The Art of War, Chapter 2: Waging War

“Sun Tzu said: In general, the strategy for employing the military is this”:

If there are 1,000 4-Horse Attack Chariots, 1,000 Leather-armoured Support Chariots,
100,000 Mailed Troops, and Provisions are transported 1,000 li, then the domestic and external campaign expenses, the expenditures for advisors and guests, materials such as glue and lacquer, and providing chariots and armour will be 1,000 pieces of gold per day.

Only then can an army of 100,000 be mobilized.” *

* Sawyer’s translation

As an accountant who has worked in a bunch of technology start-ups; when I read this, the first thing I do is try to extrapolate Sun Tzu’s Quarterly Burn Rate.  It’s a bit tougher to try and calculate Cash Zero date seeing as, if the campaign is successful, you will have gained “the masses of All Under Heaven” – AKA “priceless”.

After spending a fair bit of time getting to know Indicee lately, the next thing that naturally came to mind was whether Sun Tzu’s Accounting system ties to his ERP system.  If he has Pieces of Gold in one system and Numbers of Men in another, he could be spending a ton of time cutting and pasting reports in Excel to get his Departmental Salary Breakdown by Headcount!

As a lark, I hacked together some Data to represent Pieces of Gold on one report and Numbers of Men on another report based on Sun Tzu’s numbers.  Pretending these were generated from different systems, I uploaded them to Indicee to see if I could combine the 2 reports into a single report.

Dating back to roughly 500BC, The Art of War is widely acknowledged as the greatest book of strategy ever written.  It pre-dates paper – the original would have been painted onto slats of bamboo.  It is also widely acknowledged that concepts from the book have applications far beyond the realm of warfare.  Personally, I think The Art of War is more useful than a library full of Psychology textbooks for understanding human behaviour.  Not in the Gordon Gekko kind of way.  Who can forget Michael Douglas in Wall Street?  Or for the real cinemaphile, Vin Diesel and Giovanni Ribisi parroting Wall Street in a sleeper flick called Boiler Room?

That said, the pop culture stuff really doesn’t do it justice.

I like the little snippet above.  Not only is it a slice of life from the Spring and Autumn Period of Chinese history – a period of time between roughly 722BC and 481BC.  It exemplifies that real expenditures are required to create gains.  1,000 pieces of gold a day.

Sun Tzu’s budget didn’t exactly break out all the costs for me in detail though.  In order to actually look at this in Indicee, I needed to figure out the cost on a line item basis.  I had to get creative.

So, I went to the most warlike company around, KKR (Kohlberg, Kravis, and Roberts). Sure, some of you may argue that Goldman Sachs is the more warlike.  But to me, KKR cemented their status back in 1988 with the LBO (Leveraged Buyout) of RJR Nabisco.  A transaction that was later immortalized in the film, Barbarians at the Gate, with James Garner and a cast of other hooligans that you are sure to recognize.  Back when $20 billion meant something!

I looked for a Profit & Loss (P&L) statement and anything I could find about employment by department for KKR.  I wanted to find comparables.  I couldn’t find much.  KKR was a private company up until a couple years ago. They went public just before the “unpleasantness” so I went looking for their public reports.  I found precious little detail there either.  Another similarity perhaps?

I had little to go on.  So, I used KKR’s relative split between Investment Expenses and Administrative & General Expenses to get the ball rolling.  I categorized all of Sun Tzu’s expenses as one or the other.  Then, I started taking guesses as to how the Expense statement might hash out.

With the 100,000 men, I created some departments and allocated guys keeping in mind KKR had 2 founders employed and 12 general partners (I believe) back in 1988. I employed copious amounts of artistic license in coming up with the following breakdown.

This is still Sun Tzu’s time though.  It’s 500BC.  Not surprisingly, the system didn’t recognize this date.  So instead I used a rough guess of the traditional Chinese calendar year, being approximately 2196.

Here’s a flyer: 2196 will be a leap year!

What was the end result?
After uploading all this stuff, I found the Quarterly Cash Burn for Sun Tzu’s operation was:

If I had to compile this information on a quarterly basis for a real business, I would just create this report once and then upload new data to Indicee as required.

The point of it all

Going back to my original thoughts, what if Sun Tzu’s Accounting System and ERP System didn’t talk to each other?  In this case, I would use Indicee to combine the data from the 2 reports to come up with something like this:

Now that I’ve set up this as a question, I will be able to add new data as it becomes available and Indicee will add-on to the existing stuff.

Sun Tzu never had it so good.

– Remember, next Tuesday we will be posting Part 2 of Interdepartmental Language Barriers Post—

Have a great weekend!

Related posts:

1. The Meaningful Scorecard
2. Quarter End Reporting – A Time for Reflection
3. Strategic CFO: Get in the Game