Wouldn’t you like to earn the same dollar twice? It may sound crazy - or even illegal - but it’s actually the secret to success in the new normal: invest and spend in people and enterprises who will end up giving you back the money, one way or the other.
For most larger companies, revenue and growth are products of their ability to extract value from the places and markets in which they operate. The formula is pretty simple: open a branch, compete the locals out of business, and pull as much money out of circulation as possible in order to deliver returns to shareholders. The money goes in one direction only. Each dollar you earn, you earn only once before squirreling it away.
Sounds good on the surface, but in an accelerated and increasingly synthetic economy, this tactic has reached a point of diminishing returns. In fact, corporate profit over net worth has been going steadily down over the past 70 years. It’s easy to accumulate wealth, but when we do it solely through extraction and efficiency, the sources of revenue eventually dry up.
As the communities in which a company operates get poorer, they complain. We “pay back” in the form of an expensive corporate responsibility plan - as well as a publicity campaign costing ten times the charitable giving, itself. Now, instead of money coming in, it’s simply going out.
The longer you can keep your revenue in circulation, the greater opportunity you have to make additional profits off the same dollar before it ends up stuck in the bank account. By spending money with your customers, you end up making your money back. Likewise - and equally important for the health of the markets you hope to tap - by spending their money with you, your customers need to stand a chance of making that money back, too.
Not surprisingly, perhaps, trade unions were among the first to figure out how to recycle money. The AFL-CIO targets their retirement funds to invest in projects that - surprise - hire their members. They invested $750 million in New York City to finance the first construction after 9-11, generating 3,500 union jobs and building 14,000 housing units. Another billion went to mortgage loans for union members and city employees. Similarly, the union invested in restoring the Gulf Coast after Hurricane Katrina and in multifamily housing shortages in Chicago and Massachusetts. The investments generated jobs and affordable homes for members, in addition to retirement fund returns for union members. The same dollars were earned multiple times.
Unilever, inspired in part by the inability to gain traction through unidirectional corporate giving or traditional social entrepreneurialism, has realized terrific success by integrating such practices right into their business processes. Normally, companies evaluate vendors by the bottom line alone, and the cheapest bid gets the contract. By favoring local vendors, sourcing from smallholder farmers, and treating their employees as potential customers, Unilever strives to enhance the livelihoods of everyone working across their value chain. Of course, the brilliance of this strategy - what the company calls Unilever Sustainable Living - is that the money comes back.
Any business or person can employ the double dip. The next time you have some money to invest, think twice before buying stock of some companies you’ll never interact with. Consider investing in your own town’s main street, companies that employ your customers, or even your very own vendors.
Yes, it’s a form of favoritism. A restauranteur hiring his kid to wait tables is a multi-faceted investment in his family and its future, and an airline buying stock in oil companies is a hedge on its own expenses. By putting boundaries around your capital, you stand a chance of seeing your hard earned cash come back at you. And it gives a whole new meaning to the phrase “return on investment.”