BY KEVIN COX
Making money from investing drives economic activity to create the things we want for less effort. Businesses make money by making a profit. Calculating a profit is difficult and how much profit is made includes the product price and how much of the profit we give to buyers through discounts. The rules to calculate profits are set by governments so that government can take some of the profits as tax and use the money for the public good.
Economists know that calculating profits and tax is inefficient and like simple tax rules such as a goods and services tax. However, there is a simpler way: find an algorithm to calculate profits and taxes at the time of each business transaction using the rules set by the government.
The government, through the financial system taxes, profits from Capital separately from trading goods and services at different times and in different ways. We can create a more efficient system by calculating all the taxes and profits at each sale.
Doing this removes the need for Capital Markets, the need to accumulate Capital to pay profits and taxes, and increases the productivity of the financial system. For products where most of the cost is the cost of Capital, we can double the use of a given amount of Capital while still using the same government accounting and tax rules.
Today accounting separates money into Capital and Operations. Capital is the use of money to make more money. Operations money is the use of funds to pay for production. Standard accounting turns Capital into a product bought and sold on Capital markets. Separating money into two types wastes money converting from one to the other, slows investment, leaves large amounts of Capital uninvested, and reduces the number of people who can invest.
Instead of treating money as two separate types, we can treat all money as one when we move it from buyers to sellers and separate Operations costs and Capital costs at the time of payment with accounting procedures.
Instead of thinking of Capital as a separate type of money that earns money, we think of all money as the same. Whenever we transfer money to an organisation, we think of it as part Capital and part cost of production. When products are given to the buyer, the buyer receives their goods and their Capital back. The longer the time between giving the money and the return of money, the greater the amount of Capital. If more Capital is given back than received, that is a Capital gain and is noted.
The price of a product includes the cost of Capital, production, and profit. With today’s accounting, the seller gets all the money, including the cost of Capital, and keeps the Capital used to create the Product. This is unfair as the seller has charged for the Capital and kept it. However, it is impossible for any single sale to separate the costs, which vary with time and price. To overcome this, we can estimate the cost of Capital used. Instead of leaving the Capital used with the seller, we can move it to the buyer in the Balance Sheet.
Giving Capital to the buyer means the buyer takes an interest in preserving the Capital in the existing business — but it also transfers the Capital to those who use the products the Capital produces, replaces the need for Capital Markets, and speeds up the transfer of Capital making it available for immediate use. Today Capital accumulates in overpriced assets and is not used until the Capital is sold by the business. By changing the accounting, the Capital is immediately available.
The approach puts in place negative feedback control loops that automatically set prices, control investment, lead to reduced consumption of physical resources, and repair, recycle and reuse of products. It spreads the extra Capital more evenly across society, involves everyone as investors, and builds social Capital or trust.
It achieves the same outcome on prices assumed by proponents of free-market economics, and it removes the need for a market to transfer Capital.
For example, let an organisation invest $1,000, and each transaction of $100 uses $10 of invested Capital, $80 of operational costs, and creates $10 of profit. For each transaction, the total amount of money in the business increases by $10. All of this is available to take from the business. With the new accounting, the total amount of money increases by $10, but $10 of Capital in the business transfers to the buyer. The $10 of Capital can remain with the buyer, but more likely, they will sell it to an investor as it is available. The extra money available is now $20, not $10.
It achieves the same outcome on prices assumed by proponents of free-market economics, and it removes the need for a market to transfer Capital. It controls prices because of the mixture of investors and buyers owning Capital, with all having a say in the choice of investments. Investors like prices to increase, while buyers want the prices to decrease, but buyers want prices to increase when they become investors.
Governments will like the system as tax can be estimated and paid at the time money transfers and potentially remove the yearly exercise of tax payments and refunds.
The system transfers money from investors to buyers and will reduce the need for many social benefit transfers of tax, reducing the need for taxes.
Economies will become efficient because the cost of the tax and finance systems will drop dramatically without changing the existing rules around tax. The boards of companies will concentrate on buyer benefits of reduced prices, leading to long-lasting, easily repaired, and recycled goods and services.
A business currently renting can instead pay rent to a member community organisation. The community organisation pays investors an indexed annuity return twice the value they would get from a super fund. Half the rental payment goes to the investor as a return on investment, and the remainder transfers to the buyer as non-income earning Capital in the office they occupy. A member who owns a property can sell it to the community organisation, pay rent, and use the Capital to invest in their business.
Typical office rental costs are 7% of the Capital Cost or $70,000 annually for a $1,000,000 building. An indexed annuity of 10% annually for 20 years is double the amount available from Australian Superannuation Funds. With Community Capital, 5% of the funds paid to the investor are a return on investment, and 5% is Capital redemption. 50% of the rental payment is a return on investment to the investor, and 50% purchases Capital. If a member pays $70,000, $35,000 is rent, and $35,000 purchases Capital. The same principle applies to housing and halves a house’s cost.
We have removed the cost of renting money or rentier payments. We do this by freeing up Capital to be reinvested. Capital moves quickly, whereas, with individual purchases, Capital moves slowly. Other significant savings are removing the cost of title transfer and the cost of the office and housing real estate markets.
Rentiers lose, but rentiers add no value, so we will not miss them.
The Investors can invest their returned Capital to make it less costly to use the building through better insulation, a Community Battery, and purchasing cheaper renewables.
Stop throwing more money at problems. Throw more minds. Mindhive will help you harness the power of your own team.
This will be the 7th year BDO’s project management professionals donate a day of their time and expertise to work with charities and not-for-profit organisations to solve their burning project management challenges. BDO hosted a discussion on Mindhive which focused on the key topics of discussion throughout PMDoS. BDO was passionate about capturing the key insights from this discussion and ensuring that they extend the knowledge beyond the event.
BDO in Brisbane supported the Project Management Institute Queensland’s (PMI Queensland) Project Management Day of Service (PMDoS). The one-day problem-solving event matches NFP organisations with business management professionals to discuss and analyse the potential challenges facing their organisation and how to address and overcome these issues. In order to gain a further understanding of the issues and challenges facing entity leaders and offer further insight to the NFP community, BDO in Brisbane, in partnership with the PMI Queensland Chapter and Mindhive, utilised the Mindhive ideation digital platform to collect insights from the NFP audience, aiming to further understand the sector and determine how BDO, as service providers can assist in overcoming potential barriers facing NFP sector’s leaders.
The discussion had attracted 466 active followers, with a number of attendees contributing actionable solutions. The top theme from the discussion was the recommendation of a shared service organisation, which would inadvertently save a lot on expenditure and resources. Some of the key challenges facing NFP’s that were identified included, conflict arising from competition; maintaining compliance with changes being introduced through government reform; funding sources; and legislative/compliance changes. There were a total of 78 comments and 38 highlights, which triggered 20 different ideations.
BDO is one of the world’s leading accountancy and advisory organisations. We provide the capability and depth of expertise of a large global organisation, with the approachability and relationship-driven style you expect from a local firm. Our history gives us a thorough understanding of the local marketplace, and the knowledge required to provide real value and expert advice to local businesses. Today, across our ten offices in Australia we have 1,901 people, including 219 Partners, providing a full range of audit, tax and advisory services.
PMI (Project Management Institute) is the world’s leading project management organisation. It is a NFP, serving more than 2.9 million professionals located across 208 countries and territories. The Queensland Chapter was chartered on January 1999. With approximately 800 members and more than 2,000 LinkedIn followers, it was awarded ‘Global Chapter of the Year’ for 2019 and 2020.
The NFP Collaboration is one of thousands of teams around the world using Mindhive because the future is human.
BY NYREE JOHNSON
Have you ever sat and asked, ‘but why?’ so many times that you uncover a level of uncomfortableness that takes you to a place of depth and meaning?
To decide to think deeply is more courageous than we give credit to. Not thinking is easy; thinking is hard.
Autonomous thinking and decision making is engrained in our daily lives, so much so that we don’t even realise we’re making hundreds and thousands of decisions and thoughts each day. We decide on everyday life moments without realising the habitual practice we’re engaging in, and comfort zones thrive in this environment, enabling complacency.
Of course, it is essential; otherwise, how would we breathe, eat, walk and communicate? We choose to do these things and spend less than a millisecond thinking about the action; we just don’t realise it at the time.
A challenge in today’s world is a lack of genuine thought, depth and understanding about what isn’t working and what we can do about it. Wrapped up in our bubbles, complacency has been mistaken for happiness, and the post-pandemic world has shifted the mindset for many to focus on ‘life being too short’ and, therefore, only needing to focus on one’s own happiness. The choice to withdraw rather than contribute and think.
We need to think differently about ways to encourage collective impact and intelligence collation because the days of community town hall meetings are gone.
Too much faith is being placed in the structures we’ve established as a nation to take care of the responsibilities we have. Often structures that forget community has a voice too and don’t realise it would be best served to genuinely engage rather than box-tick. In addition, transparency is lacking, accountability is non-existent, and we find ourselves in a world requiring group thinking with the aim of collective intelligent impact, starting from an individual’s perspective.
It’s left to a courageous few to drive change and influence the direction for all, parallel to navigating the chain of command dictated by government elections and perceived hierarchy. The sense of knowing we’re here for a bigger purpose is lost.
We’re an entitled society and have created a culture that is used to having things done for us rather than us contributing to the outcome we’re invested in because we’ve been involved in creating the solution, having identified the problem collectively.
Everything is busyness work, and we’ve lost our way in what it means to be a connected community that collaboratively creates solutions to their unique circumstances.
Pockets still exist, of course, but the older generation predominantly drives those. The generation in our communities who know a world before the one we’re in now. A population who know their neighbour and who actively help one another. A generation of people who know the pride and passion of community-led decisions and who take ownership of the outcomes required.
Perhaps collective intelligence can be fostered simply by articulating the minimal impact that involvement will cause in a person’s life until we resume our culture as a nation of community-minded collaborative effort. To interrupt that busyness work, many find their lives wrapped up in.
We need to think differently about ways to encourage collective impact and intelligence collation because the days of community town hall meetings are gone. While they still exist and attract a particular target audience, they don’t reach their full potential.
If we make something simple and easy to do and sell it in a way that explains the purpose, ignites passion, provides perspective and potential solutions, engagement can be higher.
Alternative solutions need to be welcomed and used to engage a broader range of contributors to the problem-solving opportunities of the world, not limited by the community you live in and recognising that all societies face similar challenges.
Most importantly, be respectful; if the recipients aren’t, that reflects on them as a person, not you. That’s the importance of collaborative and collective intelligence.
If one community has identified a challenge, chances are another has solved it. Why reinvent the wheel when you can engage the world?
With all the significant shifts in how we achieve outcomes, it’s time to get uncomfortable. It’s time to realise that we, too, can make a difference simply by engaging in collaboration efforts and recognising that we have a voice and can make an impact. While it can be disheartening when we might often find ourselves in organisations with people in positions who shouldn’t be there, it’s essential during these times that we realise our purpose is more significant than just ourselves.
We’ll never escape the impact of Leaders promoted beyond their capability, but the bigger picture is still in play, and the compound impact of one repetitive voice can be significant.
If you don’t have a seat at the table and you want one, pull up a lawn chair. If it’s more than just you, bring a truck of rent-a-chairs. Be seen, be heard and know that you have value to add.
Most importantly, be respectful; if the recipients aren’t, that reflects on them as a person, not you. That’s the importance of collaborative and collective intelligence. If we all push forward with this in mind, the flow of impact we make will compound, and the collective impact will be felt.
As a community, we need to connect, collaborate and demand to be heard. Be heard in a new way – we have technology at our fingertips. We are more connected than we’ve ever been digitally, so let’s layer the human interaction component and build a foundation for genuine connection with collaborative, collective intelligence, creating a connected community.
In this book, you will learn how to use the new revolution in problem-solving and creating fresh ideas to your advantage.
Thank you for being a Premium member of the Mindhive community
Want to share your insights and ideas? Become a Wax Lyrical contributor today! Email us at team@mindhive.org