It looks like it, but LLMs still lack critical reasoning by and large. So if a client tells them or asks for something nonsensical it won’t reason its way out of that.
I’m not worried about software as a profession yet, as first clients will need to know what they want much what they actually need.
Well I am a bit worried that many big businesses seem to think they can lay off most of their software devs because “AI” causing wage suppression and overwork.
It’ll come back to bite them IMHO. I’ve contemplated shorting Intuit stock because they did precisely that, which will almost certainly just end up with crap software, missed deadlines, etc.
True but I think Spolsky meant it more as a metaphor for understanding users' psychology. Knowledge workers need empathy and creativity to solve important problems.
And design, product intuition, contextual knowledge in addition to the marketing, sales, accounting, support and infrastructure required to sell software at scale.
LLMs can help but it remains to be seen how much they can create outside of the scope of the data they were trained on.
You should read the article in full, and/or learn the difference between a share and asset deal. Your link is about the former, the article about the latter.
"You can have the shares for €4m or the assets for €5m". Both sides have agency in a negotiation.
AIUI the .de rules are intended for a somewhat different situation, perhaps more common. The article describes a situation where almost all of the exit is profit. I'm happy for you if you're in that situation, but I'd guess that most people have costs. In that case .de lets you set costs from past years against the exit, and I've heard (hearsay alert!) that .de gives you more flexibility than most countries.
All that said: if you have high income and no costs, German taxes are hard on you, it's true.
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> Do you have any evidence that this is the case for everyone at every company no matter what?
Of course not, you are asking for the impossible.
But we have evidences that 4 day weeks boost productivity at least in some settings. If you are interested in the topic, look up "4 day week productivity" on a web search engine, or "4 day week" / "4 day workweek" on HN [1,2] if you want previous discussions about this. The topic is not new here. You'll find many posts where companies think it works.
I love it when people post studies just because it agrees with their worldview. For full disclosure, I support the 4 day week but I know to be objective. None of those links contain references to proper RCT with control groups or a variety of office roles so there is really no evidence for it. Trial plus survey is a better term as it carries no scientific connotations.
You are not really going to get your average companies to participate in those kind of studies anyway. Those companies want warm bodies and it has nothing to do with empirical evidence
This hack seems to affect the Dropbox Sign application, which is based on HelloSign which they acquired a few years ago. It’s still running on the hellosign.com domain and seems mostly separate, so it wouldn’t surprise me if they also store passwords differently.
I find it a strange choice to explain double-entry bookkeeping with the example of "one entry for Alice, one entry for Bob". That's really not what it's about. It's obvious that a transaction with two parties could be recorded in two places, but to me the crucial point of double-entry bookkeeping is that it requires two entries for each party of the transaction. So if Alice buys book from Bob, four entries are made.
I get that this is supposed to be a simplification for educational purposes, but I find this is simplification is an oversimplification, since it omits the key point.
In all fairness, if you're trying to understand a piece of software like Quickbooks and are not coming from an accounting background, anthropomorphizing each "account" at your company as an individual actor with their own ledger can actually be a helpful mental model. Everything needs to be a dance between actors, and, for instance, when you make a vendor payment in cash, you can only do so as a message sent simultaneously to the Accounts Payable actor and the Cash actor, and each actor must accumulate the effects of that message/event in the way that makes sense. (Namely, each one will translate the event into credits/debits based on the characteristics of who they are, and maintain a balance accordingly. Double-entry, I suppose, means each event must be ingested exactly once by an even number of actors.)
If you're building payment rails, that event might itself be one of a pair of events, sourced from a meta-event tracking the transaction intent. (As a meta-point, I find it much more useful to think of the "graph" in accounting as having edges not made of money, but of data in a derived-event hierarchy.)
And a first step towards being able to have that mental model is ensuring that you have a good mental model of multiple physical-human actors accumulating events in a structured and atomic way.
But the OP doesn't actually make it clear that this is what the analogy is in service of! And I fear that the OP article will cause more confusion than it solves.
You're right - it was a silly thing for me to write! Something more accurate would be that because debits and credits must balance, there is no way to send a message that would only be seen by a single account (other than a no-op); thus, any meaningful transaction will have an impact on at least two accounts.
anthropomorphizing the accounts is not the problem. the problem is that in the example the two parts of the double-entry are the two partners of the transaction. to anthropomorphize properly alice and bob would be two employees of the company buying a book from a bookstore.
> if you're trying to understand a piece of software like Quickbooks and are not coming from an accounting background
Unfortunately, QuickBooks won't help you understand accounting. It's not a true double-entry accounting system, at least it wasn't the last time I touched it. That said, it still does its job and does it well enough, and real accountants are fine with dealing with it.
Simply Accounting is a better example of a true double-entry system.
> Unfortunately, QuickBooks won't help you understand accounting. It's not a true double-entry accounting system, at least it wasn't the last time I touched it.
QuickBooks absolutely is a double-entry accounting system. The "bookkeeper" mode abstracts away and hides what's going on under the hood, but if you enter "accountant" mode, you'll see the full ledger, and you can even make direct journal entries to modify it.
> I must have only ever encountered it in "bookkeeper mode". That abstraction is likely what threw me off!
I personally find the bookkeeper mode very confusing, and having observed others (non-accountants) using it to manage small businesses, I think that folks would be better off taking a one-day course in accounting and learning just enough to use it in accountant mode.
You don't have to be a CPA, just literally enough about A = L + E to follow the flow within Quickbooks and record one side of each entry.
i was about to write the same thing. knowing that double-entry is meant to apply to myself only, i actually found the example confusing, because well, of course bob is going to have an entry in his accounting book, but i don't care about bobs accounts, i don't want to track that. i only care about mine. i buy a book. how do i record this transaction using double entry bookkeeping in my accounting book?
and bob is not even doing any bookkeeping. he is bookselling ;-)
You gained $20 worth of assets, so the counterpart of the $20 leaving your bank account is countered by your assets-account gaining $20
Now each year your book loses 1/5th of its value, due to wear and tear (4$ disappearing from your assets-account), this is countered by your depreciation-account (4$ tax write off, every year!)
After 5 years, it is worth $0 according to your books, but you manage to sell it again for $10: your bank account gets debited for $10, while your capital-gains-account gets credited for $10
> And how about food? I can understand a book having a resale value I keep in my books, but once I've eaten the hot-dog I bought it is gone forever.
Perishable and consumable food wouldn't be counted as an asset in the first place. You spend the money - it's credited to your asset account (reducing the value of your cash-in-hand) and then debited from your expense account (reducing the value of your equity - or, in more layperson's lingo, increasing the total sum of the expenses you incurred during that period).
Of course it would be, asset is anything of value, you're confusing with subtypes of assets. Just mujhe liability is anything you owe regardless of for how long
> Of course it would be, asset is anything of value, you're confusing with subtypes of assets. Just mujhe liability is anything you owe regardless of for how long
If an office buys snacks on Monday for the office party on Friday, they're not counting it as an asset and depreciating it on their books.
If food production or delivery were part of the core business, it would be one thing, but in the context that OP's talking about, it would be overkill at best (and fraudulent, in extreme cases) to try and count a transient consumable as an asset on their books.
Depreciation isn't relevant here, again, you're confused in the types of assets, not all of them are depreciated, only some with some specific properties like time of expected user. Just read the definition of assets in any (accounting) dictionary, or try to record your snack purchase in real accounts and see which side of the balance sheet this account end up in (hint: inventories, assets).
Do you actually do that? When people are working late at the office and you order pizzas you put that into your inventory and then remove it as people consume the pizzas? I record that into a separate operating expenses account meant for this kind of fringe benefit, not into inventory.
Pretty small so I do the accounting as well, but I think I'd lose my mind if I had to record them into inventory. Then when they leave half the pizzas for the next day, I record that? No way.
No, nobody does this. GP is engaging in an exercise in pedantry, under the guise that it serves some pedagogical purpose. Personally, I don't think it's particularly useful to teach people about how things could theoretically be done, when it's much easier to show then how things actually are, but I'm sure there is some accountant nerd out there who is extremely meticulously tracking the total value of the gumballs on the secretary's desk as they are consumed.
you don't need to record the halves, nothing stops your pizza order to be automatically recordered as
-A_cash +A_inventory
-A_inventory + L_expenses
Sure, if your pizza is frozen and consumed in another period, your books will not reflect reality, but so what, when talking about the very basics of accounting you offset that misrepresentation of a simple example by gaining an important pedagogic benefit! Which one, though? What do you gain by denying that pizza is an asset, going so far as calling recognition of an asset as an asset a fraud (but only in extreme cases of 5 pizzas!) and bringing depreciation/core business in?
Perhaps this is obvious to you, but I don't see what I'm gaining by doing this. My inventory management system will have different things unless I'm also recording these pizzas in there for the day. And it will show my inventory valuation as fluctuating when I do things like lunch or dinner for the team. It really seems useless to me when running the business.
That's fine, many accounting practices eschew precision for simplicity, you don't mark-to-market everything, depreciation is linear, etc, so if you don't see any value in this, but only troubles with integration with other systems etc, then it's useless to you. But then the article wasn't about running a real business
The person you're replying to is confused, but that's because accounting can be confusing.
An account is fundamentally either an asset or a liability. When you buy something with a credit card, you've incurred a liability, and gained an asset, no matter what you've purchased. If you use a debit card or cash, you're trading one asset for another.
One of the basic asset categories is expenses. That's the confusing part! When you acquire an asset, which is consumed or otherwise has no book value, that's an expense.
So when you buy groceries with a debit card for a hundred bucks, that's a +100 in Expenses:Groceries, and a -100 in Assets:Checking. If you buy the same groceries with a credit card, it's +100 in Expenses:Groceries, and -100 in Liabilities:CreditCard. When you pay off the credit card, that's -100 Assets:Checking, and +100 in Liabilities:CreditCard.
Asset is overloaded here, because Expenses are not included in calculating net assets. It's confusing! I find it even more confusing that Income is a liability, which always gets lower. That's because whoever paid you had a liability to do so, which they met out of assets.
This is also why, when you pull a CSV of a checking account, purchases are positive numbers, and income is negative. A CSV of a credit card will have purchases as negative, and payments as positive. It's the difference between an asset account and a liability account. Again, not to be confused with net liabilities: Income is a liability, but not one you owe anyone, rather the contrary, Income just gets smaller and smaller (ideally! If it isn't getting smaller then your net assets will be shrinking, most of us can't afford that for long).
The main thing is that an account which fluctuates from zero to positive, or accumulates, is an asset account. One which fluctuates from zero to negative, or accumulates negatively, is a liability account. There are times when this matters, notably when you can take a tax deduction for expenses, that's a good example of why they're on the asset side of the books.
These are the sorts of comments that make accounting and bookkeeping more difficult for people who are learning it. It helps no-one to try to think of income and expenses as equivalent to liabilites and credits. They are merely on the same sides of the accounting equation.
Assets + Expenses = Liabilities + Equity + Income
Expenses are not assets. For example, depreciation is not an asset. It is the representation of the life of the asset getting used up. It is an expense, a pure expense. Interest paid on a debt is not an asset. It is a pure expense. There are no word games that turn these into assets, like you might have for a software subscription or a gas bill.
Expenses diminish the business. Unlike assets, they do not represent anything that can be liquidated. Income increases the business. Unlike a liability, it does not represent a claim against the business.
Why aren't expenses and income on the balance sheet? Because they are netted out into retained earnings for the period. Imagine a business that cannot have a liability. Its accounting equation would simplify to:
Assets = Equity.
Income increases equity, expenses decrease it. Is equity a liability? NO. It is a separate account category with a credit balance. Want to look silly? Do as I did when I was a young programmer who knew everything and confuse the two.
People not learning bookkeeping before writing accounting software (which is a lot more software than people expect) make many dumb errors that frustrate users, bookkeepers and accountants. A decent bookkeeping book (e.g. Bookkeeping for Dummies) goes a long way to familiarizing someone with how to handle double entry accounting.
> or try to record your snack purchase in real accounts and see which side of the balance sheet this account end up in (hint: inventories, assets).
Yeah, and as I said, this makes sense for a company for which food is a relevant part of their business, but in the context OP is asking about, nobody is tracking it this way.
It’s been 15 years since I took an accounting course. Why would my bank account be debited when the balance went up? Is a debit not negative? Is the cash balance presented as a negative?
Indeed this is confusing to most people (myself included the first time I dealt with it), since if your phone company says they’re giving you a credit, you're getting money.
Your bank account is an asset for you, so debits increase the balance while credits decrease it. This is also called a "debit normal" account.
Liability accounts are tracked in reverse and are "credit normal". You increase the value (how much you owe) with a credit to the account and decrease the value (payments you receive) with a debit.
One way to think about is you always "credit" the source of the money.
If you get money from somebody you "credit" them for giving you the money. You say "I must give you credit for having done this".
If money goes into your bank-account you don't credit your bank-account because money didn't come from there it went there. If you don't credit the bank account you must be doing something else and that is called "debit". When money goes to your bank-account you "debit" it because now the bank-account is more "indebted" to you. You don't have the cash in your wallet but the bank-account is indebted to you by that amount.
From the view-point of the bank-manager things are of course reverse. When you put money into your bank-account the bank-manager "credits" you-the-account (in their books) for having done so.
I guess a crucial thing to realize is that your bank-account in your books is a different thing from your bank-account in the books of the bank. It seems like there is only one bank-account, but two different parties (you and the bank) each have their own version of that "account" in their book-keeping system.
A double-entry book-keeping system is "subjective" in that it always describes things only from the viewpoint of whoever it is who is doing the book-keeping.
Yes! Because you can remove your deposits from the bank and they also have to pay you interest on that balance. Your mortgage is an asset to the bank for the opposite reasons.
In your books, your bank account is an asset, and therefore an increase in the balance is recorded with a debit. In the bank's books, it's the other way around.
In a nutshell, double-entry bookkeeping is tracking all your money in two ways:
- where has it come from/has it forever gone?
- where is it now?
So, you start a simple ledger of having $100 in cash with a transaction like this:
Dr "cash" Cr "original funds" $100
Then you spend some of it on food and loan some to Bob:
Dr "food expenses" Cr "cash" $25
Dr "loan to Bob" Cr "cash" $20
Bob pays you back $22:
Dr "cash" Cr "loan to Bob" $20
Dr "cash" Cr "interest income" $2
You can't write 'Cr "Bob" $22', because... I don't want to get into the principles of accounting, but basically all asset accounts only go one way. You can't have minus two dollars in your pocket, and Bob can't owe you minus two dollars either.
Some of the accounts, like "original funds", aren't very useful by themselves, but they are the only way to make sure "money I literally have in my account/pocket", "money I owe people" and "money that people owe me" can all be counted together: if you tally up both kinds of the accounts, the total sum should be the same, just with the opposite "sign".
Every explanation of double entry accounting seems to do the same thing. If I'm trying to understand the double part of double-entry bookkeeping, what exactly does the "double" refer to? What's being "doubled"?
How would you salvage the article to actually explain the "double" part in detail? Could you do it purely from Bob's (or Alice's) perspective?
The 'double' in double entry book-keeping is related only to the book keepers own records/books. It has nothing to do with counter party's record keeping.
If Alice purchases a house worth $100,000 in cash, then 2 (double) accounts will get effected. Her cash account will decrease (Credit) by $100,100 and simultaneously her House equity account (or any other appropriate name such as immovable asset etc) will increase by $100,000 (Debit).
This can be recorded in a 3 column table as
Credit account -- value -- Debit account
Cash -- $100,000 -- House equity
In the above transaction, two accounts were effected. Hence the name double entry. This gives a truer picture of ones assets and liabilities.
Note: 1. Debit and credit dont have much to do with increase decrease.
2. A transaction can be modelled to have affect more than 2 account. For example if Alice were to make the purchase with $80,000 loan, then the book keeping could go like
Credit Lender $80,000
Credit Cash $20,000
Debit House Equity $100,000
For the sake of better understanding, if one is uncomfortable with having one record affecting 3 accounts, one can be more robust and split the loan and the purchase into 2 transactions. After all, taking a loan and purchasing a house are 2 different events(transactions).
Transaction one ->
Credit Lender $80,000
Debit Cash $80,000
Transaction two ->
Credit Cash $100,000
Debit House equity $100,000
Don't forget the depreciation, interest, maintenance, and tax accounts if you want to track those against the real estate cost basis for various purposes. You also need to figure out how to create and map accounts to IRS rules or you could put yourself in a real bind when it comes to figuring out tax liabilities or deductions.
It’s a checksum; by decomposing every transaction into a double of (credit A, debit B) that must sum to zero, you catch random arithmetic errors.
You can think of it as “conservation of value”, so you can’t just create money out of thin air in your payment service (credit), without tying it to some account with a corresponding debit.
This originally was intended to protect against typos; eg write a 10 instead of 100, at the end of the day your ledger needs to balance. In software typos are less likely bit it still provides auditability to prevent a large class of bugs from wiping you out.
Speaking of history, I learned that the word "control" comes from contra rotulus -- roughly "checking against the wheel", which was apparently from an early medieval device for keeping tallies. The second meaning of "domination" came later.
Bob and Alice each have a "money" account and a "books" account. Each money account tracks how much money they have on hand while each books account tracks the total value of their private libraries.
So to be clear, there are 4 accounts. Bob's Money, Bob's Books, Alice's Money, Alice's Books.
Because these two homeless librarians only have money and books, you can add the two balances together for each person to get their net worth.
If Alice owns 3 books worth $120, then the "Alice's Books" account would show a balance of $120. Meanwhile, Bob has 12 books worth $700.
When Alice buys the books, she -credits her bank account $20 and +debits her books account $20 (the value of the new book). Thus her net worth stays the same, but she has more books assets and fewer cash assets.
Similarly Bob -credits his books account $20 and +debits his bank account $20. His net worth also stays the same but he now has more cash than before.
On Alice's way back to the bridge she resides under, it starts to rain. Alice's new book is ruined. She -credit's her books account $20 and her net worth goes down by $20.
And when the book is ruined, she credits her books account (an asset account) $20 and debits her "depreciation/impairment" account (an expense account) $20.
Cash might be an account, and a bank account might be another one. So if Alice buys with cash, it'd be $20 debit in the books account [1] and $20 credit in the cash account. Or if she paid for the book with something that directly takes the money from the bank account, the credit would be to the bank account.
Note that "credit" in double-entry bookkeeping means a transfer from that account and debit means a transfer to that account. So the debit side of buying the book goes into the books account. The credit entry is for whatever account value is transferred from in the transaction.
I'm not sure I'd say that Alice's net worth goes down by $20 when she buys the book since the financial value of the book would technically also be part of her net worth.
I also wouldn't consider "net worth" to be a single account.
Technically net worth would be the sum of all of Alice's assets in cash, bank accounts, real estate, books and other non-financial assets etc., minus all her liabilities. Each of those might be a separate account in the bookkeeping.
Disclaimer: I'm not an accountant.
[1] There might not be a separate account for books unless Alice is a real books aficionado and a meticulous bookkeeper, so the account might also be "books, movies & music", "entertainment & culture", or just "personal items" depending on what granularity is desired/needed.
It might also be that such items are not considered to have financial value in the system (which would probably be the correct unless Alice collects books) and the debit ("to") would actually go in some kind of an (abstract) expenses account instead. Either way, both the value leaving cash/bank and the value "entering" some other account would be entered.
In a real world example you would be correct. This would fall under the “equity” of the accounting equation assets = liabilities + equity. The equity part can be confusing but is where many of the non obvious second entries end up.
Because double-entry accounting requires two (thus "double") entries for each transaction (i.e., Alice buys a book)
- one for the assets/liabilities account involved in sending or receiving the money ($30 credit, bank account)
- one for the income/expense account to which the transaction corresponds ($30 debit, "education" expense account)
one of the two entries is a credit and the other a debit
Remember, this was all done on paper before software with tagging and such existed.
I'll give a description shot, since I've been doing finance work recently. Other people can feel free to correct.
A company using double entry (as opposed to single) has a "chart of accounts." This means they have a bunch of imaginary accounts for tracking everything, including:
- Assets (e.g. cash on hand.)
- Liabilities (e.g. loans)
- Equity (e.g. investments in the company from outside parties)
- Income/Revenue: (edit: as PopAlongKid kid mentioned, I forgot this one. This could include sales revenue, but also things like interest.)
- Expenses (e.g. team lunch or a flight cost)
Some of these "accounts" may map to actual bank accounts: there is likely a liability account for a credit card or an asset account for the company checking.
Knowing all that, every time money is deposited or withdrawn (a transaction) the "double" references the fact that it's recorded in the journal (a.k.a ledger) of two accounts. (Edit: As bregma mentioned, one records where money is coming from and the other where it's going.) Often, an expense is often recorded in the checking "account" and the and the corresponding expense "account." E.g. a flight may be recorded in a travel expense "account," but you also record that the money came from the checking account. Every transaction is recorded in two places.
Beyond just being more accurate than single entry, this helps with important finance reports like Profit & Loss, since you can now see how money is moving around.
Edit: Now that I'm back on my desktop, these are a couple of useful links for understanding basic double entry bookkeeping: Accounting for Computer Scientists [0] and Accounting for Developers, Part I | Modern Treasury Journal [1]. What is a Sample Chart of Accounts for SASS Companies [2] illustrates some charts, which may be helpful for some folks.
> this helps with important finance reports [...] since you can now see how money is moving around.
This is the real benefit I've encountered. Any time I try to "simplify" financial recording for someone else and avoid double-entry, I inevitably end up wanting to perform a query that would be easy in a double-entry system but is not in any other system.
Right. I didn't mention that a chart of accounts can look different in different companies/sectors. Some accounts may be considered nested (software may even show them as nested.) Then you can roll the totals for all accounts of a type into a general category account like "Assets" or "Expenses." That makes it easier to answer questions like, "how much have we spent in total?"
>A company using double entry (as opposed to single) has a "chart of accounts." This means they have a bunch of imaginary accounts for tracking everything, including:
- Expenses (e.g. team lunch or a flight cost)
- Liabilities (e.g. loans)
- Equity (e.g. investments in the company from outside parties)
- Assets (e.g. cash on hand.)
Not sure why you didn't complete your list by adding "Income".
So double entry is defeated if you uses a computer to enter the entries. For example if you brought a laptop for 1000, but you accidently wrote 2000 AND the computer automatically entered 2000 in the asset account it would still balance even though it was a mistake to enter 2000.
In addition, you can still make the same mistake by hand for both entries. So I’m still not getting how double entries catch mistakes
There are several categories of mistake that you can make when bookkeeping. Some are caught by the double-entry system when a trial balance is prepared.
The error you've described is an "error of original entry" and will be invisible if you only look at the trial balance. It can ultimately be caught when you compare the banking ledger with what's actually in the bank.
Other errors that don't appear in the trial balance can be incredibly hard to detect and in fact, may never be noticed. This is where the real art of bookkeeping is IMO.
The types of errors that do affect the trial balance are things like forgetting to enter a purchase in the purchase ledger but entering the transaction into the banking ledger correctly. Silly errors really, but we can all need help to stop us making those.
When you reconciled the balance in your bank account / credit card statement against that in your set of accounts, you'd notice the error as the statement balance would be 1000 higher than reflected in your accounts.
In a general sense, it really doesn't matter, as long as you are consistent.
That said, there are accounting standards that define the general set of accounts for a particular industry, etc.
But every person having a set of books will want to customize it to some degree.
For instance in a personal set of books, if you want to track every person you pay, you might have accounts, 1 for every single person you have ever paid, ever.
That obviously can get pretty big! Others might not care that their electricity provider changed from Tootie inc. to Turtle inc, so they just have Utilities:Electricity as their account name.
Others might not care at all, and just have a very general "Expenses" account for things like that.
Make sense?
The important part is consistency of using the same accounts for the same transactions.
OK So it is somewhat open but you could use a set of standard accounts, I see.
Makes sense. Probably it's important to keep somewhat of a registers of accounts available to avoid making mistakes and to write directions on where things should go
There's also GAAP in the US and IFRS in Europe, which are standards for how certain things need to be done to be compliant. It's not specific about things like account names or how your ledger should be structured, but outlines many expectations and rules/constraints that build confidence in the resulting numbers.
Agreed, but every industry/sector might have their own set of standards that usually are overlays on top of GAAP/etc. For example in the US for state and local governments there is GASB: https://gasb.org
The chart can differ in different companies or sectors. In my mind, it comes back to what you want to be able to report on.
Some companies may have a larger and more detailed chart of accounts so that they can have very specific breakdowns of things. I've heard of big charts where each of a company's departments have specific accounts and all departmental transactions go there while the rest are lumped into a "Sales, General, and Admin" bucket. (Although I think it's more common to tag transactions with a department code these days?)
That said, categories can be broken down into sub-types beyond Assets/Liabilities/Equity/Income/Expenses. For example, assets are categorized based on how quickly they can be converted to liquid money and if they physically exist. So, under the assets account you may have accounts for current, fixed, and intangible (e.g. trademark or domain name) assets and you would record those appropriately.
Edit: To answer the question more directly, it depends on the company and how they've customized their accounts or guidelines. But, there are general accounting practices that mandate the need for specific things and common questions to be answered, so a lot similar structures and guidance emerge that a company's finance team could use to tell you where something belongs.
Every time money is exchanged, it has to come from somewhere and it has to go somewhere -- that's two places it need to be recorded (or "entered in the books").
Money can not be created out of thin air, and it can not be destroyed. Every movement of money has to be accounted for, which is why it's called "accounting". Double-entry accounting means you have to account for where the money comes from, and you have to account for where it goes, and each of those is a separate entry and it all has to add up to zero.
Where it can become confusing is when money leaves you or comes in from an external source. There are still two entries, but one entry is in one party's books and the other entry is the other's. For example, I get a paycheque and I enter my income in a little book with green paper and DB/CR columns. At the same time, my employer has entered an expense in their book. Double entries.
>Where it can become confusing is when money leaves you or comes in from an external source. There are still two entries, but one entry is in one party's books and the other entry is the other's. For example, I get a paycheque and I enter my income in a little book with green paper and DB/CR columns. At the same time, my employer has entered an expense in their book. Double entries.
I agree with your first two paragraphs but not with this last one. When money leaves you or comes in from an external source, there is always some proxy account for that external party in your own books. And the whole situation is mirrored in the accounting system of the external party (unless they are a consumer). Each party records two entries.
Yes. I have a proxy account with one entry (say, "expenses: bank fees"). They have a proxy account with one entry (say "income: bank fees"). Between the two proxy accounts there are two entries. Money can be neither created nor destroyed.
> Where it can become confusing is when money leaves you or comes in from an external source. There are still two entries, but one entry is in one party's books and the other entry is the other's. For example, I get a paycheque and I enter my income in a little book with green paper and DB/CR columns. At the same time, my employer has entered an expense in their book. Double entries.
NO.
I mean your employer probably has a set of books, but that's not true in your own local set of books.
In your local set of books you would have something like:
ACME, inc Employment Income $100 DEBIT
Bank Account $100 CREDIT
You are accounting for ACME, Inc's Employment expense in your set of books too.
When you send a payment to your Power Company:
Power Company Expense: $100 CREDIT
Bank Account: $100 DEBIT
I mean if you are categorizing expenses you might do something like that. If you aren't, you might title one account "Expenses" and spend it all there, it doesn't really matter what you call the accounts, just that you are consistent.
in my employment income account that money has not come out of thin air. Remember, money can not be created nor destroyed in this system. Somewhere there is a matching entry something like
bregma, services rendered $100 CREDIT
in my employer's books. And that money, in turn, was probably moved in from some other account internally. Mean time the only real movement of "money" was an electronic communication between two banks (my employers and mine), with a matching entry in an account in each.
Things like income accounts and expense accounts are not magic sources or sinks for money flows. They're just half of a double entry system with the other half somewhere else.
I agree generally speaking, but what does that have to do with your local books? Nothing.
You almost certainly don't have access to your employer's books.
Also, the ledger entries for "bregma, services rendered" i.e. payroll will be much more complicated than that, there will be taxes, deductions, etc they have to account for as well.
> what does that have to do with your local books?
It's how double-entry bookkeeping works. Money can neither be created nor destroyed. On your local books you have an account where money goes and appears to be destroyed, but in reality there is a doubled entry in someone else's books. Just because you're unaware of it does not mean it does not exist.
And it's true that bookkeepers will have splits in their ledger in which one transaction consists of multiple entries, but that's a convenient shortcut for consolidating multiple items each of which is one half of a double entry. It has no bearing on how double-entry bookkeeping works and just needlessly complicates a description of the fundamentals. It has only to do with conventions for recording double-entry bookkeeping, just like using DB and CR to indicate whether entry is moving money into or out of an account.
The fact that you have a counterparty with his own books has nothing to with the phrase “double-entry accounting”, it is a method of keeping your own books.
Sorry, but no. I have no idea why you think double entry means 1 of the entries is in some other persons books that you don't have access to is somehow useful. Double entry is 100% local to a singular set of books.
The point of double entry accounting is to avoid many simple mistakes. If you can't access a 3rd parties books to check, what is the point of double entry accounting, when you only hold a single entry?
I literally have no idea how you think this even remotely makes sense.
> Money can neither be created nor destroyed.
Totally as an aside, money can indeed be created and destroyed, the govt and even banks do it all the time[0]. But I agree practically speaking from an accounting perspective in a singular person/organizations books money isn't created or destroyed it's just moved around. But for double entry accounting, it's 100% not useful to talk about money in some other person's books, it's irrelevant.
Might be the slight fever talking, but wouldn't the debit and credit be exactly the other way around? When you get paid by your employer, in your books the money enters your bank account ("debit") and is coming from an (abstract) employment income account ("credit").
When you pay your power company, the money leaves your bank account ("credit") and enters the (abstract) power company expenses, utilities expenses, or whatever account ("debit").
That method only works if money can be created out of thin air, and also destroyed. The grandparent comment was pretty clear that money cannot be created out of thin air, nor can it be destroyed.
While money can’t be created or destroyed (unless you run a central bank…), value can be. Ledgers always have a specific perspective, and that perspective can assign a different value to something than someone else.
In the case of gifting something, from the perspective of the gifter, they destroyed some value they had on their books and got nothing of value in return. There’s an account type for tracking why your net worth decreased - Expense accounts. The giftee received value and they have an account to track why their net worth increased - Income accounts. If value was objective, then the net worth decrease on one side would exactly equal the net worth increase on the other.
With something like cash, the unit of account and the store of value are the same thing - so 100 USD objectively the same value in everyone’s ledger. But say you were gifted a painting. The gifter may have valued this painting at 100 USD, while the giftee actually thinks it’s worth 50 USD. If the gifter didn’t tell them the price, there would be no way of knowing they recorded different numbers. So in this transaction value was destroyed.
The same thing happens when you buy and sell things. Say the painting was sold instead of gifted, then the difference in what the buyer and seller thought the painting was worth is value that was created and destroyed. Each person’s net worth would go up or down depending on whether they thought the painting was a bargain or overpriced. When providing services, value is created at the moment of usage and a ledger will track the creation of value in your landscaping business.
> While money can’t be created or destroyed (unless you run a central bank…)
That's not the case. Money, of course, is just a promise to provide something of some defined value at some point in the future. Anyone can make such promises. Heck, that's why we invented accounting – to keep track of the promises outstanding and delivered!
If a bookkepper destroyed or created money they would be in a great deal of trouble and probably end up working for the state for two years less a day.
Money is just a promise. Anyone can create those. Which should be quite obvious. When you go to work to, as we literally say, make money, your employer is making a promise that in exchange for you work you can take something of some defined value later. Later, you will take that promise and turn it into something of value, such as food. Once spent, the money is destroyed. The promise is no longer valid. The deal is done.
Currency is a promise to a particular entity, such as a central bank. A central bank will loan you something of some value, you equally promise to give them something of equal value (we'll ignore interest for simplicity) back at a later date. Indeed, only the central bank can accept promises made to the central bank. If you accepted a promise on behalf of the central bank, without explicit authority, then you are quite right that trouble is coming your way.
Because there is a trust component required in promises, often promises made – such as the promise of your employer to feed you later – will be backed by a promise to the central bank. The central bank has a military to send if someone really tries to play nasty with promises made, so that carries a lot more trust than if you and I wrote up our own 'IOU'. This may be why you see money and currency as being one and the same. Often they are, but not necessarily so.
Accounting is simply for keeping track of promises. That's why we invented it. You don't need accounting for barter. It is the promises that necessitate accounting in order to keep track of what promises are outstanding and what are fulfilled. A bookkeeper doesn't create money per se, but they certainly account for money created and destroyed by the entity they are bookkeeping for.
I think you’re right that currency is technically what I meant by money in that sentence. Like you said most people equate the two, which is why I prefer to use the word “value” for the various promises we track in accounting. It just has less baggage with most people since it’s more abstract. Value can definitely be created or destroyed from the perspective of the entity whose net value we’re tracking.
AR and AP accounts track promises, and as you point out, bank accounts and cash are also conceptually no different than other AR account. I call these asset and liability accounts State accounts. They track the current state of your promises and expectations. Since a promise can be reneged or an expectation not met, we need accounts that balance changes in State accounts when value is created or destroyed. That’s what income and expense accounts do — which I call Change accounts [1]
> You don't need accounting for barter.
I get what you’re mean, but I think a good way to get your head around multi-currency accounting is to think of it as double-entry bartering. Each currency only has value because it can be swapped with another currency at a certain rate. Which is basically bartering. How many sheep for how much grain? How many USD for how many GBP?
The interesting part is bringing double-entry into this:
- how do you balance a transaction when the two sides are in different currencies?
- How do you track the exchange rate between currencies?
The answer to each question is the other question. You balance entries by adding two more lines that track gain/loss due to exchange rate fluctuations. I did a talk on this at Fintech Devcon [2] and we cover this in our docs [3]
> I prefer to use the word “value” for the various promises we track in accounting.
Value is the opposite side of the transaction, though. Money is the promise of value, not value itself.
> Which is basically bartering.
Yes, it most definitely is, but the difference with bartering, by definition, is that the value is always delivered immediately. As in, you give me grain and I give you sheep at the same time. We both have what we want, the deal is done, and there is no need for accounting as there is no reason to ever think about it again.
But if, instead, you give me grain and I give you nothing but agree to later give you sheep after they have been fed the grain and are ready for slaughter, then we have an unbalanced transaction. You gave me value, but I gave you nothing – just a promise.
Enter accounting. I record that you gave me grain and I record that I made you a promise (money created). You record that I gave you a promise and that you gave me grain. My books will show a loss (promises outstanding) and you will show a profit (promises yet to be delivered). This gives us both a reminder that the deal isn't yet done, which is useful because people are prone to forgetfulness. Also, perhaps even more significantly, you can pass on the promise. The person who finally receives the value in the future may not be the person who made the deal originally, so accounting is critical to settling the promises across a chain of trades.
No money was created or destroyed. The "cash gifted" account would have a corresponding entry in the recipients books reflecting the cash received. Unless he's delinquent about updating his books in which case it's implied but not realized. Few (unmedicated) individuals are going to track every transaction to that level though.
If it was important to account for the cash donation, the company would require a receipt in exchange. If it's part of a coverup the receipt may be for something unrelated but at least the books are in good order.
Cash went out. One half of the double entry is correct. But nothing came back in return. There is no corresponding element of trade to account for. The transaction doesn't balance. Which is obvious in human terms. That's the point of a gift – the transaction isn't supposed to balance! But formal accounting methods are not as fluid as people are.
So, of course, in reality money was created (and then destroyed, it being a gift) in order to make the transaction whole. But as far as this magical fairytale land where money can't be created the entry doesn't work. You can't account for nothing.
Let's say it's not a gift. Let's say someone is borrowing $1,000 cash instead. The same applies. There is no corresponding element in trade to account for. It doesn’t balance. Thus, when the cash goes out you need to create money out of thin air to satisfy the other side of the transaction, which is later destroyed when the cash is returned.
You're misunderstanding double-entry bookkeeping. Something does not have to come into the company got every transaction moving something out of the company. If your company gives $1000 to Billy, you document a $1000 debit from your gift account and a $1000 to Billy's account payable. The goal isn't to get any one account to zero but to get a source and destination recorded separately for every movement of funds.
Lending would be at least two sets of doubly-recorded transactions.
> The goal isn't to get any one account to zero but to get a source and destination recorded separately
Right, because transactions are actually two-sided. I give you something, you give me something in return. That's how people work with each other. And, as such, we account for a source and destination because that matches what actually happens.
But often times you only offer a promise. For example, I write some software for you, and in return you offer me food. But I'm not hungry right now, and I certainly don't want food that is going to spoil before I get around to eating it, so instead you promise to give me fresh food sometime in the future when I am hungry.
How do you account for that? You received software services, but gave nothing back in return other than a promise. Well, what if you recorded the promise? Software services in, promise out. You got your software, I get my food, the credit and debit accounts match. Everyone is happy.
Congratulations, you just created money out of thin air! -- And now, later on, I am feeling hungry and am ready to take you up on your food offer. You give me the food, I give back the promise, food out, promise in, I'm fed, debits match credits, and the money is destroyed.
That's exactly why we invented accounting: To keep track of the money being created and destroyed. You wouldn't need accounting if promises never needed to be made. Without promises, you'd have the software services, I'd have the food, and we'd have no reason to think about the transaction ever again. It is the promise that has us wanting to look back to make sure that promises outstanding are made good.
> Money can not be created out of thin air, and it can not be destroyed.
Yet accounting is necessary because money is created out of thin air. Money is just the representation of debt, an IOU. There needs to be a record of it in order to know that a debt was created and that a debt was destroyed.
More practically, let's say you give me corn today, and I promise to deliver some of the chickens fed that corn to you after it is ready to for slaughter. Money keeps track of the promise outstanding. We record that promise, or account for it if you will, so that we remember that there is a promise and so that we can later ensure that the promise was delivered upon as agreed. Something that becomes especially important when you realize that promises can be traded on to other people who weren't party to the initial deal. Perhaps you don't really want chicken, but would prefer a watch instead. Luckily the watch maker would like to eat chicken for dinner down the line, so you give him the promise of chicken in exchange for the watch. So on, and so on.
Realistically, double-entry accounting is really quadruple-entry accounting. You record that something was received and you record that a promise was made, then, later on, you record that something was delivered as promised and also record that the promise is no longer outstanding (or in reverse if you are on the opposite end of the transaction). A profit indicates that people still owe you things that you haven't collected upon. A loss indicates that you still owe people things that you haven't yet delivered.
From what I got out of the article and my own limited understanding of double entry bookkeeping, the "double" seems to be referring to the part where we split a transaction into credits and debits as opposed to a transaction with positive or negative balance. The doubling is happening with the labels we use to describe what's happening with the money.
From an individual account perspective, there's a doubling of the number of columns you could enter a transaction's amount into.
The core innovation of 'double entry' is that you can see the flow of money between accounts for every transaction.
This is possible because you (the accountant) are always adding a back-reference from the other account (hence the 'double' in 'double entry').
There's really not much to it. It throws people that are new to it for a loop, I think, because it is a strange way of behaving, and it isn't obvious why you're doing it until you have to track down something that doesn't balance. It's just a disciplined behavior that accountants started using because it allows one to track things that were difficult without it.
this is probably not true, but I heard that this stuff predates the idea of negative numbers so you have db and cr accounts that offset each other without negatives.
$100 appears in your account. That’s one part. The other part depends on why.
* you moved money from another account, the double is -100 in that account.
* you sold stuff, +100 in income.
* you borrowed some money, +100 in ‘debt’.
In a physical book each of these categories would have a left and right column, and each transaction has numbers in one left and one right column. Or in many columns but the sums of left vs right columns must be the same.
Always needs two entries to keep assets equaling liabilities plus equity. If you do anything it effects both sides of the equation, thus “double entry” is required to keep this relationship. It’s the accounting equation.
For example, a bank might decide you likely can't pay your loan and write it down to zero. You might still have the liability on your books because you plan to repay it. They'll make the relevant entries in their system (and the debits and credits will balance) and you'll do nothing (which balances).
Double entry bookkeeping has zero to do with other entities. It's solely about your own books.
I'm not a psychiatrist, but this bit stroke me as funny:
> Solving the problem of conditional self-worth is less complicated than you might think. You don’t have to go through regression therapy and get a better understanding of how your early-life caretakers gave you implied messages of contingent worth, neither do you have to sift through the wreckage of emotional or physical suffering you endured growing up.
> You simply need to recognize that you are worthy exactly as you.
How's that different from telling a depressed person to 'simply stop being sad', or a disabled person 'simply stand up and walk'? I'm sure the point of regression therapy is to get to that point, and this 'realization' is not a shortcut to it (caveat: I don't actually know what regression therapy is).
I can actually answer this. It is a decision you can make, but that phrasing trivializes it.
Getting to that point and internalizing it is not an easy process and may require medication or therapy to gain the necessary perspective to see this as a choice.
I had to unlearn a lot of things and spend years putting the past in perspective to get there.
For me it came after smoking too much pen and getting crippling depression for which I had to crawl out of. Emerging from it was like a bitch slap of regression therapy.
It's not, and using the term "regression therapy" shows how little Gervais actually understands about modern integration and trauma informed therapies.
Gervais is a leading toxic-positivity guy and former coach turned pop-therapist focused around "maximizing potential," so you can safely ignore anything that he says
Some people need to unpack an entire lifetime of learned behaviors and biases that impede them from trusting yourself
Edit: And as far as I can tell this whole article is a submarine for his leadership business. Makes sense, as that’s what HBR is all about at this point
> How's that different from telling a depressed person to 'simply stop being sad', or a disabled person 'simply stand up and walk'?
I've been in therapy for a bit over 5 years to deal with issues of past abuse and the residual Complex PTSD the experience left behind.
I agree with the sibling comment that points out the article is trivializing the process.
When I started therapy, I thought that digging through the past is what it would be all about. But looking back, the function that it served was to help prepare me for the realization that the article points to.
There was a very clear inflection point where I rather suddenly realized that the trauma of my past and the harmful modes of thinking that it caused were causing me to continuously modulate my experience in a negative way by getting caught up in thoughts about it. And that moving past it had less to do with slogging through the shit, and more to do with re-training myself to think in more helpful ways.
To simplify this a bit, the realization was essentially that I had the power to change how I think, and that changing how I think was the real path forward.
Had I been told going in that "you need to change how you think", it would have bounced off of me. I would have told the person telling me that to go to hell, and it would have been like telling me to simply "stop being sad", to your point.
It took me some years to be ready to realize that this was really the solution. And when I did realize it, it completely changed the trajectory of my progress and the nature of my weekly sessions. Instead of getting stuck in the muck every week, I could reflect on how the embedded patterns of thought had impacted me that week, and I could practice new ways of thinking. I still think getting stuck in the muck for awhile was a necessary part of the process. To the extent that exploring the past helped explain the present, it was useful to help make the present feel less "crazy".
I agree somewhat with the message that the ultimate solution is a kind of realization about self and the role that I have in changing my own experience. But the path to reaching this realization can still be a hard one, and in my case was facilitated by an excellent therapist who patiently steered me away from my rumination about the past and taught me how to understand what I was feeling in the present.
I think arguing against regression therapy as the article does is doing a disservice to therapy. CBT or ACT seem far more relevant, and still often necessary to reach that critical realization.
You can't change the past but you can change the story you tell yourself about it which will change how you feel about it. Ultimately this will change your memory of the past as well.. so self reinforcing loop.
It's not asking you to change a physiological (can or can't you walk?) or emotional (are or are you not sad?) reality, it's asking you to change your rational self-perception. That's literally just a matter of changing your mind. Of course, if you still don't feel worthy, you have to ask why that is. Usually the issue is a critical environment, which you may or may not be able to change. I suppose there's value in reminding yourself that you have inherent worth and that the world can't take that away, but then you're still dealing with a world that wants to (and will take related action towards that end), for whatever reason.
It’s also difficult if you’re aware that “worth” is not an objective measure but a subjective construct. Any choice of “worth” is neither objectively correct nor incorrect. The only thing you can say is that having a higher self-worth (but maybe not too high) is psychologically healthier.
Depression and self-worth are apples and oranges. One is an ailment, the other is more like a metric that is dependent on variables.
As an individual you control the variables that produce your self-worth. That can’t be said for the factors that create depression, at least not fully.
> Giving a fuck about other peoples opinions is a choice.
When you grow up in an environment where other people's opinions mean the difference between receiving care and not, or of getting hit with a stick and not, or of being told you're going to hell or not, it deeply ingrains the belief that other people's opinions are a matter of life and death.
It trains the developing brain to automatically become hyper-vigilant of the emotions and opinions of others, and these bedrocks of thinking carry forward into adult life where they either lead to a life of anxiety and worry about what others think, or a life of unwinding and replacing it with better ways of thinking.
When that kind of thinking gets embedded at an early age, at a time when the victim has no choice in the matter, it's absolutely not correct to say that this is a choice.
I don't think this was the intent of the GF comment.
Of course that if you've been conditioned for something that is no longer a choice.
If you have a broken leg and someone tells you to walk it off you're going to think they are clueless.
If you literally have a [chemical] imbalance and someone tells you that you should be happy instead of being sad it's not as clear cut observing it, but it's also as infeasible as walking off a broken leg. Btw: being conditioned for something literally alters the chemical your brain/body releases.
As with the broken leg, you need help to figure out how to walk until it heals. Realizing that you need help and seeking and accepting the help is critical. Part of that help can be reframing how you view your interactions to transform what used to be implied and automatic to now being a choice.
If you're the kind of person who cares about what someone else thinks, you are by definition conditioned to be in that state. Some people are more deeply conditioned than others, and to their psyches, the stakes are much higher than average (i.e. the trauma example). The broader point is that framing this as a "choice" doesn't make sense.
I agree that a person can make a choice to counteract their conditioning (if they even realize it's something they need to counteract). But this is quite a different thing than having a choice over the kinds of automatic modes of thought that need to be addressed.
A person who is anxious about what other people think chooses to be so the same way a depressed person chooses to be depressed. By which I mean to say that it's not the kind of choice that it's made out to be.
We all care about what others think. We are social creatures with that experience real consequences for anti-social behavior. You still have to filter things and pick your battlea.
All DSM disorders are just clusters of symptoms that a board of psychiatrists decided were disorders. They are no more or less real than any other mental phenomena that the APA board decided weren’t “disorders”.
And if what you say is simply a choice, why do some people struggle with it? Maybe for person A it’s easy, but for person B it’s exceedingly difficult. It could be because of inborn traits or their upbringing or any number of other things, but for some people, making the “choice” doesn’t stick. The mind keeps going back to its old processes, regardless of the conscious choice that was made.
People need to stop assuming that everyone else’s brain works the same as their own. Everyone is different. Neurodiversity is a thing.
No, it is in the category of "Symptoms, signs and abnormal clinical and laboratory findings, not elsewhere classified" which does not mean that it is unclassified..
It is classified as a symptom, not a condition. Those are different things. Only a subset of ICD-10 concept codes are considered conditions. But in certain areas of mental health that distinction is rather arbitrary.
Possibility seeking religion might help with this. Measuring self worth in relation to human dignity as the beloved creation of a diety might help distance us from more materialistic measures of self worth that society proposes.
Religion is one of the central reasons that I felt I had no self-worth growing up. It literally taught me that I was inherently bad, and it was one of the core justifications for years of physical abuse.
I recognize that not all practitioners of religion engage in the toxic kind, but I think it's more helpful to look at the ways that some religions help people, and seek that out vs. adopting a belief in some deity.
Seeking forms of self exploration and contemplation that lead to realizations about self and the inherent value of all beings can be useful. Contemplating the vastness of the universe, the improbability of existence, and the fact that we're all made of the same stuff can help chip away at negative self beliefs.
But relying purely on religion can be a form of "spiritual bypass", and has so many pitfalls that it's hard not to push back against it when I see it recommended. I'm not saying there is never value, but there are less risky ways of finding the same kinds of benefits.
On mobile, the "Let's talk" button in the top right corner is cut off by the carousel menu overlay. Seems like CSS is still out of scope of the bug fixing magic for now.
On a more serious note, it's an interesting blog post, but it comes off as veeery confident about what is clearly an incredibly broad and complex topic. Curious to see how it will work in production.
Yeah, if only there was some scientific way to ensure that elements don't overlap, let's call it "constraints" maybe, so one could test layouts by simply solving, idk... something like a set of linear equations? Hope some day CSS will stop being "aweso"me and become nothing in favor of a useful layout system.
Except outlawing acquisitions by larger tech companies will absolutely reduce funding and incentives to start companies, and result in less products, less companies, and less competition.
I think this is net-negative for consumers, in a pretty significant way. If the most incentivised lifecycle is to seek VC investment to make a non-susitainable product in the hope of being acquired and swallowed into The Borg and shut down, we still end up with less good products.
- Product life-cycles become short, consumers are weary of anything new. How many times have you seen product launches here on HN where the top comments are worrying about sustainability? That either there will be a rug-pull for consumers in the future, or they just plan to be acquired and shut down.
- Larger companies continue to have no incentive to actually improve their product and compete with others if they just purchase everything in the market.
> If the most incentivised lifecycle is to seek VC investment to make a non-susitainable product in the hope of being acquired and swallowed into The Borg and shut down, we still end up with less good products.
"Aim for the moon so if you miss you still end up amongst the stars."
The actual _goal_ is to be an independent successful company, but getting bought is the back up option that provides a safety net. If it was success-or-bust (no "-or-get-bought") the risk calculus would not make it worth it. It would make the American economy much more conservative and much more like Europe.
But when the most common business plan is "1. Spend VC millions, 2. Acquire non-paying customers, 3. ???, 4. Profit!" it kinda seems like the un-written step 3 is "get acquired by a MAGMA company". You just say something like "oh, we'll get revenue by adding advertising / premium accounts later" as a fig-leaf for the public.
I think it's fine if no one starts vampiric companies that dump free services on the public destroying the perceived value of software for the purpose of a fast unicorn exit. Of course, these companies always look to advertising for funding so they are obtrusive.
Unless you are thinking of real companies that would be affected by this ban? Retail stores don't care about this ban. Companies that sell real products wouldn't care. If they sell real software services and plan to turn a positive profit rather than exit this wouldn't impact anyone other than unicorn chasers, which are bad for everyone.
But Figma isn’t a vampiric company dumping free services for the purpose of a fast exit. It’s been around for over a decade and charges _more_ for its principal product than Adobe charges for comparable products.
So by your own definition, real companies are affected by this!
I don’t see the relevance of that question: outcomes for companies fall onto positivity/negativity ranges beyond merely a bankrupt / not bankrupt bjnary.
The company will probably do well for the reasons you mentioned, only some late shareholders are affected. A good exit for the economy would be actually an IPO.
> A bureaucrat will decide if you can exit the way you want to.
It's not up to the bureaucrat but to the courts. The FTC doesn't "approve" or "reject" deals--it can just take legal action to try to stop a deal, but that still gets adjudicated either in a federal court or in an FTC administrative law court to a judge which is appointed independently.
Adding a legal battle with the FTC to the cost of any acquisition can chill and kill otherwise obvious deals, and or sap value out of those that push through.
FWIW, I think there are good reasons to limit tech consolidation, including this one. But anyone should realize that it will reshape the industry in unpredictable ways, including some that harm "real" consumers and builders.
But anti-trust isn't being invented now. It's always existed. Companies already factor in anti-trust risk when doing M&A—it's just hard to quantify the expected value of that risk
If anything, IMHO, we've been too lenient with anti-trust in Tech in particular over the past 5-10 years. This just dials things back a little, and makes it so that "hard to quantify" risk is a little more likely than it was before, and certainly a little more likely than zero
I don't think Adobe / Figma specifically is an "otherwise obvious deal" precisely because it has such obvious anti-trust risk. The fact that this merger was even announced is all the proof I need that we were being too lenient. Figma can still sell to any number of huge Tech companies
What’s net new about this? It has been the case for decades that if you try to sell to the only major competitor that it could be blocked under antitrust.
A bureaucrat also decides the amount of lead you can put in your product and sell.
In fact, there are all kinds of things you can't arbitrarily do because it hurts consumers, both physically and financially. This includes strengthening industry monopolies which has time and time again demonstrated that it causes incredible harm to entire segments of society.
> This includes strengthening industry monopolies which has time and time again demonstrated that it causes incredible harm to entire segments of society
I don't think you can take a hypothetical worst case and make it apply here. You could also say that we shouldn't have governments, because look at WW2 and all the war they declared.
Adobe buying Figma wouldn't cause incredible harm to entire segments of society. It's barely even a monopoly, in that Adobe doesn't really do what Figma does already, and there is incredible potential in just making another Figma competitor if Adobe ruins Figma.
Yeah, I get it, some founders start their startup motivated by a potential MA. And this is great for them.
However, as a customer, I absolutely hate this. Instead of finding a way to actually make the product/service self-sustainable, they just increase the number of (usually) free users. But once they sell, normally the new owner either shuts the service down or turns it into crap.
It’s a personality thing. The type of person who starts companies tends to start a lot of them. The idea of sticking around at a company and keeping a steady hand on the tiller (after all the big product problems have been solved) is anathema to these folks. What they need is a succession plan.
It just happened that mergers and acquisitions turned out to be the cleanest, easiest way for founders to hand over the reins. In days past, companies would go through this transition process internally, often by succession through the founder’s family. The founder may have been a very entrepreneurial type, but the child who was raised to be the successor was more of a managerial type. When it worked out, anyway. Sometimes none of the founder’s kids were suitable. Or the founder tapped the wrong kid to take over.
Agreed. I think if you’re passionate about an idea then you should be able to channel that energy into making it a sustainable business. If you can’t motivate yourself to do that… maybe let someone else who is motivated do it.
This isn't that though. This is a company with a clear monopoly trying to hoover up smaller competition to reduce competition. We shouldn't incentivise this behaviour, on either end.
If this is the liquidity event that Figma were betting on from day 1 that's their mistake for not foreseeing regulators being unhappy about it.
I'm fine with some other company buying-up Figma, just not Adobe. Microsoft could buy them (and hopefully not repeat what happened to Expression Blend) - or maybe Alludo could resurrect the Corel brand and launch Figma under that title?
The reality is that for extremely high-growth companies such as Figma, only companies with an extremely strong existing business and strategic fit can afford to acquire them. Corel, for example, was valued at $1bn in their 2019 acquisition. There's absolutely no way they could acquire Figma. At the same time, VCs are betting on Figma-like outsized exits for their model work.
I get people are dying to stick it to the big tech cos, but the reality is that the long-term effect of actions like this is reduced funding and less new, disruptive companies – and strengthening the situation for the cash-rich behemoths like Microsoft, Google, etc.
I think the "disruption" narrative has played itself out by now. Nothing has been disrupted. Society still largely functions the same way as it did 20 years ago, and the same firms are mostly still running the same businesses.
We were promised a radical new world, what we got was a couple of apps for fast food delivery from McDonald's.
Hmm... I struggle with your post. What about AMD vs Intel? Or TSMC / Samsung vs Intel? Intel is far weaker that it was 20 years ago, and chips are cheaper (inflation adjusted) and WAY faster 20 years later. Is that not a win? I feel like desktop computing is basically flying cars at this point. For 1500 USD, you can get 5GHz CPU, 32 GB RAM, 2 TB NVMe drive, reasonable GPU that is utterly light speed compared to 20 years ago. The first time I ever used an NVMe drive, I literally thought the Linux commands were not running correct because they finished so quickly!
Last one: I promise that I am not trolling here: What about psuedo-self-driving that Tesla and a few others have in cars now? On an expressway, it is pretty amazing -- hands off the wheel, talk with your friends with no worries of distraction.
I think the person you’re replying to was referring to the post-smartphone startup era. All those hardware companies you mentioned are older than dirt. None of them qualify as “disruptive, VC-backed startups” like Figma, Uber, or Airbnb.
Clearly Figma is providing a valuable product to the market. In part visible here by how people celebrate this decision. But people are celebrating Figma's continued independence without understanding that without the possibility of being acquired for a large amount of money, the funding and incentive situation that resulted in the beloved independent Figma wouldn't exist.
This is not as much about Figma, which is big already and will be fine, but the 100 other potential Figmas that might not even been started yet. They will have more difficulty finding funding, attracting employees with equity, etc., when the scenario 'big tech co acquires company for lots of $' doesn't exist anymore.
Why would anyone go worth at a small company for equity if there's no chance to get liquidity? Why would investors invest? This decision might improve the short-term situation of the market, but over the long-term, I can only see how it benefits the big companies, which rely on today's cashflows / RSUs to attract people.
> Are you saying that the business of "we make a thing and we ask for money from our users for said thing" model cannot work?
I'm saying that companies like Figma, which has raised $333 million dollars in venture capital, at up to a $10bn valuation, cannot exist if those investors don't see sufficient options for liquidity.
And given that people strongly value companies like Figma, as evident in this very thread, that would be a bad outcome all in all. The only market participants for whom this wouldn't be a bad outcomes would be big, established businesses that have to fear less startup competition.
"I value Figma the product, I couldn't care less about how much money they raised" is an argument like "My power comes out the socket, so I couldn't care less about building power plants". It's hard to have one without the other. Figma the product was built with the the money they raised.
That would certainly be good for Adobe's users, but it means they'll have to put in a lot of work, which costs money that could otherwise buy so many yachts.
Maybe it would be more accurate to say that they that there is no way for them to make a product that will steal Figma's market for less than $20 billion.
Adobe's despised reputation in business practices makes it hard for users to choose Adobe when any other creative option when it is available.
I'm fine with some other company that has a track record of doing bad things to the things they've purchased, which is no different than the company I'm against buying this company.
How are you okay with MSFT? The logic is not very sound
I guess the parent's point was that it's better for Figma to be acquired by a company that clearly has a Figma-shaped hole in their lineup, rather than someone with a lot of existing overlap that will likely just strangle it quietly in the night.
TBF, they kept Skype, GitHub, and Minecraft, running fairly well - one can disagree on the features, but they did get continuous development and support, they weren't just "deprecated" and sunset like, say, Yahoo would do.
Let's say you're pitching your startup to a potential investor. Would you pitch it as "the next Adobe" or "something Adobe might want to buy"? Which one would you be more likely to invest in?
I think it's the opposite. Because many companies start with the dream of an exit with a high price tag, and what they end up developing is a missing feature from a bigger software suite, which is already enshittified by a big software house to the core.
Instead, smaller companies can start and slowly get bigger while getting bigger. Affinity suite is a great example. While their photo tool is not my cup of tea, designer is great, IMHO.
Tech acquisitions haven't been outlawed. And this particular situation is applicable to perhaps 2 or 3 a year (all of which are multi-billion dollar values).
I doubt very much if this will stop funding of new companies except perhaps at the level of Uber/WeWork.
Acquisitions also reduce competition. If competition only exists to be acquired you are only funding an ever-growing oligopoly, the more acquisitions into the oligopoly the more power they have, diminishing the number of available markets to compete in (since one of the oligopolistic companies will certainly have more capital than a newcomer).
Anti-trust is not a new thing, it's even considered a foundational aspect of competitive capitalism by some thinkers...
If your only goal in founding a company is to get acquired, you haven't made a company; you've made a product, and probably not a profitable one.
We should be encouraging way more medium-sized companies, that operate sustainable business models, make money for their founders and employees, and aren't subsidized by cheap money. I think if startups actually had to sustain themselves we'd see a lot less grift and waste in VC.
I don’t disagree with the notion that there should be more medium sized, self sustaining (“lifestyle?”) companies, but such statements are rarely if ever followed up with _why_ this is a desirable outcome for everyone involved.
I guess it comes back to how you view the current system. If you find the idea of unicorns and acquisitions and the further centralization of capital distasteful, it's kind of self-evident why you'd want to see something that represents a break from that norm.
For me, yes, I see the obvious argument that more money leads to more (and faster) innovation. But it can also result in an economy that is too tightly coupled and dependent on the might of a few massive companies, whereas an economy that is distributed across more smaller businesses is more robust.
At the extreme, you might imagine South Korea: a country that is highly consolidated into one or two major cities and propped up by massive, economy-shaping corporations. I don't think anyone would disagree that Korea made massive economic strides in a short period of time, but I think there's much more debate about the long-term health of the Korean economy and people now that their continued prosperity is so centralized.
And, of course, there's the consumer angle; though I can't claim any scientific methodology, my impression of the sentiments surrounding this merger are that it was pretty popular with Figma's investors and employees (understandably so, as they stood to gain from the merger), but was deeply unpopular with their customers. You could make the argument that "a Figma owned by Adobe is better than no Figma at all," but consumers have seen it all before at this point: a good product is acquired, and then either a) the pricing model changes, b) the rate of innovation slows down, c) the product is ultimately abandoned somewhere down the line, etc, etc. None of these outcomes are essential truths, but they are common outcomes of companies getting larger and larger to the point where a business unit that is otherwise healthy is deprioritized because it is not profitable enough or growing fast enough for the larger parent to care; or, conversely, the smaller parts suffer because the larger parent encounters trouble and can no longer sustain their acquisitions, even if they are keeping the bloat afloat.
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