Posted tagged ‘relationships’

Money is a Metric

September 4, 2013


Money is a metric.  Indeed, in my mind, money is only a metric.  What is the real-world utility of this mental model of finance?  Most importantly, viewing money as a metric enables the business executive to create systems around money in the same way he or she does with any other metric.  Take this blog, for example.  The number of page views is a metric.  I am able to measure the relative success of each post, and with this information I am able to build systems around my activities that are designed to yield specific results.

It’s all about relationships.  This is not just a philosophical ideal.  If you make it about money—about the bottom line—and decentralize your focus on relationships, you will quickly lose the essential links that make everything work.  The ancient proverb, “The love of money is the root of all evil,” is very often misunderstood.  This statement is not about money; it’s about love.  If you don’t love people, your business won’t work.  That’s what it means.  If you focus your passion, your interest, your emotion on a metric . . . well, that just doesn’t make any sense.  Why would someone do that?  It’s just a metric!

Love is a two way street.  Love is a relationship.  The exchange flows in two directions naturally.  That’s the nature of relationships.  If you try to form a “relationship” with a metric—if you try to fall in love with money—you are trying to connect with something that is incapable of connecting back with you.  This stops the flow of energy.  I won’t say that’s downright evil.  I will, with a laugh, say that’s just probably misguided.

So, how does one build an effective system around a financial metric?  I’ve found that the fluidity of the system is important.  The executive and his or her team must respond to changing conditions.  This requires flexibility.  Yet structure is also important.  Structures hold form; and form is necessary for things to function properly.

Imagination is key.  You must be able to visualize how the entire system will work at various thresholds as cash flow increases.  Likewise, you must know exactly which system is most appropriate as cash flow contracts.  Developing a working matrix of functional financial systems—each with working parts—is a good place to begin in functionally activating the concept that money is a metric.