Sig makes a good point when he talks about the inadeqacy of the accounting framework for managing a business. I will quote a list of his bugbears in some detail.
"The indirect representation of reality by proxy, the transactions,
in today's reporting and management systems has to go, it must be
replaced with a representation of reality directly.
[2] Management systems, accounting
[3] Accounting departments
[4] CPA
[5] Visit customers, people at the front lines and in the plants
[6] Shareholders
[7] Capital increase, IPO
[8] Financial institutions
[9] Your local bank that knew all the townspeople
[10] Good old bound ledgers
[11] Enterprise software
[12] Derivatives and other creative financial instruments
[13] Wall Street workers
[14] SEC et al.
[15] Analysts (duh)
[16] Washington, Brussels, Westminster etc. workers
[17] Lehman Brothers
[18] AIG
[19] Fannie Mae, Freddie Mac
[20] TED Spread
[21] Barack Obama"
Quite a list, but the basic question is, if we replace this, how do we do it? Two jokes to start.
"God made the world in seven days, but he had no installed base to deal with."
"Buddha walked into a Pizzeria, and said: "make me one with everything.""
But I am leading to a serious point. Why are railway tracks spaced at the distance that they are? Either because it was determined by the size of a Roman standard horse chariot axle, or at least because of the need to use existing technology where possible. In other words, installed base is everything.
Pacioli was the main who invested the basis of modern double entry book keeping, with one main intention being to stop the landowner's agent's ripping him off, as it is harder to hide cash in this approach. (Also for the love of beauty, of course.)
It persisted in the subsequent periods because it stopped Victorian shopkeepers spending all the money in the till, as they could see the difference between their committed money (accounting) and their cash in hand. (If you do not see the difference try being an independent contractor. You have invoiced the client hundreds of Euros, or even thousands, but the bank account is empty until they pay.)
So, people had a common language, the accounting standards, but they need interpretation, and training to understand.
Sig makes a point, we need a new approach to allow the business world to anticipate and react. But what standard? What measures are useful?
Buddha would like to be at one with everything, but where do you go to get it?
I think that the system has to pass two very different criteria. It has to reflect the reality of the business and its processes in a timely and accurate way, allowing decisions to be made. However, it also has to allow third parties, who invest in businesses, and need be to assured of the accuracy and completeness of information given to them at arm's length to assess the business. (Enron, Worldcom, every damned bank under the sun, etc.)
That's where the hodge podge arises. If I am acting only for my own interests, then I can act as I see fit. If I act for others, sadly I must expect to wear another's collar round my neck.
What measures would be needed to run a business, and to satisfy others as to how the business is being run. I have no ready answers, but it is an interesting problem.
Quite a list, but the basic question is, if we replace this, how do we do it? Two jokes to start.
"God made the world in seven days, but he had no installed base to deal with."
"Buddha walked into a Pizzeria, and said: "make me one with everything.""
But I am leading to a serious point. Why are railway tracks spaced at the distance that they are? Either because it was determined by the size of a Roman standard horse chariot axle, or at least because of the need to use existing technology where possible. In other words, installed base is everything.
Pacioli was the main who invested the basis of modern double entry book keeping, with one main intention being to stop the landowner's agent's ripping him off, as it is harder to hide cash in this approach. (Also for the love of beauty, of course.)
It persisted in the subsequent periods because it stopped Victorian shopkeepers spending all the money in the till, as they could see the difference between their committed money (accounting) and their cash in hand. (If you do not see the difference try being an independent contractor. You have invoiced the client hundreds of Euros, or even thousands, but the bank account is empty until they pay.)
So, people had a common language, the accounting standards, but they need interpretation, and training to understand.
Sig makes a point, we need a new approach to allow the business world to anticipate and react. But what standard? What measures are useful?
Buddha would like to be at one with everything, but where do you go to get it?
I think that the system has to pass two very different criteria. It has to reflect the reality of the business and its processes in a timely and accurate way, allowing decisions to be made. However, it also has to allow third parties, who invest in businesses, and need be to assured of the accuracy and completeness of information given to them at arm's length to assess the business. (Enron, Worldcom, every damned bank under the sun, etc.)
That's where the hodge podge arises. If I am acting only for my own interests, then I can act as I see fit. If I act for others, sadly I must expect to wear another's collar round my neck.
What measures would be needed to run a business, and to satisfy others as to how the business is being run. I have no ready answers, but it is an interesting problem.
