Entropy is taking over.

Another excellent post from The Belmont Club, Which I read every day.

The barbarians of ISIS destroy ancient artifacts, in an outrage like those committed by the Taliban in Afghanistan.

The Taliban’s rejection this month of international appeals to halt the destruction of much of Afghanistan’s pre-Islamic heritage — their leader Mullah Mohammed Omar termed them idols — indicates that those most determined to impose their vision of a perfect Islamic state are firmly in control.

That article was from the period before the US invasion. Many artifacts were repaired but that will stop and the destruction will resume after we leave.

The Mosul destruction is to be expected everywhere the Takfiri tide rises enough to control an entity.

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25 Stories About Work – On Your Own Time

The posts about work in the not-so-long-distant past brought to mind this essay, the original of which was posted in 2005 here, at The Daily Brief)

Believe it or not, the military is full of enthusiasts, amateur devotees of all sorts of arcane arts and pursuits in their off-duty time. Drinking, carousing and other hell-raising have been from time immemorial associated with off-duty military, and the economies of entire towns have been built around providing the venues for that sort of amusement but the little-recognized truth is for most adults, they eventually pall, in the military and on the outside. The advantage to the military is that that there is really no rigid set of socially acceptable off-duty pursuits as there are other walks of life. What you do, when you go home and take off the uniform is pretty much your own business for enlisted people; as long as it is not illegal, embarrassing to the service or the US government, and does not impair you in performing your regular duties or showing up for work on time the next day. There is very little social pressure to conform in your choice of hobbies and amusements, which may seem a little outre for a profession which many civilians expect to set a standard for conformity. In reality, the officer-class is a little more constrained, and expected to be a little more conventional and middle-class in their leisure pursuits, and the very top enlisted ranks are supposed to set a good example, but among the lower ranks it doesn’t really matter if you are off on a weekend motorbike road trip to Burning Man, taking classes in economics or obscure martial arts, building houses for Habitat for Humanity, puttering around with your kids at soccer games, or out in the ville drinking to excess with your friends. On Monday morning the reaction among your co-workers is guaranteed to be something along the lines of ‘Hey Dude, whatever.’

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25 Stories About Work – The Difficulty of Verifying Cash

I was recently on a plane doodling and thought of some funny / interesting stories from 25+ years of working and traveling. So I decided to write them up as short, random chapters of a non-book with the title of this post. Hope you enjoy them and / or find them interesting. Certainly the value will be at least equal to the marginal cost of the book (zero)…

The Midwest, early 1990s

For a long time many governmental entities did not have audits from outside firms.  Beginning in the 1980s and 1990s it became common-place for them to have to open up their books and bring in third party professional audit firms to review their accounts.  If they had not been audited before, we called it a “first time through” audit because the amount of work was exponentially maybe one and a half to two times higher – you had to document the controls, figure out who was who at the client, validate the opening balances, etc…  Typically after the first audit it was much easier because the 2nd year audit just followed the work papers of the prior year auditors (unless you were like me and asked a lot of questions, which is a story for another “25 stories about work” article).

Recently I thought about my experience when I read this article about the state of New Mexico while reading this article from Bloomberg (a fantastic news source) titled “New Mexico’s $100 Million Accounting Error”. From the article:

New Mexico can’t balance its checkbook.
Cash in the state’s bank account is at least $100 million short of what’s recorded in the finance department’s ledger, pushing officials to adjust reserves by that amount, to about $650 million. The blame, the current administration says, lies with the introduction of a new accounting system in 2006.

While it would seem astonishing that in this day and age, when you have on-line bank statements and immediate access to data for personal accounts, that a governmental entity could be that far off the mark, it wasn’t shocking to me. As a new auditor at this first-time through audit, I was given what was thought to be the simplest of tasks – auditing the cash on the books and reconciling this cash balance to the bank statement.

How you and I and almost everyone else operates is that you have a checkbook balance and as you make a payment (write a check), you deduct that amount from your available cash and you then know how much money you have left in your account. Since deductions can come in many forms (ATM withdrawals, auto-payments, and manual checks) you need to balance your checkbook periodically to make sure you don’t miss anything, but other than that it isn’t that difficult conceptually. The same process obviously works in reverse for deposits.

The governmental entity I was auditing in the early 1990s, however, used a totally different philosophy. They assumed that they HAD the cash forever until you proved that the check was cashed by whomever they sent the payment out to. Thus when you started to look at the bank balance “on the books”, it showed hundreds of millions of dollars. When you looked at bank statement (from the bank), you saw a few million dollars. Thus my nearly insane task was to reconcile out the hundreds of millions of dollars in payments that had been made over the years to get from all the cash deposited back to the few million dollars left on hand. To be fair, staff at the governmental entity had taken a “crack” at this task and there was lots of manual records attempting to bridge the gap, but it was still a giant effort. New Mexico apparently uses the same “model” today – per that Bloomberg article:

Officials commissioned a study on the variances between the state ledger and its bank accounts from fiscal 2007 through February 2013.
Contractors could match only 2 percent of 160 million entries to a corresponding bank transaction, according to a Jan. 19 memo to lawmakers from Legislative Finance Committee staff.
Hundreds of thousands of transactions totaling more than $836 million are absent from the system, the study found. It estimated that the state could have from $76 million to $400 million less than its records reflect.
Clifford said he requested $3.4 million to create processes to properly record cash balances. It will take about two years to achieve a “clean” annual financial report, he said. Should the imbalance exceed $100 million, the gap would come out of reserves, he said.

I still remember writing up memos attempting to explain this situation to the partner on the engagement. We did not have a lot of time set aside for auditing cash, which is supposed to be simple, and when you bid out these governmental jobs we were already doing the work at a loss (compared to standard billing rates) so there was little or no tolerance for spending extra work at this unprofitable client. Thus I was not only handed an impossible task my own firm was not pleased with my careful documentation of this situation which caused them to have to spend even more time writing memos to provide credence to the numbers so that we could complete the audit.

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The Next Big Thing

A few weeks ago while sitting around, my wife and I started discussing the Next Big Thing. My new smart phone is simply an improvement over the last one – that isn’t it.

I will tell you what is the Next Big Thing – driverless cars.

I had heard about them a few times before reading America 3.0, and they are mentioned in that book. I send Lex links about testing and we have both come to the conclusion that the big hurdle with them won’t be the technology – it will be regulatory hurdles. But this is coming faster than we all think – and there really won’t be much anyone can do to stop it since the demand will be intense.

I imagine the cops will be trotting out “safety” issues when the real reason will be that their days of writing dumb speeding tickets will be over. That revenue train, along with the DUI industry, will take major hits. I imagine they and others will fight this to the end. Insurance companies will likely see damage done – as crash rates go lower, they will be forced to drop premiums, or people will just go to a simple liability policy and chance the crash.

As for me, I lose 70 minutes a day of productivity sitting in my car. All isn’t lost since I listen to Bloomberg business news, however if I could have that 70 minutes to catch up on email, or to simply further myself by reading a book it would be a huge plus in my life. How about being able to have more than one glass of wine with dinner with my wife at a nice restaurant or at a wedding reception and not having to worry about a DUI?

Elon Musk says that we will be ready, tech wise, in five to six years:

Mr. Musk expects autonomous driving to be safer for riders and pedestrians by a factor of 10.

I absolutely believe this. In addition, when the computer gets traffic reports, it will choose the quickest way to the destination, and will choose the speed to use the least amount of fuel.

This article is interesting from CNBC. Here is a quote:

But for some mass market brands like Chevy, Honda or Volkswagen, Winterhoff says it will tougher to compete and win in a world where self-driving cars usher in the idea of mobility on demand.

“Autonomous drive vehicles will mean many families will need fewer cars and if you only have one car instead of two, you will likely make it a premium brand,” he said.

Imagine having only one car for a family of four. In my life, it would drop me off at work, head home and transport the wife if she needs to go somewhere, pick up/drop off a kid at school, head to the market where my groceries will be loaded by a clerk there that I have already paid for with Google Wallet, etc. etc.

When you get talking heads speaking about winners and losers, you can feel that it is on the way. I just can’t wait.