Monday, May 3, 2010

Time is Money by Gary North [abridged]

Time Is Money

by Gary North

A German man I know used to sell vacuum cleaners door to door. The man who trained him in sales once asked a group of trainees if they would pay him the equivalent of $10 if he would show them how to earn 25% more money. They all did. Then he showed them how. "Work 25% longer."

Did he cheat them? No. The salesman never forgot this lesson. For $10, that was cheap tuition.


Most people are not willing to work 25% longer. That would mean a ten-hour work day. But 25% more pay is not the heart of the matter. People who start businesses are more likely to get rich than anyone else. I have never known a business owner who worked an eight-hour day. All of them work at least ten hours, and most work on Saturdays. Yet they make far more than 25% more or even 50% more. If their business survives, they move into the top 20% of income earners.

It is not the fact that they work longer that makes the big difference. It is that they decide to meet the demand of consumers in a unique way – a way worth the consumers’ money.

The barrier to entry is three-fold: (1) his ability to work smarter; (2) his willingness to work longer; (3) his willingness to accept failure. These are major barriers.

In effect, he invests his time in his business. When you’re starting out, that’s the asset you own. You don’t have much money.

There is a young radio announcer in my church. He has already seen how the industry works. "The guys driving the BMWs are the ones who sell air time. The guys behind the microphones drive Honda Civics." He’s got it. The man who can convert air time into money is not easily replaceable.

I told him to spend the next two years studying everything he can about how to sell air time. He is in a good place to learn the basics of selling. He is getting paid to modulate air. He must learn how to sell it. He must therefore give up leisure.

THE HIGH COST OF LEISURE

Leisure was once the major blessing of slave-ownership. Aristotle praised leisure as the basis of the good life. The fact that Athenians were slave-owners made their leisure possible. About a third of Athens’ population were slaves. The good life, in Aristotle’s view, was civil: participation in politics and culture. He had contempt for manual labor and the work of artisans: work fit only for slaves.

For most of man’s history, hard manual labor has been the norm. Men have had to struggle with the earth to eke out a living. Most of their children died before reaching adulthood. The words of Genesis have rung true.

Capitalism changed all this. Population grew, worldwide, as technology improved. Henry Ford figured out that he could run three shifts of 8 hours each and keep his plants open 24 hours a day. The 8 hour day became a reality.

After the mid-19th century, the shorter working day became a goal of American and British workers because it became possible. Output rose. Income per hour worked rose as private capital provided the tools that made workers more productive.

Most folks take their pay in extra leisure. They agree to work for a fixed salary: weekly, monthly, or whatever. Then they negotiate a shorter work week. They don’t ask for more money. They ask for more time off. Extra money is taxable. Extra time off isn’t.

OVERCOMING NATURE

With Edison’s light bulb and air conditioning the ancient rhythms of night and day and the seasons have been overcome in homes and work places. We can choose how much we want to work.

Most people decide that 8 hour work day is sufficient. Then they want paid vacations. They take their marginal income in leisure. The fruits of our labor are paid in units of "free" time.

The energy revolution, more than anything else, has liberated mankind. We employ energy rather than slaves to do our work. Like the slave-owners of Athens, most people prefer leisure to more work. They prefer consumption to investment, not just with their money but with their time.

But there are a handful of people who prefer work to leisure. They would rather be creative than leisurely. They are not lovers of leisure. These people are the engines of creation in civilization. They do what they enjoy doing, probably because they do it better than anyone else. Work is more of a game than a burden. They show off. The goal is winning. The form of reward is money, not gold medals. If it were something else, these people would still compete for it.

If you are in this group, you are unique. You have been given a tremendous advantage. You will not make 25% more when you work 25% more. You will make far more.

Leisure disperses capital. Work compounds it. Therein lies the difference between wealth and poverty.

INVEST IN YOURSELF

Because most people don’t like their work, they don’t like to work. The pioneer likes his work. He chooses his work in such a way that he is happy to invest the extra time in developing his skills and his business.

If you hate your work, you will find it difficult to work the extra hours needed to master the field. This is why a young person would be wise to take why a young person would be wise to take less pay in a job that draws him deeper into it. He will then be willing to invest that extra 25% or more that it takes to be successful in any field. 
If you have above-average intelligence an investment of 1,000 hours will make you competent in any field for which you have innate ability. 5,000 hours will make you a master.

At 2 extra hours a day, 300 days a year, it will take you less than 2 years to become competent. It will take less than a decade for you to become a master. But you must not waver. If you make no extra pay, no matter. You’re paying tuition.

A bachelor’s degree takes most people 5 years to earn. If we think of a work week as 40 hours, that’s an investment of 50 x 40 x 5 = 10,000 hours. Knock off 30% for vacations, where you get a low-paying part-time job: so, 7,000 hours. When you graduate, you are not a master of anything except the ability to tolerate boredom.

The cost of the move from competence (1,000 hours) to mastery (5,000 hours) is what blocks most people from becoming successful. It shouldn’t. The day-to-day experience of applying what you have learned is invaluable.

What most people do not recognize early enough is that they should find employment in a field in which the compounding process produces a sense of personal achievement that lures them back into an ever-greater investment of their time.

THE PROBLEM WITH SCHOOL

Teachers are paid salaries. The educational certification process screens out entrepreneurs. Yes, there are super teachers who are masters. But the inherently bureaucratic nature of formal education does not reward these people. They may be great teachers, but they are not allowed to multiply themselves. They are oddities.

John Taylor Gatto was such a teacher. He won Teacher of the Year for New York City three times. He won it once for the state. Then, after decades of career success, he quit. He realized that he had wasted his time. The educational system is structured to grind down teachers and students alike. He decided that students would do better in business situations or other non-bureaucratic productive environments.  He has a website devoted to alternative education. Read his free, on-line book, The Underground History of American Education.

Teachers do what they are paid to do: baby-sit and give exams. They multiply themselves. But the system militates against the development of skills leading to consumer satisfaction.

Time spent in school is money down the drain for creative students. It is compounding time lost forever.  Schools teach to the best and the brightest a set of skills that are suitable for leisure-seeking wage-earners.  Schools do not teach business skills [especially graduate schools of business, which are staffed by Ph.D.-holding writers of scholarly journal articles].

LEARN HOW TO TELL YOUR STORY

Why don’t more people do this? Because they don’t like marketing.  They are delighted by their hobby, but unskilled in sharing this delight. These people should work on telling their story. The art of salesmanship is the ability to convert a good story into a stream of income.

I recommend joining Toastmasters International if you want to learn public speaking. Or teach Sunday school to teenagers. That will show you what it takes to keep people alert.

CONCLUSION

Time is money. You can’t slow down this outflow of capital. But you can get it to work for you if you can learn how to convert it into money or the things money can buy.

1 comment:

Jharlan said...

so if I work 50% longer will I get 50% more? I need to talk to my boss about this right now!

This is probably a true correlation though.