6. Avoid self-deception in financial or accounting models.

Avoid self-deception when using valuation multipliers in financial or accounting models.


This one accompanies #2 on looking at what we really do and using physical measures. The obvious self-deception is using cheap energy to obtain expensive energy, thus distorting the energy yield ratio. However, the warping of judgment by using cost systems or other valuation systems is well known (see Lean Accounting, for instance.

As long as an organization must sell its output for less than it pays for the input, “monetization” will be necessary. Just stay aware that what is being measured, or projected, is only cash flow in a limited context, not what is actually being done.
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Guidelines
6. Avoid self-deception in financial or accounting models.
1. Quality over quantity, always
2. Seek physical reality in the present and in the future
3. Look at the big picture—all the earth. Question all assumptions
4. Holistic systems thinking
5. Favor the precautionary principle.
7. Create vigorous learning enterprises
8. Learn fast from many little “mistakes,” – avoid re-learning
9. Strive for long-term elegance
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