Why the Feds Just Called Accountants 'Non-Professionals'+ Is NVIDIA the Next Enron?

John Siegel: Uh, on this episode of Fintech Flow, we get into the AI tech bubble and how Nvidia swears it's not Enron. How, uh, the department of Education, classified accounting majors as non professionals and the science behind gut decisions. Let's get into it.

Mike Whitmire: Fintech Flow. What's up everybody? My name is Mike Whitmire. I'm the co founder and CEO of flowcast, inactive CPA and more recently an active flowcast certified accountant as well. Welcome, uh, to the most recent episode of Fintech Flow. I'm joined by John Siegel to help us navigate bunch of awesome accounting topics. So John, let's take it away.

John Siegel: Thanks Mike. Happy to be here again. Feels a little bit weird not actually kicking off the episode like I did last time. I feel like the guest where I guess I kind of am the guest. This is your show.

Mike Whitmire: It's like back and forth. You iterate into things and arrive at the right layout. So I think we're good. I think we're getting there.

John Siegel: We'll figure it out.

Mike Whitmire: The explanation made a lot of sense to me.

John Siegel: So. All right. Um, this one I think is really interesting. We talked about it a little bit on the first episode, but Nvidia is taking some flack again. Um, there's a recent Barron's article. Um, the title of the actual article is Nvidia says it's not Enron in private memo refuting accounting questions. Um, a quick synopsis. Nvidia is facing public allegations of aggressive accounting and potential fraud fueled by investors like Michael Burry. Uh, concerns focus on ballooning accounts receivable suggesting potential customer payment struggles or sales manipulation. And I should clarify, these are allegations that are out there. Just wanted to put that out there. Uh, allegations include circular financing which we talked about last episode. Uh, and improper use of special purpose vehicles, which is the name of my band that I haven't yet made. To hide debt. To potentially hide debt and inflate revenue. Um, and that's when Nvidia, uh, issued the memo saying all is well. Please proceed. So what do you think about that? I think it's just we've talked a little bit about it beforehand. Seems to be getting worse. Uh, I don't know if any new new anything in new is coming to light to fuel these alleg. But it's not going away.

Mike Whitmire: Uh, with Burry you always have to kind of question he shorts stocks and so you have to wonder how much panic is he trying to create. Is there really something here? But there are a couple issues that I won't be Surprised if there's some truth to it. And we're discussing two different topics. So accounts receivable and the aging of it being one and then the special purpose vehicles, those are two separate things. And when there's fraud, or if there is fraud, it can, or it might just be honest. Gap treatment discussions. Like you look at Enron and a lot of what Enron did was they got approved for mark to market accounting, which is GAAP compliant. And if you watch, uh, I highly reckon the smartest guys in the room like, awesome documentary about Enron, it's a little dramatized version of it, but there's a scene where they get approved for Mark to market accounting, which is where you look at an asset and then on a quarterly basis you're just like, yep, it's worth this. And if it's a publicly traded stock, you do it based on the stock price. But if it's not, you can kind of make up some numbers and value things to what you think they're going to be worth in the future. So there's a lot of judgment that goes into it. It was such a big deal for them to get approved for that that the executives all threw a party in the CEO's office after they got formal approval from Arthur Andersen because they knew, like, okay, we passed gap guidance. Now we're going to take advantage of this and manipulate it aggressively. So technically what they were doing through a gap lens was allowed, but then they just ran with it way too far on making assumptions and estimates after that. So I look at a special purpose vehicle, there might be some risk of that occurring. You're revaluing this vehicle. What does it look like on a quarterly basis? It's not a publicly traded company. There's nothing to tie it to. But let's say you do a joint agreement with a construction company that's going to build out the data centers and something happens. The state that they're going to work in cannot get additional power plants brought online to provide sufficient power for the data center. The project's not going to get done. You're supposed to go and mark the value of that project down, which means financially you're going to take a huge loss.

John Siegel: Right?

Mike Whitmire: Maybe, uh, maybe we let a couple more elections go by. We might see if we can get this approved and then the power will be got and we'll be good. So let's just like not deal with that right now. You can start to bring a lot of assumptions and estimates into the fold, uh, which can then, yeah, get tricky. And lead to like, no, you were doing too much, that is you're fraudulent at some point separately is the accounts receivable issue. We know that a lot of these deals are very forward looking. It's like OpenAI commits to build data centers at some point out in the future. There's not a timeline put on a lot of these contracts. So I don't know how their booking account's receivable. Like you're not going to, I don't think you're going to be like OpenAI committed to spend $30 billion as such. There's $30 billion of accounts receivable on our balance sheet if there's not a defined timeline for it. I think we're missing a lot of the criteria for putting it as ar. And I say all that because if it were booked as like long term accounts receivable or something, that would be a good fair reason for, hey, receivable collections are getting longer because we have more of these long term commitments. I don't think that's in accordance with gaap. So something else, is, something else might be going on here. But just because receivables are getting a little longer on the outstanding side is not suggesting that fraud is being committed or anything like that.

John Siegel: Interesting. So they could just kind of let it. I mean, is it, what's a, what's a natural timeline for that? Because you mentioned a couple of elections and it's like, that's several years.

Mike Whitmire: Well, so like in a normal course of business, like let's say floatcast, we sign a customer, it's like, okay, you're going to pay your invoice in 30, 60, 90 days, whatever is like mutually agreed upon for that. That's your standard contract. But if, if one company is going to another and saying we're, we're Happy to commit 30 billion to data center build out. The reality is like today a lot of companies are just starting from scratch to go build a data center. So Oracle is like, cool, we'll build out the data center. Or you have like new, uh, Cantor, uh, Fitzgerald is another one. You have all these property management companies that they're partnering with to build out the actual data centers. But there's no like, we're ready to go, you should pay us $30 billion tomorrow. It's like we got to identify a state. We have to lobby the government to allow them to pass this to. For us to build data centers within that state. Then we have to get, uh. And then they go in with your standard like give us tax Credits, we're going to create jobs, we should be able to build this. But what's happening right now is the states where they've already built data centers, the monthly electric bill is going up for everybody in the state because of how much power is being consumed. That I'm very confident there's going to be a huge pushback from people around having data centers built in their states. I think that could be a thing that actually really slows down the build out of these data centers. And then all of a sudden it does not matter what anyone is committed to spend on these data centers if there's literally nowhere in the country that will allow for them to be built. Which is probably pretty fair because like, if you're a citizen in a state, it's total nonsense for you to pay more in electricity because some data center is consuming a bunch of power. So, like, something's got to give on this front. And I don't know from accounting perspective whether you book it as AR or not, but I look at this as a very, like, long term, big problem.

John Siegel: I committed to learning Spanish several years ago and that hasn't happened yet. But how, how would, how would. If states pushing back and these data centers aren't built, how does that impact this potential or the bubble that we're in? The AI bubble?

Mike Whitmire: It is. The bubble would pop.

John Siegel: How does that. What, how does that, how does that, what happens after that?

Mike Whitmire: Uh, this is a, this is an idea, this is a thought that I have on, like looking at what, what could cause the bubble to pop. And I think this is one of those. Um, but I think it's a problem that's slow moving enough to where it's not going to be like the straw that breaks the camel's back on all this. You look at 2008 and seeing Lehman crash and then all the mortgages reset at the same time. It was such an acute event that caused the market to just collapse all at once, like over the course of a week or two weeks. Um, but this is like, oh, another state didn't approve it, Another state didn't approve it. It'll be like a longer play out for all this. But it could very much mean that like, the potential of AI is not reached. If you don't have the ability to build enough data centers, if you don't have the electric grid to power those data centers, then you can't run the models, you can't accomplish, like, what all these valuations are suggesting you're going to be able to accomplish. So at the end of the day, like legit, just power might be the problem with all this.

John Siegel: That's crazy to think about, but, uh, power to the people.

Mike Whitmire: Well, it's also, in my opinion, a great. Maybe if you're a Google or somebody, you can think about it a little bit differently. It's like I'm sitting on so much money right now. Perhaps it would be a good idea for me to go in and build some power plants and provide some of that back to the community, buy some goodwill with everyone in that state and then build my data center. Power my data center, feed some of it back to the community to actually reduce their electric bill. They'd be excited to have me here. There's a good value prop, like that's a way to go into a state and get approved. Not to say we're going to create a bunch of jobs during the build out and then afterwards it's going to take like 500 people to run a data center. So it's not that many jobs.

John Siegel: It's a little goodwill. I think that's an interesting way of doing things. But will it ever happen? Probably not.

Mike Whitmire: I don't know. Yeah, we're not like these large companies aren't going to be liked more. So I think anything they can do from a PR perspective in their power to like make this something that benefits everybody would be a good thing for them to do.

John Siegel: Absolutely. I remember in 2020, uh, as a member of the marketing team, um, we really started to lean in on the. How the, how the pandemic was impacting the office of the CFO and how it was making it, ah, making. Not that CFOs were at any point in time like devalued or anything like that, but making them much more empowered, um, in the eyes of both the board and the rest of the, uh, C suite. Um, we're five years after the fact. Uh, we talk a lot about CFOs, especially when it comes to AI these days. Um, looking back, uh, do you think, do you think that that's still true, the fact that CFOs probably hold more power and more sway than they ever really had before the pandemic?

Mike Whitmire: I think it's the. Yes. So I think it's the pandemic plus like the natural order of things? I think what ended up happening was Covid kicked CFOs into that storytelling mode because what was going on outside of the walls of your company was that was a time where perhaps there's more, it's more important to understand the story behind the numbers and what's going on within your business, rather than simply looking at financial statements and looking what everyone else is doing and making a decision based on that. I look at Floqast like us specifically. We were in an incredible position when Covid hit, actually, because we had just raised $40 million of funding. We had not executed on a big hiring plan ahead of that. So we weren't in a position to have to do anything rash from a financial perspective. So we got to be. But all that said, from the outside, I was getting so much pressure to cut expenses just because that's what everyone does. We didn't have a CFO at the time, so I was effectively the cfo. I'm like, I get that. However, the story behind our numbers is we have $60 million in the bank still. Because we hadn't spent our last round of funding. We just raised this. Our, uh, burn profile is effectively nothing. We haven't hired any people. And if we decide to cut a bunch of people, they're gonna be very good people. This is like, there's not an opportunity for, like, trimming the fat or anything. Like, this is not a good time to do it. And I pushed so hard back on all of that. Just like, pushed really hard because I knew the story of Flo cast, but. And wasn't just looking at what every other company was doing because it's what. It's what you do. So that was a big thing I was dealing with behind the scenes as, like, effectively the CFO at that. that point in time.

John Siegel: Interesting. So I guess these days, uh, this actually transitions into, uh.

Mike Whitmire: Can I layer onto that just a little bit more?

John Siegel: It's like these stories kind of.

Mike Whitmire: And then I think there was more appreciation for being able to tell the story behind the numbers because of what was deemed as, like, a once in a lifetime event. Like, oh, man, you got to think outside the box and critically and like, how are we going to handle this? But then I feel like we've been met with several once in a lifetime events since then. And so you just get more credibility with, like, interpreting the business and the numbers and thinking holistically about what's going on with your company and then providing that feedback to the board.

John Siegel: It's probably an old, uh, old story here, but you think about the Greatest Generation, Great depression, World War II, and how they were so resilient and everything. Millennials, man, we got hit with it hard.

Mike Whitmire: It's been wild running a company through this. People forget about svp, svb, Collapse. That was a thing that just happened real quick in the middle of all this, uh, Ukraine, Russia thing was nuts when that happened. It's like, what are, what are we going to do here? Is World War Three starting? And then. Yeah, it's been a wild ride. Wild ride.

John Siegel: So I think we could take these, this, the, the story about the, the cfo. Uh, and that was from CFO Brew. Thank you, CFO Brewing. Um, with another story from CFO brew. Um, CFOs and CIOs must collaborate more closely when it comes to AI. Um, there can be some friction there, obviously between who owns it, who's overseeing it, um, I guess even, um, it's involvement with things. Um, why don't we dive into that? Do you have any thoughts on that?

Mike Whitmire: Yeah, I have a lot of thoughts on this one, obviously. So, um, really important. And with AI coming in, there's going to be even stronger collaboration between the two groups, I would say. Accounting and finance specifically is an area where the CFO and their team should be owning the implementation and maintenance of the technology that they're using. They should collaborate very closely with IT resources. They're going to need, like some of that help to get a lot of the work up and running. But the reason I say I think it's important for accounting to own IT is because of the audit ability of all this technology. And it's tough to train an IT person to always be thinking about the audit when they're doing their work. Um, so if you think about, imagine sending an IT person in to automate a workflow, they're definitely not going to understand how me automating this thing at this point in the process is going to feed through my reconciliations, my journal entry, my GL come out in my reporting and properly present itself in financial statements. It's a lot to piece together for someone who's never done accounting before. So the question becomes, do you want to teach an IT person how to do accounting or do you want to teach an accountant how to use IT to automate some of their work? And I firmly believe, like, I'd rather teach an accountant and provide them with some software that makes it easier for them to automate work rather than having to go the other way around IT teaching them accounting and then bring audit risk into the fold because of that. So you can have a more efficient adoption and deployment of technology by having accountants own IT and collaborate with it, but and then ensure you're going to be compliant from like a financial statement audit perspective by having them do that.

John Siegel: Are, uh, CIOs thinking about risk when it comes to this sort of stuff.

Mike Whitmire: I don't think it's top of mind for them. What I've, we've had a couple clients where they came to us and said, hey, uh, our CIO is thinking about building that thing you're offering us or something to that effect. We've gone back and said, hey, what are they like, what's their plan for audit compliance? Are they going to get their SOC1, SOC2 reports? How are you going to make sure everything's working properly and what's happened in the time, the every single time so far as they've gone back to the CIO and said, how are you thinking about this? They were not thinking about it and so they backed off and we're basically like, okay, I'll let accounting and finance own this. And then they make their people available for, for stuff like, hey, can you help us integrate with this internal system? You know there, there are use cases where it's like, nope, we need an IT person to do this type of work because accountants can't do that. But it's the minority of the work. And then you get the benefit of having the assurance around your audit to where CIOs like quickly back off. They go, all right, I carve out some team members, they can collaborate with accounting and then we'll go focus on automating more on like the revenue.

John Siegel: Is that the optimal workflow for a situation like that? Like what would be a best case scenario for a CFO and a CIO to work on implementing something like Flowcast Transform?

Mike Whitmire: The best situation. I would recommend so having the ownership of IT live under the cfo, specifically under the controller or a finance transformation group if you have that. And then taking an IT resource from who is reporting directly up to the CIO organization, but give them a dotted line into the controller, right? So there's their time is committed to accounting. They're there to support them. It's not their full time job, but org charts are important and putting a dotted line over will give that people that clarity that like hey, no, this is a person that is committed to helping accounting and finance. And then there will be. The reality is there'll be some weeks where you need a good amount of the time. There'll be some weeks where you don't need any of their time because you're just managing stuff. But having someone available and carved out is really important. So I'd recommend a dotted line structure from IT over into accounting you mentioned

John Siegel: finance transformation in that role and obviously how it would fall into this sort of organization. I'm, um, curious to learn more about that. Um, especially moving forward. Uh, obviously not a lot of companies have a finance transformation role, but it's becoming more popular. How do you envision it growing in the next five to 10 years?

Mike Whitmire: I see it becoming more impactful. So I think early on a finance transformation person was somebody who would sit down, look at workflows, checklist items, maybe some systems, and try to think about what are some ways we can make all this work better together, or can we optimize some of these workflows? Is there even work we can cut off our plate? Like we're doing this thing on a monthly basis. We only need to be doing it quarterly. So that's transformation is more around thinking about the work you're doing and can you do it a little more efficiently. What that's going to look like in the future is somebody who looks more like a software engineer who's using a Flowcast transform to automate that work and then manage their automating work. Building agents and they're managing the agents and that's, that's what the future is going to look like. More tightly integrated with the technology, understanding the software and then working and understanding the accounting knowledge, um, as well. So I think it morphs into look more like a software engineer. Whereas when it became More popular like 10 years ago, you kind of started to see them pop up. It was more like you hired a consultant out of Big four to help you optimize your processes.

John Siegel: A lot of opportunity there.

Mike Whitmire: Yeah, huge opportunity. I really think that's going to be one of the big roles in demand going forward.

John Siegel: Well, I don't know how to transition to this one. Um, it's going to be a rough one. Accounting, um, degrees were reclassified as non professional by the feds. The U.S. department of justice of Education. I don't know where justice came from. Implementation or implementation of the new repayment assistance plan requires a federal reclassification of degrees to determine loan eligibility. The non professional status that was assigned to accountings accountant accounting majors, uh, affects graduate student loan caps. Uh, so the DOE reclassified accounting degrees as non professional, which is a wild classification. They couldn't come up with a better term than that. Um, the change, effective July 2026 cuts federal graduate student loan caps for accounting from $50,000 to $20,500 annually. What colleges cost 20,000 annually. I don't think they cost that much.

Mike Whitmire: When I was in College, like, yeah, states, uh, states.

John Siegel: NASCAR is pushing back. Yeah. State schools. NASBA is obviously pushing back. Um, what's wild to me, aside from the whole story, uh, is other licensed professions also reclassified as non professional include nursing, architects, physical therapists and educators.

Mike Whitmire: This is crazy. Yeah, not good.

John Siegel: These are all the professions that I associate with being professionals, not like marketers

Mike Whitmire: like nursing and physical therapists are going to be insanely important positions going forward. Nursing, uh, physical therapists and educators. That's insane. Those are jobs that are going to be around, you need through AI. I guarantee you those are three jobs that exist. Like, it's like the intersection of knowledge and person, personal skills is where you're going to have a hard time replacing that. And so it's like these are maybe three of the most important professions going forward and we're not calling them professions anymore.

John Siegel: They should be raising the caps, not cutting them.

Mike Whitmire: Yeah.

John Siegel: So obviously NAS was saying that even fewer people are going to go into the accounting profession because of the financial impact on accounting students, which already sucks.

Mike Whitmire: Yeah, they're probably right. They're probably right. So people just aren't going to get well, I guess. What's really the impact of this? You have the student cap, uh, the student loans is such a big problem with how expensive colleges. Maybe the bull case here is like, yeah, now you're going to get your accounting major. Probably not at a private school because no private school is 20 grand a year. I don't think. Like, I, it's, I don't know, my nieces and nephews going to college and it's like insane what, what college costs now. So maybe price comes down. Mostly accounting services are offered through state and um, local colleges, junior colleges, man. This, this is concerning. This is not smart.

John Siegel: I think, I mean, I think that we had this conversation before. We ear proponent, or in the right circumstance, a proponent of the community college junior college route and then going to, I guess in this situation, a state school.

Mike Whitmire: Yeah.

John Siegel: Minimizing costs, um, and you know, giving you time to work on the side as well. But does something like this, uh, if they're cutting student loan caps, um, do you, how do you think that would impact the path to becoming an accountant for someone that's dead set on being an accountant right now they're in high school, they're like, I have always dreamed of being, being an accountant. Do you think that they follow through? Let's say they go to a state school, they graduate with a degree in accounting. Um, I guess it wouldn't really impact that Too much. But how do you see that, how do you see this, this impacting students moving forward?

Mike Whitmire: Well, it's tough because it's per year.

John Siegel: Yeah.

Mike Whitmire: So like in my head I was thinking like, oh, can you save up a little money and go to junior college and then bank it and then you can get a little bit more of a student loan when the college is more expensive presumably. But it definitely, it even further suggest the path of like yeah, junior college into state school or yeah, into la. Like go to Moore Park Community College for a couple of years, then go to either CSUN or UCLA and wrap up your degree from there is the most financially reasonable way to do it. You still have to take out debt to do it, but yeah, you'd have to just like encourage that path a lot more unless your parents can afford to send you to college. Great, awesome. That's great for you. But if you have it to pay your way through, that's like, seems like the most reasonable path to do it.

John Siegel: Do you see private institutions trying to pick up the slack in any sort of way here? Not private colleges. Private uh, business in a way too. They offer a, uh, less expensive accounting.

Mike Whitmire: Almost like a. You could argue flowcash should fire up a school right now and start doing baseline education around. Yeah, yeah, it might, that might be an opportunity that pops up. But you can't. Big four can't hire that way. You can't become a CPA. You need four years. You need uh, 120 credit hours again to get your CPA now. So even that would hang up from like if Floqast wanted to fire up a school, we'd have to become an accredited university and then go from there.

John Siegel: Did that make you the dean?

Mike Whitmire: Yeah.

John Siegel: That's pretty cool.

Mike Whitmire: Dean Whitmire. Yeah.

John Siegel: Oh my God. That sounds. That sounds like something out of Animal House.

Mike Whitmire: We uh, this is not good at all. Yeah, we have the talent crisis already. This is definitely going to make it worse. I would love to hear what the logic was for not classifying this as a profession. Like, I guarantee you many members of the administration have very highly compensated CPAs who they would argue are professionals because they help minimize tax payments being made. It's like mind boggling to me.

John Siegel: I wonder what they classified as professionals. But I didn't look that up for the story because it would probably make me and you pretty angry.

Mike Whitmire: That sucks. Well, all our accounts watching, I think you're a professional.

John Siegel: Me too. Uh, moving on to the next story, uh, we're going into the sports world. But there's also accounting fraud.

Mike Whitmire: Nice.

John Siegel: Uh, Napoli fc. I think it's fc. It's a big football team. Soccer, uh, team out there. Uh, the president and CEO are ordered to stand trial for alleged false accounting between 2019 and 2021. Um, the case centers on inflated capital gains, which is called plus Valensae. If you haven't seen sports accounting secrets that Floqast recently dropped, check it out. We get really into it. That's, uh, how I knew how to pronounce that.

Mike Whitmire: Nice.

John Siegel: I hope Bennington was correct on that one. Um, from player transfers, including Victor Osman. I think that's how you pronounce it. Prosecutors allege the valuation of fringe youth players, uh, used in the deals, was artificially boosted to improve the club's financial position. The practice is common in European soccer. Soccer to meet financial fair play requirements. Uh, again, check out, uh, accounting, uh, sports accounting secrets from Flokus. Learn more about that. Um, does this make any sense to you at all?

Mike Whitmire: It's actually kind of similar to like the Enron mark to market discussion. So you're able to revalue these players based on presumably their potential.

John Siegel: Right.

Mike Whitmire: And you're just kind of making up numbers and then you can go to the bank and take out more money or you can sell the company for more. Like. Yeah, that's okay. I'd love to see the supporting schedules behind all this.

John Siegel: I would too.

Mike Whitmire: Yeah. You know, there's some, there's some like, they have to support the valuation they've, they've gotten to. So it has to be something around like statistics or scouting reports or is there some equivalent of like top 100 prospects in baseball? Do they have some equivalent out there? And it's like part of how you decide to value these players. That's like. I would, I would be interested to see the audit evidence.

John Siegel: I would too. I think what surprised me about this one is that you would figure that it would be something that Serie A, that the league in Italy would. Obviously they slapped Napoli on the wrist. I didn't see what the punishments were there. But this is going to trial. Like it's, it's more serious than just than some penalties from the league here said, uh,

Mike Whitmire: arbitrary. Do you know what they did with the arbitrary, arbitrarily increased financial position? Because if you did that and then took it out to get loans or do something or sell part of the club, something like that, that's a super shady thing. And yeah, you're going to end up in court.

John Siegel: I didn't go that far. So that's my bad.

Mike Whitmire: I'd be curious. Maybe, maybe we follow up on that one.

John Siegel: I will be following up because I think that's really interesting and I'm very interested in Italian, uh, football. Once I find out what the other teams are now there's Juventus and Napoli,

Mike Whitmire: I'm going to double down on recommending our sports series now. That's going to be a lot of fun. I think the audience is gonna like him.

John Siegel: Yes. I'm looking forward to the next episode as well. Moving, um, on, uh, we've got another, another story from CFO Dive Detroit Riverfront Conserve Conservancy. Yeah, Conservancy tightens controls after CFO embezzlement scandal. Uh, the conservancy implemented its sweeping reforms after its former CFO was. Was sentenced for embezzling over $40 million across 11 years. The CFO fraudulently used a shell company and falsified bank statements to cover his tracks. Not well enough, apparently. Uh, new measures include outsourced financial services model for better segregation of duties. Uh, reforms also mandate multiple transaction reviews, reduced board size and fiduciary training. I guess you have to make sweeping changes like that if your CFO took $40 million over 11 years.

Mike Whitmire: Yeah. I'm gonna make an argument for a controller, a stronger controller. Like we, um. Do you vote for the LA City controller? That's something you look at ever. Yes, though it's, uh.

John Siegel: Although I couldn't tell you who I voted for last time, but I do do the research.

Mike Whitmire: Okay.

John Siegel: So the.

Mike Whitmire: Our guy's a naming guy named Kenneth Mejia and I actually, oddly enough, I was at EY at the same time.

John Siegel: Really.

Mike Whitmire: He's a younger guy, runs like a very on social media campaign and he's been.

John Siegel: I know that name for sure.

Mike Whitmire: I think he's had the job for like eight or ten years at this point. Uh, but you watch a lot of his stuff and I love the auditor mentality because he goes in, he's like, it's almost as personal affront if someone's wasting money on your watch. And so he goes in like, and he's calling out all this like, fraud waste. We're throwing away money here. We're doing these projects that make no sense, blah, blah, blah, blah, blah. Um, so you see him going on these rants, but what I'm shocked about is how little controller power he has. Like the mayor's office is able to be like, no, we're not doing that, or we're not looking into that. They can shut down his investigations and so I don't know where it aligns with the CFO in there as well. But this is where, like, the controller, effectively the auditor of our budget should have a lot of power and a good amount of, like, budget under them to hire associates to go look through all of this. Because embezzling 40 million bucks over the course of 11 years is material. And I'm sure if you had someone auditing the books, he would have found this. Particularly with, like, a city like Detroit that's struggling financially, as much as we're aware of, this is something that could have been picked up by an auditor or stronger controls or a stronger controller.

John Siegel: I want to go back to the city of Los Angeles controller. It sounds more just like a watchdog position, almost like a third party.

Mike Whitmire: Yeah, you should follow some of his stuff, man. There was one about, um, how much money we contribute to homelessness projects and how much of it's wasted.

John Siegel: Yeah, I've seen stuff about that.

Mike Whitmire: It goes to, like, people buying, uh, building luxury condos, and then over, like, a period of time, you can do it. You can rent it out for a period of time, and then ownership of the building reverts to the people who built it. So, like us as taxpayers, we're funding real estate companies to go out and build luxury condos, rent them out for a short period of time, and then own them and be able to sell them afterwards.

John Siegel: That's wild.

Mike Whitmire: It's insane. And it's all. It's your classic, like, crony capitalism and everyone knows everyone and they get the contract, so there's not bids going out. It's like, so sketchy, and he's not able to shut it down. I'm just like, you gotta give more power. Gotta give m him more power. Like, yeah, yeah.

John Siegel: We need, like, an accountant Batman or controller Batman who can actually do something within, Within. Within the. Within the laws, you know, we don't need him. Uh, nothing. Not resorting to violence or anything like that.

Mike Whitmire: We need to have controllers who are bonused on finding fraud. That's like a controller and a team where there's some bonus pool where it's like, if you find anything, you get. Or even like, you get 10% of what you save, get 40 million bucks you found. If you're a staff accountant and you find a $4 million a year fraud, and you get 10% of that. Pretty good.

John Siegel: Yeah, pretty good. I like Win Win.

Mike Whitmire: City would like it. Staff would like it. Taxpayers would like it.

John Siegel: Boom. It's like financial bounty hunters almost.

Mike Whitmire: Yeah, that's Pretty cool. We might be onto something here.

John Siegel: I like that. That's, that's the new FLO series.

Mike Whitmire: Hmm. I do genuinely believe if you comped auditors differently, it would be a whole different. It's a whole different ball game because the way you're comped today, if you find an error, it's more work for you, which lowers your effective hourly rate. You don't get a bonus for finding errors and fraud.

John Siegel: Well, no one, no one hiring auditors wants to find anything wrong.

Mike Whitmire: Correct.

John Siegel: I mean they, they appreciate it because they don't want it to go on forever. But it's a giant pain.

Mike Whitmire: Mhm. It's a giant pain. But every once in a while there's some people are stealing money.

John Siegel: Yeah. Like $40 million over 11 years.

Mike Whitmire: Pretty sizable.

John Siegel: He was sentenced to 19 years by the way.

Mike Whitmire: Okay, that makes me feel better.

John Siegel: Yeah.

Mike Whitmire: Yeah. They have to outsource financials now have better segregation of duties. Like the better segregation of duties is baseline stuff and I would, I'm going to assume if the controller was hyper involved that wouldn't have happened. So. Yeah. Shout out to Kenneth Mejia in LA trying his best to make sure our dollars are spent effectively. I love it.

John Siegel: Thanks Kenny. I'm gonna start following you now. This uh, one I think is pretty interesting because it's something that I've heard you talk about in the past. Um, trying to sort of balance uh, your gut instinct with that sort of analytical accountant, um, professionally skeptical mindset as well. Um, uh, a former psychologist explained the surprising truth about gut feelings. Gut feelings are not random, but are a ah, form of rapid subconscious processing of information. Uh blend of intuition and analysis. Uh, for investors, relying on intuition can lead to a lower success rate but the biggest home run payoffs. Um, I'm m curious what your outlook on gut instincts are, um, and how do you balance that with, with being extremely analytical, um, and risk averse.

Mike Whitmire: I'm like always going to go with my gut on it. Yeah, that's your gut is when if I just summarize a little differently than it's like you feel very strongly about something but you're incapable of intelligently verbalizing why you feel that way about it. It's almost like a logical blocker but emotionally and in my subconscious I know something is the right decision. So it's just a feeling you get and like the more you follow it it uh, hasn't steered me wrong, man. So it's hard to like argue with the batting average that my, my gut has.

John Siegel: Yeah, I mean I Don't think it's necessarily like, you know, you playing a random utility man at second base because you feel like he looked better, um, when he got into the clubhouse this morning or he dressed sharper or something like that. Your gut feeling in your case is based off of 10 plus years of running Floqast, as well as your accounting and audit background as well. It's the accumulation of all those experiences and that knowledge that you're rapidly recalling on. Right.

Mike Whitmire: Well, it's probably what allows you to develop the feeling in the first place. There's just like something. Like what? There's something. Something here and it makes all the sense in the world. And yeah, that's probably based on all your experience that you've had. I like your Miguel Rojas, uh, Dave Roberts comparison there.

John Siegel: That one worked out.

Mike Whitmire: That really was. He probably was like, I got a feeling like, Miggy's got something going on. He's like, he's clutchly. Let's put him in here. And there was no statistical analysis to back that up.

John Siegel: No, probably not.

Mike Whitmire: Probably should have pinch it for him in the ninth.

John Siegel: He honestly should have.

Mike Whitmire: Yeah.

John Siegel: I was thinking, well, Shohei's coming up with two outs, so not, um, ideal, but. And then get the home run.

Mike Whitmire: That's exactly where my head.

John Siegel: Yeah.

Mike Whitmire: I'm saying that at least we're gonna get the Shohei.

John Siegel: And then it's still so wild, like all people to hit that home run. I mean, I guess the only other person would have been Andy Pahas, but then again, he had, what, 25 home runs in the regular season.

Mike Whitmire: Yeah, that would have been a surprise. Miggy was the best. Best to do it. I love. It's November 25th. I'm still not over the World Series. It was so amazing.

John Siegel: Instagram and Twitter both know how. How into it I still am. All right, enough Dodger talk.

Mike Whitmire: Okay, Fair.

John Siegel: Can. Can you think of, uh. I don't know if it has to be recent. It could be in the past anytime. Running Flo cast, gut decision, uh, that you went with, um, off the top

Mike Whitmire: of your head, hiring accountants to sell that. That's it. It's like, um, I. To the point where I. I guess I was able to verbalize it, but, like, I got sick of arguing about it with our investors. That's more like. I stopped talking about it because I get sick of arguing about it, but I'm just like, I don't know. It makes up, uh, front. I was like, I don't know. It makes all the sense in the world. Like, I'd want to buy from an accountant. So let's give it a. Let's give it a shot. 0 statistical analysis to back it up and stuff. And then, like, over the years, I started to put together, like, spreadsheets around, like, here's how successful the accountants are versus non accountants. Here's how it works out, here's the unit economics, blah, blah, blah. And like, ultimately I had numbers to back up the gut feeling upfront, but upfront I was just like, now this is the right, right decision. Let's go for it.

John Siegel: I mean that aside from the fact that you and Chris started the company and some other key positions were filled by accountants, but it created the foundation for who we are as a company. Buy accountants for accountants.

Mike Whitmire: Yeah. Uh, and some investors as well. Like Maritech was a gut feeling. Insight was a gut feeling or just some. We had options at the time. And so a lot of it was like, I can't tell you why one is better than the other. A lot of them are. Offer the same services and every. They all have money. But, like, there's something you get in your gut about the actual partners you get to work with.

John Siegel: So this might be a dumb question, but based off what we're. We're talking about gut decisions. Do you ever have. Do you ever react to a situation with the equivalent of a gut feeling, but it's telling you not to make a decision right now where you might not have all the variables or understand exactly what's going on, and that you should table it, even if it's like, hey, we need to know about this, like, kind of soon.

Mike Whitmire: I think that's something I've gotten better about lately. I hope. Um, that's more. Yeah. I have a history of having knee jerk reactions and then collecting more information and changing my mind from the initial knee jerk reaction. So I think I've recognized that I've been wrong enough before hearing out all the information that I'm now, like, uh, more recently, I like to think I've gotten better about not forming a strong opinion quickly and trying to gather like all the evidence before having a thought on something.

John Siegel: So a decision does not have to be made right now. Let me sit back and think about it.

Mike Whitmire: I change my mind all the time, dude. I really. I know it's annoying for people, but, like, it kind of just. As I gather more information, I reserve the right to change my mind and hopefully arrive at the right decision and stuff changes. You should be open to changing your mind.

John Siegel: You are the CEO. Uh, it's Kind of what we expect.

Mike Whitmire: Yeah, I would hope.

John Siegel: Yeah. If you, if you've gone in the wrong direction on one thing and you don't course correct because you don't want to sound like you're making. You're changing your mind, then you're not doing your job.

Mike Whitmire: A lot of people perceive changing their mind as like not a good thing. Oh, it means I didn't know what I was talking about. Or it's, it's a bad look on me. And so I think or learn more.

John Siegel: You just learn more about.

Mike Whitmire: That's how I think. That's how I think about it is like, yeah, you should be uh, very open to taking in new information and changing your mind. But I feel like there are a lot of people in this world that aren't like that. It's more. They're rather argue for their position than take the time to learn new stuff and change their mind.

John Siegel: I think they view it as a bad thing is like, I'm not going to admit that I was wrong. It's like you weren't necessarily wrong. You just didn't have all the information so you were uh, totally informed. So to make that decision in the first place or to have that opinion in the first place, it's okay to go back and say like, hey, I learned more information. This is what I think now. But some people think of it as admitting that they're wrong and they don't want to do that.

Mike Whitmire: Yeah, totally. So please have the former. The mentality of the former one. It's much better to change your mind as you learn new things.

John Siegel: I have no problem that I'm wrong. Yeah, I do it quite often.

Mike Whitmire: Good. That's healthy.

John Siegel: Well, that's it. Thanks for. Thanks for having me on this episode of fintech Flow. Mike, I have a feeling you'll be seeing me next time as well.

Mike Whitmire: Great episode, John. Thank you for putting all this together.

John Siegel: Appreciate it. Thanks everyone.