The right way to spend

I have been persuaded.
After a few glasses of wine and a very informative economics discussion (thanks Kevin), it turns out the best hack for this recession is to spend. While that sounds counter intuitive, since spending seems to be the reason we got into this mess in the first place, it does economically make sense. When a critical mass of Americans stops spending, fearing that they will lose their jobs, industrial production falls and as a result people lose their jobs. Historically, what turns a recession to a depression is just this - a lack of confidence in the future.

Well, in 2009, whatever we do, the future will be waiting for us and we need to be sure we are well placed to take the lead as the old order passes. With this in mind, I have identified 5 ways that we can spend in order to facilitate a faster change of order. Whoever we give our money to in the next few years will be the winners. (If we give it to the same old financial institutions the same old institutions will be the winners and we all know who benefits then!).


1. Spend on your home.
Property prices are low (no news there). Labor and materials for the building industry are as likely to get cheaper. There has never been a better time to invest in your home - but, invest differently.

As we find ways to build that are not so fuel hungry and wasteful it is a good time to switch over to new energy solutions or sustainable products. Efficiency upgrades to your home pay for themselves over time but will support the economy in the short term. Supporting experts in progressive building techniques will help them come out on top. There are a number listed at e-house or the Dwell House competition.


2. Spend on people, not things.
Since much of the economy is service based these days, buying and consuming products is not going to help us get out of this mess. Paying people to do things for us rather than buying more 'stuff' will serve our economy better. This means we are justified in paying people to do the things we don't like doing and calling in a specialist rather than trying to do it ourselves. The good thing is that this allows us to focus on what we do well and hopefully allows us to make more money out of it. The people we employ pass on their well-earned money to others and if our chosen profession is something other people need, we will ultimately fuel our own success.


3. Buy things that help us produce rather than consume
Our economy is struggling because too many people simply consume, rather than produce. Production has been left to large corporations who take all the money and distribute it unevenly (the guy at the top gets millions and the sweat-shop workers get less than minimum wage). If we spend our money to become more productive this would fuel the economy and boost creativity, innovation, enterprise and consumer choice. Production doesn't just mean making products. We can produce content, web sites, movies, music, screen plays, books and other intellectual property. What's important is that we create so others can consume. Then we all end up earning extra income on Etsy , CafePress, or Ponoko etc.


4.Support the digital economy by paying for what we use
The new economy will include new business models as well as unfamiliar revenue streams for businesses. We need to change our mindset and be prepared to pay for the things we feel we get value from. Think how much we waste for services we rarely or never use - the cable channels we never watch, the gym membership we rarely use or the magazine subscriptions we never read. If we invested the same amount of money into the digital products and services we value we will help determine the future. Although we all love the free trial of shareware that allows us to use a product without paying for it and we all skip past Wikipedia's request for donations. Isn't it time we started being more generous in our support of subscription and donation based digital businesses. After all one day it could be our business's future that depends on this revenue steam.


5. Participate in Microfunding - Its digital busking.
If Mr Obama can raise $265 Million from 1.5 Million people giving on average less than $100 (source: LA Times June 5th 2008) then there is hope for anyone wanting to fund a venture or cause using micro-funding. There is nothing new in micro-funding for charities and causes but micro-funding is being used to fund a variety of ventures and web 2.0 businesses as the angel investors with big money shy away and the VC's get tougher to deal with. There are some success stories out there already, but there will be more. The movie Iraq for sale was funded by 3000 viewers who donated on average $62 each.

There are lots of tools out there to help us with this. In fact I think there are more tools than there are success stories but my guess is it's only a matter of time before one of these is bought by Google or Microsoft and gets critical mass. Here are just a few Tipjoy, ChipIn, Fundable.

I see real potential in the idea of funding ventures through SMS services like mGive but at the moment it appears much of the donation goes to the carriers.

Some have experimented with rewarding early investors with payback plans if the venture acquired or goes public. However, it seems there are all sorts of legal issues with this. Although if some legal genius could work out how this could work I think we could all be onto a good thing. Couchtycoon has a peer 2 peer venture market place but since I don't have a beta invitation it's hard to say if this is real or not (watch this space).