Good morning. I'm on a three day backpacking trip in North Texas. I thought today I talk a little bit about transparency while having a moment break here in the morning. Transparency means the ability to understand why things are the way that they are. So transparency is can be enhanced much more readily when we understand the concept of business events. Let's start with the definition of transparency.

The first definition of transparent is dealing with physics having the property of transmitting light without appreciably scattering. So the bodies line beyond can be seen clearly. When can see why this this word was also later used to describe transparency in business. Your remember in our earlier episode, we talked about the differences between transactions and balances. If we were to start our reporting process in trying to understand what's happening within a business, beginning with just the transactions. But the overall impact of the set of transactions is not very clear.

Whereas if we begin with a set of balances, for example, customer lifetime value balances, that gives immediate information that's quite discernible, quite understandable quite quickly, after we understand the balances. The next question is, why is that the way it is? Why is customer XYZ provided so much greater value to the corporation to the business, then customer ABC, there's no way to explain that from these balances themselves. They do not answer the question Why? To understand why a balance is the way that it is, requires looking at the transactions. We have a very significant transaction, very large value, but a very old transaction.

We might need another time. of balances might call recent customer value balances. There are only four things that have happened within the last few years. But the situation is, is reversed from what we thought over the customer lifetime. That customer ABC has been providing much greater value in the most recent years then has customer XYZ. So we can say that, in a certain sense transactions create balances.

But in order to understand balances, balances are explained by transaction, this little pattern of going from transactions which are captured as original business events, to create balances to create understanding, and then having to understand what those balances why those balances are, what they are, is a pattern that happens over and over and over again, in all quantitative structured business analysis. So let's go back to the two batteries. As again, there are many balances that are possible to be made off of a set of transactions. So we've made and analyze these two balances in this segment. We have many different metrics, all created from these simple set of transactions, these simple 11 transactions. You'll remember last time we also talked about reconciliation, you remember that we can add up all of the transactions and add up the balances on sis and see that they're still equal.

We have a problem now when we add in our new values, our new balances cannot be added up they do not equal the total of all the transactions are the balances. This is because we only selected a limited set of the transactions and creating these balances. This behavior is not uncommon in order to understand and create new insight balances are needed for particular sets of transactions. Once those balances are created, they may or may not reconcile with any other balances. Because the criteria used to create those balances can be different from the the balances that are created in the transactions used in any other way. We now have a reconciliation issue that creates questions as to what is the appropriate balance for the different questions we're asking.

So let's summarize here a little bit. transactions are the original records of business events. But by themselves, their usefulness is limited for reporting. But they are very flexible in making reports because these discrete events in time, have all attributes that were captured at the time the business event happened. And you can make any combination of any attribute anything that you knew about the business event, you can combine with any other thing you knew about the business event, because it's all recorded on the business event. And any calculation you want to do is possible.

Balances on the other hand are typically summaries of business events. And they're the starting point for almost all reports. But they're limited for other uses. Because balances are created as of a point in time for a selected set of attributes from the transactions. They're answering a specific type of question, a specific question that they were designed to answer. And they're typically simple aggregations, other kinds of more complex balances are often not kept or those calculations have to be performed and stored as another balance.

So the negative aspects to balance are they duplicate information stored on transactions, which are the real book of record, they are less flexible in reporting than transactions. They require reconciliation to ensure the confidence that they're correct. If reconciled and in err, they must be adjusted or the actions taken based upon them would be wrong. However, we can't do away with balances completely because they are the first step in reporting. They show the status as of the current point in time, and they optimize computing resources needed to show that status going forward. We'll talk more about the performance this in subsequent episodes.