Alfred Korzybski was a Polish-born engineer who emigrated to the US around the turn of the twentieth century and developed a branch of philosophy called General Semantics — the study of how language and symbols influence human thought and behavior.
He coined two lines that run through everything we do:
“The map is not the territory.” “The word is not the thing.”
Language can point at reality, but it never fully expresses it. Every word carries assumptions. Every category has implicit boundaries. And most of the time, we don’t notice.
The Platypus Test
Everything is either that or not that. Things that are kind of like that are not that. This is an inarguable truth.
Sometimes you find things that break the rule — a mammal that lays eggs. If you find too many platypuses in your language, in your math, in your financial model, then it’s time to question your first principles, your generalizations, the implicit assumptions embedded in how you talk about the problem.
“Inevitably, when you face a situation frankly, a solution appears.”
See the poem Using Language Like Math.
Applied to Finance
The traditional financial statements are a map. A precise, authoritative, 500-year-old map. But the map is not the territory. The income statement is not the business. The chart of accounts is not the revenue engine. The balance sheet is not the health of the enterprise.
The Fourth Statement is an attempt to draw a better map — one that instruments what actually drives the business, not what the accounting conventions happen to categorize.
Korzybski opened his 1937 seminar on General Semantics at Olivet College with five words:
“To begin with, lose all fear.”
Good advice for looking at your own numbers honestly.
From Zen and the Art of [nothing] by John Zdanowski & Jeff Abrams, Chapter 7.