Wednesday, November 15, 2017

On the point of the capitalist spear


Is your project on the point of the capitalist spear?
Probably; or should be.

Capitalist: One who invests the proceeds of business into R&D, new capabilities, and new production to make the pie bigger. (*)

Not-capitalist. One who invests proceeds in other than the above, having no discernible effect on making the pie bigger.  See: zero-sum economic stagnation (I gain by making you lose)
Conundrum: many capitalists make non-capitalist investments; many decidedly not-capitalists start businesses and make investments toward expanding the pie.

Pre-capitalist, zero-sum

Before about the time of Adam Smith, say 17th century and earlier:
  • There was no conviction that the future could be better than the past, and 
  • Saving was a better deal than investing
  • Investing in R&D, process improvement, etc wasn't really on anybody's to-do list
  • There was no concept that economy could grow any faster than the demographics
  • The best use of "profits" was to put them in the mattress, or indulge one's self, leading to enormous wealth disparity, but also leading to a near-desert of new ideas that would expand the economy
Since then
Nearly all who will read this posting believe the future can be better; the pie can be larger meaning the sum is >0; the economy is more likely to be driven by invention and innovation than demographics.

And, thus we arrive at project management and the balance sheet of business:
  • Business assets are entrusted to PM to execute on invention, innovation, and business effectiveness
  • Assets are financed by -- that is, provided by -- lenders and those that work for the project for future payment; and by investors and owners. These are "holders of liabilities" against the business
  • Happiness is a balance: holders of liabilities are happy with the work of the asset managers
Trust
Trust in the future is the lubricant to make all these wheels turn. Trust that the future is a better thing motivates investors (to be investors, rather than savers) and allows for work for future payment rather than "pay me now" .... in other words, credit. 
  • Without a credit system there can be no projects of any scale
  • Without trust -- backed up by rules and regulation -- there can be no banks or contracts
  • Without banks, there can be no credit
  • Repeat
So, deliver!
To keep the creditors happy there have to be favorable outcomes. And, that more less closes the circle on project management: Successful delivery begets more or repeated credit which finances more projects, the objective of which is to expand the economy leading to even more availability of credit and a greater economy.

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(*) See: Adam Smith, author, economist, and philosopher, and "The Wealth of Nations"


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