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Undestanding OPM as an

Alternative Finance Model

By:Ayobamidele

Kalejaiye

•Understanding OPM as an alternate finance Model

Ayobamidele Kalejaiye ©2016

www.dcubeconsulting.com

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Understanding OPM as an alternate finance Model

Ayobamidele Kalejaiye ©2016

www.dcubeconsulting.com

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INTRODUCTORY TEASERCAVEAT!!!“There is risk in everything that one does, and no one knows where

he will make his landfall, when his enterprise is at its beginning. One man trying to act effectively fails to foresee something and falls into great and grim ruination, but to another man who is acting ineffectively, a god gives fortunes in everything and escape is folly”

THE GREAT POETAND STATEMAN SOLON IN X1TH CENTURY BC.

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Chapter 1

What Is Money?

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Meaning of Money

Money (money supply)—anything that is generally accepted in payment for goods or services or in the repayment of debts; a stock concept. Money supply is the total amount of money available in the economy. (stock)

Wealth—the total collection of pieces of property that serve to store value (stock)

Income—flow of earnings per unit of time (flow)

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Functions of Money Medium of Exchange—promotes economic efficiency by

minimizing the time spent in exchanging goods and services.

Facilitates specialization and division of labor.

A good medium of exchange Must be easily standardized Must be widely accepted Must be divisible Must be easy to carry Must not deteriorate quickly

Unit of Account—used to measure value in the economy: assets, goods, services.

Store of Value—used to save purchasing power; allows intertemporal substitution of income

most liquid of all assets but High inflation diminishes its “store of value” function.

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Evolution of the Payments System Commodity Money: Gold, Silver, other precious

metals, certain stones, Cigarettes, etc. Representative money that is backed 100 % by

precious metals (banknotes) Fiat Money: No consumption or investment use:

intrinsically useless pieces of paper. Checks Electronic Payments: EFTs, wire trasfers. E-money: Debit cards (POS), etc.

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Definitions of Money From most liquid (narrow) to the least

liquid (broad), M0, M1, M2, M2Y, M3.. M0 = paper currency and coins M1 = M0+ Checking Accounts+ Traveler

Checks M2 = M1 + Savings Accounts M2Y = M2 + Forex Accounts

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ILLUSTRATION OF MONETARY AGGREGRATE

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Chapter 2

History of Money?

Developmental phases of of Money

Best Forms of Money

Historically, gold & silver coins and bars

Warning on Love of Money

The love of money is a root of all kinds of evil...

-1 Tim. 6:10 NIV

[Note: money is not evil, just the love of it.]

The Roman Denarius

COLLAPSE OF ROMAN MONEY SYSTEM

Collapse of the Roman Silver Monetary System, measured by silver content, 10 BC – 290 AD

11th Century China – Flying Money 11th Century China – Flying Money

Called it “flying money” because it could just fly from your hands

Banks had switched to the use of iron coinage due to copper shortage

These iron coins became over-issued and fell in value

A bank in the Szechuan province issued paper money in exchange for the iron coins

Initially, the paper money was fine, because it was exchangeable for gold, silver, or silk

Eventually, inflation began totake hold, as China was fundingan ongoing war with the Mongols,which it eventually lost.

In the end, the best families inthe empire were ruined, a new set of men came into the controlof public affairs, and the countrybecame the scene of horrific warfare and confusion.

Money In France John Law was the first man to introduce paper

money to France in the early 18th Century

Louis XIV died and left 3 billionlivres of debt to his son, Louis XV

Louis XV required that all taxes be paid in paper money, which was initially backed by coinage

After high inflation, people demanded coinage, and the currency collapsed.

John Law became the most hated man in France and was forced to flee to Italy.

Money in Post War Germany Post-World War I Weimar Germany was one of

the greatest periods of hyperinflation that ever existed.

The only way the Germans could pay the war reparations required by the Treaty of Versailles was by running the printing press.

Thousands of people lost their life savings

Many starved to death

1 billion mark, 1923

Inflation got so bad in this period that German citizens were literally using stacks of marks to heat their furnaces.

Evolution Money

1. Goldsmiths store gold and become banks

2. Banks lend gold that’s theirs

3. Banks lend others’ gold

4. Banks lend with no gold backing (fractional reserve concept)

5. Money is debt; no gold backing

Clever Bankers

“Permit me to issue and control the money of a nation, and I care not who

makes its laws.

- Mayer Amshel Rothchild, Banker, 1744-1812

What determines something’s value?

When a sale is made, who benefits and who loses, the buyer or the seller?

Can wealth (value) be created simply through trade?

How much profit, in your opinion, is too much?

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Some Init ial Questions on Value

Personal Computer (think pre-1970)

Good Risk/Idea or Bad Risk/Idea?

Perceived UpsidesPeople with computing needs have access to machines: Accounting? Engineering?

Perceived DownsidesPeople need programming skills to use. Power consumption. Heat.

What They Never ConsideredInternet. Miniaturization. Social Networks. Web Commerce. eBay. email. iPhone.

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Why do we work so hard or so smart?

• for money• for fun• for legacy• for prestige• Others

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$$$$ Money !!!!!

A stack of $100 bills, ½ inch high.

100 packets of $10,000.

$100 million fits on a standard pallet.

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Chapter 3

OPM –Other Peoples’ Money

The surest path to success is Other People’s MoneyMonday, February 1, 2016Luke Johnson

OPM

MOST of those who become very rich share a particular secret aboutabout the accumulation of wealth: they use OPM. This stands for Other People’s Money, of course, and is a far more important tool than brilliant inventiveness, or hard work, or almost any of the other attributes that entrepreneurs are expected to possess.In 1914, the US Supreme Court justice Louis Brandeis wrote in In 1914, the US Supreme Court justice Louis Brandeis wrote in his book Other People’s Money and How the Bankers Use It that OPM is even better than having a goose that lays golden eggs, because it amounts to “taking the golden eggs laid by somebody else’s goose”.

There are certain lines of business that are built on OPM. There are certain lines of business that are built on OPM. Property is perhaps the most obvious, and is still Property is perhaps the most obvious, and is still responsible for generating more fortunes than any other responsible for generating more fortunes than any other trade. It all boils down to the ability to borrow large trade. It all boils down to the ability to borrow large amounts of OPM — mainly bank debt — secured against land amounts of OPM — mainly bank debt — secured against land and buildings. In property, it is more important to know and buildings. In property, it is more important to know how to coax money out of lenders than to understand how how to coax money out of lenders than to understand how to find sites, or design structures, or obtain planning to find sites, or design structures, or obtain planning permission, or construct buildings. It is all about leverage. permission, or construct buildings. It is all about leverage. As Archimedes said: “Give me a lever long enough and a As Archimedes said: “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.”fulcrum on which to place it, and I shall move the world.”

Another ingenious way of using OPM is to franchise or license one’s brand. Sir Richard Branson does this prolifically and very profitably with Virgin. Many of the businesses that appear to be his are in fact mostly owned by others — Virgin Active, Virgin Mobile, Virgin Australia and Virgin Money, for example. Branson charges fees for lending them the Virgin name.

Leverage you don’t know…banks and funding of assetsmortgage FMBN mutual fundsbanks and forex mtn ,glo using OPMFacebookInsurance companies and claimsPre paid mentality is OPMUber experience etc..

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Not all Debt is bad… OPM challenges the dark connotation on

debt: debt can be good debt, but for debt to work for you, a good and functional plan is required. The most important thing is research and a reliable team and advisory structure.

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Risk.. Leverage… earn….

Risk as a socio-economics phenomenon means different things to different individuals in different circumstances.

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THE END…Outro (CAVEAT!!!)“There is risk in everything that one does, and no one

knows where he will make his landfall, when his enterprise is at its beginning. One man trying to act effectively fails to foresee something and falls into great and grim ruination, but to another man who is acting ineffectively, a god gives fortunes in everything and escape is folly”

THE GREAT POETAND STATEMAN SOLON IN X1TH CENTURY BC.

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Understanding OPM as an alternate finance ModelAyobamidele Kalejaiye ©2016www.dcubeconsulting.com

THE END!!!! THANK YOU!!!

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