The Accounting Podcast

Blake and David explore the controversial H-1B visa program's impact on the accounting profession, particularly how firms like Deloitte reportedly pay visa holders 10% less than U.S. workers and the potential implications for audit quality. They also examine Bench's sudden shutdown and subsequent acquisition and then discuss Barry Melancon's farewell interview with the Financial Times as he steps down as AICPA CEO, where he defended the 150-hour rule, his legacy, and his impact on the profession.

Chapters
  • (05:01) - Sponsors and H1B Visa Discussion
  • (11:14) - H1B Visa Impact on Accounting
  • (26:53) - Bench Accounting Shutdown
  • (45:17) - VCs and the Tough Decisions
  • (47:42) - Challenges in Automating Bank Transactions
  • (48:58) - H1B Visa Workers and Financial Misconduct
  • (52:19) - Predictions for 2025 and Beyond
  • (58:12) - Private Equity's Impact on Accounting Firms
  • (01:08:15) - Barry Melanson's Legacy and the Future of CPA
  • (01:15:23) - Conclusion and CPE Credits
  • (01:16:45) - Bitcoin and Quantum Computing
 

Show Notes
Robert Sterling – Twitter - H-1B DATA MEGA-THREAD
https://x.com/RobertMSterling/status/1873174358535110953
 
Deloitte employees with H-1B visas were paid 10% less than US workers, report finds
https://www.hrdive.com/news/deloitte-employees-with-h-1b-visas-were-paid-10-less-than-us-workers/735162/
 
Bench to be acquired after abruptly shutting down
https://techcrunch.com/2024/12/30/bench-to-be-acquired-after-abruptly-shutting-down/
 
‘Most important man in accounting’ warns against lowering standards
https://www.ft.com/content/033792af-18e4-4d69-92f9-5b78b01f2012
 
Meet Willow, our state-of-the-art quantum chip
https://blog.google/technology/research/google-willow-quantum-chip/

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Transcripts
The full transcript for this episode is available by clicking on the Transcript tab at the top of this page

Creators & Guests

Host
Blake Oliver
Founder and CEO of Earmark CPE
Host
David Leary
President and Founder, Sombrero Apps Company

What is The Accounting Podcast?

The Accounting Podcast (formerly the Cloud Accounting Podcast) is the world's #1 accounting, bookkeeping, and tax podcast! Join us weekly for a roundup of accounting news, analysis, and interviews. Plus, earn free NASBA-approved CPE credits for listening with the Earmark app. Learn more at https://earmarkcpe.com.

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Blake Oliver: What is the biggest implication of quantum computing? It's the fact that a computer will be able to crack current encryption technology. What does cryptocurrency rely on? It's in the name cryptography. So like if somebody develops a computer, a quantum computer that can hack RSA encryption, which is what we use for Bitcoin, as I understand it, then they can literally steal money out of your wallet. Because the only thing that's protecting that bitcoin in your bitcoin wallet is your private key, which is guarded by this encryption.

David Leary: Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: Hello, and welcome back to the Accounting Podcast, your weekly news roundup in the accounting profession and the number one podcast for accountants in the world. I'm Blake Oliver, I'm.

David Leary: David Leary and Blake. Your hand looks worse. Why does it look worse?

Blake Oliver: I know, well, I had to have surgery on it. Um, I had a rod inserted into my fifth metacarpal over New Year's. On New Year's Eve, that was my celebration.

David Leary: I saw the x ray, so it was like a diagonal crack. It was a.

Blake Oliver: It's a boxer fracture, but unfortunately it was a spiral boxer fracture. And my pinky, if it healed, if we just let it heal, would be shorter. Uh, which, you know, kind of gives you like this, like weird. Kind of like gimpy, you know, pinky thing. I don't want that. And I'm a cellist. So how does that affect?

David Leary: Is that which hand is which?

Blake Oliver: I mean, I might be flat forever playing on my fourth finger. So, uh, got to get that fixed. So, uh, it wasn't fun because it felt like my hand had been broken all over again. But now it feels great. And I'm looking forward to, you know, getting back in the pool, uh, doing all my other stuff in approximately 51 days is my countdown to full recovery. Maybe sooner. In the meantime, I'm lucky that we live in Arizona, so I get to go out and hike and walk around and you can see I've got my scarf on. The the challenge of having a giant like brace or it's almost like a cast. It's not a cast, but it's like big and bulky is you can't put on a jacket. So I'm really glad I'm not in one of these states where I have to wear like a giant winter jacket, because I don't know what I would do. So it's going to be a beautiful 70 degrees here today.

David Leary: Yeah, I think we hit 82 on New Year's Day here in Tucson. It's ridiculous. Or the third, it's yeah, yeah, it's a little warmer than it should be.

Blake Oliver: So that's that's my, my news. Um, but the good news is I'm a talking head, so it doesn't really matter if I can't use my left hand and just got to click around on my mouse. And the beauty is that I spent all this time learning how to use AI transcription tools, uh, specifically a tool called Super Whisper, which I found in Jason STAT's newsletter. And I set that up months ago just out of curiosity. Um, and I've been using it to draft emails just by speaking. I can use a hotkey on my computer. I think I've even demonstrated it on the show. Right, David.

David Leary: And we did on the show. I think you you brought the show before.

Blake Oliver: So I can press a hotkey and just talk, and then I turns my, uh, transcript, whatever I say, into an email or a slack message. I've got different prompts that I've created for each of those, and it works extremely well. It's actually faster than typing, so I think I'm good. I'll be okay.

David Leary: But bad news, I think when you brought to the show before, there was still no windows version.

Blake Oliver: No windows version yet.

David Leary: Still on Mac only today.

Blake Oliver: Um, so welcome to our live stream viewers. Boring accountant. Our number one viewer asks when is the next cello live stream? Maybe I'll have to do one. Uh, to celebrate getting back in shape after I do my physical therapy, um, I am setting goals though, to keep myself in shape even though I can't swim. I am going to do on March 1st. Terrell Turner is coming to town and we are going to hike a 2627 mile loop in the Scottsdale Sonoran Preserve all around the edge of it. So I'm training for that.

David Leary: Now, I always see him wearing a weighted vest when he goes for his hikes and walks. Are you going to wear a weighted vest?

Blake Oliver: Uh, well, maybe to train. Putting it on is a little challenging though, right? Putting on like a 40 pound weighted vest when you only have one hand. A little tricky, but, you know, maybe I can get some help figure it out. Um, yeah.

David Leary: Just don't trip, that's all. Be very.

Blake Oliver: Careful. Hey, Evan. Welcome. Hello. Hello. Happy new year. Uh, all right, what are we talking about today? Actually, before we go into that, David, let's thank our sponsors.

David Leary: Yeah. So today's sponsors we have on pay boom tax, tax bandits and Basil. And we'll have ads for those in the episode.

Blake Oliver: Thank you so much for your support. If you want to support us. Support our sponsors. So go check those out. You'll find the links in the show notes. I want to talk about H-1b visas. David, the first cracks in the Trump coalition have surfaced. And it was over the holiday break. And it was regarding these H-1b visas for skilled workers. There's something like 85,000 of these that are issued every year, and many more than that renewed. I dug into the numbers on this program, and it seems that something like, I'm not totally sure if this is right, because it's hard to get the data on it, because there's a lot of applications and not every application gets approved. There's something like ten applications for these visas for every one that gets approved. But they can be renewed. And it looks to me like there's about 300,000 to 400,000 of these skilled workers brought into the United States every. Uh, that are in the country, you know, on like a every year basis either.

David Leary: Am I correct? Historically speaking, this has been very heavily used by the tech companies to bring engineers in, starting with Cisco back in the day.

Blake Oliver: And that's right.

David Leary: Facebook's big on them.

Blake Oliver: Heavily weighted towards tech. But interestingly, uh, there are quite a few that are approved for accounting. So it's basically tech is the big group computer systems IT people. And then after that you get consultants finance accounting is the next biggest group. So there's a direct tie in to the accounting profession here because the big four import quite a few immigrant workers on H-1b visas. And they do it for accounting and finance positions. And a recent study found that Deloitte in particular Who pays these H-1b visa holders 10% less than market rate for these jobs. So the question is, is H-1b suppressing accounting wages in the United States? It's a legitimate question, and it's one that broadly has been used to advocate for ending the program by the MAGA base that opposes immigration in the Trump camp. And so this debate broke out into full view on Twitter and in the news over the holiday break. Because really, the the catalyst for this was the appointment of Sriram Krishnan as Trump's AI policy advisor. Now he's advising on AI, but he's not advising on immigration. But he has made some past comments about H-1b visas. He wants to expand them. He thinks we need to bring more folks in from countries like India and India and China to work in the United States. And Laura Loomer, who you may have heard of. David, a far right activist on Twitter, criticized the appointment, calling it deeply troubling and against Trump's America First agenda. That was on December 26th. And then on December 28th, David Sacks, one of the co-hosts of the All In podcast, the venture capitalist who is now Trump's White House AI and crypto czar, engaged in a public disagreement with Loomer on this.

Blake Oliver: Trump weighed in and said he's always been in favor of visas, but actually, in his first term, he acted to reduce H-1b visas and called them bad for American workers. Um, Elon Musk said he would, quote, go to war over the H-1b program, saying there was a dire shortage of talented engineers. And Vivek Ramaswamy, who is Musk's you know, collaborator on the committee. Hee hee hee. Kind of made a political misstep. He told the New York Post that he. Actually, no, that was that was Trump who told the New York Post this. Here's what Ramaswamy said. He said, our American culture has venerated mediocrity over excellence. A culture that celebrates the prom queen over the Math Olympiad champ, champ, or the jock over the valedictorian will not produce the best engineers. And that really set off the anti-immigrant Trump supporters. And Ramaswamy and Musk both had to clarify that they believed that the H-1b system is broken and should be changed or replaced. Um, so, like, this is this is the cracks in the coalition, right? It was tech that got Donald Trump elected. Something like $250 million raised by Elon Musk to support Trump's reelection efforts, and the tech industry wants these skilled workers brought in on these work visas. And the America First anti-immigrant group wants to end the program completely. So we're going to see, I guess, what happens in the coming year. You know, who who has the true influence when it comes to this?

David Leary: For the tech companies, you basically get to get employees that are highly qualified. You get to pay them 10% less. And not only that, you have this power over them because you can threaten at any time to pull that away. And it's not it's not the best scenario for the worker, that's for sure. And then obviously it's not good for people that are competing against people that are in that position because they're abused is not the right word, but you could see it easily happening. You have power over the employees that you wouldn't have if they were just U.S. employees.

Blake Oliver: That's exactly right. And actually, I have a story about how H-1b finance and accounting employees face more ethical pressure from from management. And it's because they don't really have other options. If they leave their job, they have to leave the country. Robert Sterling, we'll get into that. Um, I want to highlight this thread by Robert Sterling on Twitter. So this was one of the kind of threads that started this that Elon commented on. He downloaded five years of H-1b data from the Department of Labor website. And he crunched the data in Tableau, and he shared it on Twitter. Um, and he found there's just tremendous demand for these visas. 868,000 applications for fiscal year 2024. Now, remember, only about 10% of those are going to actually get approved. But it just shows you how much companies want these workers. And interestingly, uh, 75% of them are for less than $150,000 a year. So this chart that I'm sharing here on the screen shows you the bands of pay. And you can see that like, um, you know, maybe it's like 18% or 17% of them make less than $75,000 a year. If you add up the next group 75 to 100 K, then you get to maybe like a little under 40% and then up to 125 K, like that's about 60% of the applications. So there's there's this idea that these visas are for highly skilled workers. Right. But 60% of them are making less than $120,000 a year, and 75% of them are making less than $150,000 a year. So who are the people that are coming in? What jobs are they doing on these visas and their three year work visas, by the way? And they can be extended for another three years. And then there is a pathway to become a permanent resident, but I'm not sure how many of these workers are actually staying here versus going home. One of the scary things about this program, or questionable things about this program is that, um, the vast majority of the applications that are approved are for these outsourcing companies. Um, cognizant.

David Leary: Cognizant.

Blake Oliver: Infosys, Wipro, HCL tech. I mean, they get like tens of thousands of applications into the system. These aren't American companies. These are actually like Indian companies that import H-1b tech workers and mass. And they fill positions, contract roles in US companies. And one of the things that we have observed happening is that companies will do layoffs and then hire contractors from these companies who are immigrants on H-1b visas.

David Leary: So it's like it was a huge customer of or client, or Intuit was a customer of cognizant, massive customer of cognizant back in the day. I don't know if the relationship is still there, but I remember a lot of these were a lot of product development, a lot of tech support was all done by cognizant.

Blake Oliver: Yep. And this is a chart that shows um certified applications by job category. And you can see it's very small, but you can see here that software developers make up the vast majority of these applications, like 620,000. Right. Um, and then another band that's also called software developers is like 516,000 computer systems analysts, 191,000. But the But the next group, like when you get down past the IT stuff, it's business intelligence analysts. You've got mechanical engineers, operations research analysts, and there's accountants and auditors with 49,000 applications. So it's it. And then it's like consulting analysts and then it's accountants. The biggest employers are like Robert Sterling said, cognizant. Google is a big one. Ernst and Young has a huge number of certified applications like over like it looks like 60,000 applications. Um, Amazon, Microsoft, Infosys, Tata Consultancy Services. Apple has quite a few. Accenture Deloitte is on there with 17,000. And then you got some of the banks. And if you look at the NAICs code certified applications, you see like the vast majority are in computer systems design and related services. But we've also got like 50,000 here in accounting.

David Leary: Accounting is a top seven of these positions basically.

Blake Oliver: It's the sixth one down. Yeah. Um so basically it's like you have computer systems design related services. These are the these are like the, uh, codes for the businesses that are hiring them or not hiring them, submitting the applications. So computer design then colleges, universities and professional schools. Then you've got consulting firms, um, electronic shopping and mail order houses, then software publishers and then accounting, tax preparation, bookkeeping and payroll. So I guess those are the, you know, the accounting firms that are doing this, the big accounting firms. So, you know, the average salary is like 80 to $120,000. These are good middle class American jobs, is what I'm sensing here. And there's even a tweet here in the thread about the big four firms. Right. Ea had 16,000 applications. Deloitte had, you know, close to 4000. Actually they they have two entities. So if you add those together, it's like, you know, 7000 PwC, 2000 KPMG 1300 there.

David Leary: Bdo four is the four. Four of the top five are big four.

Blake Oliver: It's just crazy how much EA has compared to everybody else, right. So the big four firm with the worst audit quality has the most H-1b applications visa applications.

David Leary: And so what's the advantage I guess if you're going to obviously outsource work to India, you're one of the big four versus bringing people to the states to do the exact same work.

Blake Oliver: I think it's, um, well, think about it this way. If you want to offshore a job, the easiest way to do it is to bring the offshore worker here to the United States, have the US employee train that person in person, and then send them back to India.

David Leary: To do the job. So this, in a way, is a leading indicator of future jobs that will be outsourced.

Blake Oliver: I think so. Like I don't see how this helps American accountants and auditors and finance people. Right. That's that's that's what worries me about this.

David Leary: And some of this like it's glad you brought this up with cognizant because I remember when I was working with outsourced labor at cognizant that was in India to do QA work. And it takes you a long time to train somebody and get them up to speed. But one of Cognizant's value propositions for their own employees is every two years they can switch projects. So you get pressure to, hey, I'm going to move to a different project, which means now you're going to have to train somebody from scratch again if you don't bring me over to the States. So there's something in the whole culture, the value prop, where you, as the employer can get pressure to bring people in because they want to get to the states, obviously. Yeah. I think Elon Musk's arguments that a billion people will come if you let them. Right. That's his argument.

Blake Oliver: And here's the problem for American wages. We know that low wages are the number one problem in recruiting accountants into the accounting profession. That's what young people say when they choose to go into other majors. It's because the hours are too long and the pay is too low. It's those two things. And Deloitte employees with H-1b visas were paid 10% less than U.S. workers, according to a recent report. This was published on December 10th, 2024. Um, they're not supposed to do this according to the rules. They have to pay market rate, but companies systematically pay slightly less to their H-1b visa holders. Um, this was researched by George Mason University, Columbia University, University of Hong Kong, and our own Arizona State University. The way they did it is they used 2005 salary data. Um, that was hacked and publicly released in December 2014. And while the H-1b worker status wasn't included in the hacked data, the researchers used US Department of Labor data to infer which workers held visas. Deloitte said that the data set cited in the paper is incomplete and has not been validated. In an emailed statement to Air Dive, which published this report. So. Does the H-1b program suppress US wages? The study that I found on this said that there's no evidence that it suppresses US wages, but I fail to see how it can't. How could how, how does bringing in tens of thousands of foreign accountants who work for 10% less than US accountants, how does that not suppress our wages?

David Leary: Yeah, because you're essentially it's an alternative. You don't have to hire these people. But of course you're going to hire people that are 10% cheaper. Why would you not do that, even with all the overhead involved of the legal paperwork and doing that stuff done, it's still a significant amount of savings. If you're doing tens of thousands, it really adds up.

Blake Oliver: And the real savings is when they come here now they're locked into working with you for three years. They can't leave. If they leave, they have to go home. So they have no negotiating power. They can't ask for raises and they can get a renewal for another three years or so, but they still don't have any power.

David Leary: Nobody can hire them and pull them away from your talent, from your company. Exactly. The employer has a lot of advantage in this.

Blake Oliver: Yeah. So it's it's troubling. And oh, this is the part that I wanted to highlight too, when it comes to audit quality or the, the, the, the quality of like the pressure that these H-1b visa holders face, if you think about it. Why? Like what would happen if you had an ethical dilemma and you're an H-1b visa holder? You're here on an H-1b visa, and management asks you as a CPA to do something unethical. Well, you could say no and you might lose your job and have to go home and lose that really great salary that you've got here in the US. Your chance of chance of staying here on a green card. Your chance of becoming a citizen.

David Leary: You discover something you might not want to, you know, raise the flags and draw attention to yourself.

Blake Oliver: Exactly. Um. And I lost it. I can't quite find it. I had it open, but there is a study that shows that, uh, that like these visas, like the the presence of these workers in firms actually increases the risk of, of material financial misstatements. So not only is it suppressing, potentially suppressing the wages of American accountants and auditors, it's also increasing the risk of misstatement and failing to protect the public, because these accountants do not have leverage to stand up against management when they're asked to do something that's unethical. And even though they're a tiny percentage of the workers of the accountants at these companies. Um, if you're in management and you want to get something unethical to happen, who are you going to go to? You're going to go to the guy who doesn't have any leverage, the guy who has to do what you say because they're here on an immigrant visa or a work visa. It's not even an immigrant visa. I mean, you can't stay here, right? You aren't guaranteed to become a US citizen. So. Um, so that's that's the accounting connection of the whole H-1b visa debate. Let's see what the what the chat has to think about this.

Blake Oliver: Drew. Drew wants to know if I've bought a Bitcoin yet. Drew we'll come back to that. Let me star this here. Uh, Azriel says I just graduated with my accounting degree. About to start my MBA. Pray for me, hoping the job market is salvageable this year. I think you're going to do great. Uh, even even with the challenges that the accounting profession is having, it's a It's a great place to work. Great opportunity. Lots of lots of lots of opportunity. So I'm optimistic for you. Asriel. Uh. Parzival asks. Hi. Quick question. Has the 120 hours CPA pathway come into effect? Uh, no, unfortunately not yet. But I'm hopeful. I'm hopeful for action in California this year, and then maybe the other states will follow. Let's see here. G-accon says this is the best point. Too much pressure produces unethical behavior, and accountants take the fall. Benji says, totally burned out at Big Four and now working for a very tiny firm and making more than it Big Four. That's great. Great to hear. Hope your busy season goes well. All right. What should we talk about next, David? Uh, I think you had an update on bench.

David Leary: Yeah, I have a lot on bench we can run through.

Blake Oliver: So before you get into that quick recap, shut Just to recap.

David Leary: Right, on our last episode, we didn't have a lot of details because it happened a couple, 2 or 3 hours before we went on the air last week. And on December 27th.

Blake Oliver: Bench was one of.

David Leary: These shut down.

Blake Oliver: Accounting tech bookkeeping startups. Been around for 13 years, raised over $100 million. And apparently my theory was never got to profitability and burn through the 100 million and couldn't raise more and just shut down out of the blue a couple weeks ago.

David Leary: So so now stories are coming out. Well, first, there's a lot of speculation and some of these theories I'm not even buying into. There was a whole narrative about it's because the VCs got rid of the founder, and I don't buy that at all. When most accountants know it's the business model. And lots of people are bubbling up now. Hey, send your business to me. I'll. I'll take you bench client and I question that. Right. Blake, if you're if somebody chose bench to begin with because they don't see the value in paying your firm for your services. Do you want a bench client at all? Like, if you're going to be in this constant fight where they're going to want more than what they're willing to pay. Mhm. Um, some of the other narratives out there is all these other tech companies are starting up and you and there are these AI startups like it was almost it's not exactly another bench, but a lot of them are very similar type product. Hey we have AI bookkeeping. It's going to do all the work for you. Come, come use our service. And even though as I was clicking on a couple of those and you dig in and you look at the terms of service, they're using QuickBooks, a lot of these companies don't have the tech they're promising. And there was an article in TechCrunch that really had a little bit of a timeline of benches downfall. According to TechCrunch. So one of the main things, according to the employees, was they had to struggle to automate things.

David Leary: So it seems easier on paper than it is in real life to categorize expenses. Right. Uh, one former employee claimed the only way bench could ever scale would be because of AI. But the execution was flawed and the tools didn't work properly, so overreliance on the tools just caused at the expense of human bookkeepers caused delays. So the books went from team to team to team. It goes from the bookkeeping team prior to the engineering team to maybe a categorization team. And because of that, people's books were never done on time. It's just the execution of this was the problem. I don't think it's leadership. It's arguably execution in the business model. Right. Because they're not charging enough. But this is just very, very hard to do. Everybody thinks it's going to be done very easily. It's just very, very hard. Now what's interesting about this, they went through some management changes and they had a plan to sell in November of 2024 already. So then there was no takers. And in late December a bank was calling on their venture debt. And so on December 27th, they were forced to shut down. Then it got so much attention that other people realized, oh, bench is available for purchase. Nobody actually knew it because of Because of that, and the founder of employer Comm saw the news. 36 hours later, a deal was done and Employer Comm bought bench and is going to basically relaunched it. If you go to the bench comm website right now, it exists and it's at bench Comm or Bench Co.

Blake Oliver: I think it might be bench.co. Yeah. Bench.co.com employer.com has not been around for very long. Like I'd never heard of them before.

David Leary: Well they just bought the domain for $450,000 a few months ago. They never had the domain before. It was a different company right.

Blake Oliver: But the company itself is new, not just the name.

David Leary: It's a fairly new startup. Yes. So they are what they paid. That's not disclosed, which because they're a private company, or if employer comm was a public company, they'd have to disclose it. If it's over 30 I think 30 million. So it has not been disclosed. Um, they are an HR payroll employer of record, and they also do some global hiring and recruiting and talent type stuff like that. Bench before was saying they had 35,000 customers, according to employer. They told TechCrunch in this article they actually had about 12,000 customers, not the 30,000 35,000.

Blake Oliver: My my suspicion is that the 35,000 is the total number of customers that bench ever had and that they churned two thirds of their customers, which is why they couldn't make it work.

David Leary: That makes a lot of sense.

Blake Oliver: They spent a lot of money on acquiring customers, and probably more than they would earn from that customer in terms of gross profit because of their high labor costs being in Vancouver. And so if a customer churns, you have a loss on that customer. They got to stick with you for years in order to make it back. If you're spending a lot of money on acquisition, I mean, this is why most accounting firms refuse to pay more than I mean it would. It's very aggressive in accounting to spend more than one times the annual contract value on acquiring a customer.

David Leary: If you buy if you buy a firm, that's why the multiples are at like one time, but.

Blake Oliver: Also just when you're generating customers internally. So let's say a customer generates $5,000 a year in revenue for your firm for some sort of bookkeeping package that you do for them on a monthly basis. To spend more than even a few thousand dollars on acquiring that customer is like a bad idea, because like, your margin on that customer might be like 20% net right after you pay all your labor costs, all your overhead, you know, if you're doing it right, you might make $1,000 in the first year in profit on that customer. So to spend more than $1,000 acquiring the customer is betting that you're going to going to retain them over a period of years, but it also creates a cash flow crunch because, you know, let's say you spent 5000 to acquire that customer. Well, if you're if you're spending 80% of what you make from that customer on, like paying employees and overhead right now, now you're paying 5000 to acquire the customer through some sort of like marketing effort, sales, that sort of thing. And then you're paying another $3,000 to service the customer.

David Leary: And I would argue you're paying more than that because you're you have the accountant or bookkeeper doing the work, working in parallel with an engineer who's quote unquote, going to automate it. So you have double the expense every time you service a client. You're doubling your expenses. Yeah, they're way more than that.

Blake Oliver: They have way more in terms of R&D costs than an accounting firm has, which generally have like no R&D costs. They just have like some sort of software cost, which might be like, I don't know, 510% of revenue might be their software cost 10% probably if they're like aggressively using technology. So. Yeah, I think this is just tech people trying to apply software as a service principles to a service based business, and they were never able to automate it enough to get the humans out of the equation. And so their margins were just too thin to support a super high growth strategy. You have to slow down. That's why most accounting firms can't grow more than 20% per year once they reach a, you know, $1 million a year in revenue, it's really hard to double and double and double every year because you're hiring so many people. And to keep customers happy while you're bringing on all these new people and you've got all this churn inside of your firm is really hard. So bench was losing customers. They didn't have good customer service.

David Leary: And what's interesting I saw in this article is so the employer founder, Jesse Tinsley, never met anyone at bench before he saw the news on LinkedIn etc. and decided to go pursue this. But he purchased bench based on Bench's reputation and track record. It tells me I don't know if that due diligence is there, because I've talked to lots of accountants over the years that have just said the bench customers clients they get are messes. So I don't know what the track record is, but you know, obviously we have a different audience.

Blake Oliver: Well, let's be fair, right? So the the clients that are turning off of bench are the clients having the worst experience. So of course they're going to have the messiest books. The question is what is the quality of the books of those customers that aren't churning off the bench? How is that? Is that acceptable? We don't know. We only see the worst cases. Yeah. Right. When they come to us. Same thing with TurboTax, right? Everyone's like, oh, TurboTax really terrible work. Well, the the returns you're seeing are from the are probably the worst returns. They do. That's why they're coming to you now. Right. But you don't see the success stories because they stay with TurboTax.

David Leary: And employer comms. Bet is they're going to get accounting experience people experience and customers quickly. And my theory on this is this is just like Legalzoom. We talked about this on the show. Legalzoom surveyed their clients and that's how they understand small business. If you're working with small businesses, you start surveying them. They're going to tell you they want more help for the accounting and bookkeeping services. So the the survey data is out there and I'm sure employer. Com surveyed their clients and they've been thinking about this for a while. I don't think they just woke up and thought, hey I could buy a bench today. They they they've been kicking around the idea of offering bookkeeping services. They probably have the data. And this ties into what I've kind of said, right. If we know small business owners want CAS services, they're not saying it perfectly that way, but they're they want bookkeeping type services, right? Yeah. It's very obvious they want them. They don't understand how much it costs, etc.. And this goes to what to what I've said before about pricing your tax services against Direct File and TurboTax live, kind of that same thing. Put in on your website your cash, your cash packages, but also put in benches, cast packages and put in QuickBooks Live and price against those services and show here's what you get with these services. Here's what you get with my services and price against that. So you can show people the difference between what you offer versus what these other services are offering. Because if you don't line them up like that side by side, people don't know, you can't just say, well, I'm going to give you better service. What does that mean? You got to line your services up and make a chart and, and put that on your pricing page.

Blake Oliver: And highlight the key differentiator, which is you. On my advisory package, whatever it is, will get access to me. Yuri Kapilovic on my earmark podcast. Go listen to that episode. Yuri shares how he has like 100 clients and they all have his cell phone number. Now, I know some people. That is totally unacceptable. You would never give out your cell phone to a client. And I understand why you wouldn't if you had 1000 clients. Because you'd be getting calls all day long. But Yuri has designed his practice so that he only has 100 clients. He doesn't get so many calls that he can't pick them up. He'll pick them up, like at the gym. That's part of the value. And no low cost provider can compete with that. And his clients are happy to pay a lot more for that level of service. So I think that's the big difference, right, is when you go with a bench, a tech plus people solution, you're almost always going to get a team approach to doing your books. So you're going to be talking to different people all the time. They're going to be swapping in and out. The quality is going to be questionable.

David Leary: Nobody ever knows your business or your story, right?

Blake Oliver: They're just pushing data around and it's people plus tech. It's like, you know, every time you get into an Uber, you got a different driver that works for certain things, like getting from point to point. But does it work for your business when it comes to producing financial statements that do what you need them to do. That's a lot more complicated than getting from point to point. For most businesses, but not for all. For some, it works great if you've got a very simple kind of business and you just need a tax return to get your taxes done, maybe that's all you need. Maybe bench can do it. Um, should we read Ian Crosby's post about this? Ian Crosby is the former, uh, founder and CEO of uh, bench, who was kicked out by the board. He said, by the way, he's now at Mercury. He's head of accounting products at Mercury. He said, I'm very sad today to see that bench accounting is shut down. I've avoided speaking publicly about bench since just over three years ago, when I was fired for the company fired from the company I co-founded. I still don't have a lot of appetite to talk about it, but I think at least a short statement is appropriate. In November 2021, I went out for what I thought would be a regular lunch with one of my board members. We had just raised a series C and turned down a highly lucrative acquisition offer. We had budding partnerships with companies like Shopify that were interested in the technology we were developing. We were winning. The board member thanked me for bringing the company to this point, but that they would be bringing in a new professional CEO to take the company to the next level.

Blake Oliver: I have been battling with some of the board members over strategy. They wanted me to take the company in a new direction that I thought was a very bad idea. I wanted to continue with what was working and with what our partners had signed on to distribute. I was intransigent. Rather than continuing to fight me, they opted to just replace me, thinking that they could run the company better themselves. I was totally convinced that their approach would destroy the company. I opted to resign from the board rather than fight because on the off chance that I was wrong, I wanted to give them the best chance of succeeding. I reasoned that if they were right and I'm just a wrong headed founder who won't listen, then I should just fully get out of the way so they can see their vision through. And on a personal level, I just didn't think I could stand to watch them dismantle the company I had spent a decade building. So I moved on. I started off fresh and built a new company, teal, earlier this year. We successfully exited to Mercury. Things are going well and I'm excited for what we're up to. I hope the story of bench goes on to become a warning for VCs that think they can upgrade a company by replacing the founder. It never works. Now, here's what's interesting about this post is Ian says that he had an acquisition offer. So this was after the series C, and they got an offer to sell the company and tried.

David Leary: To get a deal done with Shopify.

Blake Oliver: And the VCs turned down the offer. And this happens all the time in tech is often VCs will have a veto power over deals, and if they don't think they're going to get enough of a multiple on their investment, they're not going to get a really good return. They'll just kill the deal because they don't care about the employees. They don't care about the founders. All they care about is the return to their fund. And they're going for big returns, not little ones. So they'll turn down a decent acquisition offer, uh, to benefit themselves at the expense of everyone else. And that's really sad. So this is a lesson for accounting firms that are taking PE money is it's very similar to VC money. Right. It's private equity is just slower growth venture capital essentially. So if you sell to a PE firm they might have control over your firm like this and push you out if you disagree on the direction. And investment funds don't care about you in the end. The people running these funds, their Obligation is to shareholder value. It's to their limited partners. It's to the people who put in the big checks. And so if you get into a fight with them, they're going to do what is right for their investors, not what's right for you necessarily. Unfortunately, that's just the way it's set up. That's how these funds work. And I've heard many stories like this. So it's unfortunate. But I also think that like long term, I don't see how bench could ever have survived because of their high costs. Like, why weren't they off shoring everything? All the labor could be offshored to.

David Leary: Get some of those H-1b1 visas.

Blake Oliver: Or just send it to people actually in those countries, doing it for a fraction of what it costs to do here. The the successful accounting tech. Plus you know people companies are that's what they're doing. That's the only way you can afford to do it at the margins that you get for a service business.

David Leary: And I imagine also like new competition. It's just like obviously bench was disrupting accounting firms bench themselves was getting disrupted. When you see startups like pop up where Final Loop is really focused on those Shopify accountants or I'm sorry, Shopify sellers, right? And they're going to do the bookkeeping for them, and they're coming in a price lower than benches or coming in at 245 a month and promising human bookkeepers and very similar product offering. It's just bench never had competition coming directly at bench before. And now they did. And it makes it tough right. It's funny because now the VCs obviously took a deal because the option was nothing. It was either zero or take a deal at this point. And and maybe that's a negotiation tactic as well, because I imagine if they were trying to sell this in November, they made the decision to sell. Either they weren't getting offers or the offers they were getting were lower than they wanted. They didn't want to sell.

Blake Oliver: They wanted to take this on a rocket ship. That's what VCs want. They don't want to sell for like a fraction of their investment. There's no point like they have no incentive to do that. It's not about getting back a little bit of what you put in. It's about squeezing this thing, you know, until it is a ten x at least or 100 x. And I guess they never figured it out, which just seems so obvious. But I guess, you know, everything is easier when you're observing from the outside. Like you and me, David. Right. Ailes says to Brian Ailes says, seems like Non-accountants do not understand. I'm just going to call you Jake. Okay. Seems like Non-accountants do not understand how hard it is to automate categorizing bank transactions. Imo, the client will always have a part to play. Maybe banks could come up with the solution. Um, yeah. It's not that easy to categorize transactions into a general ledger. You would think it's easy.

David Leary: Never there. The why is not there. Why was this purchase made? Because you could you could buy a lot of stuff from Amazon, but you can't really categorize it unless you know why they bought it. Well, this is for this project or this client or this job function.

Blake Oliver: And it really depends on what your business is, how you're going to categorize stuff. And uh, you also need to like look at the revenue streams. You look at a company like bench, what they do is they put everything into one revenue account and then it's all the expense is broken out. But that's not very useful. That's not helpful. How do you calculate like gross profit on different lines of business? If you do that you can't. There's literally like no useful information. Um, in terms of like how you run your business from that. So. Uh, Mike T says, guys, you may not be fully up to speed with H-1b and L-1 in Big Four. For example, every Big Four has a set of rules and procedures that protect whistleblowers who disagree with the manager on something. Uh, this is a multi. This is like the post continues, but I lost number two. Um, Mike, I think I know where you're going with this. Like we didn't get the second part of your post in the chat for some reason. But like I understand they might have rules and procedures that protect whistleblowers who disagree with the manager, but like what happens in reality versus what the rules and procedures are, is like completely different in my experience. And so just the fact that this person has like no opportunity to like, leave their job if they feel unfairly pressured means that you're going to have more pressure. And I had a study that I brought to the show about this, and I just can't find it. I lost it here. Oh, here it is. Okay, I found it. I'm going to bring this up. So, um, this is called employer power over H-1b workers could create financial risk. And I found this in TechTarget.

David Leary: You're not sharing yet, Blake. I don't know if you want to share it or not.

Blake Oliver: Yeah, I'm not sure if I will need to. So the paper was called does US immigration policy facilitate financial misconduct? And it focused on the dynamic created by the H-1b visa holders, dependency on the employer to maintain legal residency in the US. And essentially. After the H-1b cap was reduced in 2004, firms that had previously hired H-1b accountants saw a 2.3% decrease in accounting irregularities. That's a meaningful decrease in accounting irregularities from a decrease in these H-1b visa holders working at firms in accounting and finance. So the. The argument is that the fear of losing your visa status makes H-1b workers less likely to report misconduct, and it enables financial wrongdoing to go unreported. So, um, Nick G says office supplies. That's where I put personally. I just categorize everything into office supplies. It makes it really easy to do my tax return. Rafi says the why should be in the Po process before it's approved to purchase. Rafi, how many small businesses use a Po process? Zero zero. Small businesses use a Po process. Most midsize businesses don't even use it properly. Um, that's why you got to go get it after the fact. Okay. What should we talk about next, David?

David Leary: Um, I think this the whole small business is not having appeal process leads me into 2025, 2025 predictions. So Sage had their predictions for 2030. So even five years out from now because it's 2025 already on.

Blake Oliver: Their blog or something.

David Leary: And um, yeah, this I picked it up. It was on Yahoo's finance page. So it was probably a press release that went out. Um, one of the prediction, one is ethical AI leadership will be a priority, and they predict 80% of small businesses will have adopted robust AI ethics policy by 2030. I doubt that they have no policy on spend. Why would they have an AI ethics policy at their small business? It's just not going to happen unless AI writes it for them. That would be the only way they'd have it.

Blake Oliver: Did I write this article?

David Leary: I'm sorry, did.

Blake Oliver: I write this article, this press release. I don't know if it's going.

David Leary: One thing I thought was interesting is they have a prediction that there's a total overhaul of risk management. They think AI is going to continuously monitor anomaly detection, reducing financial errors and fraud by over 95%, which essentially reinvents that whole part of the company risk management. That's an interesting one. I thought from them the end of the monthly close. But God, we've been hearing about this for decades. It feels like the the monthly close is going to be real time. The traditional monthly close is going away. We've heard this forever. I don't know if I buy into it. Um, 75% of small businesses will transition to dynamic continuous accounting practices. Um, real time data will fuel finance decisions. 70% of SMEs will integrate real time data into their financial decisions. I'm not sure. I think people, just small businesses, just spend and then figure it out later or hope for the best, I don't know. I don't think there's a lot of planning, and I don't know if AI is going to come in and all of a of a sudden change that dynamic of like, now I have real time data. I'm going to make a better purchase decision or make better decisions with my company that I don't buy into. And then the other one I don't believe either is increased creation of new roles and opportunities for accountants. I will automate routine tasks, freeing up accountants to focus on strategic thinking and provide valuable business insights. This transition will create new opportunities for accountants to leverage their expertise in new ways. Driving business strategy innovation. I don't necessarily think AI is going to do a bunch of work, and now accountants are like, well, I have this new job now. I think you're just going to do the same job you did before, but you're going to be more supervising it and taking on more client work. You're just going to have more. Yeah, the volume is going to go up.

Blake Oliver: You're going to have a bunch of like AI agents that you chat with in Microsoft Teams that do very simple tasks. It'll be nice, actually, and they'll do it instantly. You know, they'll process those POS. They'll they'll do those journal entries. They'll they'll book the the payroll, whatever it is that's happening.

David Leary: And that'll probably impact the H-1b1 visas more than anything else. Right. Because you're going well.

Blake Oliver: Yeah. We'll just we'll.

David Leary: Look for talent with agents.

Blake Oliver: We'll import the workers undercutting US wages from India, and then they'll supervise AI agents that then eliminate the entry level jobs for American workers.

David Leary: That we actually that we're exporting out to their own home country.

Blake Oliver: Yeah, yeah. So we're fully just going to, like, put Americans out of work, you know, with AI and H-1b visas and offshoring.

David Leary: Just faster.

Blake Oliver: Just faster. Yeah.

David Leary: Do you have predictions for 2025? I think for me, after looking at where bench was at, this is the 2025 is the year experiments are going to play out and come to finish lines. You know bench is obviously an example of this. I think pe pe is effect on accounting. You could argue all this flood of PE money that's coming into the accounting firms is an experiment right. So that's going to flush out the results of what that means. I think QuickBooks and TurboTax live will be there will become forever plays this year for Intuit or they'll be killed.

Blake Oliver: Wait, wait. What?

David Leary: Forever plays like turbo QuickBooks Live TurboTax live. I think 2025 is the year and two. It's going to figure out this is this is going on forever, or they're going to kill them like the 2025 is the year of these. All these experiments coming to a head like bench came to a head TurboTax live.

Blake Oliver: I thought you said TurboTax.

David Leary: I was like, oh, sorry. Yes. Quickbooks Live TurboTax live. Got it. Um, and I think we're going to get closure on AI's impact on accounting. I think this is the year we're going to see. Is it really affecting it, or is it just opinion pieces that keep getting written, like we're going to really see AI's impact on accounting. And again, moving from experiment to this was the results of these experiments. I mean.

Blake Oliver: Will that happen this year? I think we'll start to see it happening. We're only a couple years in to AI, and it generally takes five years, at least, for us to see the technology get implemented into the tools that we use. Uh, so if you're in a firm and you're using the tech stack in that firm, like how much is AI really going to affect you yet? It'll start to probably. But I mean, we still got a ways to go and accounting moves pretty slow. Accounting software moves pretty slow. Um, the thing that I'm the thing that I would love to see is like, an easy way to set up a virtual computer and to have an AI agent work in that and to be able to like, like chat. I want a service where I can set up a virtual AI agent on a virtual desktop and have it work for me, do work for me in applications. I know you can set that up now. I just don't have like the time or the technological know how to like figure it out in an easy way. But like that would be really powerful because then we could start doing like basically robotic process automation with plain English prompts and automate a lot of like copy paste Hey, stuff. I mean, there's all sorts of stuff in our business that if we had like an AI agent that could click around, like, you know, use the keyboard in the mouse on its own, I think we could automate a lot of really routine stuff. Um, so that would be really neat. Maybe somebody will figure out how to do that.

Blake Oliver: Or maybe if that exists, somebody could let me know. The, uh, the thing about private equity, you said, David, that's interesting. I have a I have a prediction about private equity in accounting. So something like a third of the top 100 firms are going to have private equity investments very soon. I remember seeing something like that in accounting today. There's a lot of interest. And all these older managing partners, uh, and equity partners are like looking to get bought out. And private equity says, all right, sell us your equity. We'll come in and we'll help you fix up the firm. And, you know, they paint a rosy picture. Well. What happens if the private equity investment continues. And like let's say that eventually private equity owns a majority of accounting firms, like 50% or more of accounting firm equity is owned by private equity. That really changes, I think, the dynamic at organizations like the AICPA, because who does the AICPA work for? Who do they really represent? Whose interests do they really represent? Yeah, historically, it's the equity partners, the people who've been around the longest. The managing partners are the ones who have the voice at the AICPA in the profession. And then it's also the educators and the policymakers. They make up the AICPA Council. And what happens when those managing partners are like, no longer CPAs but our private equity people like, how does an organization like the AICPA claim to represent the interests of certified public accountants when it's private equity that owns accounting firms? And what happens.

David Leary: To the actual CPA itself?

Blake Oliver: And what tension does that.

David Leary: Protecting the public?

Blake Oliver: Yeah. What tension does that create. Right. The private equity is not interested in protecting the public. They're they're interested in protecting their own interests, which is growing their private equity funds. So I see a lot of tension eventually created by private equity, buying up these accounting firms between the associations and the CPAs who remain. And I think, like we want to see salaries go up, we want to see ours go down. But private equity would love to see salaries stay down and hours stay up. If they want to continue the traditional model and private equity is you know, these firms are not known for being like the most innovative. That's not how they make money. They make money by buying existing businesses that are profitable, standardizing their practices. And then, like you say, David, squeezing the blood out of the orange.

David Leary: Well, eventually.

Blake Oliver: Or the stones.

David Leary: To flip it. Right. They eventually kind of they want like a house flippers. They buy it, they fix it up. You flip it. Is that are we going to see exits from PE companies that are going to take a firm and sell it? But like you said, if they all get bought by PE, who are they going to sell it to another PE company? Like who's going to buy the now new improved flipped firm I guess.

Blake Oliver: And take it public.

David Leary: But or it's a firm going to crush crumble under the pressures that are introduced from PE. That's what I mean. We're going to start getting answers to this in 2025. The PE experiment on accounting because that's like you said, five years it's been happening. What's what's the results of this P experiment? Because you could it's not it hasn't been really clear other than the only concrete thing is partners have been getting some nice exit checks and getting out. That's the only thing that's really been clear so far.

Blake Oliver: Refried bean counter says lots of negatives with P. What kind of positives are there with the profession? Would they have enough weight to possibly influence the credit hour requirement for an individual to earn their CPA? I would hope that the private equity firms would weigh in on this and streamline licensure requirements and all that, but you see, they don't really need to because they can just offshore the work, right. Send the work out to CPAs in India and the Philippines. And and then you don't even have to deal with these requirements. So what we're seeing is the hollowing out of the CPA in the United States by a variety of factors. It's follow the money. It's expensive to hire people here and to pay them well. So if there's like no limitations on bringing people in to do the job or offshoring the work to do the job, where is it going to go? Um, and again, I don't mean to say that like accounting is a bad profession to get into. I think it's a great place to get into right now. If you get into the right job or you make a job for yourself, like because there is a ton of demand for like skilled people here, but you can't be doing just like a rote job. You know, if you want a job where you're just told what to do and you just do it. I wouldn't get into accounting. That would not be a great place to be, because those jobs are going to be the ones that get automated and offshored. Uh, David Sculley says other than p going IPO, possibly securitizing the cash flow, some other P rolling them up into a mega accounting firm, I guess. Yeah, the P firms could just get like the private equity could just make a new Big Four maybe I don't know.

David Leary: Because that's some of the argument of a firm. Anyways. You're pooling resources and sharing resources, which essentially the partnership model.

Blake Oliver: Right? Well, I think.

David Leary: Instead of instead of each partner renting their own office, getting their own little marketing, their own little front desk person right to to answer the phones in their own print shop, to print returns and staple them together. You pull that together. And to some extent, that's the whole value of P is they're going to have shared resources, a tech guy, an IT department for you, they're going to have a marketing department for you. And so I could see that keep rolling up and up and up. But it's not that much different to the existing model, which is well, it.

Blake Oliver: Is the existing.

David Leary: Ownership model. It is the model.

Blake Oliver: It's the exact same model. But you just have private equity owning part of the firm instead of partners.

David Leary: Owning.

Blake Oliver: Part of the firm.

David Leary: There's no more.

Blake Oliver: Cpa. But like, yeah, that's that's what's going to be interesting is seeing whether or not private equity can adapt to the changing business model, because I believe that AI is going to force firms to drop the billable hour. Because if you become many times more efficient, if every one of your people can be way more efficient using AI and you bill by the hour, you're going to lose a lot of billings. So just like I experienced with cloud based bookkeeping, I automated 80% of my job. I had to switch to fixed fees, or I was going to have to pick up five times as much work to make the same amount of money, which doesn't make any sense. So I feel like that's going to happen everywhere else. And so if these private equity firms now own firms just keep doing the same thing, they're actually going to have a revenue collapse. They're going to they're going to like and they're going to have to if they keep the same model, they'll have to overload their people with more and more work. You get more efficient if.

David Leary: You did less money in this disruption that's happening to the accounting industry. Other models of their purchases they've been making in the last five years are going to go to hell. If they didn't price in like, oh, we can't bill by the hour. The, the, the revenue structure of these firms we bought is not going to be there. It's not going to be the same. And if they didn't build that into their P model to begin with, maybe that's the experiment that we'll see is a lot of these p situations fail and P starts leaving because you said they can't handle the transition.

Blake Oliver: Mike T says this convo about offshoring and quality deterioration as a result. Do not forget that professional standards require a review by a CPA of work done by a subordinate. Fully applies to work done by a non CPA. Okay Mike, sure, but I can just hire a US licensed CPA offshore to do that review. Or I can import one on an H-1b visa and have them do the review. I don't need to use us CPAs like American CPAs anymore to do this work. And Nasba and the AICPA have made it ever and ever easier for people offshore to get a US CPA license by making the exam available in other countries, like they've facilitated this at the at the urging of the big firms. So, you know, tell me how that benefits Americans. Uh, I think this is a good pivot point to Barry Melanson.

David Leary: That's exactly what I was going next, because he talks about the business model in here in the future.

Blake Oliver: So our our favorite president of the AICPA, Barry Melanson, gave an interview to the Financial Times in which he warned against lowering standards. That's the headline of the interview. Well, the.

David Leary: Headline was the most Important man in accounting warns against lowering standards. Make sure you have that full headline.

Blake Oliver: That's right. Um, Barry Melanson, the longest serving CEO of the AICPA, is retiring. I think he did retire right. It was supposed to be at the end of the year. So he's done December 31st. So? So he's out and he gave this interview to the Financial Times and, uh, he, he said that the 150 hour rule has been pivotal in elevating the profession from a trade to a respected field. And he warns that lowering standards may harm the profession's reputation and public trust. Uh, and I just can't. I just can't believe, actually, I can believe it because he's been doing it for decades. So he's in complete denial that Barry Melanson thinks that he has raised the profile of the profession over the last 30 years or more that he's been running the AICPA. Um, like, it's just like you look at the numbers and it's not better than it was when he started. It's worse. Like salaries have stagnated for decades. We have fewer accountants and auditors than ever before, and they aren't making any more money. And they're they're working long hours for low pay. How can we claim to.

David Leary: Have elevated.

Blake Oliver: Them?

David Leary: What's that? The Big four has gotten bigger than ever, though, under his tutelage. Right. And the big firms have become.

Blake Oliver: Richer, more and more profitable. The only thing that has improved that I can tell in Barry Melanson's time as the president of the AICPA, is big firm profits and the compensation of the senior equity partners and managing partners who make millions of dollars a year, including Barry Melanson, who made something like over $2 million a year as the president of the AICPA. I mean, how can he be? How can he be so clueless?

David Leary: A lot of his article, he feels like double speak. He talks about, well, what if you if you remove the 150 hour rule, right, you make a change to that. We're going to have a lowest common denominator problem, e.g. an unskilled practitioner could bring the profession into disrepute. Disrepute is basically the state of being held in low esteem by the public right that these, these, these people without the extra 30 hours are going to hurt the profession. But he also argues that the number of entry level positions will be reduced because of technology, and the pyramid shape of accounting firms won't exist in the future, and that folks need to be trained to move up to the middle of this non pyramid shape, whatever this new shape is going to be. It's not a pyramid, it's like a.

Blake Oliver: Diamond shape that he shows.

David Leary: Yeah. Diamond or an octagon. Right. And you got to move people to that thing. But when I hear see the words or hear the words. So folks need to be trained to move to the middle of this new non pyramid shape, that means you're going to train them right, like an intern or it's like a trade or profession. So it's a full circle back to what he tried to eliminate, which is accounting being a trade or Trade or profession. People being guided and tooled up the ladder.

Blake Oliver: And like the idea that a fifth year of education is what is doing that is just crazy. Um, you know, the irony is that he says we elevated accounting from a trade to a profession. And meanwhile there are many trades that make more money than accountants do now.

David Leary: I talk to accountants all the time. Who they're plumbing clients make way more money. 180 grand a year for a plumber is no problem.

Blake Oliver: It just. It just makes me sick when I see, like, these accounting. I'm glad the Financial Times like, made this the headline and emphasized this in their article, because they're doing good reporting. But like, it makes me sick when I see coverage in like accounting today or CPA Practice Advisor, that's like praising or CPA trendlines, praising Barry Melanson and everything he's done over the years. And then I go through and I read these articles and, you know, I'll ask perplexity. Tell me, Barry Melanson, chief accomplishments. And it's all about increasing the membership of his organization. It's all about like merging AICPA with CMA and making it an international organization. It's about getting bigger. His organization got bigger. He made the organization stronger. But like, what did he actually do for accountants? How did he make accounting more ethical? How did he improve, uh, financial reporting? How did he improve the quality of audits? And he didn't do any of that. How did he protect the public? I don't even think Barry Melanson thinks about the public. I don't even think it crosses his mind. All he thinks about is himself and his association and his legacy. He's so focused on his personal legacy, he couldn't care less about your average CPA, who makes like $100,000 a year and who can't afford a house in America.

David Leary: And he never did the extra 30 hours If it's so important you think you would go back and set the example and get those himself right? Like his CPA was issued in August of 1980, which is around the same time all this started changing. So he just got in right before the the change. I, I don't know it for him to like he's just digging in harder on it. Yeah. This is the best decision that's ever been made in accounting. And it's and it's still arguably not proven that it is.

Blake Oliver: And if he just went around and talked to practicing accountants like young accountants on the front lines and, you know, not professors and not managing partners who are completely out of touch, I mean, even the managing partners don't want the 150 hour rule anymore. If you just talk to his constituents, he would learn something. But I don't think he does, and I don't think he will. And I think he's going to go off into the sunset and give a bunch of speeches and talk about how great accounting is. And, you know, it's it's it's just It's spectacular, honestly.

David Leary: Well, hopefully this is the last article now. Like, his opinion should not come up ever again.

Blake Oliver: Oh, I doubt this is the last time. I doubt this is the last we've seen of Barry Melanson. He basically had to be forced out of the AICPA. This. This man can't. This man loves to hear the sound of his own voice.

David Leary: He hasn't updated his LinkedIn profile yet. Like so. It's still these are current rules still for him. You know, president and CEO, president and CEO. It says he's present. Like there's not there's no end date yet on his LinkedIn profile. So maybe he has not stepped down. Really. Still, it's not LinkedIn official. Until then.

Blake Oliver: Thank you everyone who joined us live today on our first episode of 2025. Great to have you with us. Don't forget that you can earn a free CPE credit for having watched this on YouTube, or listened to it on the podcast. Download the earmark app on the App Store or go to earmarked app in your web browser. Sign up for free. Find the accounting podcast channel. Take a course, take a quiz. It's just a five question quiz and you can earn your free CPE certificate. Thank you to everyone who subscribed. At the end of the year, we had a ton of people come in and subscribe and support the work that we do. We issued over a hundred thousand CPE credits now as of the end of last year, uh, and we doubled basically last year, we issued more CPE credits in one year than we have in our entire history. So it's just fantastic. I'm so happy that we can help make CPE less painful, more entertaining for all of you. And we want to hear from you. If you have thoughts about earmark or about the show, send me an email. It goes to David as well. It goes to both of us. That email address is the accounting podcast at earmark Me. The Accounting podcast that earmarked me. Find me on LinkedIn as well. Love to connect with all of you there. And we will see you next week.

David Leary: Break. Did you start a comment about Bitcoin? Oh yeah. Talk about I want to make a prediction on bitcoin as well.

Blake Oliver: All right. Drew said hey guys has Blake bought a Bitcoin yet? Since his last earmark podcast guests convinced him it's the future. Uh, drew. That's funny. Yeah, he didn't convince me it's the future.

David Leary: Because over the holidays here. Right. Bitcoin hit $100,000. Is this correct?

Blake Oliver: Yeah. Yeah. It went up over 100 100. Yeah. People are like oh that's going to go to 200.

David Leary: I'm seeing predictions that it's going to go up over 200. And a lot of them are arguing because of Trump being pro crypto.

Blake Oliver: Right. Because the US government is going to like establish a Bitcoin strategic reserve and start buying it. And like if if this happens, David, it's going to be the biggest handout to tech that you've ever seen. It's basically just giving money to like Winklevoss twins and Zuckerberg and to Musk and to David Sax. I mean, like, you might as well just hand them taxpayer dollars, billions and billions of dollars because they're going to be the ones selling it to the US government. If that happens. It's just nuts.

David Leary: It's their exit, right? It's their it's their exit. They get to it.

Blake Oliver: They're ipoing Bitcoin to the American people through the presidency. It's just and and here's the thing that's crazy is that we saw all this news about quantum computing. Google developed a quantum computer over the holidays. Uh massive news because current computer technology is like zeros and ones a bit can be 0 or 1 and everything rests on that. But as soon as you add quantum computing, now you like just orders and orders and orders of magnitude more computing power now, because you have it.

David Leary: Would take 25 years with our current most powerful computers are now going to take 15, 20 minutes. Right. Well.

Blake Oliver: What is the biggest implication of quantum computing? It's the fact that a computer will be able to crack current encryption technology. What does cryptocurrency rely on? It's in the name. Cryptography. So like if somebody develops a computer, a quantum computer that can hack RSA encryption, which is what we use for Bitcoin, as I understand it, then they can literally steal money out of your wallet. Because the only thing that's protecting that bitcoin in your bitcoin wallet is your private key, which is guarded by this encryption. So that is how the bitcoin crash will happen. That's how the crypto crash will happen is that.

David Leary: Nobody will have any trust in it. It's it's like it's all we trust the banks.

Blake Oliver: It's all based on it's there. It's a public ledger that's guarded by current cryptography. And if somebody can hack it, and everything that has ever been invented by humanity has eventually been hacked, then there's going to be some, you know, somebody's going to do it. Somebody will abuse it. Right? And that will cause the collapse is the lack of trust in cryptocurrency due to that. And I know there are like researchers that are working on upgrading the algorithms to be quantum computer resistant. But in order for that to work, you would have to get all of the Bitcoin miners. Everybody on the bitcoin network would have to upgrade as well. And that would be very, very expensive because to create encryption that is quantum computer resistant will be even more expensive. So it's going to dramatically increase the cost of mining, dramatically increase the cost of processing transactions, which is the opposite of everything we've been promised, which is that crypto is going to become more less expensive and is going to.

David Leary: Become a password that's 500 characters long instead of.

Blake Oliver: 43. Yeah, whatever it is. Right? Like it's like this is a existential issue for crypto. And I just feel like the people who are like promoting it as the future of transactions are not really thinking about this, like, and they don't want to think about it because they're invested in it. So when somebody tells you to buy crypto, ask them how much they are holding because like, I just don't trust what I read online about this stuff.

David Leary: Well, at the end, there's still no product, right? There's not. It doesn't actually create anything. It's just a it's snake oil. You're just buying something with the hopes it's going to go up. It's not actually worth anything today. It doesn't.

Blake Oliver: Do anything. I mean, it doesn't do anything. You can use it as a currency, but it's not any better unless you have to use it because you know you're doing something illegal or you're trying to skirt some sort of like financial regulation. Why would you use it? What's why would anyone buy Bitcoin? What would you spend it on? For most people, the vast majority of people on this planet, there's no reason.

David Leary: Unless you're buying it and hopes it goes.

Blake Oliver: Up. Exactly. And that is the definition of an asset that causes a speculative bubble.

David Leary: So my prediction it will drop 50%. And this is strictly the same argument they're making that it'll go up go up because of Trump. It's going to go down because of Trump. And it's pro US and pro USD policies. The the US dollar is going to grow faster than bitcoin ultimately. And it's going to decrease. People are going to move your anti funds leave Bitcoin and go into USD because I don't know is going to be stronger.

Blake Oliver: I mean because I think that like there's still room for this speculative bubble to go up. Like we could like derivatives created on Bitcoin. We're starting to see that like MicroStrategy, which is the company that's just like investing in Bitcoin right now. Like their entire business model is just we we take loans, we issue we issue convertible notes and we use the cash to buy Bitcoin. And then our stock price goes up. So now we issue more convertible notes to take cash to buy Bitcoin. It's essentially a derivative. The stock is now a derivative of bitcoin. And so if enough of that starts to starts to happen, like eventually it's that House of cards kind of, uh, financial product where at some point nobody wants to buy more Bitcoin and then the whole thing falls down. Like at some point the price stops going up, right? If, if, if your whole strategy is based on the price going up in order to buy more, so the price goes up eventually that'll stop. And that's when it falls apart.

David Leary: And then it'll be a run. It'll fall apart fast.

Blake Oliver: Exactly. But by then you want.

David Leary: To cash out as quickly.

Blake Oliver: As possible. Then all the billionaires will have cashed out, and it'll be the US taxpayer who's left holding the bag. All right, David, we got to go to a meeting. Thanks, everyone who joined us. Great to see you. See you again next week.

Bye bye. Hey, hey.