Most web tools that are re-shaping commerce are doing one thing, handing over control to the users from the producers. They are democratizing the factors of production so that anyone with access and ideas can now play. They do this through cutting out two things that existed and thrived in the industrial era: middle men and gate keepers. The power of collaboration has been touted as a revolution consistently since the the word web 2.0 exited the mouth of Tim O’Reilly. I think it is entirely justified. This is particularly the case with the latest disruptor to emerge – crowd funding. The reason that funding our projects from the crowd changes everything, is because it doesn’t really change anything.
All things have always been funded by the crowd, we just didn’t know it before.
To bring this idea to life let’s consider a couple of examples:
Debt funding via banks is a form of crowd funding: They take our deposits, assess and carry the risk of ‘sub-letting’ our deposits on margin. Essentially banks make money from crowd funding projects and managing the organisation of it.
Capital raising via VC firms is a form of crowd funding: They take large portions of their venture money from Superannuation or 401K funds which has been allocated to ‘high risk’ investments. This is typically between 1-5% of the total asset allocation. Again, our money is being allocated in our behalf from which transaction profit margin is made.
The point is that pretty much every type of investment that involved aggregated money, has always been the money of the ‘audience’ hidden within a structured system. A system which we are now re-structuring with deomcratised tools so that we can organise our capital amongst ourselves. So that we can access each others funds without permission from financiers. So that we can decide what is worth funding. So that we can make the margin available on float capital. And this is just the start of the inevitable changes to the financial system.
The very truth about crowd funding is that before it arrived in its current ‘web organised’ form – we got locked out of the system that our money funded. And it feels like crowd funding of micro projects is just the begging of something much bigger and more important. The question for aspiring entrepreneurs is how can we disrupt the finance industry further with newly connected commercial eco systems?
There are a bunch of ways to increase our incomes. Whether we are business owners, startups or employees the principals are the same. So here’s a list of 10 things we can do (starting tomorrow) to boost the income we receive from whatever we do.
- Learn or improve our public speaking skills - Our ability to sell ourselves and anything verbally is still the number skill in business. Anyone who can speak in private, can speak in public – it just takes practice. There are tricks we can learn and if we learn them what we earn will increase dramatically.
- Write a blog – If we write a blog on what you do it has a wondrous way of increasing our knowledge bank, our reputation and builds a verifiable asset we can use to sell our credentials. All I can say is that of all the things I’ve done in my life, blogging has created more economic benefit for me than anything else. You’ll only know how this happens if you have faith and do it.
- Keep your body in good shape - I believe it has two important ways it impacts our earning potential. Firstly a fit body has a brain that works better. This is a medical fact. Secondly, people subconsciously judge us on what we look like. If we are in good shape people increase their trust levels of us. Because we look after ourselves, they believe we can look after them and their business. I know this is almost cultural heresy, but I do think it is true.
- Groom & dress well – As per the second point above. How we look is an asset. It doesn’t mean we need to wear expensive clothes or look like a movie star, but have pride in our own human existence. Never be afraid to invest money in nice clothing.
- Work harder on yourself than you do on your job – People buy us as they asset, both in startup land and employment land. So we must invest in self development more than developing the business. If we do the former, that latter happens automatically.
- Leverage the wood chips – Every job has some kind of ‘off cut’ or left over which is part of the process of being productive. This is often a great asset which can be leveraged. Know what your wood chips are, and take them to market. This not only invents revenue, but displays vision. People will notice.
- Help others grow – Help friends and colleagues achieve their goals. Help them with what you know and inspire them to be all they can. Do it without desire for any repayment. It will inspire you and karma will return the benefits.
- Save 30 percent – Keep 30 percent of your income to be invested. Do this before any expenditure occurs at all. Put 10% into active capital (your own entrepreneurial ideas). Put 10% into passive capital (shares, interest bearing deposits, other peoples business ventures) and put 10% back into society – this should be defined by yourself. It takes far less than people think for the compound benefits of such a simple financial strategy to accrue.
- Spend 10% on your income on self education – No matter what we earn we must ensure we allocate 10% of this to re-educating ourselves. In a world of rapid change this is not a choice but a must. This is the ingredient to continued self worth and value. It pays for itself many times over. Just ask any millionaire.
By the way this list is ‘non-exhaustive’ – but a set of activities I have learned and used. Maybe you’ve got some additional tactics you can share in the comments.
There is no point being a successful entrepreneur, or selling a startup if we have no idea how to handle the money we get. So here is my top 10 financial life hacks.
- Spend less than you earn, no matter what that amount is. The net result is happiness.
- Allocate cash to savings & investments before anything the day you get your profits, pay or dividends.
- Never go into debt for anything which does not appreciate in value.
- The real definition of an Asset: Anything that puts money in your pocket. The accounting definition of an asset is flawed.
- Do not trade stocks. Trading makes the broker and tax man rich and you poor.
- The greatest financial instrument is ‘compounding’. It only happens when we hold assets, not by trading them.
- If you can’t afford a consumer product in cash, you can’t afford it.
- There is no such thing as ‘financial engineering’. It was invented by Wall street to trick you.
- The best type of share investment is an Index Fund. They are investments in civilization. If that fails, we have bigger worries than our money.
- Invest more in education than entertainment & ‘things’ and you will outdo society financially.
Reading the New York Times this weekend it seems clear that the Global Financial Crisis has not diminished the ability of investment bankers to extract bonuses from poorly performing assets and even losses.
I still believe that private profits should also result in private losses. I remember back last year having a discussion with a prominent Australian Venture Capitalist. He held a strong view that the bailout activities were justified, while my view was strongly opposed.
“If a child trips and skins its knee that’s fine, but there is no point letting it fall from a 10 story building. The consequences are too great”
“It’s not a child, they’re investment bankers. And maybe what we need right now is a few of them splattered on the sidewalk.”
My view has not changed.
But it seems the general populous has a short memory as the rot is returning very quickly. In fact, it might do both our economy and our environment good to let the current system bleed for a while. Why not allow time for new eco-friendly industries and egalitarian reward systems arrive?
Startup Blog wonders what your think?