Beyond the bottom line (The Financial Athlete #126)

“I’m not out there sweating for three hours every day just to find out what it feels like to sweat.” – Michael Jordan

What if a river rafter were to say, “I burned 1000 calories today river rafting” and made no mention of the experience of river rafting? From a statistical point of view, the bottom line may be how many calories were burnt, but this entirely misses the point of why people love to river raft. Can anyone enjoy river rafting with the single-mindedness to burn calories? Of course not.

A single-mindedness obsession with the bottom line (earnings) drives senior management at some companies.  Too concerned about meeting this quarter’s target numbers, they are willing to lay off the most valuable employees to cut expenses. Here management rationalizes the layoffs with the cliche,  “Everyone is expendable!” This managerial philosophy engenders the destruction of the enterprise.

All assets cannot be found on a Balance Sheet. Key employees are Off Balance Sheet assets. Dismiss a well respected business-to-business sales representative and risk losing the clients to another vendor. Generally, clients feel more loyal to a likable and effective sales representative than the company he represents.

For residential real estate, the full value of a house cannot be conveyed in the MLS (Multiple Listing Service) data. You must go and visit the houses to evaluate the floor plan and quality of construction. Get a “feel for the place”. An artist instinctively knows as soon as she walks into a home whether the environment is conducive to creativity. Much value is intangible.


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