Pick a Box

Wealth is created in boxes. The key challenge once you understand a problem, is understanding the box. The box is so important, that sometimes it is better to start with a box. Pick a box with money in it... then start looking for problems to solve. The box defines the shape and form of supply and demand. The barriers to entry. The barriers to exit. Who makes the rules? Who can compete? Who are you serving? One of the key measures of inequality looks at equality within the primary wealth creation box that we use. Nations. The Gini Coefficient would be 0.00 if everyone had the same, and 1.00 if one person had everything. South Africa is the worst box in the world (estimates of 0.63-0.70) and yet is at the level of the global income Gini coefficient (0.61-0.68). Our biggest box is as bad as our worst box. There are boxes within boxes... but one of the best ways to open opportunity is to chip away at barriers to entry and exit for the four freedoms (Goods, Services, Capital... AND People).

Pay for Work

Money “should” cost something. Interest is the salary of money. A low interest rate environment is a way of artificially providing cheap labourers (cash to invest). It is the same as you get cheap labour in countries where there isn’t enough work (e.g., South Africa now), and have to force people to go to work with hut taxes when there is too much work and not enough labourers (e.g., South Africa during the Bhambatha rebellion of 1906, or Sierra Leone in the Hut Tax War of 1898). The flip side of cheap labour is that those getting paid struggle to survive (actual workers or Gran living off her pension). Cash is low pay work, so the labourer can decide when and where to work or sleep. A bond is lending your labourers for a higher fixed salary. Like getting your money a job. Equity/Stocks are slices of ownership in a real underlying business. Businesses are where the work gets done… with cash, borrowing, salaried workers and the resources from owners. No salary is paid for equity (dividends are the closest they come). If long term value is added, the capital will grow. If long term value is destroyed, the capital will shrink. There is lots of noise, smoke, and mirrors… but in the end, it’s what you do that matters.

"Bauer beim umgraben" Van Gogh

Build Capital and Free Labour

For my Batchelor’s Party, my Best Man knew the normal ways of embarrassing me would not work. Instead, he dressed me up as White Jesus with a MAGA hat. Politically and economically, I am of the “The Future and its Enemies” (Virginia Postrel) and “The Righteous Mind” (Jonathan Haidt) school of thought. We are all best placed to make our own decisions and agreements. My main objection to the politics of the last few years is the gunk in our ears. The picking of teams. The lack of acknowledgment that decisions are complicated, and we cannot see into each other’s worlds clearly enough to make decisions for others. We can just do the hard work of breaking down barriers and building agreement. With the available resources and technology, we are in a better position than we have ever been to empower people rather than looking towards putting people in power. We are in a better position than ever to build endurance and resilience, and release each other’s creativity. To build capital and free labour. I am tired of being tired. Let’s build.

Not My Decision

Freedom of Movement

I moved to the UK from South Africa in 2008, via Bermuda. My high school Maths teacher used to tell me I always did things the long way (my answers went “via Cape Town”), so it was time to up my game. I spent six months in Bermuda because it was easier to organize a work visa, and the company I was with was based there. The goal was to move to Putney, which was where my brother would be with my new niece. Reverse-Colonisation, my sister-in-law called it.  On the day the little lady was born I was still in Bermuda, strapping a celebratory cake onto my scooter to take to my colleagues. I am a supporter of the Four Freedoms of Movement (Goods, Capital, Services, and Labour). Having grown up during Apartheid, I have never understood why the lottery of birth should play such a big role in determining the container in which people are able to build their financial security. Whether the container is nationality, race, gender, or any other form of discrimination.

Via Bermuda

Made in Containers

Money is made in containers. Four key barriers to entry are nations, schools, universities, and businesses. You mostly don’t get selected for your Nation. That is primarily race and luck of the draw based. There are however countries that let you in based on selection criteria. I was born South African, did all my schooling in Westville (Durban, Kwa-Zulu Natal) and worked at three Companies. In 2008, I moved to London on a points-based visa (salary, language, education, age). I renewed, then got indefinite leave to remain, then got a British Passport to add to my South African one. The whole (expensive) process took 7 years. After school, there were plenty of “sortings”. Times when other people had to decide whether I was good enough. With enough ambiguity in the process, and enough supply of applicants, to try hide the politics and hereditary privilege reinforcement. I mostly made it through, and was fortunate, but also got annoyed at the balance of power. For markets to work, the negotiation has to be between peers. With transparency, and the ability to walk away. The market for labour is lopsided. Containers aren’t people, even though we speak of them like they are. We’ll only see real meritocracy when containers are competing for people, rather than people for containers.

Hand to Mouth

Some common ground between anti-capitalists (labour should get all the reward) and anti-welfare (work ethic/ safety nets make people lazy) is a romanticising of work. Work for work’s sake. This commits us to hand to mouth living. Hand to mouth living commits us to cycles of booms and bust when our hands aren’t sufficient. Hand to mouth living commits us to hunger when there is not enough work. If you think of work as problem solving, then presumably you want the problem to be solved. We shouldn’t be afraid of technological advances solving problems, or increases in supply of people able to solve the problem making it cheaper to solve. We shouldn’t build borders that keep problem solvers out. We shouldn’t want to create fake problems just to keep people busy so we can pay them with “dignity”. We should welcome the spread of knowledge. This can only come if we turn everyone into owners. With Capital that moves from solved problem to new or harder problems. Work isn’t just a way of keeping us busy. The last thing we should be killing is time.

Keyhole Solutions

Keyhole Surgery is a minimally invasive approach to fixing a problem that restricts the collateral damage. I had my appendix out when I was a little guy. Embarrassingly (now) I was quite excited about it. My Gran used to bring me sweets when I was sick, and my older brother seemed to have such fun when he had his out. Balloons, TV, comic books. Hospitals aren’t scary. I turned out not to have appendicitis, but just an ulcer. Fortunately, the surgeon still felt the surgery was necessary. I still have the scar. Mine was small for the time. Now they are tiny. We are getting better at dealing with the specific problem. Immigration would be a massive financial boost to the global economy. Economist Bryan Caplan calls it “Trillion Dollars Bills on the sidewalk”, but people have concerns. In his book “Open Borders”, he takes the concerns seriously and provides keyhole solutions. The step forward with Capitalism was realising win-win wealth creation beats win-lose wealth extraction. The same is true of Property Rights. Freedom of Movement (Capital, Goods, Services, Labour) doesn’t take anything away. You can surgically remove Global Apartheid while protecting the things we rightly value. Wealth Creation doesn’t require oppression. Holding someone down doesn’t lift anyone up.

Income Addicts

You can live off an Income, a Buffer, or an Engine, but they are very different beasts. If you live off an Income, it has to come in. What you get, you spend. So if you don’t work, you don’t get, and you can’t spend. A Buffer has to be very liquid. You have to be able to sell it quickly if it isn’t already cash. That means it can’t be working too hard, or be doing something where the benefits only come in the future. If you are living off a Buffer, the clock starts ticking. It will run out. But, it gives you time to retrain or find more work. An Engine is a long-term vehicle. It provides Endurance if you can live off less than it produces. If you are a good custodian who doesn’t extract all its future potential during the short term. If it is protected by a resilient Buffer, and invested in when there is work available. Unfortunately, the world focuses on humans as productive assets and calls this “Work Ethic”. With no Buffer, and no Engine, there is no space to pause. To breathe. To reflect. When you have no choice but to stop, the cost suddenly becomes real. When the world restarts, we must never again forget the need for Buffers and Engines.

Work (1852 - 1865) - Ford Madox Brown

Foundational Space

The marriage between income and expenses is an unhappy one. Incentives matter. I can see the crude rationale behind a superficial meritocracy where spending more is a signal of success. A lack of breathing space is a fundamental flaw in this idea. If you spend everything that comes in, there is no capacity to pause. There is no space for seasonality. Periods of unlearning. Periods of re-engaging with the core of what is important to us. Periods of creation. Periods of appreciation. If we define ourselves by our labour, it becomes all about us. Us and a pay-check that almost lasts. Normally. Unless there are unexpected bumps. We have no vested interest in the complex relationship of stakeholders and institutions that empower wealth creation. We are not owners. We are work takers. There is a better way. If we all build Capital. Capital is connection to a world that works. If we all create interconnected breathing space. Inhaling and exhaling trial and error as we iterate towards a world with more endurance, resilience, and creativity. Together.

Creating Space for a Solid Foundation

Opening Up

Having grown up in Apartheid South Africa, I am a supporter of the Four Freedoms of Movement – Goods, Capital, Services, and Labour. Wealth compounds over the very long term. The marginal contribution is amplified or muted by what came before. A lottery of birth shouldn’t determine the impact of our effort. I believe in “Open Borders” (See the book by Caplan and Weinersmith) but ironically/hypocritically (?) came to the UK on a Highly Skilled Migrant Program that allowed me to arrive without a job offer. This opportunity wasn’t (and isn’t) open to everyone. I got a job offer before moving, but didn’t like the idea of being tied to a company. Still, I went through the process and now hold two passports. Two of the things I don’t believe in. Caplan calls this a “keyhole solution”. Better than closed borders by targeting the specific objections as narrowly as possible. Typical keyhole solutions include immigration tariffs, guest worker programs, and linguistic and cultural fluency requirements.

Netflix the Problem

You can’t quantify value. Pricing and trade are the closest we can get. Price isn’t value. Price is simply a clearing mechanism. A Trader takes how much there is of something (Supply) and the Price goes up until the something is no longer wanted (Demand). Along that path, the price is never “correct”. It feels too much for some, and a deal for others. Compared to whatever else is available in their world, and what their priorities are. Salaries are a price. They are the price of labour. The value of labour is even harder to figure out, and there isn’t a great market (Like houses, which swap infrequently… we change jobs as seldom as we can). A salary Netflixes the problem. It is an all you can eat buffet for your “full-time”. Companies pay a subscription and you pitch up every day. They may pay bonuses and other measures to incentivise you, but this still isn’t value. You, determine value. For you. It is up to you to be aware of what is available in your world, and what your priorities are.

One-Dollar

A $1 salary is way more impressive than a $1,000,000 salary. Money is a crude communication tool, and “more” is a caveman form of comparison. This bigger. This good. Me like. No. If you are able to work for $1, it means you have taken money off the table. Money making requires something you can count. We tend to grab at the simplest measures. Charge by hour. Charge by project. By day. Per full person. How much? Let the market decide. Pay as much as will get you the inputs you need. It has very little to do with value added. Your salary is not your value. It is simply the cost required to get your attention and effort. Someone who is earning $1 has given that idea the middle finger. Clearly there is a magic trick behind that. Except it isn’t magic. Capital can set people free. Capital can do the inhuman work of being pushed in the direction of the most efficient allocation. People, can move beyond crude tools.

No Point

There is no point in hating money. If money isn’t important to you, the best thing to do is to pay only the necessary attention to it, and no more. That doesn’t mean ignoring it. That doesn’t mean pretending it doesn’t exist. Like toxic anger, contempt, vengeance, regret, or shame… money can control you if you don’t control it. There is no universal rule that we have to work for money. Capital can work for money so that we can Labour for love. But Capital has to be built. That requires time and reinvestment. The first step is getting an income. The second is controlling your spending. That doesn’t require all-consuming attention, but it does require conscious choices. The important part is the gap between income and spending in the right direction. Spending more than is coming in builds debt. Spending less than is coming in builds potential. A gap between hand and mouth can build a Buffer that means monthly expenses and surprises aren’t making your decisions for you. Gradually that can grow into an Engine. An Engine is Capital that acts as a breadwinner. So that money works for you, rather than you working for money.

There is no point

Still the Waves

Capital is accumulated wealth employed reproductively. Hoarding is amassed wealth put away for preservation or future use.  Reinvestment - that is what separates the two. Capital is alive. Capital can be the heart that supports Labour. Capital can work for money, so we can Labour for love. Buffers may appear to be Hoarding rather than Capital.  Because Buffers can’t really work that hard. “A little extra” put aside in case. An Emergency Fund. Say 3-6 months spending if you live mostly hand-to-mouth. In case your hand gets hurt, its work gets interrupted, or something out of the ordinary attempts to knock you off course. It is working, but more as a private security guard, who you hope largely does nothing. Hoarding is when this gets lazy and wasteful. When it isn’t doing anything of value. A Buffer isn’t Hoarding. It lets you breathe. It lets you look up and plan. It stills the waves so you can set sail.

Say No

There is a bitter irony in the tying of the means of production to labour, and the responsibility for looking after the worker to the employer. Hand-to-Mouth living binds the person’s survival to their labour. A Minimum Wage restricts the work that can be done to that which can explicitly be monetised sufficiently. If we worked towards a world where everyone had sufficient Capital to ensure survival, then everyone would have the most powerful negotiating skill there is. The ability to walk away. The ability to say the word, “No”. At that point, people will do the work they want to do. If you need a person to do the work, you will have to make the work attractive and remunerative enough to appeal to them. True freedom for workers would be if they were all Capitalists.

Labour

Not this, Not that

The Vedantic Philosophy of Yoga is the most Capitalist world view I have come across. “Neti-Neti” is a form of guided meditation/analysis, where you negate the things you are not. Capitalism empowers the most powerful of these. “You are not your job”. Norway is a great example. The Norway Sovereign Wealth Fund was established in 1990 as the Oil Fund. Gradually it has reinvested the surplus revenues of the petroleum shares elsewhere. Norway slowly ceases to be defined by Oil. Similarly, we can be released from being defined by our work. We can learn. We can change. We can see the unintended consequences of the things we are doing and adjust. We can empower ourselves to redirect our actions. Instead of people being viewed as, and required to be, productive assets, we can be released. 

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.

Capitalism

Absolute Poverty has massively decreased 

as the world has become Richer

Words tend to mean different things to different groups. We end up missing each other when we are talking, because despite using the same words, we aren't talking about the same things. Capitalism is one of those words that gets used very loosely. For me, Capitalism was the alternative to Mercantilism. Under Mercantilism, 'The People' was represented by a centrally planned state, and wealth was taken and hoarded by force. Adam Smith suggested (1) local people are better decision makers than committees, and (2) trade could be win-win. Instead of taking wealth, you could make wealth. Wealth, in the form of capital, could be reinvested rather than hoarded. It could grow. It could continue to serve in the form of factories or other productive assets, rather than big piles of jewelry and large houses. Wealth can work.  To me, Capitalism has been a major force in the destruction of poverty. Building Capital can free Labour - through Personal Engines, Community Wealth Funds, and Sovereign Wealth Funds.

Adam Smith

Capital and Labour

You need money. You don't have to work for money. Capitalism is the idea that you can own Capital, and that Capital can do the work so you don't have to. That is the fundamental cause of some of the biggest conflicts of the last century. Breaking the link between who does the work, and who gets paid. It breaks thousands of years of intuition. 

Some people opt out. They work in moneyless communities. In off-grid subsistence communities. Hut Tax stopped that. Tax in general. On income, land, and consumption. It prevents you from opting out... unless you have Capital. 

The irony is that Capital isn't the enemy of Labour. Capital sets Labour free. It lets you make choices with how you spend your time that isn't based on how much you will be paid. 

I believe in building Buffers and Engines. A Buffer is enough Capital that you have the Financial Security to raise your eyes from living hand to mouth. A Buffer gives you breathing room to study, change directions, think, pause, and just be aware of the direction of your life. An Engine pays you a Basic Income for life. It works for your money, and frees you to choose what to do with your time. You may still be paid, even paid well, for what it is you do, but you no longer have to work for money. There are many other incentives to work. There are lots of types of work that don't pay very well.

You may be lucky enough that your parents, friends, and community gave you a Buffer. They supported your studies, chipped in for a car or house, helped get you a job, provided advice along the way, and eventually let you go when you were your own Engine. But it is very empowering not to have to think of yourself as a money generating machine. To be able to take the next step and build an Engine yourself.

Countries like Australia have models for long-term thinking (Superannuation Funds). Often we have to take the pain upfront to build Engines. If you always eat everything, you can't build an Engine. Another interesting model is the growing number of Sovereign Wealth Funds.

I love the idea of a number of Community Wealth Funds growing. Small groups of around 150 people who build Buffers and Engines for each other and invest in each others' lives. Who help set each others' Labour free. That is a Capitalism for everyone to believe in.

Norway Sovereign Wealth Fund

Beyond Survival

We should retire the idea of retirement. The two strongest points of Capitalism are the ideas of (1) reinvestment, and (2) emancipating labour. When we consume whatever we produce, and our physical and mental labour is our only source of income, then we are forced to live hand to mouth. Retirement was an industrial age concept where we needed to provide for when we couldn't work anymore. Instead, by building an engine you can find the financial security to shift your attention. You can have the freedom to direct your energy towards fulfilment rather than mere survival. Retirement is a survival concept. There is more to life than survival.

Industrial Age