Ask HN: What are some good resources to learn business administration/finance?
As a software engineer, I want to learn more about business administration and finance. I want to able to level with CEOs, CFos or other managerial positions.
Accounting is a huge topic; being able to read financial statements is a good, first tangible exercise.
Best book I have found for this is Thomas Ittelson, Financial Statements.
Using double-entry accounting methods for your own financials with a tool like Beancount is super helpful from a practice perspective, and appealing to an engineering mind:
"Being able to level with CEOs and CFOs" is less about administering a business and more about being able to communicate with executives. This is essential for all technical people, whether or not they have management or executive ambitions themselves.
This also is a huge topic, I would suggest starting with concise definitions of what managing is, and what being an executive is about. When you understand the concerns of the people you are communicating with, you can do so more efficiently and effectively.
From a mindset perspective I would start with Peter Drucker, The Effective Executive, and since everyone is their own CEO, his book Managing Oneself is very valuable.
These are all classic texts, still valuable and relevant, as these topics are as old as the hills.
Good luck.
I think at least a 100-level knowledge of account is beneficial to nearly every developer. Bookkeeping is, arguably, one of the oldest and longest-practiced "data processing" disciplines. It seems arbitrary and somewhat old-fashioned until you grok the reasoning and history behind it (double-entry sourced from summaries of various different "journals" to facilitate separation of duties, closing periods and rolling-up detail entries into totals because human computational power is limited, an equation that balances implicitly when there aren't entry errors, etc.)
From a personal finance perspective I think everyone should get some training in account but, sadly, that's probably way too optimistic of an attitude.
Cash aims to replace non-free accounting software, Ledger is both a file format and a general purpose tool for parsing and transforming that file format, that is designed for accounting but can be used to drive a wide variety of applications.
You can be ahead of most technology peers by simply knowing the basics of accrual accounting. How to learn it? When working on a project, talk to the finance person you work with about the accrual process. They will be happy you asked. If they don’t help, google “when should I accrue an expense or revenue”
Once you get that down, you will want to spend a little time doing some NPV practice. When it comes time to getting your project approved, you want to show benefits in your NPV model. 99% of this is not the math around the NPV, that part is easy. The hard part is getting business partners onboard with supporting the benefits case.
Most finance people at large companies are mainly doing basic math, but doing it well and spelling out logic in a small program called a financial model. The best way to get good at this besides working in finance is to model everything you can. Small widget models are the key to building that skill
But OP was asking for guidance in learning how to engage on those topics- as opposed to communicating about technical things to that audience. Hence the recommendations.
I agree about the value of NPV, tho I would argue that NPV without some accounting chops is tricky waters. "Value" in that context has an accounting meaning, not the largely useless goofy ROI calculations that tech folks usually create.
Agree tho they can start in those areas- and of course just talking across domains is infinitely valuable on its own accord. Cheers.
Accrual is important. Mostly because it impacts timing and gives you some levers to adjust to make the financial statements the way you want. Eg depending on your goals, you may want to form a strategy on when to sign a vendor contract.
Financial statements is where it’s at though. And it’s easy to learn from a book. However, what you need to learn, is how this general knowledge fits your company. This is really the difference between good and bad CxOs (and I’ve seen my share of both).
This is a different path. It’s metrics and KPIs. It’s strategy and knowing what’s important for the company. Are you conserving cash, are you growing at all cost, prove you have an ROI on your project, prove you can execute the project as promised, articulate why a project is off the rails (signal risk). A lot of this is financial politics, but if you talk the talk and earn credibility you’ll be seen as has a strong fiduciary over your domain. Also, depending on the size of your company, get a finance guy that reports or has a dotted line to you. If company is too small for that, you can just build a very good relationship with the finance team. I’m my experience, 25%-50% of our job is partnering with other executives; meaning we educate them (comprehension And prep for meetings with other executives/BOD) and we have full scope knowledge of what every other department is doing.
The other thing probably worth studying earlier is HC costing. It’s really easy to understand, but often catches directors/vp in non-finance functions off guard.
Basically, timing matters a lot and people make mistakes when asking “can I afford this?”
Also fairly specific to CTO, learn the area of accounting around capital expenditures. Whether something is an expense or cap ex is very important for CTOs especially since labor can be capex. Every company will have their own accounting rules / interpretation of GAAP that you will have to get familiar with too.
I'd say your company valuation how it's modeled and pitched to investors, etc. is not as important. Very few people see that info outside of Finance and CEO with the BOD.
Accounting Made Simple: Accounting Explained in 100 Pages or Less by Mike Piper
How to Read a Balance Sheet: The Bottom Line on What You Need to Know about Cash Flow, Assets, Debt, Equity, Profit...and How It all Comes Together by Rick Makoujy
Then I started doing my personal finances on GnuCash, and now on ledger-cli. It's helped a lot both professionally and personally.
Just my thoughts.
"Business and Finance" is like saying "Apps and Code"
Before computers, many many people like today's computer programmers would be accountants, quants and other financial professionals (and engineers).
If your company is publicly traded, learn about the variety of SEC filings that most C-level executives are responsible for. In particular, learn how to parse the footnotes of 10K/S1 filings — an income statement might be 1-2 pages but the footnotes are often 30+ pages. The interesting choices a company makes are often in the footnotes. For example, the related party transaction for WeWork’s “We” trademark that everyone was up in arms about appears on page 199 of the filing.
Finance is about cashflows. GAAP accounting is about subjectively spreading costs across periods. The two are often at odds. Learning to navigate both and knowing which your audience cares about is critical. You often need years of context about a business to be able to make contributions on this front.
[0] https://www.bloomberg.com/news/articles/2002-02-03/the-fine-...
Its also quite common for FS to have actual footnotes (ie in bottom margin of page) in addition to notes.
For reference, I've worked in finance for several years (investment banking and as a professional public markets investor [hedge fund]), and I also have a PhD with a focus on capital markets disclosure.
A quick search finds many examples where "footnotes" is used by the SEC [1], the FASB [2, 3, 4], the CFA Institute [5, 6], KPMG [7], and Investopedia [8], to name a few. I also saw several papers in both The Journal of Finance and The Accounting Review that use the term "footnotes".
[1] https://www.sec.gov/reportspubs/investor-publications/invest... [2] https://www.fasb.org/jsp/FASB/Page/SectionPage&cid=117616858... [3] https://www.fasb.org/jsp/FASB/Page/SectionPage&cid=117616372... [4] https://www.fasb.org/resources/ccurl/599/128/ASU%202014-15.p... [5] https://www.cfainstitute.org/en/membership/professional-deve... [6] https://www.cfainstitute.org/-/media/documents/support/progr... [7] https://www.scribd.com/document/335028195/Disclosure-Overloa... [8] https://www.investopedia.com/articles/02/050102.asp
1. Understanding the domain language and key processes of all the business units that you didn’t already, which is by the way all of them. The heightened ability to engage in their own domain terms with everyone in a standard company is a social and cognitive upgrade.
2. Finding actionable insights (sometimes dramatically so) within your customers, partners, and competitors financial statements.
3. Recognising your own decision biases. (Whether you bother correcting for them is another matter)
Interestingly I feel the most under-rated of these is #1, to the extent that many of us in tech carry the mistaken assumption that we already know all the machinery of firms, having learned it “on the job” or by deriving the existence of tax accounting from first principles. Unless you’ve been a general manager or founder already this is almost certainly a self-delusion. I can say it was for me, I am a mathematics major who appended the MBA twenty years later and despite directing many successful enterprise-scale projects and lurking around Day 1 startups for aeons still had scales removed from my eyes.
Never under-rate the value of understanding other people better; there is no diminishing return, quite the opposite, it is compounding.
I didn't have a bachelor's degree, got into coding as a hobby and turned it into a career. I needed a degree to put on my CV. All the hard problems I'd encountered weren't in the technology (99.9% of business coding is simple), so learning more CS wasn't actually going to help that much. So I took an MBA (they accepted my board experience as good enough to not require a bachelor's, with some hoop-jumping).
The MBA itself wasn't that instructive. The Leadership unit was the highlight. Knowing how to read a balance sheet and understand Corporate Finance was interesting. The Entrepreneurship unit was farcical - the first step was always to create a 40-page business plan and then consult a lawyer about IP. At the time I was getting heavily involved in the startup scene, and the differences between what I was learning at Uni and learning from actual entrepreneurs were huge. The rest of it was OK, not great, not bad. Certainly not difficult.
Having an MBA is useful. It has landed me interesting jobs. It does act to dismiss any "but he's just a code monkey" arguments. It looks great on my bio when part of a startup team. The leadership training has been great when managing people.
But it doesn't stop the bias against people who build things. I still get regularly sidelined in meetings in preference to sales and marketing people. I still find it hard to argue my case even with the correct finance terminology. It's annoying, and it was one of the things I hoped the MBA would fix. Apparently not.
There are a few cool things about it:
1. You get the feeling that the author has developed a deep sense of how learning works, and is using the same teaching methods in the book that have been honed over a lot of in-person classes. For example, having you puzzle out which balance sheet belongs to which company early on in the book, and it being surprisingly doable.
2. There are different levels of abstraction discussed in close proximity - the math, then the account from a cfo.
3. It’s concise. That lets it cover a pretty wide range without feeling like a textbook, and I think that helps a lot for developing an early understanding.
Finance is an important component but other MBA topics would be strategy, marketing, organizational dynamics, operations and so on.
In a business school you would learn many of these through case studies (to the extent the school is influenced by HBS which every school is to some extent).
These topics also have recognizable curricula. Operations courses will delve into queue theory (exercise: one oven bakes a cookie in 5 min but your constraint is the strainer which can only ... blah blah, or something to tell throughout from latency), a course in marketing might describe the 4 ps (price, placement, product, promotion). A course in strategy night talk about a swot analysis (strength weakness opportunity threat) or Porter points out that the pricing power in an industry is set by workers, customers, competitors, new entrants, substitutes and so on.
Most MBA courses have their class requirements online. You can even click through the classes and add the curriculum and the books required. The materials, quite frankly, are not technically difficult but you have to practice them in order to remember to use them when you need them.
Other important components of the actual experience inckude working in teams and presenting to the class.
A while ago I developed a library for double entry accounting in Django. To do this I had to learn how double entry accounting worked from scratch. I was therefore briefly in a position to remember not knowing how it worked, while also grasping at least the basics.
I therefore add a page in the docs titled "Double Entry Accounting for Developers":
https://django-hordak.readthedocs.io/en/latest/accounting-fo...
I kind of cringe posting this here, because 1) I wrote it a long time ago, 2) it may not actually be entirely accurate, and 3) it may be overly simplistic.
That being said, I think a fair few companies are running their finances from Hordak, and I haven't had any angry issues opened yet. So I can only assume I wasn't too far off the mark.
[1] https://personalmba.com/ [2] https://micromasters.mit.edu/fin/
- Fundamentals that can be learned and quickly applied. This means taking an Accounting 101 and 102 course. Then applying those accounting principles to your own personal finances. They're not that different from a small business. I would also encourage you to take a couple of intro to law courses, they have been very helpful to me.
- Contextual understanding. This is the ability to take what you have learned in the fundamentals, and understand how it applies to a current set of data. This is significantly harder, and there isn't a general solution here. For example, cash flow seems like a fairly simple concept. But once you take into account enough variables, it gets very complex. Those variables are specific to one organization.
Finally, while not directly tied to your skills, I can tell you that as a founder, having an excellent accountant who I can trust to understand the minutia of all of this is super helpful. I focus on the high level and making sure that it's driving in the direction I need, he focuses on the guts. My understanding of the fundamentals means I can understand what is going on when he explains why something happened that I may not have understood initially. All of what I wrote here applies to our lawyer as well.
In layman terms, it's all sorts of revenues and expenses, short term or in the future, interacting together. Ask yourself, how much do you pay for salary? for office? for equipment? for materials? when? and a hundred more questions...
A good chunk of it is rather straightforward really, yet it takes a course or a discussion with an accountant to learn the proper terms and the broader concepts formally. Seen all of that in university long ago, to be able to make our own companies when we graduate.
That being said, I am not sure this would help to talk to the CEO. I'm not sure CEO generally care or understand about this sort of this. Just outsource accounting.
Prof. Lo taught this course at MIT in the Fall of 2008, which you can imagine would be a very interesting time to teach finance. The course is excellent. I think you'll really enjoy it.
1) Time value of money - internal rate of return (IRR) and net present value (NPV). Both are easily learned on the web in 30 minutes.
2) Broad accounting concepts. Others have recommended learning double entry accounting on this thread. I do not think that necessary - too much in the weeds. You need to understand what is revenue, when it is created (different industries and companies have different rules), what are operating expenses, what is EBITDA (earnings before interest, taxes, depreciation, amortization) and why it is a good approximation of cash flow, and why capitalizing some expenses matters. In my experience, the FP&A (financial planning & analysis) team is often the best people to discuss this with as they are responsible for reporting these metrics to management in a manner consistent with how the executive team runs the company.
3) Option theory - more decisions are being discussed as options. Developing a new product idea is an option to ultimately produce and sell the product. The initial investment to blueprint the product, get regulatory approvals, etc can all be thought as the cost of the option. Importantly, you can always walk away from the option if you determine the payoff is too risky (unlikely to be realized) or too low.
While there are more finance concepts to know, they tend to build off the ones above (e.g. reading financial statements builds off the accounting ideas).
A final note, if you are looking for formal online courses on these topics, the University of Pennsylvania Wharton School has a great series of their fundamental courses for MBA students online that were free last time I looked.
1. Financial Statements, Thomas Ittelson - https://www.amazon.com/Financial-Statements-Rev-Thomas-Ittel...
2. Financial Intelligence, Karen Berman - https://www.amazon.com/Financial-Intelligence-Revised-Manage...
I've also found this website useful: https://www.accountingcoach.com/
But at the same time, some material kinda helps to put disjointed pieces together.
Based on my experience there (I did not finish it yet, btw), I think the best approach would be to actually get your hands dirty with running a business AND investing first for quite some time, and after that take an MBA class to organize all the knowledge you gained. Without getting hands-on experience, I am not sure much of MBA program will make sense or help beyond learning the vocabulary and getting connections (connections if you go to a prestigious school of course, that what most pay for I think). It is much easier to understand the importance of financial statements after you actually traded or run books for a business, filed taxes.
If you want to actually pass the exam, you need to register and get the current curriculum. You should be prepared to put in to 200 to 300 hours of study for this, though. Its a lot of material.
If you are not looking to pass the exam, I would recommend going through the accounting section and the economics section. The corporate finance section would probably also be useful.
If you were to pursue all 3 exams and pass, you would have a knowledge base that exceeds an MBA in finance. The MBA has other things the CFA can't give you though like project and presentation experience.
A great unrelated line that I heard from an MBA who works in Marketing: Everyone thinks that Marketing is a creative field and Finance is a methodical quantitative vocation. But in reality, the best marketers are methodical and quantitative, and the best Finance folks are highly creative.
They're available for free on www.berkshirehathaway.com ("Annual Reports" -> "Chairman’s Letter"), for those who prefer a book Lawrence Cunningham wrote a great compendium with annotations and context called "The Essays of Warren Buffett".
I re-read these every once in a while over the years and found endless useful insights as my real-world business and finance experience grew.
They are world renowned accounting professors from BYU and their courses are easy to understand and surprisingly entertaining. They have several excellent courses on LinkedIn learning.
Here's a good one to start with: https://www.linkedin.com/learning/accounting-foundations-2
I highly recommend them.
To level with the CEOs, I think many CEOs value few things above else: either have a great understanding in relevant specific industry niche like residental construction or copper mining or in specific technology like web applications or weather measurement hardware. Another few things CEOs have to constantly think about are investments, in what and how much to invest to balance optimal risk reward ratio. Third thing is maybe the strategy/business/industry language like SWOT, business model canvas, balace scorecard, revenue, roi, roe, equity, debt, corporate taxes, ebitda, earnings, customer life time value, product lifecycle, growth drivers, organic/nonorganic, acqusitions, divestments...
I learnt to code from books and the internet. I'm not bad at using high level languages to get things done. I couldn't pass a Google whiteboard test, I couldn't write a compiler, an os, a db or anything. I know about coding, but I am not a software engineer.
Becoming an accountant actually does not have a prequsite much beyond basic maths, ratios, percentages etc. Then it requires 2-3 years of intensive on the job work and study to get to the basic level. In the UK that would also mean passing 10 intensive exams in that time. To get to CFO would probably mean another 7 years experience.
But it sounds like you want to know about finance. I would learn to read financial statements. Get some financial statements for some smaller companies from whatever your local corporate register is (uk companies house has them free online). Start with the balance sheet (sometimes called statement of financial position) and profit & loss (sometimes called an income statement). Go through it line by line and read the acounting policy and Google the terms. You can also look them up in your local accounting standards.
Next take a look at a cash flow statement. Notice how different looking at cash is to looking at profit. Work it why and why it is much more important to have cash than profit.
Learn some accounting ratios like Return on Capital Employed, see if you can calculate them from those statements.
A bit of knowledge about Mudigliani & Miller, and NPV (not the maths, Excel can do that. The assumptions) would be good. Learn the Sunk Cost hypothesis, and relevent costs.
I think this will get you where you need to be without long coursed of material that you may not use. You don't need to be able to prepare financial statements.
I'll read books mentioned in interviews of people who have a track record. Even watching a video like this https://www.youtube.com/watch?v=8aW5gdRRn_U (check out the first comment and replies). It only lasted a few seconds, but we got the books in the background figured out. We recognized some by the spine.
There are a lot of things that are the way they are because someone did something at some point, and it's only reading a book where the author mentions an anecdote that you piece things together. There are entire deals that didn't happen because someone was a jerk to another years before that. These books also expose a situation, and the decisions made in a certain context, the tradeoffs, etc. How people went about the product, which strategies they used to find a market, how conflicts arose and were handled with.
But, back to your ask:
Wharton has a "Business Foundations"[0] series on Coursera which includes entire courses on marketing, accounting, finance.
Microeconomics (two or three books you find in every course: the ones by Pindyck, Perloff, and Mankiw. Either named "Microeconomics" and "Principles of Microeconomics").
You can checkout the MIT OCW courses on these.
[0]: https://www.coursera.org/specializations/wharton-business-fo...
1. Michael Porter's Competitive Advantage [0] or Understanding Michael Porter [1]
2. One of the things that really applies well to tech businesses has been Platform Business Model. This book [2] is a good starting point
3. The Lean startup [3] and Hacking Growth [4] round up the tech books that I have benefited from.
3b. Warren Buffet's letters are a classic to learn about businesses and help when you are dealing with CXOs.
4. With these basics in place, I would recommend Stratecherry - the blog and Economist for keeping up with the current developments in the field.
Good luck!
[0] https://www.amazon.com.au/Competitive-Advantage-Creating-Sus...
[1] https://www.amazon.com.au/Understanding-Michael-Porter-Essen...
[2] https://www.amazon.com.au/Platform-Revolution-Networked-Tran...
[3] https://www.amazon.com.au/Lean-Startup-Innovation-Successful...
[4] https://www.amazon.com.au/Hacking-Growth-Fastest-Growing-Com...
FYI, I come from a similar background. Was a techie for 9+ years before switching to an MBA and can personally attest to the materials given above :)
My recommendations are a little different from most other folks here, in that they relate to understanding the business as a whole and how finance figures into it:
Norm Brodsky's "The Knack" http://theknack.info/
Jack Stack's "A Stake in the Outcome" https://www.amazon.com/Stake-Outcome-Building-Ownership-Long...
If you're in a startup environment, Brad Feld's "Venture Deals" https://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitali...
I am not a finance person but what, to me, this series gets right is that (a) the technicals are just a tiny part of what makes someone “good” at finance and (b) what seems to make CFOs “good” is very strong discipline around measurement, a deep understanding of the product/market and ability to lead people.
Particularly in terms of generating what another thoughtful user dubbed "contextual understanding," this is a gold mine. Also occasionally gives very lucid, refreshing descriptions of how lots of things that other finance people take for granted work.
[1] https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...
The thread has some interesting comments.
Look up the curriculum/reading lists of MBA programs.
But my friend Adam Bader has been creating a video course on How to become a good Product Manager and it is almost done!
It's gonna be a video tutorial. I've see the content which is almost done and really loved how it's presented!
He will walk you through what he does in his day-to-day job, the fundamentals of product management, development, design, stakeholder management, user and market research, how to find and get your first PM job, as well as everything else you need to know.
I highly recommend buying this course: https://gumroad.com/a/84636787
University of Virginia Financial Accounting Fundamentals! This is the only one that you need to get started. Luann J. Lynch is a fantastic teacher. She guides you through all accounting fundamentals with lots of example problems (including a breakdown of the Coca Cola's Balance Sheet).