While I generally agree with your thoughts as to what accounting is, it is nonetheless essential to decipher the current situation, but it is really useful to chart the trend.
Perhaps part of the difference is financial acc't v managerial acc't.
In every business I ever ran over 40 years, I always demanded the CFO produce charts that showed the trend of about a dozen different bits of data. I also demanded the books close w/in 72 hours of the end of a month. [Yes, I got plenty of bitching on that, but they did it.]
The most critical thing to spot is when there is an inflection point. We would chart the occupancy rate at thousands of apartments and we would only raise prices when we hit 95% and the trend was upward. OTOH, we would offer incentives and discounts when the trend turned down.
The most profitable transaction a landlord can undertake is the renewal of a lease -- no new leasing commission, no make ready cost, no vacancy expense.
At the time (early 1990s) I could not find any other apartment owner in Texas doing that same thing. We were very nimble and our apartments stayed full.
One caution as to AI, it is held hostage to the timeliness of the data (DeepSeek seems to only have date through June 2023 whilst Grok is more timely). I have used Grok, DeepSeek, and ChatGPT to analyze the same issues and have gotten slightly different answers -- not grossly different, but slightly.
My counterpoint to that is that is to invest in things that aren't trendy. Face the herd instead of running with it. If you are right, the trend lifts your investment and you can sell into the trend rather than chase it.
Interesting that no one recognized the marginal customer acquisition costs of renewing a lease.
Agree on AI. It's only as good as the data it is trained on, and what the geeks who program it allow it to train on. The broader point from the essay is that AI might make us work more, not less. I think people have the impression that AI will make you work less and give you more free time. Instead, it changes the opportunity costs of NOT working.
Not really commenting upon how one should invest, but rather how to use acc't data to effectively make operational decisions.
One of the best ways for an individual to invest is to read the news (back in the day I would have said "the front page of the newspaper" but who reads newspapers?)
Look at Rheinmettal's (Rheinmettal AG ADR) price on 24 Feb 2022.
The current world is both fascinating and terrifying. It is fascinating that so much information is so easily and quickly accessible. Yet the abundance of information cheapens it and allows what is trivial to drown out what is meaningful. I see this in my browsing of X. I will start reading my "page" and there will be some interesting comments. Yet very quickly the majority of posts fed to me are banal - comments that have no value and yet I am in the habit of reading what is put on my screen!
All the more terrifying is the sense that most of what I am reading is manipulative. Many posts are just opinion and emotions and these are intended to create opinions and emotions in me! At least I have this self awareness. What about the many millions of people who allow these random messages to solidify thoughts in their minds? It does seem as if the "social media" is a drug that strips people of their agency and personal identity.
I read there is no slowing of the building of "data centers". These computers systems and networks will allow tracking of every earthly activity! They will allow instantaneous access to all information. But to what end? What value is being created?
What produces human value? What makes life meaningful?
In August 1985 a friend and I were following the afternoon's Yankee game on the radio as we drove back from golfing. In the 9th inning Ken Griffey (dad to Ken Griffey Jr.) made a great catch leaping above the wall to prevent a game tying homerun. My friend and I knew it had happened, but how could we see it? We dropped into K-Mart, went to the TV displays, tuned one to the local news and the sports segment of the news showed the highlight. To this day that memory of going to K-Mart and sharing that experience with my friend has provided meaning to our relationship and my teenage love of the Yankees.
The Apostle Paul writes in the New Testament of people who are: "always learning and never able to arrive at a knowledge of the truth." Is that not the world enabled by instant information? We can know everything! But do we have knowledge of what is true?
I think there is a difference between Paul's truth and getting to the truth on something else. My wife has decided to engage in a remodeling project. She has a vision. Hired a subcontractor. But, she can't communicate because he doesn't speak English. AI can translate. There are still lots of communication difficulties but Grok makes it better. AI might make it easier to search for the Apostle Paul's truth faster too, with links to help people understand.
Life has always been about separating the wheat and the chaff. Today we call it signal v noise.
No question the noise is deafening, but that makes the ability to separate signal from noise all that more valuable.
The best approach to that separation is to rely upon data because in most instances data doesn't lie. Of course, there is a ton of fake and manipulative data out there.
I always enjoy these posts. It’s fun to realize what I have assumed is correct, or more often than not, are incorrect or incomplete assumptions.
In this case hasn’t improvement and advancement always lead to opportunities to out-compete the competition? There have always been those predicting “in the future we’ll have more time for non-work activities because advancement X will do the work for us”. Like you pointed out, advancements create a vacuum, within which lies opportunity.
I commented on a LinkedI post (mourning the loss of DOE) that schools are in the job market as suppliers of workforce - and are subject to market forces, namely: if their product is poor quality (illiteral,incurious, based work ethics, low knowledge, etc), parents as well as consumers (employers) should be able to choose a different supplier. I was called crazy and inhumane.
Opportunity cost to education providers has been artificially withheld by bureaucracy.
The article you quoted opens new way of thinking...I will have to re-read it to fully understand. Never tried AI, don't want to and feel it is being artificially (!) forced on us. Just like covidomania.
Well, that's all fine but I think it's leaving out "utility" in the economic sense. Assuming you mostly believe we are something resembling utility maximizers.
I don't want to sound like a marxist here but the point of production is eventual consumption. For most of us production doesn't provide nearly as much utility as consumption.
There are a few people who's work is rewarding enough to provide inherent utility. I'd say Elon Musk is the best example. The guy loves what he does and who wouldn't.
Most people, yourself presumably, maximize utility when you sometimes "always order the cheese course in France". Of course you lost some productivity when you did but ultimately the point of the productivity was to support the cheese habit.
So that's why most of us eventually conclude that the "supply curve of labor" is usually backward bending. Both in the micro and in the macro.
Working in production allows you to get paid, which allows you to consume. As Adam Smith observed, division of labor and trading gives an individual greater gain. It doesn't mean you love your job.
And I remember when they said computers would reduce paperwork! I should have bought stock in a paper company...especially one that sells to the government!
Lots of good concepts to deliberate upon in this one, Jeff.
Accounting can indeed help with more than just seeing the results of past decisions, esp a well crafted activity based costing effort. Problem is, like in all numbers we use to run/fix companies, is the quality of the data. We called it "data hygiene"...not sure, honestly, that AI will necessarily help that as it depends on those constructing the models. I suppose multiple iterations of tests can help (which AI facilitates, obviously). Still I have more than once fixed issues which were caused by very talented people with siloed vision creating massively wrong models/algorithms etc.
In the end, data is just so much noise. It takes wisdom to parse through it to find the critical information for making decisions.
Living life well transcends, imho, much that we learn in finance. Faith, family and friendships are cornerstones to give us meaning and balance. Opportunity cost DOES apply in how we spend our time to cultivate a more balanced life. A wise professor of mine counseled me early in my post college career that you can "have it all, just not all at once". I have found that adage to be quite true, and marvelously freeing during periods where work becomes overwhelming, or likewise demands from family/friends clip time for work.
Make the trend your friend.
While I generally agree with your thoughts as to what accounting is, it is nonetheless essential to decipher the current situation, but it is really useful to chart the trend.
Perhaps part of the difference is financial acc't v managerial acc't.
In every business I ever ran over 40 years, I always demanded the CFO produce charts that showed the trend of about a dozen different bits of data. I also demanded the books close w/in 72 hours of the end of a month. [Yes, I got plenty of bitching on that, but they did it.]
The most critical thing to spot is when there is an inflection point. We would chart the occupancy rate at thousands of apartments and we would only raise prices when we hit 95% and the trend was upward. OTOH, we would offer incentives and discounts when the trend turned down.
The most profitable transaction a landlord can undertake is the renewal of a lease -- no new leasing commission, no make ready cost, no vacancy expense.
At the time (early 1990s) I could not find any other apartment owner in Texas doing that same thing. We were very nimble and our apartments stayed full.
One caution as to AI, it is held hostage to the timeliness of the data (DeepSeek seems to only have date through June 2023 whilst Grok is more timely). I have used Grok, DeepSeek, and ChatGPT to analyze the same issues and have gotten slightly different answers -- not grossly different, but slightly.
JLM
www.themusingsofthebigredcar.com
My counterpoint to that is that is to invest in things that aren't trendy. Face the herd instead of running with it. If you are right, the trend lifts your investment and you can sell into the trend rather than chase it.
Interesting that no one recognized the marginal customer acquisition costs of renewing a lease.
Agree on AI. It's only as good as the data it is trained on, and what the geeks who program it allow it to train on. The broader point from the essay is that AI might make us work more, not less. I think people have the impression that AI will make you work less and give you more free time. Instead, it changes the opportunity costs of NOT working.
Not really commenting upon how one should invest, but rather how to use acc't data to effectively make operational decisions.
One of the best ways for an individual to invest is to read the news (back in the day I would have said "the front page of the newspaper" but who reads newspapers?)
Look at Rheinmettal's (Rheinmettal AG ADR) price on 24 Feb 2022.
JLM
www.themusingsofthebigredcar.com
Excellent article! In the “marriage market”, I lost once, and won once. It’s not how you start the race, it’s how you finish it.
The current world is both fascinating and terrifying. It is fascinating that so much information is so easily and quickly accessible. Yet the abundance of information cheapens it and allows what is trivial to drown out what is meaningful. I see this in my browsing of X. I will start reading my "page" and there will be some interesting comments. Yet very quickly the majority of posts fed to me are banal - comments that have no value and yet I am in the habit of reading what is put on my screen!
All the more terrifying is the sense that most of what I am reading is manipulative. Many posts are just opinion and emotions and these are intended to create opinions and emotions in me! At least I have this self awareness. What about the many millions of people who allow these random messages to solidify thoughts in their minds? It does seem as if the "social media" is a drug that strips people of their agency and personal identity.
I read there is no slowing of the building of "data centers". These computers systems and networks will allow tracking of every earthly activity! They will allow instantaneous access to all information. But to what end? What value is being created?
What produces human value? What makes life meaningful?
In August 1985 a friend and I were following the afternoon's Yankee game on the radio as we drove back from golfing. In the 9th inning Ken Griffey (dad to Ken Griffey Jr.) made a great catch leaping above the wall to prevent a game tying homerun. My friend and I knew it had happened, but how could we see it? We dropped into K-Mart, went to the TV displays, tuned one to the local news and the sports segment of the news showed the highlight. To this day that memory of going to K-Mart and sharing that experience with my friend has provided meaning to our relationship and my teenage love of the Yankees.
The Apostle Paul writes in the New Testament of people who are: "always learning and never able to arrive at a knowledge of the truth." Is that not the world enabled by instant information? We can know everything! But do we have knowledge of what is true?
I think there is a difference between Paul's truth and getting to the truth on something else. My wife has decided to engage in a remodeling project. She has a vision. Hired a subcontractor. But, she can't communicate because he doesn't speak English. AI can translate. There are still lots of communication difficulties but Grok makes it better. AI might make it easier to search for the Apostle Paul's truth faster too, with links to help people understand.
Life has always been about separating the wheat and the chaff. Today we call it signal v noise.
No question the noise is deafening, but that makes the ability to separate signal from noise all that more valuable.
The best approach to that separation is to rely upon data because in most instances data doesn't lie. Of course, there is a ton of fake and manipulative data out there.
JLM
www.themusingsofthebigredcar.com
I always enjoy these posts. It’s fun to realize what I have assumed is correct, or more often than not, are incorrect or incomplete assumptions.
In this case hasn’t improvement and advancement always lead to opportunities to out-compete the competition? There have always been those predicting “in the future we’ll have more time for non-work activities because advancement X will do the work for us”. Like you pointed out, advancements create a vacuum, within which lies opportunity.
I commented on a LinkedI post (mourning the loss of DOE) that schools are in the job market as suppliers of workforce - and are subject to market forces, namely: if their product is poor quality (illiteral,incurious, based work ethics, low knowledge, etc), parents as well as consumers (employers) should be able to choose a different supplier. I was called crazy and inhumane.
Opportunity cost to education providers has been artificially withheld by bureaucracy.
The article you quoted opens new way of thinking...I will have to re-read it to fully understand. Never tried AI, don't want to and feel it is being artificially (!) forced on us. Just like covidomania.
try Grok on the platform X.com....it's excellent
Don't have X, FB, tt, etc. Limit my media exposure.
Well, that's all fine but I think it's leaving out "utility" in the economic sense. Assuming you mostly believe we are something resembling utility maximizers.
I don't want to sound like a marxist here but the point of production is eventual consumption. For most of us production doesn't provide nearly as much utility as consumption.
There are a few people who's work is rewarding enough to provide inherent utility. I'd say Elon Musk is the best example. The guy loves what he does and who wouldn't.
Most people, yourself presumably, maximize utility when you sometimes "always order the cheese course in France". Of course you lost some productivity when you did but ultimately the point of the productivity was to support the cheese habit.
So that's why most of us eventually conclude that the "supply curve of labor" is usually backward bending. Both in the micro and in the macro.
Working in production allows you to get paid, which allows you to consume. As Adam Smith observed, division of labor and trading gives an individual greater gain. It doesn't mean you love your job.
And I remember when they said computers would reduce paperwork! I should have bought stock in a paper company...especially one that sells to the government!
Lots of good concepts to deliberate upon in this one, Jeff.
Accounting can indeed help with more than just seeing the results of past decisions, esp a well crafted activity based costing effort. Problem is, like in all numbers we use to run/fix companies, is the quality of the data. We called it "data hygiene"...not sure, honestly, that AI will necessarily help that as it depends on those constructing the models. I suppose multiple iterations of tests can help (which AI facilitates, obviously). Still I have more than once fixed issues which were caused by very talented people with siloed vision creating massively wrong models/algorithms etc.
In the end, data is just so much noise. It takes wisdom to parse through it to find the critical information for making decisions.
Living life well transcends, imho, much that we learn in finance. Faith, family and friendships are cornerstones to give us meaning and balance. Opportunity cost DOES apply in how we spend our time to cultivate a more balanced life. A wise professor of mine counseled me early in my post college career that you can "have it all, just not all at once". I have found that adage to be quite true, and marvelously freeing during periods where work becomes overwhelming, or likewise demands from family/friends clip time for work.