Category Archives for "Mutuality"

Multi-coloured dandelion clocks

Moving from Technical to Adaptive Solutions

Intentional businesses seek more than clients.  They promote real change in the world.  They may aim for change to a particular industry, eg to help people in the printing industry enjoy healthier lifestyles.  Or maybe to see their neighbourhood transformed.  So, they need both technical and adaptive solutions.

Technical and Adaptive Solutions

Businesses need both technical and adaptive solutions.  Mostly we depend upon technical solutions.  This is particularly true for marketing, where we have seen a massive increase in technical solutions, in recent years.  All businesses market and so the change for society is profound.

So let’s define terms:

Technical solutions:

  • A pre-determined outcome where, perhaps you try to increase traffic to your website using seo. You can be more specific and aim for a minimum percentage increase in traffic.
  • This happens according to an agreed plan. You seek a plan of action to optimise seo to drive traffic to your website.  Everyone involved understands and agrees the plan.
  • The plan is based on previous positive experience. If there is research to back up your plan, so much the better.  A good technical solution reduces risk.

Adaptive solutions:

  • There is no agreed outcome – the mindset is more experimental – try something and see what happens. Imagine a few businesses get together to design something new.
  • So, this involves limited risk taking, which means risk informed by experience.  There is no risk involved when you attempt something known not to work! Your intention is to develop something from which everyone benefits financially and so good business practice limits risk taking.
  • Your aim is to create community – where people invest in change. The businesses seek an approach that creates community in the marketplace by finding people who benefit from what the businesses offer.
  • And in so doing they seek to change the subject and the object of the change. This new community has a stake in the outcomes.  They define who and what needs to change as well as the purpose of the change.

The business world needs both technical and adaptive solutions.  Too often the claims of technical solutions drown out adaptive solutions.

Left Behind in a Changing World

Advocates of technical change often use the image of a toolbox.  Hunt around and you shall find the right tool for the job.  You have a flat tyre and so you need certain tools to replace the tyre.  There is some skill involved but after a few repetitions, you can become expert at replacing tyres.

But no matter how proficient you become at car maintenance, you will not find any way to cross a river in spate that has washed the bridge away.  Now you need an alternative means of transport.  Can you adapt to sailing a boat or flying a helicopter?

Technical solutions are efficient and when applied to the right problem, effective.  Without adaptive solutions, however, you are left with tools not appropriate to a changing world.  You discover new technical solutions through adaptive solutions.

Adaptive solutions are effective where they genuinely take into account the changes happening in their context.  Sometimes they take and apply a technical solution from another context.  As technical solutions develop, they open up possibilities for new applications.

Problems arise where you apply technical instead of adaptive solutions.  It is tempting to assume proven methods always work.  This is a real problem for businesses, who use off-the-shelf solutions, where innovation is called for.

Transformation

Intentional business development is about transformation.  We develop something new that transforms the context within which we operate.  Every business does this to some degree.  Where there is clear demand for a product that can be manufactured and distributed, maybe less so.  But for the coach or consultant, the chances are they offer something different, something that addresses issues where the market is not fully aware.

In marketing there are many technical solutions.  The problem is many people have no grounds for choosing one instead of another.  You don’t have to be around for long before you’re told you need to use a website, social media, seo, a sales funnel.

You may need some or all these but without understanding what you sell, what you want to achieve, the chances are these methods will not work for you.

Your clients seek transformation of some aspect of their lives.  They seek a solution to a unique problem.  When you sit down together the chances are there is no clear idea of where your work together will take you.  The clarion demands of the marketplace do not help.

This is the fourth post in a short sequence about intentional business development.  It’s all a part of Market Together.  Sign up below so you don’t miss a post and visit my new website by following the link.

  • Chris
  • December 11, 2017
  • IBD
Stylised speaker and listener

Moving from Individual to Collaborative Business

I recently completed a series of posts about working in private (Otium) and public (Negotium).  This is different because it is a movement in how we understand business.  All business involves movement between private and public.  This post is about how we perceive business itself – is it for self-enrichment or enrichment of many?

Private and Public

It may be tempting, once you identify your business through discernment, to set out as a self-employed person to make your fortune.  Indeed, it may be essential.  Even if you can sustain outgoings exceeding income for a period, actually making a living is pressing.

This conspires to focus on self-interest at the expense of others; to miss the possibility that self-interest may be better served collaborating with others.

While discernment requires private contemplation (Otium), movement into public (Negotium) should naturally involve movement into collaboration with others.  It is not simply making an offer.  The sustainable approach is to enter into conversation with your market.

Your first step is to identify your market, which can be difficult.   Fortunately, you have competitors and they can show you the way.  Competitors offer similar products and services to yours.  Unless you offer something unique, you have competitors.   Your challenge is to find a market they are missing and enter into conversation with that market.

Your market and your competitors’ markets share the same problem.  You work together to increase awareness of the problem.  This is likely to increase the size of everyone’s target market.

Listening into Free Speech

Your next step is to enter conversation with your market.  You do this by meeting people who express interest in your offer, for a one-to-one.

The aim of this meeting is for both of you to hear what your prospect is saying.  This is really important for two reasons.

  1. The prospect needs to articulate their problem. Most people live with their problems and never share them.  They hardly know what the problem is themselves.  They hear you speak or see your offer and it triggers recognition of their problem.  Now they seek a space where they can hear what they are saying.    This is free speech, not in the political sense of permission to speak in public but in the personal sense of voicing the problem.
  2. Listen to what they say for two reasons. Their way of describing their problem helps you develop a solution that genuinely helps your market.  The more listening you do, the more likely it is you find solutions that have a better fit for your market.  The second reason is you may find this prospect has a better fit with one of your competitors.  Usually it is better to work with those who have a good fit and pass on those who do not.  This reduces the possibility of dissatisfied customers and enhances your profile in the business community.

I am because we are

We live in a Cartesian society.  You will remember the philosopher Descartes rationalised thinking through “I think therefore I am”.  This principle of modern philosophy is common ground for most thinkers today.

But what if it is not the entire story?  We experience formarion in language and culture by listening to others.  So, it is not a massive leap to see that we function at our best when we are intentionally part of some community.

The key to this movement is “listening” but telling (or selling) is modern business’s primary goal.  We need time in private to work on our offer of something different.  But when we move into the public sphere, our aim is to build community, if our business is to be intentional.

The point of intentional business is sustainability, building a community who help one another by doing business.  If we aim to make loads of money, we may succeed.  But what we succeed at is effectively reducing the money in circulation.

Together businesses can meet the needs of their markets.  In doing so, they create relationships that enable communities to flourish.  This needs to be the focus of the business-owner’s intention.  How do we create the spaces where businesses flourish and build community together?

This is the third post in a short sequence about intentional business development.  It’s all a part of Market Together.  Sign up below so you don’t miss a post and visit my new website by following the link.

Sunset

Moving from Self-Centred to World-Centred Business

There are five movements in Intentional Business Development.  The first moves from self-centred to world-centred business.

Here and Now

The focus is upon here and now.  It is not about looking to some idealised past or a fantasy future.  There is no business in paradise.

Perhaps our greatest problem is solipsism; the belief I am my sole concern and the world revolves around me.  The traditional way to deal with this is to encourage focus on God, not self.  Solipsism assumes a primitive understanding God.  God, understood as a man above the clouds, is a childish image many carry into adult life.

The danger is we get bogged down in a debate about whether God exists. Perhaps it is better to seek common ground; appreciation of here and now.

Solipsism presumes some idealised past or future.  Take a popular idea “Make America Great Again”.  This slippery slogan can never deliver for these reasons.

  • The least essential word is “America”.  Substitute “Britain” and you have a rallying call for Brexiteers.  Substitute “Christianity” or any faith and fundamentalists everywhere spring to attention.  The phrase is ultimately devoid of meaning.
  • Notice too “Great” is devoid of content.  What exactly does it mean?  How would anyone know when the task is complete (or even started)?
  • But the most powerful word in the phrase is not “Make” (who is asked to do what exactly?) but “Again”.
  • The phrase invites not action but a nostalgic imagining of what America was like in those halcyon days when it was great.  It is an invitation to live not in the present but in an imagined past.

When we turn attention inwards, we lose touch with reality, here and now.

Paying Attention

This is not to say we should avoid inner work.  Inner work avoids fantasies and teaches us to focus on here and now.  Religious traditions have many tools for this.  Prayer and meditation connect with what is real.

Let’s take it away from religion and strip paying attention down to basics.  What’s your relationship with silence?  Can you abide in stillness?  Listen to your breathing, feel the sensations in your body?

Are you adept at stilling thoughts?  Are you even aware of the clamour of your thoughts?

Do you reflect on your day or your life?  How do you express gratitude?

You can do this by keeping a daily journal where you note concerns, gratitude and anything else that’s on your mind.  Or take a walk and allow your thoughts space to develop in response to the reality around you.

Discernment

How do I know what is fantasy and what is reality?  The act of telling truth from self-deception is discernment.

If paradise is truly the place where all our needs are met, then we know there is no need for business or indeed any form of relationship.  This is why many religious people do not believe in paradise.  We have need of one another and it is reaching out to the other that makes lives worthwhile.

Business is one expression of that need we have for each other.  Business conducted with integrity is the glue that holds communities together.  It depends on relationships of trust, keeps money circulating and contributes to all those activities that cannot generate income themselves (eg health and social care) from its wealth.

When we contemplate the world around us, we discover the needs of our fellows and develop the products and services to meet them.  Of course we don’t get them right.  This is why small businesses are important.  They are the people willing to try something at their own risk.

Many factors lead to successful business but the key factor that underlies all the others is: Do we have a viable business?  A viable business is where through discernment a business-owner identifies a real need.  They may not be competent or they may be outmanoeuvred by competitors, who have more capacity but if it isn’t viable it won’t survive the long-term.

This is the second in a sequence about intentional business development.  It’s all a part of Market Together.  Sign up below so you don’t miss a post and visit my new website by following the link.

  • Chris
  • November 27, 2017
  • IBD
Woman on ladder with giant post-it notes

What is Intentional Business Development?

I’ve based this sequence upon a talk I heard recently about intentional faith development (IFD).  As I listened, I found the points made mapped onto my understanding of business.  And so I invented this new phrase, intentional business development.

Everything I do relates to my Methodist faith.  Some posts in this blog are for those who share my faith or at least have sympathy with it.  This sequence is not part of that spirituality theme.

When I asked at the end of the talk about IFD and business, the speaker said he had drawn a lot from business.  This is no surprise.  Faith and business have a long history together.  However, my focus is on business and how insights from religious faith can help businesses understand what they do.

Understanding Intentional Business Development

Isn’t all business development intentional?  Well, yes and no.  In one sense anyone who sets up in business does it intentionally.  They may stumble upon some insight or product by accident but the decision to go ahead is intentional.

The real issue is keeping it intentional.  Your aim is to grow your business.  You may have stumbled upon something that offers immediate profit but then what?

In the next five posts, I shall explore five movements that apply just as much to business as it does to faith.  Before I outline the five movements, allow me to make a few points about faith.

What is Faith?

Faith does not mean belief.  I may believe in God but that does not mean I have faith.  The meaning of faith is more akin to trust.  Setting up in business is always an act of faith.  More usually we talk about risk.  You take a step into the unknown and cannot possibly know in advance your venture will work out.  You will never know if you don’t try it.

Therefore faith should never be confused with superstition.  If you believe the earth is flat, you are choosing to believe something in the teeth of the evidence.  All the evidence points away from the earth being flat.

Faith is in something that is not proven one way or the other.  To start a business venture is always an act of faith because there is no way of knowing in advance the venture will be successful.

Faith, Politics and Business

The reason so much political activity is not faith-based is many politicians are ideologues, believing their view is absolute.  We see this in politicians who believe Brexit will be a massive success.  The evidence mounts that it won’t.  The need is for politicians who are ready to find a compromise that works, even if it pleases no-one.

The truth is the only sand we have to build on us shifting.  This is as true for business as it is for politics.  The only certainty is change.  When we set up a business we seek to change things in a world already changing.  Without faith you are either moribund or absurd.

Faith is a Christian word and other religious traditions have their own words.  The five movements describe what intentional business development might look like.

Five Movements

  1. From self-centred to world-centred. The key word for this movement is discernment.  To be successful in business you need to focus on your market and their needs.  You seek mutual benefit out of self-interest and not self-centredness.
  2. From individual to collaborative. The key word for this movement is listening.  To go into business is to move from the private realm to the public.  As well as seeking mutual benefit between your business and your customers, it is also possible to work in partnership with other businesses.
  3. From technical to adaptive. The key word for this movement is transformation.  Being in business is never simply applying proven tools to a given situation.  The businesses that succeed are those ready to adapt without necessarily knowing the outcome.
  4. From cognitive to behavioural. The key word here is embodiment.  A successful business demands commitment from the whole person: mind, body and spirit.  It is not solely about what you know.
  5. From theory to practice. The key word here is Praxis (action / reflection).  An alternative key word might be learning.  No-one has ever learned from experience, they learn from experience reflected upon.

What Next?

There is no guarantee these five movements result in a successful business.  Perhaps some people have been successful through serendipity and never paid attention to any of this.

However, perhaps on reflection some would say: “Yes, actually these five movements were important.  I didn’t realise at the time but on reflection, I followed most of these movements.”

This is the first of a sequence about intentional business development.  It’s a part of Market Together.  Sign up below so you don’t miss a post and visit my new website by following the link.

  • Chris
  • November 20, 2017
  • IBD
Ebook cover: Community Development is Dead! (Long Live Community Development!) by Chris Sissons.

A Few Reflections on Community Development

I received an email from Paul King, who had downloaded my ebook, “Community Development is Dead: Long Live Community Development”.  See below if you would like to download the ebook.  In his email he offers a few reflections on community development in his experience.  I reproduce it here with his permission.

Paul King’s E-mail

I downloaded your ebook out of curiosity, because I am engaged both politically and ecclesiastically in forms of community development – though not necessarily along your lines.

 

When training in 1960/61 to be an education officer in the Colonial Civil Service I was introduced to TR Batten (see the comments), whom you refer to a little.  The context then was encouragement and facilitating community development both in rural life based on subsistence farming and in urban areas made up of people who had come to town in search of a better life – sometimes finding it, sometimes not.  A grotesque feature of the urban areas was that social welfare was financed in part through profits from ‘beer halls- crude sheds for the dispensing of ‘cibuku’.

 

Because I was actually appointed to teach French in the country’s leading high school for African men and boys, I did not refer again to Batten.

 

My second brush with community development was in Stoke on Trent 1970-75 when, as a Methodist minister, I found myself collaborating to some degree with the post-Seebohm social workers and with an over-elaborate good neighbour scheme. This was at the end of the pits and pots culture which has now largely evaporated, I think.

 

Now, In Chesterfield in retirement I am both Secretary of Christians Together for Chesterfield and Membership officer of the local Liberal Democrats, where the sustaining and fostering of community relations comes under both my hats.   Chesterfield is a fairly neighbourly place, dating from the same pits and pots culture of 1970 Stoke, but its bourgeois estates are not strong on community except where a fellow I know in the Libdems is running a Facebook for his estate and has 90 members.

 

So I am not much use to you, I fear, with your interest more in community development in economic terms.  But have you met the Sheffield Local Renewable Energy people?  They sound to be barking up the same tree as  you.

Why Not Share Your Story?

It’s great to receive emails like this and if you have similar stories to share, please comment on this post.  Or if you would like to publish a guest post, to share your story, please let me know.

Are Community Development Workers Consultants?

This blog connects a unique range of topics from website design to marketing to consultancy to community development. This feedback appeared in my inbox this week, asking: are community development workers consultants?

I know your blogs have included ruminations on the subject of consultants and consultancy. I suspect that the research being carried out by IVAR (Institute for Voluntary Action Research) will raise – if only by implication – the issue of the relationship between consultancy and community development. It might be interesting and helpful to look at this relationship; to look at the relationship between the role of consultants (your definition and others’ definitions) and the role of community development workers.

My suspicion is that there are some people, formerly CD workers, who are now consultants for organisations such as Big Local, who would claim to be still doing CD but in fact are no longer doing CD. Consultancy can be helpful, and so can CD, but claiming to do CD when you are not doing CD is probably not helpful.

The following thoughts are from my definition of consultancy. I don’t follow IVAR/Big Local. Do they employ their workers as consultants or community development workers?  Either way the question may be: are they doing community development?  My post about imbricated roles may help.

Expert and Non-Directive Consultancy

I have occasionally mentioned two types of consultancy, expert and non-directive (or coaching).  Organisations hire expert consultants to contribute specific skills.  So, a website designer or accountant are in effect expert consultants.  They offer a Done-for-You service and so usually save time and money.

Non-directive consultants help organisations by thinking through solutions to problems with them.  They in effect add brain power.  Their aim is to help at least one member of the organisation to learn new skills.

Of these two approaches (both have their strengths), the second is most compatible with community development.  Development workers used to say they are appointed to work themselves out of their job.  A claim I suspect most often honoured in its breach.

There is no doubt coaching is an appropriate approach to community development.  It benefits local activists because it equips them to do the work they need to do to further their aims.  It is certainly superior to training, a skillset that usually prioritises accreditation of activists.

Are Development Workers Coaches?

Is there more to community development than coaching?  With a degree of caution I incline to the view activities beyond coaching are not essential.  Why?  Most other skills are more like expert consultancy, doing things for others.  If you are good at and enjoy organising meetings, the chances are your aptitude for that task may prevent you from coaching.

But I am not saying coaching and community development are the same.  Good development workers are coaches.  But not all coaches are development workers.  Experience in the field is important.  Many coaches might cope and do well in a community development project but experience of working with the unique pressures of development work also counts for something.

Has this post been helpful?  Leave a comment if you would like me to write more about this topic.

Personal Branding

I’m not sure I know what to make of Personal Branding.  We’re all familiar with branded products and retailers.  If we think about it, we can see their point.  A familiar brand is trusted, memorable.  You pay your money and know almost exactly what you’ll get in return.

But personal branding?  I am not a product or a business of any description.  Why should I be branded and what does it mean?

I’ve based the following thoughts on a new book, “Branded You: How to Stand Out in Business and Achieve Greater Profitability and Success” by Adele McLay.  (The book will be published soon, follow the link and scroll down to register your interest.)  The book brings together all the ideas you need to build your personal brand.  It is really helpful to find them all in one place.  It is an easy read and short enough to return to for deeper reflection, as you work through each part.

I’ve had the following thoughts in response to the book.

Outer Branding

Don’t make the mistake of thinking outer branding is somehow superficial.  If your branding is superficial, then you haven’t done the work.  Integrity is a core principle here.  There needs to be coherence between you and what you sell.

Your story, your appearance, your public persona are all elements of your personal brand. These need to be consistent with each other and coherent with your offer and your market.

The challenge is to make the right choices.  If you help people overcome their problems through outdoor activities, do you approach your market dressed for outdoor activities or in regulation business clothes?

There is no correct answer because the question is a challenge.  Your brand is to accept neither option but to seek something that works for you.  Find a creative solution to build your brand.

Your Brand as a Mask

Stylised drawing of comic and tragic masks from Greek Theatre

The masks in ancient Greek theatre communicated the character through sound (Latin: per sonar) Clker-Free-Vector-Images / Pixabay

The paradox is the outer brand is a mask.  But the mask you wear is you!  It may be a heightened version of you but it must be genuine.  The Latin word persona goes back to Greek and Roman theatre and refers to the masks Classical actors used to wear.

Their masks concealed the actor’s identity and amplified their voice.  The paradox is the character depicted through the mask was always more real than the actor behind the mask.  The personal brand similarly amplifies the person behind the mask but with coherence between the brand and the actor.

 

Inner Branding

You can see there is an inner discipline to personal branding.  You need to work on congruence between how you present yourself and what you promote.

This always feels awkward to me.  I am naturally disposed to being a grumpy old man.  When I was a teenager, someone referred to my husky exterior.  So, I’ve been a grumpy old man for many years.  I am sceptical that I can present myself as relentlessly positive.

On the other hand I know I can be engaging.  I can inspire people through spoken words. I speak with humour, energy and passion.  And I love doing it!  Is this really me?  I surprise myself sometimes.

My problem is I naturally present myself in grumpy mode and can in the twinkling of an eye transform myself into my other persona.  I couldn’t be energetic and engaging if it were not for my grumpy demeanour.

My problem is bringing the two together, so my brand has coherence.  And the truth is, this is something everyone in business struggles with.  Your natural and public dispositions need not be at odds and your brand is how you find a creative solution to presenting both.

McLay’s book describes the necessary practical approaches to working on your brand in both its outer and inner aspects.  If you work through her 7-step programme, you will build a personal brand and hopefully a successful business as a result.

Outward Branding

Here is something I don’t think McLay or other writers are aware of.  How does your brand reach outwards?  This is not about how you appear to the world but the impact your personal brand has on the world.

We are not isolated individuals.  We are all part of various communities and our brand is a measure of our influence in those communities.  To some degree, my brand represents all the communities to which I belong, not just my business.

I live in a part of Sheffield that has had a poor reputation in the city for many decades.  If people know I come from Pitsmoor, this could devalue my personal brand.  But I want to advocate Pitsmoor as a positive place.  I need to find creative ways to do that.  It is perhaps not an easy call but it is something all businesses should consider.

Roots and Branches

If you have a global market, the street in which you park your business may not seem that important.  You probably chose it for all sorts of reasons, not least costs.  If you’re selling to someone even a few streets away, your place may seem irrelevant.

But we devalue our neighbourhoods as we leave them for town or shopping centres.  Maybe businesses need to advocate their place, grow the roots that support their many branches?

When we do this, we support other businesses and grow the communities we need to support enterprise in general.

Again this type of personal branding requires time to develop ideas and grow solutions.  It’s not about ramming the delights of Pitsmoor down the throats of my customers; it is being rooted in a place and committed to it.  Open to ways to build sustainable community there.

Have you encountered examples of outer, inner and outward personal branding?

Investment: an Ethical Revolution?

Cartoon woman with smiling angel and devil on her shoulders.

Perhaps this image is too polarised – Rich Dad, Poor Dad is more nuanced. OpenClipart-Vectors / Pixabay

You can read Kiyosaki’s “Rich Dad, Poor Dad” as a morality tale.  Remember the cartoon angel and devil sat on the hero’s shoulders?  Poor Dad works hard for money and spends it all on things like mortgages and food.  Rich Dad invests and builds income sources to fund his lifestyle and his family’s.  So, what are the ethics of investment?

We’re left in no doubt which is on the side of the angels and yet, the author repeatedly alludes to his Poor Dad and how his moral approach to money was important too.  I part company with Kiyosaki to the extent he implies the wealthy are somehow superior to the rest of us.

Revolting Against the System

I suspect many people contemplate revolting against the system that expects us to work from 9-5 most days of our lives.  If not, we can languish on the dole, excoriated for being welfare scroungers.

There is a degree of common ground between right and left, where right means support for those who build their own sources of income.  The right in UK politics looks after the interests of  investors; the left cares for those in employment.

Many people on the left make a similar break from the system.  I did way back in the early eighties, when I left research science and took up community development.  Whilst I was in employment for most of my working life, I believed I’d made a radical break with the system.

There’s more than one path

Many people break away from the road they start out on and find their own path.  Others don’t and perhaps suffer for it as they find life is not rewarding, even though they put everything into their chosen career.

But others find great satisfaction in their careers.  They may be artists or creatives, scientists, carers of various types, even teachers!  Many remain in the system, as I did but that does not mean their choice was futile.

I can see why Kiyosaki’s approach is attractive.  It combines learning to play an exciting game and the security at the end of it.  His approach is actually based on his privileged education, with his Rich Dad.  That gave him an advantage and has led him through many cherished experiences.

But this does not make him better than all the others who have found ways to accommodate with the system, some more successful than others.  What inadvertently undermines his argument is his relationship with Donald Trump.  Trump is an unfortunate standard-bearer for the right.  He comes over as a blustering toddler with an overweening sense of entitlement.  His contempt for anyone he disapproves of, such as women, is well-known and he makes no secret of it during his current political campaign.

Should Investors be Taxed?

The right do not like being taxed because they have worked hard for their money and don’t see why they should pay it to governments who do not spend it as wisely as they would.

Even the Conservative Prime Minister in the UK, in her speech to the Tory Conference this week, was highly sceptical of their arguments against taxes.  She pointed out taxes pay for the infrastructure everyone uses to support their businesses and investments.  Someone who makes a lot of money does so through investments many people have made before them.

OK it may be clever and brave to spot a potential bargain, eg a house that might sell for below its real value.  It may be a risk to buy it outright (not always how they do it), put in tenants and wait for the price to go up.

Is the Prime Minister Right?

Let’s say you buy a house for £10K and its price goes up to £100K.  It may have been under-priced when you bought it and it may be overpriced now but you’ve made £90K.

I don’t have much of a problem with this but I do believe the transaction should be taxed.  The house didn’t pop up out of nowhere.  Someone built it, perhaps several decades ago; there would be nothing to invest in without their work.  It will be on a road and receive the usual services.  The fact is this sort of investment exists because of  the work of hosts of other people, perhaps over decades.

The investor speculates on its value.  I don’t object to them doing this but I do not agree their profit is solely the result of their enterprise.  Of course, it is impossible to estimate the contributions made by others that enable someone to make a large profit.  But the state is entitled to tax such transactions.

A Game of Cat and Mouse

I can see it is something of a game of cat and mouse.  There are many ways to protect funds from  tax authorities, by reinvesting them in various ways.  If we plan to maintain the freedoms we all take advantage of as we choose our life paths, we do to some degree need to compromise.

However, the world I want to see is one where entrepreneurs see their role as primarily their contribution to building their local economies.  Stable businesses, supported by investment may be ideally how we can build sustainable communities.

If an entrepreneur cannot point to how the world benefits from their success, perhaps there is something wrong?  Paying taxes is only one way they can do this but why not expect investors to contribute to the general good?  Remember many others make their contribution from within the system. For one reason or another they do not build up personal assets but that is no reason to treat them with contempt for not being clever enough.

It is worth reading Kiyosaki’s book because it will transform the way you hear news bulletins.  This sense of entitlement pervades modern politics and it helps to understand what politicians actually mean.  We need desperately a left or Green take on investment.  I’m sure some have tried.

Let me know what you think.

Wealth and Riches? What’s the Difference?

Last Friday, I explored the implications of Pareto for the local economy.  This principle suggests inequalities between neighbourhoods are inevitable.  What are the implications for a thriving marketplace in every neighbourhood?  In this post, I want to question this from a different angle by exploring differences between wealth and riches.

To do this I shall review the book “Rich Dad Poor Dad: What the rich teach their kids about money – that the poor and middle class do not!” by Robert T Kiyosaki.  This week I shall explore some positive insights from the book.  Next week I’ll explain where I disagree with it.

The author tells the story of what he learned about wealth from his own father and the father of a friend. The story is well-told and I have found since reading it, I hear what the wealthy say in a different way.  This worldview is new to me although not entirely unfamiliar.

Here are two important insights from the book; I encourage you to read it because there are many more.

The Importance of Learning

One welcome and not unfamiliar insight is learning is important.  The author suggests working to learn is far more important than working to earn.  The wealthy understand learning about how the world actually operates is important.  The more they know, the more likely they are to recognise financial opportunities when they encounter them.  And of course they know what to do to invest in them.

This immediately resonates with the observation marketing is essentially educational.  Most business people seek investment in their businesses, most often through their customers.  This may be particularly true for B2B customers, although I can think of non-business transactions that are also investments.

The point is most of us do not learn how money works at school or in our families.  Even accountants don’t understand it the same way as the wealthy do.  Once you understand the strategies wealthy people use, you can hear them talking about them in radio and TV interviews.

They see themselves as free spirits who do not subscribe to the rules the poor and middle classes follow.  There is a lot in this and I can empathise because I made a similar decision to abandon the rat race 30 years ago when I left my work as a research scientist for community development.

The problem for people who make similar decisions to mine is we do not usually buy into building our wealth.  Most are altruistic and then find later they have to abandon community development and opt back into the mainstream to fund their family.

There is a good deal of common ground between the radicals who opt for alternative employment and the wealthy who opt to build financial independence.  I’ll highlight where we part company in my next post.

Wealth or Riches?

We all know stories of people who win the lottery and in a few years have nothing left.  They were rich but not wealthy.  The wealthy person may not have a lot of money in their current account but can pay their bills.  The rich pay their bills but every time they do so, make themselves poorer.

Of course, the wealthy do this by building their investment portfolio.  They understand and trade in things like shares, real estate or intellectual property.  The wealthy spend time building and maintaining that portfolio.  They may not have a lot of ready cash but once their income from investments pays their bills, they are financially independent and therefore wealthy.

This is an important insight because it gives the lie to those who promise massive riches through some marketing scheme.  It is not the volume of income you receive from work so much as what you do with it.  The people who make large sums of money from their business may be rich but are they wealthy?  What would happen if their business failed?

But note it also means wise investment of funds means you actually don’t need to turn over vast sums of money.

This is what I meant last week when I suggested perhaps we’re asking the wrong question when we discuss inequality between neighbourhoods.  Of course some neighbourhoods will do very well and others less well.  But investment in our neighbourhoods is also important.

Wealth in the Local Economy

But how do we build investments for our neighbourhoods?  Do we rely on wealthy people to increase their own wealth and use it to invest locally?  Or do we create organisations that build assets, they can invest in their neighbourhood?

The last was the original purpose of development trusts, now often called social enterprises.  Their problem is they are not usually run by entrepreneurs and so fall back on what they know, namely dependence on grants.  When they own assets, it is usually a building in which they’re based.  Usually that building is a liability.

This suggests business people are crucial to local regeneration.  It is a pity they have been and continue to be marginalised.  Next time I’ll explain why I think that is, when I look at where I part company from Kiyosaki.

So, this is my question: is it possible to build an asset base in support of our neighbourhoods and the local economy?  If so, how?

Pareto in the Local Economy

Last Friday, I introduced the Pareto Principle and today here are some problems it throws up.  I’m not saying there’s anything wrong with the principle that 20% of inputs result in 80% of outputs. However, Pareto raises issues for regeneration of communities.  So, what can we learn from Pareto in the Local Economy?

Inequality is Inevitable

Graph showing the typical Pareto curve.

Typical Pareto curve, showing how the top 20% will make 80% outputs.

First, consider the Pareto curve.  If we accept the Pareto principle, we do not need to measure everything to make predictions about the economy.  If we took every self-employed person, ranked them from the lowest income to the highest, we know we would get the Pareto curve.

Twenty percent of the self-employed (the same would apply to other groups in the local economy, eg traders or businesses) would make 80% of the money generated by their businesses.  Remember the curve is fractal and so 4% of the original number will make 64% of the available money.  This is statistical and so the real figures will not be exactly the same but the principle will hold.

We can see there will be a long tail of low paid self-employed and most of these will sooner or later go out of business.

What Pareto tells us is inequality is a statistical inevitability.  We all know most businesses do not survive and a few do very well indeed.

One feature of the modern business world is the guru, who has found success and shares their advice, often with generosity and usually offering support at a price.  They have a winning formula, it works for them and they can point to others who have learned the trade at their feet.

But if everyone learns their methods and applies them we will still have the Pareto curve.  Some people will do much better than everyone else.

Neighbourhood Inequality

Now, let’s consider neighbourhoods.  There is a problem here because it is hard to define a neighbourhood; where does this one end and the next begin?  Also, do we define neighbourhoods by area or number of businesses?  By money in circulation or the wealth of the businesses based there?

Whether this is research that would be worth doing and possible to do is a matter for conjecture but we can say if it were possible to rank neighbourhoods according to their wealth, we would expect the Pareto curve.

This is intuitively true, we would expect some neighbourhoods to be far wealthier than others.  City centres for example will have much more footfall than out-of-town estates.

I think we can be fairly confident this is true and inequality is inevitable between communities.  Some will always do better than others.  There are many complicating factors and reasons why some places fare better than others but statistically we would expect that to happen.

So, does this mean my vision of a thriving marketplace in every neighbourhood is an impossible dream?  Well, it was never going to be easy.  But Pareto suggests it is impossible.

But to leave it like that is to allow injustice to continue and for many that is intolerable and increasingly unsustainable for society.  The evidence suggests our world is becoming more unequal and the Pareto curve tells us why, because more wealth is accumulating in fewer hands.

It may be statistically inevitable but if it is, it means so is bloody revolution.  The rise of populist movements worldwide is clear evidence of malcontent, unlikely to be mollified by stories of the statistical inevitability of their misfortune.

I suspect the problem is we’re asking the wrong question.  I’ll return to this issue over the next few weeks.

What alternative questions would you ask?

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