The conundrum of cash

Keeping a balance sheet of your company finances is an essential and legally required practice. You should also do this with your personal finances so you know at a glance where your money is and how much cash you have free.

In my current life circumstances this balance sheet looks pretty lame. I think my greatest assets are my two year old scooter, new push bike and brand new running shoes, which makes asset management a pretty easy task.

For my boss however, this is another story and leads to a whole new set of conumdrums, namely:

  • Once you have all the assets you want and the lifestyle you desire, what do you with your free cash?

Most people automatically say “put it in an interest earning bank account”. But where? And why?

If you put it in a kiwi account, what if you want to spend your money in the USA once you retire? Will your money be worth less by that time, or more? What if you change your mind about what you want to do when you retire? What if you put it in the USA, and end up living peacefully in New Zealand for the rest of your life?

How are you supposed to work out what you want to do in the future, and what should you do in the meantime?

My boss explained that he has reached a point in life where, without doing anything, he is able to ensure his lifestyle for the rest of his life and his children’s lives. Maintaining this level on a balance sheet  is easy enough once you have apreciating assets and shares in companies, and cash flowing in from various sources for day-to-day financial management.

So what to do with the free cash, once your lifestyle has been bought and paid for?

He doesn’t see the point of letting his free cash sit in a bank account, earning minimal interest and not doing anything to help anyone or grow the economy.

If you were in a position in life where you could help others without comprimising your personal happiness would you? Or would you just sit back and enjoy what you had created? My boss has publically stated that he wants New Zealand to grow into a high-wage, high-growth economy, and he once told me “$1 million won’t make much of a difference in my life, but it would sure make a hell of a difference in yours.” He is not satisfied to sit around passively, but wants to do something to make a positive impact.

So something short of throwing money into a pit or putting it under his pillow, my boss has me and a couple of others working on finding investment opportunities, where he can contribute his money and knowledge to build the next Endace.*

There are a couple of parameters around the kinds of investments we are looking for… they have to be in the hi-tech industry and they have to make a difference and be worthwhile, which means the idea or company must be positive to society, and of course it must make enough money for it to be worthwhile putting money, time and energy into.

I am currently on the search for the next big thing, and I have a feeling that the right investment is not going to come from the obvious channels; it will come from reaching the mad scientist who needs help to get out of the garage, or the company which needs years of experience to guide it to a profit. We have the cash, experience and energy to inject the right opportunity with whatever it needs to succeed, finding it is probably going to be the hardest part, akin to herding cats.

*Endace is arguably my boss’ most successful company. He started it in 2001 with $250,000 NZ, one other partner and an engineer. The company now has a market cap of £83.5 million and is listed on the London Stock Exchange.

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