Thugged out since cub scouts

I just heard a song that made me giggle. It's called "Thugged out Since Cub-Scouts", by CunninLynguists. It made me laugh a bit because I was in cub-scouts, and grew up in the ghetto. Although I wasn't "thugged out" so to speak, I could relate with a lot of the emotion of the song (even though I get the impression that they were never actually in cub-scouts).

The desire to express our personality, to exclaim who we are, and what we are about to anyone who will listen is actually very natural. We all do it in one way or another. In some cases (as with the gangsta' troop 859) it's overt. In other cases it's very subtle (what you wear, how you speak, etc). Everyone does it. Even the people who say they don't do it because they don't care what people think about them, are expressing that they are the sort of person who doesn't care what other people think of them. Sorry...

We all care what people think about us. We may not care what every person thinks of us, but we have opinions about other people's opinions of us at some level.

When it comes to economics, this is important. Only in recent years have people bothered to look into what they are calling "psycho-economics", or "behavioral economics"; the effect of the irrational mind on the economy. Up until now, if you can believe it, they thought that entire groups of people could be expressed with simple mathematical formula. That every human had an inherent "completely rational" side that took in all information and made the objectively best decision. It's like they never went outside.

The fact of the matter is, that everyone wants to be liked by someone else. And this desire drives us to do things that aren't perfectly rational like buying over-priced clothing, eating at un-healthy restaurants that are too expensive, driving in un-safe ways, listening to (and therefore supporting) certain types of music, etc. The list goes on and on. And if we are going to be reasonable, we can see how those actions impact real industry in one way or another.

So, what do you want to be known for? Why do you want people to like you, and who are those people? Is it working?

Sometimes it's hard to know. It's hard to know who you are communicating to with your words and actions. It's hard to know why you are doing it (our own real desires are sometimes hidden to us). It's hard to know if the message is getting out there.

Enter Propits.

Propits lets you put yourself out there in any way you like, and get real feedback (and a real piece of the irrational economy) for it. You can clarify who you are to others, who you are trying to be, and how well it is working.

What's your dream? What's your legacy? Are they the same?

Help us make the world better by giving people the power to really and truly support themselves and their loved-ones in doing whatever it is that is important in their lives. Help us help others clarify their dreams and visions, and become the people they want to become, whoever that might be.

Weather you were trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean and reverent, or if you just want people to think you were, get a button, and get to making the world around you better.

The tip jar and the collections basket

A tip jar is sitting on the counter of your favorite deli. After you pay, you drop your change in as a little extra something to them. A monetary "thank you".

You're sitting in church, and at the end of the service they pass the basket around directly asking you for money.

Which one do you give more to?

The deli provides a real product that keeps you alive right here and now. They spend their time and resources, feeding on other people's products and services to provide this for you. It's real food that has a real impact on you right now. The church provides a service, not a product, and the payoff of the service (depending on your church) may or may not ever come to pass. I know that I usually gave more to my church than to the tip jar at the deli.

That says something about money. It's not that the sandwich has an inherent value, in dollars, and a 20% tip is the correct amount to "voluntarily" add on to that. It's that there is a feeling associated with the sandwich, and a feeling associated with the church service. You value that emotion more or less depending on your opinions about those things at those times (combined, maybe, with a little social obligation).

So, what's the value? Is that to say that it's whatever you make of it? Sure, in a sense. A starving man would pay a million dollars for a slice of bread. Does that make bread under-priced or under-valued in general? No, it means that context and feeling matters.

Propits is supposed to be a way of expressing that feeling when you are "out and about" on the internet. Thanks, that's cool. Here's a tip. Oh wow! That changed my life, here's an offering in thanks. The amount doesn't matter. There is no intrinsic "value". The feeling matters.

We are trying to make the feeling matter to both parties, not just one. The sandwich maker is thankful for the tip. It passes some of that feeling onto them. That's the whole point. Pass along the warm-fuzzy. Make a difference in your life and the lives around you. You shouldn't have to do anything at all in life for any reason other than it brings you happiness. Propits makes that a real proposition, not just a nice idea.

On loans, the nature of banks, and trust.

Would you borrow money from a friend, or lend money to a friend in need? How much? For how long? Would the amount or duration change if they were family instead of a friend?

What factors do you use to make those descisions? I don't know about you, but when someone wants to borrow some money from me, I don't bust out the spreadsheet and do a cost-benefits analysis.... It would seem kind of cold, given that they are a friend.

On the other hand, if they asked me for a large sum of money, I just might have to break out the Excel-fu...

That points to an interesting reality about the nature of money and trust. We put a lot of emphasis on money in our culture. We also put a lot of stock in relationships with other people. When we start crossing the two, things can get a little sketchy. Here's a thought-experiment:

Imagine how you would feel loaning $10 to a friend.
Now imagine $100.
Now $1000...

I don't know about you, but at ten bucks, I wouldn't even ask for it back. It's not a sum large enough to make me want to be a debt collector, and weaken our freindship over it. Some would argue that you have to ask for it back, or the act of letting it go will strain the relationship, but I'm not getting into that right now. Let's just say that those aren't the kinds of friends I keep.

But everyone has their throw-away number. Weather its $10, 10 cents, or $10,000; everyone has a number that they can just let go of and not worry about anymore. It's the basis of "impulse buys". That's why candy bars are only a dollar, and why they are in the check-out lane. You can let go of a $1 without having to worry about it, so why not buy the Snickers? Why not hand it over to a friend, and then forget all about it.

We also have a number that we are willing to part with, but only with the promise of getting it back later. That's like the $100 for me. I can happily give that to a friend in need, but I do expect it back at some time. I'n not going to set a schedule or anything, but I will expect to be repaid at some future point.

Then there are the numbers that you just aren't willing or able to part with, regardless of who they are.

Banks have the same dillema. They don't deal with numbers small enough for them to just let go of. Banks don't give out loans below, usually, $3,000 specifically so that they can chop off the bottom category. There are no friends in banking, and every dollar is an important one. If they give you $10, and you don't pay them back, are they really going to spend hundreds trying to track you down and get their ten-spot? Hell no. So they don't bother giving the $10 to start with.

They also don't hand out numbers that they aren't willing to part with. Go to your local bank branch and tell them that you need to take out a loan for 10 million. They won't even give you the forms to fill out. Granted, they may direct you to another bank that deals in numbers that large for loans, but those banks have their scales set differently (although, on a funny side-bar, if you take out 10 million over the course of multiple $10,000 loans they are just fine with that, as long as you show good payment history). If you take out that much money from your local bank branch, it could take away enough liquidity that they will be in violation of SEC and banking regulations. They just can't do it.

But banks have a card up their sleeve. They have a metric that tells them how much to trust you. It's called your credit score, and based on it they alter the amount of money they are willing to give you, and how much interest they charge. It's a funny artifact of how banking works that people they trust less get put on the hook for more money...

The point is that they can alter their expectations and behaviour up front based on a (relatively) simple formula. It's good for them because they avoid getting their pants in a twist later. It's good for their investors because they have a sense up front on the likely returns on their investments. It's good for you because it shortcuts having to make friends with bank managers. Despite all the problems with our current credit tracking and lending system, the idea behind it actually makes a lot of sense.

So, what score (from 1% to 100%, just for discussions sake), would you give a friend? If you said 100%, does that mean that you would be willing to give them any amount of money at any time? Did the score just go down a little? ;-)

How about from the othe way? Would you take a loan from a friend if they required that you payed interest on it? How large would the loan have to be for that to make sense to you? From which friends? What about from your mom?

I'm not sure there are easy answers to this (though I have an idea that I will be testing out a little later. I'll keep you informed), but it's a fun thought-experiment. It really helps to clarify what money and economy means to you as an individual. Think it over. Pass this post on to your friends and discuss it with them. There's nothing really to do with it, but I would assert that this kind of thinking is generally healthy for people who are interested in money and finance.

What are your thoughts? Can I borrow some money? :-)

Management, Motivation, and Mayhem

Take a minute and start to think like a manager. A real pointy-hared-boss. Got it? Good.

Now, imagine that I told you to stop giving bonuses for good performance, don't require people to be in the office... Ever. Cancel all meetings, and make any that absolutely MUST happen be optional. Give your employees payed time to work on whatever they want to work on, with no promise of return for the company. Make it a rule that you have to take a full hour lunch out of the office. And finally, make the only metric that the company tracks for an employee their deliveries vs dead-lines.

You would tell me I was crazy, right?

Now, take a minute to put yourself into the head of an employee. Now, re-read those points above. Feels pretty good, right?

There have been actual studies performed that show that the kind of management I listed above greatly improves efficiency and effectiveness of workers, increase company value, and
makes everyone (even the managers) happier, healthier, and more productive. More-over, there have been real-life companies that have used this method. You may have heard of Google.

Why is it? Why does almost every company in the developed world runs themselves using carrots on sticks, and fear of layoffs to manage their employees, when all the science says that
it doesn't work, and what does work is the thing that everyone wishes their boss would let them do? Why do companies keep a strangle-hold on out-dated methodologies when the work
that we do, the people that we work with, and the atmosphere we enjoy has fundamentally changed in the last 100 years?

People are essentially hunters. It's built into our DNA to chase after things, keep a sense of purpose throughout the day, have large amounts of dopamine and serotonin drop into
our brains when we get what we are aiming for, to compete, to track, to kill. In the modern world, however, we don't get to hunt. Instead, we get to sit under florescent lights for hours and hours on end, tapping out patterns of romantic and Arabic symbols on an over-priced piece of plastic and silicon, and then go home and simulate the excitement and enjoyment of success with a beer.

Yay.

But you can't beat genetics. We try all the time, and simply fail. Even in basic physical activities: Champion swimmers are Swedes and Germanic, while champion runners are Kenyan. It's not an accident; It's because of the lighter bones, and higher muscle-density respectively. It's genetics. We have an almost unstoppable drive to have sex simply because it feels good. It's because we are driven to that feeling of "goodness" that keeps the species from dying out.

We are driven to the hunt, the chase, the capture, the kill. Only, we've changed what we are chasing after and in the modern world we have unparalleled freedom to pick what it is that we want to chase. Until we go to work.

Imagine what it might be like at work for you to take some time to pick a thing that you want to track and chase (a new project, a pickup-game of basketball, etc) and went for it. And at the end of the day, not only did you make progress on it, but everyone around you congratulated you on it, and your boss handed you some cash. That's real success. That's what our DNA is telling us to go for in this modern world, and yet almost every company in every industry tries to run away from that in the hopes that.... What? That we will be more productive as we fight every instinct that humans have left?

I could go on and on, pontificate to the end of time on the merits and demerits of this theory; examples of its success and failure. But I won't. All I will say is this: Are you happy? Do you think you would be more-so if your office looked more like the scenario above?

What is the economy to you? What does it mean to support "fun, cool things", and get support for doing "fun, cool things"?

Just a thought....

Prop by email is a hit!

As we suspected, Propping people via email is a big hit. About 70 more people have received cash from Propits via email, and many of those have converted into full Propits users. I'm so pleased to see the community growing!

More ideas in the works, more ways to Prop...

Inflation and value

This is a meditation on business practices I wrote a while back, that I thought would be fun to post here. I'm not sure I still feel the same way, but I'll throw it out there and see what kind of feedback we get. Caution: It's a biggun.

Way back in the day you could put your money in a bank, and come back to said bank at any later date and be sure that you're money would be safe in vault somewhere. These days, that's just not the case. If you go to your bank right now, they can show you an account statement, maybe even liquidate it for you (depending on how much you have in your account), but if you ask them to see the actual cash safely locked away in the vault, they'll laugh you out of the building.

The reason for this is something we call "fractional reserve banking". Basically that's where a bank only has to hold (or keep on reserve) a fraction of the money entrusted to them at any given time. The rest of it can be on loan to other people (the hope being that those people will pay back the loan with interest, and the bank owners get money). The system works pretty well as long as everyone doesn't ask for all their money all at once -- we call that a "run on the bank". It also encourages people to own and operate banks, because there is a way to make money off of it.

But what happens if everyone tries to get their money all at once? In that case, there are central reserve banks that keep a metric ass-load of money on hand that they can give out to a bank that gets "runned" on. These central banks are owned by the Federal Reserve, and private banking conglomerate with board members appointed by the federal government. The idea with the central reserves is that not all the banks in the entire country will have a run on them all at once, so they can cover a few at a time. Sounds good, right?

Well, kind of. The idea is nice. All the banks are covered, so that people can know that their money is safe even though it's not technically in a vault somewhere. At the same time there's a reason for people to open banks, and competition is good for us all. Or so they say. It's important to remember that in the grand scheme of things, capitalism is a pretty young experiment, still in it's early stages. Because of that, there are a lot of unintended consequences of seemingly good decisions.

Because banks only have to keep a fraction of their entrusted money on hand (10% in the US), they make money off of interest on loans, and they have a grand bail-out bank making sure that they won't get totally boned by over-zealous bank members there is a strong incentive in a competitive market to give out loans to as many people as they possibly can. Even if some of that money is lost because of defaults, they central reserve banks got them covered. Mean-while, they maximize their potential gains by riding close to the line (most banks keep EXACTLY 10% cash on hand, the other 90% is on loan all the time). Another funny thing about the way that capitalist institutions keep their books is that money that they have given out to other people is actually an asset, even though they don't have the money any more! They have the promise of a lot more money, though. They can take out loans of their own on this promise, or even sell the promise for face-value to other banks before that promise has ever been realized (effectively turning a potential gain into a realized gain -- without anyone ever giving any money back).

So, we have a bank give 90% of it's money away to anyone who asks for it, and then sell the piece of paper that says "I'll give it back. Scouts honor" to someone else for a profit. Rinse, repeat. Because everyone knows that the reserve banks have their backs, there's no reason not to just run that as far and as fast as you can, which of course leads to a lot of the problems we are seeing now with the credit crisis, collapse of financial insurance companies, people losing their houses (and not paying back their loans -- 90% of which is your money), etc etc.

But the fed has them covered, right? Well, kind of. The fed can bring the money into existence to cover them. That's right; the fed invents money as it's needed. As the fed issues more and more money, there is more in the market, bringing the value of any given piece of money down relative to the rest. We call that inflation. Which means that every time money is given out by a bank and not given back, the overall value of money eventually goes down. That's why banks give interest on some accounts; to try to get people in the doors with a counter-trend to inflation (although savings account interest rates are never as high as inflation...).

So, see if you can follow this:
1) Banks go nuts giving out money.
2) Any money they make, 90% goes right back out the door again
3) Any money that they lose gets conjured into existence anyway, and
well all lose. In other words, capitalism, in this case, guarantees that we all LOSE purchasing power -- the exact opposite of what capitalism is supposed to provide.

It's not some conspiracy, though. There's no one at the top wringing their hands and cackling in the night at your expense. Quite the opposite: they're losing out, too. That's why they come up with more and more investment vehicles, in the hopes of finding the magic thing that makes them not lose out anymore.

It's all a funny artifact of the fact that at one point we decided that banks were good, and to make them better, they needed to be able to compete within a market. Both good concepts, but with some odd, unintended consequences.

So, here's what I propose: We still need banks, and no one will run them if they aren't going to make money, so the bank still needs to be able to run on a fractional reserve. However, we just need to get rid of the backing. Make a bank stand on its own decisions, and rise or fall as their business practices dictate (what capitalism is supposed to be). Check it:

1) Take away federal reserve backing of banks.
2) Drop the required reserve to 1% (so that banks can decide for themselves what makes the most sense for their business)
3) If a bank fails, or gets "runned on", only a small group of people lose out, instead of all of us.

Of course, this will make the federal reserve angry, because they are invested in making money as well. To keep them going, just move them to a government bank (still privatized, though). Here's the thought:

1) If banks rise and fall on their own merit, they won't want to give out loans to dodgy people
anymore (good)
2) The dodgy people need the money for things like food though (bad)
3) Let the government gives out and absorb those loans, and back them with the fed

This will keep the fed in business, allow for a healthy amount of inflation to allow for economic
growth, and keep the government from having to nationalize anything. Everybody wins -- in theory. Also, the government already has the debt-collection part in place with the IRS to cover people who take out a government loan and default. A bank can't come to your house and take your stuff. The feds can, though. So the government has less risk in giving out loans to bad customers than private banks. Private banks can focus on intelligent business practices like giving out loans intelligently, running their margins at a reasonable level to support their customers, and giving out interest that actually matters, and is relevant to how well they do in a competitive market.

We get the benefits of capitalism, without all the stupid by just getting out of the way and actually letting the market decide.

So, that's my idea. What do you think? Can you think of any unintended consequences of this kind of plan, or can you think of a whole new plan that would do even better?