Category Archives for "Mutuality"

2 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.

[amazon_link asins=’1612680194′ template=’ProductAd’ store=’markettogether’ marketplace=’UK’ link_id=’3c36efca-0035-11e8-8854-ab6da33d912b’]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?

0 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

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?

0 The Power of Fascination

Everyone in business wants to draw their market’s attention and hold it.  For the small business person, stories are a powerful way of doing this.  They’re not the only way but perhaps the most accessible approach to promoting a distinctive offer.  But perhaps stories are not enough.  To draw attention is a start but you want to hold attention and turn it into action.  This is the power of fascination.

There are some ethical considerations here.  The world of marketing is full of attempts to manipulate markets.  The goal is sales and where sales are the sole aim, manipulation appears to be the only option.  This may seem to be a harmless irritant but actually a powerful story can become dangerous.  History is full of brilliant rhetoricians who became tyrants.

However, sales are a small part of marketing.  It is legitimate to have a good product or service, find your market and draw their attention to it.  We’ve all experienced the pushy salesperson who we have repeatedly to tell “No”.  Good marketing should avoid that by making a genuine offer that will really help  with some problem the prospect cannot solve on their own.

With a complex offer you need to draw and hold your prospect’s attention .  This allows for a conversation that will sometimes lead to a sale.  I have recently found public speaking can be a powerful way of doing this.  I’ll report back on how I followed up on this experience and the results at a later date but I’m hoping to build some good working relationships from this experience.  My aim is to have the marketing conversations and arrive at a decision to work together or else a positive “No”.

Fascination

Anyway, my aim today is to focus on fascination by reviewing a book by Sally Hogshead, “Fascinate: How to Make Your Brand Impossible to Resist“.  This is a revised edition of a book that has been around for a few years.  The revision is significant and took about 3 years.

The book is a good read and the real power in the writing comes from the way it deploys stories, dozens and dozens of them!  These stories alone are worth the price of the book.  They are not just entertaining but show many tactics businesses use to place their offers in the minds of the public.

As a result this is a book that will repay re-reading a few times to not only understand Hogshead’s principles of fascination but also to get a feel for how they might work for your business or cause.

Seven Advantages

Hogshead suggests there are seven advantages available to businesses.  These are strategies you can use to market your offers.  Some are approaches that immediately capture your market’s attention.  You can be innovative or passionate about your offer.  Here you, as it were, make a lot of noise and make sure everyone hears about you and your offer.

Alternatively, you may be more interested in a quiet, apparently unassuming approach.  You may have an old trusted brand or believe attention to detail.  Most people seeking insurance are not really that interested in razzmatazz – they want to trust you or believe you will exercise due diligence.

And quiet brands can be alluring; a little mystery can actually draw in customers who like that sort of thing.  Mystery can add prestige to a product or service.

You will note some things work better for established businesses, such as trust or prestige, while others might work better for new businesses.

Seven Tactics

The power of this approach lies in the ways you can combine the seven advantages.  So, if you are innovative you might use tactics inspired by trust to show how your innovations do not mean you will be here today and gone tomorrow.

Now, if you have seven advantages and they can each be combined with tactics inspired by the other six, you have 42 different approaches to branding your business.  This may be good news if you are looking for an approach that’s right for you, the chances are you might find one.  However, they can be somewhat daunting.

I recommend this book because it opens up a distinctive dimension to marketing, written by someone with significant experience in brand promotion.  However, it will leave you wondering where to go from here.  There is a supporting website and the option, I suppose, of contacting the author.  For my part I plan to read it again and work out how to digest it and apply it in my business.

What are the positive reasons for using fascination in marketing?  How can fascination help business owners enjoy their marketing?

0 Full Co-production Means Planning and Delivery

Last Friday, I posted about co-production.   The post shows how the core economy is fundamental to the marketplace but not always recognised as it is essentially non-financial.  Today I shall explore full co-production and its alternatives.

Co-Production
PLANNING
		Professionals	Co-Planning	Community
D
E	Professionals	Traditional Services		Community Planning
L
I	Co-Delivery		Full co-production
V
E	Community	Outsourcing		Self-help groups
R
Y

The table contrasts planning and delivery.  Professional and community organisations working together can carry out both activities.  Full co-production is where professional and community organisations plan and deliver together.

I’ll work through the table, defining terms as I go.

Planning

Planning is an activity integral to community development.  Whilst local residents may not be able to deliver services, they can always have a stake in planning them.

Professional Planning

When professionals make decisions, they can consult with residents either before they make a plan, eg using a questionnaire, or afterwards by consulting on their proposals.  Many people will be familiar with Arnstein’s Ladder of Participation and where professionals totally control planning, they’re working in the manipulation and tokenism parts of the ladder.

Traditional services assume professionals do the planning, perhaps with some consultation.  This is  legitimate where community organisations do not wish to be involved in all aspects of planning.  The work can be tedious and so long as the planning covers what it needs to cover, people are happy for the professionals to get on with it.  However, when things go wrong, professionals need to listen.  Professionals can resolve some issues by listening to complaints and responding, others may need a more systematic approach to planning together.

One essential, where planning is primarily led by professionals is a good complaints procedure.  Professionals need to be clear what a complaint is and how to manage them.  If the numbers or seriousness of complaints increase it may be worth considering co-planning.

Co-Planning

Community Planning is primarily a community activity, whilst co-planning or planning includes professionals.

Co-planning should be in the top section of Arnstein’s ladder, Citizen Power.  Partnership may be  most appropriate, when considering Co-Planning, as delegated power and citizen control implies some form of co-delivery.

Whilst a move towards Co-Planning may be the result of complaints, it is not always so.  The initiative might equally come from local residents who identify an issue and want to have a say in it.

Community Planning

The big advantage of community planning, is it enables neighbourhoods to work out their own priorities, independent of professional agendas.  Community planning has limitations.  A community plan may allow representatives of a community a place at the table with professionals but it is at that stage it is important to move the debate into the Co-Planning column.  To insist a community plan, has more validity than everyone else’s is likely to get short shrift.

Professionals will come to the table with their own plans, often responding to the needs of several neighbourhoods.  The challenge for local residents is finding they are competing for resources and services with other neighbourhoods.

Think of community plans as means to move a community organisation towards full co-production.  There are times when it is right for community organisations to take on delivery.  However, where collaboration with professional services is essential, the aim is collaboration in the central square in the table.

Delivery

Broadly professionals or professionalised community organisations, sometimes called social enterprises, achieve delivery.  There are advantages to delivery of mainstream services centrally.  They have the resources and skilled staff.  Voluntary organisations usually identify and fill gaps.  To what extent is it possible for professional organisations and community organisations to collaborate in delivery of services?

This was the 2000 Local Government Act’s vision.  Community plans were to result in collaboration between professionals and residents, planning and delivering services.  Local assemblies, based on local authority wards in the UK, were to be the platform where the council could make decisions relevant to local neighbourhoods.

Whilst this activity has declined, with changes to national government, the principles still exist, despite their political steer.

Professional Delivery

It still makes sense for local authorities to deliver services.  Their role has been eroded in recent years, not through collaboration with residents but through private companies.  Council services such as refuse collection or road maintenance have been outsourced, increasingly using Private Finance Initiatives that tie councils into long-term contracts, often with terms and conditions kept out of the sight of the electorate.

The real issue here is transparency and accountability to local residents.  When councils deliver services, if the problems become intractable, residents can vote them out or at least threaten to.  With a PFI, the same delivery arrangement persists whoever controls the council.

Co-Delivery

Whilst it is not too difficult to imagine circumstances where co-planning is helpful to all parties, it is harder to think of examples of co-delivery.  Perhaps one is Burngreave New Deal for Communities.  If you read these blog posts, you will get some idea of the difficulties of this type of collaborative approach.

It’s not just that local authorities and other professional bodies are juggernauts, likely to crush community organisations, it is also the changing political complexion of local authorities.  Adverse political change Good can rapidly wreck good working relationships.

Community Delivery

Social enterprises are one example of a professionalised community organisation that can plan and deliver services in a neighbourhood.  Social enterprises may be engaged in co-production but retain some independence from the big players.

Perhaps neighbourhoods with their own development trust or similar are better equipped to contribution to co-production, whilst building alternative or independent sources of funding.

Conclusion

It seems the main weakness of co-production, likely to undermine any full co-production arrangements is changing political fortunes.  A change in council leadership can undermine co-production.  Similarly, national government decisions can favour alternatives such as PFIs.

To work with professionals, community organisations need to professionalise to bring their independent contribution to the table.  As such they need to work out how they as professionals co-plan and co-deliver with their residents.

So, what do you think?  Can full co-production work?  I’ve filled in some of the squares on the table, can you think of practices that fill the remaining squares (or indeed better ideas than mine!)?

1 What is Co-Production?

Co-production relates to many of this blog’s themes, such as the local economy, mutuality and community assets.  I’m grateful to Mark Woodhead for introducing me to co-production.  The New Economics Foundation has published a free ebook “Co-production: A Manifesto for growing the core economy“.  If you want to know more about co-production, this paper is a good place to start.

The Core Economy

My aim is to explore co-production’s relationship with some of my key themes and particularly the local economy.  You will note the term “core economy” in the subtitle to the NEF paper and this is a good place to start.  Edgar Cahn, in the forward to the ebook, writes:

Alvin Tofler reminds us of the obvious in his question to Fortune 500 executives: “How productive would your work force be if they were not toilet trained?”

Although the core economy is the foundation for all economies, people often take it for granted.  The relationships between people and families in a locality generate the assets underpinning other economies.  The core economy is essentially mutual.  In an ideal world, people find a role where they can offer and receive support to and from others.

The non-toilet trained workforce may be an amusing picture but it effectively illustrates the value of contributions to the economy we don’t value because we don’t see them.  When we meet someone in the marketplace we don’t have to ask ourselves whether they have been toilet trained.

Who Contributes?

It clearly has a feminist dimension because women provide much of the core economy.  However, it is certainly not restricted to women because everyone contributes in some way to the core economy.  Older people, particularly after retirement, make significant contributions.

People undervalue the core economy, the primary source of economic value, in comparison with the local marketplace where financial transactions take place. Even more so when compared with the activities of the corporate executives we hear so much about; those captains of industry to whom we owe so much.

The core economy is the source of many community assets but these assets are infrequently measured in financial terms and usually not at all.  Where the core economy is weak, communities might experience higher crime rates, for example.  They have a weaker local marketplace because a thriving neighbourhood marketplace depends upon the core economy.

Page 12 of the NEF document mentions three central factors that account for the failure of the delivery of public services.  These perhaps illustrate how a strong core economy supports local economic activity, including but not restricted to financial transactions.

Relationships Deliver Public Services

Relationships deliver just about everything.  They are fundamental to the marketplace but the market cannot do everything.  Neither can centralised bureaucracies.  The more people know like and trust one another, the greater the chances are they will look out for one another.  The marketplace can deliver goods and services but these do not include the core goods and services delivered by the core economy.

The story was the public sector provides the welfare safety net; the voluntary sector identifies holes in the net and fills them.  Co-production suggests the core economy provides the safety net and public services make a massive mistake when they attempt to replace local relationships with bureaucratic solutions.

Relationships Between Professionals and Their Clients are Mutual

Of course, too often professional-client relationships become dependency relationships. The teacher needs her pupils as much as they need her.  When her pupils are autonomous learners, she benefits from being a part of a dynamic learning environment.

When my doctor told me I needed to lose weight, he depended on me to collaborate with the health service for my benefit.  The next step might be for me to share my experience of losing weight with others, so that they too can lose weight.  No-one’s ever asked me to do that!  But think of the benefits to the health service if patients shared in support for other patients.  The NEF document provides several examples of exactly this type of thing.

Social Networks Make Change Possible

Centralised bureaucratic models of service provision, where professionals plan and deliver services, erode relationships within communities.  The same social change that has led to the loss of local marketplaces have also eroded essential social networks.

The aim is not withdrawal of public services so much as remodelling them on mutual lines.  Just as the retail co-operative movement transformed local economies between the mid-nineteenth and mid-twentieth centuries, so mutual approaches can transform health and social services, policing, education and just about everything.

So, that’s a brief introduction to co-production.  What do you think?  How can we learn to make best use of the core economy to support local people and build a marketplace?

3 Resources for the Local Economy: Local Currencies

In this final post before the Easter break (back in a fortnight), I’m visiting perhaps one of the most common resources for the local economy, local currencies.  Perhaps the two best known examples are the Brixton Pound (perhaps the first) and the Bristol Pound, which is the first city-wide local currency in the UK.

It is worth looking at both sites as they are good examples of how to convey a complex idea; inspiring the visitor with the vision for the scheme as well as the practical information they need to take part.  There’s always room for improvement but both sites get most things right.

Under the next four headings, I shall explore local currencies and the contribution they make to local economies.

Equivalent to Pounds Sterling

This may seem an odd starting point but it is important to understand local currencies.  They are not the same as Local Economic Trading Schemes (LETS).  A LETS creates a new currency that is completely self-contained.  It is not possible to value it in pounds sterling or any other currency.  I suppose bureaucrats might attempt to assign a value to LETS, eg to enforce benefit rules, but essentially LETS are ways of tracking transactions between people; they form self-contained economies independent of the mainstream.  This is not a criticism of LETS, it merely distinguishes them from local currencies.

One Local Pound (usually designated by preceding the word pound with the name of a place), is equal to one pound sterling.  It is essentially a voucher system.  You buy them with sterling and can sell them, receiving sterling in exchange.

Practicalities

So, I could pay with a five-pound note and receive Bristol pounds in my change.  I can refuse them if I choose.  I might refuse them as I don’t live in Bristol and so unable to spend them.

Usually these schemes work in units of £1 equivalent.  So if I purchased something worth fifty pence with a Bristol pound, there’s no reason I shouldn’t receive 50p sterling change.  It works so long as the trader and the customer are happy to do this.

Some of the schemes use local pounds to pay for council tax or include them in employees’ wages.  This is possible where all parties agree.  Shops can easily declare them in tax returns, simply add them to the total income or expenditure in pounds sterling.

I understand some schemes have a more complex system where they sell local pounds at the rate of £11 local for £10 sterling.  The £11 local received are still equal to £11 sterling.  The exchange rate the other way is £9 sterling for £10 local.  If you do the maths you will see this balances the books.  The person who loses would be someone who ended up with more local pounds than they first purchased.  This is an incentive to stay in the scheme.

Retains Money in the Local Economy

So, why bother?  The aim of the scheme is to keep money in the local economy.  They are designed to enable businesses and customers to keep money circulating locally whilst still participating in the wider economy.  Over time, businesses can collaborate to make sure more of their trade remains local.  Businesses can for example, offer local pounds to their local suppliers.

It does not benefit local economies to be cut off entirely from the rest of the world.  After all, local economies grow as new money enters it.  The problem for many localities is the flow of money out of their economy is greater than the inward flow.  Money leaving the economy largely goes to global corporations who salt it away in offshore accounts, avoid taxes and in effect take money out of circulation.

This means local businesses use local currencies and not local branches of multi-national corporations.  Local businesses are likely to use local suppliers and collaborate with other local businesses.  They are dependent on the flow of currency locally and so many can see the advantages of developing a local system that increases the flow of currency through their businesses.

This means customers may need some incentive to use local pounds.  Why should they bother?  After all, it restricts what they can spend their money on to local businesses.  But this is an opportunity to educate everyone about the economy and how it works.  Just as the first retail co-operatives usually included a library and meeting room because they needed to educate their customers, so local currencies need to see their scheme as to some degree educational.

Helps Traders Identify Local Customers

One big advantage, easy to overlook, is it helps businesses find local customers.  Anyone using their local currency is likely to be local and so has the potential to become a regular customer.  One thing few people realise is the role of friendship in business.  Where a business owner can befriend their local customers, they are likely to build long-term business relationships with them.

This can be as simple as the trader, knowing their regular customers’ habits and being able to prepare their usual in advance.  Brief conversations accumulate over the years and a network of friendships, can support the core activity of a business.

This can be supported with special offers for customers paying in the local currency.  Examples can be found on both the Bristol and Brixton sites.

Use of Mobile Phones

Banknotes are a simple way of promoting a local currency and can be an opportunity to promote the area.  The Bristol notes for example include hidden away an image of the dreaded Bristol crocodile that apparently inhabits its waterways, eating who knows who.

However, most schemes have a means of banking their currency, using a local credit union for example, thus allows some interesting schemes using texting.  Note this is not an app, you simply pay by texting.  Both Bristol pounds and Brixton pounds use this payment method.

If you know what you owe, you can set up the text whilst queueing at the till.  The text goes to a special account that returns a confirmation text to the customer and to the retailer.  This is a good example of how online methods can support local trading.

Can you think of other advantages or indeed disadvantages of local currencies?  Do you use them?  If so, what difference have they made to your life?

0 Resources for the Local Economy: Gift Vouchers

Resources for the Local Economy is a new occasional series where I shall introduce websites about interesting schemes in support of the local economy.  The first in this series is gift vouchers.

The website is Goodmoney and you will find the home page if you click on the link.  (Note: websites change from time to time and so if you read this post in the distant future, the site will not necessarily match what I write!)

The first big positive is the home page explains the gift voucher scheme and nothing else.  At the top of the page there is a brief introductory text explanation and a video.  Beneath the video there are three buttons, to press, depending on how you wish to respond to the message.  Best proactive suggests it is usually best to have a single call to action.  However, the three possibilities are logical and clear.  Is it confusing to have three to choose from?  It would be interesting to look at conversion rates for this page.

The Turquoise box below the buttons seems a bit superfluous and would benefit from having links to the ethical supermarket and online store.

The next three sections correspond to the highlighted words in the introductory text.  Links from the introductory text to these sections would be helpful.  Five benefits for local businesses follow these sections.

Next are three buttons and one of these is different from the first three.  Usually when links repeat down the page, they are the same.  This allows people already decided to follow the link at the top and the undecided can read more and then encounter the same buttons again afterwards.

Overall this is a good home page and clearly conveys the gift voucher scheme and its benefits.  There may be a few navigation issues but if the page converts, they may not be too serious.  I would certainly recommend this as a site to visit not only for its core idea but the simple, clear way they conveyed it on the site.

What we don’t see on the website is the complementary in-person marketing that will be going on in Brighton and Hove.  My guess is the website supports a primary in-person marketing strategy.  Judging by the number of participants in the gift voucher scheme, it is building support.  It would be interesting to see some statistics on the site.  I gather it is early days and so these may follow at some point.

If you read the About page, you will find the gift voucher scheme has two purposes.  First, it directly supports the flow of money in the local economy.  Also Goodmoney are using the scheme to build their local business membership.  It sounds as if they have plans to launch other forms of support as their membership grows.

This type of scheme will work when people visit businesses and explain the advantages of joining the scheme.  As the number of participant businesses grow, this will make the scheme more attractive and evidence of income from the scheme will also be helpful.  Another advantage personal contact has over depending solely on online registration is opportunities to identify barriers to joining the scheme.  The reasons why potential customers might not invest in it can be varied and not necessarily what the developers of the scheme expect.

Research into the barriers to the scheme can result in changes to the marketing and perhaps to the scheme itself.

This is a brilliant idea, that could be extended to other areas.  It is clearly described on the website and it seems it is being effectively marketed locally.

If you are aware of other resources supporting the local economy, please share them in the comments.  My aim is to encourage the sharing of ideas and so I plan to review the idea itself as well as how it is conveyed online.

0 Building Social Business

Muhammad Yunus is best known as founder of the Grameen Bank.  In his book “Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs”, Yunus introduces a new idea, the social business.

What is a social business?  The idea is a business as close as possible to conventional business, with one exception.  Investors can draw from the business only the amount of money they first invested in it.  So, if you invest £1000, you can draw only £1000 from the business.

The idea is social business challenges business owners’ motivation.  They are seeking not personal enrichment but effective ways of supporting the poor.  Yunus argues most social enterprises allow personal profit from investment.  Where profits are possible, owners may have conflicting aims.

Yunus first published this book in 2010 and it would be interesting to find out how the idea developed over the last five or so years.  The book has a rather distant tone and it took me a while to feel the enthusiasm but it does seem to be effective.  Yunus genuinely believes this approach could abolish world poverty in a few decades.  Whilst I’m somewhat sceptical, I can see social business is likely to make a big difference.

Two aspects of social business interest me:

Capitalism Misrepresents Human Nature

Yunus writes in his introduction on page xv:

The biggest flaw in our existing theory of capitalism lies in its misrepresentation of human nature.  In the present interpretation of capitalism, human beings engaged in business are portrayed as one-dimensional beings whose only mission is to maximise profit.  Humans supposedly pursue this economic goal in a single-minded fashion.

Both right and left hold this belief.  The left believes the priority is to oppose capitalism.  Sometimes they give little consideration to the size or local nature of business.  Others distinguish between local businesses and corporations who extract finance from local economies.  I suppose that is where I stand.

Politicians on the right, take profit maximisation as self-evident, a good thing and worth supporting in legislation.  Economists developed this one-dimensional model and they never intended it to be anything else.  Their assumption simplifies reality to enable modelling of the way the economy works.  The results of using this assumption to model the economy may be more or less accurate but it will always be approximate because human beings do not behave as this model predicts.

Corporations Invest in Social Business

Yunus provides several examples of corporations investing time and money in social businesses, where they expect to see social change and not to make a profit from their investment.  Yunus anticipates a parallel economy where social businesses grow the portion belonging to the poor and conventional businesses grow the portion belonging to the rich.

Whilst I welcome the very wealthy business people prepared to invest in social businesses, I don’t think Yunus appreciates fully the consequences of growing their portion.

Problems start where personal wealth outstrips business owners’ ability to spend their wealth.  This effectively removes wealth from local economies and concentrates it in financial markets.  The problem is in inequality, as the gap between rich and poor widens, the gap itself is the problem.

Social business may make the poor richer and to some degree close the gap but it does not tackle the systemic problem of inequality.  Immense wealth increases power and the temptation is always to use power to personal advantage.  When corporations take on government contracts, they usually lack transparency and become unavailable to democratic influence.

Whilst social business appears to be an effective way to tackle poverty, it cannot possibly address world poverty as a whole whilst corporations run things outside of democratic control.

Starting Locally

Yunus describes several social business projects and the inspiring thing about them is his approach to development.  Having a good idea is one thing, working out how to market it is another.  For example, arsenic poisons a lot of water in Bangladesh.  The effects are cumulative and take several decades to show up.

One village piloted a social business providing clean water.  The results were disappointing.  First, people were unused to paying for water, even though they set the price within range of the poorest families.  Also, the most vulnerable are women and children.  The men usually eat out and buy far more expensive bottled water and so do not need the clean water.  This alongside perceiving arsenic poisoning as a long-term problem, made take-up disappointing.

This shows the power of Yunus’ approach.  By starting in a single village he was able to find out the barriers to marketing the water.  The next step is to find ways around the barriers.  How do you market clean water under these circumstances?  Depending on the product, this period of testing can result in changes to the product, its packaging (especially size), its cost and maybe its mode of delivery.

Packaging for Different Markets

Sometimes different communities need the same product in different packages.  Urban and rural communities, for example.  The aim of piloting is to enable the offer of the same product in other communities with its marketing approach integral to the product.

This is an important insight.  Many good products fail because they are not marketed properly and usually the reason for this is the market is not understood.  No-one is going to argue that cheap clean water is a bad idea.  How do you sell it to a poor community and generate sufficient income to cover costs and expand the business?

This is a question any business has to answer. Yunus argues social businesses enable solutions to be entertained that benefit the poor because the pressure to enrich shareholders is absent.  The aim is to provide clean water to the poor and not generate profit for the rich.

Conclusion

Social businesses are a powerful tool and could be adapted for use in the West.  They encourage business people to invest in effective approaches to tackling poverty and many of them are willing to do so. I doubt they are likely to be effective on their own in tackling poverty because they do not address inequality.

I suspect Yunus is trying to present a model to corporations that enables them to make an effective contribution to tackling poverty.  To that extent what he says constrains him.  The effects of inequality on local economies and democracy are such that I doubt social business alone can have much impact.  As part of a wider democratic social movement they could be very effective indeed.

What do you think?  Do social businesses have a place in local economies in the UK?  Have you examples of experiments with social businesses anywhere in the world?

1 The Art and Science of Selling

Older readers will remember the adverts that began with a doorbell: “Ding Dong” and will immediately respond: “Avon calling”.  The point of the advert was to soften up the viewers for the “Avon Lady”, when she called.  How many have even noticed that practitioners of the art and science of selling on the doorstep have disappeared?  Very few people these days sell from door to door.

It seems doorstep selling began with the Fuller Brush Company in the United States.  They were the origin of the term “foot-in-the-door”.  Many companies, including Avon Cosmetics, copied the Fuller Brush Company and it seems a good salesperson was often a welcome visitor, building long-term relationships with their customers.  However, the current image is of the brash salesperson who will not take no for an answer.  Where have they gone?

It seems it’s the Internet what’s done for them!  Whether this is a blessing or a curse probably depends on whether you believe Internet sales are better or worse than doorstep sales!

Daniel Pink in his book “To Sell is Human: The Surprising Truth About Persuading Convincing and Influencing Others” (subtitle from 2014 edition) charts the decline of doorstep selling and the surprising rise of selling in general.  His point is not that Internet sales have usurped the place of doorstep sales but that we are all salespeople now.  Or most of us!

His argument is other changes apart from the rise of the Internet mean we are all practitioners of the art and science of selling now.  He highlights three trends that have led to this change.  The archetypal doorstep salesperson has given way to the professional who incorporates selling into their daily work and perhaps is not aware they are doing so.  I suppose it depends on how you think about your work.  I’ll mention his three main trends here and comment on how they relate to the local economy.

Entrepreneurs

Every local business is dependent on selling its product service or cause.  This is most obvious with retailers perhaps but there are plenty of self-employed freelancers who must learn how to sell.

The self-employed, who abandon employment to sell their skills and knowledge, are sometimes called the precariat.  Many are not very good at sales and barely cover their costs.  Many are not successful and either change their practice until they find something that works or go under.

The problem for many entrepreneurs is believing what they offer has real social value.  It is hard to sell something you don’t believe in.  Their failure to believe in their own offer does not necessarily correlate with what they offer.  For every brash salesperson selling something over-hyped there is the too timid entrepreneur who never quite convinces about something that is really rather good!

Successful businesses usually find a business community who offer support and bolster confidence to sell.  Whilst some businesses could benefit from a healthy dose of brashness, perhaps it is quiet confidence in a good product or service that ultimately wins out.  And perhaps many businesses would benefit from other businesses singing their praises!

Selling in the Community

Community and voluntary organisations are often in a similar place to local businesses.  They may be selling a cause and so they are not necessarily seeking finance but they are still engaged in sales.  Perhaps the main difference between these organisations and local businesses is that usually, they are not dependent on the success of their enterprise.  People promoting a local cause will often do so in their spare time, whilst remaining in employment.

Leaving aside possible clashes with their employers over the cause they promote, the primary difference may be lack of experience.  Many will think of their selling as promoting a cause or campaigning and do not associate it with the marketing local businesses do.

Nevertheless, there is a lot of common ground and perhaps mutual recognition and sympathy would lead to more collaboration.  Businesses may be able to help organisations with marketing, whilst some community organisations may have valuable local knowledge.

Elastic Businesses

Entrepreneurs can find they are marketing alongside representatives from more established businesses.  These are not from the sales department because many larger businesses have done away with their sales departments, flattened hierarchies and declared that everyone is responsible for sales.  Many workers find their role stretches to cover far more than they would in the past and everyone has some role in promoting their company.

Selling through your role in your business is increasingly your responsibility.  If in promoting your role, you bring more customers to the business it is all to the good.

Many workers are waking up to the fact that they belong to a community.  It may be local, perhaps a city or region or it may be online.  They are part of a community, customers and collaborators who may bring customers to the company.  The challenge is to navigate the sea of people who seem to be creative on a shoestring.  Building relationships with entrepreneurs, third sector and in business, can bring greater benefits to larger companies.

Education and Medicine

Pink’s point here is that not all selling involves money.  The aim is to persuade others to take a course of action for their own benefit.  So, a teacher needs to sell learning to their pupils or students.  A doctor needs to persuade patients to change their diet to help them return to health.

By extension just about any activity needs a sales approach.  Community and voluntary organisations often find they are marketing a cause.   They may want donations or time or members or signatures or letters to MPs.  How do they move people to support their cause?

Sample Cases

After he makes the case that selling is a natural part of being human, Pink goes on to show how it can be done.  This is the best part of the book, as Pink describes the characteristics of a good salesperson and suggests practical exercises to improve their approach to sales.

Sample Cases follow each chapter, practical things anyone can take up and use.  So, this is essentially a practical book packed with simple tools anyone can use.  I suspect it is something I shall return to many times.

If you are active in local marketing you will find this book a useful practical guide to the art of selling.

Are you comfortable with being a salesperson?  If you are in any business or profession, you are almost certainly expected to sell things.  How do you go about it?

0 Theonomics

Over the last couple of Fridays I have reviewed “Theonomics: Reconnecting Economics with Virtue and Integrity”, edited by Andrew Lightbown and Peter Sills.

Two weeks ago, I questioned a phrase quoted from Pope Leo that calls the nature of common ownership into question.  Last week, I looked in-depth at the contribution St Benedict offers to our understanding of community.

This is not an easy book to review. The problem is not so much particular chapters, some are interesting and challenging but the idea there is such a thing as theonomics.

Christians and Usury

Some time during the late middle ages, the Christian faith abandoned its condemnation of usury.  Presumably this was around the time capitalism became the dominant economic model.  I suspect from this point the Christian faith could no longer lay claim to a distinctive position on the economy.

Islam still maintains the ban on usury. It has developed approaches to funding businesses and financial institutions that do not involve charging interest.

At the time Christianity abandoned usury, early capitalism offered a radical departure. It promised to enrich all by allowing ordinary people to become wealthy and not concentrate wealth in the hands of the aristocracy.  Despite the religious divisions of the time (several centuries!), the churches completely adopted capitalism. Only a few sects distance themselves from the economy, eg the Amish.

It is hard to adopt a radical stance to the economy, when you have a stake in an inherently unfair system.  This is not in any way to devalue the ideas in the book but it is to question the value of labelling it as theonomics.  Most of the values in the book can be found elsewhere.

Virtue

Perhaps one of the most searching ideas in the book is that of Virtue.  The book contrasts virtue with values.  Everyone in business is aware of values.  They are self-selected values and standards that we claim shape our work.  They can be chosen as self-serving attributes for a business or organisation.  So, you may genuinely believe in your commitment to honesty in your dealings but in practice are you?

Virtue is an external quality we are born with and it enables us to live a virtuous life.

“Virtue is the agent of inner change and growth, and the pursuit of virtue gives us a moral strength to live by higher qualities and standards than those that simply serve our self-interest.” (Page 70)

The idea of virtue relates to Benedict’s teaching in a monastic context. The point of the monastic community is to develop people not so much for their skills as their character.  The point is of course bad faith governs economics today.

Capitalism in Good Faith

Does this mean capitalism is always bad faith economics?  It depends on which alternatives you count as capitalism.  Mostly alternatives to mainstream capitalism are reforms of capitalism, not really alternatives to it.  Capitalism in good faith is possible although an economic system governed by good faith would be nothing like the system we have now or indeed many of the so-called alternatives we have seen.

Whilst welcome, the book’s insights raise the question whether most churches have surrendered virtue to the prevailing economic system.  When the banks are able to survive the 2008 financial crisis at the expense of just about everyone, when financial decisions made every day take wealth out of the economy, concentrating it in the hands of barely 1% of the world’s population and at the same time banks will not make loans to poor people on the specious grounds that they are unable to repay them; whither virtue, character or integrity?

You don’t need to be a Christian to see there is something seriously wrong in a society that allows this to happen.  Some of the most effective approaches to tackling poverty through alternative financial systems have in fact originated in Islam and I shall return to this in a few weeks time.

Christians can and do make a positive contribution to the economy, challenging its excesses and devising alternative economic systems.  But it’s a long time since it was possible to claim a single view from the Christian faith.

Still this book is a significant attempt to find some common ground and if it fails to convince, I would not want stop the search.  You never know what might be uncovered in the next book!

Do you believe faith contributes significantly to economic debate?  What roles do people of faith have in economic systems?