Requirements for Your Job

Make sure your job fits these requirements, otherwise you'll spend your whole life labouring away for nothing except a paycheque:

- It's something you like to do.

- It's something that'll create lasting value (and preferably, increasing value).

- It's something that'll start growing eventually, thus precluding you from always working.

- You'll get more and more income from it over time, even as the hours you put in head towards zero.

- It'll make the world a better place for at least one person other than yourself.

The One Winner in Today's Financial Crisis

The environment.

Yes! Have you ever thought about it? The ultimate winner in this financial crisis is the environment - but that also means that we are all winners. Sure, many of you have lots your pants and shirts and underwear - but for the majority of the people on this Earth, nothing has changed. That majority of people are still struggling for survival today as they were during the height of the boom. You may point out that there are people, like recyclers in China, who lost their life savings because of the financial crisis - but is economic prosperity really worth decimation of the Earth's environment?

The biggest polluters on this Earth are manufacturing, mining and shipping (cargo and people), and it follows that with a decline in the economy, these activities are reduced to a fraction of what they were before. What does that mean for pollution? Yes, it also means that pollution has been reduced by an equivalent amount.

As manufacturers reduce output, mining operations scale down, exporters export less (people turning to local products), consumers stop going out as much and people start tightening their belts - the environment gets a little more room to breathe. And so do we.

What's Your Labor Earning You?

Today I was at a place in Taipei called "Ximen Ding," basically "West Gate Square," and I stopped to watch one of the many street performers. The guy I was interested in played the Erhu accompanied by music... as I stood there watching with the crowd that had also gathered to watch, I noticed that every couple of minutes, someone was dropping a donation into his box (he was blind). Then, I saw that across the ways was another street performer who was doing traditional Chinese paper cutting of people's silhouettes (he also had a crowd). Both of these street performers only asked for donations - it was up to you what you wanted to donate. The person cutting the silhouettes left it up to the person whose silhouette was being cut to decide the amount donated. The person playing the Erhu didn't even explicity ask for donations.

Now, why am I talking about street performers and their donations? Well, there was a huge difference between these two street performers, economically speaking. The Erhu player was able to perform his services (music) for a large group of people, who could stand there and enjoy the music together, and they could all donate at the same time. The Silhouette Man, however, made it so that the expectation of his "customers" was that they must get their silhouette cut before even considering making a donation. In actuality, however, there were equally large crowds gathered around both men watching (and enjoying) what they were witnessing. The people watching the Erhu took away the music and the sight of seeing him play. The people watching Silhouette Man took away the sight of seeing his skilled hands cut the paper... but only one person at a time received their own unique silhouette paper cutting.

I talked to my wife, Sandy, and she boiled it down to this: the Erhu guy was offering his services to many people all at once, whereas the Silhouette Man offered his services to only one person at a time. I agree with this, and that is the thing to think about here. The labor that you do - is it being offered to one person at a time, or is it being offered to a multitude? If your answer is the former, you'll be stuck making low wages. If your answer is the latter, you'll have the chance to make great wages.

Now, you probably think I'm simplifying this too much. After all, the nature of music is that many people can enjoy it at one time (a service), and the nature of paper cutting (a product) is that you trade your money for the item. But, let me first argue that the paper cutter could have not only asked for a donation for his cutting of your silhouette - but he could have asked for donations from people who enjoyed watching him (make a sign, perhaps?). He could have also simultaneously cut out several sheets of a famous Taiwanese landscape (or any other landscape) and had people watch him, and at the end sold the product to whoever would like one. Of course, maybe more people go for their own "personal" cutting.

Beyond these two street performers, however, let's talk about what you do for a living. Do you just serve one person a time, make one thing at a time? If so, that blows. Let's look at making a tangible item first. Let's say you hand craft a wooden chair... you are using your own labor to make that one hand crafted chair. That's nothing to laugh at, but you only get the money for that one chair, and maybe it took you an entire day to make. Even if it was expensive, you still pocket a limited amount of money. The money's all yours, however. On the other hand, let's say you come up with a popular design for a chair and you have it manufactured and sold to the multitudes. You've labored alright, but your labor was put into the design (and not the crafting), which can be disseminated amongst tens of thousands, if not millions of chairs. You'll get a cut from each of the chairs sold, and although you won't pocket as much per chair, the numbers would just be overwhelming. (Of course, there will be other people who get a part of the sale price for actually making the chair.)

Presently, let's look at performing a service. Performing services is a bit more complicated than making an item, because particular services MUST be performed one-to-one, whereas certain services can be performed for many at a time. Look at music for example - it's practically limitless as to how many people can watch you at once (think TV). Teaching is a good example, too - university lecturers have hundreds of students listening all at once. Other services, however, must be performed one-to-one; such as hair cutting, massage, cooking your food, etc. The only way that these one-to-one services can be expanded beyond your physical capacity as one person with one body is if you train others to do it and you are the proprietor (But in this case, you're not actually using your own labor - you're just taking a cut of the labor of others and being rewarded for the risk you took in entrepreneurship.).

Think about this as you go about your days... examples are everywhere.

Everyday is Labor

Yes, that's right - everyday is labor! You're either going to have to get out there and labor away your days, or you're going to have to get other people to do it for you. There are only two choices.

Of course, I would choose the second choice anyday. And that's how a business works. Sure, the workers are paid their share of the profits the company generates, but ultimately, it is the owners who are making money off the backs of the workers. Of course, this doesn't stop you from being the owner of a corporation (through stocks) and at the same time laboring away at one.

It's like this: If you can generate $50/hour through whatever economic activity it is that you're doing, a company would pay you maybe $20 to do the job. They'd take the rest of the $30 and do other stuff with it; such as marketing, R&D, and profits, etc.

Now, the thing is that if you're a worker and have to work all the time in order to support your lifestyle (however grand or sparse you choose it to be... YOU choose...), you're going to have to be using your own body and mind to do that labor every day. In order to support all the material things that are your life - you're going to have to keep working. From that, you'll have to save a portion (parsimony) to support yourself when you're not working or can't work (vacation, retirement, etc.). BUT, what if you get injured or can't work for some reason? Or what if you just don't want to damn work? Too bad! You've got to work because that's the path you've chosen.

You can choose another path, however, but you've got to do it early! You can choose to be the owner of an entity that continues to generate income for you even when you're sitting at home. What is that entity? Yes, it is a corporation or a business. Of course, there are some businesses that require you to work, and virtually all businesses require you to work at least at the beginning... but you better be aiming for a business where the reigns can be handed over to someone else AND still give you a nice monthly income (if you want to be truly free). In this way, you can still pass your days working on the business (which, in the context of the universe is probably insignificant... unless you're doing something that will change the world), or you can choose to take vacation at any time, OR you can choose not to work altogether! Of course, you're going to have to create this business for yourself or take one over somehow.

Freedom, Williams, Freedom

I've always remember the name of this CD album cover... Freedom, Williams, Freedom... and I think not because I remember the music (I don't), but because of the powerful message. Sure, he could've meant freedom from any number of things, but because I live in this money-driven society that I do, I choose to consider it "financial freedom." As you may have figured out already, the only type of freedom that we have in this world (society) that we choose to live in is financial freedom. Sure, it's great to have political freedom, but what pattern emerges? People are most always happier with some sort of financial stability than they are with liberty and political freedom. If you're poor in a politically free country, your life would probably be pretty crappy. If you're rich in a politically unfree country, you can be sure that things will be pretty good. Like Singapore!

Anyway, the point of today's post is:

"The poor think of survival, the middle class think of comfort, and the rich think of freedom."

When I say "rich," I don't mean someone who has lots of money - I mean rich in the sense of a rich and wonderful life, rich and wonderful thinking. Poor means poor, of course, and middle class is talking about the amount of money they make. However, the key to this is that anyone (living in a developed country) can move up to thinking "rich" and living a life of freedom.

What I talk about today only applies to developed countries... talk about underdeveloped countries is a whole different topic. Anyway, the poor just think about paying their bills, putting food on the table and surviving day to day. And that's all that they ever do, because they don't even know that they have options to live a better life. If they come into a little money, they just "treat" themselves and start enjoying material objects... rather than invest it in some furthering education or some asset of value. It's a mindset. There are a few who move out, however.

As for the middle class - I'm sure most of you out there are middle class - they just think of comfort. They're always asking themselves how they can make their life more "comfortable." Maybe if you work longer hours, you can afford a nicer house... maybe if you kiss more ass, you can take longer vacations? Is that what comfort is? Killing yourself most of the time, so that you can enjoy a very small portion of your life? (Y'know, sleeping doesn't count as enjoying your life, because it's partly done for the sake of your crappy job - AND you don't know what the heck's going on while you're sleeping.)

The rich, however, all they can think of is freedom. And yes, that's a good thing. Sure, they might seem middle class at some point in their lives (and might even start out as poor), but the difference is in their thinking. They're always thinking about what they can do today to make tomorrow free. The key is free. Will you spend the money you have on a vacation now, or will you sock it away and enjoy 10x the reward in a couple years? I think the answer is obvious for the rich. Are you going to buy a fancy Beemer, or are you going to get a nice used Chevy and put the difference away for a rainy day? And by rainy day, I mean freedom.

So go ahead, the choice is yours.

Young Folk

I look at young people walking around these days, and they look so bright, so energetic and so full of ambition. Well, at least some of them are - the others are just having fun while they can. Anyway, the sad thing is that after these young people have enjoyed their lives and finished university, they'll go onto the sad world of the workplace. At their dungeons of employment, they'll be forced to do menial tasks and to climb rungs of some metaphorical ladder. This will be the case for most of these people, and some will enjoy their climb, while others won't. It's all the same, however, as the outcome is the same: getting old, having children and having them repeat the vicious cycle. Even the ones who enjoy it don't really enjoy it - they're chasing phantoms, they're chasing material wealth which really brings them nothing in the end. Sure, actually betting with money at the casino makes it more exciting, but what does everyone know? Yes, that most people come out losers! It's no different with life.

The fact is that you can't go into a casino expecting to come out a winner. Even though there are those lucky individuals and those that really know how to play the system; most people come out losers. You shouldn't think to yourself that you can overcome such huge odds, because c'mon, they're HUGE odds! Obviously, some do come through, but that is a very, very, very, very, very (I can't emphasize it enough) small percentage. Even the godfather of economics nags us over and over that people always beleive their luck and fortune and skill to be better than others. C'mon, stop fooling yourself! The sooner you understand that you aren't lucky, the sooner you can actually escape the casino.

The trick is not to even go into the casino in the first place! Life is about living, right? And what is living? Living is lifestyle, and if you can have the lifestyle you want, there's nothing more to ask for. Teachers and professors have got it figured out, I think. They are people that understand how to play the games at the casino, can play the games themselves (and might be good, or might have played the games in the past), but have figured out that it's not worth it to gamble. Why not just teach others the rules of the game, understand how to play, and get people's chips? This way, you can have a great lifestyle, earning enough to keep you well fed and keep life relaxed and a little interesting... but no need to kill yourself at the tables trying to make the next buck or it the jackpot.

Other people forgo the casino altogether and have figured out how to live outside the casino, while everyone else tries to make their way amongst the tables and slot machines. Maybe they'll put up a slot machine or two in the casino of life and live off the money that generates. Or maybe they'll rent out a spot in the casino where other people can put up a table and hire workers to work the tables...

Income Units

I bet you've heard the term "economic unit," which basically means each one of you! Yes, you are an economic unit capable of producing economic output. Of course, nobody wants to be called that, because the world and our lives are about much more than just mere economic capability. However, you do know that practically whatever you do is input into the economy, right? You take the bus in the morning: you've just paid for part of the bus driver's wages and the wages of the multitude of people it takes to service the bus and the roads it plies. No small feat! You buy breakfast and coffee - same thing. You read a newspaper, use your computer, etc. This is all economic input. Even putting your savings into the bank is economic input! It's inescapable!

Anyway, let's talk about income units today, rather than economic units. Economic units normally focuses on the amount of output that the "unit" can contribute to the overall economy. I want to discuss what is relevant to the individual: which is "income units." You yourself are an income unit, eh? In fact, for most people they only have one income unit, which is theirselves. Well, most people, but I'm sure that most middle-class people have a few other income units - but still, their own self is most likely the major income unit, with the other income units just making up a small percentage of total income.

So, what is an income unit? An income unit is something that is capable of earning money (the equivalent of labor) all on its own. It gives its master (hopefully, you) some money every month, week, year, etc. You yourself are an income unit, because you go out there all on your own and earn and income through some type of activity. Now, for many people, that's where it ends. One income unit, and only one. Commonly, however, there is the stock or share income unit. You own a couple shares in a publicly traded company and that is an income unit for you. Of course, it's still people down there ultimately generating the income, but they're generating for both themselves and for the shareholders. If you have a great stock, it'll go up in value all the time (capital gains) and pay you a dividend (a portion of the company's profits). There you go: income unit.

But, for the more ambitious (if you don't trade stocks or futures or options full time), there are other types of income units available. You have a home, right? Sure, you spend tons of money on it every month in the form of mortgage, maintenance, upkeep... but if you were to own a home that you rented out - ba-da-bing, ba-da-boom - income unit. Ultimately, it is people paying you that income, out of their own wages, but who cares?! It's income and money in your pocket for something that they need. Real estate is a powerful income unit, because like stocks, they can go up in price, pay you dividends... but the most powerful thing about real estate is that you can borrow maybe 80% of the total cost. Of course, the lender (the bank, usually) will make a percentage profit in the form of the mortgage, but everything above that, you keep... even though you only paid 20%. Over time, that gets paid off by the renters, too... so you own more and more of the real estate (equity). AND any increase in value is all yours! Decrease is also yours, too, just to let you know.

More income units? Well, you can own a van and rent it out to a delivery company. As long as you've got your books in order and are charging appropriate rent, you've got income from that investment. How about a burger joint? If you run it correctly and have taken yourself out of the management picture, that equals income unit. My neighbor's friend has three "Harvey's" burger joints in Toronto somewhere, and supposedly, that guy spends about an hour each day at each of his locations and collects about $300 per unit, per day net profit. Not bad income units!

More income unit ideas: vending machines, coin laundries, convenience store, etc. Of course, owning stock in a publicly traded company amounts to the same as owning your own business (and is a heck of a lot easier), but you only own a part of the business. But anyway, that's not a bad way to go, either.