Build It

The global population is due to tick up to 8 billion. So in reality, any practical implementation of a Universal Basic Income is going to have to have simplifying assumptions. “Human Rights” are a goal... an agreement of how we should live. We then need to build that reality. 

I prefer the model of bottom-up collaborative savings vehicles, or “Community Wealth Funds”. A Stokvel 2.0 or a “Stokvel that went to Harvard”. England was in a bad way after the Napoleonic Wars. One of the ways we used to deal with hard times was to head to frontiers. We don’t really have the ability to head somewhere with nothing but a strong backbone and willingness to work. The area the 1820 Settlers arrived in had been a warzone between the isiXhosa and Dutch settlers for more than a hundred years. They had cattle markets, and that was where the word Stokvel came from. An Afrikaans name given by isiXhosa people to an English market, and made their own. 

“Collective Savings Vehicles” are not uniquely South African, and the mixed-kitchen origin of the idea would have come from and gone all over. There are growing Sovereign Wealth Funds, like Norway’s Oil Fund. Australia has changed the countries savings culture over time through the gradual introduction of powerful Superannuation Funds. 

Wealth needs to be built over time. It is a slow process that has to start somewhere, and with protection, can slowly gather increasing momentum. The key question is “how do you sustainably pay for a good idea?”

Nguni Cattle

Increasingly Released

We will always be thinking of something. Although often pitched as emptying the mind, meditation is practicing letting distractions pass through. Enhancing the capacity for conscious focus. That is the connection between money and yoga. 

If you have or build buffers for financial noise, and an engine to support your immediate physical needs and future development, you gain the ability to choose your point of focus. You can care about things that are bigger than you. 

What are you worrying about? Is it what you want to be grappling with? Can you involve yourself in solving problems that revolve around more than just you, your survival, and your status? 

With community wealth, we become truly invested in the bigger vehicle that solves those problems. We build universal capacity to deal with noise. With a longer-term commitment, it is no longer about mercenaries and sellswords who are rewarded and go on their way. We become a part of something larger. 

Focus can expand when you have confidence that the basics are secure. Focus can expand beyond money, as the money distractions pass through. 

Where money gradually takes more of the burden of working for money, and we are increasingly released to focus on issues that get suffocated by the rules of money-making.

Sani Pass

The Power of Grayskull

Risk is not just the chance that something will go wrong. The study of risk goes wider than that. Looking at the complexity, ambiguity, and randomness of the world and asking whether within that, “is there anything that we can rely on?” When you look at an individual instance of something, it is a bit of a roll of the dice. At least with dice, while there is uncertainty, there can only be six clearly defined outcomes. With a coin, there can only be two outcomes. If it is a fair dice, and you roll it enough times there will be roughly the same number of ones, twos, threes, fours, fives, and sixes. If a coin is fair, toss it enough times they will be roughly half tails and half heads. It is not merit that drives victory. Actuarial Science is partly the study of, and attempt to weather the storms of, the underlying distribution rather than the specific result. The distribution is the variety of outcomes that are possible. Alternative histories. A form of “there, but for the grace of God, go I”. What happens if we pool risk, and stop taking full credit for everything that goes well or badly? What happens if we admit that we are not Masters of the Universe?

Mad as a Potter

Somewhere in Cape Town lives a crazy potter named John. He is not hard to find if you follow the trail of creativity he leaves in his wake. He used to live (conspicuously) a couple of houses down from me when I was in Harfield Village. His dream was/is to bake some houses that would grow into a Creative Community. A group of people coming together to make beauty. Community building is hard. Even with passion. I also want to build a virtual Community of 150 people that pays Basic Incomes and builds a Community Wealth Fund. The challenge is who?, how?, and around what common fire? What happens when (not if) people leave? As we discard geography, race, class and other containers, how do we build new ones to support each other? In a world where tomorrow is very different from yesterday, what does a thriving us look like?

johnbauerart.com

Muy BIEN

“A Basic Income is a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement. (1) Periodic - It is paid at regular intervals (for example every month), not as a once-off grant. ,(2) Cash Payment – It is paid in an appropriate medium of exchange, allowing those who receive it to decide what they spend it on, (3) Individual – It is paid on an individual basis, and not (for example) to households, (4) Universal – It is paid to all without a means test, (5) It is paid without a requirement to work or to demonstrate a willingness to work” https://basicincome.org/about-basic-income/. There are a variety of pilot projects going on which make different simplifying assumptions to turn Basic Income into a reality. I like the idea of Community Wealth Funds. Building Communities with strong financial foundations, through voluntary short-term commitment to transfers from those with the capacity to fund the project, and the long-term building of Capital to make the idea sustainable. With sufficient time, we can build Engines to fund basic incomes for all.

basicincome.org/about-basic-income/

Building the Assets

The largest 300 Pension Funds collectively hold about $18 trillion (12 zeros) worth of assets. The idea of a retirement fund has taken root. That you can build capital to put to work on your behalf when you no longer can. Many Retirements Schemes started life as Defined Benefit Pension Plans (DB). This means the payment was a promise from the container the retiree was part of (employer/sponsor). The amount of the promise depended on formulas based on length of service, final salary, and age (for example) rather than on investment returns. Many were funded Pay-As-You-Go (PAYG) with those currently working effectively paying those who retired directly. PAYG is fragile with a constant balance between contributors and beneficiaries. There has been a big shift to Defined Contribution (DC) where individual accounts are set up. Where the amount paid depends on the Capital built over the working life. There are lessons to be learnt in figuring out how Universal Basic Income can be funded. How do we build the assets to support strong, flexible, foundations?

Building over more than a day...

Connecting the past, present, and future

Building Together

You can’t just wave a wand and wish yourself a Norway Sovereign Wealth Fund. A more realistic model is presented by the Australian Superannuation Funds. One of the most powerful forces preventing the development of financial security is “the lifestyles to which we are accustomed”, and discretionary spending (the things we want, after the things we have no choice but to pay for). Investing can be a team sport. If the entry ticket to our community is high because everyone is living hand to mouth, it makes it hard to be the odd one out. The one building rather than lifestyling. The Australian Supers make saving compulsory, and add tax incentives. Over time, the amount has gradually increased, so people can become “accustomed”. In 1992, the minimum contribution started at 3% and has gently increased with a target of 12% in 2025. In 2018, AU$2.7 trillion made Australia the 4th largest holder of pension assets in the world. Sometimes you strike Oil. Otherwise, build. Ideally, together.

On the Ball - Australia & Norway

Reality Check

There are four broad categories of investors in Asset Management Funds. Institutional, High-Net-Worth-Individuals (HNWI), Retail, and those who get left out because the economics are hard. Institutional investors are Pension Funds, Fund-of-Funds, Company Assets, Insurance Companies, Endowments (e.g. Universities), Charities and Governments. Investment Committees make the decision to invest on behalf of others. They pool the assets to reduce the costs. HNWI are rich people. They make their own decisions, or get an adviser. Retail Investors are non-professional but still have enough to invest that the expenses don’t completely swallow the growth. Not having money is expensive. Scale makes things cheaper. One of the hardest problems to crack is making investing accessible. Two companies I follow with interest working on this problem are Franc (www.franc.app) which aims to make investing affordable and social, and Meerkat (www.meerkat.co.za) which focuses on those who are in a hole of debt. Charting a path off debt reliance and providing cover for the clear and present emergencies that can make long term capital building a pleasant unicorn frolicking in another reality.

Putting Capital to Labour

The question “What work do you do?” puts constraints on your earning ability. It is true that we live in a world where most people have to be their own financial catalyst. Where people have to be productive assets. But we also live in a world where you can gradually shed those constraints. Where it is possible for money to make money. For Capital to Labour. You can separate the questions, “What do you do?” and “How do you finance what you do?”. What you do doesn’t have to be filtered through the constraints that are necessary to make money. Money making needs something you can count. Not everything can be counted. Money making cares about supply and demand. Value is personal. Money making requires conspicuously demonstrable value. Value can sit beyond words. Lie beyond numbers. Dance beyond containers. You don’t have to be the Best Actor in your money-making story. “What needs doing?”.

"Weaver" - Vincent van Gogh (1884)

Public Pool

Pooling allows us to have a slice of something bigger. If you buy a house, it is yours or it isn’t. Private Property. Mostly, it is also the banks because it is easier to borrow for. Equity is different. You can buy and sell smaller slices of ownership. It isn’t as either or. A share/stock is a slice of ownership in a real underlying business. Public Equity. It is like getting your money a part-time job with clear constraints rather than giving it a boss with 24-7 access to its email and phone number. Your money can work at multiple companies. With multiple suppliers. In multiple countries. For multiple clients. It is not in a Scrooge McDuck pool of coins. It is working. An Equity Fund is when you have units of a pool of money that a professional equity manager chooses jobs for. A Public Pool.  An Equity Analyst acts as the Engine Driver, doing the Due Diligence on the underlying businesses. When you need money, you sell units. If the money does a good job, over time it grows. If that growth is sustainable, it can power your focus on things that don’t make money.

Building Campfires

A Community could invest in its common endurance and resilience by building a Community Wealth Fund that pays a basic income to its members. This could be financed through a combination of redistribution and wealth building. Any Community is built up of people who are learning, people who are doing care work, people who are doing work that gets paid, and people who need support. They all contribute in different ways. The hard part is finding the common ground that pulls the community together. The campfire that provides enough light for people to see themselves in the others. The vehicle is then easy. Collect money, distribute some, invest some. If you (you now being a community) spend less than you earn, you can build Capital that can create a solid foundation. Where you are not alone. Where you are more than you. “If you want to go fast, go alone. If you want to go far, go together”.

Start Again

Building an Engine (Capital) starts with finding an income. The raw material is the first person’s labour. Labour is like the Oil that started the Norway Sovereign Wealth Fund (now in a position to divest from Fossil Fuels). It starts with striking Oil. It's especially hard if you are a work taker with no work to take. Hard to develop the skills and knowledge required to kick start the process with no external assistance (Bank of Mom and Dad). Even then, the next obstacle is Emergencies. Even with Titan like self-discipline keeping outs (spending) less than ins, unavoidable bumps loom. Particularly if you are the first in a community to break free, and have obligations beyond yourself (Bank of Son or Daughter). Even when Governments legislate compulsory savings and investment (like Australia’s Superannuation Funds), the question of Emergency Access remains. What clear and present dangers are acceptable to etch-a-sketch all the Capital? To start again. What emergencies are worth borrowing against your future income stream, so that you end up endlessly working to pay off debt rather than building Capital? Forced back from the starting line. Finding an income is the hardest part, but even then, you may not be in a position to build an Engine yet.

See a Stream

Disability Insurance covers the risk that you are unable to work. If you can’t work, you still have to live, and the way society is structured… it is a problem if you aren’t a productive asset. Should you get disabled, depending on the product you bought, the cover is paid out as a Lump Sum or an Income stream. This is intended to replace your earning ability, and the adjustments to your lifestyle. A useful analogy for Engine building. People don’t have to be productive assets. You can replace a salary stream with sufficient Capital. You don’t have to get disabled. You do have to build the Capital. The challenge is changing the way you see money. As something to look after, rather than something to spend. $1,000,000 is not a big pile of cash to be spent. It can be an income stream. Put to work on your behalf, it *can* last for life *if* you spend less (on average) than it makes (on average). 3.5% real return (after tax, inflation etc.) would give you $35,000/year. Capital for life. For life.

Streams create Life

Laying Groundwork

One objection to Capital is that the owners aren’t doing the work. There is a moral feeling that the people involved should be the people being rewarded. It’s complicated. Reward and input don’t go hand-in-hand. The feedback isn’t instant or clear. Often there is a substantial delay. If you look at an ultra-long-term growth chart of GDP in the UK, you will see that a lot of the value “has been added recently”. Rubbish. The majority of value gets added in laying the foundations. The dirty, unglamorous, upfront work. Like in Rugby. The match is won by the forwards, and the backs determine the scoreline. “Meritocracy” tends to financially reward the last decision maker in a binary, “what would it have looked like without this decision” way. That is lazy attribution. Capital allows owners to do the dirty work knowing they will benefit even if they walk away when different skills are required. Or they get tired and lose sufficient inspiration to overcome the attached nonsense. The challenge is hereditary entitlement. The balance between passing on unearned wealth, and recognising that most of the groundwork for today’s Merit has been layed over the 50,000 to 2 million years since we started speaking to each other. Community Wealth.

Rooted People

Building Capital is a team sport. In the same way plants need a conducive environment until their root structure is in place. It can seem like simple advice to say spend less than you earn, and invest the rest. Good advice to ourselves. We don’t notice the storm that didn’t blow us over. Even if you conscientiously set out to build a fruit-producing tree, life shocks can take big bites out of the roots. Family trauma, childrens’ needs, fertility challenges, divorce, death, disability, severe illness, job loss, mental health – all sorts of winds blowing from various angles. Even the simplest part, “Spend Less”, is heavily affected by the team you are on. Living by your people. Spending time with your people. Supporting your people. Retirement Savings is the capital building idea that has taken the biggest hold. Even then, few people invest enough. If we want to jump further than that, to a world where Capital works and Labour loves… we are going to have to do it together. Starting with strong roots.

Treebeard and Hobbits

Community Investment

A Stokvel is an invitation-only club which can serve as a rotating credit union (pool money and take turns to get the pot) or a savings scheme (pool the money to reduce the costs of saving and investing). I am a Soutie. One foot in South Africa, and one foot in the United Kingdom (my wife is British)… so my interest in Stokvels seems appropriate. The name (but not the idea of group saving) comes from the rotating cattle auctions of English Settlers to the Eastern Cape in South Africa (“stock fairs”). Stokvels have a Constitution which dictates who contributes, how much, what gets done with the money, and how it gets paid out. A Community Wealth Fund could be a Stokvel that pays a Universal Basic Income to all the members of the community. A Universal Basic Income is a periodic payment delivered to all on an individual basis without means test or work requirement. This could be funded partly through redistribution, and partly through building a long-term solution in the form of Capital. We can talk about the kind of world we believe in, or we can build it together. Starting with agreement, and following through with action.

Photo: Rodger Bosch

Pop the Bubble

A Universal Basic Income is a periodic payment delivered to all on an individual basis without means test or work requirement. Without Capital, a Basic Income would need to be redistributory. It would be paid upfront to everybody, and then claimed back at the end of the period from those who conspicuously demonstrate their wealth (income, assets, consumption). It would not end inequality or remove incentives to work for more, but it cuts out the middleman and expenses in providing an absolute floor for financial poverty within a given community. Sometimes the best way to solve a problem is directly. With Capital, a UBI can be viewed as a dividend on common wealth. A UBI, like a share, becomes an inalienable slice of ownership in society. One path to this is National Governments. Another path is Community building. People coming together from the bottom up to voluntarily build the kind of Communities they are proud to be a part of. Ignore borders and bubbles. Build relationships. Build Community Wealth Funds. Empower yourself and others in a practical and tangible way. Move forward.

Agreements and Action

A Community Wealth Fund is analogous to a Sovereign Wealth Fund. A Stokvel is a savings or investment society to which members regularly contribute an agreed amount, and agree to a constitution which controls how the money is dispersed. A Community Wealth Fund is a form of Stokvel. A group of people can come together and build an Engine which could pay the whole Community a Basic Income. This could start Pay-As-You-Go redistribution (while the Engine is being built), and part investment (then fully Capital funded when the Engine is big enough). The difference between a Community and Sovereign Wealth Fund is that “The People” isn’t abstract. It starts from the bottom up with names and faces. It starts with agreements. Agreements to build, and agreements to support each other. Agreements followed by action.

Get Started

Three Pots

My money works for me. If I spend less than it earns, on average and in the long-term, then I don’t need to work for money. This means I can dedicate my time and energy to things that are hard/undesirable to make money out of. Like reading, writing, listening, learning, and relationship and community building. My Engine is invested in three main pots, and I have a Cash Buffer. Two pots are Global Equity Funds from the last two companies I worked at. The third is a portfolio of about 20 Global Companies I selected myself. I top up the Cash Buffer when it gets low, and that is where I “draw a salary” from. If I start worrying about the sustainability of this plan, then I need to think of ways to top it up. I need to work for money if I am regularly spending more than my money makes. If the outs swallow the ins. If I can live relatively simply, then I can focus on my dream of building a Community Wealth Fund that pays 150 Universal Basic Incomes.

Claude Monet

Support and Build

One way to finance an idea is to convince people it is important, and then get those people to fund it. Raise and spend. Another way is to build the Capital to finance it. The dilemma is most of the needs we raise funding for aren’t limited. This means building Capital for later, means not spending now. Even though there are things that need spending on now. Financial Poverty is just one example. There is mounting evidence that the best way to help people in Financial Poverty is directly. Give them cash. Pay as you go redistribution is a hand-to-mouth solution. Another way would be to build Community Wealth Funds that pay a Universal Basic Income as a dividend. That requires time. There is a middle ground. If some of the money raised is used to fund immediate needs, and the balance is used to build a sustainable solution. Eat some fruit. Plant some trees. Live in the present, but build for the future.

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