The goose and the golden egg. Lessons for Investors & Entrepreneurs

Have you ever heard about Aesop’s tales of the Goose and the Golden Egg?

Most certainly, Aesop’s name rings a bell. His tales are commonly known through their simplified version for kids. Nevertheless, “most of those children’s editions of Aesop are carefully selected and so heavily rewritten and artificially expanded that they have only a tenuous connection with Aesop”.

His best fables were full of wit and jest and were largely quoted by writers like Aristophanes and philosophers like Plato and Aristotle. Many of these fables had morals and were used by orators in speeches.

Needless to say, I heard about one of Aesop’s tales – the Goose and the Golden Egg – in such manners while reading the book by Stephen Covey: 7 Habits of Highly Effective People.  While introducing his 7 habits, he states the principle he calls “P/PC Balance.“

To explain it, he uses Aesop’s fable of the Goose and the Golden Egg. The story follows these lines:

One day, a poor farmer discovers in the nest of his goose a glittering golden egg. Day after day, he finds a new golden egg in the nest. He becomes fabulously wealthy, but with his increasing wealth comes greed and impatience. Unable to wait, he decides to kill the goose and get the golden eggs all at once. But when he opens the goose, he finds it empty. The farmer has so destroyed the goose that produced the golden eggs.

Covey states that this fable entails a natural law, a principle, and the basic definition of effectiveness.

True effectiveness is a function of 2 things:

• what is produced (“P”; the golden eggs) and
• the producing assets (“PC”; the goose).

Covey states that if your life focuses on the golden egg and neglects the goose, you will soon be without the asset that produces the golden egg. On the other hand, if you only take care of the goose without aiming toward the golden egg, you soon won’t have the wherewithal to feed yourself or the goose. Effectiveness lies in the balance between Production (the golden egg) and Production Capacity (the goose).

Covey’s analysis goes into financial examples:

A) in our quest for short-term results and returns, we often ruin our assets. How often do people confuse the principal with interest? If you erode the principal (your investments), you decrease the power to produce interest or passive income. The capital becomes smaller and smaller until it no longer supplies even basic needs.

B) Our most important financial asset is our capacity to earn. If we don’t continually invest in improving it (PC), we limit our options; we limit our capacity to produce golden eggs.

Bottom line

Coveys definitely enrich and details the moral of this Aesop’s tale of the goose and the golden egg is extremely relevant and in line with my Financial Approach of Sweating your Assets:

• Invest in yourself and improve your earning capacity (increase your production capacity); you are your first Goose;
• Design a system that develops several income streams (produce additional geese);
• Rely on more and more golden eggs;
• Make sure you don’t over-sweat your assets; otherwise, you kill your goose.

Until next time, Sweat Your Assets.

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