The joke goes like this: A guy jumps off the top of the Empire State Building. A woman in a 74th floor apartment has her window open. As the jumper plummets by, she hears him remark, “So far, so good.”
I thought of this joke recently, when the US economy improved and the unemployment rate fell below 8% for the first time in Obama’s presidency, forcing Governor Romney to abandon his favorite attack—that Obama’s unemployment rate had never been below 8%—and pivot to saying the rate was now the same as when Obama was sworn in, so there’d been no progress.
That struck me—a businessman—as most dishonest.
In accounting, the two most important measures of financial value are the balance sheet and the profit & loss statement (P&L). The balance sheet tells you how the company looks now. The P&L tells you how the company has done over time. The balance sheet is a snapshot; the P&L is a movie. Acquisition specialists evaluating a company will view the snapshot, sure, but they really want to watch the movie.
To illustrate this, let’s return to our New York jumper. If, as he’s passing the 74th floor, you take a photo, you see a guy at the 74th floor. But if you’ve been running a movie camera since he jumped, you see a guy in free fall. That’s why the overheard comment—“so far, so good”—is funny. You know it won’t be “so good” for long.
In the year before President Obama was sworn in, national employment fell from 95% to 92.2% (5% to 7.8% unemployment). During the next nine months it continued to fall, then stopped and gradually climbed to the level it was when Obama began (see chart below)—at which point Romney declared there’d been zero progress.
This, coming from a man who’d been spectacularly successful buying and selling businesses, seemed to me the height of disingenuousness.
He was comparing the snapshots, ignoring the movies, and hoping no one noticed. The snapshots were identical. The movies were quite different. The same employment numbers, but two very different trends—a free fall versus a steady climb. Mitt Romney would have been thrilled to buy the first economy and sell the second.
All candidates tell lies to get elected. I understand. It’s part of the game. But there are lies and there are lies. Mr. Romney’s strength—the thing about him I valued most—was his business acumen, and for him to pretend to misunderstand that … that was the lie that cost him my trust and caused me to vote to give Obama the chance to finish what he started.
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