When Financial Reports Used to Be Cool & AI's Microwave Moment

0:04David Leary: The staff are gone. It's managers, directors, and partners. And the firm of the future will basically be a team of those people overseeing a bunch of AI agents and maybe some administrative.

0:17Blake Oliver: Coming to you weekly from the OnPay recording studio.

0:24David Leary: Hey, everyone, and welcome back to the show. This is your weekly roundup of news in the accounting profession. I'm Blake Oliver. I'm David Leary.

0:32Blake Oliver: Blake, I need to talk about some experiences I have with AI this week. But first, let's thank our sponsors. Sponsors this week, we have Cloud Accountant Staffing, Numeral, OnPay, and Veltrix AI. So two new sponsors. So be sure to stay tuned to hear other ads today.

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1:53Blake Oliver: Yeah, Blake, so I had two experiences with AI this week that, one, I'm kind of a ho-hum opinion about, but I do think there's a warning for accountants here. And then a second one, I had an experience that we'll go into with you and AI. So first off, I'm turning 52 next week, right and you have to do your yearly physical are you at an age where you're doing yearly physicals

2:15David Leary: and blood draws every year yet i should be you should i don't like going to the doctor okay so

2:22Blake Oliver: i got my blood drawn and then they send you the results and all these doctors have these portals and they send you a little email and i got an email and i'm like i think this doctor's note might be ai because it was just too generic it said hello your cholesterol numbers numbers are still pretty high, dash, not urgent. Had the dash, right? The telltale sign. But you can discuss with Emily at upcoming appointment. Diet, low fat, high fiber, at least 30 grams of fiber per day. Exercise, 30 to 60 minutes a day. Healthy weight. Like he knows, I literally go to Orange Theory classes with my primary care physician.

2:56Blake Oliver: He knows I get exercise. He knows probably how much I weigh. Like I'm pretty sure AI sent this. And my thing is, I fear this is how accountants are going to use AI. You're busy. I'll just have a reply to the client. It's just going to give a shitty, pointless response to the client. The client's going to get a bad experience.

3:14David Leary: It won't feel human. It'll feel like, why did I hire this person just to send me a templated email? Exactly. And so don't do this to your clients.

3:25Blake Oliver: Treat your clients with the time and energy they deserve. If you want them to pay, maybe you can do it with your free clients, but a doctor you pay a lot of money for. Then the second thing this week, AI, that's really got under my skin, Blake, it was you. Your AI went into my database schema for all the ads we do for the show and changed the database schema in our database. Arguably it was minor because I was able to fix it quick. But if your AI, though, didn't brag about doing it in an email it sent me, I would have never noticed probably for another two weeks when math didn't work or something.

3:59Blake Oliver: And I made a mistake and miscalculated or overpaid somebody and then probably blamed our human salesperson for changing the database. It's crazy, right?

4:11David Leary: Well, David, your big mistake was giving me administrator access.

4:14Blake Oliver: Yes, I've downloaded your access.

4:17David Leary: So now I'm just a lowly editor and my AI plugged in acting on my behalf couldn't actually add a new field value, which apparently is what it did. Because we're trying to mark some ad slots as pending for 2027.

4:29Blake Oliver: It just created a whole new status of pending. I was like, where did this come from? Yeah.

4:32David Leary: Yeah, no, it's good. I mean, it's a good point. I apologize, David. I was, you know, touching, playing in your sandbox there and went too far. But I mean, it's a good lesson in internal controls, right? Is if you're going to give access to an AI agent to a system that you use, you need to set up a login or permission so that it can't do stuff like that. Like the same way a human. You wouldn't want a human mucking around and doing it. Exactly. Yeah.

4:59Blake Oliver: Because the humans I've locked down, but I thought, because the thing is, Blake, you would not have done this if it was you going to the database, clicking around. You probably would have been, I probably should ask David before I just edit the field settings.

5:15David Leary: So what I did for my own accounting is in Xero, I've got an AI agent doing the close in Xero, the month-end close. I created a login under our practice manager account just for the AI agent. It's called agent. And it's agent at, and that's the email address. And then that's the one it logs in with. So we can actually see what it's doing in the audit trail, whether it's going through the connector or through Chrome. And it doesn't have administrator rights. So that's how I'm getting around that security issue.

5:47Blake Oliver: To lock things down. That's actually a good tip. I mean, create, set up, if you're going to set up agents to be on your team as little mini humans or whatever you want to call them, give them an inbox, give them a login that's just them because that's the best way to audit it. You can say, oh, they logged in, they made this. And then you can control their data access.

6:06David Leary: Well, David, I've got a video here I want to play for you about financial reports and about when financial reports that companies put out, like their annual financial reports used to be cool. and I didn't know this because I'm from a different era, I suppose. And now they're all just super boring, right? You download them from the internet and it's just a bunch of text. And maybe if you're lucky, there's some images. But this is kind of a cool overview of what it used to look like.

6:32Blake Oliver: Corporations used to treat annual reports like modern art, but today it's just another spreadsheet. Pre-internet, these reports were the only touchpoint businesses had with investors. So it had to communicate success, innovation, stability. So they went all out. Beautiful graphic design, expensive paper, bespoke techniques. It was the corporate flex to make a coffee table book level report. Then two things happened. First, the internet made it so the physical report was no longer necessary. Then the 2008 financial crisis spawned strict guidelines on the way this data is presented. So in the eyes of these companies, it became too much of a risk to get cute with the design.

7:03Blake Oliver: But the story doesn't end there because we're seeing a bit of a renaissance in this space. Because this random data storage company realized people pay more attention to data when the design around it looks good. So now their entire content strategy is just making mock-up designs for earnings reports. And they do respectable numbers on X. The story is exposing a fundamental truth about human nature that too many business people ignore. And that's that if you want people to pay attention to something, the first thing you have to do is make it fun to look at. I don't think that's to be fun. It's the experience, right?

7:33Blake Oliver: The investors are the client of that report. And they gave them something they would have a good experience with.

7:40David Leary: It wasn't. Yeah. And it's a good reminder, you know, like for accounting firms, right? The reports that you deliver to clients, like make those beautiful, make them want to look at them so that they're more likely to open them and not just disregard them sitting in their email. That was Lucas Mullen on Instagram. All right, David, now onto the news. I've got a story about taxing AI. As we've seen AI agents and LLMs improve over the last few years, there's been more and more talk about taxing AI because these AIs are going to put humans out of work. And now Bill Gates is out saying that he wants to tax AI tokens and robots.

8:23David Leary: His reasoning is that if you hire a person, you pay payroll taxes. If you buy a robot, you get to write it off as a business expense. So there's like an economic disincentive to hire people and an incentive to hire bots and depreciate them.

8:38Blake Oliver: Because tax policy dictates social policy.

8:41David Leary: So on a recent blog post on Gates Notes, he floated this idea that he calls human reserved. Certain jobs would be set aside for people only, either because automating them would displace too many workers who can't easily retrain or because a human should be doing it. And his example is a robot telling you that you have an incurable disease. It's technically possible, but it shouldn't happen. And on speed, he says the usual comparisons about AI and other technologies don't work. The PC, it took about 20 years to really change how we work. Software had to get built. Prices had to fall. People had to learn to use it.

9:23David Leary: But AI already runs on the devices that we use, and it speaks in plain English, and we don't have to adapt to it. It adapts to us. So he thinks that areas like law, customer service, medicine, software, and manufacturing are going to get hit over a decade, not generations. So like the change that we saw from the computer revolution in completely rewiring our economy from manufacturing to information, that's going to happen not over generations, but in the next decade. And one of the examples that he gives is an accounting worker replaced by a bot in this article. And what's interesting about this is accounting is always on the far end of the chart when it comes to jobs that could be displaced by AI.

10:17David Leary: But we have not yet seen meaningful job losses.

10:22Blake Oliver: I'm waiting for one. I don't know one yet. One person in accounting that lost their job because of AI.

10:28David Leary: So I feel like there's some sort of disconnect here between what these AI companies are saying can be automated, eliminated, and what's actually happening. If accounting is so easy to automate with AI, then why aren't we seeing accountants lose their jobs? Maybe it just hasn't happened yet. Maybe it's coming. But there's a part of me that thinks that it's not. And it's because of something that these technology people just don't understand about the job.

10:59Blake Oliver: Well, of course. It's the same mindset when they build the GL. Like, oh, I have a startup. Accounting's so easy. I'm going to build the GL. Well, it's not good for plumbers. No real businesses can use it, just other startups. They have a broken view of the world.

11:13David Leary: I saw another story that maybe gives us a clue as to what's going on. This was in Business Today, and its headline is, U.S. Jobs Paradox. AI exposed roles see 46 % pay surge even as AI-linked layoffs rise. So companies are using AI to automate tasks and reduce headcount, but the workers in the most AI-exposed occupations, like accounting, are actually seeing the fastest pay growth. that doesn't make sense right you would think that in a in accounting we would be seeing pay

11:53Blake Oliver: go down if ai is competing with us now yeah if it's actually taking the jobs away yeah yeah so

12:01David Leary: the the takeaway here is that it's not necessarily a bad time to become an accountant because what we're going to have is leaner teams but higher compensation. And since we have already been in a talent shortage situation for several decades now, this has gotten worse and worse, we are actually perfectly positioned to take advantage of it. We don't have enough accountants. We're going to have to use AI to do more with fewer people anyway, and there are going to be compensation bumps higher than the rest of the economy for accounting. That's my theory based on what I'm seeing here.

12:46Blake Oliver: But yeah, it's funny how like all these people always use accounting as the example in their stories.

12:53David Leary: Yeah, I guess because people just don't, people don't value it. It looks easy. It seems easy, but it's not. one more story here related to all of this the head of the pcob was at an axios live event recently and uh his name is jim logo thetis he's the chair of the pcob now and he said that when asked about uh what's going to happen with audit and with ai he said that audit is part science and part art. And that the science and the transaction work that can be handled by the machines, it's already happening. But the art part of accounting is a different story. Professional skepticism, judgment, knowing what you're actually looking at in a particular industry.

13:48David Leary: And that part, according to Logothetis, needs people still.

13:53Blake Oliver: I feel like AI is good at those things.

13:57David Leary: I don't know. Well, some of them, some of them, right? It's like, it really depends. It depends on whether or not you can create a strict criteria for success. So if you can define and write down very, very detailed criteria for success, the objectives, how to do it, AI at this point can now follow an instruction set. It can follow a process and it can reliably get to the objective and correct itself along the way if there's enough context, enough information. And it does that by using lots of sub-agents and creating checklists and working through the checklists and converting probabilistic outcomes into yes or no outcomes.

14:44David Leary: So if one sub-agent fails, or here's an example, this is how you can really improve the quality of an AI prompt that you're writing is like in Cloud Cowork now, you can explicitly tell it to spawn sub-agents. So you can say, to do this task, I want you to spawn two sub-agents. And I want them to, they have to agree for this to be successful. They have to come to the same result, just like two humans checking their work.

15:11Blake Oliver: It's just like a secondary table in Excel where you're doing a checksum against the other values.

15:17David Leary: Exactly. So, you know, let's say you have a 90 % success rate for a particular task with AI, if you have two of them do it, that reduces the probability of failure dramatically because they'd have to both hit that 10%. So I don't know if I'm doing the statistics, right? But it would be like 10 % times 10 % is like, now there's a 1 % failure chance. And if you want to reduce it even further, you have three AI agents do the same thing independently. And that's how you get the accuracy up. You can increase your token spend. and get more accuracy.

15:51Blake Oliver: Toss more token spend and more agents at it, now you can get to Six Sigma. Six Sigma? What do you mean? Well, Six Sigma, you might be in that weird generation that like it bypassed. If you're a little older, you know a lot more Six Sigma. It was the GE way and it came from Motorola originally. And to be honest, it almost killed Intuit at one time. It's all about perfect data, perfect measurement, perfect numbers. But the Six Sigma is like, your uptime is 99.99999 % but that means you're down for one day a year, right? But essentially that's the, which is basically kind of what you're saying, right?

16:25Blake Oliver: You could get from 90 % quality to 99.999 if you just put enough money in tokens and agents on it.

16:33David Leary: So what the PCOB chair said fits in with this in the sense that the science of audit, the stuff that you can actually document down to the smallest task, that's all going to get automated with AI. It's the judgment part above that that won't. Well, what's left when you do that? The staff are gone. The staff are gone. It's managers, directors, and partners. And the firm of the future will basically be a team of those people overseeing a bunch of AI agents and maybe some administrative folks. But how are you going to create an informed opinion if you're not in the weeds, if you're not eating the dog food?

17:11David Leary: Because those people already aren't in the weeds. They've got humans doing it for them and just they're getting reports. They're getting spreadsheets. They're getting, you know, they're not actually -

17:19Blake Oliver: But where did they get the ability to have this judgment?

17:22David Leary: By doing the work. And that's the challenge, right? Is how do you make more reviewers if you don't have preparers? And nobody's figured that out yet.

17:31Blake Oliver: This professional judgment comes from eating the dog food and doing the work. No, it's not. I mean, obviously who, who, who set up their training simulator last week? We talked about it. Was it EY? KPMG, I think. Like, yeah, like that's, you don't get, you have to use years of this simulator before you get to that point of having professional judgment. This is why it's called professional, right? You're practicing your profession. I don't know.

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19:12David Leary: Since we're talking about the big four, let's talk about one of them in particular, EY. EY has reported improved audit quality, according to Accounting Today. it's the biggest turnaround in PCAOB inspection history for the firm. Back in 2024, 18 out of 64 audits reviewed had significant deficiencies. That was a 28 % deficiency rate. So over a quarter of the audits that the auditor of the auditors inspected did not pass inspection. In 2025, it was just three out of 64. That's under 5%. So they went from 28 % down to 5 % in just a year. And they are crediting the$1 billion investment into tech and talent, including agentic AI tools that every US audit and tech risk professional can now access inside of their audit platform.

20:13Blake Oliver: I feel like we talked about another firm that had an improvement. It might have been BDO or somebody then they said oh it's because of all the money we spent on tech but they had a big improvement too so is this true or is the pcob just not measuring in the same way as they used

20:28David Leary: to measure i don't know well i guess it depends on what the pcob is actually finding fault with in these audits and my guess is that the pcob is traditionally very like nitpicky about actually following all of the processes that you're supposed to follow in the audit, not skipping procedures, having all the documentation, all that stuff. Well, guess what is really good at making sure that you don't skip procedures and that you have backup for everything? It's this agentic AI stuff, right? All the just checking the box that gets missed when people are rushed. And speaking of people getting rushed, there's another data point here from their press release that says something important about how to actually improve audit quality.

21:13David Leary: 69 % of the public company audit hours at EY, so over two-thirds of those hours, are now done before year-end. They are not having to wait until after to cram them all in. And so this makes sense. If you have less busy season crunch, you're going to have less rush judgment, fewer managers, directors, partners rushing through and not able to review things properly and push the work back down and just pushing it through to meet the deadline, you're going to get a better result.

21:50Blake Oliver: So it's not really AI. The use of AI is making it get done with higher quality. It's AI is changing. It's spreading out the workflow or the workload across the year so people, the humans, can function properly and not make mistakes on the audits.

22:06David Leary: And I think it's probably both. And we don't know exactly how much. But given that back in, well, only a year ago, there was not nearly as much agentic AI stuff going on, these AI agents weren't as good, I think it's probably the pulling the work forward that's doing it. So in theory, the PCOB should use AI and audit more of the returns and not just take

22:29Blake Oliver: random samplings of what, 30? Two-year-old percentages?

22:32David Leary: Actually, that's a great point. PCOB, right now, they just select a certain portion, a very small portion of the audits to inspect. Well, they could just do all of them. They could say every audit firm has to upload all your work papers and everything into some sort of portal and then run an AI that examines all of them and looks for issues. I wonder if anyone over there is thinking about that. I bet the big firms would love that. I'm sure.

23:05Blake Oliver: I want to jump into AI had its microwave moment this week, Blake.

23:11David Leary: What is a microwave moment?

23:13Blake Oliver: Microwave moment. At one time, you had to know how to cook. right you had to have some skills to cook something and then the microwave came out and as long as you could push a button you could cook food heat heat up food and eat it right two-year-olds can cook with a microphone microwave 99 year olds can cook with a microwave it but this is the moment it had this week because meta dropped its new ai called muse and it right away was the number one downloaded app on the Apple App Store. I was like, I should try this out. Let's check it out. So in part of their press release, they say there's no learning curve.

23:53Blake Oliver: Anybody can use it out of the box. No technical experience required. And I used it because I'm going on a trip to do some research at parties that are at bars before the Bills game in LA. And I sent you the link. I was like, oh my God, look what this did. And you replied back and said, oh, just tell Claude to make an artifact and it'll do it. But the point was I didn't have to create projects. I didn't have to configure background agents working. I didn't have to ask for an artifact. I didn't even know I wanted one. It made this beautiful thing, this output that I didn't even know I wanted. All our moms, Blake, are going to use Facebook Muse.

24:25Blake Oliver: This is the AI for our moms and those boomer partners, right? Because sure, they're probably dabbling with AI right now, asking Google a search question, asking a question here and there, but they don't really do stuff with AI because they don't know how to configure it and set it up and do all that all the stuff or even know what they want it to do and so this really truly is the microwave moment like anybody's going to be able to use ai because of this and what hopefully will happen is the other models will copy this right right who wants like honestly it takes it gets on your plate okay i gotta go set up a project i gotta link it in like that's all like brain waves you have to spend to make sure it's all configured properly like out of the box this just is amazing it's amazing most people

25:11David Leary: aren't going to do that yeah okay i mean that's that's interesting i uh i wonder how much meta is going to spend on muse because creating what you sent me that like bill's schedule that beautiful artifact that it built or web page essentially like that's going to be a lot of tokens right and so if people are like messing around with this for free at facebook scale yeah and and And so this is the issue, I think, for Facebook is they're investing all this money in AI infrastructure, but their model, their business model is free and tokens are expensive. So how do they make money on this?

25:50Blake Oliver: That's interesting, too, because it'll go shopping for you. It's using a Stripe payment portal. But they insist it's siloed out in its own virtual machine just for you. It's Facebook's ad network can't see what you're doing and insert ads. But I don't know. I don't trust Zuckerberg. I'm kind of at that level with some of these AI companies. You don't trust them. But they claim that there's no ad integration. But that's a good question. How are they going to make money for this? So it's free for basic use, but they are going to have paid subscriptions for heavier users. Now, one of the things you said, I want to book your haircut.

26:29Blake Oliver: So I tried to have it book a haircut for me because I need to get a haircut. It couldn't because my haircut place only takes phone calls. Now, if you're a firm and you don't have a place to book an appointment on a website, and I tell Muse, hey, book an appointment with my accountant, it's not going to be able to do it. You are going to lose business. So you need to make sure you have your website and you're inbound to your firm set up in a way that AI can go book things.

26:56David Leary: Oh, David, you just gave me an idea. what if an accounting firm had their own MCP server? What if you could plug in to the accounting firm directly through whatever AI bot you're using, through Muse or Claude or ChatGPT, and connect directly into the firm to submit documents? No more portals, no more emails.

27:25Blake Oliver: else yes actually even beyond that right hey muse go get all my tax stuff off my google drive go find it and just put it to give it over to the accountant yeah right you're you're gonna have some interface for machines if you want to call it machines or bots or agents to your firm you're gonna have to um same thing with paying because it can pay for things it can go shopping you can pay for things so you can have a form where it books the appointment for me and pays you all through my agent. And I mean, they claim all this privacy stuff, but I don't fully trust them. I didn't connect it to my email or calendar.

28:00David Leary: Oh yeah. I don't trust Facebook at all. I mean, at this point.

28:04Blake Oliver: I just pasted in like a screenshot of my calendar appointment. Like, hey, I'm on this airplane flight. Here's the game time. Go find me all the bars that there's events happening at.

28:13David Leary: I like this though, David. This is how we get the boomers onto AI. For good or for bad, it's going to be Facebook. Yeah.

28:21Blake Oliver: All right. No, exactly. This is how you get people in your firm that don't know how to, maybe they just, they use the Google prompt and they do AI in there or what's built into the Apple phone and that's about it. They're not doing the next level because it's, you got to understand a little bit on the relationship of a project and how it ties and what an artifact is. You don't have to know any of this anymore.

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29:53Blake Oliver: So I have two articles that are tied together. It's something Expensify did, something Zero did, and it ties back to a conversation that you had with me and your opinion on things. So Expensify announced that they are one of the first expense management tools available in Claude. right and so you can just inside of Claude now ask questions like which expenses are missing my receipts and not actually leave Claude but I'm starting to feel like this is kind of dumb because I saw this I was like what about the new Expensify can I just do that there so I opened up Expensify which is essentially arguably a chat interface and I said exactly that question which expenses are missing receipts and it said hi David you currently have three expenses that are missing receipts.

30:40Blake Oliver: If you'd like, I can help you show which ones those are, help you get them cleaned up. So basically Expensify is training users to not use Expensify. Now think about this, there's risks to this and Intuit's doing the same thing. And I'm going to talk about Xero here as well. You're training your users to not open your app. And that is probably not safe long-term. Why? Do you remember, like think about this, we went just like, I feel like it was yesterday, we went from apps adding chat interfaces inside their app, to now telling you chat outside of our app. Yeah. Remember Jax from Xero? Is that even a thing now?

31:23Blake Oliver: Because Xero has now launched an integration with ChatGPT and Claude, letting their 5 million small business users open these, get data in Claude and ChatGPT without app switching. And this is the thing, and I think you said this too, the value prop they're solving is I don't have to open a second browser tab. Like, what is the point of this? You're giving up control of your data, your users. It's really risky for Xero and Intuit and Expensify and these other companies to let Claude own the customer relationship.

31:58David Leary: Oh, it'd be the interface? But here's the problem, David. If they don't, somebody else will do it. And I am going to switch because I don't want to have to go into a separate app and do the thing when I'm working with an AI agent that's closing my books and helping me process my spend. I want to do that there. I don't want to do it separately manually. And so, like, you know, that's why Ramp has an MCP. And I can provision virtual credit cards via a Cloud Chat.

32:29Blake Oliver: I mean, this is going back to my theory, which is the lesson we learned about Microsoft in the for Microsoft Windows back in the day, Microsoft was in bed with Apple, IBM with OS two, and they were building Windows itself. And whoever was going to win the OS game for your computer, Microsoft was going to be a winner. So that's kind of your opinion. Like, they have no choice, because if not, Claude is going to build expense tracking right in the damn app.

32:55David Leary: Well, somebody will build it and integrate it. I think that the way to think about this is that Claude and ChatGPT and Gemini are the new OSs. That's the user interface. And all these apps are plugging in, just like apps you used to install on your desktop. And so whoever grabs the audience, whoever grabs the users is going to be the OS layer. And with Claude, it seems like it's professionals and especially accounting and finance people. Claude has really taken that market, the developers too, and owns it. It stole that from ChatGPT almost overnight when they released Cowork. and Cloud Code. And ChatGPT kind of tried to catch up in this kind of field.

33:50David Leary: And ChatGPT has actually embraced the consumer market. Most of ChatGPT's revenue is those individuals, not organizations at this point. And so there's going to be, again, we're going to have like two OSs, right? We're going to have the, it's like Apple versus Windows.

34:09Blake Oliver: We're going to have Blue Bubbles.

34:11David Leary: Yeah, and maybe a few others too, right, if they can catch up. But it's interesting because I'm having to revise my whole theory about how these companies are going to do because I thought, and I still stand by this, that if you're just building large language models and selling access to them, like tokens essentially, that's a commodity eventually because there's going to be many, many, many good models. there's no there's no ip on any of that right other than a specific model but anyone can make a model right it's not there's there's no patent on this technology and so that's going to go towards the cost of electricity so where do they capture value like where do they create value it's in that management of all of the stuff going on management of the agents so cloud co-work is so powerful because it allows you to organize all the work that your agents are doing into projects and scheduled tasks and skills and maximize the effectiveness versus just single prompts.

35:15David Leary: And you can do really complex work now because of it. So that's the value add. It's the orchestration layer of all the agents.

35:24Blake Oliver: I'm going to talk about orchestration layer next in my next article, but I want to close this thought on this. But ultimately, or Claude, Claude Code was actually another company called Codex. And they learned what they were doing and they just basically stole it. Right. And that's the danger of this. Expensify might not exist in a year because Claude will just steal it and just do it. We'll just see Claude expenses and it'll just do what Expensify does. So why would you prematurely send your people into those apps to do these things and let these companies learn and steal from you? Because that's exactly what they did to Claude Code.

35:57Blake Oliver: They're doing it to Figma. all the developer tools they're doing this to. They're sucking in and just stealing the customers and stealing the business.

36:05David Leary: And Microsoft did that. Microsoft was either, and Apple did that. They acquire your app. Yeah, history of platforms.

36:12Blake Oliver: I agree, it's a history of platforms. But knowing that we know the history of platforms, why would Expensify and Xero do this in Intuit? It doesn't make sense. They're gonna get screwed by these platforms. They can't be trusted.

36:22David Leary: Well, they can't be trusted, but also, you're not the low-hanging fruit for them. creating payments rails and routing like payments through the banking system is not something that the developers of clod want to do and build because that takes a lot of time and there's a lot of regulation but if all you're doing is like creating i don't know designs in some software right that that's something they could clone rating code yeah yeah and same thing with like gl right it's like creating a multi-tenant general ledger system that can serve you know millions and millions of businesses, something that took into it like decades and decades to build.

36:58David Leary: Not something that AI companies are going to come after anytime soon.

37:02Blake Oliver: And going off your word, the orchestration layer, right? So Avalara just announced a new product called Avalara Aviator, and that is their orchestration layer for their AI agents. So if you think about, they have the orchestration agent, I think it's called Avi, and then you have a transactions agent, a returns agent, a research agent, a certificates agent. So these agents are doing all this work rolling up. And this is kind of has been my thoughts. I want dumb AI, right? I may want AI that just does one thing really well. All you do is enter bills. Another AI that does nothing but create invoices, right?

37:38Blake Oliver: All these small areas. And then I want a parent AI agent or the orchestrator directing these things what to do. But I don't want my agents having knowledge of the entire world. Now, I was thinking about this. And in theory, shouldn't Intuit and Zero be building something like this? you have hundreds of apps that are trying to write to the GL, right? And nothing's controlling that. I mean, there's an API call, an API key, but the data itself and what gets written and how fast and is it correct or not, there's no, I guess, like, I think there's opportunity for Intuit and Xero to be the, quote unquote, to build an agent that's like the human in the loop for the GL.

38:16Blake Oliver: And this is something I think way back in the day with Intuit, we had beer conversations about this. If you think about the GL, right now in the world, the API world of cloud accounting, if whatever third-party app developer had a transaction, they never had all the details of a transaction, right? But they have some parts of a transaction. The other part's over here in the Stripe, the payment part. And this part's over here. And from an API perspective, these are beer conversations a decade ago. Imagine if the developers, instead of sending a perfect API call in, they could just send half a transaction.

38:50Blake Oliver: I know this about a transaction. And then there's a orchestration level at Intuit level that wraps that all up and then writes a real transaction to the GL, right? There's prior opportunity for, because like you said, this orchestration level for them to control the data getting into the GLs. And that's what I would like them to see them do.

39:10David Leary: Here's the thing is that orchestration layer would be limited to accounting. And I'm gonna use an orchestration layer that is unlimited to anything. this general purpose. And that's why I like Cloud Cowork is so powerful, because I can use it for almost anything. And my entire business can be in it, run by it, not just accounting, also sales, also marketing, also operations, also production, everything. And that brain, that mind, and all those agents that are inside of it, which I've been building the last few weeks, It's wild. You don't want that broken up either.

39:53Blake Oliver: You want one universal chat. That's your one interface to the whole world of data and whole world of everything. You don't want to open browser tabs. You don't want to have a different chat program. You want one interface for the rest of your life.

40:06David Leary: Yeah, and if I have to open browser tabs, it does it for me and tells me where to go. It drives for me so I can know what I'm looking at and get there automatically. It's really incredible. Hey, David, we need to thank our next sponsor. I'm going to let you do that. And then after that, we're going to get to some of the live stream comments. We are on, you got Onpe? I did Onpe. You are on Veltrix.

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41:36David Leary: Welcome to our live stream, viewers. Thanks for catching us live. Mail22 says, people are not getting fired yet, but definitely not hiring new ones. So the hiring growth has slowed down. Yes, that's true. We'll see if the firing happens. El Capitan on X says, how does the future of Deloitte look in comparison to the other big four? That's a great question, El Capitan, and I have no clue. But I asked Claude while David was reading his ad. Deloitte is enormous. It leads PwC by 17.6 billion, which is bigger than most firms' entire consulting practice. And it's also got a massive consulting practice, and that's been driving most of its growth over the many years and decades.

42:27David Leary: But that's also now its weak spot, because AI is driving down demand for consulting. AI is really good at making all those PowerPoints, all those reports you got to use to justify whatever it is you want to do to the committee. Technology and transformation, Deloitte's biggest consulting business, grew only 2.5%. Last year, the previous year, it grew 4.7%. But the slower businesses grew faster. Tax and legal, audit and assurance. Both above 5%.

43:05And it's interesting, this consulting thing.

43:10David Leary: I really do think that as AIs get better, more and more executives are just going to start using it for all that stuff that consultants were doing. because there's got to be truth behind the joke that consultants just reuse templates and come up with meaningless notes for the slides and say a bunch of stuff, but they don't really mean anything, right? And isn't the joke that a lot of times when you hire a consultant, it's just like CYA, right? You're covering your ass, right? You want to do something and you need to hire Deloitte to give you the cover to do it. And if it doesn't work out, you just blame Deloitte.

43:47David Leary: Well, I mean, maybe that won't go away, but it's still going to get done a lot cheaper, right? And it's going to put pressure. And AI is putting all this pressure on consultants to do the work faster. And I actually have a story in my queue about that. It is from Business Insider. Headline is, clients now expect some projects to happen twice as fast. This is actually a PwC partner who talked to Business Insider. Janelle Johnson leads PwC's 2 ,200-person DC office in consulting and says that a project that used to take 8 to 10 weeks is now expected in about 4. She says that the tools should accelerate the work.

44:35David Leary: That's the expectation from the clients. McKinsey says AI turned its week one answer into an hour one answer. A Deloitte engineer said some coding tasks dropped from days to five minutes. An EY consultant said due diligence that took two weeks of spreadsheet work now takes a day. So all of this stuff that used to take a lot of time is now taking less time. And here's the question that nobody answered in the article. If the time shrinks, what happens to the bill? And I don't think that bill can stay where it's at when the clients are seeing it take half the time. or less. They're not going to put up with that.

45:15David Leary: So the fees are going to have to shrink on these consulting engagements. Unless you're somehow delivering more value, it's not going to work. The fees are going to come down. And more and more smaller firms are going to be able to do the same quality work that Deloitte and PwC did today or in the past. So I'm glad you asked that question, El Capitan, because I think the future is often contradictory. It doesn't match what you hear. What you hear in the press, in the mainstream media, is that accountants are screwed. And in reality, it's the accountants who are going to be making the most money if they adapt to using all these AI agents and move up the chain.

46:02David Leary: And it's the consultants who are being highly paid to do theoretically sophisticated work that requires a lot of judgment, but really it's just PowerPoint mucking around, those people are going to lose their jobs. And we all know those people. I have plenty of friends from college who went into consulting, and they're not geniuses.

46:24Blake Oliver: And this sounds like a career at Big Four kind of question from El Capitan that he's looking for. So I have some career advice. If you are thinking about going to big four, or if you're already in big four, if you're at KPMG, that's where you want to be. And here's the reason why. So obviously, we know KPMG and all the big four, they've all announced they're going to spend billions of dollars. Well, KPMG just announced that they're launching. It's a horrible name. It's called the Client Technology Innovation Group. And essentially what this is, it's going to be like a lab. It's an incubation lab where they're going to have – rotate different people in from the company.

47:01Blake Oliver: Rising stars are going to roll in, and they're going to build companies, build apps, build like a startup accelerator. They're going to build new products and then roll up from there, and they'll work closely with Anthropic, Google Cloud, Microsoft, OpenAI. They really want to build like a lot of AI-type products they want to build out. And arguably, they have no choice but to do this. they blew or blowing over a billion dollars right on AI. They need to figure out how to create products that they can grow and make money off to earn back all that spend. And it sounds great on paper, right? Rising stars will rotate through the CT &I as founders and leaders of edge companies, building AI literacy and entrepreneurial skills before returning to core leadership roles.

47:47Blake Oliver: But I don't think it's going to work out this way. And this is why, pay attention, this is a good career move. What happens with these labs at these corporations there's corporate bottlenecks. So the people that are in there, the founders, these people like that, they usually leave and build very successful companies. And I've seen this happen. When I was at Intuit back in the day, arguably me, I was really heavily involved in Intuit Labs. And it let me sharpen my skills with startups and creating companies without the risk. I was getting a nice paycheck from Intuit. It was safe, but I was able to launch new products and build stuff when I was at Intuit.

48:24Blake Oliver: And that was, and the other people that were there, Webflow came out of, that was a former employee that was at Intuit Labs. They launched Webflow at one time, hit a$4 billion valuation. There was an app called Tiempo, which is a contractor and payment app that was built by people that were formerly in the Intuit Lab that got bought by Stripe. But if you go further back in history, Yahoo used to do this. It was called the Brickhouse and it was an internal startup incubator. And then people just got frustrated and left. Well, you ever hear a Y Combinator? That is former people that were in the Yahoo Brickhouse.

48:57Blake Oliver: WhatsApp, former people that were in the Yahoo Brickhouse. So if you're at KPMG, you should try to get involved in this. Brush up on your entrepreneurial skills while you're on the paycheck of KPMG. Get good at launching and building products. Make mistakes. Then go start a company. So what's going to happen is KPMG is spending billions of dollars to do this, right? and we're going to see a few billion dollar startups that are tied to kpmg from a resume standpoint but not actually tied to kpmg because people are going to get a good idea and they're just going to quit they're going to quit so i so it's not good for kpmg but it's really good if your employee kmg to get kpmg to get involved in this incubator do it it's a really good idea

49:43David Leary: we don't have any more sponsors right so we can go on to our next story here

49:47Blake Oliver: Yeah, I could talk about hacking and AI if you want that. FBI was hacked.

49:52David Leary: I want to talk about how America has become an entrepreneur's paradise. And this is from the view over the Atlantic from the UK. This was a story in The Economist. Why is America now an entrepreneur's paradise? I mean, I guess we kind of always have been, but it's getting even better. This is the good news. It may not feel that way, with everything going on in the world, but it is. Here's the numbers to back it up. Americans filed over half a million new business applications in June, 531 ,000. That's double the monthly average from 2019. Okay, half a million new business applications in June alone, double the monthly average from 2019.

50:42David Leary: Since the start of 2021, we have averaged 466 ,000 applications a month. And the share of founders who used AI to help launch their business doubled to 60 % between 2023 and 2025. That's according to Gusto. And it makes sense. If you're using Claude every day or ChatGPT every day, it can help you do all of this crap that used to be so hard and time consuming. You want to build a website, get a license, figure out the rules, do back office work. You just have to do that yourself.

51:20Blake Oliver: All your minute notes to the corporation commission.

51:23David Leary: All that stuff, right?

51:24Blake Oliver: Just register with the corporation commission.

51:25David Leary: I mean, you can basically have AI doing all that stuff that's not core to the business that you're doing. Now, here's what's interesting is that these new businesses are less likely to hire people. Only 30 % of the new applications last year were high propensity, meaning likely to hire at least one person beside the founder. And that's down from 38 % in 2019, so an 8 % drop. So less than a third of these businesses are likely to hire more people. That means that two-thirds of them, 70 % of them, are just going to be solo. but you can do so much more now as a solopreneur. So I think we're going to have a renaissance of self-employment, single person companies, because you're going to be able to do a lot of stuff that used to take a team without having to hire a team.

52:23David Leary: And that's why I think like the CPA firm of one, bookkeeping firm of one, tax shop of one, audit firm of one, consultants of one are going to be huge and they're going to make so much money you know instead of making like low six figures you're going to be making half a million dollars

52:43Blake Oliver: a year million dollars a year it's all possible and i love this concept of the the company of one right i really love this concept now the thing is these business filings don't necessarily i don't think actually believe they're tied to real businesses being started. We saw this with COVID when the, when the stimmy money came, all these new businesses just started getting created because people were trying to get COVID money, right? You need, and now think about all the Instagram influencers. Oh, you need to start a business and LLC and then put your car pink slips in there. So you don't have to pay for taxes.

53:19Blake Oliver: How many are actually real businesses being created? How many of it's just business structures to, because it's the thing to do, like, are they, Are the actual businesses being started? So that's where this word entrepreneur, just because somebody applies for a business license doesn't mean entrepreneurship's happening. Maybe that's my point of view. And I would argue there's probably a lot of just paperwork happening, not actual entrepreneurship.

53:44David Leary: All right, David, I'll let you take the last story.

53:46Blake Oliver: I think we both have two music stories we should touch on.

53:49David Leary: Okay, what's yours?

53:50Blake Oliver: I don't know who wants to go first.

53:52David Leary: I can do it. Okay, you go first. Okay, so this is an op-ed in Accounting Today by our friend Giles Pearson, What Accounting Firms Can Learn from the Music Industry. And he says that what Spotify did to music, AI is doing to accounting, which as a musician, I don't know, that worries me because the music streaming services basically demolished the music industry when I was just getting into it years ago, getting out of college, kind of screwed it up big time. It's changed now completely, right? It used to be you made your money from record sales, and now it's none of that. It's all merchandise and touring and all that stuff.

54:28David Leary: Completely shifted, but that shift was really painful. Anyway, I digress. So here's what Giles' argument is. He says that AI can accelerate tax returns, compliance, reports, and workflows while cutting costs, but your competitors are going to get the same benefits. Clients also have AI-supported advice tools and more ways to obtain work that was once available primarily from accounting firms. So his warning is that adopting AI itself is not a strategy because it's going to just get bundled into tax and audit and accounting and practice management and workflow software. And if everyone becomes faster and more efficient, the tool-based competitive advantage is going to disappear.

55:12David Leary: There's an advantage if you're an early adopter, right? But eventually it just like goes away. Here's the Spotify comparison. Spotify disrupted music two decades ago by giving enormous catalogs for a fixed price through inexpensive subscriptions or free access. And the artists benefited in the sense that they got instant global distribution. They didn't have to sign with a label. They could just go on Spotify. But every competitor did too, right? So having good music alone, it stopped being enough. Anyone could distribute their music. There wasn't this gate of the publishers. And so musicians then responded by building brands, going on YouTube, getting online attention, interacting with fans, building up their own audience.

55:58David Leary: And so Giles says that AI is going to do the same thing with accounting because the actual work product, the outputs are going to get cheaper to produce, easier to create. And so it's going to change what firms have to do to win. So what did musicians do? Musicians built their own identity. They created their own audience, not relying on a record label to have the audience. They published on SoundCloud. They got on YouTube. They gave their music away for free, built an audience, got emails.

56:36Blake Oliver: They sell LPs because they can make more money selling one LP or physical record than they can with 50 ,000 plays on.

56:44David Leary: Because it's a collector's item, right? It's a souvenir. Yeah, so I think building your own audience is like so critical now. I mean, it was important before, but now it's like that's a big differentiator, right? Between you and any other firm that's using AI to do work in tech. So make a community, make your firm visible, create live experiences, bring people in to seminars, roundtables, client events. That sort of thing makes a lot of sense to me. So basically, the parallel is actually really good. It's that the thing that musicians sold, which was their music, because of online distribution, because of streaming, the value of that went to zero.

57:30Blake Oliver: This is a commodity, yeah.

57:31David Leary: Anyone can do it. There's no barriers. You can't sell it anymore. It's all free. Everyone's giving it away online. So you have to sell something else. and what musicians today sell is the relationship, right? They sell something that gives their listener a feeling of being connected to them, which is the T-shirt, which is the LP that you put on the wall. The T-shirt, the VIP ticket, early access. Yeah. So I think that's an amazing example. And anyone building a firm, right, should really be thinking about that. That's the thing that you build that technology is not going to be able to disrupt.

58:09Blake Oliver: So I have a story that actually proves that a little bit. And then I think you have one more music story, I think about somebody in taxes, which you could follow up on this one. So you've talked about John Summitt on the show before. I still don't really know who he is. He's a DJ guy, right? But he used to be the accountant. So those listeners -

58:27David Leary: It's not going to help for trying to get him booked on the show, David. You should at least go listen to him on Spotify.

58:32Blake Oliver: But he, you know, so he used to be an accountant at EY and quit his job. He's a CPA. Crushing audit job. He started and became a DJ and he's a CPA, right? Yeah.

58:43David Leary: And basically like the number one DJ in the world, like one of the top. Number one DJ in the world. In the US. Yeah.

58:50Blake Oliver: But I don't listen to his music because Spotify has 10 billion other choices, right? This is the issue, right? There's no radio. There's nobody pumping his music into my face. Anyways, that's not, I digress. But I've always said, right, that like, and I tell my kids, right, get an accounting degree because no matter what career you have in the future, you will be successful because of your accounting degree. Well, someone is actually crediting his accounting background for keeping him financially literate in an industry where artists routinely go bankrupt despite making millions. And so he's now taking some ownership models on music festivals.

59:26Blake Oliver: He's launching music festivals with 50 ,000 attendees sold out over two days. And he says he spends half his day on business operations. He said you can't half-ass it. Now, if he was a chef and then he decided to be a DJ, he probably would not be as successful as he's currently successful because he has those skills, right? The accounting skills will carry you into any other career you get. And he flat-out credits it. There's no denying. Yes, he hated the job of accounting, but the accounting skills are making him a successful DJ.

59:58David Leary: And the number one thing he's doing, you mentioned this, is he's created his own record label. So now he owns the distribution from that standpoint. And he's booking other artists on it. And it's a festival. So he's having events under his own label called Experts Only. and they do the biggest one in New York City on Randall's Island. It's a two-day festival. It just wrapped up. It was September 19th and 20th. And it attracted over, well, 30 ,000 to 50 ,000 fans over the weekend, despite rain. And, like, that is an impressive thing. He now has that community and he's built a business around it.

1:00:42And so it's amazing, right?

1:00:45David Leary: Like an accountant has become a global electronic music superstar and now is building an empire.

1:00:56Blake Oliver: And the empire building is because of his accounting background. That's what's given the skill set to do that.

1:01:02David Leary: The discipline for sure, right?

1:01:04Blake Oliver: All right. Just the knowledge on how to do it. And I think you have one, so you have an example that's the opposite, a musician that's the opposite of the story.

1:01:12David Leary: All right. So John Summit, he was just in New York playing a set for tens of thousands. Shakira, global Latin music star Shakira, is playing 12 shows in Madrid this month. She was never an accountant, right?

1:01:27Blake Oliver: Has no accounting background.

1:01:29David Leary: And these are her first concerts in Spain in eight years, which is a long time because I think she's really popular there. Well, why? Because she was in a 63, well, not 63, it's 55 million euro fight with Spain. She won a tax court case there worth 55 million euros. And simultaneously as she's doing these concerts, Spain's Supreme Court is reviewing her win. The government appealed. The whole dispute came down to one question. Did she actually live in Spain in the early 2010s? I don't know if she did. I mean, that's the question. It's all about residency, right? So I guess...

1:02:14Blake Oliver: I predict who won't have any tax issues, John Summit. His ducks are going to be in order. He's not going to have tax issues.

1:02:23David Leary: I hope so. Yeah. I'm trying to think what came down. I want to see if I can see where the residency issue was. Yeah. I don't have the details here. Anyway, David, that's all the time we have for this week. Thank you to everyone who joined us live, tuned in on the podcast, on YouTube, wherever, on Spotify, please rate and review us. Those five-star reviews help get the word out about the show. And don't forget you can earn free continuing professional education for listening to this episode and many, many, many others and many other fine podcasts on the Earmark app. Go to earmark.app in your web browser or get the free app from the App Store or Google Play Store.

1:03:04David Leary: It's free to create an account, free to earn one CPE per week. And if you want to support the work that we do and get access to premium content, subscribe for the low price of$199.99 per year. Just 200 bucks for unlimited CPE. We really appreciate all of our subscribers.

1:03:28Blake Oliver: And I was going to say even better, if you want to save 25%, sign up for your team. Teams, three, four, five people, you get 25 % off. Sign up your team for Earmark.

1:03:38David Leary: You can do that right there in the app. Create a team account, invite your coworkers, get a discount. And if you want more discounts, you're a larger firm, email us, sales at earmarkcpe.com. Let us know you're interested. We'll get you set up with a free trial. All right, David, see you around here next week. Thanks, everyone.

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