Yesterday we talked about money and its existence as a medium of exchange and store of value. Today we will talk about how to have more of it. Owning more is two fold. I can have more by earning more or I can have more by spending less of what I have earned.
The key variable in earning is what do you have to trade in exchange for money? If you want to earn more, you must trade away more things, or trade things each of greater value.
Each transaction has a value to the person receiving it. Things they can’t do are more valuable to them. Your education, skill, personal attributes and experience will add value. People are willing to trade more money when the skill they want is in short supply, hard to deliver, or they value highly what the service does.
Once you understand that money is a way to barter effectively and money is what you receive in exchange for your goods and services, it comes clear that people who earn more money provide more value than those who earn less. It has nothing to do with the value of a person, just barter.
You earn money only in exchange for something else. So, it is a smart idea to increase your value.
Provide a more valuable service is the usual way. Skill, enthusiasm, time, experience all factor in. That is where to start, but you cannot get huge money bringing just those things. They are linear. An hour for some money. Want twice as much, work two hours. It is true for both a clerk in a variety store and a heart surgeon. The hourly rates are different, but the fact remains.
Huge, non-linear money arises from repetition. A popular entertainer or athlete may seem to make unreasonable sums for their services. People just see the number and think that is the entire dimension. They don’t really get the barter idea. Money has little to do with the value of a particular skill or presentation. It has to do with scarcity and audience size.
Consider Oprah Winfrey makes $150,000,000 per year. $5,000,000 a week. Is she worth it? Yes, because she can get it.
In one on one situations she might be worth the price of a good lawyer. Maybe $1,000 per hour. But she never works in one on one situations. If 5,000,000 people watch her for an hour five times a week she will be paid the $5,000,000 for the week so long as advertisers believe that an hour of attention from one person (15 minutes of commercials) is worth $0.20. Twenty cents per person per hour doesn’t seem so much.
Actually far cheaper than one to one would be.
From Oprah’s side, the cost is about the same for 5,000,000 people as it is for one, yet her return is much higher. When many people want something that is not consumed or destroyed in delivery to one, it provides great wealth to the purveyors.
Same idea for music, or computer chips, or car parts. The first one is enormously expensive. The second and every one following cost nearly nothing.
When picking a career, look for the ability to replicate your delivered value for a low cost. Sometimes you can do it by creating a business and training employees to deliver the service.
Money, especially a lot of it, has mystical values that confuse us. It is simple. Wealth is just the result of barter that has not completed yet. The people earned the money, and so far have not consumed or given it away. For each of us building wealth is that simple. Earn more than you spend.
Tomorrow we will talk about how to use the ideas of money and other resources to organize the financial part of your life plan. The first step in getting what you want and need, with what you have to get it with.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772