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Games People Play with Cash Flow (2020)

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Re: Games People Play with Cash Flow (2020)

#51

Post by hobs »

dfhvneoieno wrote: post #50
whall6 wrote: post #48

One of the most genius “games” that I’ve seen in real life is Tesla’s offering of a roadster for a huge up front payment to pre-order (~$45,000). They literally created a new product out of thin air that they are untethered to in terms of time or specs (except that it has to be able to accelerate with the force of a jet engine?) to “unlock” millions of dollars of cash flow to fund current operations. (I imagine this…

That's not "genius". Saying "give me money now for something later", making it vague and then not delivering isn't new or genius. It's something which is illegal, and this will be found to be illegal, once there's political will to investigate/prosecute.

Yep, that's called Fraud. The only reason its continuing is because the political will to prosecute the rich, especially their big donor friend Elon who they've been giving billions of government subsidies to - investigating him after helping him makes them look bad too, and oh boy did MANY state and federal dollars flow his way.

Re: Games People Play with Cash Flow (2020)

#52

Post by arthurofbabylon »

This strikes me as an excessively complex argument. Personally, I would zoom way out to work with some more abstract axioms, namely…

- Money now is more valuable than the same money later.

- The above applies for all parties to varying degrees.

- Some operations are money-constrained.

- There are ways to move money forwards or backwards in time.

Now most businesses are not in a position to financially engineer all that much, rendering the response to a given situation per the above axioms rather simple.

However I agree with the piece in its insistence that you shouldn’t just look to the obvious categorical solutions — there may be some interesting opportunities to find in the cracks. This point was well outlined in the example of the restaurant owner securing a discount by pre-paying for ingredients.

I would love to hear some non-monetary examples of axiomatic reasoning failures. Whenever I reflect back on a process I led a couple of years prior, I am startled by my limited awareness of dynamics/risks/opportunities — even though I was confident at the time and it went well. These reflections make it clear to me that we are always missing useful information, and I further laud the author for acknowledging this fact.

Re: Games People Play with Cash Flow (2020)

#53

Post by nick3443 »

wodenokoto wrote: post #35

I had a an accounting class in college and cash flow never clicked. I get the examples, especially the restaurant one. But I don’t blame anyone for not being able to play cash flow games.

Simply put, assuming the books will balance eventually, would you rather hold the money or hold the IOU, and for how long? If you hold the money as it changes hand, you can make money off of that (or use it for opening the next store).

For a corporation where revenues are consistent, 90 days of payables that you haven't paid anybody yet could be equivalent to tens or hundreds of millions of interest-free loans.

Home depot notoriously has payment terms that can extend beyond one year.

Edit: To add on to that, understanding the accounting of E,I,T,D, & A (earnings, interest, taxes, depreciation, amortization) as in EBITDA is an important factor to grokking beyond the surface of the article. Basically cash accounting versus amortization accounting.

Re: Games People Play with Cash Flow (2020)

#54

Post by ethbr1 »

hobs wrote: post #51
dfhvneoieno wrote: post #50

Earlier quoted context omitted.

That's not "genius". Saying "give me money now for something later", making it vague and then not delivering isn't new or genius. It's something which is illegal, and this will be found to be illegal, once there's political will to investigate/prosecute.

Yep, that's called Fraud. The only reason its continuing is because the political will to prosecute the rich, especially their big donor friend Elon who they've been giving billions of government subsidies to - investigating him after helping him makes them look bad too, and oh boy did MANY state and federal dollars flow his way.

It's fraud if you never deliver.

It's certainly not fraud if you are making progress towards delivering at some nebulous future date, and there was no contractual delivery date in the pre-sale.

It's debatable whether it's fraud if the initial pre-sale expressedly included the possibility of non-delivery (i.e. Kickstarter).

Re: Games People Play with Cash Flow (2020)

#55

Post by ethbr1 »

arthurofbabylon wrote: post #52

This strikes me as an excessively complex argument. Personally, I would zoom way out to work with some more abstract axioms, namely… - Money now is more valuable than the same money later. - The above applies for all parties to varying degrees. - Some operations are money-constrained. - There are ways to move money forwards or backwards in time. Now most businesses are not in a position to financially engineer all th…

The best axiomatic reasoning failures I've seen are in Thomas Aquinas' Summa contra Gentiles, e.g. 13th century natural law Christian apologism.

Don't get me wrong -- they are works of philosophical art and among my favorite texts in all of philosophy.

But they also very much abuse the space between axioms to deduce truth which seems absolute but is incomplete.

Re: Games People Play with Cash Flow (2020)

#56

Post by [deleted] »

refurb wrote: post #34
graemep wrote: post #21

There are a few very strange, almost unbelievable, things said about people's understanding of the issues. I can understand that startups and small business may not understand that value comes from cash flow not profits. The value of an asset is the value of the discounted cash flow. This is very basic to the theory finance, so how come banks and wall street did not know it? There has to be more to this. just being a…

I can understand that startups and small business may not understand that value comes from cash flow not profits. This is not correct. You can have positive cash flow over a period but still be losing money. You can also have minimal cash flow but be wildly positive. Cash flow is one component of value, but not the only one.

[deleted]

Re: Games People Play with Cash Flow (2020)

#57

Post by dfhvneoieno »

ethbr1 wrote: post #54
hobs wrote: post #51

Earlier quoted context omitted.

Yep, that's called Fraud. The only reason its continuing is because the political will to prosecute the rich, especially their big donor friend Elon who they've been giving billions of government subsidies to - investigating him after helping him makes them look bad too, and oh boy did MANY state and federal dollars flow his way.

It's fraud if you never deliver. It's certainly not fraud if you are making progress towards delivering at some nebulous future date, and there was no contractual delivery date in the pre-sale. It's debatable whether it's fraud if the initial pre-sale expressedly included the possibility of non-delivery (i.e. Kickstarter).

[flagged]

Re: Games People Play with Cash Flow (2020)

#58

Post by ethbr1 »

dfhvneoieno wrote: post #57
ethbr1 wrote: post #54

Earlier quoted context omitted.

It's fraud if you never deliver. It's certainly not fraud if you are making progress towards delivering at some nebulous future date, and there was no contractual delivery date in the pre-sale. It's debatable whether it's fraud if the initial pre-sale expressedly included the possibility of non-delivery (i.e. Kickstarter).

[flagged]

[flagged]

Re: Games People Play with Cash Flow (2020)

#59

Post by TacticalCoder »

ftlio wrote: post #6

Great read, especially from the perspective of just trying to understand why people overfit certain thinking to certain problems. My startups perspective: I think it’s hard for people to understand the subtlety from all the memes and hearsay. We hear that you need to talk to your users to understand what to build, but I’ve seen this fall flat on its face and lead to extreme confusion, several times now, when you’re n…

> This is Henry Ford / Steve Jobs talking about faster horses. You’re not asking your customers what to build. You’re asking them to help you understand the reality against which your logic plays.

There's also this joke that the absolute scariest thing ever is an user with an idea. As in:

"I need to go from A to B", so far so good, that's what we need to know an act on. Then the user has an idea: "What if midway I could change to a fresh horse?".

I mean, sure, yup, it's been done (changing horse midway to quickly deliver a letter)... But that's not how cars were invented.

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