4 ms·

Accounting is the language of business. If you go into business, you should either know it or be willing to learn. It's not good enough to have someone speciali

Accounting is the language of business. If you go into business, you should either know it or be willing to learn. It's not good enough to have someone specialize in it for you unless you want to be handed your ass when it comes to anything regarding business valuation--which concerns more than raising capital and m&a. For a business with resources, capital allocation is perhaps the most important concern and accounting is the toolset you work with.

edanm 11y ago
I disagree. And I'm pretty sure many people have started successful businesses without learning accounting. What usually happens is that they'll learn the important parts on-the-job, which is I think the best way to learn most things if you're anxious to start a company. That said, I kinda agree with the point that knowing this stuff, at least to some level, is 1) very valuable, and 2) something you can't totally hand off to a third party.
TheOneTrueKyle 11y ago
Could you elaborate more on why it is not wise to have someone specialize in it for you? I can certainly see how knowing accounting can help when going from MVC to capital. At what point should you rely on someone who is more knowledgeable in accounting?
- run4yourlives2 11y ago
  I don't think he's saying " it is not wise to have someone specialize in it for you", he's saying that that isn't "good enough". Ergo, you need to have a solid fundamental understanding of how money is processed in a business as well, in addition to having specialists handle the things beyond your level of detail.
- dontscale 11y ago
  It's wise to work with accountants, but it's not enough. There are a lot of characters in business, and in order to know when they're full of shit (because sometimes they don't even know), you need to know how to count beans by the rules. For example, a public company might report itself as profitable for some period based on operating earnings alone. But, you read their annual report and see they took a loss after tax with some extraordinary items. If you don't know what that means, then you don't know what it means--It really means they didn't make any money for the period, but they're going around talking about it like they did. I should mention that's all elementary stuff--there exists a whole field called "Forensic Accounting" where accountants work to spot fraud in financial reporting. And small business owners can get mixed up too. They talk about their big revenues but don't mention they have a lousy 5% net margin. It can extend beyond trying to bullshit you--they can get into the habit of bullshitting themselves thinking they're ballers.
pbreit 11y ago
That's a weird analogy. You shouldn't be your own lawyer but you should be your own accountant?
- mathattack 11y ago
  The analogy holds. You need to know enough about the law to not break it. (Don't discriminate, don't inside trade, don't abuse privacy) Look at Zenefits, though perhaps there was willful lawbreaking. Similarly, you don't need to be an expert in financial engineering, but as a CEO you need to be on top of the metrics of your business, and that involves knowing something about accounting. Accounting is the rare subject that's nearly impossible to learn on it's own. It's just too boring. There are no good easy plain English textbooks that carry one's interest. You have to learn it in school, or possibly via a MOOC.
  - aggieben 11y ago
    > Accounting is the rare subject that's nearly impossible to learn on it's own. This is total nonsense. Accounting isn't that complicated, you just have to commit to learning it just like any other topic. I learned the basics in about two weekends.
    - mathattack 11y ago
      I think you're the rare exception. :-) For every person I know who says "I wish I would have learned programming" I know a dozen who say "I wish I would have learned accounting." You're the first I've met who got to a decent level entirely self-taught. How did you do it, and what were your sources?
      - aggieben 11y ago
        Well, firstly I didn't learn all accounting. I learned enough to read a balance sheet, understand the accrual method, and do day-to-day bookkeeping (by the time my business is big enough to need more than that, I will hire an accountant, or bench.co, or whatever). It took about two weekends, and the OP was my most important source. A whiteboard is helpful.
spinchange 11y ago
Excellent comment. Keying on this: >For a business with resources, capital allocation is perhaps the most important concern and accounting is the toolset you work with Warren Buffett, arguably the most successful capitalist ever, says when it really comes down to it, a CEO's job is essentially one thing: Capital ( or "resource") allocation.
- dontscale 11y ago
  There's an excellent book (you're probably aware of) called The Outsiders. It compares the results of operations focused CEO's like Welch to capital allocators like Buffett, Singleton, and Malone. The thesis is that overtime, the good cap allocators just blow everyone else out of the water. http://www.amazon.com/Outsiders-Unconventional-Radically-Rational-Blueprint/dp/1422162672/ref=sr_1_4?s=books&ie=UTF8&qid=1457375626&sr=1-4&keywords=outsiders http://www.amazon.com/Outsiders-Unconventional-Radically-Rat... “An outstanding book about CEOs who excelled at capital allocation.” — Warren Buffett
  - spinchange 11y ago
    I was not aware of this one but appreciate the recommendation! I've also been a follower of John Malone's over the years so this sounds like a very interesting read. Added to my list!
awl130 11y ago
>Accounting is the language of business #warrenbuffet

edanm 11y ago

I disagree. And I'm pretty sure many people have started successful businesses without learning accounting. What usually happens is that they'll learn the important parts on-the-job, which is I think the best way to learn most things if you're anxious to start a company. That said, I kinda agree with the point that knowing this stuff, at least to some level, is 1) very valuable, and 2) something you can't totally hand off to a third party.

TheOneTrueKyle 11y ago

Could you elaborate more on why it is not wise to have someone specialize in it for you? I can certainly see how knowing accounting can help when going from MVC to capital. At what point should you rely on someone who is more knowledgeable in accounting?

run4yourlives2 11y ago
I don't think he's saying " it is not wise to have someone specialize in it for you", he's saying that that isn't "good enough". Ergo, you need to have a solid fundamental understanding of how money is processed in a business as well, in addition to having specialists handle the things beyond your level of detail.
dontscale 11y ago
It's wise to work with accountants, but it's not enough. There are a lot of characters in business, and in order to know when they're full of shit (because sometimes they don't even know), you need to know how to count beans by the rules. For example, a public company might report itself as profitable for some period based on operating earnings alone. But, you read their annual report and see they took a loss after tax with some extraordinary items. If you don't know what that means, then you don't know what it means--It really means they didn't make any money for the period, but they're going around talking about it like they did. I should mention that's all elementary stuff--there exists a whole field called "Forensic Accounting" where accountants work to spot fraud in financial reporting. And small business owners can get mixed up too. They talk about their big revenues but don't mention they have a lousy 5% net margin. It can extend beyond trying to bullshit you--they can get into the habit of bullshitting themselves thinking they're ballers.

pbreit 11y ago

That's a weird analogy. You shouldn't be your own lawyer but you should be your own accountant?

mathattack 11y ago
The analogy holds. You need to know enough about the law to not break it. (Don't discriminate, don't inside trade, don't abuse privacy) Look at Zenefits, though perhaps there was willful lawbreaking. Similarly, you don't need to be an expert in financial engineering, but as a CEO you need to be on top of the metrics of your business, and that involves knowing something about accounting. Accounting is the rare subject that's nearly impossible to learn on it's own. It's just too boring. There are no good easy plain English textbooks that carry one's interest. You have to learn it in school, or possibly via a MOOC.
- aggieben 11y ago
  > Accounting is the rare subject that's nearly impossible to learn on it's own. This is total nonsense. Accounting isn't that complicated, you just have to commit to learning it just like any other topic. I learned the basics in about two weekends.
  - mathattack 11y ago
    I think you're the rare exception. :-) For every person I know who says "I wish I would have learned programming" I know a dozen who say "I wish I would have learned accounting." You're the first I've met who got to a decent level entirely self-taught. How did you do it, and what were your sources?
    - aggieben 11y ago
      Well, firstly I didn't learn all accounting. I learned enough to read a balance sheet, understand the accrual method, and do day-to-day bookkeeping (by the time my business is big enough to need more than that, I will hire an accountant, or bench.co, or whatever). It took about two weekends, and the OP was my most important source. A whiteboard is helpful.

spinchange 11y ago

Excellent comment. Keying on this: >For a business with resources, capital allocation is perhaps the most important concern and accounting is the toolset you work with Warren Buffett, arguably the most successful capitalist ever, says when it really comes down to it, a CEO's job is essentially one thing: Capital ( or "resource") allocation.

dontscale 11y ago
There's an excellent book (you're probably aware of) called The Outsiders. It compares the results of operations focused CEO's like Welch to capital allocators like Buffett, Singleton, and Malone. The thesis is that overtime, the good cap allocators just blow everyone else out of the water. http://www.amazon.com/Outsiders-Unconventional-Radically-Rational-Blueprint/dp/1422162672/ref=sr_1_4?s=books&ie=UTF8&qid=1457375626&sr=1-4&keywords=outsiders http://www.amazon.com/Outsiders-Unconventional-Radically-Rat... “An outstanding book about CEOs who excelled at capital allocation.” — Warren Buffett
- spinchange 11y ago
  I was not aware of this one but appreciate the recommendation! I've also been a follower of John Malone's over the years so this sounds like a very interesting read. Added to my list!

awl130 11y ago

>Accounting is the language of business #warrenbuffet