Apr 072009
 

The key to understanding the abundance mindset is understanding “value”. Value is simply anything you consider valuable. This is a circular definition because value doesn’t have any “objective” meaning, but instead requires a consciousness to perceive it as such. A rock, for example, does not consider a mansion very valuable, because it does not have the consciousness to perceive it. Value is all in our minds.

If I told you I wanted to sell you an old piece of cloth on a wooden frame with some oils on it for a “measly” $100 million dollars, you’d look at me like I was crazy. The materials cost of this thing would probably be less than $20. If I gave it to a goat, it’d just eat it and probably get no nutrition from it. However, if I told you that it was a canvas, 500 years old, drawn by the legendary Leonardo da Vinci, the oils depicted the Lisa de Giocondo and was called the Mona Lisa, you’d probably wonder what the catch was because that painting is “worth” or “valued at” at least $670 million dollars and I’m offering it to you for “only” $100 million. My previous description of the Mona Lisa is still accurate; it is still some old oils on a cloth on a wooden frame and its material value is no more than about $20, however its other value is so much more as a great work of art, as a milestone in the history of art, as a work of the great Leonardo da Vinci and as an accomplishment for all of humanity, as well as an object of intense curiosity and study.

This should suggest something important to you: Not only are there many different kinds of value, all value is within our heads not in the world out “there”. The Mona Lisa has no value to a goat beyond being able to eat it. A bear would not notice it, and people who do not know about it would probably consider it a weird painting and not give it a second look if it wasn’t hanging in the Louvre. Honestly, I only know about its value because other people have told me its valuable. Different people can have different understanding of the same object.

Let me illustrate this with another example: if I told you that I wanted you to spend your valuable time doing something unejoyable for me and in return I will give you some pieces of a (perhaps) shiny metal and some pieces of paper. Or, better yet, I’ll simply just bump up some numbers on a computer somewhere, would you look at me like I was crazy? You might, but remember that that’s what money is. The value of money is entirely in our collective heads. It’s a little more complicated than that, obviously, however that’s an accurate (though not very useful) way to think about it. As Steve Pavlina and Warren Buffett say, money is a claims cheque for withdrawing from “society” value that is worth the agreed upon value of that money.

Value is usually not so obviously conscious. Often times, things just “stick out” in the environment for you. When you focus your attention on something, you are indicating it is relevant in some way. Relevance, salience, importance are all very important, related concepts but they’re tricky to nail down. For example, say you walked into your room and found two things that are different: a very attractive person on your bed and that the walls have gotten one shade lighter. Which would you pay more attention to? What would you drawn to pay attention to immediately? Odds are high you wouldn’t even notice your walls have gotten lighter. You wouldn’t have the thought, “Attractive person, walls slightly lighter. I think I will pay attention to the attractive person.” It’s usually not a conscious choice: you simply pay more attention to the attractive person. The attractive person…attracts your attention. Further, you probably wouldn’t pay attention to the things that did not change, such as your bed, desk or closet. You wouldn’t ignore the attractive person and look at your books.

What “sticks out” in the environment for you is a result of perceptual filters. If you know about the Reticular Activating System (RAS), then that’s what I’m talking about. Things in the environment just jump out at you. Generally, attractive people in the environment stick out and cause you to look at them. That filter on your perception is set by evolution. If you come up with a new goal, such as to stop smoking, you’ll suddenly find yourself noticing ads that advertise stop smoking, or randomly overhear conversations people are having about not smoking. Another example: ever notice how even if you’re in a crowded, noisy room and you hear your name, it comes across clearly even across the room? Your perceptual filters are set to bring your name to your attention.

So, to make money, you have to convince enough people to give you their money. You can do this by begging, of course; convince others that you “deserve” or “need” the money, and you can, of course, steal it. However, the best way is to give enough value–that they consider valuable–so that they will give you money in exchange for it, or to own a system or structure that delivers value for you and you can enjoy the profits. A good rule of thumb is that anything people want is valuable for them. I want and value convenience or mobility and I’m willing to exchange one form of value (money) for it, when I buy a laptop rather than a desktop.

The value mindset understands that value is being created all the time, simply because other people perceive it as such. For example, if I have made someone laugh, I have created value because they perceive it as such. If I said or did the same thing and another person did not even smile, then I have not created value for them because they did not perceive it as such. Not everyone reacts to the same object the same way, nor in the same location or the same time. What value is exchanged for money is largely a matter of convention and need. For example, even if you go to a professional masseuse and get a nice relaxing massage, they created value because you feel that was a valuable experience and you expect to exchange value in the form of dollars or favours for it. If, however, your girlfriend or boyfriend who happens to be a professional masseuse gave you a nice relaxing massage which was also full of love, they have created greater value than going to a spa, but if they asked you for money, it would be really strange.

This is the big difference between a “scarcity” or “cost/expense mindset” and the abundance or “value mindset”. The cost/expense mindset has a very narrow definition of what is valuable to other people and it is generally based on what is valuable to you. We often don’t know a whole lot about other people, so we fill in our understanding of other people with liberal helpings of our understanding of ourselves. A mistaken understanding of what is “valuable” enough to be exchanged for money is what is at the core of the difference between the two mindsets.

The cost/expense mindset, however, has a much narrower definition of what “value” is that can be exchanged for money. Here are some definitions I have believed and discarded:

  • If I work hard, I am creating value for other people. “Hard work” meant long hours, personal stress, being constantly on call and doing something I disliked. This is unsustainable. You can read more about it here.
  • If I am the best or at the top, only then I am creating value and deserve money in exchange for it.
  • If I am good enough, I am creating value. The value I am creating to others is being able to have ME and my time. This was largely egotistic.
  • Value is objective and everyone agrees on what value is, rather than each person having their own idea of what’s valuable to them.
  • Only the material cost of something is valuable. So, if a pair of shoes costs $5 to make and someone wants me to pay them $60 for it, they’re being greedy and unfair. The real “value” of that thing is whatever the cost is.
  • Only the “function” is valuable. For example, an $100,000 Aston Martin and a used $10,000 Honda both perform the same function: transportation. So, an Aston Martin seems extravagant when a Honda will do, however the function is not the only kind of value of the Aston. Its fast, its the most beautiful car in the world. But only some people care about that stuff, many people just care that a car get them from point A to B. Don’t project your values onto other people.
  • Value is created only by my personal effort and its all about me being good enough.
  • Only my own original ideas create value.
  • Only things with definite physical price has value. Things that give me a fluffy “emotion” or experience do not.
  • Only things that last have value. Something transitory such as a massage does not have very much value.
  • If I’m smart enough, or good enough, I am creating value or I can create value.

People in the cost/expense mindset tend to pursue money rather than attempting to give value. I’ve been there and during that time I did worse than I did otherwise and generally did not enjoy how I felt every day and about myself. I felt a bit like a cheat desperately trying to grab what he can. I do not recommend this path. Steve Pavlina has also experienced it and recommends against it. That said, you’re free to try out both and see which one works.

Value created is when someone else acknowledges that you have done something they value. They may return the favour in money, in other favours or in something else you may find valuable. They may do this implicitly by simply putting their attention on it.

This view transforms money into something to be valued rather than a scarce resource. Some people think there’s only a limited amount of money and it’s just wrong. Money represents psychological value, which is basically infinite. While before it would seem noble to not take a whole lot because others would not have enough, now you can have as much money as you’d like as long as you’re creating value. If there’s greater value than the amount of money out there, they can print money. It sounds pretty noble to me to create something people value. You’re helping other people in a way that may well not take anything away from you. Does that sound noble to you?

Footnote:

The “redefine it ’till its absurd” is a game I love to play. See what else you can apply it to? Movie theatres are places where we get to sit in the dark quietly listening to some sounds and having some light movements hit our eyeballs. And we get to pay money for the privilege.

Part 1 – Introduction

Part 2 – What is Value?

Part 3 – Practically Creating and Delivering Value

Part 4 – What is your Current Mindset?

Part 5 – Value & Self-Esteem

Part 6 – Value & Service

Part 7 – Value & Marketing

Apr 052009
 

The abundance mindset is the key to making a lot of money, according to noted Personal Development for Smart People blogger, author and speaker Steve Pavlina, as well as I Will Teach You To be Rich blogger and entrepreneur Ramit Sethi. Other personal development experts, such as Stephen Covey and Paul Piotrowski, also claim that financial, career and sometimes even life success is found in shifting from a scarcity mindset to an abundance mindset.

Unfortunately, I haven’t found a good, practical guide shifting to an “abundance” mindset, only indicators or markers of where it is. I have spent the past year or so creating my own understanding of the abundance mindset that brings together my knowledge of personal development, the way the world works, psychology, philosophy and economics. I want to share this understanding and my process for achieving it here.

What makes this guide special? My goal is to help you shift your mindset to an abundance mindset by delivering clear reasoning (instead of assertions) behind each of the pillars of the abundance mindset and contrasting it with the common mindset. You can then test out your results with the abundance mindset versus your previous mindset and decide which works better for you. The other guides I have seen have done some things I will avoid:

  • included assertions rather than arguments
  • have only described the final mindset without contrasting it with the “common” one
  • have only talked about the “symptoms” of the abundance mindset (such as finding a ten thousand dollar a night for a hotel room acceptable) rather than why that is so
  • made metaphysical assumptions about the nature of the universe such as for the law of attraction. There may be value there, but I will stick to a naturalistic understanding of the world whenever possible.

The criteria that define the abundance mindset are:

  • it has to be ethical.
  • it has to model the world as it is by explaining how people make money right now and accounting for why people don’t.
  • empower us to make more money easier, better or faster, and deliver all sorts of results easier.

How this guide works This guide is written so that the next page will contain almost all you need to know about this mindset. It will be a sort of overview of the whole guide. The pages after that will contain greater detail, illustrations and depth about each part as well as my personal history with each idea. This is a work-in-progress. If some part of this guide could be improved or if you feel that some parts are lacking, please contact me and let me know so you can help create greater value for the other readers of this guide.

Table of Contents:

Part 1 – Introduction

Part 2 – What is Value?

Part 3 – Practically Creating and Delivering Value

Part 4 – What is your Current Mindset?

Part 5 – Value & Self-Esteem

Part 6 – Value & Service

Part 7 – Value & Marketing