You’re getting screwed. Someone else is using your idle capital. 5 things you didn’t know.
Unfortunately, very few people truly understand the meaning of what idle capital is. So let’s briefly define idle capital from a few vantage points;
A firm’s unused money and property, the money and assets of a business that is not being invested productively. This could be cash in the bank, stocks, bonds, warehouse space, office space, interests, shares, etc. If it’s not being spent, it’s an idle asset and hence it’s idle capital.
An Idle Wheel is a gearwheel interposed between two others to transmit torque without changing the direction of rotation to the velocity ratio
Idle assets such as extra bedrooms, garage space, vehicle, vacation home, parking spot in the city, beach house, washer/dryer, food, land, truck or utility vehicle. Any asset that sits idle without at least 50% utilization will fall under this category as idle capital.
However, the focus on idle capital has been purely from a big business commercial standpoint. This propagates the view that a fancy term such as “Idle Capital” is one for MBA’s and Wall Streeters and beyond the average person. This is simply a myth if anything, the masses hold the largest idle capital asset base on the planet. Just ask Airbnb, uber, or phlatbed. If you’ve ever heard about the new economy or the sharing economy then you’re talking about turning idle capital into revenue sources.
To quote the former Canadian Prime Minister Kim Campbell:
“Businesses need to spend their cash on investments that upgrade their U.S. plants and hire American workers. There is an enormous amount of capital sitting idle that could be a powerful economic stimulus. In the short term, government stimulus policies can be quick responses to downturns, but the government has done a lot to get the economy going and now the private sector needs to act.”
Kim Campbell (@AKimCampbell) served as Canada’s 19th prime minister.
Here are 5 Things you should know about idle capital;
- You have at least ONE Idle Capital Asset at your disposal: Look around you…your car, that extra bedroom, your washer-dryer unit, your parking spot if you live in a metropolitan area, your utility vehicle if you drive an SUV, Tools if you’re the handy type, a deep freezer, a garage, and food if you’re the kind that buys food in bulk and a good chunk of it expires on an almost monthly basis. Take fashion, the new trend in peer to peer fashion lending, gardening, and horticulture to name a few. Peer to peer moving is no different.
- Each Idle Capital Asset can easily become a revenue source: That extra bedroom can pay your mortgage via Airbnb, and it takes minutes to get set up and listed on Airbnb. That vehicle could pull you hundreds of dollars per week via uber or lyft. That utility vehicle could pull you hundreds of dollars per week from pHlatbed. Your garage could do the same, have a washer/dryer? You’ll be surprised at how many people don’t and are willing to shell out for safe access to one. Same with a parking spot in the city, or your beach house. Fashion, gardening, and car-sharing to name a few.
- Idle Capital increases in value over time: As your expenses on your idle assets decrease, turning them into revenue sources only increases their value from your wallets point of view. Pay off the car and watch it pay for its insurance, maintenance, and even the car payment. It pays for itself. The extra bedroom pays your mortgage. There are entire real estate purchases around the Airbnb model where people buy houses simply to list them on Airbnb and watch it pay for itself. This alone can change accounting rules. What was a liability is now an asset…even after depreciation has been fully accounted for.
- It encourages minimalism, which is also good for your wallet: People often confuse ownership and hoarding. That $350 drill bit you bought because you need to put a few pictures up will never see the light of day until your next house relocation. Why not let a tool like bscrappy show you who has a drill bit nearby you can rent it from for $10 for the day? You just saved yourself a couple of hundred dollars, the time, gas, energy, storage space, extra item to worry about, and aggravation. Your idle capital lets you focus on the essentials, encouraging minimalism and eliminating the tendency to “collect stuff”. If you own one, even better, you can rent it out to anyone local who needs one for the day.
- It disrupts traditional business models and encourages trust: U-Haul advertises $19 per day truck rentals but they never mention the $75 initial rental fee, hand truck rental charge, fuel surcharge, mileage surcharge, insurance surcharge, delivery charges, taxes, and other associated charges. Does this encourage trust? That’s the traditional business model for you. Furthermore, the amount paid does not directly benefit the community….it goes into the “market”…some like to call it wall street. So even if your friend works at U-Haul, you best believe they’re not seeing any of that money. On the other hand, imagine you needed to move and a local person helped with the move through pHlatbed. They get paid immediately the move is completed at your agreed price and schedule. Compare the trust to U-Haul that promised $19 per day but you ended up spending $180 to the neighbor who you agreed to spend a flat $100 with and that’s exactly what was paid, in addition to making a new friend. Who knows you may even end up being facebook friends too!
That being said, it’s time everyone understands the meaning of idle capital and it’s applicability on an individual basis.
#phlatbed #gigeconomy #deliveryapp