The Expert Witness ... Sufficient Affluence/Sustainable Economy: Economics for small groups (part three)

By John F. Sase, Ph.D.
Gerard J. Senick, Senior Editor
Julie G. Sase, Copyeditor

“Whether it be the sweeping eagle in his flight or the open apple-blossom, the toiling work-horse, the blithe swan, the branching oak, the winding stream at its base, the drifting clouds, over all the coursing sun, form ever follows function, and this is the law. Where function does not change, form does not change. The granite rocks, the ever-brooding hills remain for ages; the lightning lives, comes into shape, and dies in a twinkling.

“It is the pervading law of all things organic and inorganic, of all things physical and metaphysical, of all things human and all things superhuman, of all true manifestations of the head, of the heart, of the soul, that the life is recognizable in its expression, that form ever follows function. This is the law.”

—Louis H. Sullivan, American Architect, “The Tall Office Building Artistically Considered,” Lippincott’s Magazine, March 1896

During the past nine months, we have laid down some basic tracts of Economics for the recovery of the City of Detroit and Southeast Michigan. During this time, we considered the fundamental fulfillment of our needs and wants, the management of scarce resources and their division into human and non-human categories, the delineation of both into factors of production, the combined monetary and fiscal policy as carried out by the Federal Reserve Bank System and the U.S. Congress, the cost and social benefits of corporate regulation, and the application of economic essentials—the core elements of success—that every small business or professional practice needs.

In this month’s column, we build upon our core elements of success to determine the root purposes for building, structuring, and maintaining a business or similar institution. The core of our discussion focuses upon satisfying the need to attain and to maintain Sufficient Affluence through a Sustainable Economy. We will address this theme from a large perspective across time and space down to a more immediate, personal one in the context of current technological and cultural changes.

What are Sufficient Affluence and Sustainable Economy, exactly? Sufficient Affluence is defined as what and how much is necessary for a person to meet his/her needs. Sustainable Economy is the system of managing one’s resources that remains feasible and flexible over an extended period of time.

Specifically for law firms, the goal of creating one’s own practice is the “function” to which the “form” of that business (the organization, the financing, the marketing, etc.) must follow the function.
Function is the reason why the form should exist. Creating the form of a business without understanding the reason and function behind it is like putting the proverbial cart before the horse, which is dangerous for both the driver and the horse.

How many of us realize that there are a greater number of humans with genius IQs in the People’s Republic of China than there are a total number of humans in the United States? We mention this point because even small mom-and-pop businesses are competing in the global marketplace via the Internet. For this reason, we need to define what we must accept as our level of Sufficient Affluence, both today and in the future. Conjointly, we must understand and develop the kind of Sustainable Economy that can support our Sufficient Affluence.

In order to create a suitable infrastructure for a small (family-size) business such as a law firm, we need to know some information about the intended function that the business will serve. It is true that most businesses share similar structures, a fact attested to by generations of business students who have taken the same set of business-school courses. However, each business that is created remains unique in purpose to its own entrepreneur. In this sense, one or more human beings have built an individual business. As a result, every firm reflects various aspects of human nature, including personality, political leanings, the primary directive of the owners, moral and deist beliefs and practices, and other characteristics.

In studying a business firm in respect to its nature and to its probability of success, certain characteristics emerge as more significant determinants and indicators. We might ask ourselves whether we live to work or work to live. This essential tenet may tell us a great deal about a business and its owner/manager. In this sense, we might ask whether the firm is economic-centric, social-centric, cultural/spiritual-centric or family-centric. For example, we expect that a family-owned law firm would have some values that are different from those of a storefront theatre or art gallery.

We may ask if professionals operate their businesses or practices out of a dedication to the intrinsic values offered by their work. Conversely, does the firm serve as a vehicle that allows these professionals to play more golf, to enjoy more time with their families and communities, or to devote more time to the practice of their arts or religious beliefs? Many of us recall the dairyman Tevye, who sings the song “If I Were a Rich Man” in the musical “Fiddler on the Roof” (Jerry Bock, Sheldon Harnick, and Joseph Stein, 1964). In one verse, Tevye sings, “If I were rich / I’d have the time that I lack / To sit in the synagogue and pray / And maybe have a seat by the Eastern wall / And I’d discuss the holy books with the learned men several hours every day / That would be the sweetest thing of all.”

Another question arises when one decides to create either a single enduring business or a line of successive ones over time. This contemplation prompts the question of how long of a time span is envisioned for a single-life business or for a dynasty of closely held firms. One may aim to develop a business that will sustain for a few years, a few decades, or a lifetime. In the fields of Business and Economics, researchers have discovered that dynastic families who acquire large caches of wealth do so through a plan that extends numerous generations into the future. Other families go from shirt sleeves to business suits to shirt sleeves in a few generations.

On the other hand, we can look to the values within extended family traditions that span backwards and forwards across millennial ages. We also might add the precessions of Platonic years, if one’s concept of familial unity and strength remains basic enough to survive, as do the Sea, the Air, and the Earth, all of which are mentioned in the beginning passages of the Book of Genesis as well as in other ancient texts. However, like our natural environment, extended family traditions may need to adapt to change while remaining strong enough to protect our human resources. In addition, these traditions need to protect our natural resources, such as water, gasses, and trees, so as not to deplete them faster than they can be renewed. If we manage these resources irresponsibly, they may not be available for our descendants. To sum up, many entrepreneurs seek to establish businesses that will serve them and their families for a very long time. Contrastingly, other entrepreneurs build businesses with the prescribed goal of establishing them and then harvesting them within a few years, selling the business lock, stock, and barrel as a turnkey operation. To conclude, our range of beliefs and the business sense reflected by them vary widely among us.

Most of us maintain some plan of action to keep the economic wolf from the threshold of our homes, be they a 120,000-square-foot Downton Abbey, a 172-square-foot Tiny House, a Mongolian Yurt, or, as Motivational Speaker Matt Foley (aka Chris Farley, Saturday Night Live, 1993) offers, “a van down by the river.” We all remain woven into the socio-economic fabric of the world around us, to some degree.

Therefore, each of us must answer three questions for ourselves and for our global community: What amount of affluence is sufficient to meet our needs and, to a lesser degree, our wants? What size and kind of economy is capable of sustaining a sufficient level of affluence? Is this level of affluence likely to increase or to decrease over time due to changing life-needs? In order to gain a deeper understanding of these questions, let us break down the elements of Sufficient Affluence through a Sustainable Economy.

In economic analysis, we need to consider the target optimum and then to explore the paths needed to achieve it. We achieve the optimal condition by meeting necessary conditions. However, the first question that we must ask ourselves is this: are all conditions met necessary ones? If a condition is not necessary, it will not contribute to the requirement of sufficiency. Secondly, not all of the conditions that are necessary, either separately or as part of an ensemble, will be sufficient. However, all sufficient conditions are necessary. As a result, the second question that bakes our noodle is this: can we achieve a level of sufficiency without fulfilling all necessary conditions? We ask this because some adequate degree of substitutability exists among necessary conditions. This allows sufficiency to be achieved with only a partial set of necessary conditions.

To simplify this matter, we may ask ourselves what set and mix of needs that also may satisfy our wants are necessary and sufficient. We may ask what amounts and combinations of physiological needs, safety, social/familial love and belonging, self-esteem, and self-actualization will meet the conditions for sufficient affluence. However, we should grapple with the meaning of affluence before progressing further. The word “affluence” is built upon “fluence,” which may originate with the Latin word fluere, meaning to flow. Hence, the word “fluence” as used in Physics is taken to mean a stream of particles crossing a unit area. “Affluence” is related to the words “influence” and “effluence.” “Influence” suggests a flow into an area while “effluence” describes the flow out of such an area. “Affluence” suggests a steady state of having something within that area.

Therefore, we experience an influence through which something of value flows to us. We measure the balance of something of value as our affluence at any point of time. Of course, the effluence defines wealth that flows outward and away from us. When influence exceeds effluence, our affluence increases. Conversely, when effluence grows greater than influence, our affluence diminishes. In business, the dynamics and status of influence, affluence, and effluence form the basis of Accounting in terms of Income Statements and Balance Sheets. Over time, the influence of Revenue offsets the effluence of Expenses. We state the resulting Profit or Loss on the bottom line of our Income Statement over a given period of time. At an endpoint, usually at the end of a Fiscal Quarter or Year, we measure the result of the influence and effluence since the last point of measurement. We express the resulting measure of affluence in terms of Assets (what we have or what is owed to us) against Liabilities (what we owe) and express the level of affluence on a Balance Sheet. Hopefully, we have enough knowledge, skill and information to define our level of Sufficient Affluence.

To complete our analysis, we conclude with the matter of a Sustainable Economy. The word “economy” denotes the science of management, administration, and rule of the household. The term comes from the Latin word oeconomia, which is originally patterned on the Greek Ta Oikonomika, the name of a treatise written by Aristotle on the subject. In the active sense, an economy entails the allocation of resources that are scarce in both time and space, divided into those that are human and those that are drawn from nature. These resources are subdivided into functional factors and are applied to the production of goods and services in order to fulfill our needs and wants. Over the course of human history, the sense of economy has been envisioned as something active and has been modeled as something spiritual, mechanical, or biological.

Whatever it may be in actuality, economy represents our ability as humans to organize both ourselves and the nature around us in order to survive both individually and collectively as a species of beings. Knowing how we behave in an economy, how it affects us, and how we as a species affect it helps to ensure our survival. However, our survival goes beyond the physical. We may be light or spiritual beings enforming the matter and energy of the universe around us. Taking this meta-analysis one step further, Albert Einstein tells us that the amount of Energy in the universe equals the amount of Matter multiplied by the Speed of Light (maybe constant, or at least close enough for rock ’n’ roll and jazz) times itself. In respect to economy, this relationship of energy, matter, and light presents a couple of points that are significant to our current discussion. (Note that Albert left “spirit” out of this theory, though he later brought this factor into his Unified Field Theory in respect to the existence of a deity.) First, the ratio of Energy to Matter in the universe remains constant (E/M = C^2). Second, as long as this ratio is maintained (which it must, by definition), the amounts of Energy and Matter can increase or decrease in proportion to one another.

In an age in which we recognize not only the existence of anti-matter but have the ability to create it, this tidbit of knowledge is important to our current discussion of Economics, scarce resources, and the like. Building on these past works through the present, we find that ancient wisdom was transformed into mysticism and superstition and eventually was suppressed in favor of science. However, our recent scientific advances have led to findings that correlate to and support our ancient wisdom. For example, ancestral beliefs in Creative Destructionism, where the world emerges from a primal fire, seem to be supported by the Big Bang Theory in contemporary thought. Also, the variety of beliefs of Oneness emerging from Nothingness, transforming into a balance of Duality, and then becoming Trinity falls into place with what we have discovered through Quantum Physics.

Therefore, the concept of Sustainable Economy, in which economy exists on both an immediate, personal level and on a level that is integral with the much larger plane, demands that we address
sustainability in an equally broad perspective. A Sustainable Economy requires that all elements of the complex economy work in unison or harmony with one another. However, we need to ask this question: what is sustainability? The simple answer is that the word “sustain” is the stem of sustenir, from the Latin sustinere, meaning to hold up. In music, “sustain” is the effect that prolongs the resonance of a note. In Tantric thought, sound-before-sound reverberates upon itself and sustains. From this sustain, everything in the universe continues to unfold. For our immediate discussion, “sustainable” means being able to provide what is needed by an economy, a business, or a household in order to thrive consistently while replenishing resources for the future.

All of the preceding suggests that the economy of a small business must be sustained or else that business will diminish in value, either to its salvage value or to nothing. For an economy to remain sustainable, a business must continue to grow. The tradition in much of the Western World focuses on the idea that bigger is better. Therefore, the notion that a business must continue to grow larger and larger in size, profits, and other attributes while sacrificing quality, stability, and personal intimacy no longer suffices. Most of us quit growing as physical bodies sometime shortly after high school. When I (Dr. Sase) graduated from high school, I had reached a height of six feet, three inches and weighed 150 pounds. To this day, I remain that height. However, I have gained about fifty pounds, due to changing metabolism. If any of us continued to grow without restraint, we would endanger our health and end up morbidly obese and, then, dead.

Nevertheless, most of us have continued to grow in other ways. We have a greater variety and level of education and skills. For this reason, our personal economies have become more sustainable as we continue to improve in our professions. Therefore, increased sustainability has more to do with qualitative growth than it does with quantitative growth.

In classes on Economics and Business, we teach students that new firms must go down a Learning Curve. This curve reflects a growing length of experience as well as the discovery of ways to improve quality and productivity. Typically, we measure this Learning Curve by a downward trend in the cost per unit (Average Cost). Usually, we can observe an increase in profitability even if the quantities of goods produced and sold remain the same.

Of course, factors in addition to cost-management exist that make any business more sustainable over time. In order to achieve continuous improvement, these factors demand work. The factors of Know, Like, and Trust are important to a business of any size. In small businesses, they often take on the unique qualities of a solopreneur. The relationship of one person to an entire community continues to develop. Today, the market of a solopreneur may be global, with the relevant community residing on the Internet. Maintaining sustainability means changing with the times and keeping up with new media. Ten years ago, just having a generic Web site may have been sufficient. Today, a Web site is only one element in a larger social-media network for most small businesses, including law firms and my (Dr. Sase’s) Economics practice. Furthermore, all of the elements need to work together. Our Web sites must communicate with our LinkedIn and Facebook pages. As video continues to grow in importance and affordability, strategically designed and placed videos on YouTube, Vimeo, Amazon 3S, and elsewhere must interface optimally with other social media in order to move views into traffic, traffic into conversions, and conversions into new customers and clients. If the last four sentences flew over your head, please shoot me an e-mail and I will link you up with some professionals who can assist you, even if you only have an iPhone for a video camera.

We hope that our readership of attorneys find this month’s column and the others in the series helpful to their law practices. As a Forensic Economist who is also a Business Economist, I (Dr. Sase) believe that, if each of us identifies our own level of Sufficient Affluence and further develops our professional practices with an awareness of Sustainable Economy, then we will increase our individual and collective probabilities for survival and success, however we may define these terms.
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A PDF copy of this article will be posted at http://www.saseassociates.com/legalnewscolumn.html. We continue to post videos related to our monthly column on www.YouTube.com/SaseAssociates in the Legal News Features playlist.
KindleBooks (that can be read on PCs and Macs) and paperbacks adapted from selected past series are available through amazon.com – Search All – John Sase
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Dr. John F. Sase has taught Economics for more than three decades and has practiced Forensic and Investigative Economics since the early 1990s. He earned an M.A. in Economics and an MBA at the University of Detroit and a Ph.D. in Economics at Wayne State University. He is a graduate of the University of Detroit Jesuit High School. Dr. Sase can be reached at 248-569-5228 and at drjohn@saseassociates.com. You can find his educational videos of interest to attorneys at www.youtube.com/saseassociates.
Gerard J. Senick is a freelance writer, editor, and musician. He earned his degree in English at the University of Detroit and was a supervisory editor at Gale Research Company (now Cengage) for over twenty years. Currently, he edits books for publication and gives seminars on writing and music. Mr. Senick can be reached at 313-342-4048 and at www.senick-editing.com. You can find some of his writing tips at www.YouTube.com/SenickEditing.
Julie G. Sase is a freelance copyeditor and proofreader. She earned her degree in English at Marygrove College and her graduate certificate in Parent Coaching from Seattle Pacific University. As a consultant, Ms. Sase coaches clients, writes articles for publication, and gives interviews to various media. Ms. Sase can be reached at Julie@royaloakparentcoaching.com.