Archive for the 'Life' Category

Why do we need money?

Published on March 31, 2013 in Life, with 2 Comments. Tags: , , , , , , , , .

Here’s a question for you: if I was to give you money for reading this post, what would you spend it on? $100,000 to be exact. Imagine what you could do with that money? Now hold that thought, because I’m going to ask you again after you walk through this thought experiment.

Our economic system is designed to make us think that making more money is a good thing. Society is measured on GDP which is based on the concept of aggregate demand. What we spend reflects what our demand at all price points are for the good and services in an economy, thereby allowing economists to measure the value of the economy (or better said, to price the value of gross domestic product). So if more aggregate spending makes a bigger GDP, then more personal spending is considered wealth.

And bingo, that’s why we have a materialistic society. But without going into the value judgement of that, let’s dig deeper. Because to spend, it means you need money. Money you generate from an income. (It’s why you want that pay rise.) The more money we can make, the better off we are…we are made to think. Because after all, more money means more spending. And more spending results in a enthusiastic nod from the economists that society has a more valuable economy.

Let’s break this down now: what is money? When it all boils down, money is an agreement in society, to represent value (because money itself has no real intrinsic value outside of the raw materials). Therefore, with money, you can exchange that value with something else of value. Which brings me to the question behind this post: what value does money allow us to purchase?

I mean, buying a car is value — but what are we really buying? It is the convenience enabled by this transportation? It is the dignity generated from being associated with an asset?

What value does money purchase?
As humans, we are governed by two instincts: survival and procreation. If we lived in caves with no food stores, we would spend every waking hour trying to generate sources of food. And because all living beings have a life cycle that eventually ends, we’ve developed an instinct in procreation, which I believe is ‘survival’ in a different sense: of the genes, the kind, the species we are. These two instincts are at the core of value that we purchase with value, but there’s more.

We no longer live in caves. We’ve freed ourselves from this burden of daily food generation to enable our being — which in itself reflects a fundamental concept, which is “time”. Significant, because we remove this burden by purchasing time — we go to restaurants and we purchase tomatoes from the super market, buying outputs from the labour of other people who did what we would have done ourselves (what’s stoping you from growing a tomato in your backyard?). But what’s even more significant, is that as we generate value elsewhere in society so that we can then purchase other people’s time (which we would have otherwise had to do ourselves), we end up having more available time. And humans then ask: what next?

Given we have senses in hearing, touching, seeing, smelling and tasting — by activating our senses, we give a sense of purpose to what we do with our available time. Which is why we seek an ‘experience’. The pursuit of experiences give us, at their base level, a sense of sensory fulfillment.

I believe a final super-category outside of survival, procreation, time and experiences  is power. Because without power, we cannot control our behaviour. We cannot determine how we use our time. Power enables us to shape our environment in a way which further aligns with our goals in survival, procreation, and stimulating our senses. Without power, we can’t use our time. Freedom in my eyes — one of the key dimensions to success in life — is a combination of time and power: the ability to do what you want whenever you want.

Applying those thoughts
You go to the doctor to ensure you are healthy: that’s survival. But you go to the dermatologist to clear that awkward (but harmless) skin imperfection on your face: that’s your desire to remove an impediment to your status in society, which amongst other things, can impact your ability to procreate. You purchase a car so that you can experience more in life, buy time so that you can do more, and give you a rush due to the sensory excitement of driving — but potentially also to have status which will lead to better procreation opportunities.

In my eyes, of all the things I mentioned above, the ultimate of all value is survival and procreation. To say purchasing time is the ultimate, is not true because it’s simply a means to an end. But time, despite this, is probably the most significant of all the factors for what we purchase. If you dedicated you life to one goal, arguably you will be able to get access to that prize. But it could take years, require other people to assist — purchasing access provides value. Think of how advertisers purchase space in publications: they purchase access to an audience that has taken many years to develop by the mast head. (But if the company, like how Apple has, invests in building its own brand and audience — the need to advertise and access those audiences becomes less necessary.)

I mean hey, who needs to purchase more time when you can survive, procreate, and have your senses stimulated with the power to do so as you please? Well, of course we wil always feel like we need more time: because we will never get enough of a good thing. And which is why time dominates our purchasing decisions.

What do we need money for?
Now let’s me ask that question again: if I was to give you $100,000 for the labour you went through to read this post — what would you spend it on? And when you’ve answered that, is money necessary for you to achieve that?

If money is the goal in your life, then maybe you’ve drunk too much cool-aid from the economists who have mistakenly identified the basis of aggregate demand. Which is done on the assumption that humans have unlimited wants and are only limited in achieving them due to scarcity in supply. And short of disputing the fundamental problem in our society, which is based on an inappropriate theoretical understanding of what us human’s desire in life, just remember this one indisputable fact: money purchases value, but money doesn’t create value (in the ultimate sense).

Benjamin Franklin made the observation that time is money, which as a cliche, is to mean your time is valuable like how it is to making money. I wonder though when he said it, he actually called it out for what it really is.

Measuring success

Published on September 29, 2012 in Life, with 0 Comments. Tags: , , , , , , , .

In March this year, I posted my still evolving thought process on what success is. In the post, I said how success, like religion, is a personal thing and so there is no right answer. But I proposed a framework to think about the question: whereby I defined success as having three dimensions, which have no minimum or maximum value but simply are a constant pursuit of development. Those dimensions are existence, freedom, and impact and which I suggest you read before continuing with this post.

The problem with that framework, is it actually is still too broad. And where it lacks in detail, it also lacks in something fundamental: metrics to measure success. Six months later, this is how my thought process has evolved — still evolving, but I hope can stimulate your own thinking about your life.

On the pursuit of existence
You can define existence as a variety of ways, but I think a fundamental concept is your life expectancy as well as the quality of it. How long can you live, in years, to your full ability — being the ultimate (never ending) goal.

Number of years you are alive I think is a pretty self-explanatory thing to say as a goal: 75 years is better than 50 years. Less obvious, is how able you are: a 65 year old on life support due to lungs, kidneys and liver issues from poor dietary habits, is by no means the same as a healthy 65 year old. If life span is the number to measure this dimension of success, then your health is the factor to create an expected value: 65 years at 25% capacity versus 65 at 95% is 16 years versus 62 years. Literally, a life time apart.

Which is why your nutrition matters: look after yourself in your 20s and you’ll be doing better in your 40s, not just in life span but life quality. Drinking soft drinks at 30 once  a day hurts your  long term health quality and will reduce your life span expected value. We forget that, and it’s only when people get older do they regret not thinking about this (so I’m told).

But then there is a flip side to being a health freak:  being 30 worrying about what you eat hurts you in different ways, like your freedom and experiences. More on that below.

On the pursuit of freedom
Whether you claim to chase money or not, the point is moot: money is what makes the world go around because it’s what we’ve agreed to be a mutually exchagable form of value. Money simply represents value, and its accumulation has value not from the paper bills/plastic notes/lumps of metal itself that money is printed as but what it represents: purchasing power to save your time (not a representation of your capital base, which is materialism).

In society, we are so focussed on the material and the bigger numbers but we forget the character of what matters. But its key to understand income  – recurring monetary inflow — is such a key concept to success, because it enables freedom: without the ability to pay for food and shelter, you’re going to spend the rest of your waking time trying to find solutions to these issues, an opportunity cost.

When I spent nine months backpacking around Europe in 2005, I observed how people travelling, like how I had become, are very primitive in their activities: look for a new hostel to sleep in, find a new place to eat food.  I was quite literally, a cave man. Even with cash to pay for these, the search took time. Now imagine you need a summer job as a working holiday to experience the travel, and you’ve just knocked out more time outs during the day to experience your “travel”. Travel might be temporary, but rephrase what I said now for regular life and the point remains. “Living” means surviving as its most basic, but we can do better than that as humans.

When it comes to measuring success on freedom, understandably income should be considered a core benchmark. Not how much you spend, but how much you can make — that spending power gives you not material wealth, but something much more valuable: your time. Income can buy you food, shelter, and the ability to outsource or delegate functions in your life that time would otherwise need to be expended.

However, how much you make is not the ultimate because its not secured. Which is why the ultimate measure of income in capital: after all, capital is simply the accumulation of income. Capital is the result of income, without the need to personally exert yourself from getting the benefit of it; more specifically, capital can been monetised, generating a passive income which is the ultimate in enabling freedom.

Therefore when it comes to success in terms of capital, $100,000 is much more valuable than $10,000, obviously. But a subtle point to remember, is that to get the value of capital it either is locked up making a passive income (say, in real estate with a rental) or it’s liquid so that it enables the ability for you to use that purchasing power for your life.

One million dollars in the bank that can be withdrawn tomorrow? Very successful. One million dollars invested in a property making a 10% return? Also, very successful though not very liquid:but that’s ok becayse it’s generating $100,000 a year in passive income, on top of the capital base that grows through capital gain. One million dollars locked up in an stock market investment that can’t be liquidated for a month? Not good — but very good if it generates a 10% return on say, the stock market in that month.

But simply attaining capital is not life accomplished because if inflation rates are 9%, then that 10% return on real estate and stock is actually only a 1% return. That passive income (or rather, purchasing power) now is only 1% of the capital base. And that’s fine because capital has value in immediate liquidity (also purchasing power), but sometimes it’s worth trading short term liquidity to grow that capital base otherwise inflation will catch up and any income dependent on that capital will actually erode in value. Capital generates passive income, but that capital needs to be secured through investment to not have it be eroded.

Therefore the ultimate measure of capital is lifetime cashflow in real purchasing power. You can try to accumulate it, and you want to grow it above inflation. But once you’ve done that, you’re now getting greedy: the time cost in your life now actually impacts on your freedom, the whole point of capital accumulation, passive income and purchasing power. But as you dance with growing your capital base , income stream, and ultimately freedom, let’s not forget being busy we dream of more time, but when you have too much time on your hands it can be downright depressing. Enter impact.

On the pursuit of impact
Impact, like existence and freedom, is a core tenent to life about what I think matters if you want to define success. Impact not only gives you purpose but it gives you direction in life. Impact boost your self esteem. Better still, impact benefits your surroundings better than how you found it.

However impact is a hard thing to quantify. Is it number of people you “impacted” and what does that mean? As a raw score, sure helping one person once a day is better than helping one person once a month. But nothing in life is free: “helping” often comes with a benefit for the other party, such as profit for the business merchant, conversion for the religious zealot, or an orgasm for the sexual expectant.

If you go though life travelling the world, you leave an impact through the people you meet; if you toil yourself to build a business, you leave an impact through the products you create. But when impact is simply measured by “number of people”, it’s actually not all that solid: their needs to be not a mutual exchange, but a net positive where an interaction outputted more than what was entered with.

So what makes it a net positive? When you’ve really touched someone. But you can never know if you did that, so failing that we need to make sure one person was touched by the impact: you. You might have spent three months suffering, but that story will inspire, educate, and benefit 1000 other people in a profound way — and we may never know until your funeral, though you remember those three months. You might travel speaking to one hundred thousand people, of which only 1% where meaningful conversations: but no one remembers your name to prove it, but you remember the experience.

So when it comes to measuring impact, it’s not just number of people but number of people’s who’s lives you have touched. And by touch, it’s not a number but a meaningful impact that comes from your own life experience. One hour a day in a homeless soup kitchen is a different kind of impact from one hour a day building a game that someone plays on their smart phone. And neither is better than the other, so long as someone’s soul was touched; the most important one, being your own.

Meaning, whatever it is you’re doing, you’re leaving an impact by touching the lives of other people, but one person who we can measure is your own in the form of experience which is the only number that we can reliably count.

Success: measured
For those that think in numbers, success as a number  = (Number of years you are alive times by how able you are due to health) multiplied by (capital base times by return) multiplied by (number of people impacted times percentage that were truly touched). That gives the theoretical optimum to the ultimate thing.

Otherwise said, if you have a long healthy long life and you have a lot of purchasing power to buy freedom, then you have more time to impact which ultimately leads to the only thing that matters: number of life experiences (which along they way, benefited others as well that increased their own existence, freedom, and impact).

And that, I believe, is a what a rich life is.

Defining success and its pursuit

Published on March 21, 2012 in Life, with 2 Comments. Tags: , , , .

People often think I’m joking when I say I’m not successful. They perceive the jobs I’ve had, the education I’ve gone through, the media exposure I’ve generated, and other fake indicators of success as somehow meaning I’ve made it. Not quite, status symbols are not what I consider success.

If you’re not quite sure what I mean, let’s say you measure success on money — then how much is enough? Or for those that consider fame to be success — how many media mentions is enough?

A few months ago, I did my first ever meditation and came up with an amazing insight on some thoughts that had been stewing in my head. It was what I realised was *my* meaning to life — what I needed to be happy in life. Today, I Tweeted a summary version of that insight and have had several people retweet and favourite it, flagging to me that maybe my meaning to life is actually something that a lot of other people can relate to.

So here it is my thought process; who knows maybe it can help you define your own success.

Existence 
What’s the point of life if you can’t be alive to enjoy it? That one question should pretty much explain what I mean by this — and you can broaden this to mean more than that. For example, our mental health is just as important as our physical health — family is something we consider a chore, but I personally consider an emotional need. Good nutrition, regular excercise, a close connection with your family, good friends around you, being in control of the demons in your head: each of us can interpret our existence in different ways, but they all fundamentally point to the same fact that without your full and able self, there is no life.

Freedom
When I went backpacking in 2005 for nine months, I would often start the day not knowing what country I would end up in. I was in between finishing my university degree and a guaranteed job at PricewaterhouseCoopers; I was living off my savings and had no need to work that year; and had complete freedom to do whatever I wanted whenever. I had never been happier.

Freedom to me is a relative term: personally, if I lost the functional use of all of my limbs or was convicted for a life in prison, I would die on the inside because my personality perceives those aspects for my life as essential to my freedom. That’s not to say I correctly perceive it,  but that’s my own personal interpretation to freedom. And without drilling down into this any more with the many anecdotes to guide this insight for me, having creative control can be one of the most liberating experiences you will ever experience and can bestow on someone. I call that freedom.

Impact
If you drill into the psychology of great entrepreneurs, it’s not money or fame that drives them even though they may say it is. It’s the fact they are building something of value. We’re all like that — our self esteem benefits from knowing we’ve done something that improves our surrounding. That’s why charity is deep down such a selfish act: it makes us feel good.

Again, impact is different for different people that no one person has the right answer. For me, I’ve come to realise the impact I want to have on the world is something that improves the quality of life for us all in society. What that means, is something I’d rather save for when I do it and can look back  but in essence I get extreme satisfaction that I’ve played a role that improves life on this planet by enabling the entrepreneurs and scientists who have the potential to do that.

 

What’s success?

The American forefathers may have not only already come up with this before me but put it much more eloquently. Life, Liberty and the pursuit of Happiness.  Whatever you want to call it, it begs the big question: what does existence (life), freedom (liberty), and impact (pursuit of happiness) have to do with success? Money is not success. But income is: because that enables freedom. Fame is not success. But influence is: it enables you do perform the actions you believe ought to occur.

Success, like religion, should be a personal thing. There isn’t a right answer — but above, I believe is the framework that we can all apply to our own lives to think about what we want to do with our lives. Instead of thinking of what should you do, instead ask yourself — how can I exist more fully, have more freedom, and have a bigger impact with my being? This framework might not be the right one, but it’s a start to asking ourselves all the right questions that lead to the answer.