Balance sheets are exact. The value on the left side precisely matches the right side. But do the books overall represent reality, where "value" is complex and floats up and down like a balloon?  

Let's illustrate the point: famous English anonymous artist Banksy sure knows how to make the value of an asset pop. ​

Virtually all kids can learn to read — if they are taught the right way. And yet for decades, only about a third of 8th graders in the U.S. have been proficient or advanced readers. 
 
Even though reading is the most studied aspect of human learning, this situation persists.  Why?

Most school reading classes assume that learning to read is a natural process, like learning to talk. But it isn't.  Decades of scientific research has proven this.  The human brain isn't wired to read.

As this article from American Public Media say, kids must be explicitly taught how to connect sounds with letters.  They must learn phonics.

It's frustrating to see a better way, a known effective method, go to waste. 

A simple fact also explains the why people can't read balance sheets and income statements. It's not because of the numbers.  It's because they don't understand the words.  

Like English teachers should be teaching sounds, accounting teachers should focus more on what the few critical accounting terms mean (and don't mean.)

Revenue doesn't mean money, even though many dictionaries say it does. Revenue is an activity, not money.  

Equity isn't a stake in a business . That would be an asset, as seen from outside the business looking in. Equity is inside the business looking out.

Phonics helps accounting students too.  We ask, what's the sound of income? Everyone answers ka-ching.  But that's the sound of cash.  Better to say, snip-snip, in a hair salon.  Or type-type in a law firm. 

But enough of me sounding off.  Thank you for reading this. 

Peter. ​

Fast forward to 2017 when British politician Diane Abbott nervously spluttered on radio as she tried to explain her plan for an additional 10,000 police officers… only she couldn't do the simple costing on air.  She started with £300,000 before changing to £80m. That gives a range of between £30 and £8 000 per police offer per year.  Bargains both. 

South Africa's President Jacob Zuma famously got tongue-tied in parliament and couldn't pronounce a number in the billions.  He just couldn't get the words out.

Stage fright and stress do weird things to people's mental abilities.  Research has proven a strong correlation between emotions and cognitive functioning.

Best we all take a chill-pill around our numbers.  Seriously relaxed is the way to go. 

Peter. ​

Marchionne did things differently, and knew what numbers to pay attention to.  

He spent money on the seemingly little things like bathrooms.  "How can you build nice cars when the employees' bathrooms are unfit for the workers?"  

While he said, "Please don’t buy our electric version of the cute Fiat 500."  He knew they lost $20 000 on each one.

But he saw the profits in Ferrari, which he spun off to be a separate company from parent Fiat Chrysler Automobiles. 

In the end, his results measured up.  After rescuing Chrysler from liquidation in the crash of 2008, he turned the company he bought for $2bn into an asset worth $84bn. 

Farewell to you Mr Marchionne.  You were fast driving even as you left your marque. 

Peter. ​

​Me & the Bees is creating a buzz.  Mikaila Ulmer turned her great-grandma’s lemonade recipe into an $11M Whole Foods deal.  From which part of the profits go to honeybee causes.

Honey lemonade is sweet, but sweeter still is the story: Mikaila is just 13 years old and started the business at the age of four.

​The lemonade’s winning ingredient may well be the honey, but it’s also business acumen. At the age of four, while most kids bring their teddy bears to show and tell, Mikaila had a lemonade stand at a children’s business fair.

Lemonade stands are an almost mythical  entrepreneurial platform for children. And yet here is this young lady from Texas creating a very real business from her sidewalk venture. 

The delightfully articulate Mikaila appeared on Shark Tank and talked to NBCabout how she got (literally) stung when she was starting out.  Methinks with her business savvy, and no-doubt presence of behind-the-scenes advisors, this social entrepreneur won't get stung in business too often.

Wishing you a sweet week,

Peter

Investors use a company’s profit this year as a starting point for predicting next year’s.  The prognoses drive the company’s share price. 

When making those predictions, it can be reasonable and make sense to adjust the reported profit figure so that it better foretells the future.  But that’s where the trouble begins. ​