Where is the Value?

I was talking to an old friend last week about a new business opportunity. He’s a very exciting guy and was talking about his involvement in a company that needed a push to get its fire started.

 He is now on the company’s board and was going to connect them to some of his contacts so they could increase their web traffic. If these connections worked out, he was going to be able to cash in on some stock options and make a few million.

Now I have to say, I found myself leaning into this conversation. Wow…. just put some folks together, blow on the fire and harvest a great reward. Isn’t that awesome?

Yet something was nagging at me… a question was calling my attention. 

How is this whole thing adding value to peoples’ lives? Oh, that question. I didn’t particularly want to hear that question. You know, I kinda like the get rich now thing. Isn’t that the American dream?

I suppose it is and that’s the problem. There isn’t anything wrong with offering something of value and receiving value in return. The problem is that this get rich quick approach led many to what may be considered magical thinking.

Take the stock market run up during the dotcom bubble. Many middle-class Americans were investing everything they had, including funds from their 401(k) portfolios, in technology stocks. How could you go wrong. The returns were amazing and each day you could watch their portfolio grow.

That was until March 11, 2000, when the walls came tumbling down. A panic spread and the financial net worth of millions dropped like a rock.

The only thing of value each of us greedy investors was adding to the system was our desire for more money. Money that we wanted to feed our need for more stuff or a better retirement. Whatever the reason, we brought money to the table, which is just some bits in a database really, not something like gold or silver, and we wanted a great return for being smart. Smart like the millions of others ponying up to the trough of gluttony.

If this wasn’t enough, in the same decade, we’ve had the precipitous drop in housing value. We kept buying houses at higher and higher prices, kinda like hopping from stone to stone across the water. The only problem was the stone path ran out and the water rose so we couldn’t go back to where we came from.

Millions of us have lost our homes, through either foreclosure or short sales, and it is estimated that over twelve million of us have houses that we can’t sell today for the money we owe someone for the house. This is the first time in American history this is occurring.

What we were doing is hoping that if we just lived in my house long enough (for many this meant a few years), I could increase my net worth by a few hundred grand and do it again. Keeping this almost ponzi-like scheme going required that everything operate perfectly. Meaning that the growth engine must keep increasing year after year. One small problem is, if you study either history or natural systems,this is impossible. So we were betting our little nest eggs in hopes of making them bigger with a system that couldn’t possibly give us what we wanted.

One of the difficulties in all this is that value has turned from something that is tangible, meaning I can use what I am receiving as value, to intangible, meaning that is exists in some digital form rather than in fact. This disparity of value has created a crisis of inflation of perceived net worth. This false sense of prosperity fueled ever-increasing consumer spending and debt.

 Now the bloom is off the rose. We are faced with a cold reality that value comes from real goods and services for which an in kind value is offered. Dmitry Orlov talks in his book Reinventing Collapse about the strong informal economy that grew up in Russia after the fall of the Soviet Union. The Russians were already participating in this type of economy because of the inefficiencies of the Soviet system. People knew how to barter to get by. Orlov warns that we don’t have this history in the US and reminds us of the consequence of continuing to believe the world of the past will the world of the future.

 So what does all this mean? The truth is, I can only speak about what it means to me. Remember, I was talking about the conversation with my friend. I am reminded that it only makes sense for me to put my attention on, and resources, behind activities that are creating real value. This is the best way to both change a system that is clearly broken and to survive a challenging time that we are just entering.

One thought on “Where is the Value?

  1. What a stimulating question!
    I think the core problem is plain and simple human greed.
    I agree the current system is broken. I believe it worked for a time and then people learned how to take advantage of it for personal gain. Systems theory says no system is immune from this. Therefore I agree we need changes but we have to accept that any changes we implement will only work for a time. Then someone (and it only really takes one) will figure out how to gain the system and that is the beginning of the end of that system. It will be replaced with a new system and the cycle will repeat.
    Humans are easily lulled into greed. If you come to me and offer me $1.05 tomorrow for $1 I give you today I will probably say ok and noone will say I’m greedy. If you honor this and then offer me $1000 tomorrow for $900 today, I trust you now and probably do it and still noone says I’m greedy. Repeat a few times until one day you come to me and offer me $1M tomorrow for $100k today. I trust you. I think maybe this is too good to be true. But I trust you and I do it even though I don’t need the $1M. That’s greed. It only takes a few to bring the system down.
    You might call me pessimistic, but I am not. I also believe in the resilience of the human spirit and just like we’ve pulled through worse in the past we will pull through this one and end up the better for it, even though I admit the way is not quite clear yet, and probably won’t be until we have the benefit of hindsight.
    Now if we could cure humans of greed, that would be something. I like to think that just because it hasn’t been done yet doesn’t mean it can’t be done.

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