Value in 60 Seconds: Why Exec pay for non GAAP EBITDA is bad for business and investors

When executives are getting paid for improving return on invested capital, they're creating shareholder value. And you want them to get paid for that. Now, if they're getting paid for non-GAAP EBITDA, what are they going to improve? Non-GAAP EBITDA. And how much value does non-GAAP EBITDA create? Oftentimes zero. Or worse, it destroys value. The best example of how bad non-GAAP EBITDA is Uber. The executive team and investors on Wall Street, for a long time, their key performance indicator for Uber was non-GAAP EBITDA. Well, when the Fed started raising interest rates and profits started to matter again, at least for a little while, one of the first things they did at Uber was say, oh, by the way, that's a bad KPI. It doesn't really correspond to profitability at all. So we're going to get rid of it. Oh, let's just forget about the fact that you actually tried to sell us for a long time that non-GAAP EBITDA mattered. I always used to joke, you can't pay bills with non-GAAP EBITDA. There's no cash flow there, right? We warn people against investing in any stock that's paying executives for non-GAAP EBITDA improvement. It's about return on invested capital. That's where we should be.