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.