Be Rich by Spending More

The subtle difference between spending and investing is a very simple matter, but the concept is little understood or appreciated. Had we listened to Bill Gates in 2015 through his Ted Talk, “The next outbreak? We’re not ready” and invested enough on developing a universal vaccine and infrastructure, we would have averted the social and economic cost, the whole world is paying now. I will try to explain this through the concept of ‘Coke Plus’, a popular social phenomenon that is very much vogue in India. For my technical audience, I will take the salt and pepper approach by touching on the oft taught and discussed SPIN Selling and Lean Management techniques.

Years back, after reading the book, ‘The Rich Dad and Poor Dad’, by Robert Kiyosaki, that reveals the secret of being rich is, ‘making your money work hard for you through investments’, I gave the book to my young nephew. After reading it, he got even more confused. To clear the air, I explained by taking the example of his favourite drink ‘Coke Plus’, which is half Coke topped with other half of Scotch. I explained, “If you take the Coke Plus all alone or with your non-business related friends, it is a cost, but if somehow you can use this to create opportunities by building useful connections, it is an investment. The same thing could be a cost or investment, it just depends on how you use it”.

When we were little children, we wanted everything. It was our parents’ problem to worry about the cost or more accurately, affordability. As independent adults we get very used to impulse buying. We often consider “impulse buying” as a statement of liberation. We, sometimes, question the cost of a product or service, to only outsmart a clever salesperson and justify our win with a newly invented need.

So, what is wrong with this? How else can we make smart purchases? While in the consumer market we must figure out this our self, in the commercial arena, our job these days is simplified by the salesperson. In the consumer market, enormous money is poured into the research to find the right stimulant to attract the masses and trap the “prey”. I apologise for not using the correct word “Customer”. On the other hand, in the commercial market, the salespeople are trained in a systematic approach called ‘SPIN Selling’, to strike mutual benefit. This involves exploring the current ‘Situation’ of the business, making them aware of their ‘Problems’, digging deep into the ‘Implications’ and finally establishing the ‘Need-payoff’. A business then feels comfortable to make an investment that will pay itself off in near future and then keep generating more profits, which is the real objective of a business.

So, can we apply the same logic in our non-business life and establish before buying, if this is going to be a cost or an investment? What are some of the examples for differentiating cost from investment?

I am lucky to have the experience of culture and business in two different countries. I was born and brought up in India, which is a developing country with proudly oriental values and then I migrated to a developed country, Australia with a characteristic occidental value system. Listening to some of my friends, who have been fortunate to have explored most of the world, I am comfortable in using my imagination, by associating developing countries with the cost component of my equation, and developed countries with the other half of my equation, the investment.

Let us compare the construction of the roads in India and Australia. In India, in most parts, there is little consideration given to the traffic, drainage, pavement and nature’s strip when designing or constructing the roads. Within few weeks, the roads will have potholes and other deficiencies. It does the job, but at what cost? Accidents, traffic jams, frustration, poor health as roads are no place for walking or jogging, resulting in the loss of national productivity? The nation and its people will still pay a largely disproportionate cost of poor roads by not investing in the first place. On the other hand, I experienced what is involved in building just 70-metre-long connectingroad, as part of a property development project, I took up in Melbourne. In addition to usual storm water drainage, pavement and nature’s strip, I was required to provide two streetlights and space for guest parking.

I would like to draw the attention of businesses, that are struggling with the wastage in production, poor quality of the products and high turnover of employees. All this adds to the cost, erodes profit and makes an organisation sick and unfortunately leads to its demise in some cases. Thanks to the Australian government, for the grant for the defence and related industries, that helped me completing my under-graduate diploma in lean management. I learnt a lot more about the world-famous car manufacturer, Toyota. The story is about the time invested in observing and understanding each process in detail, breaking it into multiple basic activities down to the seconds, and finally retaining only activities that added to the value, for which customer would be happy to pay. The cost or the fat was removed, and the process became lean. Toyota became the leader in automobile industry. McDonalds is another company that applied the same formula and now almost every major successful company invests heavily in lean technology.

With fast-growing technology both in retail and commercial market, the opportunities for investments are unlimited. We just need to make a conscious decision, whether we want to invest or pay the cost. Investment is an insurance against the cost. It could be tangible or intangible. We must learn now, to invest in our self, in our families, in our friends, in our society, in our environment and in our future, so that we do not have to pay the cost when we cannot afford.

4 Responses so far.

  1. Manish Jain says:
    I agree: each “cost” can be converted to an opportunity or investment
  2. Rohan Raman says:
    Nice !!
  3. Sanjay Tingal says:
    Excellent , applicable in all walks of one’s life.
  4. Medahalli V Ramakrishna says:
    You have made some very good observations.

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