The Lake Effect
They say that what distinguishes us from animals is our invention and use of tools. Exactly what is a tool? I suspect you can recognize a tool when you see one, but can you define it?
If I showed you a pipe wrench and a stalk of asparagus, I suspect you would tell me that the pipe wrench is a tool, but the asparagus is not (unless under very special circumstances).
A hammer is a tool, basically a lever with a hard, heavy end. A pair of pliers is actually two levers at once with the hinge being the fulcrum. (For more about levers, click here.)
There are other types of tools, however. How about a spreadsheet? Is that a tool?
I try not to use spreadsheets very much, but I think they would qualify for tooldom.
How about your multiplication tables? Are they tools? Well, if I need to multiply 7 by 8, all I have to do is remember the answer, 56. I don’t need to go to my marble collection and arrange a rectangle 7 marbles by 8 marbles, then count how many marbles I used.
So what exactly would the definition of “tool” be?
Well, pliers multiply work. You move the end of the handle over a large arc with a certain amount of pressure, applied by your hand, and the jaw moves over a much smaller arc, but with a lot more pressure! Tools like spreadsheets contain work done by others (the programmers) that can be applied to whatever numbers I put in the cells. To use the spreadsheet, I don’t have to know how to build it. To use the pliers, I don’t have to own a forge and be able to cast metal.
Oftentimes ideas are tools, usually our most powerful! E=mc^2 is basically a tool. To use it, I don’t have to remember, or even know, how it is derived. I just plug in a number for m and a number for c, then do the arithmetic and get the amount of energy stored in a certain mass.
Storing energy is very much like storing work! Release the energy in a certain amount of mass and you have an atomic bomb. Create a new tool (the printing press or the Internet) and you have a revolution!
Thoughts can be tools.
The best way to get to work when the expressway is jammed up is actually a tool. Either someone told you the alternative route or you found it yourself in the past, but today, when a tractor trailer is overturned and the expressway is shut down, you don’t have to think about what to do. All you need is to remember what you figured out last time.
From a slightly different perspective, the idea of tool and the idea of metaphor are very similar.
You might describe your favorite vacation spot as “heaven.” That’s a metaphor. What it does is convey a lot of meaning without you having to go into details. When someone asks you how your vacation was, you don’t have to say: I got to sleep late; I could eat anything I wanted; I stayed up all night dancing and looking at the stars; I sat in a deck chair and watched the ocean change color for three hours; I didn’t yell at the kids (because they weren’t there! :)).
All you have to say is, “It was heaven.” The person you are talking to will just interpret your comment with their own “heavenly” idea of a vacation–which by the way could be radically different from yours.
The reason I’m saying all of this is I thought of a great tool or metaphor to use when thinking about creating wealth.
I call it “The Lake Effect.”
North of where I live, there are two hydroelectric dams, which have formed two very large lakes behind them. How did the lakes get made? Well, the dam stopped up the river, and the water collected behind it. Where did the water come from? Upriver, along with the various streams and tributaries that flowed into the river before it was dammed.
Let’s talk about the lake as a metaphor for the money that flows through your life. The river upstream and its tributaries are your sources of income. You could even think about the river as your main source of income and the streams and tributaries as sidelines. I currently have a job. (A problem I want to correct as soon as possible.) That’s my river. The websites I’m building, our little eBay business are smaller, but yet very important, streams that feed my lake.
What’s the dam and what’s the lake?
Well, in a real lake the water collected is there for future use–future drinking, future power. Your money lake is your assets, stocks, real estate, IRA’s, 401k’s, money hidden in your mattress, that sort of thing.
The dam is your budget, whether it’s written down or just a matter of habit.
If one of the two lakes north of me dried up, chaos would ensue. I live in a city of 4 to 5 million people. We would have no drinking water, nor electric power. Can you imagine what that would be like?
It is important that while the lake is filling up, more water flows in than out. Once full, you can take more out, but not more than flows in. Whatever you do, do not let your money lake dry up! You do that, you’re…screwed (for lack of a better phrase).
While you are working and preparing for retirement, you hopefully are letting your money lake fill up. You do this by spending less than you make. Once retired, you still have to watch your lake so that it doesn’t dry up, or even get much smaller. Spending your capital is not wise!
One more thing.
A city needs a certain amount of electricity, just as a family needs a certain amount of money each month to be comfortable. If you’re not making enough money, you can try to figure out how to let less water out of your money lake per month. That’s often uncomfortable, rarely something you want to do for the rest of your life.
If you don’t have enough money flowing into your money lake, you need to figure out how to get more streams of income, or how to enlarge the streams you currently have. For me, that’s what online marketing is all about. Creating more tributaries.
If you’re having money problems, it helps to figure out how to spend less–but that only really works in the short run. In the long run, it’s better to figure out how to make more money! That’s a permanent solution you can live with more easily. It’s also a lot more fun :).
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