do you use AI?” I always push back against that question because we're all using it every day.” —Jennifer Huddleston

  • “We're seeing the EU setup offices in San Francisco to work with the tech companies on how they're being regulated in Europe. Those are things that should be really concerning.” —Jennifer Huddleston

  • A big THANK YOU to Jennifer Huddleston for joining us today. She is a Senior Fellow in Technology Policy at the Cato Institute. Find her work here: https://www.cato.org/people/jennifer-huddleston 

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #507: Interview with Brand Scientist, Reilly Newman of Motif Brands

NEW SHOW FEATURE: If you want to ask Ron or Ed a question and be featured on the show, please submit a voice recording from any device at https://thesoulofenterprise.com/questions

SHOW SUMMARY: In this episode of The Soul of Enterprise, Ron and Ed sit down with Reilly Newman to explore his manifesto: the powerful intersection of science and strategy in business. Reilly emphasizes the importance of clarity as a driver of growth, helping business leaders make confident decisions that align with their vision. He discusses how simplifying complex processes can uncover opportunities for pure progress and ensure that your business remains a cornerstone of your life. Tune in to discover how clarity not only reveals where growth exists but also how it serves as a foundation for future success and informed business decisions

SHOW NOTES

Segment one

  • At the beginning of the show, Ron asked Reilly how he became obsessed with brands. He loves that design is creative and artistic but Reilly also loves that it has a purpose. 

  • Reilly co-founded Motif Brands. A motif is a recurring pattern throughout a story that reinforces the main story arc. Reilly takes that idea and applies it to brands at Motif Brands.

  • “Business is transactional. A brand is relational.” —Reilly Newman, Motif Brands

  • “If marketing were done perfectly, selling would be unnecessary.” —Peter Drucker

Segment two

  • Financial Cents is having a virtual conference called Workflow Con (for conference) on October 22/23. It’s FREE! Find out more at WorkFlowCon.com

  • How does Reilly define “brand”? It’s a collection of impressions we have regarding a certain entity. 

  • Regarding a CMOs inevitable desire to refresh or change a brand, “Rebranding a company shows effort…but really, are you getting rid of these core assets that have helped build the brand to that point?” —Reilly Newman

  • On the relationship between brand and culture, Reilly comments: “Culture is a by-product of brand. Brand gives a consumer clarity and culture is a manifestation of that clarity.”

Segment three

  • The power of sound in branding, sonic branding, is extremely hard to trademark but there are some good examples. NBC and Harley-Davidson are two examples that came to mind during the show

  • By the way, Reilly Newman has a GREAT podcast called “Brandy” which is about all things brand. Check it out here: https://podcasts.apple.com/us/podcast/brandy/id1737030138 

  • The lifetime value of the customer is often neglected especially with older brands. For example, in the automobile industry. They are more focused on the transaction and less so on the relationship.

  • Ron asked Reilly about his pricing philosophy at Motif Brands. GREAT answer by quoting Warren Buffet with, “Pricing is what you pay, value is what you get.”

  • Name the brands that you truly admire, Reilly: Disney, Apple, Trader Joe’s, and….of course, Costco. 

  • The Professional Pricing Society is having their next conference in Vegas in October. Ron is one of the keynote speakers and you can find out more at PricingSociety.com

Segment four

  • Ed asked Reilly about Starbucks and their brand. In summary, they’ve lost so much in terms of small touch points in the experience. Higher efficiency comes at the sacrifice of personalization.

  • This is on brand for Reilly (see what I did there?) …. “Know yourself, be distinct, and have that clarity.”

  • A big THANK YOU to Reilly Newman for joining us today. Check out Motif Brands and also his book, “Brandy: 101 Sips of Wisdom For Attaining A Successful Brand https://www.amazon.com/Brandy-Wisdom-Attaining-Successful-Brand/dp/B0C9S7Q7Q8 

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #506: Bantering with Bastiat: Timeless Truths from a Free-Marketer

NEW SHOW FEATURE: If you want to ask Ron or Ed a question and be featured on the show, please submit a voice recording from any device at https://thesoulofenterprise.com/questions

SHOW SUMMARY: In this unique episode of The Soul of Enterprise, Ron and Ed embark on a journey through time as they "interview" the legendary 19th-century French economist, Frédéric Bastiat. Thanks to AI technology, ChatGPT will bring Bastiat back to life, offering insights in his signature style on some of today’s pressing economic issues. From his famous concept of “the seen and the unseen” to his sharp critiques of protectionism, this virtual conversation delves into how Bastiat’s timeless ideas apply in our modern world. Join us for a thought-provoking dialogue that blurs the lines between history, economics, and technology in ways you’ve never heard before!

This was an AI-based show, so it only seems appropriate to provide AI-based show notes.

Discussion with Frédéric Bastiat via AI:

  • Utilizing AI technology, the hosts engage in a conversation with a simulated Bastiat, discussing his core economic ideas, particularly "the seen and the unseen," which highlights the hidden costs of economic decisions.

  • Bastiat explains the impact of overlooked consequences in economic policies, using examples like government spending that appears beneficial but has hidden trade-offs affecting other sectors.

Bastiat on Free Trade and Protectionism:

  • The conversation delves into Bastiat's views on free trade versus protectionist policies, where he criticizes the latter for harming economic prosperity by limiting consumer choices and driving up prices.

  • He articulates the irony and harm of protectionism using analogies and historical context, asserting that free trade benefits all sectors of the economy by fostering competition and innovation.

Satirical Take on Economic Policies:

  • Bastiat, known for his satirical critiques, shares his famous "Candlemakers' Petition," a satirical plea to the government to block out the sun to boost the artificial light industry, showcasing the absurdity of certain economic policies.

  • This segment underscores Bastiat’s method of using humor and absurdity to highlight irrational economic policies and encourage a more critical examination of governmental interventions.

Bastiat's Influence and Relevance:

  • The episode wraps up by exploring Bastiat’s lasting influence on economic thought, discussing how his ideas remain relevant in addressing modern issues like climate change and technological disruption.

  • The hosts reflect on how Bastiat’s principles can guide current and future economic policies, emphasizing the importance of balancing governmental intervention with market freedoms to foster true economic growth and innovation.

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #505: Pushing Past Practical — Pursuing Purpose with Peter Block

NEW SHOW FEATURE: If you want to ask Ron or Ed a question and be featured on the show, please submit a voice recording from any device at https://thesoulofenterprise.com/questions

SHOW SUMMARY: In this episode, Ed and Ron delve into the profound insights from Peter Block's book The Answer to How is Yes, especially his How? vs. What Matters questions. We'll explore these six pivotal questions that Block argues keep us trapped in our current way of thinking and prevent us from embracing true change. These questions, often disguised as practical concerns, subtly hinder our ability to innovate, take risks, and transform both ourselves and the world around us. Join us as we unpack the deeper meaning behind each question and discuss how shifting our mindset can open up new possibilities for leadership, creativity, and personal growth.

SHOW NOTES

Segment one:

  • Ed wanted to kick off the show today with a quote from Lewis Carroll: Do we decide questions at all? We decide the answer no doubt, but surely, the question decides us.” 

  • Today’s show is about Peter Block’s book from 2002, “The Answer to How Is Yes: Acting on What Matters” https://www.amazon.com/Answer-How-Yes-Acting-Matters/dp/1576752712

  • Peter Block’s epigraph to the start of the book “The Answer to How is Yes” is “transformation comes more from pursuing profound questions and seeking practical answers”

  • The premise of the book, “The Answer to How is Yes” is that there are roughly six questions Peter Block believes that we spend 90% of our time on in business https://www.amazon.com/Answer-How-Yes-Acting-Matters/dp/1576752712 

  • The Finance and Accounting Tech Expo is on October 29-30. Over 1,400 of your colleagues have already registered and you can go for FREE. Just use the code kid812 at this link https://strategiccfo360.com/fate/ 

Segment two:

  • The alternative to asking the “HOW” questions in Peter Block’s book is yes. It's a stance towards the possibility of more meaningful change. More at this link: https://www.amazon.com/Answer-How-Yes-Acting-Matters/dp/1576752712  

  • One of Block’s questions in the book, “The Answer to How is Yes” is: What is the price I am willing to pay? This is all about value because the definition of economic value is the maximum price a customer is willing to pay for an item 

  • 1/2 “When we follow fashion and ask for steps, recipes and certainty, we deny our freedom. For we are trapped by the very act of asking the question.” —Peter Block

  • 2/2 “Freedom asks us to invent our own steps, to be the author of your own experience. Asking how is an escape from freedom and accountability. We wish to go to heaven, and not die.” —Peter Block

  • This is the story of Frank. As told by Ed Kless on his website: https://www.edkless.com/blog/2023/10/the-story-of-frank 

Segment three:

Segment four:

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits.