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LIFE CAPITALIAN POLLARD

Ferrier HodgsonInsolvency and Banking Law Seminar

15 October 2009

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www.investing-in-your-life.com

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The more you put into life, the more you get out

DIVIDENDS• Pleasure• Satisfaction• Companionship• Income• … etc

Meaning in life and happiness

REINVESTMENT

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Life CapitalHuman Capital Social Capital Financial Capital

• Cultural capital• Emotional capital• Intellectual capital• Physical capital• Sensory capital• Spiritual capital• Symbolic capital

• Your family• Network capital

(personal and professional)

• Institutional and community capital (bonding and bridging capital)

• Environmental capital

• All your financial assets (such as shares, bonds, property, cash or businesses) less your borrowings (such as bank or credit card debt)

Who and what you’re surrounded by

What you own or control

Who and what you are

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“The average US woman executive foregoes US$500,000 in

accumulated career savings because of her coyness in

negotiating her remuneration”“Women Don’t Ask” Babcock and Laschever 2003

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Drivers in the accumulation of financial capital

• The power of compound interest

• The value of annuities• The power of leverage• The value of options• Awareness of opportunity

loss• Return for risk

• Diversification to spread risk

• Qualified deal flow• Sound decision making• Circles of competence• Margins of safety• Benchmarking• Performance attribution

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The Power Of Compounding In Human And Social Capital

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Boss offers constructive feedback

on next issue You listen and

absorb – boss notices

You seek to implement feedback –

boss noticesBoss offers more

feedback on your

progress – you feel the boss cares and

wantsyou to

succeed

You master the feedback

You’re energised to

perform

Your relationship

grows

Virtuous circles in relationships

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Virtuous circles in learning a language(equally applicable to learning jargon in your new occupation)

Compounding

effects of improving vocabular

y, grammar, listening

and speaking

Increased confidenc

e

More effective and wider engageme

nt

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Virtuous circles in building a professional practiceEnhanced

professional

knowledge and

experience

Increased confidenc

e

More effective

and wider engageme

nt

Wider range of contacts

Wider range of assignments and clients

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The Value Of Annuities In Human And Social Capital

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“Teach a man to fishand you feed him for a lifetime”

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Good habits lead to an annuity of opportunities

• Good listening skills• Empathetic behaviour• An open mind

• Effective learning• Negotiation or selling skills• Keenness to help others• An open heart• …………

• Having the courage to ask

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The Power Of Leverage In Human and Social Capital

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Leveraged opportunityA = B minus C

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200

(171.0)

(190)

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Income Expenses Savings Income Expenses Savings

Base Case - 10% income increase and 10% expense decrease

$000 Savings = Income less Expenses

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An example of A = B minus C leverage Client’s satisfaction (per Maister’s First Law of Service)= Client’s perception (after) minus Client’s expectation (before)

Perception110

Less Expectation 100

= Satisfaction 10

Base Case

Perception120

Less Expectation 90

= Satisfaction 30

“Underpromise and overdeliver”

A tripling of client satisfaction

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• Options

• Qualified deal flow

• Return for risk

• Opportunities

• A flow of opportunities for (say) a change of job

• Rewards from having the courage to ask

or to experiment

Financial Capital Equivalent in Human and Social Capital

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Call for action

• ... and on your own satisfaction?

• Find an opportunity to experiment with underpromising and overdelivering.

• Gauge the impact on the other person’s satisfaction?

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Call for action

• Where in your human or social capital, personal or professional, can you see an opportunity to achieve a virtuous circle and the consequent compounding?

• Is there a vicious circle you can convert into a virtuous one?

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If you are socially connected:

• You live longer(isolation has a bigger negative impact than smoking)

• You are happier(connection has a bigger positive impact than wealth)

Source: Robert Putnam author of “Bowling Alone”

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A conversation= An opportunity for people to leverage off each other’s Life

Capital• Human capital (knowledge, ideas, judgment, shoulder

to cry on...)• Social capital (introduction – to a network, a babysitter,

a blind date…)• Financial capital (“would you like to be my partner in

this?”)

(Note: unlimited potential subjects)

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Call for action• What things do you continue to do simply because

you find that easier than asking or teaching someone else?

• Can you negotiate a better way?

• Will you just do these things forever?

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Blind spots lead to annuities of opportunity loss

• Poor listening skills• Lack of empathy• A closed mind; a closed heart• Weak learning skills• Poor negotiation or selling skills• Disinterest in helping others• Reticence to ask

…

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Example: what are the negative impacts of an absolutely full diary?

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• Your use of your time and energy is poor and you get drained and less effective (vicious circle - negative compounding)

• Poor preparation means meetings are less effective than they should be (opportunity loss and wasted time compounding your diary problems)

• Poor preparation means you learn less at the meetings – about the content and also about the others there (opportunity loss)

• No time for reflection immediately after conversations or meetings means some of the potential benefits are lost (e.g. good opportunities forgotten, soft signals missed, follow-up commitments forgotten) (opportunity loss)

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• Consequently others are not as impressed with your contribution and may be less keen to work with you in future (Multiple opportunity loss because of the number of meetings you attend and the number of people at each meeting)

• You’re always in a rush between meetings so you are often unengaged in conversations and miss opportunities to help others (opportunity loss)

• In the event of something negative (which is more likely if you’re rushed), you don’t get any time to process what’s happened and clear your head before the next event (potential negative compounding)

• People think you’re too busy and unavailable so they don’t offer you opportunities (opportunity loss)

• ............................

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Your potential return from learning

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Your current standard

Your potential standard

Your potential improvement (i.e. Return)

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Your current standard

Your potential standard

Your potential improvement (i.e. Return)

Your Perception Actual

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After going on a course or speaking to someone deeply knowledgeable

New dimensions of opportunity

you hadn’t contemplated

(eg. the psychological component in

sport; the body language

component in conversations; the emotional component in

public speaking)

Your Perception Your New Perception

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Your current

standard

Your potential standard

Your potential

improvement (i.e. Return)

New Dimensions of Opportunity

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Your new perception and potential

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Standard pre course

Impact of course on capability

Impact of low-hanging

f ruit

Impact of highest level

learning

To be world class:10,000 hours of

deliberate practiceApplying other basicdisciplines over next 6 months

More difficultchange over

next 1 - 2 years

Learning a few tricks of

the trade

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Call for action

• In which areas, of interest or importance to you, personally or professionally, might there be dimensions and opportunities you have not previously contemplated – areas which, along with some hard work, can take you from being a 7 out of 10 to being a 17 out of 20?

• Through exploratory discussions or reading, identify those with the highest expected return.

• Where do you find a book, course or mentor to get you started?

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Core messages• Your life is your responsibility – you set the rules

• Envisage the big drivers of financial capital operating in human and social capital and use them to identify big opportunities for investment in your life

• Decide how you best invest your time and energy. Think of your Life Capital in its human, social and financial dimensions - and the balance between them

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• Capitalise on accelerators – one of the very powerful ones is engaged conversation

• Opportunity loss is a huge concept. Some habits lead to recurrent loss of opportunities – an even huger concept. Look for opportunities to change them into habits which regularly lead to opportunities.

• If you’re unsure, have the courage to ask

• Don’t underestimate how big the opportunities can be in learning – keep looking for new dimensions