Convergence of Business and Music

by Robert Tucker, PhD, MBA

Having spent a career as a performing and teaching musician, I recently made a shift to business while maintaining my music performance activities. Although this change requires considerable knowledge in business, it is not as dramatic as it first appears. There are commonalities between music and business and many of the same concepts that helped me be successful as a musician have contributed to my knowledge of business, economics, and valuation of companies.

It could be stated that arts and business converge philosophically and practically in subtle or not so subtle ways. Specializing in Mergers & Acquisitions as well as Business Valuation, I enjoy applying a complex and comprehensive mix of business principles in both my teaching and side business. Not just one method meets the needs of assessing value of a business. The process requires extensive knowledge in accounting, finance, equity, ratio analysis, financial statements, and market value for starters. In valuing a business, a consultant considers multiple approaches and often needs to see several years of statements and returns. Regardless, the end result may lean a little more on art than science, depending on market value and actual purchase. Throw in some goodwill, depreciation, and market projections, along with negotiated options, earnouts, and range of value, and the result is hopefully a win-win scenario for buyers and sellers.

In the arts, performers rely on a blend of talent, discipline, and passion to carry the day. The discipline comes from years of preparation in a practice room followed by consistently applying the practice to hone skills and grow musically. Talent grows out of the discipline but is also an intangible and often difficult concept to define and includes emotion and passion. Passion comes from both the heart and the emotion as performers present the music in public. Of course, there are many other ways to express music including composition, conducting, and participating actively. The process of making music or any art form is complex and involves multiple levels of thinking and application. While music is not necessarily a process of negotiating the win-win scenario, it is a process of “selling” to a buying public, whether that involves monetary transactions or simply enjoyment.

In my unusual blend of musical skills and business knowledge, I discovered a method of reading financial statements that is akin to reading a musical score. Reading a score requires recognition of the independence and the congruence of the lines. Score reading demands knowledge of each instrument, of harmony, and of sound prediction also known as audiation of the printed notes. Financial statements require knowing how each area works independently and congruently, including projections based on growth or decline, knowledge of various accounts and categories. Good financial managers quickly assess revenues and expenses and the categories for each of those including amortization, depreciation, interest, and taxation. Conductors work to read the score by knowing which lines to emphasize and which to place in the background.

To use a Schenkerian analysis technique, score reading requires comprehensive knowledge that includes prolonging the substantive line while reducing the less substantive. This invariably results in three levels of analyses: the foreground, middle ground, and background. While such a deliberate process is not directly applicable to reading financial statements, the parallels cannot be denied. Quick analysis of the cost of goods sold and the inventory turnover rates can be compared to revenue and expenses, and financial ratios often reveal potential weaknesses in the financial operations.

Recently while listening to a Brahms symphony and following the score, I heard a wrong note on a passage in the viola part. Isolating the place, I identified which line and made an assumption of the cause of the mistake. The next day while studying through the statement of cash flows, I noticed a flaw in the net operating activities line compared to the overall operations. The musical score helped determine where the wrong sound came from while the financial statement revealed a mistake in the operations reporting. While studying the balance sheet, I was surprised to see long term liabilities and current liabilities not carried correctly. Looking at previous years, I discovered the mistake in long term liabilities as transferred over to the current year. Is business a science or an art? Is music a science or an art? The answer is both as these concepts converge into one.

No, this is not an argument for liberal arts to reign victorious in the battle against professional programs. Nor is this an argument for broad application of various disciplines in business valuation or working in mergers and acquisitions. Instead, and not overtly, this is a case for recognizing the validity and even power of knowledge in multiple disciplines that may or may not converge in certain instances. Perhaps in the end, this is an argument for harmonious reconciliation of sound and numbers. This also inadvertently serves as a reminder that good business practice integrates numbers, passion, attention to detail, discipline, accuracy, knowledge and congruence of art and science. Soft skills and hard skills work together to produce satisfied customers (listeners in music) and precise bookkeeping (creators of music). b