Arguing Agile
We're arguing about agile so that you don't have to!
We seek to better prepare you to deal with real-life challenges by presenting both sides of the real arguments you will encounter in your professional career.
On this podcast, working professionals explore topics and learnings from their experiences and share the stories of Agilists at all stages of their careers. We seek to do so while maintaining an unbiased position from any financial interest.
Arguing Agile
AA220 - Why Finance is Everyone's Job: The Hidden Truth Behind Product Failures
Last episode, we talked about Instant Pot's failure via financial engineering that most product teams may never see coming.
In this episode, we explore why financial literacy should be a core competency for product teams, not something left to the "adults in the room."
We break down why reading basic financial statements, understanding customer lifetime value, and making data-driven decisions that actually consider the cost of building features are essential and how you can start moving toward a future where you have more transparency into financial matters.
Key topics covered:
• Why whoever controls the budget is the real product manager
• How financial complexity hides exploitation and manipulation
• The curriculum gap in product management education
• Practical metrics every product team should track
• How to bring finance people into your product discussions
This isn't about becoming accountants - it's about understanding the financial impact of your product decisions and building something that lasts.
#ProductManagement #FinancialLiteracy #AgileLeadership
REFERENCES
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AA219 - How Private Equity Killed Instant Pot (And Why Your Product Could Be Next),
AA217 - Extreme Ownership: Military Leadership Lessons for Professionals,
AA201 - Mastering Stakeholder Communication & Management,
KIRO 7 News Seattle: https://www.kiro7.com/news/trending/instant-pot-pyrex-parent-company-instant-brands-files-bankruptcy/VLWFB4OF75FHLERB7B5KCMXUFI/,
LINKS
YouTube: https://youtu.be/Xbub7ZKTMKo
Spotify: https://open.spotify.com/show/362QvYORmtZRKAeTAE57v3
Apple: https://podcasts.apple.com/us/podcast/agile-podcast/id1568557596
Website: http://arguingagile.com
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so hot off the press of episode two 19, how private equity killed Instant Pot I have this other question in my head why is finance like this? Why can people get away with this financial engineering? Why is it so easy to pull the wool over, all of the people in corporate America and all development teams that can't be right. I need to talk about it. We need to explore this subject. This is one of those age old things where finance is basically up in the ivory tower somewhere, and then orders get handed down with, prescribed budgets and sometimes they play games. And we're gonna, and we're gonna play games. That's, we're gonna play games. That's what I heard. We're gonna play lots of games. Are we gonna play lizards and wizards? Yeah. Lizards and wizards. Alright. Episode number. Go look it up. episode two 19 I started that episode by saying like, I, I I was shocked and amazed because I read through a thread talking about Instant Pot, by the way, I still can't say I still, I call it Insta Pott. If you say Instant Pot fast enough, it becomes Insta Pott. I've tried it. Well then I'm just gonna give completely into the dark side. The article that originally caught my eye for the Insta Pott like podcast again. I said in episode two 19. There was a ton of people saying like, oh, they should just add Bluetooth or air fryers or Winnebago or whatever, right? To to the, to the, that's right. A Winnebago in Instant Pot, and then so many people pointing fingers to say they should run a better business. Pull themselves up by them bootstraps. Which, which by the way, that phrase pull themselves up by them, by their bootstraps. It's purposefully stupid, right? It's like, because it is, is, it's a joke, right? Because you can't pull up on your bootstraps and lift yourself up. That phrase is pointless. Those armchair folks say, oh they should have run a better business model. Or added this feature, Bluetooth, this and that. Do you know how many features InstaPot's had? Even the basic models that people didn't use all of them, right? So adding feature blow probably wasn't the answer 'cause they would've sunk the company into the quicksand even quicker. It wasn't any of that. It was financial engineering. I mean, If you take a company that has recurring revenue of $300 million profit of$200 million and a hundred million dollars in cash and you strapped them down, for a billion dollars in debt or leverage dividends, you know, other financial tactics. I don't care how profitable they are. They can't survive. It's just not possible. I only got through 200 comments before I just tapped out. But , it was aggravating that so many people didn't even do basic research to say oh, this company was financially engineered into the ground. Not a single comment leaned in that direction. Listen in the, world of corporate structures go, you know, holding companies that own multiple different companies in multiple industries. I was, in my very young days, I was part of one of those companies. I worked at the holding company headquarters, and they, every day you'd hear about a new company they've either acquired or taken off the books our job was to make sure that we had a clean addition or a clean departure of that company, financially speaking it wasn't as clean as you might think. People had to stay late and do all of these things. So I got privy to this, sometimes in fact. Not all that infrequently. Companies will take one of the assets they own a company they've just acquired and run it into the ground This is not the same thing as taking a company and breaking up into parts and then sinking some of the parts. Right that's just an attempt to stick their head above water try to survive but I'm talking about holding companies that do this as a deliberate ploy. And of course you can bet finances where it's rooted in so we're gonna try and tackle some of these things today. So let's start off with the skill portion of this. that brings me to a question that really cuts through all this, which is, should corporate finance be a cross-functional skill that the team has on par with, development skills, QA skills, product management skills, that kind of thing? I think when we say corporate finance, we've gotta perhaps define that a little bit more. What we're not saying here is that everybody on your team is a financial wizard meaning that, you know, they can do everything that a mm-hmm. Finance person can do that. That's not. Reasonable. I don't think but what we're saying is people should be able to read a statement. Yeah or cashflow analysis. Yeah. Something like that. That's exactly what what I'm talking about. Maybe assets and liabilities. At least understand assets and liabilities. Cashflow debits, credits, the p and l statement, you know, the run rates, i'm not talking about anything crazy. I'm not asking 'em to be accountants. Or do corporate taxes you know what I mean? I'm just saying, Hey, we take in this much money for the product. You are part of the product team. here's what each contract brings in. Here's what it costs us to do each feature. So that they're aware and can take in financial data as another piece of evidence to make decisions later on. That's all I'm saying. Basic stuff. And I'm all in on that, you should have that level of literacy on your team. You may not have every team member that can do that because you have newbies on your team that join. Okay. But, okay. But, you know, all attempt should be made so that they move up in their skillset to be able to do at least that. We've been talking about teams, but specifically people on the product side and people on the services side. Also need to understand the cost of providing a service and the return on that service. People on the product side, it's pretty obvious. you're making something to offer to your customers if you're not doing it in a way that makes money for you, your competitors will eat lunch. So I'm on board with the trust and transparency. The more people are asking questions about finances and the transparency about the finances like that, that helps make us better financial decisions, that helps make us more cohesive as a team. I think the developers actually will probably push back for this one is to say, listen, how much like this is cognitive overload? Like how, how much stuff do I gotta keep in my brain? I don't need let somebody else do this finance stuff, which depending on how much finance stuff we're talking about I could get behind that. Developers have a lot on their plate to begin with. So it's not unreasonable to expect that kind of a a pushback but maybe in that scenario your tech lead at least should understand what's going on. Sure and be able to answer questions in a way that is. Not be furling, right. Not beated with finance jargon. Yeah. Just simple things. You're not talking to them about, you know, various financial ratios and whatnot, but, but just basics it costs us X, we can only get y is it worth doing? How can we reduce X? Those are, conversations you can have with developers. So using it for risk mitigation, is that what you're saying? Just to make sure you are not going in over your head, right. So you're gonna lose money. In terms of like, we can build this feature for three months and then the amount of money invested in building this feature versus the signal does not equal what we'll bring back from the feature. The main pushbacks I have in this category have to do with not getting a complete. Picture of the finances , I was at a company one time and they would show the gain of certain products over time, but they wouldn't tell you the actual dollar figure.'cause they were trying to, play some games or they were afraid it would leak out and get to competitors I don't know why they had that fear.' It was very strange, but the fear of information leakage. If you're not giving the team the full picture, you might as well not do it at all. In order for the team to make an informed decision about what is the lifetime of that feature? Right. And or how much does it add to the lifetime value? Now we can make it a financial decision, we can spend eight sprints on this, and a sprint is $10,000, so spending eight sprints would be $80,000 as a feature, and then we need to recoup at least a hundred x, for right of return. yeah, right. Something like that. That's a whole different strategy than a lot of product teams deal with, which is like, who's screaming the loudest? I will tell you it's a lot harder to figure out how to do the financial side of it. But I would rather do the hard work to figure out how to work like that than just follow the children that are screaming that seems terrible. I agree with you. I think as far as the point about, not giving sufficient information, I'd say right. Just sprinkling bits and pieces with your team. That's very risky because people will fill in the gaps. Mm-hmm. And they'll basically fill in the gaps with assumptions. And that's hugely dangerous, if you're gonna tell people, tell people, this isn't just about how much this feature is costing you and how much you're bringing in for that feature, it's also the opportunity cost equation while you're building this feature for the next three months, you didn't build some other features. Right where would your attention better invested? See, here's,, here's a big issue for me in product management. Usually that question comes from leadership. Hey, you never told me what my trade offs were I need to be aware of what we've traded off. I've never seen a roadmap that clearly articulates, these are the things that we have traded off for the things we have picked up. Leadership is not involved in the deep roadmap, shuffling things around that it would require. You'd have to be there every refinement to be really in tune of what got shuffled out for the things that you had. I'm thinking about that because the resource allocation that quote resource dollars mm-hmm. That's what I mean by resource, not like people, right. or even staplers and chairs like dollars, which are real resources. The resource allocation happens at a team level. So , why wouldn't the team have that? the people with the money are not coming to every single backlog review and whatnot. Why wouldn't the team have that information? Yeah. and also, given a problem, a team could take multiple different approaches potentially and so they need to be aware of what that means and how that contributes to the cost of producing that feature. if you're gonna say, we'll do the bare minimum, now granted we're incurring some tech debt as a result which we can come back to. Yeah. Or they can say, we're gonna spend the next two sprints figuring this out those are two different things. And I think if your team. Members aren't aware of the financial aspects of that. they're gonna make the wrong decision. I wrote some notes down for like a financial pilot, like if you're gonna approach your finance and actually try to take this on and make a difference and they actually take you seriously and they take the meeting and they'll just no show to the meeting. I wrote down some quarterly metrics here. I mean they, they're, I mean, you probably could track them more than quarterly, but I don't think they would change significantly revenue growth, cash runway, customer acquisition costs, customer lifetime value, burn rate. Those, those, those are like a couple metrics just like pulled out of the air. I don't even know if any of those are the right metrics. Run rate is not on this list run rate is a very important one, because it's in the here and now, revenue growth, obviously, right? Cash runway, yes. Customer acquisition cost , lifetime value? I think you should always have those but those don't change. They really shouldn't be changing quarter to quarter No, hopefully not. but if you're implementing features with the, there's the thing about if you just have these on a board somewhere that people can see that people can see them it'd be nice to be thinking about the features that you're implementing in terms of like, how can this add to the lifetime value? How can we show that it adds to the lifetime value, which is probably a whole, like that, that, that lifetime value is probably a whole nother podcast of like, I agree. What is this number? How is he even calculated? Is it real? Like, is it unicorns; pot of golds at the ends of rainbow; leprechauns? Customer lifetime value. Like tho those are things that are on my list of, of things that don't exist. Yeah, I agree. Golden. Next. So I think we can cover that in a different podcast. I think these five, but possibly this is contextual. Depending on your industry as well, if you're creating huge industrial machines, as opposed to software, you may have some other metrics here that you're looking at. Also look above. So what's that animal that keeps popping out of the ground, looking around, going back under, sorry, I Prairie dogs. I dunno. No, it's not Prairie dogs, trailer dogs. What are talking about? I know mere cats. I guess they're, they're actually groundhogs. But I like to call 'em hedgehogs because my kids are about sign the hedgehogs. So. Now. So they're hedgehogs, now they're Sonic the hedgehog. That's what we're talking about. Sonic Hedgehog. That's right. You need to pop your head above the ground once in a while and looking at these metrics, figure out if you are in the ballpark in your industry. Are you a cost cutter? Are you a, price leader? Where are you? Would it hurt the teams to understand that and the competitive landscape? Probably not. The pushback against some of these ideas is, like you said cognitive overload. Analysis paralysis is way too much data. I'd still go down the path of information overload and then pull back rather than, scarcity of information. let's stop here and let's pivot into the next category I want to talk about, are product managers being grown to be financially illiterate? Let the adults make the financial decisions and you just manage the features, kid, get outta my office! There's stats that we pulled for the podcast- they're all made up. But it says a Stanford study. Stanford did it. So nevermind. It is totally real. The Stanford study of 200 product management job postings found that 95% required skills like user research and data analysis, but only 3% mentioned financial literacy. Meanwhile, product management bootcamps spent an average of two hours on business fundamentals compared to 40 hours on wire framing and user interviews. If any metrics are made up, I do believe that one is like, Hey kid, here's how to count some numbers. Now we're gonna go back to wire frames because like, what do you like the adults take care of this. Yeah. I think there's levels though, like if you have a bootcamp that's focused around product management and you're not touching even on the basics of finance. You're kind of short changing this. The point of me being saucy is the curriculum gap, the education gap starts from day one. No matter how good the education is, even if you're like Reforge, you know, the Reforge of the world. How much of that talks about, business finance. So we, like we talked about the curriculum gap, we talked about maybe we talked about Reforge. I, I don't know if that gonna make it into the podcast. The career progression of PMs, they get promoted based off of like, how, how many people that are VPs like them and how many positive interactions with customers. And the economics may or may not come into it. I'm sure people listening might be enraged by me saying like, oh, well Brian, if they're not profitable, of course they're not gonna get promoted. I don't know about that. I think people will get promoted, regardless. By the time you get to that level you've already lasted this long without having the financial chop. So the savvy, right? And how are you gonna suddenly get it? Well, and how are you gonna pass it on to the next people? I guess I'm casting stones today on the podcast Om. A lot of products, promotion paths have nothing to do with products. So I guess I am arguing against financial literacy here. Well, yeah, I mean, that's certainly the case today. Unfortunately, that does not make a very effective product manager, or leader. Without having those, if you're trying to build something long term that doesn't work, you gotta weed out people like that, that are like, they're good talkers and they're, you know, politically smooth and whatnot, they really don't understand product. They're not good at data-driven decision making and what we're talking about. Increasing lifetime value and features that increase lifetime value over a longer term. Let me think about more stones I can throw in the against category that product managers shouldn't be financially illiterate remember a year and a half ago on the podcast, or like two years ago on the podcast where everyone wanted a specialty product manager. You had to be a product manager I need someone who's got eight years of AI experience. people were looking for super niche. And then suddenly, the rise of generalists in the AI era has swatted that away and we don't talk about it anymore. It was like, I only need a pm Who's, let's say we're in the aircraft, software development industry. I only wanna hire somebody who's worked on airframes before and understands the whole business of aircraft and commercial air travel. And I'm only looking for someone in that niche. And then I only want someone who knows about this particular company's software because if you worked at Airbus, the way they do software has nothing to do with company X, Y, Z, Who may have a completely opposite philosophy. So now you've really filtered down your pool of potential candidates for product managers to a point where, you basically should promote from inside. Or keep the job open for, longer. You're absolutely correct. There was that phase, right? but coming back to this topic it doesn't matter if you are newly into product management from something you've never done before. Yeah. Or you've spent a few years, maybe double digit number of years in product management. If you haven't got that background of learning about the financial aspects of your craft, trying to make decisions based on finances says two things will happen, right? If you're new, you're probably gonna either get promoted because you're charming and then you'll leave, right? Or you get promoted. And you're still not financially savvy 'cause you never were and you didn't take the trouble to learn all that. So you can't pass it down to those people that are coming up the ranks behind you. Right. So you're perpetuating that cycle, basically. And that's a real danger. I think that's happened with, some of the big names in product management that didn't do anything to do with finances before. They're still not doing that. And so they've mentored a whole bunch of people since and none of those know how to do it either. Yeah. What would you say to people that will try to push back by saying listen, the market feedback will push back against I don't need to know finance numbers, I just need to pay attention to the market. They'll push back on, things and products and features that don't work. And also in the two sides of that coin on the other side is like, Hey, I've been successful so far why are you hassling me? And that's a legit argument if you truly have been successful but are you just looking at, the numerator here, right? Are you simply saying, let's look at the market and what the market will be and we'll push things out there ignoring the cost side of the equation, right? that's like the sassiest Om comment on a podcast ever, right? Are you only looking at the numerator? That's, that is the, that is the most, that's the most coaching method of being like, I don't think you're living up to your potential, Brian. You don't even know what you're leaving on the table by saying I don't need to know all this stuff. I'm great. I sense risk when someone says that because if they don't know what they don't know. You really want them in your ranks. I mean, they gotta be aware and take the trouble to find out what they don't know. And, you know, leadership should be supporting them. The other thing that scares me about this category, I don't know if it's a for or against, you've got PMs, product managers out there, people with podcasts with big followings, for example, who don't know anything about financial literacy. Like they're these big feature guys, right? Mm-hmm. And they're out there like teaching, spreading propaganda or whatever, saying like, you don't need that stuff. Who cares? It's not important. Let the back office people figure it out. And, just basically perpetuating ignorance. Hmm. I agree. I think this idea of, you know, let someone else figure it out, like the back office people or a different domain, that's what finance is for, just really creates silos. Your team is removed from that day to day.'cause you don't have that concept where you have a finance person on the team, you have an HR person on the team. I long for that day. Right, because then that person could say, listen, we're building this, but the cost is going up. Or better yet, a lawyer on the team, for when you launch your black cab copycat service in London without any licenses and you're like, just figure it out kid We got important things to do. That's right. We're working on an IPO are our product managers being brought up? To be financially literate. and then they have a media ecosystem that supports you don't need to know about finance or the law. Keep breaking the law kid. the idealists to realist spectrum where zero is focused on changing the world. We're gonna change the world. And 10 is optimize. 10. 10 is pe. Actually 10 is, we're gonna run your business into the ground. I don't know about this category. I'm squarely in the middle of it. I might be leaning towards PE on this one. if we're not willing to teach the young generation, then get ready for the same thing that happened with Scrum Masters to happen with product managers 10 years from now. I was like, I don't need any of these people. I can just have accountants run the product management business. Yeah. I mean when you make finance a dark art, right? Anything's possible. So, yeah, I agree with you. Oh, there you go. You just named the podcast The Dark Art: Finance so , here's a category that I like to wheel out at networking events when things are not contentious enough can product managers really do product without finance skill or visibility there's a great little quip. I love to zip out at those sessions. Whoever owns the budget. You have to go to them and plead and beg for resources. They're the real product manager. So this is I really like this this topic. Whoever owns the budget aren't necessarily even savvy about what needs to be done. They don't know market conditions. They don't know any of those things that a product person concerns themselves with. The only thing they know is just a number. So this is the budget you have for this fiscal year or quarter, whatever it might be. Go. And then the product people are fixated on that number and they're gonna work within that number. So their playpens already, fenced, right? That's their budget, but then when they find out things that don't lead themselves to, being amenable to that budget, what do they do? They go back and usually they're not very welcome when they say, Hey, we need more money. It's like we gave you all the money we had, so there's a lot of things wrong with this starting with those that own the budget. it's not their money, first of all. They treat it like it is. Sometimes it's not their money. They should really be encouraging the product people to make a. Financial decision on the offering, whether it's a service or a product. So if you're building a product, figure out what your potential returns might be over what period of time, and then figure out what your potential costs might be, again, over what period of time. And then build and budget product portfolios instead of just a, here's a r and d budget or development budget. Yeah. See like I'm a corporate executive listening to what you just said, it makes me feel like you're taking all my adult decisions away, like pricing models, customer acquisition strategy feature prioritization. I don't mean like feature, like we're gonna build this widget or this toggle or whatever. I mean we're gonna create a whole new thing In the software like spinning up a multi-year potentially. Product line decisions. Require understanding of cost, margins, customer lifetime value, that kind of stuff. And that stuff's not the typical product manager doesn't make decisions at that scale. They don't, but should they? No. If the adults are gonna have the big ego and want to feel like they're doing real work, then no. the adults need to be brought into the playground here. Because , they won't survive if the company is on a losing trait for all of these different things that you're building, the capability that you described could be multi-year, and you basically place the wrong bets. Now what happens? it's hugely dangerous. I mean, there's the big one. Right there is you place the wrong bets and then we pointed at the product manager and washed them out and say, no, no, no, no, no. They implemented it wrong. And now we got a big corporate blame game. So like, if this is you and you're working at a bank, sorry, I don't know why I like pointed at banks for this, , if this is you and this is your culture we're describing like, ooh, keep that resume updated. That's what I wanna say. Yeah, absolutely. These should have been your decisions anyway. So if, if, if you're making a bet in your betting your job on it, like you should have all the information to make the bet. It shouldn't be someone making a bet on your behalf. Otherwise, they're the product manager! I tried to, we tried to start this category where like something that was supportive here and we ended up back in. Surprise, you don't even do your job. They hired you to do this job and your management won't even let you do this job. They're like, oh, you can make the best decisions with all the data you have you can order a car in whatever color you want, as long as that color is black kid right. Now, get back to pounding out them widgets. Boy, how patronizing! I know we've been talking about product people here largely, but finance also has a huge part to play So if you are in finance, purely in finance, you happen to stumble across this podcast, you should be welcoming your product people into the discussions around budget formulation, things like that, right? Be ready 'cause you're the experts here. Be ready to explain simple concepts like how to read a financial statement, you know cashflow analysis, right? Simple things like that so that they can do a better job. It will actually help you too, right? Because what they're giving back to you, the information you look for, That's gonna be more meaningful overall. It can only be good for the company if you spread the knowledge. That's a great tactical call out in the middle of the podcast, which is go get your finance person that you get along with the best. Grab them and bring 'em onto the call or in person where you're interfacing with the customer so that they understand like, oh, you're gonna get an insight into how customers use our products. And then to really understand, how what you are doing. Helps us get in there, ask questions bring them into the debrief after, usually when you have a big customer call, you debrief after and talk whatever, like sure. Give them some questions to ask during the interview get 'em in to actually participating.'cause again, you're not gonna, you're not gonna take somebody who's been kept in a silo and think you're gonna bust all the silos overnight you need to do that slowly over time. So it's not challenging and everyone doesn't get all bent outta shape. So that you can start working as a cohesive team.'cause again, these people go back to the silo. CFO protects 'em and says like, I don't want them on customer calls. That's a waste of their time. They should be doing, I don't know, their taxes or something. Golfing. Yeah, golfing. Just to kind of equal out their balance a little bit i'm not saying that's not happening at all. So some companies will have finance people brought in to the discussions, at least with their salespeople. Mm-hmm during the, during the sales funnel. But that's okay. That's good but that's not all of it. You know, I got a good one I got a good pushback for you. Customers like, you don't need to align with financial optimization. You don't need to have all these numbers in your head with the development team. customers don't care how expensive or cheap or how much a feature's gonna make us money. They only care about how useful that feature is for their particular use case. I think savvy customers care that you run a sound business that you'll be around five years from now to support them so it behooves, the organization to explain to the customer why they should care. I. I mean, otherwise you could come in and sell 'em something and disappear before the warranty period's up, and that's not gonna help them. The other thing that's happened to me in my career is I establish relationships with certain people like vendor software or staffing firms then those people trade out every six months the churn in your organization is so crazy that I need a long-term partner I can just reach out to and say, Hey, I need a thing. I need you to be reliable. And the churn in their organization is so crazy that I just can't rely on them. And now I've gotta go back out and cast my net over my network to be like, Hey, I am looking for whatever I need a reliable, long-term. Partner. Yeah, I agree. on the finance side, that does happen at some companies. Especially these holding companies, they have interns that they can bring in. The interns get, converted to full-time and within a year or so they're gone so you do have that there too. But yeah, I agree with you. We're on the category of can product managers even , do product management, as opposed to like, whoever owns the budget is the product manager. Another strong contender in this category is true stakeholder communication requires financial fluency. If you go back to our podcast arguing Agile 2 0 1, mastering Stakeholder Communication and Management was the title where we had the quad of of the power, the power interest grid of how to help manager your stakeholders. At some point, you're gonna get into the people that own budgets. You have to speak their language, otherwise they're gonna zone out. They're gonna try to figure out why is this important to me? They're gonna try to take what you said and translate it through the lens of this, where it is much better if you just spoke financial metrics right away, you know, Hey, this is our runway, this is our ROI, this is what it costs to produce features, this is what we think we can contribute to the lifetime value. Go. If you're not coming to different stakeholders speaking in the language of those stakeholders, now we have a leadership problem go back to the podcast. We did with the extreme ownership most of the podcast was about leadership. You are not perceived as a good leader because you can't change your language based on the audience that you're talking to. Now you have a bigger PM problem of being a good pm. Yeah. Again, yeah, I concur with that because if you're not speaking their language, not only will you will, you know, will they just be disconnected, disengaged, et cetera. There's no understanding on their part about why these things matter and that's where I think it's important to say, these things are important. We're gonna run out of money because of X, Y, Z, I think the finest people understand when you talk to them primarily in their language, but also, relate that to what is happening with your product and with your customers. Right. So it is important, but again, we are not talking about. All of these deep and complex financial ratios. We're talking about a handful of things, these are really basic things too. You might top out at just talking about NPV, for example, net present value. That's about it, right? They're concerned about other things. Sure. But again, that's their forte, right? Well I'm definitely not gonna talk about net person value because I don't know what it is. So I'm gonna move on quickly and ask a question that I really wanted to ask since the beginning of this podcast. And that question is, is financial complexity deliberately designed to hide, an undercurrent of exploitation? Right. This is the whole Hey, we're going to fire your team and replace 'em with people out of wherever, you know, pick random country out of a hat. On the face of it you might say, that's exactly what's happening but at the same time, maybe that's how it's perceived. At any typical organization, you are not really privy to all this level of information. You just don't know. I know where you're going. I'm a hundred percent supportive of what you're saying. You're like, most actors are good actors. Most people are good people. I a hundred percent wanna sign onto this sign my name this podcast is gonna follow the financial engineering and downfall of Instapot. That's right. I said Instapot not Instant Pot. This whole debt vehicle thing was engineered slowly over time did anybody working at Instant Pot raise the flag and say, Hey guys, this is crazy our business has a hundred million dollars in cash, I mean, you pour that onto a pile and light it on a fire, people are gonna notice the smoke somebody had to notice that they were just burning through the cash, you know, they took a hundred million dollars of real money. Turned it into a billion dollars of leverage of no money, took that leverage out and then just sunk the company. At some point you have to say a typical company. Would you even know that the business was taking out loans? No. That's what I'm saying. you wouldn't know, right? But there's gonna be a few people in a company that size. I forget the headcount at the time. I don't know. Yeah, actually, I don't know. I don't know how big the company was, but I can tell you it won't be everybody that just basically was caught unawares by all this. There's gotta be a few people that caught onto it, but you know, they're usually silenced we've got this right? How do you think we got a hundred million dollars in the back? We got this, we know what we're doing. Or, you know, all the way down to, well. Stay in your lane get on with what you have to do. Instant Brands is a company size of 1800 employees according to KIRO seven News Seattle. And I don't have a, I don't have a date on that, but it says in 2023 they file for bankruptcy. This is the random garbage AI summary that Google spits out. If it's somewhere between 1500 and 2000, it says Instant Pot. Instant Pot. part of Instant Brands, which has a company size of 51 through 200. Instant Pot, the company is 51 through 200. Small business stops at 50 employees in America. instant brands might be 1800 employees. Instant Pot might be 51 through 200. So even if you go with a medium sized company, 51 to 200, I'm willing to bet wager that they were at least a few people bro, I can't that figured out what's going on. I can't believe you could bankrupt Instant Pot Pyrex and Corral. These are household names. Right? I can't believe you. They, they seem so like, yeah, may, I mean maybe your, maybe your customers only buy one set of those every 20 years. I can't believe you can bankrupt such a reliable. Revenue stream, well, not only did it happen, so you have to believe it, but also the Titanic was unsinkable, they say, right? Oh my God. It'd be different than like, the Titanic is unsinkable. If they were in the iceberg derby that's the difference here you have reliable, well-made, well-maintained brands over a long period of time and you just sunk them. The initial purchase from our last podcast was like 20 17, 20 18. I think the purchases started going through, and then the bankruptcy was in 2023. So I mean, like five-ish years you sunk the whole company , it is insane. It sounds, incredulous, but it happened there are probably many companies that went down the same path, I only went down that memory lane right there. Because I was kind of questioning like, were there people in that company that knew where they were headed, like that, that that knew they were on the Titanic? I'm pretty sure. There, were. what we've talked about in this podcast is everyone should have financial literacy, but I'm pretty sure that there's no way that like the majority of those employees knew that. The financial holding company was taking out a $400 million loan or whatever it was, They were over leveraged. also forcing the company to pay a dividend of all their cash, plus another several hundred million dollars. At that point you're like, oh, okay. This is what the owners of the business want. They want a dividend, they want a payout. What are you gonna do? You gonna say no. that forces a whole nother you have this information now. Great. You wanted financial information, and now the owners of the business are doing things unreasonable. So you have the information. You can't do anything about it the arguing point here is is a financial complexity purposefully hidden? Okay. maybe it is, but if it wasn't hidden they're like, Hey, you gotta figure out a way to pay it. you have no say, the arguing point is it's better for you, the random employee not to know.'cause there's nothing you can do anyway. And also it would just frustrate you. It would also cause harm probably sure. Because this information gets out. So. Yeah. I mean, the whole thing is engineered to keep that information from you it seems like, and that's probably The way it is, especially in this scenario, it's a holding company. You're not even aware of what those people are doing up there. Right, they're in the ivory tower, by the way. So I think some of this is coming back to is it deliberately designed to hire exploitation? Yeah. Okay. Well, we don't get to solve things on the podcast often, but it's solved. Yes, The answer is yes. All right, let's zip past this one 'cause we're already over time. Let me get to the one that excited me when we were planning this podcast quote, agile, I don't say quote little a agile by the way. Quote little, a agile and the status quo discipline of corporate finance, which includes. All of the private equity, financial engineering, all these tactics, Are these two worldviews, fundamentally incompatible? Like people listening to this conversation, coming from this worldview, we'll just be like, Brian and o like you guys are just ridiculous. You don't know how the real world works. is that just what we're driving to? I, fundamentally don't believe these two things are incompatible and the reason behind this is. Projects are projects, they're delivered in a certain way. If you're using an agile methodology or whatever frameworks things really don't change a whole lot. What changes is how you should be financing projects. As opposed to the old fashioned way, which is you come up with an amount, usually largely out of the air, and you're told, this is your budget. Go make stuff happen so already you're off to a losing start and here's why for that money. What do you want back? We'll put a list of things together that. we believe we can actually deliver with that money so we're not really talking about the real problem here do you have a product or solution that meets the market? How big is the market need? Right? You know, what is the market willing to pay early? Are you an early adopter? Are you also just a laggard? Or what, where are you? Right none of that comes into play. The other model, which Agile, recommends is you finance products, you finance features and you have a bigger time horizon. So you're not just putting features in and saying, how much is this feature? Yeah. You're actually looking at a maybe a year long or multi-year. Plan of putting a product together you might say there's probably more than one product even so you create a portfolio of products, you start budgeting those. What that allows you to do is two things, right? One is to have a smaller time horizon for each of these budgeting cycles. Yeah. And then the other is the ability to pivot from product A to B during that year, which is in contrast to the typical financial, budgetary cycle. Yeah. So agile isn't fundamentally incompatible. it's a different way of doing things. Probably a better way. Pushback. Yeah. So like the focus on sprint over sprint. Ignores long term financial health because all of your plans are in close, you know real close week to week. It's even shorter term than quarter to quarter. And when you're looking at it at that perspective, you can't take into the long term. Yeah. So valid pushback, but actually that exactly is the anti pushback because what you're doing is you are getting feedback every two weeks, every month, and you're adjusting. So adjusting isn't just adjusting what you're delivering in features, it's also adjusting how you are funding these things. Funding streams can vary and that's actually a good thing.'cause you can't foresee quarter over quarter or year over year how to fund these things. I got another one in the rapid fire. You didn't know this was a rapid fire end of the podcast, but bring it on. the way we do budgeting, the continuous adaptation, we're gonna readjust based on what we show you that makes budgeting impossible. that would be the pushback here. Yeah. I think that makes budgeting more realistic rather than impossible because, the other scenario is you have all this money initially in the early stages of the project, you're floating in money, you have tons of money, and then by the time you get to halfway stage, you, you've depleted your, your coffers. So I, I don't necessarily agree that it makes budgeting impossible. I'd say it makes budgeting more realistic. The biggest benefit is when you cut off funding at some point, for whatever reason, you've delivered the most valuable things In your product. The flip side is maybe you didn't build the most valuable yet because you thought you had a year. Mm-hmm. Or two years. So that very argument is the reason why you should be doing micro budgeting. Alright. You're on a roll right now because I got a million pushbacks as you throw these out. I didn't say they're good, but I got a million of them. Listen, all your agile teams, you can spin up like you're, I see you over here with your center of like, center of excellence or whatever, and you're spin up these teams left and right and they're really great. But also I don't have enough finance people to like, to, like I know you wanna have all your teams have financial expertise, but I don't have enough finance people to scale to support all your teams. Yeah. I mean that's a valid pushback. It is usually one of those scaling challenges, right? Mm-hmm. So you don't need a finance person on every team all the time. You need a finance person on a team. For just the right amount of time. Typically when the team is spun up, they can come in and introduce themselves and introduce the concept of micro budgeting. After that they can move on. They can come back every month, let's say, to attend a meeting. That's fine. They should be able to manage that so you don't need a huge army of finance people that's not really the right way to think about this, right? All right. Let me hit a few ones that are on my list of like, this is an annoying category and I wish it would go away. responding to change a hundred percent beats your financial plan you came up with months ago and isn't relevant anymore. my sales people are already working around it anyway, even though they're not on my team and I'm following them and I'm working around it with my development team.'cause I'm responding to what the customer says. Finance people are the ones stuck. At last year's budgeting or whatever we're all product management, software development world. We're driving around them anyway, We just don't talk about it. So responding to change beats all that stuff. Sure. And the successful companies are doing it anyway. We just don't make a big thing about it. Rapid feedback cycles prevent expensive failures. I think about this from the beginning of my career when we did months long projects without any feedback from the customer. Okay. Those are very expensive. Gambles. Gambles.'cause they could sink the company. Mm-hmm. If they're wrong. We don't do that anymore we need a micro budget to get us to the next stage of learning. We're gonna pivot. People like it, people don't, we pivot, we go to the next thing let's just talk about running a business that people wanna be part of. Sustainable pace going from this mile marker to the next And everyone's happy with the journey, right? Sustainable pace prevents burnout. Lets us keep our team together. Isn't that better than, running from burning fire to burning fire every single day, you don't know when the fire's gonna happen how big they're gonna be, or what it's gonna take to put it out? Isn't that better? it absolutely is a million times better. I mean, there are so many benefits of working in that way. one is you're not gonna lose. Good talent, right? They're gonna stay with the company because they like to be there. They like to work in a company that works in that way they get, burned out and they're gone. So that's one. But the topic of today's podcast about, financial information, financial knowledge, if you can share some of that and enable some of your teams with how to do the basics of finance, that increases their motivation because now they understand the repercussions of their decisions, right? So their decisions are more sound because they're founded in financial principles and so I think as a result, it would probably lead to. More job satisfaction, those people who hang around a hundred percent. I firmly believe that. A hundred percent. let's wrap this podcast up. I have a few things in the wrap up that I wrote down. I don't normally do that because I don't like preparing for things. When I started this podcast, I read a thread about Instant Pot. It drove me insane enough to do two podcasts on the subject. Because you have a lot of intelligent, educated people, missing the financial engineering of the downfall of the company completely. They completely miss it in all the comments. Yeah. Again, I, I only got through 200 to 250 comments. I stopped counting at 200. Then I kept reading until I just couldn't take it anymore. There were easily 500 comments in that thread you can't pin the failure on an individual person. It's not an individual failure. It's a systemic failure that goes back to this financial engineering and exploitation. The skills that make great product leaders, great product leaders. Systems thinking, user empathy, deep analysis, asking hard questions, and even being able to ask questions and not be perceived in a pointing fingers bad way. Like that kind of stuff yeah, cool. Like you can do all that and still fall victim of financial manipulation. So this is my claim on the podcast today. In order to do a great job and build something that lasts, you need to be watching these financial indicators. You need to be aware of it. If your skill is not up to par, that's okay I'm not asking you to be an expert programmer and tester and all these other things. I'm just asking you to communicate with the people on your team who do have that talent. Yeah. Bring them into the fold, work with them; whatever comes out on the other end is much stronger because you've worked together. That's my big pitch to everyone listening. Yeah. Most companies have town hall meetings at least quarterly where, they gloss over high level financial information. If you're part of these meetings, feel free to unmute and ask questions that's why they have these meetings. If you're working for a. Public company and your company issues, financial statements. It's your company's statement. You should understand it. And if you don't understand it, reach out to somebody to make sure that you really understand it right. I think those are good starting points just become, become familiar with that world. It's not a foreign world, it's certainly not detached from what you do every day. You're an integral part of it actually, right? Yeah. Again, not magic in any way, shape or form. It's another skill. You can add it to the team and then you'll be in the know. Yeah. You will not be caught unawares, rearranging the furniture on the Titanic when it goes down or maybe you will. I mean listen, my heart will go on. If your heart will go, also go on like, and subscribe the podcast. And we'll see you on the next one.