February 20, 2020

Read more On the Margins in the archive.

BS detectors

Over the years, I’ve noted that many accountants are GAAP purists. They believe in the infallibility of net income, and that every enterprise ultimately lives or dies on the ability to operate within that framework.

If you count yourself among the GAAP flock, then you probably know that legendary investor and Warren Buffett BFF Charlie Munger is a kindred spirit:

Munger cited the proliferation of EBITDA as a fake profit metric. “I don’t like when investment bankers talk about EBITDA, which I call bulls— earnings,” he said.

“It’s ridiculous,” Munger said, noting EBITDA—which is short for earnings before interest, taxes, depreciation and amortization—does not accurately reflect how much money a company makes, unlike traditional earnings. “Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You’re almost announcing you’re a flake.”

When big companies get flaky, they have the benefit of a public BS detector like Munger to yell at them. Small businesses aren’t so lucky. They have to be their own BS detectors, and that’s a bit like self-performing brain surgery.

Which is where you come in.

A while back
 I wrote about accountants reigning in their overconfident clients. Another way to do that is by playing the role of BS detector for your clients. Most small businesses aren’t beholden to GAAP—or even good bookkeeping for that matter—so they’re free to go crazy with the metrics they use to analyze their business.

That’s the “intellectual dishonesty” Munger is talking about; a business owner or manager who has a warped view of their performance isn’t likely to all of a sudden see the light and realize they’ve been deluding themselves. They need someone who’s emotionally disconnected from the business to tell them what’s really going on, and accountants are uniquely positioned to do that.

Office space

Most of us office workers—70% according to this NYT report—are crammed into some kind of open-plan workspace dystopia. Sure, we might feel closer to our colleagues, but that means we’re also in the middle of their personal conversations, sniffles, coughs, and aggro typing in the open air 40-plus hours a week.

This has done wonders for the headphone industry—but not necessarily for professional productivity. It has to be one of mankind’s most vexing challenges: People crave connection, and yet, we can’t get a damn thing done being near each other. How can we work hours on end with our best fremenies all around us, and still GSD?

Fortunatelycontemporary design mavens have stumbled upon the perfect respite:

At the research organization Draper in Cambridge, Mass., mod-looking swivel chairs framed by rectangular enclosures are grouped in an open area. The chairs are designed to block the sight and sound of colleagues.

“Those chairs are about letting people be alone together,” said Ms. Lowrey of Elkus Manfredi, which designed the workplace. “You can have a sense of privacy while being in a room full of people.”

If the “alone together” chairs aren’t coming to your office anytime soon, allow me to recommend these human blinders. They’re certain to scare virtually everyone away.

Fresh from Gusto

My colleague Will Lopez recently gave his quarterly partner update, where he talked about 2-day contractor payments and our S-corp pilot.

Web learnin’

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Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.
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