Once upon a time, in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10, and, as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20 for a monkey.
This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each, and the supply of monkeys became so small that it was an effort to even find a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistan t told the villagers. "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35, and when the man returns from the city, you can sell them to him for $50 each."
The villagers rounded up all their savings and bought all the monkeys.
They never saw the man nor his assistant again, only monkeys everywhere!
Now you have a better understanding of how Wall Street works.
Showing posts with label business. Show all posts
Showing posts with label business. Show all posts
Thursday, October 9, 2008
Sunday, August 24, 2008
Building Wealth by Lester C. Thurow - EXCERPTS
Building Wealth: The New Rules for Individuals, Companies, and Nations in a Knowledge-Based Economy. Lester C. Thurow.
EXCERPTS
In the new man-made brainpower industries of the twenty-first century, all of Europe is an also-ran. Nowhere is it an industrial leader.
For in the end, it is productivity growth (the ability to produce more output using fewer inputs) that ultimately drives real wealth creation.
At the end of the twentieth and beginning of the twenty-first centuries, six new technologies – microelectronics, computers, telecommunications, new man-made materials, robotics, and biotechnology – are interacting to create a new and very different economic world.
Knowledge is the new basis for wealth … Exactly how one controls (owns?) knowledge is in fact a central issue in a knowledge-based economy.
Just as the second industrial revolution moved us from local to national economies, so the third industrial revolution is moving us from national economies to a global economy … The existing international institutions – the International Monetary Fund, the World Bank, the United Nations, the World Trade Organization – were not meant to deal with a global economy.
In short, no one is going to set up a global government in the foreseeable future – regardless of whether it is or is not needed. As a result, the world is going to have a global economy without a global government. This means a global economy with no enforceable, agreed-upon set of rules and regulations, no sheriff to enforce codes of acceptable behavior, and no judges and juries to appeal to if one feels that justice is not being done.
In the twentieth century as local economies were replaced by national economies, national governments gained power. They needed to be given the powers necessary to control national economic systems. A global economy reverses this process.
To have great wealth is to have it all. It is not surprising that get-rich-quick books sell, even though the buyers know the books will convey nothing helpful. They are the modern equivalent of alchemy. Neither exists, but it would be so nice if they did that many are willing to suspend their critical faculties and believe in the unbelievable. Fairy tales both sell and give comfort – even when they are know to be fairly tales.
RULE ONE: No one has ever become very rich by saving their money. The rich see opportunities to work and invest in situations where large disequilibriums exist. This was as true for John D. Rockefeller as it is for Bill Gates. In both cases heir lifetime savings constitute a small fraction of their total wealth. Carefully saving one’s money and investing in normal equilibrium situations can make one comfortable in one’s old age but never really wealthy.
Big old firms understand, and often even invent, the new technologies that transform the world, but they have a structural problem that is almost impossible to solve. When new breakthrough technologies come along, old firms must destroy themselves to save themselves. They must cannibalize themselves, but they cannot.
“Entertainment” shopping will be able to compete with electronic shopping or some products, but no one knows which products. Which customers will be willing to pay more if they buy in an entertaining environment and which ones just want to buy at the cheapest possible price? Those who figure it out first will become rich.
Studies show that productivity falls sharply if workers telecommute for more than a day or two per week, but companies save most of their money by not having offices for the telecommuters.
If one takes a wide definition of culture (all leisure activities), culture is the world’s biggest industry.
New technologies mean change. Change means disequilibrium. Disequilibrium conditions create high-return, high-growth opportunities. The winners understand the new technologies, are lucky enough to be in the right place at the right time, and have the skills to take advantage of these new situations. They become rich.
The problem with wealth generated from sociological disequilibriums is that it usually reflects more a transfer of existing wealth rather than a generation of new wealth.
RULE THREE: Business that would grow rapidly with high profit margins must take advantage of technological disequilibriums, exploit developmental disequilibriums, or create sociological disequilibriums. All other activities are slow-growth, low-rate-of-return commodity businesses.
For some unknown reason the third industrial revolution simultaneously created great market wealth and a miserable productivity performance.
If countries attempt to protect their companies in home markets, their companies are increasingly shut out of global markets, and for most big companies global markets are now more important than home markets.
The wealth pyramid begins with social organization. Social organization constitutes the great building stones at the bottom of the pyramid. Think of any of the world’s poorest countries – Haiti, Bangladesh, central Africa, Albania. All are characterized by chaos, disorder, and an inability to organize themselves socially. They cannot maintain public order. They cannot build or repair infrastructure. They cannot organize and staff village schools. They cannot deliver health services.
The Americans invented mass universal public education, were its leaders for a century, and used it to create their twentieth century success. But an educational system that once led the world is no longer world-class. America has to reinvent itself if it doesn’t want falling wages for a poorly skilled bottom two-thirds of its workforce.
With the onset of the third industrial revolution, the ability to rapidly open up the new and close down the old became the central characteristic needed for economic success. The American system was built to open up the new and close down the old. That is what it does best.
Having tried to set up one’s own business, even if one fails, is the mark of a good potential employee – works hard, creative, takes risks, knows how the world works.
Capitalism is a process of creative destruction. The new destroys the old. Both the creation and the destruction are essential to driving the economy forward.
Entrepreneurs are risk takers, organizers, and doers, not usually thinkers and inventors. The characteristics needed to create new knowledge are very different from the characteristics necessary to bring that knowledge into active use.
Sustainable long-run competitive advantage can be had only through an advantage in skills, education, and knowledge. Yet this is precisely where Europe has its greatest competitive advantage. If ratings were given for top to bottom skills, Europe would get the best ratings. It is more creative at the top than Japan and better educated at the bottom than America. Relative to any comparatively sized group in the rest of the world it is the best educated. Europe is a continent rich in human capital. Why, then, is it a laggard when it comes to the creation of wealth?
Western Europe has not solved its unemployment problem because it won’t adopt policies to accelerate growth or to lower wages.
RULE SIX: There are no institutional substitutes for individual entrepreneurial change agents. The entrepreneur winners of the game become wealthy and powerful, but without entrepreneurs, economies become poor and weak. The old will not exit; the new cannot enter.
In the United States, where payroll taxes are low, the underground economy is small. In Western Europe, where payroll taxes are high, the underground economy is large.
Knowledge generates the basic breakthroughs in technology that create the disequilibrium conditions in which high returns and high growth rates are possible.
Creating technological disequilibriums is an art form that not all societies have mastered. Even within creative societies, creativity is not spread equally. American Jews win far more than their proportional share of America’s Nobel Prizes. (But Israelis win almost none.) America’s great research universities are not evenly spread across the country. Every area of America does not have its Silicon Valley or Route 128.
Creativity does not occur when it has to challenge authority. Creativity occurs when there is no authority to challenge – when there is an empty space without order where creativity can grow unmolested. But to many, an empty space without order is chaos – and chaos must be suppressed.
Einstein dropped out of high school at fifteen; renounced his citizenship one year later; lived on the margins socially, economically, and morally; called himself a gypsy and was considered a bohemian by others. His life was in some sense a search for order in disorder, both scientifically and sociologically. Great creativity requires hard facts, wild imagination, and nonlogical jumps forward that are then proved to be right by working backward to known principles. Only the rebellious can do it. Curiosity and the desire to explore can be enhanced. Useful curiosity requires individuals who have mastered the existing body of knowledge but are not paralyzed by it. Enhancing curiosity is what really good graduate education is all about. Societies that value and honor curiosity produce curious people.
The reason manufacturing does most of the R&D spending is that historically it has been impossible to make money on innovations unless one made and sold the products that were the fruits of that new knowledge. Selling knowledge so that others could make the products that came from it has never been a profitable strategy.
To be useful, inventions usually need a well-educated workforce that can absorb the technology and acquire the skills necessary to employ it. If this skill base does not exist, the invention lies unused. This is why well-educated inventors in the developing world often move to the United States. Because their fellow citizens are undereducated, they can’t get their invention to market in their home environment.
While there are obviously individual exceptions, technological breakthroughs aren’t usually made by older researchers who have been looking at the same things in the same ways for long periods of time. New ways are usually conceived by those who haven’t accepted the old ways.
Whatever the process for establishing clear, enforceable property rights, capitalism does not work unless who owns what is clear. The private ownership of productive assets and the ability to appropriate the output that flows from those assets lies at the heart of capitalism. This principle is what gave capitalism its name. To make capitalism function, legally enforceable ownership rights have to be established.
Capitalism cannot deal with pollution because it cannot establish the ownership rights to clean air and water.
The source of any retailer’s future success is apt to be buried in the software of its electronic information and logistics systems rather than in its advertising or the novelty of its products.
Without a clear, workable, enforceable system of intellectual property rights, knowledge-based capitalism is not going to work. No one is going to invest the necessary sums in research and development if they cannot garner the resulting gains.
The prevailing wisdom among those who earn their living within our system of intellectual property protection is that some minor tweaking here and there will fix the problem. Much of this wisdom flows from nothing more profound than the belief that to open up the system to fundamental change would be equivalent to opening Pandora’s box. All can vividly see themselves as potential losers. Few consider the private and public gains that might accrue from a different system. The prevailing wisdom is wrong. The time has come not for marginal changes but for wide-open thinking about designing a new system from the ground up. This is never going to happen if the problem is left to those who make their living operating the current system. They have too many vested interests in preserving it with the fewest possible modifications.
The differentiation must start with distinctions between fundamental advances in knowledge and logical extensions of existing knowledge. Each deserves a different kind of patent.
In nineteenth century capitalism, human skills weren’t seen as that important. Labor was a rented, hired-and-fired, marginal factor of production. Socialism arose as a response to the secondary position of labor in capitalism, promising to give labor a central position in the economic system. This is what gave it its political appeal. Interestingly, just as socialism and communism were dying, technology was elevating humans to a more central position in the productive framework of capitalism. Capitalism was being forced to put human skills and knowledge, rather than machinery, at the heart of its system.
In a global economy where employers arbitrage the world looking for the lowest wages, people’s pay is not based on whether they live in a rich or a poor country but upon their individual skills. The well-educated living in India make something that looks like American wages, while the uneducated living in America make something that looks like Indian wages.
Older workers sell experience and skills of an earlier vintage. Young workers sell newly acquired skills. Experience is just less valuable. Over the past quarter of a century the returns to experience have been going down for every level of education.
In the twenty-first century, no country that wishes to be rich can leave some of its citizens uneducated. This applies to women as well as men. Any society that does not educate women (the Taliban in Afghanistan) is not going to be successful … Successful societies will educate women because they contribute needed talent to the workforce, but they will also do so because uneducated mothers seldom have well-educated sons. A knowledge economy requires two interlocking but very different skill sets. Knowledge creation requires highly educated creative skills at the very top of the skill distribution. Knowledge deployment requires widespread high-quality skills and education in the middle and bottom of the skill distribution. The same country need not lead in both.
Looking at how wages rise as years of education go up, big economic payoffs exist for the first few years of education and the last few years of education, but only very small economic returns accrue per year of education in between these extremes.
An extra year of college education has very little positive effect on earnings if the student does not complete a degree program. From an economic perspective the right advice is “Get a degree or don’t go.”
Publicly financed education spreads the costs across the entire population (not just those with kids) and across each individual’s lifetime. Spread out in this way, the costs don’t seem so overwhelming.
Age discrimination laws can protect older employees against being unfairly dismissed by their old firms, but they cannot get them a good job at a new company. Employers get to decide whom they will hire. In a fast-changing world, older employees too often bring obsolete experience and out-of-date skills. There are always a lot of possible young employees who look better and are better. Older job seekers do not suffer from discrimination. They are objectively economically obsolete.
RULE TEN: The biggest unknown for the individual in a knowledge-based economy is how to have a career in a system where there are not careers.
Under capitalism those who own tools are the decision-makers, and market wealth consists of the ownership of tools and the output that flows from them.
Current consumption expenditures on the health care and pensions of the elderly (over 50 percent of the federal budget now goes to the elderly) are driving investment spending out of the federal budget.
Rising stock market values cannot be used to finance investment in new tools. The money received by those who sell stock must be equal to the money given up by those who buy stock. It is a zero-sum transaction as far as investments are concerned. It generates no new funds for building tools. Only holding consumption below earnings can provide the necessary resources to build tools.
In America, all of our social conditioning is now leading not just toward the primacy of individual consumption but toward the view that nothing else matters at all. Billions are spent advertising the benefits of different consumption goods. Little or nothing is spent advertising the importance of investment goods. When he first came into office in 1992, President Clinton was debating whether his new administration should focus on health care, education, or infrastructure. He chose health care, a form of public consumption, rather than education or infrastructure, both forms of public investment. He did not just make a political mistake. He focused Americans on a consumption problem when he should have focused them on investment problems. Even if he had succeeded in reforming health care, it was the wrong problem to address. He could and should have focused us in a very different direction.
In cities that have developed since the onset of the auto age, population densities simply aren’t high enough to justify the frequency of service that makes mass transit competitive with the auto in cost or time.
Market prices measure what is happening to the relative supplies and demands of natural resources. What has happened to oil is happening across the spectrum of other energy supplies, minerals, and agricultural products. Reductions in demand plus new technologies have created a world where natural resource availability is growing far faster than demand.
It is not possible to have American standards of living at home without at the same time having American production standards at work.
Americans want more than they have, but with marketable wealth of just $1.3 million invested in riskless government bonds, one could have those dreams without ever having to work, without ever touching one’s principal, and at death be able to leave one’s children $1.3 million in wealth.
In all countries, wealth is much more unequally distributed than earnings.
Falling equity in one’s own home is also the principle reason why the wealth of the median household is going down in absolute terms. When it comes to the wealth accumulation of the median family, home equity loans (something first allowed in the mid-1980s) have been a disaster.
Great wealth does not depend on personal savings, but modest wealth does. With lower savings rates in America, less wealth for those with lower savings rates should come as no surprise. Americans have a more unequal distribution of wealth because they have chosen to have more current consumption and less wealth. America’s greater inequality is simply a matter of different tastes.
Acquiring great wealth is best seen as a conditional lottery. Luck is necessary. One does have to be in the right place at the right time. Great wealth is created during times of change – the second and third industrial revolutions. Capitalizing on existing disequilibriums (technological, sociological, or developmental) is the name of the game.
Wealth is created in the financial markets but not by the financial markets. Financial markets capitalize the value of eliminating technological, developmental, or sociological disequilibriums.
With electronic shopping, where products are delivered to the home rather than carried home by the buyer, maybe the profits will be made by the delivery companies (UPS, Federal Express) and not by those that run the Internet stores. For what new, never-before-delivered services will people be willing to pay premium prices? What will have to be done to preserve those premium prices?
In the long run market wealth cannot grow unless productivity grows. Productivity is the putting together of the basic building blocks of the wealth pyramid so that humans with finite lifetimes and limited energy levels can produce ever greater levels of output. New technologies are staffed with new skills organized in new ways using new tools powered by new sources of energy to make new things. The difference between output and input growth is what causes wealth to increase.
Slower rates of growth in the capital-to-labor ratio inevitably mean slower rates of growth in productivity.
The antitrust suit against Microsoft is a dramatic case in point. It illustrates a type of regulatory chaos that doesn’t make sense in a well-ordered society. It’s a suit that would not have been brought in any other country in the world. In a short period of time Microsoft has become the most valuable company in the world, with a dominant global market position. It is precisely the kind of company that every country wants. Anywhere else it would be protected like a crown jewel. Other governments would ask what they could do to help it – not what they could do to hobble it … But such erratic, nonsensical actions reflect a type of regulatory chaos that does create economic space for other firms – even if those other firms are apt to be in other countries. American industry has too much chaos, but too much is clearly better than too little when a country reaches America’s position on the wealth pyramid. A high degree of chaos leads to economic creativity.
Revolutions cannot be organized from the top by those running the old system. Revolutions are always frightening to those with vested interests. Those at the top of any successful system, whether political or industrial, have vested interests.
Leaders are not entrepreneurs. Leaders are the order part of the system. Entrepreneurs are the chaos part of the system. Both are necessary, but neither can play the role of the other. Creativity cannot be organized. It is a product of disorganization. In very successful societies, creativity requires some chaos, but not so much chaos that there is not enough order to use what has been invented.
Large bureaucracies, whether government or private, always have too many vested interests in the old to be pioneers of the new technologies that will destroy the old … Capitalism’s only advantage is that death is easier if big firms are privately owned … Socialism never figured out how to kill its dinosaurs; they just went on using up resources until the system collapsed.
Big companies are where managers of the new companies learn the management skills (make mistakes on other people’s money) that allow them to start up their own companies with fewer mistakes.
Centrally organized economic change is theoretically possible but in practice impossible. The economic losers who already exist are always politically stronger than the potential winners who have yet to come into existence.
Capitalism does not work when assets have to carry debts whose value is greater than the market value of the assets themselves. Capitalism only works when profits can be earned.
If countries cannot do what is necessary, economic stagnation looms over their futures. But the causes of that stagnation are not in the economy. They lie in an unsolved political crisis – an inability to act when action is required – that leads to disastrous economic consequences.
Judges don’t think about what makes sense from the perspective of accelerating technological and economic progress. Their concern is with how new areas of technology can be inserted into the legal framework with the least disruption to existing legal interpretations.
As monopoly power wanes, and social interest in encouraging the development of new intellectual property grows, the balance in our system should shift toward encouraging the production of new knowledge and be less concerned about the distribution of existing knowledge. Tighter or longer-term patents and copyrights are warranted.
If someone cannot think of how a legal right can be enforced, it should not be a legal right.
The system must be able to determine rights and resolve disputes quickly, efficiently, and cheaply. Many of the problems with the current patent system flow from the lack of consistent, predictable, rapid, low-cost determinations about intellectual property rights and a means of quick, cheap dispute resolution.
To accomplish society’s interest in expanding knowledge as rapidly as possible, certain classes of knowledge ought to be in the public domain and freely available to everyone. The use of basic scientific knowledge is central in an era of man-made brainpower industries because it allows breakthrough technologies to be developed.
Because of low salaries, elementary and secondary teachers tend to come from the bottom of the education distribution. Americans are asking people who were not themselves good students to teach others to place a high value on being a good student.
Part of the American workforce will have the skills necessary to take advantage of the new technology-intensive global economy. They’ll march on to economic success, joining a global team and leaving the rest of the American workforce behind. The problem isn’t that this model won’t work. The problem is precisely that it will work … The problems are basically moral. Is one living in a good society if that society knowingly lets a major fraction of its citizens drop out of the first world and effectively become third world wage earners?
Governments can increase investment by spending more of their own funds on infrastructure tool-building … The tax system could be shifted from an income/payroll-based system to a consumption-based one in which citizens are taxed only on what they take out of a system (consumption) and not on what they put into it (tools or work effort).
The returns to capital are up and the returns to labor are down. On a global basis labor is more abundant relative to capital than it is in the developed world. As a consequence the earnings of capitalists grow, and the earnings of labor fall. Similarly the returns to skills are up and the returns to raw unskilled labor are down.
EXCERPTS
In the new man-made brainpower industries of the twenty-first century, all of Europe is an also-ran. Nowhere is it an industrial leader.
For in the end, it is productivity growth (the ability to produce more output using fewer inputs) that ultimately drives real wealth creation.
At the end of the twentieth and beginning of the twenty-first centuries, six new technologies – microelectronics, computers, telecommunications, new man-made materials, robotics, and biotechnology – are interacting to create a new and very different economic world.
Knowledge is the new basis for wealth … Exactly how one controls (owns?) knowledge is in fact a central issue in a knowledge-based economy.
Just as the second industrial revolution moved us from local to national economies, so the third industrial revolution is moving us from national economies to a global economy … The existing international institutions – the International Monetary Fund, the World Bank, the United Nations, the World Trade Organization – were not meant to deal with a global economy.
In short, no one is going to set up a global government in the foreseeable future – regardless of whether it is or is not needed. As a result, the world is going to have a global economy without a global government. This means a global economy with no enforceable, agreed-upon set of rules and regulations, no sheriff to enforce codes of acceptable behavior, and no judges and juries to appeal to if one feels that justice is not being done.
In the twentieth century as local economies were replaced by national economies, national governments gained power. They needed to be given the powers necessary to control national economic systems. A global economy reverses this process.
To have great wealth is to have it all. It is not surprising that get-rich-quick books sell, even though the buyers know the books will convey nothing helpful. They are the modern equivalent of alchemy. Neither exists, but it would be so nice if they did that many are willing to suspend their critical faculties and believe in the unbelievable. Fairy tales both sell and give comfort – even when they are know to be fairly tales.
RULE ONE: No one has ever become very rich by saving their money. The rich see opportunities to work and invest in situations where large disequilibriums exist. This was as true for John D. Rockefeller as it is for Bill Gates. In both cases heir lifetime savings constitute a small fraction of their total wealth. Carefully saving one’s money and investing in normal equilibrium situations can make one comfortable in one’s old age but never really wealthy.
Big old firms understand, and often even invent, the new technologies that transform the world, but they have a structural problem that is almost impossible to solve. When new breakthrough technologies come along, old firms must destroy themselves to save themselves. They must cannibalize themselves, but they cannot.
“Entertainment” shopping will be able to compete with electronic shopping or some products, but no one knows which products. Which customers will be willing to pay more if they buy in an entertaining environment and which ones just want to buy at the cheapest possible price? Those who figure it out first will become rich.
Studies show that productivity falls sharply if workers telecommute for more than a day or two per week, but companies save most of their money by not having offices for the telecommuters.
If one takes a wide definition of culture (all leisure activities), culture is the world’s biggest industry.
New technologies mean change. Change means disequilibrium. Disequilibrium conditions create high-return, high-growth opportunities. The winners understand the new technologies, are lucky enough to be in the right place at the right time, and have the skills to take advantage of these new situations. They become rich.
The problem with wealth generated from sociological disequilibriums is that it usually reflects more a transfer of existing wealth rather than a generation of new wealth.
RULE THREE: Business that would grow rapidly with high profit margins must take advantage of technological disequilibriums, exploit developmental disequilibriums, or create sociological disequilibriums. All other activities are slow-growth, low-rate-of-return commodity businesses.
For some unknown reason the third industrial revolution simultaneously created great market wealth and a miserable productivity performance.
If countries attempt to protect their companies in home markets, their companies are increasingly shut out of global markets, and for most big companies global markets are now more important than home markets.
The wealth pyramid begins with social organization. Social organization constitutes the great building stones at the bottom of the pyramid. Think of any of the world’s poorest countries – Haiti, Bangladesh, central Africa, Albania. All are characterized by chaos, disorder, and an inability to organize themselves socially. They cannot maintain public order. They cannot build or repair infrastructure. They cannot organize and staff village schools. They cannot deliver health services.
The Americans invented mass universal public education, were its leaders for a century, and used it to create their twentieth century success. But an educational system that once led the world is no longer world-class. America has to reinvent itself if it doesn’t want falling wages for a poorly skilled bottom two-thirds of its workforce.
With the onset of the third industrial revolution, the ability to rapidly open up the new and close down the old became the central characteristic needed for economic success. The American system was built to open up the new and close down the old. That is what it does best.
Having tried to set up one’s own business, even if one fails, is the mark of a good potential employee – works hard, creative, takes risks, knows how the world works.
Capitalism is a process of creative destruction. The new destroys the old. Both the creation and the destruction are essential to driving the economy forward.
Entrepreneurs are risk takers, organizers, and doers, not usually thinkers and inventors. The characteristics needed to create new knowledge are very different from the characteristics necessary to bring that knowledge into active use.
Sustainable long-run competitive advantage can be had only through an advantage in skills, education, and knowledge. Yet this is precisely where Europe has its greatest competitive advantage. If ratings were given for top to bottom skills, Europe would get the best ratings. It is more creative at the top than Japan and better educated at the bottom than America. Relative to any comparatively sized group in the rest of the world it is the best educated. Europe is a continent rich in human capital. Why, then, is it a laggard when it comes to the creation of wealth?
Western Europe has not solved its unemployment problem because it won’t adopt policies to accelerate growth or to lower wages.
RULE SIX: There are no institutional substitutes for individual entrepreneurial change agents. The entrepreneur winners of the game become wealthy and powerful, but without entrepreneurs, economies become poor and weak. The old will not exit; the new cannot enter.
In the United States, where payroll taxes are low, the underground economy is small. In Western Europe, where payroll taxes are high, the underground economy is large.
Knowledge generates the basic breakthroughs in technology that create the disequilibrium conditions in which high returns and high growth rates are possible.
Creating technological disequilibriums is an art form that not all societies have mastered. Even within creative societies, creativity is not spread equally. American Jews win far more than their proportional share of America’s Nobel Prizes. (But Israelis win almost none.) America’s great research universities are not evenly spread across the country. Every area of America does not have its Silicon Valley or Route 128.
Creativity does not occur when it has to challenge authority. Creativity occurs when there is no authority to challenge – when there is an empty space without order where creativity can grow unmolested. But to many, an empty space without order is chaos – and chaos must be suppressed.
Einstein dropped out of high school at fifteen; renounced his citizenship one year later; lived on the margins socially, economically, and morally; called himself a gypsy and was considered a bohemian by others. His life was in some sense a search for order in disorder, both scientifically and sociologically. Great creativity requires hard facts, wild imagination, and nonlogical jumps forward that are then proved to be right by working backward to known principles. Only the rebellious can do it. Curiosity and the desire to explore can be enhanced. Useful curiosity requires individuals who have mastered the existing body of knowledge but are not paralyzed by it. Enhancing curiosity is what really good graduate education is all about. Societies that value and honor curiosity produce curious people.
The reason manufacturing does most of the R&D spending is that historically it has been impossible to make money on innovations unless one made and sold the products that were the fruits of that new knowledge. Selling knowledge so that others could make the products that came from it has never been a profitable strategy.
To be useful, inventions usually need a well-educated workforce that can absorb the technology and acquire the skills necessary to employ it. If this skill base does not exist, the invention lies unused. This is why well-educated inventors in the developing world often move to the United States. Because their fellow citizens are undereducated, they can’t get their invention to market in their home environment.
While there are obviously individual exceptions, technological breakthroughs aren’t usually made by older researchers who have been looking at the same things in the same ways for long periods of time. New ways are usually conceived by those who haven’t accepted the old ways.
Whatever the process for establishing clear, enforceable property rights, capitalism does not work unless who owns what is clear. The private ownership of productive assets and the ability to appropriate the output that flows from those assets lies at the heart of capitalism. This principle is what gave capitalism its name. To make capitalism function, legally enforceable ownership rights have to be established.
Capitalism cannot deal with pollution because it cannot establish the ownership rights to clean air and water.
The source of any retailer’s future success is apt to be buried in the software of its electronic information and logistics systems rather than in its advertising or the novelty of its products.
Without a clear, workable, enforceable system of intellectual property rights, knowledge-based capitalism is not going to work. No one is going to invest the necessary sums in research and development if they cannot garner the resulting gains.
The prevailing wisdom among those who earn their living within our system of intellectual property protection is that some minor tweaking here and there will fix the problem. Much of this wisdom flows from nothing more profound than the belief that to open up the system to fundamental change would be equivalent to opening Pandora’s box. All can vividly see themselves as potential losers. Few consider the private and public gains that might accrue from a different system. The prevailing wisdom is wrong. The time has come not for marginal changes but for wide-open thinking about designing a new system from the ground up. This is never going to happen if the problem is left to those who make their living operating the current system. They have too many vested interests in preserving it with the fewest possible modifications.
The differentiation must start with distinctions between fundamental advances in knowledge and logical extensions of existing knowledge. Each deserves a different kind of patent.
In nineteenth century capitalism, human skills weren’t seen as that important. Labor was a rented, hired-and-fired, marginal factor of production. Socialism arose as a response to the secondary position of labor in capitalism, promising to give labor a central position in the economic system. This is what gave it its political appeal. Interestingly, just as socialism and communism were dying, technology was elevating humans to a more central position in the productive framework of capitalism. Capitalism was being forced to put human skills and knowledge, rather than machinery, at the heart of its system.
In a global economy where employers arbitrage the world looking for the lowest wages, people’s pay is not based on whether they live in a rich or a poor country but upon their individual skills. The well-educated living in India make something that looks like American wages, while the uneducated living in America make something that looks like Indian wages.
Older workers sell experience and skills of an earlier vintage. Young workers sell newly acquired skills. Experience is just less valuable. Over the past quarter of a century the returns to experience have been going down for every level of education.
In the twenty-first century, no country that wishes to be rich can leave some of its citizens uneducated. This applies to women as well as men. Any society that does not educate women (the Taliban in Afghanistan) is not going to be successful … Successful societies will educate women because they contribute needed talent to the workforce, but they will also do so because uneducated mothers seldom have well-educated sons. A knowledge economy requires two interlocking but very different skill sets. Knowledge creation requires highly educated creative skills at the very top of the skill distribution. Knowledge deployment requires widespread high-quality skills and education in the middle and bottom of the skill distribution. The same country need not lead in both.
Looking at how wages rise as years of education go up, big economic payoffs exist for the first few years of education and the last few years of education, but only very small economic returns accrue per year of education in between these extremes.
An extra year of college education has very little positive effect on earnings if the student does not complete a degree program. From an economic perspective the right advice is “Get a degree or don’t go.”
Publicly financed education spreads the costs across the entire population (not just those with kids) and across each individual’s lifetime. Spread out in this way, the costs don’t seem so overwhelming.
Age discrimination laws can protect older employees against being unfairly dismissed by their old firms, but they cannot get them a good job at a new company. Employers get to decide whom they will hire. In a fast-changing world, older employees too often bring obsolete experience and out-of-date skills. There are always a lot of possible young employees who look better and are better. Older job seekers do not suffer from discrimination. They are objectively economically obsolete.
RULE TEN: The biggest unknown for the individual in a knowledge-based economy is how to have a career in a system where there are not careers.
Under capitalism those who own tools are the decision-makers, and market wealth consists of the ownership of tools and the output that flows from them.
Current consumption expenditures on the health care and pensions of the elderly (over 50 percent of the federal budget now goes to the elderly) are driving investment spending out of the federal budget.
Rising stock market values cannot be used to finance investment in new tools. The money received by those who sell stock must be equal to the money given up by those who buy stock. It is a zero-sum transaction as far as investments are concerned. It generates no new funds for building tools. Only holding consumption below earnings can provide the necessary resources to build tools.
In America, all of our social conditioning is now leading not just toward the primacy of individual consumption but toward the view that nothing else matters at all. Billions are spent advertising the benefits of different consumption goods. Little or nothing is spent advertising the importance of investment goods. When he first came into office in 1992, President Clinton was debating whether his new administration should focus on health care, education, or infrastructure. He chose health care, a form of public consumption, rather than education or infrastructure, both forms of public investment. He did not just make a political mistake. He focused Americans on a consumption problem when he should have focused them on investment problems. Even if he had succeeded in reforming health care, it was the wrong problem to address. He could and should have focused us in a very different direction.
In cities that have developed since the onset of the auto age, population densities simply aren’t high enough to justify the frequency of service that makes mass transit competitive with the auto in cost or time.
Market prices measure what is happening to the relative supplies and demands of natural resources. What has happened to oil is happening across the spectrum of other energy supplies, minerals, and agricultural products. Reductions in demand plus new technologies have created a world where natural resource availability is growing far faster than demand.
It is not possible to have American standards of living at home without at the same time having American production standards at work.
Americans want more than they have, but with marketable wealth of just $1.3 million invested in riskless government bonds, one could have those dreams without ever having to work, without ever touching one’s principal, and at death be able to leave one’s children $1.3 million in wealth.
In all countries, wealth is much more unequally distributed than earnings.
Falling equity in one’s own home is also the principle reason why the wealth of the median household is going down in absolute terms. When it comes to the wealth accumulation of the median family, home equity loans (something first allowed in the mid-1980s) have been a disaster.
Great wealth does not depend on personal savings, but modest wealth does. With lower savings rates in America, less wealth for those with lower savings rates should come as no surprise. Americans have a more unequal distribution of wealth because they have chosen to have more current consumption and less wealth. America’s greater inequality is simply a matter of different tastes.
Acquiring great wealth is best seen as a conditional lottery. Luck is necessary. One does have to be in the right place at the right time. Great wealth is created during times of change – the second and third industrial revolutions. Capitalizing on existing disequilibriums (technological, sociological, or developmental) is the name of the game.
Wealth is created in the financial markets but not by the financial markets. Financial markets capitalize the value of eliminating technological, developmental, or sociological disequilibriums.
With electronic shopping, where products are delivered to the home rather than carried home by the buyer, maybe the profits will be made by the delivery companies (UPS, Federal Express) and not by those that run the Internet stores. For what new, never-before-delivered services will people be willing to pay premium prices? What will have to be done to preserve those premium prices?
In the long run market wealth cannot grow unless productivity grows. Productivity is the putting together of the basic building blocks of the wealth pyramid so that humans with finite lifetimes and limited energy levels can produce ever greater levels of output. New technologies are staffed with new skills organized in new ways using new tools powered by new sources of energy to make new things. The difference between output and input growth is what causes wealth to increase.
Slower rates of growth in the capital-to-labor ratio inevitably mean slower rates of growth in productivity.
The antitrust suit against Microsoft is a dramatic case in point. It illustrates a type of regulatory chaos that doesn’t make sense in a well-ordered society. It’s a suit that would not have been brought in any other country in the world. In a short period of time Microsoft has become the most valuable company in the world, with a dominant global market position. It is precisely the kind of company that every country wants. Anywhere else it would be protected like a crown jewel. Other governments would ask what they could do to help it – not what they could do to hobble it … But such erratic, nonsensical actions reflect a type of regulatory chaos that does create economic space for other firms – even if those other firms are apt to be in other countries. American industry has too much chaos, but too much is clearly better than too little when a country reaches America’s position on the wealth pyramid. A high degree of chaos leads to economic creativity.
Revolutions cannot be organized from the top by those running the old system. Revolutions are always frightening to those with vested interests. Those at the top of any successful system, whether political or industrial, have vested interests.
Leaders are not entrepreneurs. Leaders are the order part of the system. Entrepreneurs are the chaos part of the system. Both are necessary, but neither can play the role of the other. Creativity cannot be organized. It is a product of disorganization. In very successful societies, creativity requires some chaos, but not so much chaos that there is not enough order to use what has been invented.
Large bureaucracies, whether government or private, always have too many vested interests in the old to be pioneers of the new technologies that will destroy the old … Capitalism’s only advantage is that death is easier if big firms are privately owned … Socialism never figured out how to kill its dinosaurs; they just went on using up resources until the system collapsed.
Big companies are where managers of the new companies learn the management skills (make mistakes on other people’s money) that allow them to start up their own companies with fewer mistakes.
Centrally organized economic change is theoretically possible but in practice impossible. The economic losers who already exist are always politically stronger than the potential winners who have yet to come into existence.
Capitalism does not work when assets have to carry debts whose value is greater than the market value of the assets themselves. Capitalism only works when profits can be earned.
If countries cannot do what is necessary, economic stagnation looms over their futures. But the causes of that stagnation are not in the economy. They lie in an unsolved political crisis – an inability to act when action is required – that leads to disastrous economic consequences.
Judges don’t think about what makes sense from the perspective of accelerating technological and economic progress. Their concern is with how new areas of technology can be inserted into the legal framework with the least disruption to existing legal interpretations.
As monopoly power wanes, and social interest in encouraging the development of new intellectual property grows, the balance in our system should shift toward encouraging the production of new knowledge and be less concerned about the distribution of existing knowledge. Tighter or longer-term patents and copyrights are warranted.
If someone cannot think of how a legal right can be enforced, it should not be a legal right.
The system must be able to determine rights and resolve disputes quickly, efficiently, and cheaply. Many of the problems with the current patent system flow from the lack of consistent, predictable, rapid, low-cost determinations about intellectual property rights and a means of quick, cheap dispute resolution.
To accomplish society’s interest in expanding knowledge as rapidly as possible, certain classes of knowledge ought to be in the public domain and freely available to everyone. The use of basic scientific knowledge is central in an era of man-made brainpower industries because it allows breakthrough technologies to be developed.
Because of low salaries, elementary and secondary teachers tend to come from the bottom of the education distribution. Americans are asking people who were not themselves good students to teach others to place a high value on being a good student.
Part of the American workforce will have the skills necessary to take advantage of the new technology-intensive global economy. They’ll march on to economic success, joining a global team and leaving the rest of the American workforce behind. The problem isn’t that this model won’t work. The problem is precisely that it will work … The problems are basically moral. Is one living in a good society if that society knowingly lets a major fraction of its citizens drop out of the first world and effectively become third world wage earners?
Governments can increase investment by spending more of their own funds on infrastructure tool-building … The tax system could be shifted from an income/payroll-based system to a consumption-based one in which citizens are taxed only on what they take out of a system (consumption) and not on what they put into it (tools or work effort).
The returns to capital are up and the returns to labor are down. On a global basis labor is more abundant relative to capital than it is in the developed world. As a consequence the earnings of capitalists grow, and the earnings of labor fall. Similarly the returns to skills are up and the returns to raw unskilled labor are down.
Sunday, August 3, 2008
The 500-Year Delta by Jim Taylor, Watts Wacker, and Howard Means.
The 500-Year Delta: What Happens After What Comes Next. Jim Taylor, Watts Wacker, and Howard Means. 1998. ISBN-13: 978-0887309113
Excerpts
“freedom to know” – a world in which for the first time in human history caste or schooling or economic circumstance no longer limits access to knowledge, a world in which knowledge itself is less important than the skill to access it.
“freedom to go” – a world in which for the first time true global citizens will have true global mobility.
“freedom to do” in accord not with professional processes or bureaucratic structures but with one’s own intuition and entrepreneurial zeal.
“freedom to be” whatever one wants to be and the obligation to exercise that freedom.
If you are going to succeed in chaos, you must connect with chaos. You must act in concert with chaos. What does that mean? It means that you must trust in intuition, trust in self.
The media today is not only the message – it is the message discriminator. And increasingly it is around those finely discriminated messages that we organize our social lives.
Jacque’s theory … what really mattered in any organization was not how many people you managed, not how much money you had under your control, but how binding your decision was on the life span of the organization.
Rainmakers – individuals who simply by virtue of their existence, their contacts, and their reputations could cause large pieces of business to move with them.
The island-hopping executive. The professional who is most willing to make life changes not in pursuit of the group mission but in pursuit of his or her own ambition. The employee who recognizes that power in a chaos organization migrates to the greatest variable, that the new success paradigm frees the individual.
Because access creates globalism, and globalism disrupts political systems by making the concept of borders obsolete. As borders disappear, the concept of taxation, which supports governments, becomes increasingly fragile.
Because leverage in a chaos world goes to the critical variables, the person able to cut the best deal in a corporation today is not the most loyal one, but the one willing to leave himself or herself the most outs.
… there is no surer way to lose customers – and lose them for good – than to sell them stone and flint when you are just about to introduce safety matches into the marketplace. That is another corollary of the acceleration of technological change. Quality may still be job one, but mediating a consumer’s risk of feeling like a fool is at least job two.
First, as new products arrive on the marketplace with ever greater rapidity, the products themselves lose value and the ideas that drive them gain value. Second, as consumers increasingly drive the economic relationships of the marketplace, the need to massively accumulate data on individual consumers increases proportionally.
Generation X has powerful subsidiary values. Its very uncertainty about its economic future is helping to turn the fear of downward mobility into the virtue of downward nobility, and the rise of downward nobility – the desire not for many things but a few good things – will drive consumerism in the years immediately ahead.
Flight impulse is building to critical mass. Undermined by the death of loyalty or liberated by the new freedoms to know, to go, to do, to be – it is all a matter of interpretation – forty-five to fifty-year-olds soon will be seeking en masse completely different lifestyles and actively plotting their flights.
As the marketplace drives toward a supersaturation of products, scarcity disappears, and with it status orientation. As mass culture breaks up into, in effect, hundreds of millions of individual realities, there can be no shared assumptions of what is enviable to own.
For most people in most industrialized nations, governments now exist as a mechanism for the transfer of payments and almost nothing more – save for their sheer entertainment value. For a radical theory, that one, in fact, is about as plain as the nose on your face. Why has the Washington intellerati failed to grasp it? Because the centrality of the political process is intimately tied to the intellerati’s own centrality – if government doesn’t matter, it doesn’t matter. Like other communes, the political commune talks mainly to itself, and thus has its worldview both set and confirmed within the confines of its commune.
In the drive toward sameness, cultural discriminators are disappearing. It is in the interest of politicians to foster the impression of international business conflict, because conflict is drama, and politicians get to star in the playlets that ensue.
If nationalism no longer has meaning, if corporate identity can float away in an instant, if you are no longer identified by your race, your gender, your sexual orientation, by where you went to college or what clubs you belong to, you can choose to reinvent your life every single day.
One of the reasons, perhaps the chief reason, the explosion in information has bred such widespread discontent is that too much information is chasing too few decision – and too little interest.
Every human life becomes, in effect, a data bank. And as that happens, everything about you – your habits, your preferences, your buying whims, your opinions – assumes a transaction worth. They become more than the sum total of your wants and needs; they become your intellectual property, to be valuated and protected as strongly as any other property you possess.
As privacy becomes rarer and rarer, it will assume greater and greater worth, and privacy management will become one of the great growth industries of the twenty-first century.
… as people become more and more aware of the economic worth of their own privately held information, they will come more and more to realize what a fortune about themselves they have absolutely pissed away. Therein lies the beginning of anger. And revenge.
Time really is money; so is attention.
For better or worse, study after study has shown that working women still can be broken into two groups: those who think that what they do is a career and those who think it is a job. Otherwise, the lives of women who work outside the house for money are virtually indistinguishable one from the other.
Like the lives they reflect, the new lifestyle discriminators are situational, deal-based. None of them relies on loyalty, because the future itself isn’t about loyalty – it’s about contracts.
“filocity” – the ability to adapt instantaneously to multiple relationships and move easily among multiple cultures.
Mass religion, we contend, is as doomed as mass culture, not because people will believe less, but because group reality is becoming particularlized and because loyalty to a single overriding interpretation of the divine is as dated as loyalty to family or to a corporation.
By definition, freedoms free, but they also sweep away excuses.
To be free to know whatever it is you need to know to pursue your destiny means that there will be little sympathy for those who fail to arm themselves with the essential knowledge to succeed. To be free to go wherever it is you need to do to pursue your destiny means that there will be little sympathy if you elect to go nowhere and suffer as a result. To be free to do whatever it is within you intellectual and physical capacity to do means that if you fail to make an attempt to do it and suffer as a result, there will be little sympathy. To be free to be whatever it is within your intellectual and physical capacity to be means that if you don’t pursue possibility and suffer as a result, there will be little sympathy.
True freedom … entails true responsibility. It is impossible to have one without the other, impossible to demand true individual rights on the one hand and claim group victimization or demand group redress on the other.
Like success, failure is a solo act; individuals alone are responsible for both.
… the only thing you can count on in your personal or professional life is that people and organizations will act irrationally.
The reality is that “families” are largely a status symbol today, a luxury for those who can afford to keep them intact.
The reality in a chaos world is that the greatest power belongs to the person who controls the most unstable variable.
The reality is that there are only two kinds of workers in any business organization: owners and employees. And the further reality is that there are only two kinds of employees: the 5 percent who would stay where they are if they were offered twice their salary to leave and the 95 percent who would be gone in a flash.
The myth of governments. the myth is that they matter. The reality is that they matter mostly to those who have an economic stake in their day-to-day operation – that is, to government employees and those who receive federal transfer payments.
The myth of action. The myth, made famous by the Nike sports-wear slogan, is just do it. The reality is that in a chaos world, you cannot “do” your way to anything. You can achieve an end only by focusing on outcome and letting each individual decision be dictated by your final goal. Don’t do it. Be it.
… the myth that reality is real. The reality is that each individual edits reality for himself. The reality is that the combinations and permutations of media choices allow each person to have an entirely idiosyncratic view of reality. The reality is that today reality is constructed.
In a chaos world … the only way to manage a life is from the edge, and the only thing you can depend on is you.
… when you can’t depend on institutions as you have known them, when you can’t depend on relationships, when converging rivers of change are rushing forward into a new world, and when uneasiness, chaos, and disharmonious conjunctions have become the organizing principles driving those rivers of change, anxiety is simply unavoidable. And we further argue that the largest part of our cultural schizophrenia – of this disconnection between attitudes and behaviors – comes not from the onrush of change, but from the fact that we are being programmed to avoid anxiety as the same time we are coming to intuitively understand that we must embrace anxiety to survive.
What do you find when you embrace anxiety? That it turns to enlightenment.
Enlightened anxiety doesn’t mean that you ignore problems or that you worry over them at random. It means that you allow problems to take their course and do the best that you can within them. It means that you recognize that there are enormous numbers of things in your personal and professional life over which you have not control, no ability to effect an outcome, and that you recognize further that there is great liberation in having no control over them. It means that you stay permanently flexible, because it is only by being so that you can achieve synchronicity with a world that has itself entered into a state of permanent flexibility, a world that is being subtly and meaningfully altered every day. Here’s the real secret of successful people and businesses: They are different every day of their existence.
Fusion creates energy. Energy feeds values. Energy plus values creates wealth.
Corporations frustrate the four freedoms by their very nature. No matter how deftly they are handled, they limit the right to know, to go, to do, and to be.
It is only by giving loyalty to your customers that you can get loyalty back in return, and it is only by recognizing that customers are under no obligation to give their loyalty that you can hold on to it day by day.
How do you prove your loyalty to customers? Not by pursuing customer loyalty, but by being loyal to your customers. In a customer-loyal world, your first concern is someone who purchased your product, not someone who might do so, because that customer with the product is now your best and cheapest billboard. In a customer-loyal world, you thank your customers, not in expectation of what they might do in the future, but for what they have done in the past. And in a customer-loyal world, you make your own value structure isomorphic with the value structure of your customer base.
To structure a business so that it meets its customers’ real lives, make the ownership of a customer relationship a fundamental part of the creation of the business itself.
Best of all, maybe, you build scarcity into products by individualizing them for the individual realities that collectively compose today’s marketplace. By becoming, in effect, a component editor for your customers, you allow them to create their own individual realities instead of imposing a collective reality on them. Nothing, finally, could be more scarce than that.
Instead of the old rules of social behavior that required us to build relationships based on a reciprocal self-disclosure of information, we build them instead on a systematic sharing of information in the service of the deal at hand. And when the deal is done, we all walk away.
… pseudo-intellectuals actively pursue an entry in Who’s Who, while real intellectuals flee from such exposure. Why? Because it is in the culture of the tribe of pseudo-intellectuals to want recognition – recognition is the validation of their pursuit – while it is in the tribal culture of real intellectuals to be eternal outsiders.
The rules of such exceptional intelligence are very simple for children: Never acknowledge it, not even to yourself, and never flaunt it in from of others. Yet very smart children almost inevitably know they are very smart, and from an early age. They understand things before other children even begin to grasp the question, and they are too smart to miss that fact. Other children see it too, and being to organize their own tribes in defense against such intelligence.
Thus is born what is known as the “dilemma of the genuinely talented individual”. And thus, too, arises the fundamental ethic of the tribe of true intellectuals: never pursue celebrity and never care what others think about you.
… “privilege” implies conspicuous consumption when it is inconspicuous consumption, stealth wealth, and downward nobility that are helping to drive the dynamic of the marketplace today.
Avoid the activity trap. Manage choices out of your life, not into it. In the storm of information washing over you, realize that only a tiny fraction of it is germane to your own goals and that it is that tiny fraction on which you absolutely have to concentrate. Take a nap, catch an afternoon matinee. Conserve energy and you’ll have more of it for the things that really matter. You’re the boss; you’ll make sure you get the job done on time. That’s freedom, too.
… the ones most likely to have achieved satisfaction – the ones most likely to have internalized that they don’t have to overspend their capability in order to achieve very high levels of social and self-esteem – are people who are living ordinary lives extraordinarily.
Stop thinking of your customers as a mass market and start thinking of them as a mass of individual collectors.
In an age in which raw intelligence is the most prized commodity, being thought stupid is the greatest fear. Making customers feel stupid is the worst sin a business can commit.
What does risk management mean at a personal level? That the only way to manage risk is to embrace it. That the only way to cope with risk is to swim in it, dance with it, let it happen. A victim says that the world is at fault for exposing me to this risk. A thrivalist – a person who not just survives but thrives – says that every risk is an opportunity.
… even if you are not robbed or shot or bombed or vandalized during your adult life, even if you somehow escape the mortal lock, the only way to survive in a chaos-based world is to be 100 percent prepared for all those things to happen. Ducking for cover and planning for disaster aren’t just exercises for the nuclear generation. Today they are exercises for sustained reality – and for corporations more so than any other single entity.
Take out a sheet of paper. Write down the ten worst things that could happen to your business in the next five hundred days, the next five hundred weeks, and then start acting as if they will happen, because in a chaos world they or something very similar will.
Write down where your own business’s moats are, where and how fortified your castle walls are, where the intellectual property of your company – its secrets, its private systems – is stored, who has the key, and how many keys there are.
The best thing to do when you are lost is wait to be found.
Our advice: Find your own sacred site, not ours, a place where you can sit on the edge and look back to the center. There is no greater clarity to be found anywhere.
Listen, escape your own white noise, and you’ll be astounded by what you will hear.
It is only by concentrating on the inevitability of disaster that you can free yourself to pursue the fruits of possibility.
The critical issue in planning today is not how to get there. The critical issue is where you want to be.
It is not products per se that consumers want. Products are everywhere, generally at deep discounts. In a world starved for scarcity, uniqueness gains value. And it is only by focusing on points of distinction that you can produce uniqueness within your category.
Nothing holds you back but the reluctance to exercise your own Freedom to do, and beyond that, there can be no asking for more.
Excerpts
“freedom to know” – a world in which for the first time in human history caste or schooling or economic circumstance no longer limits access to knowledge, a world in which knowledge itself is less important than the skill to access it.
“freedom to go” – a world in which for the first time true global citizens will have true global mobility.
“freedom to do” in accord not with professional processes or bureaucratic structures but with one’s own intuition and entrepreneurial zeal.
“freedom to be” whatever one wants to be and the obligation to exercise that freedom.
If you are going to succeed in chaos, you must connect with chaos. You must act in concert with chaos. What does that mean? It means that you must trust in intuition, trust in self.
The media today is not only the message – it is the message discriminator. And increasingly it is around those finely discriminated messages that we organize our social lives.
Jacque’s theory … what really mattered in any organization was not how many people you managed, not how much money you had under your control, but how binding your decision was on the life span of the organization.
Rainmakers – individuals who simply by virtue of their existence, their contacts, and their reputations could cause large pieces of business to move with them.
The island-hopping executive. The professional who is most willing to make life changes not in pursuit of the group mission but in pursuit of his or her own ambition. The employee who recognizes that power in a chaos organization migrates to the greatest variable, that the new success paradigm frees the individual.
Because access creates globalism, and globalism disrupts political systems by making the concept of borders obsolete. As borders disappear, the concept of taxation, which supports governments, becomes increasingly fragile.
Because leverage in a chaos world goes to the critical variables, the person able to cut the best deal in a corporation today is not the most loyal one, but the one willing to leave himself or herself the most outs.
… there is no surer way to lose customers – and lose them for good – than to sell them stone and flint when you are just about to introduce safety matches into the marketplace. That is another corollary of the acceleration of technological change. Quality may still be job one, but mediating a consumer’s risk of feeling like a fool is at least job two.
First, as new products arrive on the marketplace with ever greater rapidity, the products themselves lose value and the ideas that drive them gain value. Second, as consumers increasingly drive the economic relationships of the marketplace, the need to massively accumulate data on individual consumers increases proportionally.
Generation X has powerful subsidiary values. Its very uncertainty about its economic future is helping to turn the fear of downward mobility into the virtue of downward nobility, and the rise of downward nobility – the desire not for many things but a few good things – will drive consumerism in the years immediately ahead.
Flight impulse is building to critical mass. Undermined by the death of loyalty or liberated by the new freedoms to know, to go, to do, to be – it is all a matter of interpretation – forty-five to fifty-year-olds soon will be seeking en masse completely different lifestyles and actively plotting their flights.
As the marketplace drives toward a supersaturation of products, scarcity disappears, and with it status orientation. As mass culture breaks up into, in effect, hundreds of millions of individual realities, there can be no shared assumptions of what is enviable to own.
For most people in most industrialized nations, governments now exist as a mechanism for the transfer of payments and almost nothing more – save for their sheer entertainment value. For a radical theory, that one, in fact, is about as plain as the nose on your face. Why has the Washington intellerati failed to grasp it? Because the centrality of the political process is intimately tied to the intellerati’s own centrality – if government doesn’t matter, it doesn’t matter. Like other communes, the political commune talks mainly to itself, and thus has its worldview both set and confirmed within the confines of its commune.
In the drive toward sameness, cultural discriminators are disappearing. It is in the interest of politicians to foster the impression of international business conflict, because conflict is drama, and politicians get to star in the playlets that ensue.
If nationalism no longer has meaning, if corporate identity can float away in an instant, if you are no longer identified by your race, your gender, your sexual orientation, by where you went to college or what clubs you belong to, you can choose to reinvent your life every single day.
One of the reasons, perhaps the chief reason, the explosion in information has bred such widespread discontent is that too much information is chasing too few decision – and too little interest.
Every human life becomes, in effect, a data bank. And as that happens, everything about you – your habits, your preferences, your buying whims, your opinions – assumes a transaction worth. They become more than the sum total of your wants and needs; they become your intellectual property, to be valuated and protected as strongly as any other property you possess.
As privacy becomes rarer and rarer, it will assume greater and greater worth, and privacy management will become one of the great growth industries of the twenty-first century.
… as people become more and more aware of the economic worth of their own privately held information, they will come more and more to realize what a fortune about themselves they have absolutely pissed away. Therein lies the beginning of anger. And revenge.
Time really is money; so is attention.
For better or worse, study after study has shown that working women still can be broken into two groups: those who think that what they do is a career and those who think it is a job. Otherwise, the lives of women who work outside the house for money are virtually indistinguishable one from the other.
Like the lives they reflect, the new lifestyle discriminators are situational, deal-based. None of them relies on loyalty, because the future itself isn’t about loyalty – it’s about contracts.
“filocity” – the ability to adapt instantaneously to multiple relationships and move easily among multiple cultures.
Mass religion, we contend, is as doomed as mass culture, not because people will believe less, but because group reality is becoming particularlized and because loyalty to a single overriding interpretation of the divine is as dated as loyalty to family or to a corporation.
By definition, freedoms free, but they also sweep away excuses.
To be free to know whatever it is you need to know to pursue your destiny means that there will be little sympathy for those who fail to arm themselves with the essential knowledge to succeed. To be free to go wherever it is you need to do to pursue your destiny means that there will be little sympathy if you elect to go nowhere and suffer as a result. To be free to do whatever it is within you intellectual and physical capacity to do means that if you fail to make an attempt to do it and suffer as a result, there will be little sympathy. To be free to be whatever it is within your intellectual and physical capacity to be means that if you don’t pursue possibility and suffer as a result, there will be little sympathy.
True freedom … entails true responsibility. It is impossible to have one without the other, impossible to demand true individual rights on the one hand and claim group victimization or demand group redress on the other.
Like success, failure is a solo act; individuals alone are responsible for both.
… the only thing you can count on in your personal or professional life is that people and organizations will act irrationally.
The reality is that “families” are largely a status symbol today, a luxury for those who can afford to keep them intact.
The reality in a chaos world is that the greatest power belongs to the person who controls the most unstable variable.
The reality is that there are only two kinds of workers in any business organization: owners and employees. And the further reality is that there are only two kinds of employees: the 5 percent who would stay where they are if they were offered twice their salary to leave and the 95 percent who would be gone in a flash.
The myth of governments. the myth is that they matter. The reality is that they matter mostly to those who have an economic stake in their day-to-day operation – that is, to government employees and those who receive federal transfer payments.
The myth of action. The myth, made famous by the Nike sports-wear slogan, is just do it. The reality is that in a chaos world, you cannot “do” your way to anything. You can achieve an end only by focusing on outcome and letting each individual decision be dictated by your final goal. Don’t do it. Be it.
… the myth that reality is real. The reality is that each individual edits reality for himself. The reality is that the combinations and permutations of media choices allow each person to have an entirely idiosyncratic view of reality. The reality is that today reality is constructed.
In a chaos world … the only way to manage a life is from the edge, and the only thing you can depend on is you.
… when you can’t depend on institutions as you have known them, when you can’t depend on relationships, when converging rivers of change are rushing forward into a new world, and when uneasiness, chaos, and disharmonious conjunctions have become the organizing principles driving those rivers of change, anxiety is simply unavoidable. And we further argue that the largest part of our cultural schizophrenia – of this disconnection between attitudes and behaviors – comes not from the onrush of change, but from the fact that we are being programmed to avoid anxiety as the same time we are coming to intuitively understand that we must embrace anxiety to survive.
What do you find when you embrace anxiety? That it turns to enlightenment.
Enlightened anxiety doesn’t mean that you ignore problems or that you worry over them at random. It means that you allow problems to take their course and do the best that you can within them. It means that you recognize that there are enormous numbers of things in your personal and professional life over which you have not control, no ability to effect an outcome, and that you recognize further that there is great liberation in having no control over them. It means that you stay permanently flexible, because it is only by being so that you can achieve synchronicity with a world that has itself entered into a state of permanent flexibility, a world that is being subtly and meaningfully altered every day. Here’s the real secret of successful people and businesses: They are different every day of their existence.
Fusion creates energy. Energy feeds values. Energy plus values creates wealth.
Corporations frustrate the four freedoms by their very nature. No matter how deftly they are handled, they limit the right to know, to go, to do, and to be.
It is only by giving loyalty to your customers that you can get loyalty back in return, and it is only by recognizing that customers are under no obligation to give their loyalty that you can hold on to it day by day.
How do you prove your loyalty to customers? Not by pursuing customer loyalty, but by being loyal to your customers. In a customer-loyal world, your first concern is someone who purchased your product, not someone who might do so, because that customer with the product is now your best and cheapest billboard. In a customer-loyal world, you thank your customers, not in expectation of what they might do in the future, but for what they have done in the past. And in a customer-loyal world, you make your own value structure isomorphic with the value structure of your customer base.
To structure a business so that it meets its customers’ real lives, make the ownership of a customer relationship a fundamental part of the creation of the business itself.
Best of all, maybe, you build scarcity into products by individualizing them for the individual realities that collectively compose today’s marketplace. By becoming, in effect, a component editor for your customers, you allow them to create their own individual realities instead of imposing a collective reality on them. Nothing, finally, could be more scarce than that.
Instead of the old rules of social behavior that required us to build relationships based on a reciprocal self-disclosure of information, we build them instead on a systematic sharing of information in the service of the deal at hand. And when the deal is done, we all walk away.
… pseudo-intellectuals actively pursue an entry in Who’s Who, while real intellectuals flee from such exposure. Why? Because it is in the culture of the tribe of pseudo-intellectuals to want recognition – recognition is the validation of their pursuit – while it is in the tribal culture of real intellectuals to be eternal outsiders.
The rules of such exceptional intelligence are very simple for children: Never acknowledge it, not even to yourself, and never flaunt it in from of others. Yet very smart children almost inevitably know they are very smart, and from an early age. They understand things before other children even begin to grasp the question, and they are too smart to miss that fact. Other children see it too, and being to organize their own tribes in defense against such intelligence.
Thus is born what is known as the “dilemma of the genuinely talented individual”. And thus, too, arises the fundamental ethic of the tribe of true intellectuals: never pursue celebrity and never care what others think about you.
… “privilege” implies conspicuous consumption when it is inconspicuous consumption, stealth wealth, and downward nobility that are helping to drive the dynamic of the marketplace today.
Avoid the activity trap. Manage choices out of your life, not into it. In the storm of information washing over you, realize that only a tiny fraction of it is germane to your own goals and that it is that tiny fraction on which you absolutely have to concentrate. Take a nap, catch an afternoon matinee. Conserve energy and you’ll have more of it for the things that really matter. You’re the boss; you’ll make sure you get the job done on time. That’s freedom, too.
… the ones most likely to have achieved satisfaction – the ones most likely to have internalized that they don’t have to overspend their capability in order to achieve very high levels of social and self-esteem – are people who are living ordinary lives extraordinarily.
Stop thinking of your customers as a mass market and start thinking of them as a mass of individual collectors.
In an age in which raw intelligence is the most prized commodity, being thought stupid is the greatest fear. Making customers feel stupid is the worst sin a business can commit.
What does risk management mean at a personal level? That the only way to manage risk is to embrace it. That the only way to cope with risk is to swim in it, dance with it, let it happen. A victim says that the world is at fault for exposing me to this risk. A thrivalist – a person who not just survives but thrives – says that every risk is an opportunity.
… even if you are not robbed or shot or bombed or vandalized during your adult life, even if you somehow escape the mortal lock, the only way to survive in a chaos-based world is to be 100 percent prepared for all those things to happen. Ducking for cover and planning for disaster aren’t just exercises for the nuclear generation. Today they are exercises for sustained reality – and for corporations more so than any other single entity.
Take out a sheet of paper. Write down the ten worst things that could happen to your business in the next five hundred days, the next five hundred weeks, and then start acting as if they will happen, because in a chaos world they or something very similar will.
Write down where your own business’s moats are, where and how fortified your castle walls are, where the intellectual property of your company – its secrets, its private systems – is stored, who has the key, and how many keys there are.
The best thing to do when you are lost is wait to be found.
Our advice: Find your own sacred site, not ours, a place where you can sit on the edge and look back to the center. There is no greater clarity to be found anywhere.
Listen, escape your own white noise, and you’ll be astounded by what you will hear.
It is only by concentrating on the inevitability of disaster that you can free yourself to pursue the fruits of possibility.
The critical issue in planning today is not how to get there. The critical issue is where you want to be.
It is not products per se that consumers want. Products are everywhere, generally at deep discounts. In a world starved for scarcity, uniqueness gains value. And it is only by focusing on points of distinction that you can produce uniqueness within your category.
Nothing holds you back but the reluctance to exercise your own Freedom to do, and beyond that, there can be no asking for more.
Tuesday, July 8, 2008
The 4-Hour Work Week by Tim Ferriss - Excerpts
Perhaps few of us can really pull off living well abroad by remotely managing a lucrative out-sourced business. But there are tons of earth-shaking ideas put out here by this extraordinary young man. If nothing else, you will learn just how much of the conventional American dream life can be questioned and shaken down to the very roots. Simply astounding stuff.
Excerpts
If you’re sick of the standard menu of options and prepared to enter a world of infinite options, this book is for you.
The objective is to create freedom of time and place and use both however you want.
Gold is getting old. The New Rich (NR) are those who abandon the deferred-life plan and create luxury lifestyles in the present using the currency of the New Rich: time and mobility. This is an art and a science we will refer to as Lifestyle Design (LD).
I will take it as a given that, for most people, somewhere between six and seven billion of them, the perfect job is the one that takes the least time. The vast majority of people will never find a job that can be an unending source of fulfillment, so that is not the goal here; to free time and automate income is.
… an entrepreneur in the purer sense as first coined by French economist J.B. Say in 1800 – one who shifts economic resources out of an area of lower and into an area of higher yield.
If you can free your time and your location, your money is automatically worth 3-10 times as much.
Options – the ability to choose – is real power.
This is hard for most to accept, but our culture tends to reward personal sacrifice instead of personal productivity.
“Someday” is a disease that will take your dreams to the grave with you. Pro and cons lists are just as bad. If it’s important to you and you want to do it “eventually”, just do it and correct course along the way.
Emphasize strengths, don’t fix weaknesses.
Role models who push us to exceed our limits, physical training that removes our spare tires, and risks that expand our sphere of comfortable action are all examples of eustress – stress that is healthful and the stimulus for growth.
Most people will choose unhappiness over uncertainty.
Conquering Fear = Defining Fear.
Most who avoid quitting their jobs entertain the thought that their course will improve with time or increases in income.
Are you better off than you were on year ago, one month ago, or one week ago? If not, things will not improve by themselves.
What we fear doing most is usually what we most need to do. As I have heard said, a person’s success in life can usually be measure by the number of uncomfortable conversations he or she is willing to have. Resolve to do one thing every day that you fear.
Don’t only evaluate the potential downside of action. It is equally important to measure the atrocious cost of inaction.
It’s lonely at the top. Ninety-nine percent of the people in the world are convinced they are incapable of achieve great things, so they aim for the mediocre. The level of competition is thus fiercest for “realistic” goals, paradoxically making them the most time- and energy-consuming. It is easier to raise $10,000,000 that is it $1,000,000. It is easier to pick up the on perfect 10 in the bar than the five 8s.
The opposite of love is indifference, and the opposite of happiness is – here’s the clincher – boredom.
Excitement is the more practical synonym for happiness, and it is precisely what you should strive to chase. It is the cure-all.
Remember – boredom is the enemy, not some abstract “failure”.
Living like a millionaire requires doing interesting things and not just owning enviable things.
To have an uncommon lifestyle, you need to develop the uncommon habit of making decisions, both for yourself and for others.
Being busy is most often used as a guise for avoiding the few critically important but uncomfortable actions.
Being efficient without regard to effectiveness is the default mode of the universe.
Pareto’s Law can be summarized as follows: 80% of the outputs result from 20% of the inputs.
1. Which 20% of sources are causing 80% of my problems and unhappiness?
2. Which 20% of sources are resulting in 80% of my desired outcomes and happiness?
I went from chasing and appeasing 120 customers to simply receiving large orders from 8, with absolutely no pleading phone calls or e-mail haranguing. My monthly income increased from $30K to $60K in four weeks and my weekly hours immediately dropped from over 80 to approximately 15.
… lack of time is actually lack of priorities.
Identify the few critical tasks that contribute most to income and schedule them with very short and clear deadlines.
Don’t ever arrive at the office or in front of your computer without a clear list of priorities.
Problems, as a rule, solve themselves or disappear if you remove yourself as an information bottleneck and empower others.
Just as modern man consumes both too many calories and calories of no nutritional value, information workers eat data both in excess and from the wrong sources.
More is not better, and stopping something is often 10 times better than finishing it.
People are smarter than you think. Give them a chance to prove themselves.
Fun things happen when you earn dollars, live on pesos, and compensate in rupees, but that’s just the beginning.
… the most critical of NR skills: remote management and communication.
Being a member of the NR is not just about working smarter. It’s about building a system to replace yourself.
Preparing someone to replace you (even if it never happens) will produce an ultrarefined set of rules that will cut remaining fat and redundancy from your schedule. Lingering unimportant tasks will disappear as soon as someone else is being paid to do them.
If I can do it better than an assistant, why should I pay them at all? Because the goal is to free your time to focus on bigger and better things.
Golden Rule #1: Each delegated task must be both time-consuming and well-defined.
Just as the Model-T brought transportation to the masses, virtual assistants bring eccentric billionaire behavior within reach of each man, woman, and child.
… per-hour cost is not the ultimate determinant of cost. Look at per-task cost.
People can’t believe that most of the ultrasuccessful companies in the world do not manufacture their own products, answer their own phones, ship their own products, or service their own customers.
Our goal is simple: to create an automated vehicle for generating cash without consuming time.
So first things first: cash flow and time. With these two currencies, all other things are possible. Without them, nothing is possible.
Creating demand is hard. Filling demand is much easier. Don’t create a product, then seek someone to sell it to. Find a market – define your customers – then find or develop a product for them.
Be a member of your target audience and don’t speculate what others need or will be willing to buy.
I have found that a price range of $50-200 per sale provides the most profit for the least customer service hassle. Price high and then justify.
Information products are low-cost, fast to manufacture, and time-consuming for competitors to duplicate.
It is not necessary to be the best – just better than a small target number of your prospective customers.
Aim for a combination of formats that will lend itself to $50-200 pricing, such as a combination of two CDs (30-90 minutes each), a 40-page transcription of the CDs, and a 10-page quickstart guide.
It isn’t enough to think outside the box. Thinking is passive. Get used to acting outside the box.
The guard is changing. Being bound to one place will be the new defining feature of middle class.
Question: What did you spend your last $400 on? It’s two or three weekends of nonsense and throwaway forget-the-workweek behavior in most U.S. cities.
How do these numbers compare to your current domestic monthly expenses, including rent, car insurance, utilities, weekend expenditures, partying, public transportation, gas, memberships, subscriptions, food, and all the rest? Add it all up and you may well realize, like I did, that traveling around the world and having the time of your life may save you serious money.
I know too well that it’s easier to live with ourselves if we cite an external reason for inaction.
Extended travel is the perfect excuse to reverse the damage of years of consuming as much as you can afford. It’s time to get rid of clutter disguised as necessities before you drag a five-piece Samsonite set around the world. That is hell on earth.
I no longer take toiletries or more than a week’s worth of clothing. It’s a blast. Finding shaving cream or a dress shirt overseas can produce an adventure in and of itself.
Choose a starting point and then wander until you find your second home.
It is possible to take a mini-retirement in your own country, but the transformative effect is hampered if you are surrounded by people who carry the same socially reinforced baggage.
Too much free time is no more than fertilizer for self-doubt and assorted mental tail-chasing. Subtracting the bad does not create the good. It leaves a vacuum. Decreasing income-driven work isn’t the end goal. Living more – and becoming more – is.
I am 100% convinced that most big questions we feel compelled to face – handed down through centuries of over-thinking and mis-translation – use terms so undefined as to make attempting to answer them a complete waste of time. This isn’t depressing. It’s liberating.
Most questions without answers are just poorly worded.
If you can’t define it or act upon it, forget it.
Find the cause or vehicle that interests you most and make no apologies.
There is no right answer to the question “What should I do with my life?” Forget “should” altogether.
Most endeavors are like learning to speak a foreign language: to be correct 95% of the time requires six months of concentrated effort, whereas to be correct 98% of the time requires 20-30 years. Focus on great for a few things and good enough for the rest.
Quotations
Jean Cocteau
You have comfort. You don’t have luxury. And don’t tell me that money plays a part. The luxury I advocate has nothing to do with money. It cannot be bought. It is the reward of those who have no fear of discomfort.
Annie Dillard
A schedule defends from chaos and whim.
Albert Einstein
Reading, after a certain age, diverts the mind too much from its creative pursuits. Any man who reads too much and uses his own brain too little falls into lazy habits of thinking.
Ralph Waldo Emerson
As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.
Ralph Waldo Emerson
There are many things of which a wise man might wish to be ignorant.
Anatole France
Man is so made that he can only find relaxation from one kind of labor by taking up another.
Viktor E. Frankl
What man actually needs is not a tensionless state but rather the striving and struggling for a worthwhile goal, a freely chosen task.
Paul Fussel
Before the development of tourism, travel was conceived to be like study, and its fruits were considered to be the adornment of the mind and the formation of the judgment.
Bill Gates
The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.
William Gibson
The future is here. It’s just not widely distributed yet.
Robert Henri
To be free, to be happy and fruitful, can only be attained through sacrifice of many common but overestimated things.
Jules Henry
Human beings have the capacity to learn to want almost any conceivable material object. Given, then, the emergence of a modern industrial culture capable of producing almost anything, the time is ripe for opening the storehouse of infinite need! … It is the modern Pandora’s box, and its plagues are loose upon the world.
Steve Jobs
Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.
John F. Kennedy
Once you say you’re going to settle for second, that’s what happens to you in life.
Charles Kuralt
Thanks to the Interstate Highway System, it is now possible to travel from coast to coast without seeing anything.
Anne Lamott
To be engrossed by something outside ourselves is a powerful antidote for the rational mind, the mind that so frequently has its head up its own ass.
Bruce Lee
One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity.
Seneca
Set aside a certain number of days, during which you shall be content with the scantiest and cheapest fare, with course and rough dress, saying to yourself the while: “Is this the condition that I feared?”
George Bernard Shaw
Liberty means responsibility. That is why most men dread it.
Herbert Simon
What information consumes is rather obvious: it consumes the attention of its recipients. Hence, a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.
Paul Theroux
It is fatal to know too much at the outcome: boredom comes as quickly to the traveler who knows his route as to the novelist who is overcertain of his plot.
Henry David Thoreau
A man is rich in proportion to the number of things he can afford to let alone.
Mark Twain
I am an old man and have known a great many troubles, but most of them never happened.
Mark Twain
Whenever you find yourself on the side of the majority, it is time to pause and reflect.
Oscar Wilde
Anyone who lives within their means suffers from a lack of imagination
Oscar Wilde
Morality is simply the attitude we adopt toward people we personally dislike.
Colin Wilson
The average man is a conformist, accepting miseries and disasters with the stoicism of a cow standing in the rain.
Excerpts
If you’re sick of the standard menu of options and prepared to enter a world of infinite options, this book is for you.
The objective is to create freedom of time and place and use both however you want.
Gold is getting old. The New Rich (NR) are those who abandon the deferred-life plan and create luxury lifestyles in the present using the currency of the New Rich: time and mobility. This is an art and a science we will refer to as Lifestyle Design (LD).
I will take it as a given that, for most people, somewhere between six and seven billion of them, the perfect job is the one that takes the least time. The vast majority of people will never find a job that can be an unending source of fulfillment, so that is not the goal here; to free time and automate income is.
… an entrepreneur in the purer sense as first coined by French economist J.B. Say in 1800 – one who shifts economic resources out of an area of lower and into an area of higher yield.
If you can free your time and your location, your money is automatically worth 3-10 times as much.
Options – the ability to choose – is real power.
This is hard for most to accept, but our culture tends to reward personal sacrifice instead of personal productivity.
“Someday” is a disease that will take your dreams to the grave with you. Pro and cons lists are just as bad. If it’s important to you and you want to do it “eventually”, just do it and correct course along the way.
Emphasize strengths, don’t fix weaknesses.
Role models who push us to exceed our limits, physical training that removes our spare tires, and risks that expand our sphere of comfortable action are all examples of eustress – stress that is healthful and the stimulus for growth.
Most people will choose unhappiness over uncertainty.
Conquering Fear = Defining Fear.
Most who avoid quitting their jobs entertain the thought that their course will improve with time or increases in income.
Are you better off than you were on year ago, one month ago, or one week ago? If not, things will not improve by themselves.
What we fear doing most is usually what we most need to do. As I have heard said, a person’s success in life can usually be measure by the number of uncomfortable conversations he or she is willing to have. Resolve to do one thing every day that you fear.
Don’t only evaluate the potential downside of action. It is equally important to measure the atrocious cost of inaction.
It’s lonely at the top. Ninety-nine percent of the people in the world are convinced they are incapable of achieve great things, so they aim for the mediocre. The level of competition is thus fiercest for “realistic” goals, paradoxically making them the most time- and energy-consuming. It is easier to raise $10,000,000 that is it $1,000,000. It is easier to pick up the on perfect 10 in the bar than the five 8s.
The opposite of love is indifference, and the opposite of happiness is – here’s the clincher – boredom.
Excitement is the more practical synonym for happiness, and it is precisely what you should strive to chase. It is the cure-all.
Remember – boredom is the enemy, not some abstract “failure”.
Living like a millionaire requires doing interesting things and not just owning enviable things.
To have an uncommon lifestyle, you need to develop the uncommon habit of making decisions, both for yourself and for others.
Being busy is most often used as a guise for avoiding the few critically important but uncomfortable actions.
Being efficient without regard to effectiveness is the default mode of the universe.
Pareto’s Law can be summarized as follows: 80% of the outputs result from 20% of the inputs.
1. Which 20% of sources are causing 80% of my problems and unhappiness?
2. Which 20% of sources are resulting in 80% of my desired outcomes and happiness?
I went from chasing and appeasing 120 customers to simply receiving large orders from 8, with absolutely no pleading phone calls or e-mail haranguing. My monthly income increased from $30K to $60K in four weeks and my weekly hours immediately dropped from over 80 to approximately 15.
… lack of time is actually lack of priorities.
Identify the few critical tasks that contribute most to income and schedule them with very short and clear deadlines.
Don’t ever arrive at the office or in front of your computer without a clear list of priorities.
Problems, as a rule, solve themselves or disappear if you remove yourself as an information bottleneck and empower others.
Just as modern man consumes both too many calories and calories of no nutritional value, information workers eat data both in excess and from the wrong sources.
More is not better, and stopping something is often 10 times better than finishing it.
People are smarter than you think. Give them a chance to prove themselves.
Fun things happen when you earn dollars, live on pesos, and compensate in rupees, but that’s just the beginning.
… the most critical of NR skills: remote management and communication.
Being a member of the NR is not just about working smarter. It’s about building a system to replace yourself.
Preparing someone to replace you (even if it never happens) will produce an ultrarefined set of rules that will cut remaining fat and redundancy from your schedule. Lingering unimportant tasks will disappear as soon as someone else is being paid to do them.
If I can do it better than an assistant, why should I pay them at all? Because the goal is to free your time to focus on bigger and better things.
Golden Rule #1: Each delegated task must be both time-consuming and well-defined.
Just as the Model-T brought transportation to the masses, virtual assistants bring eccentric billionaire behavior within reach of each man, woman, and child.
… per-hour cost is not the ultimate determinant of cost. Look at per-task cost.
People can’t believe that most of the ultrasuccessful companies in the world do not manufacture their own products, answer their own phones, ship their own products, or service their own customers.
Our goal is simple: to create an automated vehicle for generating cash without consuming time.
So first things first: cash flow and time. With these two currencies, all other things are possible. Without them, nothing is possible.
Creating demand is hard. Filling demand is much easier. Don’t create a product, then seek someone to sell it to. Find a market – define your customers – then find or develop a product for them.
Be a member of your target audience and don’t speculate what others need or will be willing to buy.
I have found that a price range of $50-200 per sale provides the most profit for the least customer service hassle. Price high and then justify.
Information products are low-cost, fast to manufacture, and time-consuming for competitors to duplicate.
It is not necessary to be the best – just better than a small target number of your prospective customers.
Aim for a combination of formats that will lend itself to $50-200 pricing, such as a combination of two CDs (30-90 minutes each), a 40-page transcription of the CDs, and a 10-page quickstart guide.
It isn’t enough to think outside the box. Thinking is passive. Get used to acting outside the box.
The guard is changing. Being bound to one place will be the new defining feature of middle class.
Question: What did you spend your last $400 on? It’s two or three weekends of nonsense and throwaway forget-the-workweek behavior in most U.S. cities.
How do these numbers compare to your current domestic monthly expenses, including rent, car insurance, utilities, weekend expenditures, partying, public transportation, gas, memberships, subscriptions, food, and all the rest? Add it all up and you may well realize, like I did, that traveling around the world and having the time of your life may save you serious money.
I know too well that it’s easier to live with ourselves if we cite an external reason for inaction.
Extended travel is the perfect excuse to reverse the damage of years of consuming as much as you can afford. It’s time to get rid of clutter disguised as necessities before you drag a five-piece Samsonite set around the world. That is hell on earth.
I no longer take toiletries or more than a week’s worth of clothing. It’s a blast. Finding shaving cream or a dress shirt overseas can produce an adventure in and of itself.
Choose a starting point and then wander until you find your second home.
It is possible to take a mini-retirement in your own country, but the transformative effect is hampered if you are surrounded by people who carry the same socially reinforced baggage.
Too much free time is no more than fertilizer for self-doubt and assorted mental tail-chasing. Subtracting the bad does not create the good. It leaves a vacuum. Decreasing income-driven work isn’t the end goal. Living more – and becoming more – is.
I am 100% convinced that most big questions we feel compelled to face – handed down through centuries of over-thinking and mis-translation – use terms so undefined as to make attempting to answer them a complete waste of time. This isn’t depressing. It’s liberating.
Most questions without answers are just poorly worded.
If you can’t define it or act upon it, forget it.
Find the cause or vehicle that interests you most and make no apologies.
There is no right answer to the question “What should I do with my life?” Forget “should” altogether.
Most endeavors are like learning to speak a foreign language: to be correct 95% of the time requires six months of concentrated effort, whereas to be correct 98% of the time requires 20-30 years. Focus on great for a few things and good enough for the rest.
Quotations
Jean Cocteau
You have comfort. You don’t have luxury. And don’t tell me that money plays a part. The luxury I advocate has nothing to do with money. It cannot be bought. It is the reward of those who have no fear of discomfort.
Annie Dillard
A schedule defends from chaos and whim.
Albert Einstein
Reading, after a certain age, diverts the mind too much from its creative pursuits. Any man who reads too much and uses his own brain too little falls into lazy habits of thinking.
Ralph Waldo Emerson
As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.
Ralph Waldo Emerson
There are many things of which a wise man might wish to be ignorant.
Anatole France
Man is so made that he can only find relaxation from one kind of labor by taking up another.
Viktor E. Frankl
What man actually needs is not a tensionless state but rather the striving and struggling for a worthwhile goal, a freely chosen task.
Paul Fussel
Before the development of tourism, travel was conceived to be like study, and its fruits were considered to be the adornment of the mind and the formation of the judgment.
Bill Gates
The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.
William Gibson
The future is here. It’s just not widely distributed yet.
Robert Henri
To be free, to be happy and fruitful, can only be attained through sacrifice of many common but overestimated things.
Jules Henry
Human beings have the capacity to learn to want almost any conceivable material object. Given, then, the emergence of a modern industrial culture capable of producing almost anything, the time is ripe for opening the storehouse of infinite need! … It is the modern Pandora’s box, and its plagues are loose upon the world.
Steve Jobs
Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.
John F. Kennedy
Once you say you’re going to settle for second, that’s what happens to you in life.
Charles Kuralt
Thanks to the Interstate Highway System, it is now possible to travel from coast to coast without seeing anything.
Anne Lamott
To be engrossed by something outside ourselves is a powerful antidote for the rational mind, the mind that so frequently has its head up its own ass.
Bruce Lee
One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity.
Seneca
Set aside a certain number of days, during which you shall be content with the scantiest and cheapest fare, with course and rough dress, saying to yourself the while: “Is this the condition that I feared?”
George Bernard Shaw
Liberty means responsibility. That is why most men dread it.
Herbert Simon
What information consumes is rather obvious: it consumes the attention of its recipients. Hence, a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.
Paul Theroux
It is fatal to know too much at the outcome: boredom comes as quickly to the traveler who knows his route as to the novelist who is overcertain of his plot.
Henry David Thoreau
A man is rich in proportion to the number of things he can afford to let alone.
Mark Twain
I am an old man and have known a great many troubles, but most of them never happened.
Mark Twain
Whenever you find yourself on the side of the majority, it is time to pause and reflect.
Oscar Wilde
Anyone who lives within their means suffers from a lack of imagination
Oscar Wilde
Morality is simply the attitude we adopt toward people we personally dislike.
Colin Wilson
The average man is a conformist, accepting miseries and disasters with the stoicism of a cow standing in the rain.
Subscribe to:
Posts (Atom)
