LIFE CAPITAL

1. LIFE CAPITAL IAN POLLARD Ferrier Hodgson Insolvency and Banking Law Seminar 15 October 2009

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16. www.investing-in-your-life.com 16

17. DIVIDENDS • Pleasure • Satisfaction • Companionship • Income • … etc REINVESTMENT Meaning in life and happiness The more you put into life, the more you get out 17

18. Life Capital Human Capital Financial Capital Social Capital Who and what you are What you own or control Who and what you’re surrounded by • All your financial assets (such as shares, bonds, property, cash or businesses) less your borrowings (such as bank or credit card debt) • Cultural capital • Emotional capital • Intellectual capital • Physical capital • Sensory capital • Spiritual capital • Symbolic capital • Your family • Network capital (personal and professional) • Institutional and community capital (bonding and bridging capital) • Environmental capital

19. “The average US woman executive foregoes US$500,000 in accumulated career savings because of her coyness in negotiating her remuneration” “Women Don’t Ask” Babcock and Laschever 2003 19

20. Drivers in the accumulation of financial capital • The power of compound interest • The value of annuities • The power of leverage • The value of options • Awareness of opportunity loss • Return for risk • Diversification to spread risk • Qualified deal flow • Sound decision making • Circles of competence • Margins of safety • Benchmarking • Performance attribution

21. The Power Of Compounding In Human And Social Capital 21

22. Virtuous circles in relationships 22

23. Virtuous circles in learning a language(equally applicable to learning jargon in your new occupation) 23

24. Virtuous circles in building a professional practice 24

25. The Value Of Annuities In Human And Social Capital 25

26. “Teach a man to fish and you feed him for a lifetime” 26

27. Good habits lead to an annuity of opportunities • Good listening skills • Empathetic behaviour • An open mind • Having the courage to ask • Effective learning • Negotiation or selling skills • Keenness to help others • An open heart • ………… 27

28. The Power Of Leverage In Human and Social Capital 28

29. Leveraged opportunityA = B minus C 29

30. An example of A = B minus C leverage Client’s satisfaction (per Maister’s First Law of Service) = Client’s perception (after) minus Client’s expectation (before) “Underpromise and overdeliver” Base Case Perception 120 Less Expectation 90 = Satisfaction 30 Perception 110 Less Expectation 100 = Satisfaction 10 A tripling of client satisfaction 30

31. Financial Capital Equivalent in Human and Social Capital • Options • Qualified deal flow • Return for risk • Opportunities • A flow of opportunities for (say) a change of job • Rewards from having • the courage to ask or to • experiment 31

32. Call for action • Find an opportunity to experiment with underpromising and overdelivering. • Gauge the impact on the other person’s satisfaction? • ... and on your own satisfaction? 32

33. Call for action • Where in your human or social capital, personal or professional, can you see an opportunity to achieve a virtuous circle and the consequent compounding? • Is there a vicious circle you can convert into a virtuous one? 33

34. If you are socially connected: • You live longer • (isolation has a bigger negative impact than smoking) • You are happier • (connection has a bigger positive impact than wealth) • Source: Robert Putnam author of “Bowling Alone” 34

35. A conversation • = An opportunity for people to leverage off each other’s Life Capital • Human capital (knowledge, ideas, judgment, shoulder to cry on...) • Social capital (introduction – to a network, a babysitter, a blind date…) • Financial capital (“would you like to be my partner in this?”) • (Note: unlimited potential subjects) 35

36. Call for action • What things do you continue to do simply because you find that easier than asking or teaching someone else? • Will you just do these things forever? • Can you negotiate a better way? 36

37. Blind spots lead to annuities of opportunity loss • Poor listening skills • Lack of empathy • A closed mind; a closed heart • Weak learning skills • Poor negotiation or selling skills • Disinterest in helping others • Reticence to ask • … 37

38. Example: what are the negative impacts of an absolutely full diary? 38

39. Your use of your time and energy is poor and you get drained and less effective (vicious circle - negative compounding) • Poor preparation means meetings are less effective than they should be (opportunity loss and wasted time compounding your diary problems) • Poor preparation means you learn less at the meetings – about the content and also about the others there (opportunity loss) • No time for reflection immediately after conversations or meetings means some of the potential benefits are lost (e.g. good opportunities forgotten, soft signals missed, follow-up commitments forgotten) (opportunity loss) 39

40. Consequently others are not as impressed with your contribution and may be less keen to work with you in future (Multiple opportunity loss because of the number of meetings you attend and the number of people at each meeting) • You’re always in a rush between meetings so you are often unengaged in conversations and miss opportunities to help others (opportunity loss) • In the event of something negative (which is more likely if you’re rushed), you don’t get any time to process what’s happened and clear your head before the next event (potential negative compounding) • People think you’re too busy and unavailable so they don’t offer you opportunities (opportunity loss) • ............................ 40

41. Your potential return from learning Your Perception Actual

42. After going on a course or speaking to someone deeply knowledgeable Your New Perception Your Perception New dimensions of opportunity you hadn’t contemplated (eg. the psychological component in sport; the body language component in conversations; the emotional component in public speaking)

43. Your new perception and potential

44. Call for action • In which areas, of interest or importance to you, personally or professionally, might there be dimensions and opportunities you have not previously contemplated – areas which, along with some hard work, can take you from being a 7 out of 10 to being a 17 out of 20? • Where do you find a book, course or mentor to get you started? • Through exploratory discussions or reading, identify those with the highest expected return.

45. Core messages • Your life is your responsibility – you set the rules • Decide how you best invest your time and energy. Think of your Life Capital in its human, social and financial dimensions - and the balance between them • Envisage the big drivers of financial capital operating in human and social capital and use them to identify big opportunities for investment in your life 45

46. Capitalise on accelerators – one of the very powerful ones is engaged conversation • If you’re unsure, have the courage to ask • Opportunity loss is a huge concept. Some habits lead to recurrent loss of opportunities – an even huger concept. Look for opportunities to change them into habits which regularly lead to opportunities. • Don’t underestimate how big the opportunities can be in learning – keep looking for new dimensions 46