John Collison: evaluation

Transcript context

…It’s just not branding it as such. And I think a lot of what I’ve learned from our customers is that a lot of people want the same things. They just aren’t talking about it in a way that might feel familiar to someone who grew up in or around San Francisco, for example. We’re talking a lot here about the insights into the business that Ambrook allows. One of my favorite books about accounting is the End of Accounting, which talks about how GAAP is basically poorly suited to this day and age. And one of the things it points out is that accounting is trying to do many jobs. If you’re an equity holder, it’s trying to help you figure out what the future returns on your equity might be. If you’re a debt holder, it’s helping you figure out will you lose all your money or will you get paid back. If you’re the IRS, it’s helping you figure out how much taxes this business owes. And then this management accounting, which is helping you understand, like you were saying, a P&L view of hay or the dairy side of the operation or something like that. And so it’s helping management make better decisions. But in particular, people tend to have a view that there is this God-given truth of just what the business is. Whereas, in fact, accounting is a tool for a job and the job you might want to do with accounting actually really varies. And so I’m curious how you think about that… which are the jobs that you want to help firms do? Are you helping them pay their taxes? Is it all about making different decisions? And yeah, that idea that accounting is a bit overloaded these days. Yeah, totally. Actually, I think the way that we talk about it internally is there’s four types of accounting. The first layer is just cash. It’s like if you did a snapshot, what’s happening? And actually many businesses in the US file cash basis. The second layer, which a lot of startups are subjected to because they meet the threshold requirement for this is filing accrual, which is we suddenly introduce the idea of time into accounting. So the idea of accounts receivable, accounts payable, ARAP, etc. The next layer is enterprise accounting, which is that idea of an entire business line basically. So hay, cattle, etc. And then the final layer is managerial accounting, which is truly unit economics. It’s like, what is my cost per acre? How much should it cost me for a dairy to produce a pound of milk? That type of accounting, and the way that we think about it is we have customers who come in at every layer.…

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