Deafening Silence

For any business, but particularly a small business, a hiring decision is a big decision. Meeting Payroll is the primary stress of most owners I know. The caricature of fat cats is not one that resonates with my experience. Rational people will work at big Institutions where their contribution is amplified by the success of those who have come before. Most small businesses are in the survival period before significant growth kicks in. It is long term belief in potential growth that keeps the owner going. The most successful entrepreneur I have met said it took him 7 years post pulling the trigger to earn what he was getting as a salary man. And he was the definition of an outlier jumping over aligned stars. The rational approach is to be an underconfident overachiever and let someone else stress over payroll. A salary is like a bond. You are lending your labour to the owner in exchange for a predictable, consistent, income. But that income is normally pass-the-parcel. The owner has to get the money to pay you from the customer. To commit to the risk that the customer will be there. Even Big Institutions can over commit to how many parcels they can pass. Going to zero is a reality when the music stops. Silence is deafening.

Descaling our Lives

Money is a communication tool. Like words and numbers, it helps us organise ourselves and share our skills, knowledge, and resources. Slightly smarter than barter, but still mostly unaware. We don’t trust each other enough for full transparency. We all need to eat, so even if we know there is a better solution somewhere else, we still want to sell our skills. Secrecy and politics protect our interests. Competing interests. Money-making boils down to matching an ask to an offer. How many people want the same thing? How many people can offer it? A key ingredient is scale. If you can find something lots of people want, where only you have the solution. That is clearly difficult in a world where information flows freely, secrecy is harder, and the winner takes it all. The best competitive advantages don’t have to hide. They are “in the box thinking” which, like exercise and diet, everyone knows about but doesn’t necessarily do. A real competitive advantage is not having to scale. Breaking free from supply, demand, and secrecy. Changing the rules. That requires building Capital to do the money stuff, so we can do something else. Descaling our lives and leaning into the other communication tools.

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

Who Pays?

Many critics of Universal Basic Income focus on the Gross rather than Net cost of proposed funding methods. Gross is simply the size of the population (since UBI is Universal) multiplied by the number of people in the community (since UBI is Universal). The Net cost subtracts the amount contributed in the form of contributions or tax. 

The point of a UBI relative to Welfare Payments is to shift the burden of proof. Welfare is often like the opposite of a job interview. We spend a lot of money on 'means testing' with paperwork and evidence to prove a negative. It is very difficult to prove something doesn't exist. It is also rather demeaning. In a world where we put a lot of emphasis on self-worth being determined by the 'ability to provide'.

Most proposals for a Universal Basic Income don't change the normal progressive tax system. Meaning, if you earn more than enough money, it is rather difficult to hide. If you buy anything, own anything, or earn anything... it is far cheaper to find that out, than to prove you don't. Tax could then remove the cost of providing you with a UBI.

Still, the idea is similar to Pension Funds. When they started, many were 'Pay as you Go', and much of the money paid in by workers was paid out immediately to people who were retiring. This was fine until the proportion of retirees started to grow, as workforces shrunk and people lived longer. This has lead to many large businesses having 'unfunded Pension liabilities'. When you buy a business, you also buy its promises. These can be scary. Most pension schemes have been shifting from Defined Benefit (saying what you will receive) to Defined Contribution (saying what you need to put in). Many airlines are described as Pension Liabilities with wings.

The UBI model I like still needs 'someone to pay'. It just contains the situation within much smaller boundaries. If a 150 person community was built, 75 people could be the 'Breadwinners'. Over the course of 15 years, they could (1) pay for their own UBI, (2) save for their own UBI, (3) pay for someone else's UBI, and (4) save for someone else's UBI.

So, for example, if 75 people paid $8 a day. (1) They would receive $2, (2) they would invest $2 to build an Engine for themselves, (3) they would pay as you go $2 to someone else, and (4) they would invest $2 a day to build an Engine for someone else. After 15 years, I believe they could have, with sound investing, built an Engine to sustain that $2 UBI for themselves and one other person.

The 'Gross Cost' to them is $8 a day. The 'Net Cost' is $6 (they receive the UBI too). $4 is not really a cost, given that it is invested. It grows. Managed sensibly, with good custodians, one day it could live for ever. A fully funded Community Wealth Fund could one day support a Universal Basic Income without any additional contributions.

In a world of hand-to-mouth, someone does need to pay. But we don't need to live hand-to-mouth. A Universal Basic Income doesn't have to be tax funded. It could be a dividend on our Community Wealth. One day. If we make good decisions today.

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.