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The Positive Power of Negative Learning

2/22/2018

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In a major Silicon Valley court case, Uber just gave a $¼ billion chunk of itself to Google's self-driving car company, Waymo. It came with a "sorry for stealing your trade secrets." 

What was interesting was that some of the most valuable of Waymo’s research data described not what worked, but what didn’t. 

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Many fields of study capture important information about failure.  

Regulators are thinking of making drug companies share both negative and positive results from drug tests.

In our teaching we've seen the value of emphasizing what things are not, as much as what they are.  

For example, liabilities, equity, revenue and expenses are never money. Assets alone can be. 

Thinking that revenue is "money-in" is the biggest misconception in finance. Companies have failed because of it. 

That’s a crash we can all learn from.

Peter

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Frogs & Flies

2/16/2018

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As you’d expect from our name, at the heart of Color Accounting is the logical use of color. 

Not random use to pretty-up the information.  

The teaching system uses each color to represent a specific concept. It also relies on relationship between colors. 

Frogs & Flies - a whimsical take on Debits and Credit
When we were first developing Color Accounting, the desktop color printer had just been launched. It let us exploit the human brain’s ability to process color-coded information faster than spatial information. 

Many other discoveries followed, such as insights into the grammar of financial language, and better ways to explain concepts. Today we say Color Accounting is as much about language as color. We obsess about words. 

Two little words have a bad rap and often confuse people: debit and credit. We coded them green and yellow twenty years ago, but we are still finding fun new ways to explain them. Like frogs & flies.

Peter

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Photo by Ruben Engel on Unsplash

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Longer Lives, Shorter Cash

2/8/2018

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Since 1890, life expectancy has risen from around 45 years to about 85 in the U.K. Similar increases have been seen in populations worldwide.

So, while living longer is now a given, the challenge many face is finding a way to make a living longer.

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Life expectancy at birth, England and Wales, 1841 to 2011

"The idea of hitting a cliff-edge retirement at 65 and then living off an annuity is outdated," says Alistair Byrne of money manager State Street Global Advisors.

Three groups need to change their act so that we avoid a collective socio-financial train wreck:

1.  Governments need to increase the retirement age, at which benefits such as Social Security and Medicare kick in.

2.  Financial Institutions must up the insurance premiums they ask for.

3.  And most of us need to save more.

Nobody said this was going to be easy.  Personally, I don't like the notion of retirement anyway. It's bad for your health.

Peter

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Photo by Alex Harvey on Unsplash

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Worth $67 Billion and Knows His Numbers

2/1/2018

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Carlos Slim runs Mexico’s dominant phone company, which he and Southwestern Bell bought from the government in 1992. That deal made him worth a reported $67 billion today. 

The young American executive who represented the Baby Bell in '92 was mentored by Mr Slim, and goes by the name of Randall Stephenson.

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Photo by Pavan Trikutam on Unsplash

Fast forward to 2018. Southwestern Bell was long since rolled up into AT&T and Mr. Stephenson is now that company's CEO.

Twenty years Mr. Slim's junior, Mr. Stephenson is back in Mexico, giving his old mentor a run for his money, this time as competitor.

Now in the role of scrappy underdog, AT&T has recently helped wipe $10 billion off the value of Mr. Slim’s company, America Movil.  

Stephenson knows what he’s up against in challenging Mr. Slim, and recounts an interesting story. 

At their first meeting in Mexico City those 25 years ago, Mr. Slim asked Mr. Stephenson to tell him more about Southwestern Bell’s capital expenditures.  

“I was getting ready to answer, and then he answered himself. He just recited our numbers from memory,” Mr. Stephenson told the Wall Street Journal. "He knew our numbers better than we did.” 

There’s a lesson in there for all of us. 

There's no time like the present to get better acquainted with one's numbers!

Peter

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Photo by Alex Jones on Unsplash

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    Co-founder Peter Frampton is the lead author of this blog.

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