What would happen if the world you believed to be true was not? Every interaction with every person, every emotion, every thought, feelings of joy, and pain did not exist? How would you react? How would you feel? The sky not only isn’t blue; it may not exist at all. If the truth painted a very different picture of reality than you expected, would you be willing to accept it, or would you ignore it and return to the world of false reality?
The movie, The Matrix, creates such a scenario. People live in a world like ours, or the one we believe we live in. They see blue skies, they smell the scent of freshly cut grass, and they experience love. However, in reality, none of this exists. None of it is real.
What is real? How do you define “real”? If you’re talking about what you can feel, what you can smell, what you can taste and see, then “real” is simply electrical signals interpreted by your brain.1
Machines, the antagonists in the movie, have created a computer program called The Matrix, and its purpose is to mimic the reality humans believe they are living in. Humans believe they are living their lives, waking up, going to work, having social and spiritual lives. The machines have created a situation where the humans believe this is their reality, that they are free. But they aren’t. In reality, the machines have physical and mental control of the humans. The humans are captured and living in a suspended state that is generally beyond their knowledge and control. They are being harvested as a source of energy for machines that control the world. The Matrix creates this false reality by manipulating electrical signals sent to the brain, thereby altering the perception of what is real. The mind, as they say, cannot tell the difference between what is real and what is imaginary. The Matrix controlled the “reality” the humans perceived. Instead of a bright world of friends and laughter, each individual was isolated and alone in a dark world, existing only in a pod by themselves.
There are a number of humans who are not captured and controlled by The Matrix who know about the situation. One is a fighter named Morpheus. He has a quest to find someone who could destroy The Matrix and free humans from being slaves to the machines. There is a point in the movie where Morpheus finds and develops a relationship with one potential freedom fighter named Neo. Neo is captured, but somehow concludes something is wrong with the world. However, he is not quite sure what it is and how pervasive it is. Morpheus believes Neo can defeat The Matrix. There is a scene early in the movie where Morpheus offers to explain The Matrix to Neo, hoping to have him join their cause, but he knows Neo might not be ready to find out the truth about what is happening to humans including himself. To prepare Neo, Morpheus extends his arms and opens his hands revealing a red pill and a blue pill. He offers Neo a choice of taking either pill saying,
This is your last chance. After this, there is no turning back. You take the blue pill—the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill—you stay in Wonderland and I show you how deep the rabbit-hole goes.2
When it comes to business and understanding financial numbers, we are faced with a similar question: What is real? Is something real because we are told it is real? Because it is calculated mathematically using a standard approach or formula? Does creating a better way to perform a task that is, itself, questionable, make the result real?
In business, there are two worlds, just as there were in The Matrix. Each world attempts to describe the financial performance of an organization. There is one world, like the accounting version of The Matrix where accounting numbers dictate, influence, and arguably control management thinking and action. That is a world where costing things such as products, services, activities, and work output is a critical part of the thinking and actions. Never mind the notion that the idea itself may be flawed. In this world, it is a panacea.
Then there is the world of reality—real math, real modeling, leading to a clearer understanding of business structure and operations, and this enables more effective management decision-making. In this context, this world, accounting is a reporting tool, and nothing more. Leaders look to understand the facts of what is going on in their organizations and choose to live and operate outside the accounting Matrix preferring to focus on real operational data and the financial data that result directly from it. They go into the accounting Matrix only when required to deal with the false reality that has been created.
You, like Neo, have a choice. Your blue pill is to put this book down and continue living without the knowledge of how damaging the improper use and interpretation of accounting data can be, and how to improve the effectiveness of your management skills and decision-making. Reading this book is your red pill. By choosing to read this book, you will begin to understand how the improper use and representation of your company’s cash data leads you to realize that your business reality is not, in fact, real at all. You will see that accounting tools, especially in the form of cost accounting, are damaging to your ability to comprehend what is really going on in your business. Like The Matrix without the evil intent, cost accounting is pervasive and affects the thinking and decision-making of people throughout society, both in the business world and outside the business world without their knowledge. Cost accounting alters the perception of reality. The result? The world has seen lives, families, companies, communities, and economies destroyed by poor decisions made by otherwise intelligent leaders with accounting data as a basis.
The purpose of this book is to expose some of these practices, help you understand the implications behind them, and offer you a way out.
Once you understand these ideas, you will not be able to turn back. You will be able to operate within accounting just like Morpheus, Neo, and other freedom fighters operated within The Matrix. They went in and out gathering information they needed to support their cause. You will know that this world, built by accounting data, has significant limitations and does not reflect the true reality. This is your warning. You can take the blue pill and live a professional life unknowing by putting this book down, or you can take the red pill and see the world of business differently.
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1The Matrix. Dir. Andy Wachowski and Larry Wachowski. Warner Bros. Pictures, 1999. DVD.
2Ibid.