The idea is that a new business that needs start-up capital issues bonds. Like other bonds, they have an expiry date an an interest rate, or the like.

But you have no other rights. Even if your bonds fund 60% of the business, you get no say in how it is run. You don’t get discounts, priorities or rewards.

If the business fails, you become a debtor ranked according to the terms, and typically you only get something after those who supplied goods and services are paid.

The bonds can be traded.

It rolls together early-bird funding, angel investing, crowd-funding and an IPO into one, for the ease and convenience to get a small venture running.

Without the upside angel investors can usually hope for – exponential returns – the bond must return a rate of interest unobtainable from safe investments. Say 30% after 2 years.

The business might have some reverse re-investment clause. Like, at the 2-year mark, bond holders can extended the end date, for a higher total return, but lower relative return.

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I don’t know the full story, because the business was fully-functional by the time I stayed there, but all that matters is the model, not the precise details.

Pops, the owner, started out with a very canny vision – he found a warehouse for lease in a prime tourist location, and leased it at warehouse prices. He then set up the most rudimentary accomodation and offered somewhere free to sleep in return for manual labour.

Cleaners and receptionists received a bunk bed in exchange for a few hours work each day. No more than 4 hours. In terms of pay, the pay was poor. In terms of guaranteed work, working from home, easy-going employer and various perks, the deal was a good one.

As the business grew (there were many floors to the building), paying people with free rent cost nothing. The beds were vacant otherwise.

Tradespeople – typically Aussies/Kiwis and North Americans – worked less hours for their free rent, but the advantage was the same. No cash changed hands, and the amenities grew.

When it began, there were mattresses and curtains in large warehouse rooms. By the time I lived there, it was a fully fitted hostel, with rooms, corridors and bunk beds.

By offering a barter proposition that worked for both parties, the business grew from a very low capital base. There may have also been some skill/luck with regulations that contributed…

A similar model operates worldwide called WWOOFing – Willing Workers on Organic Farms. Workers, typically foreign backpackers, spend a few weeks or months working half days on a farm in return for room and board. The farm owner gets virtually free labour – the primary expense is the food they cook (ideally sourced from the farm) – and the traveller gets a healthy, learning experience in the fresh air without spending any savings, and plenty of free time. Likewise, with care and vision, a low quality property can be transformed into a profitable organic farm, with far less capital than would typically be required.

All labour-intensive businesses can experiment with how that labour is rewarded.

The post Labour for Product appeared first on Unism.

My department once belonged to an entrepreneur. We had around 130 staff and he sold us for $38 million. Or around $300K per person. Apart from our ability to leave, how different is that than the trade of slaves? It was the sale of our people (and systems, and customers). 

I’m not saying it is slavery, of course not, it is just that the capitalism model has changed. Originally profits were meant to be reinvested in plant. That is why in accountancy, staff aren’t in the asset column. It needs a modern made-up term called “goodwill”. 

What would happen if, and only in a situation of a business being sold, the employees collectively decided that they need to be given part-ownership, or they will collectively all quit? This would lower the selling price, which means a business that anticipates this by already having employee ownership in place before selling, can get a better price.

In the gig economy era, where careers are measured in years and not decades, staff loyalty can be attained via employee ownership.

I can see a change, soon, that shows an appreciation and understanding of the value of employees, to counter the trend towards commoditising the hours we work.

If I quit and am replaced by someone of equal intelligence, skills and demeanour, there is a cost to the business I work for. Aside from hiring fees and onboarding, the experience that comes with working the same job for years has value. I would like to see that value placed in the asset column, and open for all to see.

I want employees to be seen, and valued, as assets.

The post The New Slave Trade appeared first on Unism.

I frequent a bowling club, which happens to be the oldest in Australia and is in a trendy, beachside suburb. I don’t bowl much, but I am there to socialise. It is uniquely a hip bowls club – the members are typically men over 50, but they are quite rock and roll, and not sandwiches and tea.

A club is essentially a customer owned business. The finances of the club are the responsibility of the members, whether that comes from operating revenue or fundraising activities. Because, by definition, members enjoy being in the club, they help it financially. 

The Bowlo (Aussie for bowls club) has a different vibe to other bars I frequent. 

• The bar staff are employed by the members. It is a nice change of dynamic being the owner
• If we don’t like something, we have the power, and right, to push for changes
• It is substantially more social. Everyone knows everyone

Other bars have a higher ratio of strangers being served. People who only pop in occasionally, or visitors to the area. I can visit the Bowlo any night of the week and know 5-10-20 people who are there.

Being a place where people know each other more has a positive feedback effect – it enables weekly prize draws, pool comps and footy tipping – all of which makes the place more social again.

Clubs are non-profit, because there is nobody to give the profit to. Typically that means that prices for what they receive are lower than a comparable for-profit business. A community gym is cheaper than a for-profit gym. 

Because members decide on what they want the club to provide, as long as it exists the members will be, on average, happy with it. A club that winds up will typically not be due to any failures in providing the service, but rather a disinterest in the service itself.

Club organisations, for example auto clubs or RSLs in Australia (ex-soldier clubs), offer reciprocal benefits – if you belong to one club, you can access the benefits of any of the clubs.

There is no reason why bars, restaurants and nightclubs cannot be customer owned, cannot be clubs. 

For a club to come into existence, there needs to be enough people wanting it to exist. 

Scenario #1. Kathleen loves baking and socialising, and has always dreamed of owning a cafe. When the kids left home, she and her husband borrowed $100K, secured a 5 year lease, and built a very beautiful, inviting cafe. They priced their products a little bit higher than the competition, because they felt the quality and decor were superior. 

After 3 months of less than anticipated business, and losing money, they started offering discount Tuesdays and a loyalty card. The response was tepid. After 6 months they had to close down because it was cheaper than staying open. They still owed the bank. They still paid the rent until a new tenant was found. They were now broke and embarrassed. 

They only found out later that the main reasons for their failure were:

• People were content with the cafe they already frequented
• The coffee wasn’t hot enough
• They didn’t like Kathleen’s personality

Scenario #2. Kathleen is hanging out with friends at a cafe, and she says you know what, I think we could make a nicer cafe ourselves. And cheaper.

Friends mention this to friends and before you know it, 100 people are thinking this is a good idea, and form a club.

One of the members owns suitable (vacant) premises, and says they can use it for 2 years, rent free, as they establish themselves. It isn’t in a prime location, but that shouldn’t matter.

After 2 years, 75% of the typical rent will be fine – because she knows this could likely be  a very long-term tenant.

Even though it was Kathleen’s idea, and in her head a personal dream, the club decided that no club members should be employees. It would muddle things and feel odd.

When the coffee wasn’t hot enough, members spoke up, and it was rectified. 

The lower rent and vibrant patronage meant that it was the cheapest cafe in town – more people joined the club.

The two examples are essentially the same business, just approached from a different form of ownership.

So let’s turn the existing model of small business ownership upside down. Instead of a new business being based on a dream or deluded expectations (I went to a business school of sorts, and every business plan I saw was based on rose-tinted expectations), how about it can only happen if enough people pledge to support it, and buy into it as owners?

The post The Bowls Club appeared first on Unism.

They were quite advanced for their time, and perhaps the evolutionary step that led to us humans today.

Having suffered and seen suffering enough, it was common sense for them to keep some survival supplies on hand – basically food and water. Enough for a year or three.

A pandemic came along, they noticed the deaths and figured staying away from sick people would be a good thing. So they did, they hid in their cave until it went away. Life was a bit boring – they missed the thrill of killing beasts, and missed fresh meat – but being alive was all that mattered.

Fast-forward until today and everything is the same except for two things:

1. The economy is going to be fucked
2. Governments are deciding between the economy and lives

This is the problem with our current version of capitalism. We place importance on greed and winning.

One way of looking at the world is What I Need +. That is, if I have all the food, water, shelter, clothing and security I need, everything else is a wonderful bonus. 

What we have during this crisis is a different viewpoint. We will all have all the food, shelter and so on that we need. Yet we are worried about who has more of the bonuses that we don’t actually need. To the point that some people will fight and steal. 

We will get depressed (real depression, affecting our health) about our superannuation diminishing, even though it will bounce back to normal in a few years. 

Losing our jobs can destroy us for a while, in a capitalist way. Here in Australia, we will still have food, shelter and so on for those without work. Those people  just won’t be able to reach their goal of 2 investment properties as quickly as they had planned, during this crisis.

People have literally taken cruise holidays, despite the massively obvious risk, because it is their dream and they spent money on it. Some people like that will die because of capitalism.

A pandemic is a serious, heart-breaking, damaging and potentially species-ending event. But we are suffering worse because of the shape of economics we are using. 

We need to start looking at life as bonuses beyond what we need, and model the economy around that mindset.

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