Friction is one of the more important concepts in the world. Many things are either made possible or impeded by friction.

Strike a match and the friction creates a flame. Yet that same kind of friction stops other things from flowing smoothly.

Perhaps the best description of the challenges [...]]]>

Friction is one of the more important concepts in the world. Many things are either made possible or impeded by friction.

Strike a match and the friction creates a flame. Yet that same kind of friction stops other things from flowing smoothly.

Perhaps the best description of the challenges that arise from friction is from the well known military strategist, Clausewitz:

“Everything is very simple in War, but the simplest thing is difficult. These difficulties accumulate and produce a friction which no man can imagine exactly who has not seen War . . . in War, through the influence of an infinity of petty circumstances, which cannot properly be described on paper, things disappoint us, and we fall short of the mark.”

From: Clausewitz, On War, Book I, Ch. VII

Recently Mark Pesce asked “What happens after we’re all connected?“, and he came up with the answer: “hypereconomics”.

Economics, fuelled by hyperconnectivity and enabled by the removal of friction in processes between people, equals hypereconomics.

And it is this removal of friction in processes, enabled by the internet and mobile technology, that creates the next frontier of opportunities for business.

The combination of mobile accessible applications and peer-to-peer social networks offers an astonishing array of new business opportunities.

In the Arab Spring and Occupy movements we have already begun to see the social and political shifts that are enabled when citizens can communicate and organize effectively through use of mobile technology coupled with social media.

The impact of these political and social movements will necessarily flow on to economic structures. This will create a gap for development of new business models based on removing friction and leveraging peer-to-peer capabilities offered by mobile devices.

Also people are getting used to helping themselves and each other, and the technology is enabling them to act collectively without a great deal of effort. This is the big shift.

We can now collaborate and act collectively even though separated geographically. No longer do we need to meet face-to-face to act. Collective action is enabled and made more efficient with mobile technology in so many hands. And it even facilitates better face-to-face meetings and action (viz. Occupy and the Arab Spring).

I am expecting to see a lot of disintermediation – shifts in the supply chain that that remove some existing intermediary players.

One of the first areas I expect to see this in is new mobile and online peer-to-peer payment models. Another area is aggregation of service providers and potential customers. Up until now aggregating those types of services required large capital investment, but now it just needs a peer-to-peer smart phone application.

If you are an existing economic or financial intermediary it’s time to start planning for this new reality. If you don’t then the dispersed peer-to-peer linked mob might just eat your lunch.

I was reading Bill Bonner’s recent post Zombies Born of Government Spending where he posits the notion of zombies in our economy. As Bill defines it:

“In economic terms, a zombie is a parasite. He contributes less to the economy than he takes [...]]]>

I was reading Bill Bonner’s recent post Zombies Born of Government Spending where he posits the notion of zombies in our economy. As Bill defines it:

“In economic terms, a zombie is a parasite. He contributes less to the economy than he takes from it. He lives at the expense of others.”

His argument is that social welfare programs as practised by most of the developed world only work during good times. As he argues:

“It’s relatively easy to turn people into zombies. And it’s fairly easy to support them when an economy is healthy and expanding. But when an economy goes into a contraction, you can no longer afford to give the zombies their meat. Then what?”

This is an interesting question. Western societies have created a group of people with few skills and no means by which they might generate value to exchange.  Nor do many in this group appear to have bonds to the society within which they exist and they exhibit few loyalties to ideas or ideals outside of mere existence and consumption.

But the real issue is how we create a new economy, one that is founded on creation of real value and its exchange, and not ephemeral things (like hybrid securities and CDOs). One that sustains and nurtures community rather than destroying it through extreme competition and crazy ideas like the priority of shareholder value above all other things.

This raises some important questions:

• If the government can no longer sustain them (or us) then what happens?
• How do we create ways of connecting people with skills to share with those who want to learn?
• By what mechanism can we develop shared values that support the creation of valuable skills?
• How do we create communities of people that choose to contribute and collaborate for the common good?

We don’t have to let what’s happening in other places happen here. We have the choice. We can create communities where real value is exchanged between real people. Not what passes for value in the some places – faux celebrity, immediate gratification, and continuous consumption – but sustainable and sustaining value.

There used to exist such things as commons in the past – commonly held land and other resources. But we have few of these remaining to us nowadays.  It might be times to create some new common resources to share in a fair and equitable manner?  We have already seen the rise of new forms of sharing and common ownership through Creative Commons on the internet. It makes me wonder what other things for which this approach will work. I suspect that Mark Pesce’s work on his Plexus innovation is a beginning in this quest.

It is worth considering how we can each begin to nurture collaborative behaviour and thinking in our local spheres to work against the zombie world view.

It has been fascinating to watch the consumer and media response to the recent increase of interest rates above the Reserve Bank rate by the Commonwealth Bank.

Many have expressed their opinion that the Commonwealth Bank is destroying its brand by such a callous action. But this view [...]]]>

It has been fascinating to watch the consumer and media response to the recent increase of interest rates above the Reserve Bank rate by the Commonwealth Bank.

Many have expressed their opinion that the Commonwealth Bank is destroying its brand by such a callous action. But this view ignores the market reality in Australia that organisations that have extreme market power – such as the ‘big four banks‘ – are not subject to the normal realities of branding and business.

Due to their market power and the difficulty of switching to other providers the ‘big four’ Australian banks are in a unique ‘quadropoly‘ position. They are seen as big organisations who are safe for consumers. And, most importantly, the cost of switching from one to another is very high.

Sometimes the switching cost is an upfront fee to move a loan from one bank to another, but often the switching cost is the sheer effort of transferring all of the automatic payments to another bank.

The other issue is the incumbency effect. For many of us, we still bank with the organisation that gave us our first money box as a small child. The Commonwealth Bank benefits strongly from this effect (many of its customers started with a ‘Dollarmite‘ account in primary school).

All of this means that the big banks are different from other companies. Most companies exist in an open market, without large numbers of long-term incumbent customers, and the switching costs are not very high in most cases. Bank brands are almost irrelevant for the big banks. I suspect that for the Commonwealth Bank – and any of the others that follow suit – this is a mere blip on their brand and that their brand will suffer little (if any) long term damage.

I think that this video sums up the position of the Australian banks (HT: @TRON_Lord):

I’m lucky to be attending the Australian Institute of Company Directors 2010 conference DIRECTORSHIP:10 Ahead of the Curve in Christchurch this week.

Sessions today included:

Many people have told me that freedom has a price. While others have told me that freedom has a cost. It got me thinking about the difference between a price and a cost.

While pondering about this I recalled the Oscar Wilde quote: “A cynic is a man [...]]]>

Many people have told me that freedom has a price. While others have told me that freedom has a cost. It got me thinking about the difference between a price and a cost.

While pondering about this I recalled the Oscar Wilde quote: “A cynic is a man who knows the price of everything but the value of nothing.”
Perhaps value is only perceived in relative rather than in absolute terms? How do we know freedom is a good thing unless we know that repression exists? Freedom is precious. But the true value of freedom is only known in relation to un-freedom.

Starting with a dictionary, the definitions are:

Price: “agreed exchange value, that will purchase a definite quantity, weight, or other measure of a good or service”

Cost: An amount paid or required in payment for a purchase; a price. Or the expenditure of something, such as time or labor, necessary for the attainment of a goal.

Thus it seems that both groups of people are right when they talk about freedom. It has an agreed exchange value (a.k.a. price), which is the expenditure of something (a.k.a. cost) to attain a goal.

But since freedom is not tangible (sometimes it is easier to see freedom by its absence) and it can easily be whittled away without us noticing.

Freedom is under attack all over the world. Rules, laws, things meant to protect us all chip away at freedom. Each little chip has a plausible reason, when taken in isolation. However, the sum total of the overall pattern is reduction in freedom.

What have you done today to defend, protect or extend freedom?  What is the price of freedom?  And what cost are you willing to bear?

Nearly 9,000 women signed up for the Febusave 2010 campaign, for example:

These might not seem like much; but little changes like this can make a real difference to [...]]]>

Nearly 9,000 women signed up for the Febusave 2010 campaign, for example:

• 2,307 pledged to give up buying lunch
• 1,118 pledged to give up treats
• 162 pledged to give up taxis

These might not seem like much; but little changes like this can make a real difference to your finances.

My pledge was to stop using the car to drive to work every day. The savings from that are now going into paying my mortgage. This means that it will be paid off several years earlier and save us thousands of dollars in interest payments.  I’m going to keep up this new habit of savings going even after Febusave is over.  It’s been a really good learning experience.

Some other great bloggers who have been sharing their journey All For Women, Inside Cuisine, Strawberry Communications,  Rainbowtatt, Liz and Jarrod, Little Lioness and Beautiful you by Julie

You can see what some of the other bloggers have shared via the #febusave hash tag on twitter.

Don’t forget! If you have registered for Febusave,  at the end of February simply complete the online entry form at the Febusave site and answer “what was your secret to achieving your FebuSave goal?” in 50 words or less and you could win $5000!

For the month of February I decided to give up driving to work and bank the savings. It’s been surprisingly easy to catch the train each day, even if it does mean I need to plan ahead a bit more.

The savings have been a real eye-opener, especially when [...]]]>

For the month of February I decided to give up driving to work and bank the savings. It’s been surprisingly easy to catch the train each day, even if it does mean I need to plan ahead a bit more.

The savings have been a real eye-opener, especially when one of my friends mentioned how much that adds up to over a full year.  Putting that money into my mortgage is really going to make a difference if I keep it up after February!

Over 8,000 women have already signed up, pledging to cut back in various areas to kick start their savings for Febusave.

There’s still time left to sign up now.

As part of the ANZ Bank’s Febusave campaign I’ve been following up on my pledge to catch public transport as much as possible during February, especially for the commute to the office.

I’m finding the daily train trip gives me a few unexpected benefits [...]]]>

As part of the ANZ Bank’s Febusave campaign I’ve been following up on my pledge to catch public transport as much as possible during February, especially for the commute to the office.

I’m finding the daily train trip gives me a few unexpected benefits in addition to saving money:

• more time to work on projects rather than concentrating on driving in the crazy Sydney traffic
• more thinking time so I can hit the ground running when I arrive at the office
• uninterrupted time to plan my day
• on the way home the I have time to disconnect my mind from work before arriving home

Also participating in Febusave has made me conscious of spending choices, and is making me question if I do really need to buy certain things.

Why not sign up too? You can do it here (and you might even win a $5,000 prize).

I’ve been thinking about having an overarching theme for my blog this year and have finally decided on women in …

that is women who are doing interesting things like

We do not often share stories about our personal finances (except perhaps to boast of some great success?) but here are some hard won lessons I have learned.

My parents were not great savers, subsisting from pay to pay in the way that many workers do. Thus I [...]]]>

We do not often share stories about our personal finances (except perhaps to boast of some great success?) but here are some hard won lessons I have learned.

My parents were not great savers, subsisting from pay to pay in the way that many workers do. Thus I did not learn much about saving as a child.

By the time I was 21 both parents and all grandparents had passed away and I had lost contact with the few remaining older aunts and uncles. Both of my parents died intestate leaving me to sort out the disposition of their few assets for the benefit of my younger siblings. I was left to look after the family finances, leaving university and geting a job to help support the family.

Settling my parents few debts, arranging for the sale of their house and investing the proceeds for the maintenance of my youngest siblings was done by the Public Trustee.

All went well as I repeated my parent’s habit of living from pay to pay. Then a bank offered me a credit card which I accepted. It was like all my Christmases had come at once and I shopped happily, buying all the clothing and accessories I’d always loved.

I dutifully paid off the minimum balance every month and all remained well. But then I lost my job, laid off due to a downturn, and was only able to find lower paid work. No longer able to afford to pay both my rent and the credit card bill I was in trouble.

How did I get out of this problem?

1. Borrowed money from friends to pay the rent.
2. Made a payment agreement with the credit card provider (it took me years to pay that debt off).
3. Setup a budget and followed it religiously.
4. Ran my life on cash only for the next five years.
5. Built up a savings buffer so I did not have to borrow money from friends again.

What did I learn from all of this?

Everybody needs a will – those you leave behind have a hard enough time of it without dealing with intestacy. In Australia the Public Trustee in each State can help you with this (for NSW click here).

Having a household budget is important – knowing your expenses and income & keeping them in balance  reduces stress.

A savings buffer brings peace of mind – a few dollars in the bank for an emergency makes all the difference during stressful times. I found an an automatic savings plan that takes the money right from my pay directly to the bank works best for me.

Parents need to share good financial habits with their children – you will not always be around to help them and it is better for them to learn good financial habits from childhood.

Some more useful information is at Febusave.