A stream-of-conscious first draft of accounting memories and the story of when I learned that lots of people don’t know what they do in their jobs. See also David Graeber “Bullshit Jobs”.
I was working for what was, at the time, one of the Big Five accounting firms. I had gotten there as something of a fluke. My GPA from my MBA in accounting was a 4.0, but I’m a musician/poet type who generally disdains money and hates playing golf. I had intended to use my education to go back into the social services /teaching world I had started out doing, but I got caught up in the hype. (its own story)
So I was there just to learn about the world.
It was the three years of 1999-2001, right when it all boomed and then busted under Enron, when Arthur Anderson went down like the 9/11 towers, and they had to change the accounting authorities, etc. Specifically I started on January 4th, 1999 and quit on December 28th, 2001, almost exactly three years.
For reasons that I could explain in a graph, unless you think you are going to one day make partner, three years is when a rational actor should bail out, and me making partner was a laughable idea. (Understand that three years is a long time in that world. Some people graduate from college and walk into this job where they are wildly overpaid and nonetheless quit before the first year is out. They call it “business boot camp”, and it’s an up or out, a feeder and weeder system.)
Before you start, they send you to national training at a resort they own and for a week you live a life of ridiculous hedonism with your peers from all over the Western Hemisphere. It was like living on one of those fantasy reality shows. Drinks in the hot tub late at night with beautiful people you’ll never meet again.
But they day you actually start, it becomes hellish immediately. I was just getting my feet set on my first job under a petty tyrant in-charge, maybe a month in, and on a Sunday night I get a call that I am to be at the airport at 5 am the next day for a flight to another office for a week. What I was working on would be there when I got back, but the deadline would be the same, so lots of evening work ahead of me.
A call on Sunday night was not unreasonable in context. You had to be in almost constant contact with the office, checking e-mails and voice mails at all times. I had to apologize to my wife, who understood, but it disrupted our lives together. First we had to scrounge up a week’s worth of clothes and then quickly go to sleep.
But anyway I found my niche in the world of financial services, specifically in mortgage banking. This was the high status segment in our office.
I found my place on this team because no matter where I was at any moment, I was the only person within a 10-mile radius with an an English degree. So when I started re-writing the descriptions of various accounts and transactions, the managers crawled my ass but then found out I was accurately describing things, so I was in. (See below.)
I was also really good with Excel. I peaked in my tech skills around that time and could do macros and work with complex spreadsheets with ease. I once audited the spreadsheet that valued a bunch of mortgage-backed securities made up of $3B in loans. (That’s it’s own essay).
But the main task they put to me was documenting internal controls.
Part of a standard audit is describing and testing the internal controls over the accounting system. (Our job was just to make sure the financial statements are fairly presented and in suitable SEC language.)
Internal controls are just checks on the system, procedures that make sure there are many eyes one everything, that it would be hard for anyone to embezzle or cheat or whatever. If you see that they have a tight system, you can document that and spend less time doing actual testing. (Understand that the risks we were guarding against weren’t the real risks. The cushion for *those* problems fell to the Federal government to provide.)
Accounting language is its own thing. The goal is to accurately explain what’s going on in a way that only other accountants or sophisticated investors, whose welfare we are supposedly there to protect, will understand it. But also vague enough so that accountability is spread out. One of my addendums to the various “laws” out there in the culture is this: Businesses are connected through various intermediaries, and one of the main goals is to diffuse responsibility. Auditors and credit agencies and brokers and lawyers all exist in the gaps and build in layers of accountability cushion. A type of insurance.
(That’s one of the reasons why white collar crime is the largest component of crime in our world but is rarely punished.)
My point is that I had mastered the accounting language. Here’s the story mentioned above (which you can skip).
An audit file for large bank consists of about ten boxes of files.
Each year, you take out last year’s file, and your audit is basically to update it with the current financial data. And because it’s an up or out job, each year you move up the chain from the simple cash accounts, to the larger stuff. And the file you have with the descriptions of accounts and transactions is a Frankenstein’s monster of the accumulated editing that your bosses carried forward from their bosses.
Early on, I had this account that was a 675K liability . Normally over the years, you expect a liability account to work itself out, or at least move, but this one had not changed. It’s sketchy. It was not material in the larger scheme of things, but it needed explaining nonetheless.
There was page-long description of the account written, like I said, at some point in the distant past by my bosses when they were first starting. It said something like “per [manager name’, this is account…… etc. etc…..”. And finally “Per [Accounting Firm Initials] account appears reasonable. (The goal line for every line in the financials).
Fn One of the quirks about auditing language is that you never use the first-person “I”. You refer to yourself in the first person by the initials of the firm. Spreading accountability.
But it was a garbled mess. It sounded good but meant nothing, and I had to talk to this person. So one morning I arrive at 7am as per usual and leave a voice mail to the manager named in the file asking for a meeting.
I don’t hear anything back, but that’s normal. Onto the other million things I have to do.
But then after work, my immediate in-charge (who I ended up being friends with and is on my list of top 5 bosses) told me that there were rumblings from above. Turns out the person listed as the contact wasn’t just some mid-level manager. It was the CFO. And not just that, but he was considered to be the one mean bastard that held everything together. This account had been worked out among partners, and what the fuck was this first year auditor doing asking for a meeting like that?
There were a few times I thought I might be fired from that job, and this was the first one, so I was kinda nervous.
But things were calmed, and he granted me the meeting. I gave him a copy of our “narrative” about the account. He said “Yeah, yeah, I’ve seen that, nothing has changed. It’s reasonable.”
But I said “I don’t understand what these paragraphs mean. Can you walk me through what happened.”
Even mean busy people are usually willing to describe what they do (see below), and so he explained to me what it was. And then I rewrote the paragraphs, still in vague accounting language, but much more clearly.
I submitted it to my boss above. She said “This is different. Has something changed?”
“No. Nothing has changed, but I rewrote it because our narrative was unreadable.”
It went up various levels with each manager saying the same thing. After all, they had all come up through the system seeing that prior version themselves.
I kept saying. “Yes, this is actually what’s going on. You can go ask the mean CFO”, and when it got up to the partner level, they did check my description with the CFO, and he agreed, and all of a sudden I had solid job security.
So now I was the staff writer for the financial services team, and my job was to describe the internal controls systems and to explain away, with grace, any ambiguities in difficult transactions or accounts.
All of this to finally get to my story.
At a bank, the whole operation is an accounting system, so we had to identify and describe the controls for the whole place.
And then there was this one assignment.
Because financial institutions are fundamentally intertwined, even if you audit your own system of controls, everything could be thrown off if one of your counterparties has terrible controls. So what the various accounting firms do is an extra special audit of the controls, and they write it up into a book. And then other auditors can point to that book and check that box off.
Understand that ultimately this is all a fiction, but it’s the logical justification and overlaying form.
And what that meant specifically for me was that I was on a team of three working on a subsidiary of the too big to fail Bank (which kinda failed and kinda survived (it’s own essay). One boss just reviewing work and me and a cohort going to every single employee in the place, talking to them and writing down what they did and compoling it into the book.
This subsidiary processed all of the money market and mutual fund trades for said Bank, and it was a bank that grew out of a famous brokerage, so there was lots of money sloshing around, but the folks at the bottom were just regular folks making about $7/hour (back then OK shit job pay). And they had wonderful titles. “Global Funds Analyst” was a young single mother with tattoos hidden under her shirt who just showed up and moved data for that entry wage.
In the late 1990s, tech was booming, booming and companies were buying all this shit systems on the promise that "*this* would be the one that did everything, but it never worked like that.
The machines that did the actual work of this Bank were running a hodge podge of systems stacked one on another.
I learned this working from the bottom up.
Unlike the mid managers (all of them were “Associate Vice President” which meant someone with a CPA who had managed to stick around for five or six years and was in charge of maybe twenty worker bees who all contributed to a single line in the financial statements. For every line there is someone who is in charge but not in charge.), the workers at the bottom were usually happy to talk to me.
I scheduled meetings and then pulled up a chair. They worked in the open office cube world, so I was seen going around and had gotten a decent reputation among the workers (I was one of them at heart but also had access to their boss’s boss’s boss).
I learned that what most of the humans in the system actually did was fill in the gaps between the myriad overlaid software packages.
My cohort in this (I’ll call him Smooth) ended up being, with the good boss above, the core of the mortgage banking team with me, so we travelled and worked together and became friends.
Smooth was smooth and I wasn’t, so we had an easy time splitting up the work. He would start at the top and work down, and I would start at the bottom and work up.
So I spent about a month just talking to bottom level bank workers
“Hi. Thanks for meeting with me.” Discussion of the personalized items on the desk to get a rapport because although I’m not naturally social like that, I can learn how to fake it if I do it over and over.
“Basically what I want you to do is just go through what you do. So you just describe your day, and I’ll ask questions.”
A typical worker was a young women who would describe it something like, In the morning I get this stack of papers and go through them. “From where?” I break in. “From Tina. And if they are X, I type Y into the green screen, and if they are Z, I type Q into the blue screen. Then I get a report from the red screen and if the total matches the report from the blue screen, I email Janet.”
You can imagine the questions. Who are these people? What are these screens? How does this fit into anything?
And here is what I learned. I eventually was able to piece the whole thing together by talking to everyone.
But *no one there really understood what they were doing in the scheme of things*.
Not the tattoo mothers, not the middle managers, and at the top, where the business was actually done, the C-suite had no idea how the lower processes worked.
The real business was negotiating servicing contacts where variations of a few basis points hashed out at a partner lunch could be worth many millions of dollars.
If you’ve ever seen the ants who cross streams by making a bridge, where many of them drown but they automatically default into this emergent behavior. That’s how complex businesses work. Each person is just attached to a few others and the function of the whole is greater than the sum of its parts.
And yet, it’s also all designed to benefit the few at the top. Most of the ants drown.
With one caveat. I found the folks who know as much, maybe more, than the auditors know. One of the groups I had to document were the folks manning the customer service lines. So I spent a day wearing headphones listening in with that crew.
You know how frustrating it is trying to get to a person on the phone at a bank. Well these poor souls at the end of the phone system were dealing with rich motherfuckers who were used to getting their way, and their complaints involved failed trades and whatnot that meant money on the line. They were pissed. Call after call all day.
I’m naturally not the kind of person who orders around the help in those situations, but after that day of listening in on the Big Bank Complaint Line, I take extra care to tamp my anger out when I reach a person on the other end of the line.
And these people were pros. They knew how everything worked because they had to learn it or suffer beratement from all sides.
After that day, I learned that I could go to them after hours and get them to explain to me the missing connections in the web of procedures I was documenting.
Extra incomplete scrap of writing on a tangent about my prior job:
I came from a great job at this awesome private social services company where I taught at a school and was like a vice principal. I was in charge of all testing and academics. My particular class was for adults who read at 6th-grade level or below, and if you know anything about education, you know that an adult who reads at that level hadn’t been rocking along like normal and then just stop.
It was such a great job, but my pay was terrible and I learned that the higher ups had MBAs and made five times as much as I did and were idiots.
Hmm, there’s some interesting stuff here …
It was interesting to learn what accountants do and I'm glad I never had any interest in doing it. Nicely done.