Archive for the 'Society' Category

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Rethinking capitalism

The economy. Government. How business operates. Whatever your views, I think we all agree something is broken. I’m going to propose a set of ideas that could at their fundamental level change how we perceive the world. (Warning: it’s going to help you read the linked posts to follow the thinking.)

Background
Let’s start with in 2009, how I picked my beef with capitalism:

Money, you see is just a way to sustain something. It shouldn’t be the end-goal of business, and it’s that point that fundamentally irritates me about capitalism. That being the whole focus on it being about returns on capital – not returns on humanity.

In 2011, I said how we are measuring the wrong thing in society as progress. Why is it always about measuring more consumption (GDP), and not generating more ‘actual’ happiness like better health outcomes? Certainly the guy that invented GDP didn’t think of it how we see it now.

In 2012, a thought I had ended up resonating with a lot of people.

…which I then expanded in a post and several months later I explained as a way to measure success.

Last year in March 2013, I asked a question around why do we need money — which linked it to my recurring theme round time and value. Specifically, “money purchases value, but money doesn’t create value (in the ultimate sense)”. Which furthered my thinking that making more and more money isn’t the goal, a pretty big realisation for me.

The five year test
What do I have to say now — after being an auditor for financial markets, a recognised intrapreneur at a big company, a manager in a startup, an investor at a venture capital firm, a foreign entrepreneur with no safety net in the world’s biggest (and most ruthless) economy that made money with no help  and then lost it requiring help by outside investors to get back to where I started.  Where I’ve run a business not only with traditional employee considerations, but an organisation where 40%+ of the 1000+ customers have come back to work as volunteers and run it, like short-term employees but with more passion. And might I add, has radically transformed my views about what motivates people

In short, I now feel like i’ve seen enough where I can apply business academia to real world experience. And so do I read back on all my posts in the last five years and think differently on the fundamental concepts that underpin our society?

Surprisingly, I seem to agree with my thoughts even more.

Today I met up with an old friend Dr Donnie Maclurcan who mentioned how he recalls my first post (the first link) and around that time had begun his own journey that will lead to a book called living in a Post-growth society released next year, which you can read in summary in this recent Guardian piece. Donnie has a very strong view that we need to rethink corporate structures as being the fundamental thing that needs to be changed and his view being they are non-profit. I challenged his ideas with my actual experiences, such as the incentive of an entrepreneur or needing capital when it’s not available by banks, which brought out two interesting points.

The first is actually linked to my freedom dimension of success, where I say you need to define how much money you want to make in life and draw a line. Otherwise, you sacrifice the other dimensions in life. It’s a personal decision, but let’s say for arguments sake you could make you current annual salary (or double) on a recurring base. If you were to make that every year — you could maintain your current lifestyle. And if you could maintain your current lifestyle, but have more time — you could have a better life, right? Why would you need more money? To buy something shiny and feed your ego?

But the second one that I found intriguing, was how do you motivate private investors to want to ‘invest’ in a non-profit. And his idea was that once the non-profit makes, say $1m a year it needs to pay back the loan with a 300% interest rate. Thinking this through, this is what owning equity does as a best case scenario. I know I think every day about how I pay back my investors with a return on their capital, beyond paper valuations and actual cash dividends (that is, when I’m not worried about meeting payroll and operating expenses).

A vision for the future
Assuming you’ve been able to follow the thoughts above, here I’ll attempt to finally patch them together on a new type of capitalism. A type that keeps the current system but fixes it at the fundamental level with better incentives.

  • Make all companies non-profits with entrepreneurs who create them guaranteed a permanent salary for their work as the reward. (Like owning equity, except it’s not equity.) This fixes the incentive issue for the people who initiate the value creation.
  • Private investment can still occur in enterprises, but instead of owning equity, they are simply considered debt with a high interest rate. This fixes the issue of the incentive issue for capital to fund ventures.
    • It’s no coincidence that in silicon valley, one of the most forward thinking places right now when it comes to the global economy  (meaning, new jobs and new industries are being created more so than anywhere else) that the predominant instrument used in startup financing is called “convertible debt” — which means, it’s debt and if it doesn’t convert, it turns into equity (which in practice, is what happens).

Why this is such a big thought, is because it removes the need of “owning equity” which to Donnie’s point is the fundamental problem in our society. I’m not entirely convinced on this, but consider this:

  • As all companies are non-profits, the destruction of value that can occur in the public markets is no longer and companies can instead focus on re-investing profits into things like R&D, customer value, and employee satisfaction. Like Bosche, one of the word’s biggest “big business” non-profits does.
  • Because there isn’t this focus on the mythical “shareholder value”, we can see companies doing what USAA does (one of the biggest banks in America with the best scores across all companies for customer and employee satisfaction) which is talk about “member value” or their customers.
    • If you think about it, the entire point of a business should be to serve its customers. Not its employees or its shareholders (though they have a duty to them), but the people who purchase the value created by the business. And so by changing this tone from the top, we will see a complete re-think by companies on how they operate. We’ll see better run companies.

Let’s now extend this to government just to complete the circle. Why the hell do we measure our progress in society with how much money we spend each year, and not what our average life expectancy is? Our length of life and our health quality I think is a more important measure for society than how much money we spend, which is why we have this materialistic culture that leads us to be on a treadmill of chasing the wrong things. If we no longer focus on profits, then we also need to match that with no longer focussing on consumpsion.

  • Make life expectancy our number one measure of success. GDP growth, unemployment rate — ok cool, I care about that because money matters. But why don’t we make average life expectancy the number one measure? Can you imagine how this could transform our society if politicians suddenly were accountable for our livelihoods?
  • If I sound like a hippy, let me throw this thought at you: one day, when the population growth stagnates and starts declining we are going to have a crisis in our society because we measure “growth” of the economy which is fundamentally dependent on population growth. What are elections going to be fought about then? Let’s drop population size growth and instead focus on population quality growth.

Go ahead. Tell me the thoughts in this post are crazy. And yes, maybe they are  — but just maybe there is something about this being the future. I love capitalism and like democracy, want to keep those systems — but we all agree they are flawed and we can fix them.

In the case of capitalism this is doing it fundamentally at what makes is so powerful: around incentives. If we can rethink some fundamental definitions of what progress is in life, society, business, and government — we may actually create a better life.

(On a related theme: this 2012 post will get you thinking on how we fix democracy at the fundamental level but that’s for another day.)

Be gluey: a leader in function, not name

I just read this great article on leadership quotes. Go on, read it. Which brings me to share one of the first lessons I learned of what leadership is.

In my high school, cadets was a major part of the school’s tradition which basically meant we dressed up in army clothes and got to roll around in the mud every so often. Our cadet unit did an expedition in the Australian outback which was a 40 kilometre trek and we had to travel with our backpacks (filled with camping gear, cooking utensils, etc). In the cadet unit, there was a platoon and each platoon had corporals all responsible for a half dozen cadets in ‘sections’ in addition to the two sergeants and a commanding officer.

This particular platoon had to make its way up the hills in the intense heat, along with an embedded ‘commando’ corporal from the commando platoon who considered himself a ‘leader’, which he was. As corporals, you would assume that they would lead the charge, which is what the commando corporal did. It was, after all, important to have someone navigate where we were going and something the ‘section’ corporal would have done normally,

As the front of pack role was taken up, not to be made redundant in his role as the ‘section’ corporal, he instead  kept an eye on his guys, so would shuffle through the line that was made. It would tun out that as the day progressed, one of the cadets was lagging. Slightly overweight, but also by no means because it was easy to carry 10-20 kilograms on your back in this heat and up a hill, he was practically at breaking point. Not allowing it to be a discussion but with great relief, this section corporal had him hand over his backpack who made it up the hill with both of their backpacks so the crew could make it up the hill quicker and by dusk.

Observing this taught me an important life lesson: leadership is about being the last guy in line. Leadership is not about walking in front of a group of people; it’s about helping the fat guy that’s behind everyone and holding back the group.

In my restaurant waiter days as a teenager, I learned the best kind of waiter is one that is invisible: filling your water without you noticing, clearing your plates without you asking, reading your mind before it has a chance to be processed by you as needing it done. That’s what the best kind of leader is my eyes: like what glue does or like what inspiration provides, it’s invisible but the essential reason why things are happening.

Put another way, be gluey. Be a leader in function, not name.

Global citizenship

Due to unexpected events, I’ve had to spend five weeks in Australia in the last six months. I’ve also by no means had time for holidays with a backlog of work so it’s made me wonder how practical a dual location life is.

For one thing, its completely redefined my view on being away from my family and friends. While not without some issues on my business, the upside has been my aging parents are happier, I’m more connected with old friends (and family, which makes me happy), and less home sick. Meanwhile I can continue to chase my ambitions in America.

Why would you want this?

  • Because we can now. Flights are quicker and cheaper. They say in ten years time, Sydney to London will take 4 hours (currently 24 hours). But even then, today it takes 14 hours Sydney to San Francisco; and 10 hours SF to London. With inflight wifi becoming standard (increasingly on domestic flights now, and I’ve done it once before on a international flight over the Pacific ocean so only a matter of time), it’s no longer wasted time.
  • Work is becoming more flexible. For example, smart engineers and designers I know just contract now, and small businesses give you flexibility when it doesn’t hurt the business — like how my old employer Vast had a virtual team for many years to attract top talent. Even our StartupHouse team is currently spread across three continents right now (and it’s a real estate business!) not to mention the entire StartupBus leadership team live in as many cities as we have people. While face time is crucial, I have to say from a business point of view, I’ve unexpectedly discovered having such strong networks in multiple locations opens up opportunities not to mention increased satisfaction from the team in the job.
  • health care is becoming more globalised  where medical tourism is a very real trend. I’ve heard of people I know getting plastic surgery in Thailand; eye laser surgery in Singapore; jaw bone surgery in Bulgaria — all because it was cheaper. Actually just this week, I was getting medical care in Australia for a quick checkup and prescription, which ended up being way cheaper without insurance than what it costs in the US with insurance.
  • Education is becoming more flexible, with remote study for adults and what we are seeing with kids being brought up on iPads is just the start. The success I’ve been hearing about AltSchool (where two former colleagues of mine are now working there) is another example how technology is enabling us to have more flexible and higher quality education

Of course, this isn’t a life for all people. Most people are quite happy to stay in the one location and for reasons of work can’t be flexible. But for those of us like me, with the travel bug or with global ambitions in business or with family spread across the world or with a multi-geography upbringing — the advances in technology are now enabling us to have a richer fuller life we desire.

Why do we need money?

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

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

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.

Misinterpreting Kuznets

For years I’ve been thinking that something just doesn’t feel right with the world. It started with when I joined PricewaterhouseCoopers in 2005 and would observe how we’d always be ‘growing’ by 15% a year. Little things didn’t feel right like despite growing, people felt strained; and who cares if we grew that much? Growth in business is justified on the basis of economies of scale whereby the bigger we got the more efficient business was, but fresh out of university, I couldn’t help think about the other side of that theory: diseconomies of scale, where the bigger we got the more *inefficient* we were.  And if we grew, what would that mean? A pay rise? Well, it better because if my salary grew below the inflation rate, I’d be effectively getting paid less. Our society was set up like this never-ending tread mill. Make more money, get to spend more money; spend more money, need to make more money.

Two years I go, I admitted I didn’t know the answer but I knew the end goal was “happiness”. And instead of measuring success based on wealth, I’ve come to appreciate success comes from wellness. We don’t just want an increased standard of living, which related to the definition of wealth, is about the accumulation of capital and generation of income. No, what we human’s want is quality of life, which like the concept of wellness, is about allowing us human’s to be at our optimum.

And I’m not the first to realise that.

The US Congress commissioned Simon Kuznets to create a system that would measure the nation’s productivity in order to better understand how to tackle the Great Depression. Despite this, he immediately said not to use it as a measure for welfare. He invented the concept of GDP to do this, and had this to say in his very first report to the U.S. Congress in 1934: “…the welfare of a nation [can] scarcely be inferred from a measure of national income…”. In 1962, Kuznets stated: “Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what.”

Everyone knows GDP has weaknesses. First of all, it doesn’t count the things that can’t be measured. Externalities like pollution, which during my university days a decade ago were justified as not being included in the economy because they couldn’t be measured, simply were ignored in economics as if they didn’t exist. (And thank God Australia is leading the way with the carbon tax, to help correct this fundamental flaw in economics.) But also just as problematic, is the fact unpaid labour isn’t counted.

Why does this matter? Because policy decisions are being made, and it biases activity that can be measured. Spending money on pollution cleanup, is seen as a much better way to operate than preserving the environment which doesn’t lead to income. This simplistic way of measuring not only will divert wealth creation (as true costs are not measured, distorting appropriate decisions), but it also doesn’t discriminiate on the inputs to production so that true quality of life value is created rather than just standard of life which chases income generation.

As this great piece six years ago by The Atlantic states:

Politicians generally see this decay through a well-worn ideological lens: conservatives root for the market, liberals for the government. But in fact these two ‘sectors’ are, in this respect at least, merely different sides of the same coin: both government and the private market grow by cannibalizing the family and community realms that ultimately nurture and sustain us.

I think what we need to do is realise, that wealth creation and its associated metric GDP, is simply one dimension to us being happy as humans. A second is our health, because without being alive and able to enjoy life, then what’s the point? What value is there in society if you’re dead before you get to contribute to it? And so with that, why isn’t life expectancy considered a core part of the measurement of our society’s progress, equal or even above what GDP is?

A third however, is something I know but still can’t place my finger on yet. I don’t know what to call it, other than perhaps the pursuit of happiness. When we manage to feed ourselves and keep a roof on top of our heads, then what? We need to be engaged in the mind, always looking to grow internally. We want to learn and experience the world, and always feel like we are progressing. Life’s a journey to Ithaca, where we “pray that the road is long”. And the science backs this up: our dopamine levels are at its highest at the signal of a reward (as opposed to simply the pursuit and then the actual achievement of it).

This is not me trying to push a solution to a problem that doesn’t exist. The problem does exist and it matters: we’re using growth as a proxy for our progress, and yet damaging the environment that keeps us alive which is one side affect of this approach. Our whole system of measure is GDP growth which is fundamentally predicated on the basis of a rising population, but in the next 50 years we’re going to see the western world’s population stagnate which will de-accelerate GDP growth. What are we going to do when we stop growing? We’re operating on a house of cards.

Most pressingly, we are now experiencing one of the biggest financial crises of our collective conciseness with our political leaders unable to decide or able to execute a solution to get out of the mess. Which is ironic, because the concept of GDP was invented the last time we experienced global economic turmoil.

It makes you wonder that maybe the solution isn’t just action, but an entirely different way to how we see ourselves.

Everest syndrome is the biggest crime in our society

US President Barack Obama made an observation last April:

One of the things every time I come to Silicon Valley that I’m inspired by but I’m also frustrated by is how many smart people are here, but also frustrated that I always hear stories about how we can’t find enough engineers, we can’t find enough computer programmers.  You know what, that means our education system is not working the way it should, and that’s got to start early.

A country facing recession and high unemployment, and yet Silicon Valley is in a talent crunch where companies like Google and Facebook have resorted to constantly acquiring companies now just for the talent. How so?

My friend Mike Casey (more on him below) and I  have come to call this “Everest Syndrome”. It’s where our smartest men and women are wasting their potential in middle management of a large corporation. Where they climb the corporate peaks for the elusive goal of getting to the top, many killing themselves along the way and only to find out how lonely it is at the top.

I believe it is the biggest crime of our time, as these people should be at the forefront of our economy, driving its progress and ultimately increasing our standard of living.

The Everest view

Sketching the picture with some stats from Australia
I’m good friends with the guys that run Grad connection, the largest graduate recruitment website in Australia and the fifth biggest jobs portal in the country. I asked one of the founders Mike Casey to pull out some numbers to illustrate how graduates enter the workforce. Although their total database is much higher, we were able to get 17,887 students who specified a specific course they had studied — which represents about 12% of the 150,000 students that graduate each year.

While I’m sure we could get more scientific on this sampling approach as there’s a bias on their employers and hence graduates, it still paints a fairly representative picture on the broad base ‘commercial’ disciplines. Gradconnection has just five categories which account for 88% of the total sample population, which are as follows:

  • Commerce: 31%
  • Accounting: 20%
  • Banking: 18%
  • Information Technology: 11%
  • Law: 8%

Accounting and banking means 38% of graduates end up in financial services, and the lawyers grow that professional services group up 8% to 46%. (For context, services make 71% of the Australian economy — with the topic of this post referring to the now distinguishable quaternary sector emerging.) That’s not a good thing and here’s why.

Student eeePC user

A story by the storyteller
I went to a school that made me think doing a business degree was the right thing; and when at university, thought working at a big bank or professional services firm was the ultimate goal and what would make me successful in life. Those things in themselves are not a bad thing, but the attitudes they created were: at high school, I thought the people studying art were wasting time; and at university, I convinced a former school mate to make our newspaper venture a non-profit university society rather than an actual business that his father was willing to bank roll. The reason? I didn’t want to threaten my studies by a project, that would prevent me from “something important” like getting a job at a big firm.

That attitude I had — fostered by my environment — is pathetic. (Although ironically, this “non-profit” which challenged us to find a useful product/market fit exposed me to the Internet and led me to develop my first business idea of electronic newspapers…which fortunately never went passed the business plan.) Everyone can similarly liken it to how every good family has children that become lawyers or doctors, because that’s considered a good direction in life. My father — a lawyer of nearly 50 years now –often complains about the over-supply of lawyers in the industry: there just isn’t enough work to go around to sustain all these graduates.

 

We need graduates that originate value
I’m a chartered accountant and I’m proud to have survived the grueling process to become one. But like all professions, my training  has me biased towards being a service provider. Service providers add a lot of value and we need them, but the thing is that they are optimisers of value, not originators of value.

If you had a nasty court case to handle due to a marriage breakdown, business conflict or car accident — then my father is a God-send because he can help you solve those issues with his expertise. But what happens where you don’t have any marriage, business or car issues that require his help? Well, you’re happy and he has no work. Service providers are inherently dependent on the rest of society, which is why there can only be a fixed supply of them.

This is very different to what I regard the originators of value. The art students I shunned at high school, can now do something in technology that has them one of the most sought after talent: design interfaces. Apple, a company that has brought interface design into the core of the company’s approach to building technology, will probably become the most valuable company in the world ever to have existed.

Similarly, scientists and engineers: they are builders. They can build value, for any industry and a solution to any problem limited only by their creativity. We will never have an excess supply of computer science students, because if they can’t get employed they can simply leverage their skills to entrepreneurship and employ themselves!

Accounting is the language of the business world and it’s why I decided on that path; but I’ve now come to appreciate computer science as the language of the information society. Those who smartly go in that direction, will be the leaders of our future.

future retro

We need more people in startups. But startups are not for everyone
If our smart people need to get out of the big corporations as a postulate, where should they go? They should be working in startups. And instead of being service providers at big banks, they should be product builders at disruptive companies.

But not everyone. I’ve observed multiple times personalities that are more detail-orientated and prefer structure tend to get more easily frustrated in the organised chaos that is a startup. They focus on execution, whereas a startup is more experimental and adaptive — and so clash with people who are the latter. While differences in personalities is a given thing in any work environment, the issue with these clashes is that you need people who can hold their head and not blow up. Conflict is fine, as long as it’s managed — and I’ve found more structure-orientated people tend to freak out more and then affect the work of their colleagues (which is the real issue, not the fact they need a more structured work environment).

But with that, is the only disclaimer I’m willing to give to Everest Syndrome. If there was one thing I could change in the world, it would be that. Because ahead of poverty, hunger, and war — it is smart people working on challenging problems that can help change the world. The Internet’s development and people understanding computer science creates the opportunity for not just new startups, but every day innovations that can automate processes (like research), connect people (like disaster relief) and maximise the opportunity for economic and political freedom for humanity.

Not everyone has the intelligence, passion and will to be a science researcher uncovering new medicines, one of the nobler career choices in my eyes. However, computer science is fast becoming the new literacy in business. Put more simply, if you don’t know how to put a website up on your own, then stop feeling pity for the third word’s first order impoverishment and reflect on the rich world’s higher-order impoverishment reflected in your inability. A symptom of a bigger impoverishment of the mind, that is a disillusion of what truly is valuable to drive our society forward.

Skies 1