Financial Statements in a nutshell

A friend of mine recently had a problem with financial accounting and I wrote him an email explaining the topic in a "nutshell." I guess we all have problems relating to balance sheets, income statements, and cash flow statements, so I wanted to share the short "wrap up" with you.

Source: author

Villageonomics, or why many of our towns look increasingly like concrete blocks

I grew up in a tiny village in Germany at the Rhine and I remember clearly that, although the place had only about 3,500 citizens, we had three bakeries, a butcher, two supermarkets, a toy shop, a carpentry, and a tobacco house. Last time I visited, all of those rustic perculiarities seemed to have disappeared, or rather, they've been moved into shopping mall-like zones outside of town. This development piqued my curiosity, so I decided to explore the field and found a pattern: villageonomics.

Source: author

The ingredients of a good stand-up speech

The older I get, the higher the odds of me holding a (in)voluntary speech. It’s one of the things that you cannot dodge. One day or another, a relative, a friend, or simply your professional career will put you into a situation in which you better come up with something to say. In the beginning my forays in this field were clumsy at best. They are still not perfect but tips from colleagues, friends, and other sources helped me to collect three core ingredients of a good speech. Add to that George Orwell’s six do’s and don’ts and you’re ready for the next minutes following the spoon-strike of the glass.

Picture from within the Paulskirche in Frankfurt
(first seat of the German parliament in 1848)

What do you mean "I'm quasi-rational?"

"Sooo," the left gentleman with the black glasses and the sleek, tailored suit begins another question, "after you've told us how you successfully managed a business unit for two years (you nod assent), and you accomplished the turn-around at your former employer (again, hastily nodding assent), and you single-handedly raised the funding for a future fortune 500 company ("journalists", you hear yourself say fighting to restrain your beam), please tell us a bit about what you are actually not so good at." A wet thud and the room's air suddenly turned into gelatin muffling anything rudimentary reminding of a noise. Your grip at the knot of your tie misses its destination and you feel the first beads of sweat trickling down your forehead. This would be the perfect time for a cricket to come out of the hideout and hit the legs, but the pedantically cleaned offices on floor 75 in Chicago's Willis Tower are hostile habitats to insects. You try to make sense of the pandemonium in your head but after a while that feels like an hour you come to terms with the stinging fact: you have no clue about your weaknesses.

Source: sxc.hu

Correlation vs. Causality

I was 17 when I bought my first issue of "Men's Health" and being addressed as a man probably was a bigger thing for me than gaining the insight of how to get a six-pack in four days. In one of the first issues I read the following statements: a new study shows, successful men sleep in their beds on the back and men, who happen to have a bigger bellybutton are less likely to be selected for leadership roles in their jobs. What a bummer! Usually sleeping on the side and born with a deeper navel, I was convinced that my live was already shattered before it had even started.

You can imagine my surprise and the amount of load that disappeared from my shoulders when I found out that those conclusions were pretty much bullshit. Who would have thought that a statistics class at 8:30 in the morning would provide the means for such a catharsis. My dilemma and the conclusions from it are a classic example for the two evil forces challenging data analytics: correlation versus causation. Avoiding drilling too deep into math, the former says that there can be found a mathematical relationship between two or more things, and the latter means that this relationship has a quality of mutual influence to it (as in: cause and effect). It's always worth to consider both aspects as we shall see.