Return On Investment

An enterprise starts with the hope of a return on its investment. For a start-up, this is often envisioned on a spreadsheet, with the initial revenues being smaller than the initial expenses creating losses; however, the revenues increasing by some percentage and over time they outpace expenses to generate an attractive return on investment (ROI). While that is the typical story on paper; it's not reflected in the reality around us.

The World Population graph seems to show a linear growth like the one described in the above plan with some event happening in the late 1800's to suddenly make it change. Any idea what that historic event might have been?

If you haven't read the paper folding post, this may make a more sense if you do that. The graph shows natural, exponential growth. If we would change the time scale to end a century earlier, the curve would look the same, only the historic event would now appear to be in the late 1700's.  End another century earlier, and the momentous event still moves back with the new scaling.

There was no event that changed the World population growth rate. Population growth is an example of growth from feedback and this graph is what that curve will always looks like. Small victories in the beginning, remaining small for far longer than our linear minds can imagine, then accumulating faster than linear thinking can grasp.

The two mistakes we can make are to believe the smaller growth rate is failure or to not accept the higher growth rate as success and invest in necessary infrastructure to keep the feedback going. It takes a faith that the returns will really happen to avoid either downfall. Of course this growth doesn't go on forever. There are always limits to growth; however, some are just in our linear minds.

During the Beatles's era, Maharishi Mahesh Yogi, who may have been the subject of their song Fool on the Hill, challenged his followers with the claim that if the square root of 1% of a population practices Transcendental Meditation (TM), crime in the area would decrease. In 1993, TM followers came to Washington DC during a record heat wave (which correlates to increased crime) to create such a critical number. Crime decreased for the period of the experiment. After its conclusion, it increased again.

This is not unique to TM. The story has been repeated in countless endeavors where fools have believed in continuing to repeat something powerful and gentle until the feedback effects can finally be observed; or until their return on investment is finally realized. We live in a faithful (systematic) universe; just not a linear one.

Image credit: mattlemmon

Did I just screw-up?

Anyone who has never felt this way is a poster child for the unfulfilled life. Remorse is a negative feedback with destructive potential if ignored. It's also the catalyst for developing our potential if accepted and appreciated.

There is a story about a successful Active Investor, a business owner or professional,  who was being interviewed. She was asked to revel the secret of her success (a great question networking question by the way). Her answer was that success was the result of not making mistakes. This lead to a question on how to avoid mistakes. Her response was that experience would teach you how to avoid them. The obvious follow-up question was about the best way to get that experience. Her concluding wisdom was that the best way to obtain experience was to make mistakes.

The difference between an accomplished athlete and an amateur is not just natural ability. It's the experience gained from extensive training under the watchful eye of a great coach. Even small mistakes are honed away in hours of work on the practice fields. This repetition of action and corrective feedback gently and powerfully develops the the successful athlete's abilities on the playing field we all admire.

Life doesn't give Active Investors a practice field; but the coaches are very present. Everyone benefits from mentoring. This can be from those who invested themselves in us during our past. It can also be from a current network of professional advisers we can develop. It's feedback necessary for grwoth. Being able to get good coaching is critical; however, these are only our external coaches.

There are also our internal coaches that watch our play and seek to guide us. Remorse is such a coach when we appreciate that it moves us towards better ways to achieve our goals. The feeling, although negative, is there as a driver for improvements that inevitably increase lasting values. The feelings are designed to make us stop. Not for self-pity; but to take a moment to learn from what just happened and to guide change.

Our actions may now forever limit us in the future. Limitations in one area creates opportunities for specialization and excellence in what's remaining. They may be cause for an apology. This starts the miraculous process of healing. But, most of all, they are a basis for us to rise above our past performance levels and become who we feel we should become. We get there by thinking about alternatives to our present situation that will make us feel better. It may happen in a single insightful step. Recovery may also be from one slightly better emotional state to another as we recover over time. However, there is always some better feeling way to think about a remorseful situation and our job is to find and follow it.

Although mentioned in a previous blog posting this bears repeating. The Active Investor's emotional strategy when experiencing negative feedback of any kind should be to move from a position of judgment to a position of curiosity.These negative feelings are our sensors and guides, not our enemies.

image credit: TheeErin

Entrainment - Power in Prayer and Meditation

An emerging theme in this blog is identifying key drivers of value by recognizing 3 necessary characteristics. Value Drivers of lasting consequence can be recognized because they are always Repetitive, Powerful, and Gentle (RPG). Certainly prayer and meditation are candidates. They are Repetitive and Gentle; but what about Powerful? A part of their Power may lie within an effect scientists have called entrainment.

Entrainment is the stuff of scientific legend. That legend goes back to 1666. The noted Dutch physicist, Christiaan Huygens, had to adjust the clock in his study each day because it ran about a minute slower than the one in his living room. Both were governed by swinging pendulums. One day he moved them side-by-side. With no other adjustments, the clocks began to keep synchronized time. Any discrepancies disappeared. This observation lead Huygens to the discovery or labeling of entrainment, which is the tendency for adjacent oscillating systems to synchronize.

Where ever there are cycles (Repetitions) there is the potential for the effects of entrainment. The clocks are an example of entrainment in a mechanical system. A striking example in natural systems is the synchronization of menstrual cycles among women who live or work together.

Entrainment is a Powerful effect. Can that power be accessed by prayer and mediation? For one oscillator to affect another, the entrainment has to operate through some medium. Call it the universe, God, or the Zero Point Field, we all must be connected for this scientific effect to occur.

Now consider the processes of prayer and mediation to be bringing yourself side-by-side with God. As you repeat these processes entrainment begins it's subtle work which ultimately results in the changes we call answered prayer. Was the change in the universe, or was it inside of us? Entrainment leads us to the possibility it could be either or both.

Jesus instructed the we should ask to receive (Matt 7:7). His half-brother James later wrote that we can ask but not receive because of our motives (James 4:2). Apparently asking works, but only when a level of entrainment with God has synchronized our motives.

Active Investors have very busy schedules. Repetitive prayer and mediation takes away available time; but if ignored, what will our lives synchronize toward?

Image credit: theilr

Folding a piece of paper

Paper Folded Eight Times
Originally uploaded by Curis

Imagine having an infinitely flexible piece of paper. Now fold it in half. It's twice as thick. Folding that in half doubles the thickness again. If this was done forty more times, how high would the paper become? Think of your answer before reading any more. This is a favorite introductory exercise to the explanation of growth in System Dynamics that was a subject of The Active Investor's  first posting.

When I started, I was wondering how long it would take before a brand new blog (and blog author) would start to get feedback. Last week I was speaking with a leading DFW area commercial risk specialist, Javier Hernandez, and as we parted he mentioned enjoying his reading of The Active Investor. Feedback was first felt in week 9.

Why is this small comment such a big deal? Let's get back to paper folding to imagine the power of feedback cycles. How thick did you estimate the folded paper would become? If we assume the typical thickness of paper to be about 0.1mm, then after 42 folds the paper would be 440,ooo kilometers high. This would be higher than from here to the moon.

Of course, we just can't image that. Creating anything with feedback opens a door to incredible growth potential. While feedback is easily apparent with internet activities, it's the engine of all "word of mouth" marketing Active Investors seek. Our business plans and actions are best judged in the light of their potential feedback (there is both good and bad). Then as we begin to sense positive feedback, we can take heart that we're on the right track - possibly from here to the moon.

Feedback

The difference between things that grow and things that don't is feedback. Ecology maps nature as large circles with each member feeding the next until it returns to the starting point. Salesmen know customers, through word of mouth, create more customers. In any market, buyers create sellers, who attract more buyers, who create more sellers.

For years I studied business growth. With charts and graphs I tried to discover the Philosopher's Stone that would grow any business. Marketing, Finance, HR, Engineering, Continuous Improvement were all candidates. Yet none of these necessary disciplines were by themselves sufficient to create an engine capable of growing any client's business. What is at the center of growth?

I finally found it in the study of System Dynamics. If there is positive feedback, there is growth. If there is negative feedback, there is decline. Always.

Yesterday at Starbucks in Colleyville I meet with my C-Level Consulting associates. We were discussing the importance of getting together like this. They told me how much they enjoyed one of my past series of presentations on business consulting. One of them told me he was on the file server reviewing them just this past week. He found them a source of hope and inspiration.

That was feedback. Today I start this Blog.