Wafer Thin

When I “stopped working” in 2014, I had ideas for projects I wanted to work on. What I meant by not working, was not working *for money*. 

I was just frustrated with what felt like a toxic environment. With answering the question “what do you do?” with what I do for work. With my default laid out, bar 20 odd days of leave a year. 

I still wanted to work on interesting problems, but with a different filter. Not all good ideas are good business ideas. There are a lot of things I wanted to do that I couldn’t justify. 

Another frustration was the amount of time I spent communicating what I was working on! Explaining myself. Communicating what needs to be done to people who aren’t doing it. When you get the sense that you are Sisyphus rolling a rock up a hill just to roll it up again. When you aren’t convinced of the incremental change. What the late David Graeber called “Bullsh1t Jobs”. Or fake deadlines where someone tells you to get something to them by the time your head hits the pillow... then they don’t look at it for two weeks. 

Much of my anxiety came from a sense of killing time. Time is the thing that is most valuable. That was what I wanted. Time free from price. I am also aware of path dependence. I did what I did because of the cumulative decisions that were presented to me, and that I made. Changing paths is hard when the path is relentlessly repeating. 

There can be wafer thin boundaries between what we do, and what we could be doing... but we simply don’t have the time to breathe and notice.

Stock Cubes

Not all good ideas are good business ideas. Not all good business ideas are good ideas. Because our lives revolve around earning ability, and what we “will be” when we grow up, this gets presented as a false choice. STEM (Science, Technology, Engineering, Maths) subjects tend to be the skills and knowledge that are good stock for business idea soup. To make money, you need something you can count. In order to create a container with control over supply and demand. There is a world of other paths that are fascinating and full of value, but very difficult to make money out of. It is possible to free yourself from the constraints of money making by being honest about what they are. Then by building Capital. The first step is to find a good business idea (which may be a job) and earn more than you spend. Then build a buffer to reduce the noise. To release the control of erratic expenses on your life. Then gradually put money to work, so that you can be empowered to focus on good ideas. They may still be good business ideas, but whether that is true won’t hold you back.

From Good Stock

Your Own Believer

There are a limited number of jobs. There are a limited number of employers. Many of the jobs that people currently do are being mechanised and automated. This means that however you go about planning your career, you have to think about what it would look like as a business. Employers are a middle man between you and clients. The key to every business is identifying the needs of decision makers with money. Solving decision makers’ problems. You can divide work into the categories of cost centres and profit centres. Cost centres are things that don’t finance themselves. They can be very valuable, and even foundational to profit centres, but they don’t make money. They need money. Quality Content is a cost centre. Advertising is a profit centre. Without advertising, print media started dying. Cost centres need believers. Not all good ideas are good business ideas. Good business ideas make money. Fortunately, that doesn’t have to trap us in profit centres. Gradually we can reinvest money in profit centres, and turn ourselves into decision makers with money. We can be our own believers.

Newseum

Beyond You

Financial Yoga recognises that not all ideas are good business ideas. You can’t always define yourself in the way you truly want to if you insist on packaging “that” (you) as a business idea. Most people have to be their initial source. They have to personally take on the role of Productive Asset, and figure out a way to generate an income. There are lots of things that are of incredible value that are awful business ideas. Start by accepting that. You have to articulate an Ask/Offer. Not everything can be expressed in words. You have to have something you can count. Not everything can be counted. There has to be some control over supply and demand. Some things of incredible value are abundant. The random cards you have been dealt (talents, wiring, community, world view) can be tweaked with a lot of effort. With daily practice. Gradually you can release the obstacles that define you. You can free yourself from the constraints of what makes you a good business. You can start to look at what makes a good business (beyond you). You can use good businesses to power good ideas. Expanding your possibilities.

Crystallising Creativity

Investing isn’t betting. It is true that you can trade anything with a number and a pulse. It doesn’t matter what thing is behind the number, as long as there is someone else you can play pass the parcel with. But that isn’t investing. When you invest you buy a slice of ownership in a company. You are a business owner. What the business does matters. You don’t have to find someone else to sell it to. The business has a product which it sells. It has the skills and knowledge to recognise a problem someone has, and to solve it. The problem may be someone wants Jam. The problem may be someone needs help making their own Jam. As long as there are problems, and as long as we are human and can’t know everything, there will be value to be created in cooperating. Investing isn’t playing the stock market. You become a part owner in a real company solving real problems. You get your money a real job. It has to work. If it does a good job, then it grows. If it doesn’t, it doesn’t. It grows by solving problem for money and reinvesting that money. There is no magic. It is simply the crystallising of creativity. Good businesses are built to last. Built to adapt, adjust, and accommodate a changing world. 

Friends, Family and Foundations

A lot of businesses start with a form of nepotism which could also just be called pragmatism. Friends or family who trust each other, and have some driving reason they are prepared to work for less than they would “just getting a job”. The most successful business person I have worked with said it took him seven years to earn what he was earning before, “at a job”. That is after survivorship bias. Most small businesses fail. Self-identified Meritocracy rewards Executive Management ridiculously well, ignoring the years of sweat investment in getting the machine going. The marginal decision gets one sided credit (things going wrong aren’t symmetrically punished) and ignores the leverage of the institution building that has come before. The most pragmatic path seems to be to hop on the gravy train of lopsided meritocracy until you have enough of a buffer, and a few mates you trust. Then you can have a crack at going it on your own. That is what we call “self-made”.

Thankless but Important

What Counts?

We overvalue the conspicuous, and things we can count. We undervalue the internal, and things for which there is no market. The caring professions are most brutally hit. The economics of 1-1 care, or anything that requires the time and effort to see an individual, are poor. A homemaker raising poor children does the “same” work that a homemaker raising wealthy ones does, but homemaking would be an awful business. No one else would put the level of effort in. Conspicuous is easier to manage. Work where you can clock in and clock out. Work where you say you will dig eight holes in an hour, and you dig nine. Or you dig eight, but in fifty minutes. This means we overvalue things that are easy to communicate. If something is hard to explain, it requires trust and confidence. It requires letting go of a desire to manage and control. The only way the economics of care work is by releasing them from the constraints of monetisation. By empowering them with engines of capital working in areas where the economics do work. Not all good ideas are good business ideas. Not all good work can be seen.

Starting a Fire

Money makes money. Only because, usually, you need resources to solve problems. The point where the money is made is in the problem solving. A clearly defined offer to solve a problem, recognised by a group of people (with money) who have trust (that the offerer intends to solve the problem) and confidence (that the offerer can solve the problem). Services aren’t Capital intensive. They don’t require money to solve problems. Not having Capital is the barrier to entry for Capital intensive business. The barrier for services is skills, knowledge, and recognition. We live in an age where it is easier than ever to develop skills and knowledge. Services remain the main “starting from scratch” point in building wealth. The challenge is (1) it is easier for everyone, and (2) it is much noisier with far more people fighting for attention and recognition. I think the answer may lie in localism. 1-1 services and small groups aren’t scalable. That means they aren’t great (big) business ideas. But they are great fire starters. With so much noise, there aren’t many people who listen. There aren’t many people who see small problems when we are distracted by the big. Start small.

Stuck in the Mud

“It is amazing what you can accomplish if you don’t care who gets the credit” (Harry Truman). Much of the creation of a business is in the packaging. The property rights and the ability to secure barriers to monetise the idea. The legal form. The relationships. The financing. The complex system that eventually makes things happen requires some sort of division of the pie, and attribution of where the value is added (even if this is nearly impossible). The beauty of a market for price discovery is we can fudge a price. Price isn’t value. It is a way of saying “this is a mess (too complicated to be precise), but I am happy, are you happy?”. It is a clearing mechanism. There are lots of places where we can get stuck in the mud trying to allocate credit. We get comfort in numbers. They give the illusion of precision. Money isn’t precise. It isn’t even a thing. Money is just an imprecise lubricant to clear things that get stuck. It’s in the complex web of fundamentals underneath where the amazing things are accomplished. Beyond credit.

Does it Scale?

Not all good ideas are good business ideas. Not all good business ideas are good ideas. One rule of thumb to separate good ideas from good business ideas is the question, “Does it Scale?”. Advice givers are stuck with this dilemma. High quality advice is clearly a very good idea. The world is complicated, ambiguous, and random. We are all hopelessly incompetent and ignorant in our own special way. The world, and knowledge of the world, is simply too infinite for us to be adequately equipped to make all our decisions on our own. High quality advice isn’t scalable. We all experience reality as a controlled hallucination. What we see is based on what we have seen. To see what others see, you have to develop a relationship. You have to share their hallucination. It’s intimate. It is time and energy consuming. If you need to monetise this, the only way you can make the economics work is by pushing the price up. That’s not a good business idea, its just better story telling. Another approach is for things that scale to finance things that don’t.

Boring Box

Money is made in containers. We spread the story that Entrepreneurs need to think outside the box. To generate excitement. The reality is that if they do, they also need to come up with a box. A great idea is not enough. I didn’t think outside the box to get my Financial Security. Professions provide off-the-shelf containers. Through prolonged training and qualifications, they limit the number of people who can offer the service. You can’t just say, “good idea, I think I’ll do that too”. They also restrict who this opportunity is afforded to. They box. Money makes money. Capital compounds. But there needs to be a source. Education is still one of the most effective ways to tap that. Particularly if it is a known, stable, boring problem that is unlikely to disappear. Yet still one that regularly needs solving. Like exercise and dieting. We all know what needs doing, we just fancy a doughnut and the couch more. A boring source can feed all sorts of fantasies later. Boring is an effective box.

A Slice

Equity is a slice of ownership in a real underlying business. An Equity Analyst studies what that business does to determine their view of the Intrinsic Value of owning that share. A $10 note is worth $10. The price of a stock is simply the last share that changed hands. It is a quote. What the business is really worth will be determined in the future. It will depend on the price paid when it is bought, and received when it is sold, and the dividends paid out in between. What the business does matters. Matters fundamentally. The Equity Analyst knows that price is not value. “Intrinsic Value” isn’t a single number. It is a worst case. It is a best case. It is the world of possibility for that business. A business thrown into an environment that is complex, ambiguous, and uncertain. You can’t know the value. You can gain confidence in the business’s ability to last. In its ability to survive. In its ability to create value. Then you can invest for the long term.

Boxing Dreams

Money changes hands when a problem is solved. That problem may be a service or an absent/present thing, but it boils down to problem-solving. Someone needs to clearly articulate what that problem is, and someone needs to recognise that they have it. A well understood ask and offer. Unless the problem-solvers and fuzzy value adders get together. You can have Breadwinners and Homebuilders. You can have an Engine that grows through problem-solving, and empowers other activity that is less bound by the constraints of money-making. Not a problem, but still worth doing. A problem, but hard to articulate. To make money, you need a container. To place the ask and offer in a box that you can count and charge for. Charge per hour. Charge per day. Charge per life. Time is the simplest box. There are lots of valuable activities that will scream and shout if you try box them. Valuable activities that count but can’t be counted. Don’t box them. Build Engines that power them.

I'm finished with being put in a box

Stock Market

The Stock Market democratizes business. A stock is a slice of ownership of a larger business, along with voting rights. Corporate Governance structures are put in place which include regular reporting to shareholders, and annual meetings at which boards are elected. Corporate Governance and Regulatory oversight constantly evolve, with Governments trying to prevent excessive monopolies in any industry. Public Equity provides the ability for normal people to invest in companies that serve them. It also means wealthy people no longer hoard wealth in stuffy vaults. Capital grows only if it is put to work. Public Equity provides transparency about how that work is being done. Like countries, churches, political parties and other groups of people… often we discover that work isn’t being done in the interest of all stakeholders. The Stock Market provides a mechanism for the truth to emerge. A way for us to hold decision makers to account.

Amsterdam Stock Exchange

Free to Run

“What do you want to be?” makes the cart the boss of the horse. In a dynamic world, we have moved beyond job defined identities. All businesses do the same thing. They solve problems. To make money, you need to be able to clearly articulate a problem that needs solving. Then you need someone who values that problem being solved more than the price you offer to solve it for. The power of Capitalism lies in the ability of Capital to snap the hand-to-mouth connection that dominates our labour. Not everything is a problem that needs solving. Capital can release us to focus on things that are hard to articulate. That don’t need articulation. Capital can empower our labour, and set the horse free.

Good Idea

There are good ideas, and there are good business ideas. Some are both, some are one, and some are neither. The more you accept what it takes to make a good business idea, the more you can work towards empowering all your good ideas irrespective of their ability to make money. The first step is a clearly identified need or want. A problem that needs solving. A problem that needs intervention by you. The second step is to be able to clearly articulate and communicate that problem. To paint a picture of how things are, and how they could be. To convert that imagined reality into a decision through a degree of urgency or priority over other problems. The third step is to have a container through which you can monetise that problem-solving. Something you can count and limit. If those three steps can’t be achieved, it isn’t a good business idea. It may still be a great idea. Not everything is a problem that needs solving. Not everything is urgent. Not everything needs intervention. By building an Engine using good business ideas, you can create the Financial Security, and Freedom, to pursue whatever source of Fulfilment sparks your creative fires. That, is a good idea.

Good Idea, Good Fire

Bottom-up Who

Adam Smith favoured local market exchanges because of Tacit Knowledge. Explaining our needs and wants is difficult. Conveying that information up a chain of command without it breaking even harder. When problems are scaled, they are also abstracted. We use categories and prejudices to create theoretical ideas of who people are, and what they want. The best way to find out what someone wants is to ask. Not in a survey. Not even in a direct question. Ask by being part of the community. Honesty is time spent. Instead of decisions being made in a board room, based on crude scribbles and interpretations… bottom-up decisions release information. To create value from the bottom up, you don’t need to have all the information. You just need two parties and an agreement. All businesses start with a who. Who starts at the bottom. With a name, a face, individuality, and relationships. 

Beware Central Decisions

The Container

Not all good ideas are good business ideas. That is why it is a thing of beauty that we can separate our Capital and Labour. Capital can live within the constraints of good business ideas, and be the breadwinner for Labour. Labour can love. Quality Journalism is a good idea. It used to be a good business idea when it had the Container of broadcasting from an enclosed garden through which it could sell advertising. Advertising was its engine. Social Media (Facebook) and Search (Google) stole the Engine. The idea may be awesome, but without a Container, good ideas don't matter. A Container controls the supply and demand of a scarce thing. The heart of a good business idea is "how will people pay?", "how will it keep them as paying customers?", or "how will you continually find new paying customers?". It doesn't matter what the business does. For it to be a good business it needs to show you the money. Not everything needs to be a breadwinner. We can't live on bread alone.

Gotta Serve Somebody

"What do you want to be when you grow up?" is an old question for a time when there was a set menu. In a more flexible world, any Business Model that starts with a product offering is doomed. The first question is "Who?". The second is what they need? Only then do you have an answer to what service or product you need to provide. It has more to do with them than you. The Who has to have money to be served. This is one of the reasons I support Universal Basic Income. Politicians tend to support their voters for the brief period before election day. They tend to focus on special interest groups that will get them their seat. The *U* in UBI means that everyone gets heard. They get heard because they have cash in their hands, and businesses will be trying to figure out what they need. What "The People" want isn't determined by having a vote where the words are determined by 51% of the voice. True Empowerment isn't listening once and then blocking your ears. "Who do you wanna serve?"

The Basics

Sometimes knowing less than everyone else is an advantage. I studied Business Science at the university. Like most of the people around me. We did have the token humanities, medics and science students, but for most of the people in residence with me at UCT the 'stock' for the soup was 'how to make money'. University wasn't about expanding your mind. It was about preparing for the next stage and providing. There were many courses we all did together to learn the basics, before dividing off into various specialties.

One course was Accounting. The last exam I did at school was Accounting, and I swore it was the last time I would have to 'balance the books'. I still feel guilty about how difficult I made my Accounting teachers life with my moaning. I felt like we had been tricked. Our introduction to the subject had been fun. We had figured out what we were worth, and made up businesses. Actually doing the bean counting was less exciting, and that is what you had to do for the exams.

I went to England for two years between school and university. I left school wanting to do all sorts of creative things. Then London smacked some reality into me. When I came back, I had taken the deeply pragmatic decision to study something that made money. As irony would have it, the first test I ended up doing was on the thing I had sworn to put behind me.

Not everyone had done Accounting at school. So the first lecture was very basic. The second lecture saw attendance plummet. Those 'who knew' didn't come back. For those for whom the basics were new, they weren't so basic. They came back.

Lesson 1 in Accounting is the 'Double Entry Principle'. A = O + L. Assets = Owners Equity plus Liabilities. Everything that happens has two sides that balance. The thing is there, but as important as the thing, is who owns it. Who is it doing the work for? What you see isn't the end of the story. When you see someone with a big house, a fancy car, and smart clothing... that is definitely not the end of the story in figuring out their level of financial security. This is Basic, but it is also the key. What you see is not all there is.

Those 'who knew', got used to the later mornings. Those 'who didn't', scurried to try and learn all the things the others had it half the time. They got used to having to work harder. My two-year gap had knocked a big chunk of confidence out of me. The binge studying for final exams had disappeared. I had the long hair of someone who had wandered off into the wilderness and forgotten his table manners, so I came back much more humble than the moany high school accounting student.

Eventually, who was doing the scurrying changed when suddenly the level jumped. By that point, it wasn't what you knew that was important. It was the habits that were being formed.

What you see is not all there is. Hold on to the Basics.

University