Bear with me, this one isn't really about books, computers or about killing money.
Kinokuniya hates books.
Kinokuniya would rather have no books on its shelves. It's true. If they could have it their way, they would have a shop so small, it would only stock books that are looked at or sold. Unsold books sitting on shelves costs Kinokuniya big time and they don't like it one bit.
What cost, exactly? Every dollar spent buying, housing, presenting, packaging and transporting books is working capital not invested in growing or developing the business.
Apple hates computers.
Gil Amelio (ex-CEO) liquidated two billion dollars worth of Apple's computer inventory and turned it into one and a half billion dollars of cold hard cash. Why? Working capital. A dollar in his pocket is a dollar free to spend on decisions. Anything tied up in unsold computers sitting in warehouses is dying money.
Amelio realised the opportunity and freedom of working capital.
Okay. So this is basic business management 101 for any business with inventory right? Basic stuff right? Liquidity is king yadda yadda, right? Right. Well let's take a different look at working capital.
Consider working capital in our daily lives. Not a common water cooler topic I'm guessing, but bear with me.
Consider every single thing you own as inventory. Also consider that your money might be dying.
Consider that for the lucky person, you have two eyes, two ears, two arms, two legs and two feet. Anything you own or use can only be used one at a time. Every single thing outside of your senses is not being used (let's call it 'warehoused').
Anything you own has a value, and if unused or under utilised, it's dead money. Heck, even if you sold something you didn't use for ten cents and stuck it in the bank, it'd be doing more than money being warehoused to die.
A good example of unused stuff is my library of over 100 books, lots of books I've bought over the years have been read once and shelved. Wasted working capital. First, it's a waste of my money, second and more importantly is it's selfish. If it's sitting on my shelf, nobody else can read it either. Dead, warehoused books. I've trimmed it down to about 25 now.
Apart from unused stuff, there is under utilised stuff too, a $1500 fish tank that I used to look at for 5 minutes a day and clean for one hour a week. I've stuck it on sale. That $1500 buys a heck load of entries to the best aquarium in Australia (over 55 visits actually) and no more cleaning!
When I look around now at the stuff I own (at least what's left of it) I see piles of unused capital or things I value highly. I spent over a thousand bucks on a camera, and have not regretted a single penny, but I regret buying my unused Playstation 3 (but don't worry I'll be selling it at a profit).
So why would anyone personally want working capital? I mean we're not walking, talking businesses.
Well, personal working capital buys opportunity and freedom.
Working capital for the urban battler means freedom to choose what you do with your career, your time, your entertainment and your education. Nothing is warehoused and wasted. Your resources are either used to make great decisions, or invested into things of value. It's shedding the exuviae of life.
So what if we don't have working capital? Well... no freedom and mental slavery. Being forced to do things we don't want because we have no choice. The kicker is, it almost doesn't matter how much you earn. Just look at some companies who earned a lot, but didn't have any freedom to choose (Apple and IBM are great examples of companies who turned those ships around).
Many people have asked me if I'll be okay for money. I'll be fine. I'm no millionaire (yet), and it's got nothing to do with how much I earn, or how many assets I own, It's about the fact that I've set myself up with enough working capital to make free decisions.
Working capital buys opportunity and freedom. Warehousing does everything but that. It's not just me saying it, but successful businesses, everywhere. Don't resign your money to a cold lonely death!
Flickr cred to paul+photos=moody
It's like books for me too,
I still own books, I've just shed any book that have been 'warehoused' (bought and unused, unread, unreferenced) so although they are luxuries, I use them everyday.
Books are fine, if they end up being used. Being read once every 3 years doesn't count as used and a library would be a better place for a book like that.
The issue with working capital and many household luxuries is that they lie there unused.
I love luxury, but under utilisation is the bane of any economy, personal or on aggregate.
Posted by: Richard Yong | March 30, 2008 at 03:24 PM
So wouldn't that be like books for other people?
Posted by: Andrew | March 30, 2008 at 03:11 PM
Not sure I quite follow, the idea is to spend on things you use, I use my iPod a heck of a lot and music is a luxury I do keep with me. Definitely not a warehoused item in my household.
Posted by: Richard | March 30, 2008 at 12:52 AM
why don't you sell your nike ipod?
Posted by: Andrew | March 29, 2008 at 06:19 PM