Greece voted no. It’s not really clear what it means, but there’s lessons here for waging war on a poverty mindset.
I once walked past a queue of people outside a cinema.
As I got towards the front of the queue I asked a woman what was going on.
She told me that there was a travelling film festival. As a special promotion that were offering the films for free that day. But you had to queue up to get your free ticket.
I asked how long she’d been waiting and she said, ‘oh, about 4 hours’.
4-hours! To save 20 bucks on a movie ticket?!?
This taught me an important lesson.
1. People are idiots.
2. People lose their minds over free stuff.
3. People have a hard time understanding the opportunity cost of their time.
Four hours is half a day’s work. Even on minimum wage that’s like what, 100 bucks?
So that woman had effectively spent 100 bucks to save 20. (Though maybe she wasn’t working and had nothing better to do with her time.)
But it’s worth more than that. Because rewards-to-effort are often exponential. The more you work, the more you’re able to contribute, and the higher your salary goes.
Anyway, the point is that there’s two sides to the ‘having enough money’ coin. There’s saving enough and earning enough.
And if you think about those two sides, you can see that the first has limited by the second.
That is, the most you can ever save is 100% of what you earn. You can’t save 110% of what you earn. And so savings power is necessarily limited.
But earning power is potentially unlimited. There’s no upside limit to what you could earn. You could earn 2x your current wage next year. 3x the year after. 110x 10 years down the track.
Earning power is unlimited.
So if saving power is limited, and earning power is unlimited, which one does it make sense to give the most attention to?
I remember when I first started out I was trying to scrape together every cent I could to get my investments off the ground.
And so I made a choice to drink cheap beer. I won’t name names, but it was a local beer. Not one of those shmancy imported beers. Anyway, it wasn’t my beer of choice, but it was ok, and I was happy because I was saving like 10 bucks a carton.
But then that year I turned a deal that had a 70 grand profit. Profit. After expenses.
I went to the fridge and got myself a celebratory beer. As I looked at that crappy beer I thought about how much I had saved on beer that year… $300 bucks tops. Absolute upper limit.
$300 bucks. On a day where I made $70,000 it just seemed like a miserly insult to my taste buds. It seemed totally pointless.
Since that day, I haven’t stressed too much about saving. (I don’t mean accumulating savings – I’m all about that. I mean hunting out discounts.)
Because it seemed like there was only ever going to be so much reward to effort, and that reward wasn’t much.
However, my earning power was unlimited. If I could earn $70 grand in a day, what could I earn in a year?
If I had energy to invest, this is where it needed to be invested – in finding better ways to make more money.
… not pouring over shopper-dockets to save 30c on fish fingers.
Your earning power is unlimited. This is where you need to be focused.
I’m thinking about all this because I’m now in Greece, where Greek people have effectively voted to stop saving like a nanny on pension day.
Or at least that’s what people are kind of taking from Sunday’s referendum. Technically, the referendum was on whether or not to accept a deal with Greece’s creditors – a deal that, as it happens, is no longer on the table.
Seems there’s a bit of confusion. One woman I spoke to thought it was a referendum on whether or not Greece wanted to stay in the Euro. A vote well spent.
So no one’s really sure what it means. Everyone’s just waiting to see what happens when the market and the banks open or Monday. If they do… There are rumours here that the banks only have enough cash to last a couple of days…
But the clear message is that the Greek people have had enough of saving. Greece has been labouring under an austerity regime for 5 years, and it just hasn’t worked. The Greek economy is still going backwards.
And you know, I’m a big believer in living within your means, but it’s not the number one priority. Because saving is limited.
The focus has got to be on earning power. Because earning power is unlimited.
And if saving measures are to be enforced (and there’s some good ideas) it needs to be about laying the groundwork for a stronger Greek economy. The people need to know it’s about putting things in place to earn more tomorrow.
Not about scratching together enough cents to pay off the creditors.
The people I know are happy to make sacrifices today to build a better future. But there’s no belief that that’s happening. Even after 5 years, all they see is endless sacrifice, not in the name of the future, but in the name of the government’s creditors.
In fact they see their future being scrapped to pay off the creditors today.
And that’s the idea that was rejected on Sunday.
But what that ‘No’ vote means in practice is anybody’s guess. Watch this space.
Is it right for individuals to focus on earning power? Is it right for nations?