Voices

Becoming an anti-fragile CPA

“That which does not kill us makes us stronger."

That popular quote, attributed to German philosopher Friedrich Nietzsche, has been sprinkled into countless motivational speeches by generals, coaches, business leaders and reality TV show survivors. But lately, I’ve been thinking there’s more to success than simply surviving difficult circumstances; it’s about learning how to embrace those challenges so you become comfortable with, and become stronger from, that discomfort.

Too often CPAs see change coming over the horizon and say to themselves, “How can we defend ourselves against these changes and minimize their impact on our business. How can we can we get back to our usual way of doing business -- i.e., back into our comfort zone?”

That mindset misses the point. Don’t say to your partners, “How do we deal with fee compression?” The question you should be asking is: “How do we deal with value compression?” For example, computers and software can do a lot of the tax prep services you’ve always charged clients for — and they can do it faster and less expensively than you can.

The way that you make money today is not the way you’re going to make money in five years.

Your clients are constantly growing and evolving. They’re adapting to new technologies and trying to stay ahead of their competitors. So, you have to grow with them if you want to remain relevant (and profitable).

Rarely a day goes by without a new story about advances in AI, blockchain and cybersecurity. But CPAs keep telling me they aren’t exploring these new technologies because they think their clients don’t care about them. Wrong! As a CPA, clients trust you because they already assume you are up to speed on all the tax changes and technological advances that affect their personal and business lives.

In his book, “Anti-Fragile: Things That Gain From Disorder,” Nassim Taleb talks about building an “anti-fragile” mindset. As a CPA, you’re trained to be a pragmatic, well-organized risk-mitigator for your clients — someone who loves order and balance. That’s why you’ve always been your clients’ most trusted advisor. But those traits can also make you fragile in a fast-changing world.

Taleb divides the world into three categories of people and organizations: fragile ones, robust ones and anti-fragile ones.

What kind of CPA are you?

Fragile: You are fragile if you avoid disorder and disruption for fear of the mess they might make of your life. You think you are keeping safe, but really you are making yourself vulnerable to the shock that will tear everything apart.

Robust: You are robust if you can stand up to shocks without flinching and without changing who you are.

Anti-fragile: You are anti-fragile if shocks and disruptions make you stronger and more creative, better able to adapt to each new challenge you face.

Start-ups tend to be anti-fragile. Large, successful organizations tend to be fragile since they don’t like volatility, randomness, uncertainty, disorder, errors, stressors and chaos. Yet we are in a world in which disruption and randomness are the norm. Organizations that gain from randomness will dominate, and organizations that are hurt by randomness and disorder will eventually go away or be swallowed up.

Imagine how empowering it could be for your firm if you could learn to lean in to AI, cloud computing and other important “threats” on the horizon — rather than working against them or hoping they just go away. It’s like when you see a huge wave coming your way while swimming at your favorite beach. You can try to swim against the undertow — a battle you can’t win for long — or you can go with the power of the wave, and use its momentum to push you forward.

Becoming anti-fragile is not easy on an individual or firm-wide level. It’s a lot like starting a new fitness routine. Your muscles will only get stronger by continually stressing the tissue. You want to tax your muscles just enough to cause slight damage — slightly tearing them — so they can repair themselves naturally to get ready for the next level of stress. If you’re consistent about following your workouts, you’ll be able to handle more and more stress with each session as your muscles get stronger and more pliable. Same goes for your firm. To make real gains, you have to get outside your comfort zone and not only be willing to tolerate some pain and discomfort, but actually welcome it so you can get stronger and more adaptable in the long-run.

Real-world example

It’s ridiculous that some CPAs are still debating over whether they should move to the cloud. There is no other option when it comes to sending, receiving and sharing documents with clients efficiently and securely. I know many of you are nodding your heads as you read this, but just the other day, the senior partner of another firm drove all the way over to our office to drop off a five-inch-thick stack of financials that we had requested.

That’s an example of organizational tissue that needs to be broken down.

Many of you become CPAs because you love having balance and order in your lives. You deliver nice, balanced ledgers to your clients, but your spouse doesn’t have a zero ledger. Your family doesn’t have a zero ledger. The decisions you make in your business don’t have a zero ledger. You need to get comfortable making smart financial decisions in a world that increasingly doesn’t balance.

How do CPAs change their mindset to adapt to becoming anti-fragile?

Jack Welch, the former head of GE said, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” So, if things are happening faster outside your firm, you have to ask yourself, “What are we going to do differently so we can not only stay in business, but actually thrive in the new value landscape?”

Invite a smart person who’s not a CPA to your firm. It could even be a valued client. Get everyone into a room with a whiteboard and write all your “sacred cows” (your top core processes) on the board and why they’re sacred. For example: “The reason we use our current accounting software is because it’s cheap and it’s easier to learn than the others on the market.” Is this a good enough reason to propel you forward as a firm? Is this going to be working for you in five years?

Taleb wrote, “Wind extinguishes a candle and energizes fire.” You can’t stop the wind from blowing. Would you rather be the candle or the fire?