Why giving leads to getting

Many years ago I heard a quote from the late great Jim Rohn who said that if you help enough people solve their money problems, then all yours would disappear. At first I thought it was motivational bunk.

But while reading the terrific book Homo Deus by Harari recently I came across something called The Ultimatum Game. It is a famous experiment in behavioural economics which disproves the theory that we are all rational beings when it comes to money and economics.

In this experiment, usually conducted with two people, one of the them is given $100, which they must decide to divide between themselves and the other participant in any way they want. The person may keep everything, split the money, give most away, or keep more for themselves. The other player can do one of two things: accept the suggested division, or reject it outright. If they reject the division, nobody gets anything.

Classical economic theory would suggest that people are rational calculating machines. They assume that most people will keep $99 and give the other person $1. And that, the person would accept the offer of $1 because it is still better than getting nothing. They claim that a rational person would always accept a free dollar. Except that we don’t – and it isn’t irrational.

For the record most people split it 50/50. Some 40/60 or 30/70.

People may think that we reject tiny offers because it is ‘unfair’, they look like ‘suckers’, but it has more to do with the fact that our social structures just don’t operate that way. We humans work on a warm social logic. We know that sometimes we have more and sometimes we have less. We split the labour amongst our tribe and try to collaborate so we all have more through trade and trust. Once we do this the laws of reciprocity set in. We know we are all in it together, and we benefit more through sharing, than we do through gauging. We know this intuitively through thousands of years of evolution. Greedy people and pure suckers, well, their DNA never made it through the many famines.

A practice what I preach. Come join me in Melbourne June 20th, for a Free night where I share ideas I’ve learned in my career, from my new book, The Lessons School Forgot. Drinks on me, and I’ll answering any questions you have about your future.

It’ll be a great night. Hope to see you there.

Stay rad, Steve. 

 

How to future proof your kids

There’s lots of things we can do to future proof our kids. On the top of my list would be this: Don’t condition them to into thinking they’ll get a job when they grow up.

The reason is simple – A job is only one source of potential revenue to sustain life.

This isn’t to say that jobs are bad, just that while they are young we should be introducing the concept of economics. The first concept is that we need revenue when we grow up, and a job is just one source. Imagine asking your kids this:

What will your major revenue source be when you grow up?

Their first question will be, your guessed it – What in the heck is revenue? And this invites an important conversation that opens their minds for the rest of their life. A decent answer might be this: Well, revenue is a word that describes all of the different ways we can get money for helping people. A job is just one of those ways, but there are many more. And some are more rewarding, some easier, some harder. Here are some examples Johnny and Mary:

  • Profits from selling things, or owning a business
  • Commission which can be from selling something for someone else
  • Fees for doing projects
  • Freelancing selling your skills one task at a time
  • Rents for people using things you own – like a building
  • Dividends which is money when you own a portion of a company, Like the toy shops we go to – Did you know you can own part of that toyshop!?!
  • Royalties from letting someone use your idea, like if you drew the first picture of a cartoon character
  • Licensing which is when people pay you to use something you own in another country

The list is endless, unlike the number of jobs which are about to be replaced by AI, Automation and offshoring.

You could explain all the examples above, using just one of their toys, say Lego. Shops make profit selling it. Professional Lego builders work as freelancers. The shop the Lego is sold in is rented by the person that owns  the building. Lego pay licensing fees to Star Wars to make Darth Vader. Shareholders in the Lego company share in profits from people buying lego. You get the pattern.

This will show them many possibilities. Kids are super curious about the world, and they’ll never see money in the same way again. They’ll start to see economics and different ways they can participate. More importantly though, they’ll be thinking about systems, and how to position themselves into owning the factors of production, and not being them. If we do this, we give them a chance at being the architects of their own future, and not a bricklayer in someone else’s.

Blog readers in Melbourne – I’m inviting you as a reader to The Lessons School Forgot – Live – to celebrate the launch of my new book. 

Hope to see you there, Steve. 

Why we should worry less about the robots, and more about ourselves

As if concocted by some kind of Industrial Séance, the past 100 years has turned people in the developed world into a cohort of economic outpatients. We’ve abdicated our entire financial responsibility to institutions who must now provide us with a stable job, a career for life, increasing wages, and skills that are relevant in perpetuity without the requirement of an upgrade. A strange desire given that this has never happened before.

A close look at history any time before the 1950’s, and we can see we’ve never had any of those things as a certainty of life, quite the opposite in fact. The level of stability, of economic growth and the increase in living standards we’ve experience in the past 70 years is unparalleled in recorded history. For all we know it could be a fortuitous anomaly, a once off that we’ve been lucky enough to experience first hand. But we’re not thankful, instead those who’ve been the major beneficiaries are demanding in advance that the good life not be taken away. That the life we live is some kind of right, a standard we are now entitled to, without any heavy lifting required on our behalf. While very few indeed are asking the resources needed so they can get to work on personal transformation.

Automation & robots

This kind of upheaval isn’t new either. Every period of humanity which found itself in the middle of a technological shift, had those who were disenfranchised and displaced. Some even had entire their civilizations destroyed based on technological lag. Given our current global and economic interdependence this is an unlikely outcome, but yes, the technological shift is big, the biggest in many generations, and yes, it’s happening much quicker than all the others have. The challenge with technological shifts, is that there isn’t any lessons on how to deal with them. It’s not in the text book. We instead must rely on those old school skills of ingenuity and adaptability.

But this time, there is one important difference.  For the first time we have a choice on whether or not we adapt. Every other time if we didn’t have the resources at our disposal, coping in the new system wasn’t just difficult, it was nigh on impossible. This time we’ve been given the dignity of choice. We can prepare, we can up-skill, and we can participate in the shift to the greatest period of entrepreneurship we’ve ever known. We can relearn the art of self reliance. We can do all these things, mostly for free.

Hence there are two approaches we can take to sure up our uncertain futures.

The common approach: We can wait for the Government to fix things, hope for a universal basic income, regulate against technology which destroys our industry’s business model, support populist and protectionist policy makers, and pretend inevitable technologies can be stopped to maintain our status quo.

or

The better approach: We can start today, firstly by admitting what might change in our industry, our economy and our future. Then, we can quickly start working with our communities to create an infrastructure (Physical and Informational) which provides all of us access to the tools and skills we’ll need to help shape the future economy. We can lead others and inspire them to believe they can adapt by sharing what we learn. We can meet with like minds creating income producing ideas, and expanding industries we couldn’t even imagine yesterday. We can decide that hoping everything will be Ok, isn’t a plan, and remember that we aren’t the first generation to face a challenge which might effect how we work and live. But mostly, we can sleep better at night knowing we aren’t helpless outpatients, but the architects of the future we want to live in.

New book – The Lessons School Forgot – click here for free advance chapter

The economic future of the Western World

The economic future of the Western World is bright, so long as it doesn’t squander its opportunities. So long as it remains open to the growth of developing nations and we manage to collaborate cross borders. Isolation and protectionism is not the answer, just ask China before it reopened to the world. Yet, all we ever hear is about the impending doom of the middle class and the end of manufacturing.

Abandoned factory USA

While reading my Quora feed I came across a brilliant answer to this question by Balaji Viswanathan:

What is the future of the American middle class in a world where manufacturing can be done so much more cheaply in Asia and Latin America?

About a decade ago, I was chatting with my buddy who was working at Windows Mobile. He was lamenting how the mobile industry was racing to the bottom where everyone was trying to produce $10 phones. Industry experts thought that the future of telephony was ultra cheap commodity. 

A year after that conversation, an American company came with a nice gadget named iPhone that started at around $500 [without contract]. And another company in the same city brought a great competitor in Android. In a matter of months, it was clear that the future of phone market was not down, but up. Apple went on to be the biggest the most profitable company ever. Android became the biggest ever mobile OS.

That is the future of American manufacturing and middle class, if they can focus on out-innovating the world, rather than constantly whining about cheap countries. And the US is still a world leader in manufacturing with the likes of GE, Caterpillar, Dow, 3M, Boeing etc [see more: How does the USA make money despite much less manufacturing?]

There is a whole range of exciting new technology ahead of us – Virtual reality revolution, a 3d printing revolution, autonomous vehicles on land, air and water, robotics revolution, clean energy revolution, space exploration revolution and so on. Just like how Apple changed everything in a span of mere months, there could be enormous new innovations that are to come in the next few years. 

This is probably like being in the 1950s – where everything is exciting and every field is getting rapidly changed. US has all the energy sources, a large market, the biggest labs, the most innovative companies & the best of universities. If you cannot win with all these advantages, there must be something wrong. 

Do you want to build that tomorrow or keep complaining about losing the yesterday?

It’s worth reading twice. And here’s a few more of the so ons:

Internet of things, quantified self, nano technology, molecular manufacturing, genetic engineering, vertical farming, crypto currencies, block chain technology, crowd funding and fintech, wearables, quantum computing, augmented knowledge…. I could continue, but we all know that there’s enough opportunity in this list for every industry known to humanity, and the prices of all of them are dropping – which means the cost of innovating with them is low and the opportunity for value creation is high.

Now lets get excited and lets get going.

Follow me on SnapChat – search ‘Sammartron’ for more business insight.

It's the value we create that matters

Sad little boy

It is possible to earn a lot of money and create very little value for society.

It is possible to earn very little money and create incredible value for society.

So how to do we know when we have it right, for a startup or even life? Here’s my measure – how much would people miss you if you didn’t turn up? And how long would it take for them to notice after you stopped turning up? The more our not being there gets noticed, the more valuable we know our work is. I’m pretty sure the world wouldn’t notice if Wall St took a year a two off. While I’m sure most children will notice the day their mum and dad didn’t come home.

How long would it take for customers to reach out to your startup once you stopped shipping or your software stopped working? It’s an interesting question. And while we often hope to attract a large quantum of customers and scale, I’d rather have 100 people who really cared if I wasn’t there, than a million people who clicked elsewhere the moment I disappeared.

Follow me on SnapChat – search ‘Sammartron’ for more business insight.

Why experiences are the new consumerism

The Experience Economy

It’s not surprising that ‘consumerism‘ emerged as a thing in the post World War 2 era. The last 50 years of the 20th century was a time when we quickly homogenised under the influence of the TV Industrial Complex. We all drifted into a suburban symmetry with little variety in the western world. People had to find a way to display their worth to their tribes and wider community. As many of us entered administrative jobs (think white collar clerk work) which literally looked like we were doing the same things, we needed to find a way to show our position in the hierarchy. And boom – hello consumer land. The more people had, a better car, better clothing, more expensive toys, better furniture, the more successful people would think we were. It was an unwritten ground rule we all abided by. And it was a very effective way to show people that we were creating ‘economic value’. Someone’s consumption patterns told the story of where they sat in society.

I’m starting to wonder if the ‘experience economy’ has the same underlying driver. Sure, we all claim that we’ve moved beyond shallow consumerism, that experiences are more valuable and worthy, but it could be that they provide the same emotional benefit and are just different tactic.

For me it’s more than a coincidence that the experience economy is emerging at a time when people now have the tools to show off their experiences. In the past, our experiences were invisible to all but those who viewed a photo album in our home or heard our story first hand, face to face. Now our experiences are only matched by our desire to share them on every social tool we use. The shift to the experience economy has come at a time when it’s finally possible to share what we do, in ways we never could. Just like conspicuous consumption, experiences can now be shared with strangers, loose associates and colleagues. Even the profile pic is best suited to a tropical locale, or the burning man festival. It sends a message just like a fancy automobile can.

I don’t know if this idea resonates with anyone else, but I do now that a great deal of our human drivers have not changed in 200,000 years – just the ways we express them does.

You should totally read my book – The Great Fragmentation.

Ignore what the teacher told you, and just make things up

old school

Watch a 5 year old kid play for half a day and you’ll see levels of creativity that’ll blow your mind. You’ll wonder in awe where their natural ability to ‘make things up’ comes from. You’ll be inspired by how they see the world and what it makes them think and do.

We used to see the world that way too.  But what happened was for the first 18 years of our lives we got told how to see the world. In fact, the concept of making things up brings back some very strong and personal memories for me. I can remember when I reached High School (Grade 7-12 in Australia) and that it was no longer Ok to make things up. We had to reference where we got our ideas from. All of a sudden my opinion didn’t matter. What started to matter was researching someone else’s opinion, someone who had been ordained by industrialised society and had been published. It felt so weird. Why couldn’t I just write what I think? Why did it have to be a quotation from someone else? Why did what they think matter more than what I think? We all got taught  got taught stop thinking and start rehearsing. Rehearsing for what you may ask?

Rehearsing the lines for some kind of monetary industrial pantomime.

We were getting taught how to play inside the the modern economy.  An elongated economic play in which we would become ‘extras’ in someone else’s dreamscape. Someone else had the starring role, but they needed all sorts of support so they could be the stars of the show. And we went along with it. But now the exact opposite of what we got told, is where all the value is being created.

The trick they pulled on us to not have any original ideas, to not create anything new, to keep our opinion to ourselves is rapidly becoming redundant. And this gets me excited. We all still have the ability to just ‘make things up’. Now that we have access to the tools to create anything, now that the economy is being totally redesigned, we just need to forget what we got told, and start to write some of our own lines.

New Book – The Great Fragmentation – out now.