Thinking out loud.

I was driving through a small town Friday when I saw another sign that included simple, elegant, and effective design. It was a radar speed sign, which of course you see in neighborhoods around town all the time. However, those are generally marginally effective… you know it is just sign right, and speed right by. Well, would you do the same after seeing this radar speed sign:

By taking the exact same sign and adding a very simple set of red and blue LEDs that rapidly flash back and forth when it detects you going over the speed limit, the sign suddenly, immediately, and very vividly implants the image of being pulled over in your mind and you slow down. It’s almost like the appearance of red and blue flashing lights all but guarantees this sign’s radar i actually police monitored, even though anyone who wants to is of course allowed to add such lights to their sign.

On the downside, it is so effective, I spent 10 minutes crossing town on main street at 25 MPH in a 35 MPH zone.

I was playing golf yesterday when I saw a sign that I had not seen in the past. “Warning, Bee Hive” the sign said right near the fence into a backyard along the edge of the course.

At first, I thought either these people were bee keepers in their backyard or, more likely, were the victims of being next to a bee hive that the golf course would not let them destroy. Well… upon further investigation, it turns there is no bee hive at all.

For years the people on the other side of that fence have fought uninvited visitors hopping over the fence into their yard to retrieve errant golf balls. They tried “Keep Out”, they tried “Private Property”, they tried yelling at everyone who jumped into the yard, they tried talking to the golf course, etc. all to no significant reduction in the amount of unwanted visitors.

Well, guess what… one large bee hive sign and the visitors stopped overnight. Rethink the problem from a new angle and an easy, simple, and elegant solution often follows.

…which creates huge opportunity in the software business.

The idea of having an IT Department grows more arcane to me by the day. The reason for having computers is to make getting work done easier. Software is fundamentally just a service that makes accomplishing some task easier, faster, etc. Computing infrastructure such as servers, networks, databases, etc. are just tools the software developer uses to make the delivery of quality software possible. Yet somehow over the last 10 or 20 years, “IT Departments” have moved a lot of focus from delivering software to building and maintaining infrastructure. Yet infrastructure provides a business nothing, other than a cool looking onsite computer room. Furthermore, more and more traditional infrastructure (i.e. the telephone system and even the phones themselves) are collapsing into software.

Most major applications and software packages now come with some sort of support contract. The reason for this is frankly that IT departments have filled up with a bunch Microsoft Windows admins and Cisco network admins that don’t understand the businesses they work for and don’t know how to support software. This is a gross generalization of course, but is it not true that in almost every IT department you’ve been in, the applications group is smaller than the infrastructure group when in reality it should be dramatically slanted the other direction?

So a problem arises in that the IT department just becomes a middle man on conversations about software, relaying information from the software vendor to the business and back. It creates a scenario where the business basically pays twice for support… once to the vendor and once to IT. So, of course, the business goes to cut costs and squeezes the vendor. The vendor then realizes… “hey, we could handle this support much better and more cost effectively if the software was running on reliable infrastructure that we control” (e.g. if we create a homogeneous environment). So, the vendor moves toward infrastructure mandates and then ultimately to hosted models. This affects the business none because all they wanted was for it to work in the first place. Now what is IT doing? Just getting in the way is the answer.

I love building software but only because I get to do it with my hand-selected tools, on my hand-selected infrastructure systems, and with my hand-selected programming languages. If I worked for a business where I had to turn around and port the software to run on a Windows Server so that our customer’s IT departments were able to support it, I would quit software and go back to practicing accounting full time. The result of this new is that my team and I can build a product we are extraordinarily passionate about, meaning it turns out extraordinarily good. The business can then in turn select the services like ours they need, pay for exactly what they use, and get direct support from the software developers themselves when there is a problem. The only downside is the IT department is reduced to hooking up the onsite printers, sorry guys.

Acting like “Software as a Service” is a new, trendy term is silly. Software was always a service, we just got confused about how to deliver that service. “Cloud Computing” ranks up there as equally stupid. The trick to computing for businesses going forwarding is simply selecting vendors that can deliver a fantastic, useful service at a reasonable price. The trick for everyone currently sitting around in IT installing a never-ending flow of Windows patches, is find something you are passionate about in the software space (programming, design, modeling, etc.) and move toward smaller, passionate software shops where you can use those skills to build something you are proud to tell people about.

So, we (my company, iTickmark) are getting close to ready to have our official launch party. It has been a crazy couple of years and many of my friends and even family don’t understand where I’ve been, the things that transpired, and how we’ve ended up with our third business name even though it has only been a couple of years. Well, for those wondering, here is the chain events…

Leaving Corporate America

A few years ago, I left my job at Ernst & Young. I didn’t know exactly where I was going but I did know I wasn’t happy there and that I had big ideas and could find enough service work to get by for as long as I needed to. So, Trimtab Business Technology was born. The idea was that I had some great product ideas and I could provide technology and accounting-related consulting services for as long as necessary in the interim until I could find the time and resources to build one of them. I did a lot independent consulting in college so this was no stretch, just picked up where I left off except with much more experience behind me. It was a nice theory, all except everything changed very quickly. Just a couple months after I got started, two of my ex-coworkers approached me asking if I would be interested in joining them to start our own accounting firm. They are fantastic people and I agreed to roll Trimtab into a partnership we would start and just like that… Linford & Company LLP was born.

The rise of Linford & Company

L&C did good for awhile, then absolutely killed it for awhile, then had a rough patch, and is now really rolling again (more on that later). Starting L&C has tied working for my dad’s retail store when I was 15 years old for the best professional experience of my life. I learned extraordinarily important lessons about having partners, needing sales, building a team, and following your passion all in an extremely short period (I am convinced you couldn’t learn the same lessons I learned in two years working for someone else, like E&Y, in twenty years).

A short time after starting L&C, we decided to do something we knew the market needed. As professional auditors we had been intrigued by the idea of creating a better way for doing audit confirmations. Performing confirmation procedures is this crazy, “old school” process of sending out paper letters to various third party entities to verify certain account balances as part of a financial statement audit. We started down that road and found that thanks to the unique combination of our team’s intimate knowledge of the audit process and my background in technology and software, we could easily pull this off.

In December of 2008, we did exactly that and launched AuditConfirmations, which provides web-based software for doing audit confirmations electronically on a per-transaction fee basis. AuditConfirmations was an overwhelming success both in terms of building a successful internet-based company and (more importantly) building extraordinarily well engineered software in an agile and resource-constrained environment. We discovered, that with the right team, we could build things that likely took less than one tenth of the time and financial resources that it takes other, larger companies to do similar things.

The (re)birth of iTickmark

A more important side-effect of AuditConfirmations was that I remembered I had left my corporate job to build products… I had left my job to engineer and architect things that would someday take the pain out of what I experienced in my early post-college years, things that were real, things I could tell people “I make this”. So, in mid-2009, I reached an agreement with my partners to MOSTLY leave day-to-day client service. I retained a partnership interest in Linford & Company LLP so that I could keep in touch with public accounting practice and client service, but moved mostly into a position to build software.

As a result of this decision, we rolled Trimtab out of the practice along with me. Trimtab was back in business and was now able to focus specifically on building software for professional accountants. This is our niche in the world, but unfortunately the name “Trimtab Business Technology” means nothing to anyone in the world of professional accounting. So we decided to change the name… and iTickmark LLC was born.

Where we go from here

iTickmark is quickly growing up into a fabulous little company. We are still launching new features on AuditConfirmations that I believe will it in time to being the premier product for electronic confirmation services. We are also on the verge of the launch of workpapers.com, which will be hands down (at least in my opinion) the best, most productive software on the market for working paper and project management for risk and control based audits. Most importantly, we have a small team of great people located all around the world that are starting to making things really click.

Finally, what becomes of Linford & Company? We re-focused from broad service lines to what we really do best and we are absolutely KILLING it lately. This is thanks mostly to my business partner Newel who is driving our growth, particularly in the area of SAS70 audits. He is the driving force for the company day-to-day as Managing Partner and I am helping him as necessary. You would have to ask Newel, but I think we make an extraordinarily effective team under this arrangement.

iTickmark’s future

And that brings us to tomorrow… we build software for professional accountants (auditconfirmations.com and workpapers.com), produce content on the professional accounting and software industries (eatinghours.com and simplicityrevolution.com), and provide limited professional services. I am very proud of our progress, excited about where we are going in the immediate future, and the team we have supporting us at our young age.

At this point, it is exceedingly well established that the procedures for “ensuring” airline security are really about providing passengers an illusion of security to keep air travel volume up. It is a matter of security theater as opposed to actual security. In the aftermath of the Nigerian man who attempted to blow up a flight to Detroit (however was too incompetent to do so), one new security measure was that passengers were not allowed to use electronics or have anything on their lap for the last hour flight. So… I guess terrorists are dramatically more likely to blow up a plane when it is 59 minutes from landing than when it is 61 minutes from landing?

The other main frustrations I endure at the airport are the painful security screening line and trying to get on and off the plane when 300 people are trying to stuff their suitcase in the overhead compartment. So we have three essential problems here: 1) people are bringing bomb parts onto a plane in a CARRY-ON BAG, 2) going through the security line is a nightmare because Grandma Mildrid hasn’t flown since 1967 and doesn’t know you can’t put liquids in a CARRY-ON BAG, and 3) the big fat guy in the aisle won’t sit down because he can’t find a place in the overhead for his CARRY-ON BAG.

So, I know this is complicated, but why don’t we solve three problems very quickly and just ban carry-on bags? Require people to check all bags. Much easier to find bomb parts in security screening, much faster to get through security screening, and much more pleasant airplane cabin. Done. Good solutions are always beautifully simple.

Funny thing is that El Al (widely regarded as the most secure airline on Earth), I discovered, already beat me to this idea. Figures though since they are also the only airline to discover that profiling passengers in screening is also a good way to identify security threats. That one may not be real politically correct but I really can’t remember the last time I heard a 14 year old suburban white girl from Jersey tried to blow up a plane.

First, I love how everyone tells me about how careful I need to be because going to Cambodia is sooo dangerous or because Malaysia is Muslim or because Africa is, well, Africa. A couple of years ago my house was broken into and tore up right here in suburbia Colorado. The other day we had a full blown shootout effectively right here my neighborhood. The Denver Post even called us a “sheltered suburb”. Crazy people are everywhere.

The question I ponder today however is does it make sense to expend resources and bad press to conduct an investigation into the shootout? Apparently some folks saw the getaway car on the news and thought maybe the police were a bit overzealous with their gun fire. I saw that car myself, in person, and it was seriously shot up. But, according to police, they were fired on first when attempting to pull the bank robbers over and then fired further once actually stopping the car. In such a situation, is there such thing as too much fire? They were in the middle of town. But what do you do? Establish a precedent that if you rob a bank and then snap off a few shots at the cops, they will just let you go?

I think many cops (particularly younger, white, male ones as a gross generalization), abuse their power and think they are much hotter shit than they actually they are. I make no secret of that. But I think in this case, it was probably time for society to stand up a say we aren’t going to put up with this shit in our neighborhood.

Both cops were at least grazed, they were obviously under fire and their lives were endangered. The bystanders nearby needed to flat take cover. Bad stuff happens, this is the time to get the hell out of the way. And in the aftermath when the officers are asked why the car was so full of bullet holes and why there was that level of gun fire… I am inclined to tell them to answer “because that is how much ammunition I had”. Well done Westminster PD.

It seems to me that there is some dishonesty among bankers at the moment (shocking, I know). I hear them in public interviews and televised congressional hearings talking about how they take responsibility for the crisis… how it was their fault… on and on. Then I pick up the Journal of Accountancy or CFO Magazine and all I see are articles about how the true problem is the fair-value accounting rules. Seems to be a consistency issue here.

Fair-value accounting rules require financial companies to record the value of certain securities (like the “toxic assets” we hear so much about) on their books at their current market value. Seems straight-forward enough, except the accounting standards setters think this means the price a third party would pay whereas the bankers feel this is the price managers and regulators would like them to get for them. I think you can see the gap between these two stances. So really the question is, are the bankers being treated unfairly because the accountants make them take losses to write down these assets to “fair market value” when (the bankers claim) from a long term perspective they are actually worth much more?

Well if you put lipstick on a pig, is it still a pig? Also, wasn’t it the bankers perspective on pricing these assets that got us in this mess in the first f$#%ing place?

I may not be the brightest accountant on the block, but I think I have a handle on this one. When I was in third grade and wanted to trade Bo Jackson’s rookie card to the flea market, the Beckett price guide said it was worth $5. However, the man at the flea market only offered me a $1.50 on trade. I was outraged… then my father explained to me a simple concept I would call FAIR MARKET VALUE.

“The card, just like anything else, is worth exactly what someone will pay for it” he told me. How the hell can you argue with that? The price guide could say it was worth $10,000… still gonna get that whopping $1.50 for it.

So to you whiny excuses for businessmen (and yes it is men I see doing all of the whining)… THE VALUE OF THOSE ASSETS IS EXACTLY WHAT SOMEONE WILL PAY FOR THEM. If no one will pay any money for them, that means the value is (you guessed it)… ZERO! This is not complicated to understand, yet you would think it is given the fact that legislators ARE ACTUALLY GOING FOR IT. So to all of the financial-genius lawyers in congress who think that letting banks assign values to these assets out of thin air (and who are asking the standard setters to make that possible) will make the economic problems go away… GUESS WHAT, IT WON’T. In fact, pricing outside of reality was the whole problem in the first place.

That brings me to my final quandary on this topic before I move on to my next rant… if fair value is higher than what someone will pay for these assets and the value is therefore written up on the bank’s books, where does this money actually come from? It clearly is not cash that can be loaned out to generate additional revenue is it? If it is in fact just “vapor money” (fake money written on a piece of paper somewhere) how does that help the bank stay solvent?

Quit playing accounting games and go to work on solving the damn problem please. The alternative is to go ahead and go bankrupt which, believe me, I am also fine with. Accountants are the messenger, the voice of reason in the madness… so don’t shoot the messenger, shoot the banker.

My friend Ben and I recently presented the new product my company built, AuditConfirmations.com, recently at the Denver/Boulder New Tech Meetup. This was interesting experience for me, the first “real” presentation I have given in a hell of a long time. There were over 400 people there so it was an interesting way to warm back up.

Overall though, a good experience. Turns out my presentation skills are really bad, but it was good to realize that hear and see it on video so I can make adjustments for next time. The crowd was helpful and at least reasonably interested given they were a technology focused audience listening to a presentation on accounting stuff. The biggest realization for me… I was much better at answering questions than presenting. Need to get better at just talking than presenting.

Anyway, the Rocky Radar wrote up this nice article on the event and a YouTube video of our presentation is below. Let me know what you think!

An interesting explanation of derivatives leading to financial crisis that is floating around the internet:

Heidi is the proprietor of a bar in Detroit . In order to increase
sales, she decides to allow her loyal customers – most of whom are
unemployed alcoholics – to drink now but pay later. She keeps track of
the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi’s drink now pay later marketing strategy
and as a result, increasing numbers of customers flood into Heidi’s bar

and soon she has the largest sale volume for any bar in Detroit .

By providing her customers’ freedom from immediate payment demands,
Heidi gets no resistance when she substantially increases her prices
for wine and beer, the most consumed beverages. Her sales volume
increases massively.

A young and dynamic vice-president at the local bank recognizes these
customer debts as valuable future assets and increases Heidi’s
borrowing limit. He sees no reason for undue concern since he has the
debts of the alcoholics as collateral. At the bank’s corporate
headquarters, expert traders transform these customer loans into
DRINKBONDS, ALKIBONDS and PUKEBONDS.

These securities are then traded on security markets worldwide. Naive
investors don’t really understand the securities being sold to them as
AAA secured bonds are really the debts of unemployed alcoholics.
Nevertheless, their prices continuously climb, and the securities
become the top-selling items for some of the nation’s leading brokerage
houses.

One day, although the bond prices are still climbing, a risk manager at
the bank (subsequently fired due his negativity), decides that the time
has come to demand payment on the debts incurred by the drinkers at
Heidi’s. Heidi demands payment from her alcoholic patrons, but being
unemployed they cannot pay back their drinking debts. Therefore, Heidi
cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKIBOND drop in price by 90 %. PUKEBOND performs better,
stabilizing in price after dropping by 80 %. The decreased bond asset
value destroys the banks liquidity and prevents it from issuing new
loans.

The suppliers of Heidi’s bar, having granted her generous payment
extensions and having invested in the securities are faced with writing
off her debt and losing over 80% on her bonds. Her wine supplier claims
bankruptcy, her beer supplier is taken over by a competitor, who
immediately closes the local plant and lays off 50 workers.

The bank and brokerage houses are saved by the Government following
dramatic round-the-clock negotiations by leaders from both political
parties. The funds required for this bailout are obtained by a tax
levied on employed middle-class non-drinkers.

Finally an explanation we can all understand …..

Wow… so this was funny for awhile. Jim Cramer and Jon Stewart firing back and forth for a week. I posted several blogs like two years ago that basically said I thought Jim Cramer was an idiot, and do often find Jon Stewart very funny but somewhat uninformed as well. But… when Jim finally came on the Daily Show to sort out the “feud”, I think Jon Stewart clearly took him to school and illustrated the problem with the financial markets and how they are covered by the media. The show is a must watch… do so using the hulu link below.