Business

No, Really! This is a Serious Question

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So I’m talking to a co-worker named Phil, and he tells me that he’s frothing mad. He’s been writing Cecil at The Straight Dope for months and never saw his question appear in print. The question in question is…..

“If intelligent space aliens were to land on Earth and present themselves, is it likely that we would find them using double entry accounting”

I had pretty much the same reaction that you’re probably having right now. He’s a bit odd, wondering about the way our new galactic overlords keep track of accounts recievable. But he clarified it and I realized that it was a very serious question indeed.

“Is double entry accounting just one of any number of equally good methods for managing scarce resources-or is there something that makes it uniquely fitting for the task?”

“Could it be that it’s prevalence in the business world owes only to the desirability of using a universally understood method? If not, is it superior to all other known methods? Could it even be thought of almost like being a law of nature?”

The main thing that I know about double entry bookkeeping is it’s historical impact. Used with the new Arab numerical system, it allowed businesses to expand during the latter part of the Dark Ages. In fact, some people even say that this accounting method spelled the end to the Medieval Period by promoting trade.

So are there equally effective methods out there? If so, why aren’t they better known? And, of course, is the system so tuned to basic reality that it could be thought of as a reflection of basic accounting truths?

I’ll leave it up to you guys. There’s got to be someone who knows this accounting stuff who’s also writing for this blog.

“Corporate Social Responsibility”

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Rob the BusinessPundit has a post on corporate philanthropy that echoes my own sentiments:

I tend to err on the side of business and say that a business is only responsible for major, direct, negative effects of its policies (like pollution). My problem with making companies too concerned with social activities is that the causes they champion aren’t necessarily the causes I, as a shareholder, would prefer they champion. Why should they get to make the decisions about which charities get funding? Shouldn’t they give that money to shareholders and let them decide what to do with it? Ultimately, I wish these people that hate corporate profits so much would form their own non-profit companies. Let them figure out how to produce pharmaceuticals and computers and cars and everything else without using profitability as a guide. If they succeed, then great we will all be better off. But my guess is that they will fail. When companies follow profit, they follow what consumers want. Profit comes from satisfying consumer needs. That is social responsibility. There is a demand for solutions to societal problems. Over time that demand is being met. That is why a poor person today eats better than a king did several generations ago.

It’s worth reading in full.

UPDATE: Lex and I have a long exchange of views in the comments.

“Negotiated Misery”

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Brian Micklethwait may be on to something. Martin Devon is skeptical.

CNBC Doesn’t Get It

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It canceled the excellent Wall Street Journal editors’ talk show, the only TV show that I watched regularly. What a disappointment (and I’m not the only one who thinks so). Given the generally clueless, pointlessly argumentative, conventionally leftist journalism-school sensibility that pervades CNBC’s coverage, it was remarkable that the WSJ editors’ learned, civil, conservative discussions ever passed muster. And given the show’s uniqueness and obvious quality, the Investor’s Business Daily editorial attributing its cancelation to political bias at CNBC seems a likely explanation for what happened.

CNBC doesn’t understand its own business. They have a franchise in financial journalism but are pissing it away trying to be like CNN. Feh. I want information not intermediation. I want more straight business news and less politics and Beltway herd-wisdom. Enough talking heads, suck-up interviews with Hugo Chavez, and pointless soundbite exchanges between “experts” chosen mainly because they disagree with each other. Such dross is abundantly available elsewhere. CNBC’s edge came not mainly from analysis, but from unfiltered presentation of basic financial information: prices, govt statistical releases, consensus projections. The WSJ show, the only decent analysis CNBC had, was icing on the cake. How fitting that it was dropped and that the junk remains.

Increasingly, commercial television’s business model resembles the social model of an insecure teenager at an adult cocktail party: If you’re unable to say anything worth listening to, make yourself annoying enough and people will be forced to pay attention. However, given the expanding supply of news sources, this model is beginning to work as well in business as it does socially.