Tag Archives: money

Incentives are wrong – Day 97/139

The world is run by incentives. If you want to understand the behavior of an individual or an organization you should look at their incentives.

Let’s look at the incentives of lost property offices in Finland

  1. If a person loses an item and somehow finds out the office where the object was taken, they are first charged 1,70 €/minute to call to confirm the object is there. If the item is found, you will pay the finder’s fee (10 % of the item’s value, up to 20 €). Other fees like storage fees may still apply (up to another 10 % of the item’s value). It is in the interest of the person to pay these fees probably up to about 75 % of the item’s current value if the other alternative is to buy a new item altogether. So they’re happy to pay. But the office only takes up to 20 % of the items value, so it’s a real bargain.
  2. If no one comes to collect an item that was delivered to the lost property office, they will auction it off. At the auction the office will get 100 % of the item’s current resale value.

What would you do?

Lets assume you are running a business where you have a fivefold incentive in not finding the owner of an item you have in storage. Would you try to find the owner knowing that even if you find him/her, you only lose money.

Can the incentives be changed?

Most people agree that it would be nice if you could get your stuff back without having to pay anything. The problem is that losing something happens so seldom that no one really has any incentive to do anything about it.

The incentives change automatically after enough people can agree that they are wrong. In our case that equals to the number of people who like FinderBase better.

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The essence of money – Day 91/139

In the present day society for most people money still equals cash. Cash is the manifestation of money that people can easily relate to.

But it isn’t the pieces of metal and paper that are valuable.

The essence of money is that its value is what it can buy. The value of any currency is just a mass hypnosis of the society. The only thing making money valuable is the fact that other people too believe in the value. Theoretically speaking, people could lose their faith in the value of money overnight.

To solve this problem of fiat money some people have a solution.

In financial crises precious metals, especially gold, have held their value. Gold has to be the ultimate currency, hasn’t it? King Midas would surely disagree. The fact is that gold has very limited use for people. Certainly more than paper but gold too is valuable only because people think it’s valuable. This mass hypnosis has merely continued for thousands of years.

It can help to change your attitude towards money.

If you can agree that money is nothing but a big shroud that is pulled over our eyes, you might want to stop worshiping it. What would you use to pay for food on a desert island?

What is valuable? – Day 89/139

People constantly make value decisions in their lives. We have to determine the value of time, the value of different commodities and the value of information.

Still, hardly anyone knows what is valuable to them.

People appreciate their surroundings, not based on their own values but based on everyone else’s values. As an example:

  • Stocks are valued based on future expectations.
  • Real estate is valued by what someone else is willing to pay for it.
  • Your time is as valuable as your salary.

This valuation model is crooked. We grow our children to this model without thinking about it. But there has to be another way.

What if the society is transforming from consumer-based to value-based?

Already now more and more people are seeing value in the things that are, not in the things that could be. Value-based society would value things on what is real:

  • Stocks would be priced on the way a company can actually contribute to the society.
  • Real estate would be valued based on how much it costs to build a new house.
  • Your time would be invaluable.

Who wouldn’t like to be a part of such society?

Status update 7 – Day 81/139

Now that we’ve taken things a few steps further, it’s time for a status update.

We have founded a company, so now all we need is its valuation.

FinderBase Corporation is a public limited company with 8,000,000 shares. I’m the majority shareholder with 5,500,000 shares. I’ve spent 55,000 € of my own savings to buy these shares so my project is on the negative side with the same amount (plus some peanuts to go with it).

My challenge was to make my personal ownership worth $1,000,000. This adds up to  $1,073,000 as the investment must be also covered. This means that I’ve successfully completed my project if we issue a credible number of shares to an external investor at a price of $0.20/share or 0.15 €/share.

It remains to be seen whether that is the correct price per share in our company.

The essential venture capital – Day 74/139

I just read a great article by Anthony Ha about the web startups and their need of venture capital. He quotes venture capitalist Randy Komisar who says his money is not for the web startups.

But doesn’t a startup need money to develop the next big thing?

I agree with Komisar. If you’re building something great on the web, money is one of the last things you need. Why would anyone trust a person/team who is incapable of developing a simple website with their own money?

Obviously no one should. The best part is that this really helps both parties enormously:

  1. The business angel avoids the huge unnecessary risk related to investing in an early-stage website idea. Websites do have about 99.9 % track record of not becoming business at all.
  2. The team would be stupid to sell a part of an idea that they believe in themselves. The later the stage of development the better terms they can negotiate with the angel.0 If the team can prove their idea works in smaller scale, there is a chance that someone believes it can be scaled up. Money works pretty well for that purpose.

So if you’ve concluded that money is the only thing stopping you from making a great new website, think again. Big corporations have truckloads of money and still they rarely achieve anything remarkable on the web. Just do something remarkable first and the money will follow.

Millionaire magic – Day 61/139

There are millions of millionaires in the world and they all have their own money-making method. I was recommended to familiarize myself with the teachings of one of them, namely Brendon Burchard.

His teachings have several touch-points to what I do.

You can get an excellent overview of Burchard’s life and ideas by checking out his 90-minute Experts Academy Webinar. To summarize here are the bits and pieces that I agree with:

  • Anyone has the potential to become highly paid expert.
  • You have to choose something you’re passionate about to become good at it.
  • Show and share your passion and others will follow.
  • The money will come when you’re good enough in whatever it is that you do.

The slick 90-minute presentation has its pros but also its cons. The actual relevant content is really limited. The whole show has like 15 minutes of stuff that isn’t obvious or irrelevant. To top that off, the last 30 minutes of the his video is basically just hype-marketing his program. Needless to say, it still worked.

800 people paid $2,000 just to join his program, that’s 1.6 million dollars right there.

What should we learn from this?

At least that it doesn’t matter even if your message is 80 % rubbish. If that rubbish doesn’t scare people off, you have a chance of finding someone to follow you just for the other 20 %.

What do you think? Why is Burchard so successful in what he does? Is he ripping people off or actually creating more value than his services cost?

Modern day slavery – Day 43/139

In a recent research conducted by Taloustutkimus for TWBA North it was found that 53 % of Finns are unaware of the purpose of the work they are doing. This means that 1.6 million people in our country wake up every day and do their daily chores without even knowing why. How many people would keep doing what they do even if they were explicitly told their work has no purpose whatsoever?

What on earth is wrong with people?

No one can be truly happy without a clear purpose in what they do. It is no wonder that 400,000 Finns are taking antidepressants to fill the lack of purpose they’re suffering from. But the lack of purpose does not end there. Most people are teaching their children that they should study hard so they can get a job. Shouldn’t someone tell the kids that there is a 50 % chance that they will end up in some corporate job doing stuff without even knowing why.

In the end it all comes down to money.

People are willing to suffer for money. Money is then used to supposedly alleviate the pain created by a crappy job. Everyone should ask themselves whether this really works for them? Can someone really say the money is enough to fill the void caused by a purposeless job? If you are that person, I’d really like to meet you. I’d love to share your ideas with these 1.6 million Finns that are struggling with the same issues.

What could we do better?

It’s up to every individual to make a personal choice. Personally, I try to limit my effort to doing things that have a purpose. And more importantly, I want people who I’m working with to feel the same way.