IROI
By: Anthony Fieldman
Tags: Creativity, Investing, Life Lessons, Business, Startup

IROI

By and large, the global economic engine measures things, not people. The horizon is more often short than long. And in the process, we may be missing the forest for the trees, cheating ourselves out of what makes advancements flourish: insights, cultivated and aimed. It may be time for an IROI.

Photo by Christian Dubovan on Unsplash

Most of us are familiar with the term ROI. That’s because “Return on Investment” is the lingua franca of the economic world. It’s a key metric by which potential new investments — in fledgling ventures, half-baked ideas and “what if” pivots — are weighed, then made or declined. Within existing businesses, it largely informs whether ideas or projects get green-lighted, or nixed. Among nations, it informs how leaders weigh potential regulations and subsidies, among other measures. And everywhere, it’s how regular humans and mega-corporations alike rally resources and people around something from which we all hope to profit, most commonly in the near — or very near — term.

ROI measures tangible outcomes: units sold; profit made; dividends distributed; share price adjusted. These are all measures of efficiency; at the same time, they are outcomes that cannot be measured until they exist. “Upstream”, ROI also looks at inputs as lenses through which to assess potential returns. These include trends; risk; scalability; competition; barriers; the team itself; the market; strategy; adoption and absorption rates; etc.

We are very good at measuring tangibles — at evaluating risk and reward intelligently.

What we are markedly less good at is measuring — and thus, given our risk-aversion and profit mindset, less likely to invest heavily in — are things that don’t directly yield dividends, but could do so “sometime down the road”. That’s because doing so would necessitate shifting our focus from the highly delineated near term toward a more distant and fuzzier horizon. We would further need to invest not only over a longer period of time, but also — potentially, heretically — in a person, rather than an idea, product or company — one with an expected, weighable ROI.

The latter approach is how we invest in thoroughbred horses. We pay for pedigree and potential, but we are clueless as to whether or not a particular colt will mature into the powerful — and profitable — contender we hope they will. So we invest — heavily — in their development potential, every step of the way, in a bid to actively maximize the investment. We do not simply pay the seller, sit back and wait for revenues to pour in.

They’d never materialize if we did.

Photo by Jana Shnipelson on Unsplash

A second, if obvious example of this latter approach, is how we invest in our children. We do so not because we look for fiscal returns, per se, and equally, not necessarily because we are altruistic about it, but rather we do often hope, one day, to burnish our self-image (a form of return), by association; and because many of us hope that someday our children will take care of us when we no longer can. In this way, our children are an investment — perhaps the longest, most open-ended and most effort-intensive one we will ever make.

By marked contrast, in professional day-to-day life, when evaluating new ideas and investment opportunities, most of us will give prime focus to the numerical details that point mathematically to an “informed” decision.

Few of us, in these instances, consider the person or people peddling an idea more than, or as much as, the “de-personalized” pitch, beyond their track record and bonafides. That is, we rarely if ever focus primarily on their energy and thoughtfulness, or how well their undeveloped ideas resonate with us, per se, or even at their human development potential, as people; and then, as a direct result of any of these things, open up our wallets and say, “I’m in,” without first weighing out the details of a business plan, and/or a financial model.

Wouldn’t that be nice…

By the same token, few of us support or green-light an idea and then actively participate in its incubation and future success, by enhancing the prospects with contributions to the team, thought leadership, or trouble-shooting… things that could round out missing skills, talents or thinking. Doing this would require us to invest not just our dollars but our efforts toward creating the success we wish to see happen.

If we did, we’d have to measure more than upstream inputs, or downstream returns — past or present. We’d have to measure the unmeasurable, which is a fancy way of saying we’d have to “play the long game” by investing in a person’s potential to succeed.

It’s a squidgy calculus — one conventional lending institutions run from, generally.

I was having dinner the other week with my friend Erin. She’s a travel writer and a “girl about town”, nearly always engaging with interesting people and mind-opening activities. Somewhat out of the blue, while sitting at a sidewalk bar in the West Village, talking about economics a few weeks back, she mused aloud:

“How much of what you put into life results in the kind of insights that allow you to move forward as a human being?”

IROI

It was that sentence that got me thinking about the term “IROI”, or Insight Return on Investment.

She wasn’t speaking about investments in the narrow, financial sense, but in something much larger. She was referring to the idea that everything we do — all the investments we make in ourselves — build personal capacity toward things that are impossible to even imagine, let alone measure, downstream. But we do it anyhow, because with enough time, and enough experiences, internalized, our ability to act — and succeed — strengthens.

What a beautiful thought.

StartLab

Enter a new investment strategy. A company named StartLab does just that. Founded by Itay Adam, who in 2014 became famous for closing $2M in funding from an international VC fund, with just five slides and no idea (he even quipped about it in the interview, citing Seinfeld and saying his was a deck about nothing), StarLab focuses on the quality of individuals and teams, rather than products. Of his approach Adam provides a corollary:

“Take a child to the fair. Hand him an air gun and tell him he only has one chance to win the huge brown teddy bear. He will surely miss. Now, you’ll start with the accusations and cripple his soul turning him to the sort of kid who will never try this again. Both of you lose. Take another kid, hand him the gun and tell him he has 50 attempts. He will probably nail something on the fourth attempt. But, on the twelfth attempt he will start aiming for the very center of the target, and by 40 he will get bored and create a new gun. That’s life. Create an empowering surrounding and you, too, will get empowered.”

He’s right.

We forget that a large share of success isn’t only the homework we do — the research, the work plan, our past experiences; it is also the open-ended investment we make in our own undirected development, as people, to feed our contextual understanding of the world, to inspire us, and to prime our minds for whatever may emerge from these things.

Not everything has to be predetermined, or directed toward an end. In fact, insights often, if not usually, emerge from seemingly unrelated places, within minds primed to think broadly about how we approach what we do.

I’ve long felt that someone who chooses their own path will invariably do a better job at it than one chosen for them. This applies to things as small as the methodology of any single task. It could be one’s career choice. It could involve risking one’s life savings on a gambit, which may also risk the security of providing for one’s family.

However we choose to funnel our energies into our work—and whatever our appetite for risk—there is no replacement for insights gleaned from things that have our full attention, and passionate energies.

So why, to refer back to what Adam highlighted, do we typically tell children what to do and how to think — at home and in school — teaching them rote skills and censuring “wrong answers”, in lieu of inspiring them to encourage open exploration and discovery? Isn’t that the lifeblood of invention, and creative acts? And aren’t creative acts the only path to innovation and advancement?

Why do we do the same thing with adults, not only punishing them for falling short of adequately servicing our priorities, but not even giving them the chance, when it comes to investing in them, to show us not only that they can add value, but can contribute in ways we didn’t foresee, by “creating a new gun”, to borrow Adam’s metaphor, if the context is right?

When we invest, why don’t we all do what he does, which isn’t all that different from how entrepreneurs within the Mondragón collaborative in Spain are evaluated, and funded? In Mondragón, investors admittedly focus more on traditional pitches than people potential, but at the same time, they invest decidedly for the long haul. Not only do they not scrutinize short-term gains, but they contribute expertise—human capital—and often, additional funding and ever-lowering interest rates, in an effort to ensure the venture succeeds, much the way we invest of ourselves in our children and friends. In fact, the governing principle in Mondragón is that until the venture succeeds, they will continue to contribute whatever is necessary to ensure that it does.

The success rate of incubator projects there is near 100%.

Mondragón: a 84,000-strong, 75-year running success factory

If our “belief” in a person is predicated on the ROI we receive on our investment, and further limited to the convenience and/or success of a business transaction, then we are making a clear statement about our belief in an individual. We don’t. Rather, we are transacting with people, and our relationship is nothing more than a legal structure and a financial model. In that regard, these relationships are mathematical; they are not “human”. Humans aren’t spreadsheets. We are social. We are emotional. We are works in progress. We need encouragement. We more than occasionally need help. We blossom in collaboration. We seek purpose.

When we have these things we thrive. When we have these things we are far more likely to succeed than if we feel a target on our backs or a magnifying glass over our heads, or we are told that a predetermined outcome — a certain quantum within a fixed deadline — is expected, without which there are dire consequences.

And yet, the lion’s share of our business interactions follow that very formula: show me the idea; detail how much I’ll get for my efforts, in how long; make me feel comfortable with the “risk” attendant to lending you money; and then send the check here, and otherwise don’t bother me. I’ll be back for my money; and if you fail, you’ll hear from my lawyers.

If we did that to our children, we’d seed a generation of failures.

Photo by CDC on Unsplash

In the case of our children, our success is a direct measure of the investment we make in them. We may try to do that by forging them into weapons, as tiger moms do; but all the tiger children I know personally suffer from the same tragic thing: they’re broken inside. Their nervous systems are wrecks, and while they’ll likely tell you they’re #killingit, and by external measure, likely are, inside they suffer from deep levels of self-hate, usually without knowing it. Dr. Theodore Rubin, M.D., the former president of the American Institute of Psychoanalysis, makes a compelling case for this in his seminal book, Compassion and Self-Hate—a book I’m halfway through, and is therefore on my mind, these days.

By contrast, when we allow children to explore their worlds without expectation, listening carefully to the internal cues they provide, if we are sensitive enough to pick them up — helping when asked, and sharing insights without expectation of reaction or outcome — then we seed the potential of unlocking parts of their own internal engines, and long-term flourishing. They may not know what they have in them. Most don’t! It may take ages for their experiences to gel, to connect and lead to something exciting or valuable… or even game-changing. Everyone’s path is different. Paths don’t run on fixed timelines. They don’t follow mathematical formulas, no matter how much we wish they did, or aim toward one. They aren’t prescriptive, because humans are unpredictable, and react as much from their hearts as they do from their wallets, or with pressures.

So the real question is: why don’t we treat others, personally and professionally, the way we wish we were treated ourselves? I know I’m certainly very guilty of a double standard in this regard. More accurately, I often treat myself as badly as I treat others. I don’t offer it as an excuse. It’s a self-observation — one I hope to use to overcome these tendencies. But however we fall short of the ideal for interacting, most of us do so to some degree, in professional life.

Why do we treat others by a yardstick we ourselves don’t like, whether or not this is “how business gets done”, as usual?

Why don’t we redefine the default?

Said simply, why don’t we invest in one another, rather than specific ideas, and do so over the long term, rather than being led by ROI?

Why don’t we invest in IROI, acknowledging that insight is quantifiably unpredictable, and stands a far greater chance of occurring in the right context: not with someone breathing down our necks or measuring outcomes in the short term, but by rolling up their sleeves and pitching in, investing time, ideas, patience and resources of all kinds personally, without prejudice as to the short-term outcome?

Do we not all wish someone did that for us?

Isn’t there more to professional life than ROI?

I believe there is.

Ever the clear-eyed synthesizer, Simon Sinek said:

“We should invest in people, not ideas. A good idea is often destroyed by bad people, and good people can always make a bad idea better.”

If “good people can make a bad idea better,” then you might ask, why invest at all in it? Who invests in a “bad idea”? The answer, I think, is in the first part of Sinek’s provocation. We should invest in people, whether or not they have landed on an idea we can plumb for return… yet.

Insight is admittedly not the only measure of future success. Sweat equity counts equally. Ideas are a dime a dozen. Without adequate effort, they remain nothing more. The right partners are critical. “It takes a village,” unless we’re talking about a singular creative act. And timing can’t be underestimated. Great ideas have failed because people’s hearts and minds weren’t ready. Apple’s Newton comes to mind. Jobs started incubating it in 1987, and they hit the market in 1993, fifteen years ahead of the iPhone that comprised — largely — their second stab at the same thing. The Newton bombed. What had changed in the interim was the public.

But still: the underlying engine for all of human endeavor is purpose. It must often be uncovered, coaxed, cultivated, reinforced and aimed. Sometimes, our efforts lead to dead ends, and sometimes we make the wrong decisions. Either we punish these things, or we understand that they are normal human outcomes, learn from them, and move on. Either a single wrong turn is seen as failure, and its owner is tarred with a brush and abandoned, or we recognize that failure is as much a teacher as success — usually more — and we continue to invest in their future.

Thomas Edison said of his eventual electric light, “I have not failed. I’ve just found 10,000 ways that don’t work.”

Final Thoughts

When these forces coalesce in a single person, and are supported by the community around them, then that person (or group) can maximally contribute to our collective wellbeing. It could be a small contribution, or a transformative one. There could be one of them, or a hundred.

We never know. There’s no guarantee.

But I want to live in a world of people who invest in one another: not just financially, but interpersonally; emotionally; over the long term. To do otherwise is anti-societal. To confuse people for transactions is inexcusable. It ignores half, if not more, of what generates success — both in the narrow financial sense, and in the broader sense of interpersonal enrichment, societal wellbeing and long-term, collective reach.

The way we typically measure success, by and large, is not only misdirected, but toxic. We have lost the forest for the trees by treating people as currency. We need new, more empowering and more mutually beneficial humanistic measures of returns on our investments. It may be that “insight” isn’t the only one, or the best. But insight is the wellspring of ideas, direction and purpose.

So in my mind, it’s as good a place as any to start.

Much as Bhutan developed GNH — Gross National Happiness — as a measure to broaden our definition of societal wellbeing, an IROI — or Insight Return on Investment — may lead to a greater measure of how well our investment in one another leads to the greatest currency of all: that which clarifies ourselves to ourselves, including that which can — with the right partners, in the right context — fill us with purpose, and transform the world.

Purpose, aimed, is a solid investment.