The Fix

The Rule of Three by Three

Today we take a quick linguistic and historical detour to learn a bit more about how to make a small pile of money into a bigger pile of money by using the “Rule of Three By Three”–a rule that has been employed by multiple generations of Chinese in search of opportunity or, perhaps better stated, survival in the face of crisis. There are probably other ethnic groups utilizing a similar method of value creation, but I learned the fundamentals of this rule while living and working on the frontiers of China. You may find the origin and applications of the rule to be the best three and a half minute financial lesson you will ever have. Even if you are dedicated to “art for art’s sake”, if you can’t eat, you can’t create.

It is instructive that the Chinese characters for “business” are a combination of the words for “buy” and “sell” which are themselves actually the same characters in duplicate placed alongside each other but with the addition of the symbol for “dirt” above “buy”. Moreover, another way to write “business” in Chinese is a combination of the characters for “life” and “meaning”. Think about this, I just suggested that etymologically the life of business is the business of life and there is a linguistic road map of how to get to your destination–a road map of the fabled Chinese search for “the Golden Mountain” using a sure-fire method of value-creation even under conditions of hardship that should be useful for us all.

Before we get to the history part of today’s lesson, let’s consider the notion of “value”. However meaningful it may be to life, it is difficult to organize your thoughts about value (try it); it’s easier to be very concrete about money. (Indeed, I suggest that the value/money conundrum gets to the very heart of the quality vs. quantity distinction that continues to challenge our sensibilities). You can think of money as the tangible side of the more subjective, and therefore elusive, notion of value. In this sense, if you create value, it is worth money, and vice versa. In symbolic and practical terms then, value = money. To think of value in quantitative terms provides the necessary “discipline of equivalences”that allows us to exist in society. Money focuses the mind. After you have developed the cash flow to survive, or even to thrive, you can “afford” to consider whether the equation was a good trade-off. Where we place the fulcrum of balance between value and money in our search for either during the day is a private matter that each of us must weigh in our souls at night.

Basically, there are three things you can do with (value and) money: (1) create it; (2) exchange it; or (3) store it. A useful way to think about these three aspects of (value and) money is the “Rule of Three by Three.” In mathematical terms, 3 x 3 = 9 or three squared–this is a power law. In broad economic, or even philosophical, terms, a power law is a way to leverage values or, in practical terms, a way “to get more bang for your buck.”

Let us then consider how this powerful rule came into being so you may determine what parts of the formulation are relevant to you given where you are in your cycle of life as student, starving artist, head of household or, perhaps, some combination of these roles. Many of the underlying notions of this power law have been instinctively used by about 1.5 billion people on the planet; but only a successful few have reduced it to an easy to remember rule to follow deliberately and consistently. I will give it to you now.

One of the most valuable lessons that I ever learned in my decades of living and working with the Chinese diaspora throughout Asia was their abiding application of economic leverage, as (i) a family unit or (ii) alternative social network, for survival amidst chaos and uncertainty. I have distilled what was shared with me by multiple generations of successful entrepreneurs to a simple formulation for survival that I now call the “Rule of Three by Three.” which means “work, gold, and land–three times over.” What I now teach at our Nightschool for Entrepreneurs, as a “quick-and-dirty” framing exercise, is that in order to survive in society, you take a thing of value and divide it into its three functional equivalents.

To the Chinese, Work related to what one does best in life. Gold meant any asset you could carry on your person or put under your mattress. Land was anything you could not carry, or to be more historically to the point, any fixed asset that you could “mark with your own water” (or to be even more direct as Fuzz folks tend to be, to their credit, anything that you could piss on). In time, the triplet of “work/gold/land,” became the practical proxy for how capital is (i) created, (ii) exchanged, or (iii) held. And, for safety and opportunity among those living on the frontier, one learned to perform these three value functions “three times over” (that is, (i) HERE, (ii) NOT-HERE, and (iii) BY CHANCE) by yourself first and foremost, but if that were not possible or practicable, then with your “extended family and friends.” That is why you first hold your sons and daughters close to your bosom, but then send them away to grow and prosper but always as part of your intimate social network–“here” and “not here”, by “trial-and-error” as chance will have it. Without family or friends, chance has no leverage.

Through trial and error, fault and default, the exhilarating or bitter experience of your changing fortunes on the frontier evolved to become the Rule of Three by Three. “Work/gold/land” are tangible proxies for how capital is (i) created [work], (ii) exchanged [gold], and (iii) held [land]. And to do it “three times over” (i.e. here, not here, and secretly) meant (i) locally, (ii) globally (elsewhere for diversification), and (iii) seamlessly (to set up the framework for connectivity in an ever-changing and expanding network that sits precariously by definition at the edge of chaos.) Again, the Chinese say, sometimes you have to “eat bitter” before the good comes.

What about Fuzz artists and fans who are just getting started in life? To be sure, you may possess few assets (portable or fixed) while living on the frontier. Nonetheless, you do have your passion and your brains, to do the thing you do best. This is the “work” part of the work/gold/land value triplet. In capital formation, this is often referred to as “sweat equity.”
Your sweat equity will provide the small but powerful perch that you can leverage “to tilt the earth” to your advantage. Trust me on this. Struggling artists must often eat bitter while developing their calling. But they, or better, I should say we too have more than a zero base of social capital to provide that critical starting point to deploy our own Rule of Three By Three on the frontier…where we all choose to live for a reason.