Visa acquires Plaid & Intuit makes ChronoBooks exclusive to QBO Advanced

Grab a snack, there's a lot to talk about in this episode! We talk about Visa's acquisition of Plaid, how Intuit has made ChronoBooks exclusive to QuickBooks Online Advanced, and Expensify's newest release - Karma Points. We'll also dig into the reasons why FASB is the villain, more consequences of California's Consumer Privacy Act, along with why email is the biggest threat to small business, how even more elaborate frauds are swindling big business, and check fraud. There's discussion about Walmart's attempt at warehouse automation, and why the "Buffet Indicator" may be a fairly reliable warning sign that the stock market is headed for another big crash.

Sponsors

Show Notes
  • 01:52 – David can see clearly now, just in time to admire the cracked screen of his smartphone
  • 02:42 – Blake's upping his skills game at Jirav, learning financial modeling
  • 03:08 – Blake's second webinar - Webinar Recording: How to Build a Financial Model for an Accounting Firm | Jirav
  • 04:25 – The most effective way to master a new tool or software is to use it for yourself, or a client
  • 05:24 – Is there life after The Cloud Accounting Podcast? Blake reveals his retirement plan
  • 06:57 – Side hustles can help you understand your clients' pain points
  • 07:42 – American remote-worker ranks have nearly tripled in the past two decades!
  • 08:02 – Business on top, PJs on the bottom - just one of the reasons why remote work rules! 
  • 08:18 – Reviews! Thank you, I <3 smilies, Aassas, and Glafollette!  
  • 13:43 – Visa changes it stripes, with some $5.3 billion Plaid | Bank Innovation
  • 14:30 – Is data the new oil? 
  • 15:46 – Everything old wants to be new again, when it comes to fintechs, at least | Advisorhub
  • 16:30 -- Visa's Acquisition of Plaid Presentation | Visa
  • 17:42 – No QuickBooks Online Advance? No ChronoBooks for you! | Intuitive Accountant
  • 19:16 – Perhaps Intuit killed the wrong tool? The ChronoBooks backlash begins
  • 23:38 – Who needs a one-percent reward, when you can boost your Karma with every purchase? | Expensify 
  • 27:12 – Dave Barrett makes a case for Karma | Expensify
  • 27:23 – Do you Concur? Emburse wants to change your mind! | Accounting Today
  • 29:19 – Google ups its productivity game with the acquisition of AppSheet | AppSheet 
  • 31:16 – Stand up and shout  - FASB is the villain! | Accounting Today
  • 33:02 – While it might delight CPAs and auditors, this 10,000 page codification, for mere accounting mortals, is a bit much
  • 33:28 – The End of Accounting by Baruch Lev and Feng Gu | Amazon
  • 34:32 – There's really no place for GAAP-basis financials in a subscription economy
  • 37:11 – The CCPA implementation comes with a pretty hefty price tag - $55 BILLION |The Hill
  • 39:11 – Could the CCPA be more trouble, and new risk than it's actually worth? 
  • 41:00 – Email still poses the biggest security threat for small businesses | PYMNTS
  • 42:17 – Deepfake audio fraud is the new risk in town | Axios
  • 43:28 – Are Google and Facebook too big to fail? Apparently not when it comes to invoicing scams | Fortune 
  • 44:19 – While paper check usage declines, check fraud continues to rise | WSJ
  • 45:09 – UK small businesses are just not that fond of open banking |  PYMNTS
  • 46:29 – Be afraid; be very afraid of the Buffett Indicator | CCN
  • 47:05 – Mr. Buffett buys low, and sells high, or holds ... Be like Mr. Buffett! 
  • 49:41 – Time to move to Finland? | Quartz at Work
  • 51:44 – Eliminating useless and constant meetings might be even more useful than a four-day workweek
  • 52:28 – Who needs humans when you can hire an Alphabot? Walmart's trying to stay in the game with warehouse automation | Gizmodo

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Transcript

Right now, if you currently have one client that's past due, you could be using QuickFee to get the immediate benefit of freeing up that cash flow. Stay tuned to hear more from our sponsor QuickFee later in this episode.
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This episode of The Cloud Accounting Podcast is sponsored by AccountingSuite. AccountingSuite offers exceptional cloud-accounting software that includes a robust set of inventory management tools to track inventory levels, orders, sales, and deliveries from anywhere at any time. AccountingSuite even handles multi-channel online sales. 

In one integrated dashboard, you can control inventory orders and sales across various stores at the same time to avoid product outages and lost sales. AccountingSuite lets you start out with just the features you need today, and as your business grows, and needs change, you'll have the peace of mind knowing that AccountingSuite offers an upgradeable path for your firm and company's future. 

AccountingSuite is offering Cloud Accounting Podcast listeners 50 percent off forever by using promo code “CAP_50_2020.” Head over to cloudaccountingpodcast.promo/asuite. That is Cloud Accounting Podcast dot promo forward slash A-S-U-I-T-E.
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This episode of The Cloud Accounting Podcast is sponsored by OnPay. OnPay is an easy-to-use full-service payroll that's the right fit for all your clients, whether they have just one or 500 employees. They handle all the complicated stuff, like agricultural payrolls, Form 943, multi-state, and H-2A visas. OnPay even makes it easy to switch from other payroll services by doing all the data entry for each client that you set up.

Right now, Cloud Accounting Podcast listeners can get three free months of OnPay payroll service. To learn more, head over to cloudaccountingpodcast.promo/onpay. That is Cloud Accounting Podcast dot promo forward slash O-N-P-A-Y.
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Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver.
 
David Leary: And I'm David Leary.
 
Blake Oliver: Another week, David.
 
David Leary: Yes, it's very eventful for me. I got bifocals, so that way, I could actually look at my phone. Then, this morning, I dropped my phone and cracked the screen. So, now [00:02:00] I can see my phone very crisp and clear with my glasses on, and now it just makes the cracks in my phone screen really, really stand out.
 
Blake Oliver: So, are you gonna stick with Android or are you gonna buy an iPhone?
 
David Leary: Oh, I'm sticking with Android. Are you kidding me? I'm even gonna buy my Chinese HUAWEI phone, too.
 
Blake Oliver: I hear those are really affordable. Must be subsidized by the Chinese government spying on you.
 
David Leary: Value for the dollar, man.
 
Blake Oliver: Well, what's new with me? Yesterday, I did my second webinar with Jirav on CPA Academy. It was very exciting [00:02:30] for me because I've been at Jirav now since October, and I have made it my mission, since then, to actually learn how to use the product, which is financial modeling. I've always wanted to be able to do financial modeling; I've never done it, so that was part of the reason I joined the company is, selfishly, just learn how to do this cool thing that all the CFOs I've ever worked with have been doing. So, in order to actually make that happen, because it hadn't happened - I was getting distracted by so many things - I scheduled a webinar where I would have to build one live so- [00:03:00]
 
David Leary: Ah, for public accountability.
 
Blake Oliver: Right. So, I had no choice-
 
David Leary: I should've tuned in for that. I shouldn't have missed that. Darn it! 
 
Blake Oliver: You can watch the recording. I'll put the recording link in the show notes. It was called How to Build a Financial Model for an Accounting Firm. It's very basic - basic monthly bookkeeping; build out the revenue model; and then the staffing plan; and do drivers to relate those things. You can do cool things, like, for every 25 clients, you need to hire a new bookkeeper, and you can do it two months in advance with that. Ten building [00:03:30] out the OPEX, and he CapEx for their laptops. Some simple stuff ... We couldn't  do a lot in an hour, but it was really fun to actually do it, and it forced me to learn how to do it.
 
David Leary: So, would this be a technique you suggest when people are like, "I need to train myself how to do advising of clients ..." Like, "Just go get it. Just show up to a client and start doing some advising." 
 
Blake Oliver: Even more than that ... I use the mad scientist approach for everything. Ever since I started doing bookkeeping ... My background was not in accounting, it was in music. So, I had to teach myself everything [00:04:00] about bookkeeping. Then I went to school for accounting. But when I was a bookkeeper, I had to learn it all myself. So, what I would do is I would buy the software, or join the Partner program, and then setup the account for myself. When I didn't have my business, I used my personal finances. So, I'd put myself personally on the software and then reconcile my accounts. That's how I learned QuickBooks; that's how I learned Xero.
 
Then, when I had my business, I would just plug that app into my business. I'd start using Expensify for [00:04:30] expense reports, or I'd start using Bill.com for paying my own bills. Then I would see how it actually worked. That, in my opinion, is the only way to really master something is to either use it for yourself or use it for a business you're working on. But I always prefer to use it for myself, first, because I don't wanna screw up my client's process, if I don't know the thing's gonna work right.
 
David Leary: Oh, I completely agree with you on that. I mean, that's my big learning over the last 18 months of being on my own small business journey is moving from using apps, in theory, [00:05:00] or playing with apps, or putting fake data in apps, to moving my real money through these apps, and my real data through apps. It just changes your complete tolerance level, and your point of view on it.
 
Blake Oliver: That brings me to my retirement plan or my business after the podcast - once our podcast become so successful; we're just filthy rich ... I wanna start- 
 
David Leary: Is this a 2020 plan, or is this a 2022 plan? How soon is this gonna happen?
 
Blake Oliver: You're head of business development, so you tell me. I want to set up an accounting firm; [00:05:30] maybe my own CPA firm. It would be in a retail location, and the office would actually be like a coffee shop. You know how they have- Capital One has those bank branches that are now coffee shops, and you sit down?
 
David Leary: Okay, yeah. 
 
Blake Oliver: So, it would be a coffee shop/fast-casual kind of restaurant situation. People could come in off the street. They don't have to be clients. They could eat, and they could have coffee there, but clients could also come and work, so it'd be kinda like a co-working space. Then, the reason I want [00:06:00] that element of the coffee shop/food is that I could have all the apps running that business, so I could try out all the point-of-sale systems in my own subsidiary of my firm ... Do you know what I mean? I could actually demo the software- 
 
David Leary: I totally get that. Clayton Oates told me this story ... He's down in Australia ... I do the same thing; when I see different point-of-sales, I ask the restaurant employee, or the restaurant owner, "Hey, you like that app you're using, or the point-of-sale?" Whatever they're doing, I talk to them about their tech. I guess Clayton did that with [00:06:30] a restaurant owner about some point-of-sale. I don't even know. The restaurant owner's like, "Yeah, and because I figured out how to use it, I have a whole side business. I've implemented in 40 other restaurants, and they all paid me to implement it." So, you're right, because you're using it, you become an expert on it, then you have a little ... This guy has this- he's in the restaurant business, but he had a whole side hustle implementing this restaurant software because nobody else knew how to implement it. 
 
Blake Oliver: That's great.
 
David Leary: So, all you accountants and bookkeepers out there, create a small business-
 
Blake Oliver: A side hustle. 
 
David Leary: A side hustle, so you can actually really [00:07:00] understand the pains that your clients are going through.
 
Blake Oliver: So, if you're a brewery CPA, that means you gotta start brewing beer and selling it, as well, so that you can implement the point-of-sale in your own business. CPA-IPA.
 
David Leary: I think it's been done now a couple times, but I've been wanting to try it [crosstalk] 
 
Blake Oliver: It should be a real brand, not just promotional. Anyway- 
 
David Leary: Promote ... Yeah, that's true - permanent brand. 
 
Blake Oliver: -enough about random business plans and dreams. Let's talk about what's going on in the real world. I think we got a review, right?
 
David Leary: We did get a review, but before we go away, I [00:07:30] do have something about your dreams I could tag on that's actually news-
 
Blake Oliver: Okay. 
 
David Leary: -from a tweet. So, there was a tweet that went out from- his name is @hunterwalk. His tweet had a really nice graph in it. His tweet says, "The number of Americans working from home full time has nearly tripled over the past 20 years. The trend is accelerating."
 
Blake Oliver: It looks like we're at three percent now, and 20 years ago, it was closer to half a percent, yeah. 
 
David Leary: Exactly. So, I just- I know your dream is more people working from home; more people working remotely. [00:08:00] We're well underway-
 
Blake Oliver: I am working from home today, David, and I am business on top and pajamas on bottom. It's the best!
 
David Leary: I have to work at home to record the podcast because it's the best quality studio here in the closet.
 
Blake Oliver: Exactly.
 
David Leary: All right, we can jump into the reviews. I just wanted to ... That was a news thing that was related to your dreams.
 
Blake Oliver: All right. Well, we got two reviews, so I'll just read the first one here. The headline is "2020 Predictions." "Loved this conversation. I am usually nodding my head in agreement. Got to participate in your podcast [00:08:30] at QBConnect 2019 in San Jose. Hope we can reconvene in 2020 to follow up on pricing value, et cetera. I am now a fan, just like @MaryHambeleton.😃🌟"  That is from I <3 smilies, via Apple Podcasts. Thank you so much! 
 
David Leary: We have another review related to predictions, as well. This was on Podchaser. This is from A-A-S-S-A-S- 
 
Blake Oliver: Aassas. 
 
David Leary: Aassas ... This person actually gave [00:09:00] us predictions in their review. It's a five-star review. "I have a few predictions of 2020. Accountants will become more app advisors, giving Xero or QB app add-ons advice against a small fee. Secondly, vendors will start emailing receipts just like how Squarespace ..." I think he meant to say, "Square's cash-machine app works," He thinks Worldpay, SumUp will ask for an email at the point-of-sale, as well.
 
Blake Oliver: Mm-hmm. 
 
David Leary: Which, I argue, every single SaaS app needs to be emailing receipts out [crosstalk]  
 
Blake Oliver: Oh, it's great. 
 
David Leary: I hate the ones that don't do it, [00:09:30] and I have to go get the receipt, download it, then upload it to AutoEntry. Just email me the receipt, and it saves me a bunch of work.
 
Blake Oliver: Yep. 
 
David Leary: Clients'll start to use Xero [crosstalk]
 
Blake Oliver: David, you should tell that to Xero because they email a link, and you have to go in, and download your invoice. They don't just email you the invoice.
 
David Leary: QuickBooks didn't either until I- until recently. I publicly bitched about it because ... I'm like, "Why do I have ..." It was annoying. 
 
Blake Oliver: Right. 
 
David Leary: Send me a receipt that I can enter in. "Clients will start to use Xero, QBO themselves more, [00:10:00] and use accountants for advisory and compliance work." So, this person sees a shift back into DIY with the accounting systems. Then he said, "I hope you my prediction. I really enjoy listening to The Cloud Accounting Podcast."
 
Blake Oliver: Yeah, thank you. 
 
David Leary: So, Aassas, thank you.
 
Blake Oliver: Last one. This is also an Apple Podcasts, from Glafollette. "These guys are the real deal! So I’ve been around the accounting technology world for a VERY long time and launched the very first podcast in the space way back in 2005! (Big thanks to my friends Randy Johnston & Doug Sleeter for making “Intersection Live” so much fun! We thought it was good back then —- but quite honestly it pales when compared to what David & Blake produce week after week after week in 2020. Smart, funny, insightful, edgy (occasionally even snarky) but always interesting and pretty darn accurate. CLOUD ACCOUNTING PODCAST is high on my list of weekly “must listen” programs. Just a hint for the guys —— you know we’re going to soon stop using the term “cloud accounting,” right? In the future it will be called “ACCOUNTING. 😉" I [00:11:00] didn't really future-proof the podcast very well when I named it, did I, David?
 
David Leary: Well, I think we've got a good 30-year run, possibly, here. That's my bet. 
 
Blake Oliver: Thank you so much, Greg LaFollette, for listening. It's a real honor, actually, to have you listening. For anyone who does not know this man, he is probably the ultimate thought leader from the AICPA/CPA.com. 
 
David Leary: I think he was number two on the- when Accounting Today did that list of influencers; that [00:11:30] all the influencers say who's the most influential - I think he's number two of what all the influencers think, so ... 
 
Blake Oliver: Yeah, so, really, really cool. So, David, what do you-.
 
David Leary: Hopefully, this is real. It's not fraudulent; like somebody's not just pranking us, right? This is a real-deal review.
 
Blake Oliver: So, what's top of mind for you in the news this week?
 
David Leary: Well, so we had ... What did we have? We have a big, huge acquisition - Visa bought Plaid for $5.3 billion.
 
Blake Oliver: That's a big deal.
 
David Leary: That happened. Intuit is shutting down access to ChronoBooks [00:12:00] unless you buy QBO Advanced. So, that exploded, and there's a firestorm online about ... I have some opinions on that.
 
Blake Oliver: Yep. 
 
David Leary: So, some banking-type stuff ... Open banking; more open-banking news, but I think those were the two big ones.
 
Blake Oliver: So, for me, I've got this article. The headline is just the best: "FASB is the Villain," in Accounting Today. That does such a good job of explaining everything that I feel is wrong with FASB, and accounting regulation right now. 
 
David Leary: Did you write this under a pen [00:12:30] name? Is this your article? 
 
Blake Oliver: No, I wish! 
 
David Leary: Okay, okay ... 
 
Blake Oliver: But, no ... This is great. Another update - Expensify has a new feature in their Expensify card to help donate money to people in need, which I thought was interesting. We'll talk about that. Walmart is automating their warehouses in their stores. It's pretty futuristic. Then, I'm kinda worried that we're headed to another really bad stock market downturn, or recession based on the Buffett Indicator, [00:13:00] which I just learned about this past week.
 
David Leary: This has been a theme of yours. This 'go short on the market;' things are gonna slowdown in the economy. You've been detecting different articles that are pointing that direction there. 
 
Blake Oliver: Well, I'm just ... The expansion has been going on so long, it's inevitable. Now, I don't think you should take your money out of the market because I think any good wealth manager, or financial planner will tell you that you have to stay in it to win, and if you try to time things, you're gonna fail. But, yeah, I'm a little concerned based on this indicator, so we'll talk about that. Then, finally, [00:13:30] the new Finnish prime minister has called for a four-day workweek.
 
David Leary: For everybody on the globe, or just ...?
 
Blake Oliver: Everybody in Finland, anyway.
 
David Leary: Okay ... 
 
Blake Oliver: So, what should we start with? 
 
David Leary: Why don't we just start with the big one? Let's start with the Plaid/Visa- 
 
Blake Oliver: So, for those who don't know what Plaid is, basically, it's one of those apps that lives in between your business apps that helps connect, oh, Mint to Bank of America, or ...
 
David Leary: It's kind of technology that enables all the bank feeds.
 
Blake Oliver: Right. It enables bank feeds. It enables [00:14:00] verification for instant deposits, so you don't have to do this multi-day thing to verify ACH. Visa bought Plaid for $5.3 billion! That's a lot of money! Why is this a big deal?
 
David Leary: A) The acquisition number's a big deal, right? That's gigantic. Visa's very hard about pointing out that this is not a short-term game. This is a decade-long thing for them. This is a payments consultant that said this - Plaid's APIs give Visa a new pathway to data-driven revenue streams. [00:14:30]
 
Blake Oliver: Data is the new oil.
 
David Leary: On two fronts, right? It's not just the grease that makes things work together, it's black gold oil. 
 
Blake Oliver: Right. There's value in data. You can sell the data, and you can mine it for information. That's the whole history of Google, right?
 
David Leary: One in four consumers now, with a U.S. bank account, have used Plaid. If you use Venmo, you're using Plaid. Half of the apps that connect to QuickBooks and Xero are probably using Plaid, if not more. It could be 70 to 80 percent, actually. It might be 85 or [00:15:00] 90 percent. All of you listeners, I 100-percent believe 100 percent of our listeners have all used Plaid. They might not know they've used Plaid, but they have used Plaid.
 
Huge, huge, huge opportunity for Visa. It's a little scary because how long is Visa gonna keep an open-API mindset? Let's say I'm an app that's using Plaid, but I'm a ... Maybe my app also uses MasterCard APIs, and I've been using Plaid independently, but I'm also kind of in bed with MasterCard. Does Visa come along one day and just say, "Sorry, you don't get to use Plaid anymore because [00:15:30] you're also a partner with MasterCard ..."? That happens all the time. I think Walmart did that. They stopped dealing with partners that used Amazon Services- web services. So, this happens, and that's a little scary. My thing is where is this gonna affect the open ecosystem, and the trickle-down effect of that.
 
I saw another article related to this - how this could start the wave of fintech deal-making. Right now, there's 60 financial fintech companies between the neo banks, the lending companies, companies like Plaid, and Stripe. There are 60 that are valued at over [00:16:00] $1 billion, and this could be the domino that just starts the acquisition of old fintech buying new fintech.
 
Blake Oliver: It makes sense. The banks are waking up to this whole new world of fintech, and they've gotta catch up. Acquisitions are really the only way they're gonna do it because they just don't build stuff themselves like this.
 
David Leary: You're gonna have to see consolidation. I mean, the online lending spaces, there's 5,000 players in that: all the payments players ... There's just a lot of players in this space. So, we'll see. Right now, it doesn't have a lot. There's a slide [00:16:30] deck that- I'll try to find the link so we can put it in the show notes.
 
You start looking at that slide deck, and the one chart I kind of looked at ... The only thing it's missing is a GL. Again, it's like, geez, everybody's one step away from owning the full end-to-end, from transactions to the invoicing payments, assets, liabilities, down to the GL. That's the last thing missing from the tech stack and now, Visa is a competitor with Intuit. 
 
Blake Oliver: Yeah, if I were a bank, I would buy a GL application and integrate it along [00:17:00] with bill pay into my online banking. I'd own the whole stack.
 
David Leary: Yeah, well, I think last year we saw two banks buy two very small SaaS cloud-accounting GLs. So, you're right. We're probably gonna see more of that.
 
Blake Oliver: So, you mentioned some of the possible negative impacts of this acquisition. It's a little bit abstract, though, because Plaid is not something that we use ourselves, day to day. It's one of those cogs in the machine of cloud accounting. Let's talk about an acquisition that really is [00:17:30] making a big difference, right now, for some of our listeners, which is the ChronoBooks acquisition. Intuit bought ChronoBooks back in November, and what just happened this week, David? 
 
David Leary: Intuit announced that they are going to shut down ChronoBooks for any external users. So, if you're a ChronoBooks customer currently paying for ChronoBooks, that is gonna be shut down and disabled-.
 
Blake Oliver: Unless you are a QuickBooks Online Advanced user. 
 
David Leary: Which, in that case, you just get it as part of your QuickBooks [00:18:00] Online Advanced subscription.
 
Blake Oliver: What is ChronoBooks?
 
David Leary: ChronoBooks will do a backup of your QuickBooks Online data. One of the things people have always had a knock against online software, like QuickBooks and Xero, is there's no backup. In QuickBooks Desktop, every day, you could back up your data to floppy diskettes or a CD-ROM, put it in the safe, and if there's a catastrophe, you could restore your backup. Well, great ... For natural disasters, QuickBooks Online and Xero are great for backing that up, but if you have an employee do bad data entry into your app all day, or [00:18:30] you have an app, a rogue app, do bad data entry into your app, you can't fix that without manually fixing it.
 
There are products that ChronoBooks ... Remember one of our sponsors, Rewind? There's been products that have popped up on the market that will use the APIs of QuickBooks or Xero to back that data up, so you can restore the data. Now, they're only as good as the APIs available, so there's not 100-percent backup because these products don't have all the data exposed through APIs. But, in most cases, if you can restore [00:19:00] invoices, the things that people are entering, or deleting from your software- 
 
Blake Oliver: That's enough.
 
David Leary: These tools are really, really pretty valuable, I think. I totally agree. It's got a lotta traction. These tools, surprisingly, are more popular than I think even myself would have imagined.
 
Blake Oliver: Yeah, and this is really impacting at least one of our listeners. who we know personally. Caleb Jenkins uses ChronoBooks with his clients who have ... He calls them clusters of companies - all these different entities and subsidiaries, he [00:19:30] backs them all up. Now, he's going to have to migrate to something else, but none of the other applications support that particular type of billing and functionality, so he doesn't know what he's gonna do. He's a QuickBooks power user ... I just don't get this- 
 
David Leary: The Facebook groups are on fire about it. Everybody's complaining about it. Twitter people are complaining about it. I actually- my opinion is Intuit shut down the wrong product. 
 
Blake Oliver: What should they have shut down instead?
 
David Leary: Should I explain more on this? 
 
Blake Oliver: Yeah. 
 
David Leary: Okay. Well, let's talk about some assumptions [00:20:00] we can agree on, okay? A company the size of Intuit, no matter what decisions they make, a certain percentage of customers are gonna be pissed off. That's just the fact with everything. 
 
Blake Oliver: Right. Of course. 
 
David Leary: Uber changes something, some people are gonna be mad. McDonald's changes the size of the French fries, people get mad. You're always gonna make ... That's just gonna happen. We can agree on that, right? Can we agree, too, that QBO is the future for Intuit? 
 
Blake Oliver: Yes. 
 
David Leary: Okay, we can agree on that. Can we also agree that Intuit's a public company, and they have a financial incentive or obligation to push customers to QBO Advanced?
 
Blake Oliver: Yeah. Well, to [00:20:30] QBO, I think the way they're doing it with QBO Advanced, as somebody pointed out on Twitter ... Trying to find who said it ... The way they're building QuickBooks Online Advanced is buying apps, adding them into QuickBooks Online Advanced, and then shutting them down. That appears to be the strategy. So, it's not innovating, and building into QuickBooks Online Advanced; it's forcing people to upgrade by taking away stuff from the regular product.
 
David Leary: Yeah. By shutting down ChronoBooks, they've pissed off the QBO users, which is your future, right? [00:21:00] Those users are bought into your dream. They're bought into your future. So, you're pissing off your QBO users. Then, now, what you've done is you've actually pushed them not to QBO Advanced, but to go find a different third-party backup program.
 
My argument is they should've shut down QuickBooks Desktop. You would have pissed off a percentage of users, but it's okay to piss off the Desktop users because they're not the future. Then, yes, there's options, but the vast majority would just move to QuickBooks Online. If you really want- if you really [00:21:30] want to get people on QBO Advanced, kill QuickBooks Desktop. The wrong product was killed here. That's my opinion.
 
Blake Oliver: Well, David, maybe it's coming, someday. There's always chatter every year that Intuit will end support for Desktop [crosstalk] 
 
David Leary: I'm slightly surprised at Intuit did this, too, because if I go back like 15 years ago, when Intuit bought PayCycle, at that time, they had like two online payroll products, and they just ripped the Band-Aid off and killed one. I remember the mantra ... It felt like, for at least 10 or 12 years at Intuit, it was like, "We [00:22:00] will never discontinue and just kill a product like that.".
 
Obviously, anybody who was around for that type of history, and that learning experience, and the blowback from that ... People were in tears from that blowback; senior managers, VPs that had to go into support groups, and the online channels, and respond to comments, and customer complaints. Those people aren't around anymore. The Band-Aids were ripped off, and they killed the product, what, 12 weeks after they acquired it? Less than that? Now, the blowback's [00:22:30] happening online.
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Blake Oliver: I got another app update from Expensify. We reported on when they released their Expensify card, right? 
 
David Leary: Yes. 
 
Blake Oliver: That's the credit card that's linked to Expensify. You don't have to take pictures of receipts and then get reimbursed; you actually just spend on the credit card. It syncs the receipts into your accounting system, and then, no [00:24:00] expense reimbursement has to happen. It just draws from your account every single day. One thing about these cards, these credit-card apps, is that they don't have the rewards points that you might be used to.
 
So, the question is - how do you motivate people to use Expensify card, or businesses to start using Expensify card, when they're gonna lose out on the points that they could be getting - either the business owners, or the employees, themselves, who are getting reimbursed? I kinda liked doing that when I had my business. I do that, right now, as [00:24:30] an employee; I'll put a big purchase on my personal card, get the points for it, get the cash back, and then get reimbursed.
 
David Leary: It's funny because what's always interesting about an Expensify announcement of a new product is Dave Barrett will write this stream-of-consciousness email, right? 
 
Blake Oliver: Yeah.
 
David Leary: It's usually ... I have a policy - I do not read below the fold. If I have to scroll to read your email, I will not read it. I always read Dave's because he gives their whole thought process on why they decided not to do a points card- a typical [00:25:00] points card. Really, you start following the logic is, it's like, yeah, I get it ... People are chasing one percent; spending hours to chase a little one-percent discount. 
 
Blake Oliver: Right. 
 
David Leary: If you're driving your car, and a furniture store says, "One Percent Off!", you're not pulling over to go buy furniture there.
 
Blake Oliver: Right. 
 
David Leary: The whole one percent is stupid! It's insane! It really, truly is ... That's what evolved, as they worked through this ... It's great to read Dave's brain dump about this and what they worked through.
 
Blake Oliver: So, he said, basically, that rewards [00:25:30] programs are stupid. The benefits are minimal for the amount of work it takes. "So, instead of doing that, we're gonna create this thing called Karma Points," where they're donating 10 percent of all revenue from the Expensify card to one of five funds supported by Expensify.org, which is their new charitable arm.
 
Depending on what you're spending, it donates to that cause. If you buy a meal, it'll donate to hunger; or if you're traveling, I guess that probably goes to climate. [00:26:00] It's kinda cool, and you can just opt into it. Instead of getting one percent back, you're giving back to the community. It could generate millions or even, I guess someday, billions of dollars.
 
David Leary: The other thing that I thought was interesting is the way they even looked at how Amazon does Amazon Smiles. Essentially, what Amazon's doing is, when it's all said and done, the average nonprofit gets a check from Amazon for $130 or something ... It's not that it's useless, but it is. If you're a non-profit, and you get a check for $130, that [00:26:30] is not gonna move your needle in any way, shape, or form.
 
What they've done is instead of letting people specify a bunch of individual charities and then, each individual charity basically gets almost nothing, they're lumping these together. One's an environmental one; one's for homelessness; one's for like relocation, or something?
 
Blake Oliver: Mm-hmm. 
 
David Leary: What were the five categories? Do you remember?
 
Blake Oliver: Yeah, so they've got homes, which covers the costs of reuniting a person experiencing homelessness with their family; a climate fund; a hunger fund; a youth fund; and a reentry fund, [00:27:00] which is- that reimburses the costs of a journey home for an individual just released from incarceration, so they have a fair shot at transitioning back into society. It's all based on what category of the expense that it was.
 
David Leary: I'm not sure that email is just a blog post somewhere, right? It's only an email ... Because it'd be great to link to that for everybody.
 
Blake Oliver: Oh, yeah. Well, if we can, we will. Otherwise, we'll link to the product update, and you can learn more there.
 
David Leary: I have a related - since we're talking about expense management - article, if you wanna do that. "Expense [00:27:30] Management Vendors Unite to Form Emburse." Abacus, Captio, Certify, Chrome River, Nexonia, and Tallie, a few years ago- almost a full year ago, if not two years ago, all merged together to form a new-
 
Blake Oliver: They were all acquired by a private equity firm that, for what reason we didn't know, was buying them all and had not yet combined them.
 
David Leary: During this time we missed it. Apparently, in September, Chrome River and Certify actually purchased another similar startup called Emburse. So, seven apps have all been combined [00:28:00] now as one holding company, and they're gonna brand it as Emburse. They wanna take on Concur. They have 750 people around the world. They're valued at $1 billion based on all these things added up individually. I just don't know if there's a migration path because they're all trying to get slices of the market, and- 
 
Blake Oliver: Right. Is it gonna become a single app, or are they gonna stay separate? What is the long-term strategy?
 
David Leary: This feels a lot more like a Thomson Reuters, or even a Sage-type strategy - acquire a bunch of products and [00:28:30] then rebrand them all similar. But it's ... I don't know. It's an interesting strategy. I just don't know how - for me, being at a big company, before - how you manage, and divvy up resources, and which one ... "Well, I'm the important app!" "No, I'm the important app." I've even seen that- even Intuit, right? There's resource strains between QuickBooks Online, QuickBooks Desktop. That's two products.
 
Blake Oliver: What happens when the sales teams from the different apps owned by that same private equity company are competing with each [00:29:00] other for business?
 
David Leary: Which they are because you'll go to a conference ... I think when we were at Sage Intacct, Abacus, Certify, Nexonia, and Tallie, four of these companies all had a separate booth.
 
Blake Oliver: Weird.
 
David Leary: Yeah, it's this weird strategy. But, anyways, just pointing that out that they've grown by one more app, and now, they've rebranded to that app.
 
Blake Oliver: Any more app updates today?
 
David Leary: Not on expense management, but I did have ... Google made an acquisition of a smaller app called AppSheet. Have you ever seen AppSheet, or have you used it?
 
Blake Oliver: No, never [00:29:30] heard of it.
 
David Leary: Long story short, it can take a spreadsheet, like a Google Sheet, and take all your column headings, and data, and then turn that into an app for your mobile devices. It almost feels like a very, very, very fancy Google Form.
 
Blake Oliver: Got it.
 
David Leary: I guess that's possibly were Google's heading down this path, or maybe  like with Airtable, you can build more mini apps on top of Air Table. Maybe it's to power Google Sheets more powerful; but, yes, they did acquire a product called AppSheet.
 
Blake Oliver: Gotcha. 
 
David Leary: I just never could really [00:30:00] get into it though.
 
Blake Oliver: These apps that are super-super-general-purpose, and you could conceivably do a ton of things with them, it's kinda hard to get into it, if you're not a developer, because where do you start? Sometimes it's too powerful.
 
David Leary: Well, and this is a no-code app, right? That's the theory - it's a no-code app. Yes, I might have a spreadsheet set up to track time; clock in, clock out, total hours, employee's name, or something. I've been using that spreadsheet. Then, I discover AppSheet, and [00:30:30] I turn it into an app, and now every employee can have this on their mobile phone. But it feels like all the apps that people could make themselves are half-assed solutions of something you could just get on the market. They exist already [crosstalk] 
 
Blake Oliver: Right, and it might be no-code, but it's still ... You've still gotta basically build a product, which is just as hard as coding. Designing an app is hard. Maybe Google can buy this, and then ... It's a really powerful feature in a suite, like a Google Apps.
 
David Leary: I think Microsoft has some things [00:31:00] like that. That Microsoft Flow: these no-code app things that'll take some spreadsheets, and different Microsoft tools, and compile them together into a working thing. Maybe that makes the most sense for something like this.
 
Blake Oliver: Like a Zapier kind of situation, but internally for that system, or whatever for that ... 
 
David Leary: Yep. 
 
Blake Oliver: Okay, so, we're done with app news. You wanna talk about why FASB is the villain? 
 
David Leary: Why is FASB the villain? 
 
Blake Oliver: So, the Financial Accounting Standards Board sets all the accounting laws, if you will, the accounting standards that govern how we do generally accepted [00:31:30] accounting principles. We talked about it in the show about how ... I think we just talked last week about how I'm a bit skeptical of what they're up to, and the value of it, and we're kinda wasting our time, and- 
 
David Leary: Even the prediction episode, we talked about how there's a prediction of things they were gonna do, and we were like- 
 
Blake Oliver: It's really not that amazing, right?
 
David Leary: Important, yeah. Exactly. 
 
Blake Oliver: So, Peter Margaritis wrote this blog post on Accounting Today- an article on Accounting Today that is called: "FASB is the Villain," and basically does just a fantastic [00:32:00] job of kind of summarizing the main issues, right now, in accounting, and especially accounting as it affects larger companies, and public companies that have to adhere to GAAP. 
 
He said that he speaks to CPAs around the country, and, "It's becoming clearer and clearer to me that many accountants and business owners view the Financial Accounting Standards Board as something of a villain. Three different audience members, all mild-mannered accountants, at different events, have actually said out loud to me, 'FASB is the villain.' After the third [00:32:30] time, during a keynote at the University of Nebraska at Omaha, I realized I was, perhaps, onto something.
 
David Leary: Oh, is gonna now be a trend? Like, when you're at a conference, and somebody's doing a keynote, if you're in the audience, just yell out, "FASB is the villain!" This would be amazing! 
 
Blake Oliver: Maybe.
 
David Leary: Please, please, please! Everybody jump on this! 
 
Blake Oliver: Maybe we'll start a movement here. I don't know. He continues on talking about how the guidance from FASB has been getting more and more complex. In 2018, the entire codification was over 10,000 pages in five volumes that were more [00:33:00] than a foot high. 
 
This is great news, I guess, if you want a job as a CPA, or an auditor, but for business owners and stakeholders, it doesn't really add value. It creates a lot of complexity, it's incomprehensible, and it increases costs. We were talking about this a few weeks ago that accounting standards have gotten four or five times more complex than they used to be 40-50 years ago, and what have we gotten for it? 
 
The author here talks about the book, "The End of Accounting," by Baruch [00:33:30] Lev and Feng Gu. That is an excellent book, laying out all the problems with public company accounting and the issues with accounting standards really not improving financial reporting the way they could because our economy is changing. 
 
The most important things for investors and analysts today aren't on the balance sheets. You're not gonna find lucrative contracts with customers, proprietary know-how, and employee knowledge, except as an afterthought [00:34:00] in the notes. We're in a knowledge economy, but our accounting is setup for an industrial economy. 
 
The example cited in this article - that's also in the book, The End of Accounting - is the financials for U.S. Steel. The 1902 financials for U.S. Steel, side by side with the 2012 versions are almost identical. The financial statements haven't really changed, but our economy really has because we're dealing in intangible assets. 
 
Then, he also mentions the subscription economy in the book, by Tien Tzuo, who's the founder of [00:34:30] ... What's he the founder of? Zuora. How, now that we're in this subscription economy, you're not gonna find numbers that are important to the SaaS company in GAAP-basis financials. You don't see recurring revenue. You don't see customer churn rate, not even the number of subscribers. Not in there at all. Those are numbers that are way more important to investors than any of the stuff we report on. 
 
Just one more example here, like an actual example of an accounting standard that makes no sense – ASC 606 for revenue recognition. ASC 606, changing [00:35:00] how we recognize revenue from contracts with customers, and recurring revenue, makes sense at first, but then, the way it's implemented is with this 500-page rule book. 
 
One of the problems is that you now have to take the revenue from the implementation phase of a contract. It used to be recognized upfront. So, David, if I sold you software with a subscription attached to it, and I had a setup fee of a few thousand dollars ... Let's say it's a setup fee of $10,000. Then I'm gonna charge you $1,000 a month. I [00:35:30] would recognize the $10,000 for that implementation upfront. Now, I have to take that $10,000 from the implementation, and I have to spread it out over the expected life of the contract. I have to defer that revenue, even if I did all the work upfront, okay? 
So, there's a kind of a mismatch there between revenue and expense right there. Then, the really screwed-up thing is that let's say you churn, as my customer. Because I've deferred all that revenue, I now have to recognize it all in the month that I lose you. So, we have this perverse [00:36:00] situation, where you leave, and my revenue goes up that month. 
 
David Leary: But you've lost a customer. 
 
Blake Oliver: But I've lost a customer. So, it's a complete mismatch between what is happening on the financial statements and what happened in my business. It was a bad thing for my business, but a good thing for my net income. It's bizarre. It doesn't make sense. 
 
David Leary: Yeah, yeah. 
 
Blake Oliver: So, anyway, I feel very strongly that this is something we're gonna be talking about because this trend is continuing. Businesses are about subscribers. They're about intangibles, and financial statements. [00:36:30] Just don't ... You don't see that. SaaS metrics are not on a financial statement. How useful is that to investors? It's just not that useful anymore. 
 
Anyway, go check out the article. If you have thoughts on this, let us know. If you write a review, you can tell us what you think. We'll read it. It's like a letter to the editor, right? We'll read it on the air. I wanna start a conversation.
 
David Leary: People are gonna start yelling this out of keynotes. This is coming. I can see it. This is gonna be ... This is gonna be awesome. This is my new prediction for 2020. Everybody's gonna yell out, "FASB is the villain!" at keynotes. 
 
Blake Oliver: All right.  [00:37:00]
 
David Leary: If you do that, please, please videotape it, and put it up on Twitter, so we all can see it. That'd be great to see. What do you think you wanna jump into next?
 
Blake Oliver: Let's talk about one follow-up item.
 
David Leary: Okay.
 
Blake Oliver: So, I've talked a lot about the California Consumer Privacy Act that requires businesses with over $25 million in revenue, or information on 50,000 California residents to do all this stuff, like allow me, as a California resident, to ask you what information you have [00:37:30], download it, and then tell you to delete it. 
 
It's creating huge compliance costs, and we now know ... Well, we have an estimate of what that's gonna be. The Department of Justice here in California estimates that the CCPA will affect between 15,000 and 400,000 businesses, which is a huge range. Up to 50 percent of those businesses are small businesses, even though the bill was supposed to exclude small businesses from its scope. 
 
A related assessment that the DOJ paid for estimated [00:38:00] - and this is the big number - initial compliance with the CCPA- the cost of initial compliance is going to be approximately $55 billion dollars, which is equivalent to almost two percent of our California gross state product in 2018. 
 
So, a single law about California consumer privacy is gonna cost businesses - and not just California businesses; this is spread out over any business that deals with California customers, and is of a certain size - it's gonna cost them, collectively, two [00:38:30] percent of our California gross state product - $55 billion. 
 
David Leary:To track this- 
 
Blake Oliver: It's a lot of work- 
 
David Leary: -and to comply. 
 
Blake Oliver: -and it's gonna cost a lot of money. That's why you were talking about how compliance ... A lot of businesses are just saying, "We're gonna wait, and not do anything, and just see what happens." To tell you how complex this is, the CCPA is 10,000 words. The regulations to go along with it are another 10,000 words. So, it's 20,000 words. 
This is why it's expensive because you've gotta hire lawyers to do it. I guess this was actually a fitting [00:39:00] follow-on to the FASB stuff because here we are talking about complexity in law, and regulation just creating more barriers to people doing business.
 
David Leary: Yeah, and it's not- it may not be helping anybody in the long term.
 
Blake Oliver: Think about it this way, there's actually some crazy potential ways that hackers could use the CCPA. Every business that has data on me, of a certain size, has to give me the data when I ask for it. Well, how do they know that it's me asking for the data and not somebody else? They just have to have [00:39:30] a reasonable certainty. I think the word is 'reasonable' that it's me. 
 
So, a lot of businesses are just saying, "Okay, send us your driver's license, and some other verification," and this is stuff that a hacker might be able to get - a driver's license number, and a name, and a social security number. So, what you can do now, David, is if you wanna get information on somebody, you just get a little bit of their personal information – enough to- 
 
David Leary: Because they have to give it to you [crosstalk] 
 
Blake Oliver: And then they'll send you more. So, you can basically go around to a bunch of companies and get people's personal [00:40:00] information sent to you now because you're pretending to be them.
 
David Leary: The other part of this, I think's not well thought out is, in order for me, as a company, to service you when you do request your information, I gotta have some sort of database that pulls this information in from all the places I might have your data. So, now, I've just created a whole new database with your data. 
 
Blake Oliver: Something else to hack. 
 
David Leary: The guise of trying to give you less data out there, I'm gonna have to create a bunch more data about you. It's kind of insane because the principle of it is to have less data tracked, have [00:40:30] it be open and honest about what's being tracked, and now it's just gonna lead to more tracking. 
 
Blake Oliver: Yeah. 
 
David Leary: This is gonna flop ... It'll be in California and the rest of the country is gonna make fun of it. So, that's kind of how that'll go. 
 
Blake Oliver: What if other states start passing laws, but they're not the same? So, now you've got a compliance cost to figure out the different rules in the different states, just like with sales tax.
 
David Leary: You want me to continue on this kind of old-school thinking while we're at it?
 
Blake Oliver: Sure. 
 
David Leary: Okay. I have three articles, and I can tie them all together in this old-school thinking. One of [00:41:00] them is email is the small business's biggest security threat still. So, Business Email Compromise – BEC - scam is a cyber security threat to businesses of all sizes. This is when, Blake, I maybe send you an email. "Hey, Blake, pay me this bill," and you just pay it.
 
Blake Oliver: Right, you pretend to be somebody else. You pretend to be my CEO, right? 
 
David Leary: Exactly, and we've talked about this- incidents in the past. According to the FBI, more than $26 billion in losses were reported because of this, between July 2016 and [00:41:30] September 2019. 
 
Blake Oliver: Wow. 
 
David Leary: The Better Business Bureau says 80 percent of businesses received one kind of this scam in 2018.
 
Blake Oliver: I received multiple of those at my last company and we were only 160 people.
 
David Leary: The reason it's happening so much ... It's the biggest risk to small businesses. This is according to Tim Sadler, a co-founder and CEO of cyber security firm, Tessian? 
 
Blake Oliver: Mm-hmm. 
 
David Leary: Basically, it's the most significant risk, and it's the easiest for fraudsters to achieve. It [00:42:00] doesn't take much to send somebody a fake bill. It could be a paper bill in the mail. It's just easy to do. Then, once that money is gone, it's almost impossible to get ... That's that old-school email is still a big threat. Should we talk about checks?
 
Blake Oliver: Well, no, I wanna follow on to that.
 
David Leary: Okay ... 
 
Blake Oliver: So, it's not just email. It's getting more sophisticated. At least three private companies have fallen victim to deep fake audio fraud. In each case, a computerized voice clone of the company CEO called a senior financial officer to request an urgent money transfer. So, [00:42:30] they're faking people's voices. If you've got a call, David, and it sounded like me, and I told you to send money somewhere, you probably wouldn't question that necessarily.
 
David Leary: I just reply back and say, "I'm a podcaster who has no money."
 
Blake Oliver: But that's crazy, right?
 
David Leary: I mean, the easy solution for this- it's really easy. The solution's like Bill.com. One layer of approval is all you need, until people figure out how to do that, but that's just more work. Somebody's gotta figure out how to [crosstalk]  
 
Blake Oliver: -yeah, exactly. [00:43:00] You need a notification on your phone and then you approve it. . That's the only way to verify this. You can't go on verbal, on email approvals anymore. It's gotta be in an app.
 
David Leary: Especially not an email approval. That's actually very, very, very dangerous. You should be very skeptical of that, especially ... If you're not the one who sent the email, first, saying, "Can I pay this bill?" Right? 
 
Blake Oliver: Yeah. 
 
David Leary: It should never come down the other way. Ever. 
 
Blake Oliver: Right. 
 
David Leary: That's something to be aware of.             
 
Blake Oliver: You mentioned invoice scamming - sending fake invoices?
 
David Leary: Yep. 
 
Blake Oliver: In 2017, Google and Facebook were victims [00:43:30] of an invoicing scam. They lost $100 million dollars between them to a single scammer.
 
David Leary: I think we talked about that in the show. Yeah, it's ... Those are ridiculous numbers. It's so simple ... It's very preventable. Maybe Google can build an app now that they AppSheet - a very simple app that looks at all the bills they're about to pay, and somebody can type through there, and then approve them. Sticking on fraud, there's a rise in check fraud that could [crosstalk] 
 
Blake Oliver: Oh, yes. Been going up and up for years, yep. 
 
David Leary: It's been going up. Check fraud was $15.1 [00:44:00] billion in 2018, up from $8.5 billion in 2016. So, it doubled in two years.
 
Blake Oliver: Wow.
 
David Leary: So, 60 percent of all attempted fraud against deposit accounts in the U.S. banks is check fraud.
 
Blake Oliver: A great stat to tell your clients when you're trying to get them to switch to a digital payments platform.
 
David Leary: Now, check usage is declining, but it's kind of crazy, for as much as check ... Check usage is down. It used to be 81 percent in 2004 to last year, it was just 42 [00:44:30] percent. So, check usage is down as half, but the amount of fraud is up.
 
Blake Oliver: So, it's worse than it even ... Combining those two stats, you realize it's worse than it seems.
 
David Leary: This could be $30 billion, if it was still the same percentage of checks going through. What I liked about this article is there's a quote from - not an accountant, or bookkeeper, or us - this is a quote from Robin Helms. He's the company finance and chief of Hansel Auto Group, which operates a network of car dealerships in California. He said that some of his suppliers [00:45:00] just insist on being paid by check. "There's a lot of stubborn businesses that want to operate with checks."
 
Blake Oliver: Well, they've got their workflow, right? They don't want that disrupted.
 
David Leary: So, it's not just people like us, and cloud accountants, and forward-thinking people saying, "Hey, stop using the checks." Now, the small businesses that have to deal with it are starting to push against it, as well, which is getting out of that ... 
 
The last kind of stuck in old thinking is a survey by the UK Federation of Small Businesses. It's been two years since [00:45:30] open banking has been introduced in the UK. They surveyed 1,000 small businesses about their open banking habits or share data habits. What they found is two-thirds of the people surveyed would not consider sharing their bank account details electronically with other financial providers.
 
Blake Oliver: Two-thirds. 
 
David Leary: 40 percent believe it's unsafe. Are you digesting that for a second? 
 
Blake Oliver: Yeah. 
 
David Leary: So, this is a country that has government-implemented open banking regulations, and people don't wanna do it. The FSB, this Federation [00:46:00] of Small Businesses, is calling on the UK government and banks to raise the awareness with the community and reassure businesses that the APIs are absolutely watertight. 
 
That's actually really scary because- I'm not saying ... Nothing is perfectly watertight. It's very secure versus a paper check, but for the government and banks to go out and just ... I don't think that's what's gonna encourage people to use it.
 
Blake Oliver: Well, fear is a powerful motivator either to action or inaction. So, let's talk about my fear of [00:46:30] a pending stock market collapse. I learned about something recently - the Buffett Indicator. Have you ever heard about this, David?
 
David Leary: Is it based on his liquid assets versus what's in the market? I really don't know what the Indicator is. 
 
Blake Oliver: It's pretty simple. It's the total stock market capitalization of the United States relative to U.S. GDP. So, total value of the stock market divided by gross domestic product - what we are producing as a country.
 
David Leary: Okay, so it's some [00:47:00] ratio where ... That gets out of whack, right? 
 
Blake Oliver: Right. So- 
 
David Leary: Like how could it be worth more than what we're making?
 
Blake Oliver: Right. So, the idea is that long term, stock market capitalization can't be that much more than GDP because, ultimately, what are you investing in? You're investing in products being made and sold. So, right now, it's near an all-time high, or it's at an all-time high. 
Right before the Great Recession, at the end of 2007, the U.S. market cap was 137 percent of GDP; just before the Dot-Com [00:47:30] bubble collapsed, the U.S. market cap was at 146 percent of GDP. On the first day of trading in 2020, that indicator - the Buffett Indicator - hit 153 percent. It rose 14 percent in Q4, and corporate earnings growth is flat. 
 
So, the question is, are we due for another significant market correction? This indicator says that we're overvaluing the stock market. I guess it's called the Buffett Indicator [00:48:00] because Warren Buffett uses this as a personal way of determining whether the stock market is overvalued. 
 
He's hoarding cash right now. He has $128 billion dollars in cash. Why would he be holding on all that cash? Well, he thinks the market's gonna drop, and he's gonna buy.  Buy low, sell high. That's Warren Buffett's strategy; or just really buy low, and hold. That's what he does.
 
David Leary: One indicator of this ... I like that article you found five, six, eight weeks ago [00:48:30] about the restatement of earnings and how that's been rising; people just restating their earnings, after the fact, over, and over, and over again.
 
Blake Oliver: Oh, yeah, exactly. Maybe accounting has something to do with this, right? Pumping up earnings?
 
David Leary: Exactly. 
 
Blake Oliver: Companies not really being honest when they restate; not really telling people, "Oh, by the way, we actually ... Our revenue was lower than we reported. Our net income was lower than we reported." Not notifying [crosstalk] 
 
David Leary: Yeah, there's not a lot of requirements about them reporting it [crosstalk
 
Blake Oliver: Right. Well, it's [00:49:00] to their discretion, in a lot of cases. If it's not ... We don't even have a set threshold, so it's really just do they think they can get away with it or not? So, and [crosstalk] 
 
David Leary: That's at all-time highs now, as people are ... They're restating their revenues, not telling anybody they did it, and so- 
 
Blake Oliver: Right, ever since the requirements started, after Enron, it's the lowest percentage. 
 
David Leary: Well, that's what the FASB is for, right? 
 
Blake Oliver: Yeah. Well, that's what the SEC is for, and FASB is part of that. So, yeah ... What do you wanna talk about next? I've got Walmart's roboticization, or [00:49:30] automation, and I've got the four-day workweek.
 
David Leary: I have a little bit on [inaudible] discuss with online lenders, but the more I read it, there's not much new news in there, so we can skip that. Just jump into yours. 
 
Blake Oliver: All right, so real quick, the Finnish prime minister is the youngest female head of government worldwide, and it kinda makes me feel old because she's 34. Sanna Marin is 34, and she leads a Center-Left coalition, which all five government parties have women at the top. That's pretty cool. One of her platforms, one of her goals, [00:50:00] is to introduce a four-day week and a six-hour working day in Finland. 
 
In her position as Minister of Transport and Communications, prior to the election, she said, "A four-day workweek, a six-hour workday. Why couldn't it be the next step? Is eight hours really the ultimate truth? I believe people deserve to spend more time with their families, loved ones, hobbies, and other aspects of life, such as culture. This could be the next step for us in working life." So, yeah- 
 
David Leary: Will there be ripple effects of that? Because if [00:50:30] you think, that's only 24 hours, and I think you tweeted out, or put on Facebook something about the amount of hours a year a dad spends in the bathroom to avoid their families.
 
Blake Oliver: I did. It's seven hours a year, according to [crosstalk] 
 
David Leary: Which I feel is very low. It'd be interesting to see, in Finland, if that number increases based on these new working hours.

Blake Oliver: Yeah, and I'm a big fan of the idea of a four-day workweek, or a shorter working day. But, see, I think the thing that is not really talked about, or the thing that we're missing here is that it doesn't mean [00:51:00] that you don't work- at least for knowledge workers, it doesn't mean that you're only working four days a week, or you're only working six hours a day. 
 
To me, it just means that that's when you either go into the office, or that's when you're supposed to be online. That way, it gives you more flexibility - be with your family; take care of your kids. You don't need to actually be on, "working," at your desk eight hours a day because we're in the knowledge economy, and it's really just about getting things done. If you can get things done, by [00:51:30] all means, check out at 3:00 p.m. 
 
David Leary: It would be better ... What would be a better law is not putting a requirement of how much people work; it's putting a limit on how many meetings you have to attend. That could actually change the entire world economy.
 
Blake Oliver: That's the thing, too, and why I'm so glad I'm not in an office anymore, is just the wasted, pointless meetings that people would have just to fill up their day, and make sure their calendar looks busy. You can spend a whole day in meetings, and get no work done. When you're at home- 
 
David Leary: You can't. That's [00:52:00] all that happens. You get no work done, yes. 
 
Blake Oliver: Right. Anyway, I'm excited about this because we'll see ... If they actually do it, then we'll see if it makes a difference. It's gonna be a case study, someday. Because we've seen this in certain cities. 
 
In Sweden, the city of Gothenburg, they did this. They reduced working time to six hours a day in old people's homes and at their municipal hospital, while still paying their employees a full salary. The results were good. So, if that whole country does it, I'm gonna be really curious to see what happens. 
 
Now, let's talk about [00:52:30] technology that might enable us to work four days a week, which is automation and robotics. Walmart is rushing to catch up with Amazon. They don't have nearly the automation that Amazon has. We've talked about Amazon's warehouses; there's robots going and picking items and bringing them to workers. This is really super-futuristic and pretty cool, right? I mean, there's robots zooming around the warehouse, and going, and getting stuff, and bringing them to the Amazon people who pack the boxes; because we still don't have robots that can pack [00:53:00] the boxes without breaking stuff yet. 
 
Well, at Walmart, it's, in general, not as sophisticated. When you order something online on Walmart for a store pickup, the order gets printed out, and a person takes it, and then they run around the store, and they get the items, and they pack them up for you, and you go pick them up. They bring them out to the curb. 
 
They have that in a lot of stores, thousands of stores now, but it's not very efficient because a human can only pick about 80 items per hour, and it's really hard to keep your inventory accurate because you've got stuff on the shelves, [00:53:30] and people are trying to order stuff on the shelves. It's hard to keep track of that stuff. It gets moved around the store; people pick it up; they put it somewhere else. You need a better system. That's why Amazon's been beating Walmart.
 
David Leary: You gotta get rid of the humans. 
 
Blake Oliver: So, Walmart has purchased a system from a company called Alert Innovation. It's an automated warehouse system that they can build in the back warehouse of their stores; it's called Alphabot. So, think of this as a 24-foot tall vending machine with 20,000 [00:54:00] square feet of space. It's designed to collect 800 products an hour per workstation. 
 
So, trucks come and deliver items to Walmart. Workers put the items into Alphabot. They put them into bins, and then push them into the machine. I guess they scan the items to say what they are. They put them in the machine. Then, Alphabot goes and stores them somewhere in that giant cube. 
 
Then, when somebody orders it online, it goes and fetches the item and brings it [00:54:30] to a worker who's standing in one place at this counter where all the items come out on conveyor belts in these bins. The worker takes the item out of the box, or the bin, puts it in the bag, and then the bin goes away. This way, the machine can bring 800 items an hour to that worker, so it makes the worker able to do 10 times the work.
 
David Leary: So, are we seeing a shift back to an older model of retail - of stores that died? In the '80s, you had stores like Service Merchandise, Circuit [00:55:00] City, where they were kind of just showrooms, and then all the products were in the back. Then, when you were ready to buy, you'd go up to the counter, and it would come off a conveyor belt, and it'd be on the counter for you to purchase - whatever products you were buying at that time. 
 
Blake Oliver: Right. 
 
David Leary: It's almost like the pendulum's swinging right back. Then, that makes me think, if you're in the accounting industry, if something's being automated, are there throwbacks to old business models that may have died 10 years ago, 15 years ago, that almost can be relaunched because of these new automation and technologies that we have available to us?
 
Blake Oliver: Well, and it being relaunched [00:55:30] with a twist. 
 
David Leary: Yes. 
 
Blake Oliver: In this case, now I'm gonna go on walmart.com. I order the items online for pickup at the store. So, on my way home from work, I drive by the store; I park in the special part of the lot upfront, and I let them know I'm there, and they bring out the items, and put them in my car. 
 
I can get same-day delivery essentially just by going to the Walmart, instead of waiting for Amazon to bring my box. That should give Walmart a big competitive advantage. Imagine a future in which the entire [00:56:00] warehouse is automated. This isn't just part of a Walmart. What if the entire store is one of these automated vending-machine warehouses, essentially? 
 
If they can figure out how to make the machines pack the boxes, or put stuff in bags, then you would order online, your bags would be packed by the machine, and just there in a locker waiting for you to pick them up. Now, they need humans, but eventually maybe they figure out how to automate that part. 
 
Currently, the system [00:56:30] is in, I think, three stores - one in Oklahoma, another in California. There's one at their headquarters, or near their headquarters. They wanna have it go to thousands of stores eventually.
 
David Leary: I think I read an article, and this was a while back - eight months ago ... An argument, or point of view. So, just like how Amazon got really good at building servers, infrastructure, cloud computing, and then they launched Amazon Web Services, which is a huge income-maker for Amazon. It's that really their play is - with all this automation they do with warehouse automation [00:57:00] and retail automation - is a play to provide this for others. 
 
So, Target will be like, "Hey, we wanna have robots ...." They'll basically build what you were just talking about. Target could build it from scratch, or they could just spin it up as needed from Amazon, and Amazon will actually just empower all of this for a bunch of other retailers instead of just themselves. 
 
Blake Oliver: It's a thought.
 
David Leary: Because then they win all retail. They win all retail without having to win retail.
 
Blake Oliver: Well, I think we're out of time this week, David. The hour just flies by. So, if people wanna get in touch with you, where can they do [00:57:30] that?
 
David Leary: The easiest way is on Twitter - @DavidLeary. What about yourself, Blake? 
 
Blake Oliver: I'm @BlakeTOliver, and you can email me at blake@blakeoliver.com. If you wanna let us know what you think, do us a favor, write us a review. We will look for that review. We will read it on the air. You can tell us what you think about what we're talking about; any stories you think we missed. We always check our Twitter, and email, but we don't always remember to talk about stuff on the show. But, if you write a review, we will definitely mention [00:58:00] that. 
 
David Leary: Yeah, we have a process for that. Those don't get missed. 
 
Blake Oliver: We have a workflow. 
 
David Leary: All right. 
 
Blake Oliver: Until next week. 
 
David Leary: We'll see everybody next week.
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