Thomas Rolley 00:00
Rule three, focus on productivity.
I went out to dinner with a buddy of mine, and we were discussing the likely outlook economically.
And He described to me the interaction over an extended period of why cycles happen in markets.
And He described that there is a long-term debt curve, there's a short-term debt curve, and there's a productivity curve.
And this actually came out of the video that is shared with me made in, I think, like 2012 2013, Ray Dalio.
And He pointed out these three as a model for why economies go through what they do.
And it's fascinating was a super cool, very, very good half-hour video; you can look it up.
It's like a cartoon-esque version.
And the finish was probably where the important parts were.
And He gave rule one, Rule two and rule three.
And the first two had to do with not spending too much or not, not increasing your debt more than your income.
And there was another one, but number three of three stood out the most.
And this was focused on productivity because what was interesting was that, while the overall debt curve allowed, allowed for tomorrow's production to be brought into today, by doing that, there was always a payback that had to be made in the future.
And so, going on a debt binge and borrowing money, created the future requirements to be paid back.
But because of the nature of human beings, our essential nature to jump on to a good thing and overdo things that this essentially meant that when the payback time came, the assets would fall in value, the money supply would fall in value, the general economy would suffer.
And Ray gave this advice to focus on productivity because the net output of all of the debt and the credit cycle was to bring you back to exactly where you were on the productivity curve.
And the productivity curve was very interesting; it was not a cycle.
So the debt ones were all cycles, but the productivity one was pretty much a straight line.
We're going to need a little bit more productivity; we're going to need that the weed insight that I got from this, like if we, if the apparent flatline of productivity is, in fact, not but rather an exponential curve.
I don't know if you know this, but in the early stages of the exponential curve, it looks very much the same as a straight line.
But as it gets later, it rapidly takes off.
And if we have productivity breakthroughs that allow substantially higher levels of production, one of the particular outcomes that I saw was that it could be that more and more people opt out of being productive in return for entering into or returning to more choices of consumption, or outright destruction of themselves.
And the reason for that is, hey, there's just not that much new.
If we're highly productive, then all of the tasks of society are handled.
And this means, unfortunately, also that those that manage productivity well will do extremely well; they will have a significant advantage.
If there are breakthroughs in productivity, whoever can ride that productivity if could magically skip out of the raised curve.
And instead of being linear, and you jump up to double at the early stages of an exponential curve, then this will mean that you will have a significant advantage over all of your competitors.
Basically, you'll be able to do twice as much in the same time for the same amount of money.
This should lead to a substantial increase in profitability and wisely invested.
This will then allow you to skip ahead and make it very hard for a competitor to catch up to you.
The only thing they could do is to copy you in terms of finding out Hey, how are you doing this productivity jump?
Thomas Rolley 04:59
How Are you producing twice as much? The curve should have shown an incremental 1% improvement.
But instead, you've doubled us.
So these types of systems breakthrough productivity breakthrough, it's going to be very interesting.
I'm very curious.
This, however, is not new.
It has been around for a long time.
It's just been the difficulty of implementing it, particularly as we entered into the information age, you got to remember that the first book that I was aware of I'm aware of about systems came out in 1986.
I mean, that's, that's a good long while ago.
Now, it was, of course, the classic E Myth.
And that was a book documenting the system's breakthroughs that one particular company went through in 1959.
I believe they started McDonald's, McDonald's.
So the idea of systems of productivity increase that comes from systems has been around for a long time.
The difficulty has been in understanding how to get people to use systems.
This is a seriously difficult problem, because people I'm hard to control; you're probably hard to control we don't do as we're told we skip things, we forget things.
Getting people to use a system successfully has proven to be very, very difficult.
Yes, McDonald's has shown it can be done by putting relatively unskilled people into particular work that they can learn and just keep repeating.
But as we've entered into the technological age, the pace of change has been so fast that a particular model really only works in physical businesses.
As you get into more tech businesses, the change just means you can't learn a job because it keeps changing.
That is what was apparent six months ago, or one year ago, or three years ago, as Beck's practice has now changed, and then the entire world got thrown a major curveball in terms of change with COVID.
And we're still struggling to recover from that.
Nonetheless, if an opportunity could come, this will present those that are able to willing to go you know what, I'm interested in doubling productivity.
What do you get? This is going to present those businesses with a massive advantage.
That's all I got for you tonight.
I'm going to go watch the Rugby Union.
The Wallabies, I believe, are playing England.
It should be interesting to see how they go.
Alright, that's all I got for you.
I look forward to seeing you next episode as we continue this journey into the power systems' create results.
See you then.
