Anti-XYZ Voters: Modern Day Luddites?

By Ronald J. Baker, Daniel D. Morris and Justin H. Barnett - Founders, VeraSage Institute. The following opinion piece is a follow up to the authors' article "We Are Cognitors" published on AccountingWEB in August 2001. The opinion expressed here is that of the authors, and does not necessarily reflect the opinion of AccountingWEB.

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success than to take the lead in the introduction of a new order of things.

–Niccolo Machiavelli, Florentine statesman and philosopher

In the 1964 presidential election, Lyndon Johnson trounced Barry Goldwater by 16 million votes, the total being 43 million to 27 million. Johnson received approximately 61% of the vote to Goldwater’s 39%, an outcome not unlike the recent AICPA bylaw amendment vote, whereby 62.7% were opposed and 37.3% were in favor of the Institute’s bold initiative to create an interdisciplinary global credential.

The rhetoric of the opposition leading up to the vote was somewhat similar to the infamous Johnson television ad showing a little girl in a sunny field plucking petals from a daisy while a countdown in the background begins, then an explosion occurs, and mushroom cloud forms, insinuating Goldwater would lead the country into nuclear extinction. The opponents of XYZ had the same visceral and emotional arguments against the initiative, claiming that it would ruin the CPA profession, confuse the public, was not needed, a waste of AICPA resources, etc. Not to mention their adhominem attacks against Barry Melancon, Kathy Eddy, and others in the AICPA leadership. Like the Johnson ad, none of these claims were grounded in reality.

The vote is over, the proposal lost, and the anti-XYZers need to move on. However, they now seem determined to take on the AICPA leadership over the $5 million that was spent, not to mention CPA2Biz. One comment from Ed Gray is typical of the sentiments now being expressed in the aftermath of the vote: “Very interesting, since our ‘leadership’ was telling us that there was ‘overwhelming’ support for the XYZ concept! Is it now time to have another vote–for AICPA leadership (and staff) that will listen to the majority of the members instead of squandering our dues?”

We would like to remind the No Voters, as they are popping their champagne corks in gleeful celebration, of a few basic realities. First, the notion that this vote proves the AICPA leadership is out of touch with the majority of its members is specious. The facts are quite the opposite.

Ladies and gentlemen, 61% of the membership did not even vote on the initiative. How can the opponents possibly claim that the AICPA is out of touch with a majority of its members, let alone wasted $5 million in R&D on the proposal, when 61% of the members could not be bothered to cast a ballot? This illustrates what economists call “rational ignorance.” The benefits of voting were obviously less than the costs to this “silent majority,” and therefore one can conclude they believe everything is just fine with the AICPA and it’s leadership. The anti-XYZ vote represents less than 25% of the AICPA membership. They defeated the initiative, but they are still a rather paltry–albeit vocal–minority.

For the No Voters to now go after the AICPA leadership is the equivalent of minority tyrannical rule, in disguise as a majority. If the silent majority, who were completely indifferent to the proposed credential, don’t like the AICPA leadership, they will do what all free market participants do–vote with their feet and pocketbooks. Our conjecture is they will stay where they are. The No Voters need to understand that it is they who are a minority of the AICPA membership.

Second, the only conclusion one can draw from the No Vote is the forces of “creative destruction” (a phrase coined by the great economist Joseph Schumpeter) in a free market are never the result of a democratic vote. We pointed this out in the opening of our article “We Are Cognitors,” (see www.accountingweb.com, August 7, 2001). All that happened is a vote for the status quo, yet that is not how wealth and opportunity is created in an entrepreneurial economy. We will admit we had reservations that a not-for-profit organization would be able to garner majority support for such a radical and bold initiative as this, since that is not the normal course of history with respect to innovation and change (though a university did create the MBA). Once again, history has been proven correct. It’s a good thing Orville and Wilbur Wright didn’t take a vote before launching their airplane, or Steve Jobs prior to introducing the Apple computer.

As economist and eclectic thinker George Gilder pointed out over two decades ago in his seminal book, Wealth and Poverty:

In every economy, as Jane Jacobs has said, there is one crucial and definitive conflict. This is not the split between capitalists and workers, technocrats and humanists, government and business, liberals and conservatives, or rich and poor. All these divisions are partial and distorted reflections of the deeper conflict: the struggle between past and future, between the existing configuration of industries and the industries that will someday replace them. It is a conflict between established factories, technologies, formations of capital, and the ventures that may soon make them worthless–venturres that today may not even exist; that today may flicker only as ideas, or tiny companies, or obscure research products, or fierce but penniless ambitions; that today are unidentifiable and incalculable from above, but which, in time, in a progressing economy, must rise if growth is to occur.

How we feel about the future tells us who we are as individuals. Do we seek stasis–a regulated, engineered world? Or do we embrace dynamism–a world of constant creation, discovery, wonder, and competition? These two views increasingly define our political, intellectual, cultural and business landscape. The central question of our time is what to do about the future.

Dynamism represents, according to Friedrich Hayek–certainly one of the last century’s greatest economists and social philosophers–“the party of life, the party that favors free growth and spontaneous evolution.” Its central value is learning, which unlike stability and control is an open-ended process.

The minority that voted “No” represent a vote for the past over the future, and the past is unlikely to produce major gains in knowledge or financial leverage. Further, since the No Voters have not exposed themselves to major reverses–either financial or epistemological–they are not likely to accrue huge gains. This is precisely why it is entrepreneurs who change the world–by embracing the unknown and blazing new trails– and are the impetus for major growth and progress in any economy, not bureaucrats protecting their turf, or shortsighted voters uncomfortable with disrupting the status quo.

There are major systemic issues facing the profession. Rather than attack forward-thinking leadership, shouldn’t the No Voters ask themselves, “What should we do about these issues?” The issues were, after all, brought forward and publicly aired as a result of the XYZ debate (not to mention resulted from the $5 million spent on the initiative’s R&D)? Issues such as: the eye of the needle (the fact that you can only become a CPA by going through the narrow door of audits, which only 15% of the profession currently provides; an outdated accounting curriculum that does not adequately prepare graduates for the future; a precipitous drop in accounting enrollment at colleges across the country; an antiquated financial reporting model, which is leaving an enormous hole that other entities and industries are beginning to fill (see the ValueReporting Revolution by Robert G. Eccles, Robert H. Herz, E. Mary Keegan, and David M.H. Phillips); governmental regulation which is stifling the profession from meeting the needs of its customers and the public it is pledged to serve, among others.

Would the Strategic Business Professional credential have solved all of these issues? Certainly not. But it would have been an important first step in ameliorating some of the pernicious effects that will result if something is not done soon about these dilemmas. The only constructive proposal I read from the nattering nabobs of negativism during the debate was to spend more money on branding the CPA image (not unlike Lyndon Johnson’s Great Society program, where the strategy was to simply throw money at social problems thinking that was the ultimate cure). How long do you want to throw good money after bad? One cannot put racing stripes on a pig and expect it to run any faster. The profession has been losing ground to the consulting houses for decades, and there are a host of other entities who are anxious to move into the attest arena in the areas of Key Performance Indicators, Environmental audits, and cultural audits, not to mention strategic planning, business development, education, and so on.

Make no mistake, the Global Credential initiative will be launched by some organization, be it a university, an international institute, a private company, or some combination thereof. It is an entrepreneurial experiment that deserves a test in the free market to ascertain whether or not it will add value to the lives of others. Either way, once again the CPA profession will be on the outside looking in, because a small minority didn’t have the courage to face the future, and disrupt a status quo that is increasingly becoming tenuous.

Barry Goldwater may have gone down in defeat, but he paved the way for the Reagan Revolution sixteen years later. Defeat is never final. It is just sad the profession won’t be the lead dog in the pack racing off to the future–and thus, our view is destined to never change.

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