Pay or Ask

Money-making requires friction. Perfect meritocracy would be short-sighted. Could you make money in a world with perfect transparency, perfect replicability, and zero transaction costs? If someone could compete, they would. 

There are almost 8 billion of us. With a rounding error I can ignore, I can confidently say that you wouldn’t have a job in a perfect meritocracy. Neither would I. There is someone who does what you and I do better than we do it. 

Why does the person come to you to get something done if they could do it themselves, or get someone other than you to do it better? Money only functions with constraints. 

Relationships are more fuzzy. Communities are a strong container. Communities have reciprocal respect that help each other be part of their lives. Gradually as we solve more money problems, we will have capacity to lean more deeply into fuzzier worlds, with different rules that don’t bow to counting or constraints. 

Sometimes we like the clarity of paying for something because it releases us from fuzziness. Sometimes it is much cleaner to pay a stranger to do something than ask someone we have a relationship with. That can lead to us leading very isolated lives where we don’t have to have difficult conversations. 

We end up with clear rules of engagement and expectation management, but we don’t lean into the difficult, but interesting world of relying on, or trusting people we don’t, and can’t, fully understand.

The Value of Hiding

Then you Build

Wealth building is not wealth extraction. It is not a negative competition. Yes, you are engaged with people in a way where you push each other, and challenge each other, but there is no need for schadenfreude and benefitting only if others do badly. 

We can gradually let go of that and have the genuine intention to solve rather than perpetuate problems while drawing rent from them. There is the temptation to have easy containers where the only competitive advantages are fake. 

Real mastery and resilience can cope with, and thrive under, openness and transparency. A really good business idea can be judged through the filter of how it would work in a world with full transparency, zero transaction costs, and perfect replicability. 

If someone knows what you are doing, they could do it too. Real competitive advantage comes from embodied knowledge. You can tell someone what you do and how you do it... and they still won’t be able to, or won’t want to, because it isn’t what makes them tick. You have a relationship with them, and that is something they will keep coming back for. 

The way you see the world can change, and adjust. We can go deep into different areas. Make different choices. 

My goal has always been to develop a resilient world view. One where there is nothing that everything relies on. Where changing one thing doesn’t bring everything else down. Where you hold each part lovingly, but you are not so attached to it that it defines the whole reality. 

Then you build. Choose. Go.

Building doesn't have to leave a hole

Necessary Friction

Building wealth is not purely about skills and knowledge. There is not a pure play meritocracy with a completely level playing field. The reality is we all have to eat, and that requires a degree of protection to be able to incentivize investing in skills and knowledge. With 7.7 Billion people on the planet, a pure meritocracy with no barriers would mean almost all of us would have to point out that someone is better than us at what we do. That means building wealth does require some friction. Some boundaries. Something to allow you to build an engine and vehicle completely detached from you. That can support you, and your community, without judgement of their merit. To still the waves of financial anxiety, you cannot constantly be weighing and measuring everyone. There has to be some independent commitment. That requires a level of self-awareness, seeing what your strengths and weaknesses are, what your community is, who your clients are, and understanding the market you are in. Developing skills that do not define you, but are transferable between different problems. 

 

Chocolate Monster

Lindt Chocolate does not cost the same in Oxford and Cape Town. “The Law of One Price” (LOOP) is the theoretical idea that the same thing should sell for the same price. The LOOP does not hold, because there are trade frictions. What something is does not determine its price, because price is not value. Price is a negotiation between the buyer and the seller of a thing *in a container*. The container determines the barriers to entry and barriers to exit. The container determines the story. The story determines the agreement. Money is made by solving problems for decision makers with money. The decision maker does not know everything, is not everywhere, and each decision maker has their own set of competing things that they value. More than half the battle of making money is becoming a part of a decision maker’s value recognition. “The thing” is not what determines the price.

Lindt Chocolate Cake

Safer in the Dark

Money is a smarter form of barter. It partially solves a coordination problem, but it is not the best we can do. If you have wheat and you want milk, you can sell the wheat for money and buy milk rather than finding someone with milk who wants wheat. There is still a chain of dependency. If one person had money, and ninety-nine had both something to offer and something they wanted, a purely money-based economy would need that money to slowly make its way around. Smarter Barter would be very aware of the complex market and would be able to pair and co-ordinate people without money. Half the problem is mapping. We walk around in bubbles unable to clearly articulate what we want, and unable to see what we could offer with the appropriate training. Unclear destinations. Unclear paths. We try sneakily figuring out offerings and finding customers without alerting competitors. In a world with perfect transparency, zero transaction costs, and the ability to copy instantly, the worry would be that there would be no friction to act as a container to reward effort. We live in the dark as a way of protecting ourselves. Real meritocracy would hardly reward anyone. No one isn’t replaceable in the world of money.

Add Friction

One of my pet peeves is when there is a telephone at a service counter, and the person on the other end of the line takes precedence. The people who have physically come to the place wait as the phone is picked up. 

Given how fast technology moves, it is very easy to start feeling old when you talk of 'what it used to be like'. Yes, there are now adults that don't get references to Pulp Fiction, Trainspotting, Good Will Hunting and Fight Club, but I refuse to admit that I am old. I still reckon if we make it through the next 20 years, we could all end up living a couple of centuries if not more. So they'll have plenty of time to watch the movies. 

Anyway, when I was young people still had to make arrangements to be at the phone. 'I am expecting a call' was a thing. I can understand why culturally, it was a big deal. People had to co-ordinate making sure they were available. Getting a phone call now is no longer a big deal. Sometimes our etiquette takes time to catch up. When cell phones came along, suddenly you could call anyone, anywhere, anytime. The novelty meant people liked being the person who would always pick up. My pet peeve of counter service got extended to almost all interaction. 'I just need to take this call' became a thing.

What made me think of this was seeing a Telephone Chair at a local antique shop. I thought what a good idea it would be if phones were removed from office desks, and people had to arrange to call them, or get up and walk over to them. Things are very seldom genuinely an emergency. We just turn them into emergencies. Many people spend most of their office day responding to email, making phone calls, or going into meetings. This leaves little space to think. To chew. To process. To do things differently. We end up on autopilot.

Seth Godin often talks of the value of adding back some friction. Making things a little harder. Imagine we had to pay to send emails? Imagine you had an inbox where you knew the sender had paid a £1, $1 or R1 to send you the mail, and it was only released to you after a week. Would the quality of communication you got go up?

An example of this for me was leaving living in Cape Town. I was fortunate that I got to go back for work fairly regularly. I ended up seeing my friends who live in Cape Town more regularly than when I lived there. When you live close to someone, like standing in a queue waiting, they are often to easy to see, and you don't see them. When you live in a different city, it is like you are phoning, you get given precedence. It is an occasion. Instead of just a beer, or a meal, perhaps you stay for a few days. You make time for each other.

I am suspicious that the best way to see busy people you care about is to live somewhere else. It adds friction.

Sent Away

I don't like whining. That is not completely true. Whining is like those belgian chocolate filled doughnuts I had to walk past on my way home from work. My inner voices always used to tell me how hard I had worked that day, and how much I deserved a treat. We all love a good whine even though we know it is not good for us. I am going to indulge in a little bit of a whine in this post. I justify it to myself that there is a broader issue at hand, but you can decide whether it is just a doughnut.

image: skyrock

The source of my whine is admin. I am trying to cancel a policy and I need to get my signature witnessed. The form says I need to go to the local police, a justice of the peace, or a solicitor. Over the last few days I have gone to and been sent away from all three. In fact, I went to three solicitors (none of whom were prepared to witness my signature because I was not an existing client) and two courts. No one is prepared to take the risk since they don't know me. I have a friend who is a policeman and does know me, but even they have been told that they can't sign because of the risks. I spoke about the trade offs of size in 'getting bigger'. Ariella spoke about the benefits of being small when it comes to food. One of the real trade offs in size is that people don't know each other. Each interaction becomes so specialised that there isn't a history. This has led to problems of trust. Anonymity allows money laundering where proceeds of crime can be 'cleaned' and brought back into circulation so the criminals can spend 'their' money. Governments have stepped in with 'Know Your Client' regulations and liability for those who (unknowingly) help in the cleaning. Badly worded or excessive regulation can have a real cost. They add friction (wondering around for signatures) and cost (systems that businesses need to build). Even though I know why the regulations are there, it sucks how difficult it is to find trust.

I like my posts to be positive but I actually don't know the answer here. We undervalue small.