How Money Works

how-money-worksLast weeks Monday article spoke of Economic Development in Michigan’s Oldest City and this is a continuation of that topic. We talked about how Economics is a Social Science and that relationships are acme to well running economies.

The phrase “Attitude is Everything” was as true in middle school as it is now in business.  I might dare say that bad attitudes breed bad relationships, and bad relationships breed bad Business.

There is one attitude that is particularly damaging to economic growth, a phrase coined by Zig Ziggler, “The Poverty Mentality”.

Poverty Mentality- is an attitude. It’s a way of thinking that is said to perpetuate poverty because the focus is on what one doesn’t have rather than what one does have. Thoughts and comments such as “I can’t afford this…” and “I’ll never have enough money for that…” may turn out to be a self-fulfilling prophecy.

povertyZiglar and others believe the ones who break out of poverty and really succeed are those who use what they do have, are grateful for what they do have and most of all aren’t jealous (or envious) of what others have. Basically, its an attitude of self-belief and empowerment rather than one of self-pity and jealousy that is thought to combat the destructive poverty mentality.

The interesting thing about a Poverty Mentality is that is not a social classification. I have worked with “poor” people and I’ve worked for billionaires that suffer from this debilitating attitude.

There are plenty of examples of how this mentality is played out in business. Below is a list of what to look out for:

Be All To Everyone – Business that have to sell (or provide a service) with to broad of a focus. I work with a lot of start-up entrepreneurs. I always get the guy who wants to open up a hair salon, candy shop and bait shop “hybrid” business.  If you think you can be all to everyone in your relationships, you’ve probably figured out by now, that it doesn’t go so well. Focus on one thing and do it in the best possible way you can. I think one reason entrepreneurs try and do this is due to fear of competition.

Fear – Fear has lethal effects on economics and, I would say, is the chief emotion connected to the Poverty Mentality. If you are continuously afraid someone is going to rip you off, screw you over or slander you, this will have a negative impact on your relationships–To include your employees and customers. Alternatively, if you are constantly afraid someone will come along and compete against your model, this too will have a negative impact. In my experience, if people are ‘playing by the rules’ and following the laws, they always end up on their feet. I have seen plenty of people, both in business and in relationships,  reap what they sow. So, if you are taken advantage of, ‘What goes around Comes around’, and if you’re lucky, you’ll be around to see it come around.

It is also critical to realize the difference between rational fear and irrational fear. Be careful to focus on the facts. It is an inefficient waste of time and energy to be fearful of unknown situations and those things you have no control over. Be also aware, that you don’t have as much control over situations as you might think you do!

Competition  – Here in the Sault, it seems like if you open a business and someone else opens a similar business around the block, it is the ultimate offense. It is received as the new entrepreneur  has taken out a personal vendetta against the first business and wants to destroy the shopkeep’s life. Remember in middle school, when there was a kid (or maybe a sibling) that would always copy you either in actions or possessions?

Imitation is the highest form of flattery — Charles Caleb Colton

I was on Mackinac Island a few weeks and as most know, the island isn’t very big, and the downtown, is maybe 4 blocks long. Within that small stretch, there are approximately 5 fudge shops. How can this be? One could easily say supply and demand; over 1 million people visit the island in those 6 months and they have a fierce appetite for fudge.

Let’s move north to the Sault. We have a bigger, more consistent population than the island, and you can’t swing a dead cat without hitting a drinking establishment.  Those that have gone out of business have not been because of competition or lack of patrons, they have left the market, more than likely, due to poor business decisions and or practices.

In Grand Rapids, a very micro-brew saturated market, all of the micro brews get together on a regular basis to discuss ideas, best practices and share tips of the trade. Business is good and getting better. Building these relationships with competitors has done nothing but grow business. Counter Intuitive.

Competition is Good!

Free Stuff – Free stuff is bad for the economy for several reasons that feed the Poverty Mentality. When things are free, it eliminates accountability between buyer and seller and when there is no accountability, relationships go awry.  Free stuff also stops the flow of money. The economy is dependent on relationships and the volume and velocity of the flow of money within the community. Discounts at least keep the money moving, but free stuff, dams the money flow.

Remember: there is a difference between business (and government) providing free stuff and charity. We will talk more about the importance of charity in the next article.

How can you change your attitude, to improve your business?

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