How to Increase your Financial Resilience
A permacultural view on personal economics.
“Today is already the tomorrow which the bad economist yesterday urged us to ignore.” Henry Hazlitt — Economics In One Lesson
I have this strange tendency to connect everything I do to nature. That’s not so hard of course, as I do tend to spend the majority of my free time in the big outside. Surrounded by nature, a most perfect and layered system, everything seems to connect.
I know I’m in good company as lots of fine thinkers and researchers found nature to be their major source of inspiration.
Take the economy for example.
There’s a whole string of economic theories using nature as their main model. We might take Joseph Schumpeter as an example, who proposed the idea that the economy is an evolutionary process, in the spirit of the work of Charles Darwin. This was nota bene, in 1908.
The reason why these analogies work so well is that they use existing knowledge about one topic and apply it to another one. This once again stretches the importance of obtaining a diverse set of knowledge. After all, the most interesting things happen at the crossroads of our thoughts.
What is permaculture
A connection that has been lingering in my mind lately is an economic vision based on permaculture.
Permaculture could be defined as a set of design principles, based on ethics, ecology, and other sciences. Its main focus is a way to create sustainable, durable landscapes and agricultural practices.
Resilience, according to permaculture, is created by copying techniques inherent in nature, which in essence are very complex ecosystems.
A complex ecosystem called finance
It’s exactly this image of a complex ecosystem that we’ll have to apply to our own financial situation.
In terms of agriculture: we should treat our personal finance as a polyculture rather than a monoculture. In other words: we’re not aiming to grow 100 acres of a single crop, like corn. Rather we’ll be sowing a lot of different seeds of different varieties onto a lot of different patches.
Diversification in combination with small, non-intrusive techniques is the key to financial resilience.
The basis of this design is a huge stack of layers, which after all is the true embodiment of nature.
A guild of different income streams
A diverse, interacting system of plants is also called a guild.
For example, nitrogen-fixing plants act as a natural fertilizer, big-leafed plants like comfrey as mulch to cover the earth for protection whilst networks of mycorrhiza distribute nutrients between plants, etc.
Moreover, each plant has multiple functions and purposes, increasing the complexity, resilience, and last but not least the yield they’ll provide us with. A simple apple tree, viewed from this perspective, delivers apples for us to eat, shade, protection for birds, blossoms as food for insects, a possible windbreak for other plants, etc.
In this same way, different sources of income should be treated as a guild. Each stream of income has multiple, unique assets, and is in connection to the other streams.
And just like the connections in nature, each of these incomes will work independently if necessary. This means that the chain won’t break when one element gets broken. This chain, then, is more like a complex spiderweb rather than a loose, linear connection of separate elements.
A different definition of income
If we want to use this model to increase the diversity of our earnings, we’ll first have to redefine those things we measure as income. This means shifting from a passive wage-slave and consumer economy to a true creator and household economy.
Food from the garden, then, will be a form of income. The skills to make and repair objects can be an income. The skill to barter, trade, and lend will be a form of income. Working together in your community and with your neighbors will be a stream of income. Consuming less and living a simple life will be treated as an income. A job can still provide an income. Starting a small business can generate income. Investments of all kinds are a diverse stream of income. And of course, freelance writing could be a good way to add to this income.
The goal here is not to find a “get rich quick” scheme, rather we’re setting up a sustainable and layered network of income streams.
The importance of a mature system
In nature, a young ecosystem is still vulnerable. It needs to slowly grow to maturity, as the relationship between the different plants and trees starts to mingle and interconnect. In its growth, the ecosystem gets stronger, more resilient, and more resistant to external factors.
If we want to achieve this same maturity in our personal finances, we’ll have to aim for the long run. Slowly but confident we’ll have to spin fine threads of different activities and streams of income.
The importance of every single thread cannot be underestimated. In the end, however, the one thing we must keep in mind is that we are working on a bigger picture: a complex and interconnected spiderweb of multiple incomes.
“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups… but the ‘new’ economists overlook the woods in their precise and minute examination of particular trees.” Henry Hazlitt — Economics In One Lesson