This is obviously a continuation from my last post,
No one wants to live from day to day, week to week and for the most part you don't have that when you have a salaried job. You regularly receive a lump sum each fortnight or month from which you draw down to pay for life's expenses.
Over time you actually discover it's an illusion though. A former teacher of mine once said that a salary of about 70-80K wasn't all that much. To kids that seemed liked a lot of money though. Now it actually makes a lot more sense. Factor in tax, life expenses, rental, etc... and most of it dries up very quickly.
When you head to business or law school it's the same thing. You regularly deal with millions, billions, and generally gratuitous amounts of money. This doesn't change all that much when you head out into the real world. The real world creates a perception whereby consumption and possession of certain material goods are almost a necessity in order to live and work comfortably within your profession. Ultimately, this means that no matter how much you earn it still doesn't seem like it's enough.
The greatest irony of this is that you only really discover that the the perception of the value of such (gratuitous) goods changes drastically if you are on your own or you are building a company.
I semi-regularly receive offers of business/job opportunities through this blog and other avenues (scams as well as real offers. Thankfully, most of the 'fishy ones' are picked up by SPAM filters). The irony is this. I know that no matter how much money is thrown at a business there is still no guarantee of success and a lot of the time savings can dry up in a very short space of time (especially if it is a 'standard business'. Namely, one that doesn't have a crazy level of growth ('real growth' not anticipated or 'projected growth')).
This is particularly the case if specialist 'consultants' (they can charge you a lot of money for what seems like obvious advice) need to be brought in. The thing I'm seeing is that basically a lot of what we sell one another is 'mumbo jumbo'. Stuff that we generally don't need but ultimately convince one another of in order to make a living and perhaps even allow us to do something we enjoy.
What complicates this further is that no matter how much terminology and theory we throw at something ultimately most people don't value things at the same value. A good example of this is asking random people what the value of a used iPod Classic 160GB is? I remember questioniong the value (200) of it by a salesman. He justfied the store price by stating that people were selling it for 600-700 on eBay. A struggling student would likely value it at around closer to 150. A person in hospitality valued it at 240. The average, knowledeagble community member would perceive (most likely remember) the associated value with the highest mark though.
Shift this back into the workplace and things become even more complicated. Think about the 'perception' of your profession. A short while back I met a sound engineer who made a decent salary (around 80K) but had to work 18 hour days continuously based on his description. His quality of life was ultimately shot and his wage should have obviously been much higher. His perceived value was 80K. His effective value was much lower.
Think about 'perception' once more. Some doctors/specialists who migrate but have the skills to practice but not the money to purchase insurance, re-take certification exams, etc... become taxi drivers in their new country. Their effective value (as a worker) becomes that of a taxi driver, nothing more.
Many skilled professions actually require extended periods of study/training, an apprenticeship of some form, a huge amount of hours put in, or just time trying to market your skills. A good chunk people may end up making a lot of money but most don't. Perceived value is the end salary but actual value is much lower.
Think about 'perception' in IT. In some companies they look down upon you if you work in this particular area. What's interesting is what they use you for. They basically shove more menial tasks downwards into the IT department because, 'nobody else wants to do it'. The perceived value of the worker in question doesn't seem much more different than a labourer.
The irony is that they're often just as well qualified as anybody in the firm in question and the work can often be varied to make you wonder what exactly is the actual value of an average IT worker. I've been trying to do the calculations. Average IT graduate is worth about 55K.
Assuming he works at a SME (any industry not just IT) firm he'll be doing a lot of varied tasks (a lot of firms will tend to pigeon hole you into becoming a specialist). At a lot of service providers and SME firms I've looked at one hour of down time equates to about five figures. If you work in the right firm or you end up really good at your job you end up saving your firm somewhere between 5-7 figures each year. At much larger firms this figure is closer to about 6-8 figures each year.
At a lot of firms we suffer from hardware failure. The standard procedure is to simply purchase new hardware to deal with the problem (it's quicker and technically free despite the possible loss of downtime due to diagnosis and response time). The thing I've found out is that if you are actually able to repair/re-design the hardware itself you can actually save/make a lot (particularly telecommunications and network hardware). This is especially the case if the original design cut corners. Once again savings are similar to the previous point.
In an average firm there may be a perception that IT there is simply to support the function a business. It's almost like a utility now (think electricity, water, gas, etc... That's how low some companies perceieve technology. They perceive it to be a mere cost rather than something that can benefit their business). What a lot of people neglect is how much progress can be made given the use of appropiate technology. Savings/productivity gains are similar to the previous points.
What sort of stops us from realising just exactly what our value is is the siloed nature of the modern business world (specialists rather than generalists a lot of the time) and the fact that various laws, regulations, and so on are designed to help stop us from being potentially exploited.
The only way you actually realise what you're worth is if you work as an individual or start a company.
Go ahead, break down what you actually do in your day. You'll be surprised at how much you may actually be worth.
What you ultimately find out though is that (if you're not lazy) you're probably underpaid. The irony is that if the company were to pay you exactly what you were worth they would go bankrupt. Moreover, you only realistically have a small number of chances/opportunities to demonstrate your true worth. A lot of the time jobs are conducted on the basis of intermittency. Namely, you're there to do something specialised difficult every once in a while, not necessarily all the time.
It would be a really interesting world if we didn't have company structures/businesses. I keep on finding out over and over again that you simply get paid more for more skills as an individual. This is especially the case if there is no artificial barrier between you and the getting the job done. The work mightn't be stable but once you deal with that you have a very different perspective of the world even if it's only a part time job.
If you have some talent, I'd suggest you try starting your own company or work as an individual at some point in your life. The obvious problem will be coming up with an idea which will create money though. Don't worry about it. You will find opportunities along the way as you gain more life experience and understand where value comes from. At that point, start doing the numbers and do a few tests to see whether your business instincts are correct. You may be surprised at what you end up finding out.
Here's are other things I've worked out:
- if you need a massive and complex business plan in order to justify your business's existence (particularly to investors) then you should rethink your business
- if you need to 'spin things' or else have a bloated marketing department then there's likely nothing much special about the product or service that you are selling
- if your business is fairly complex at a small level think about when it will be like when it scales up. Try to remove as many obstacles as you can when you're company is still young to ensure future success if unexpected growth comes your way
- if you narrow yourself to one particular field you can limit your opportunities. In the normal world it can lead to stagnation (no real change in salary/value), specialisation (guaranteed increase in salary/value) though niether is a given. In smaller companies multiple roles may be critical to the survival/profitability of that particular company. The obvious risk is if they leave you're trying to fill in for multiple roles
- a lot of goods and services exist in a one to one relationship. You can only sell it once and you have to maximise the profit on that. Through the use of broadcast style technologies we can achieve one to many relationships allowing us to build substantial wealth easily and quickly. This makes valuation of technology companies much more difficult. However, once you factor in overheards and risk of success versus failure things tend to normalise
- perception means a lot. Think about a pair of Nike runners versus standard supermarket branded ones. There is sometimes very little difference in quality though the price of the Nike runners may be double. The same goes for some of the major fashion labels. They are sometimes produced en-masse in cheap Asian/African countries
- if there are individuals and companies offering the opportunity to engage in solid business ventures, take them. Your perspective on life and lifestyle will change drastically if things turn out successfully
- in reality, there are very few businesses where you can genuinely say the future looks bright for all of eternity. This is the same across every single sector
- make friends with everyone. You'll be surprised at what you can learn and what opportunities you may be able to find
- the meaning of 'market value' largely dissolves into nothingness in the real world. Managing perception accounts a good deal for what you can charge for something
- just like investments the value of a good or service will normalise over time. You need volatility (this can be achieved via any means) to be able to make abnormal profits though
- for companies where goods and services have high overheads 7-8 figures a week/month/year can mean nothing. If the overheads are high enough it's possible that they company may go under in a very short space of time. Find something which doesn't and focus in on that whether it be a primary or side business
- the more you know the better off you'll be if you're willing to take calculated risk, are patient, and perservere. Most of the time things will normalise
- in general, the community perception is that making more with high expenses is more successful than making less with no expenses
- comments from people like Joe Hockey make a lot of sense to those who have had a relatively privileged background but they also go to the core of the matter. There are a lot of impediments in life now. I once recall walking past a begging 'aboriginal'. A white middle-upper class man simply admonished him to get a job. If you've ever worked with people like that or you've ever factored in his background you'll realise that this is almost impossible. Everybody has a go at people who work within the 'cash economy' and do not contribute to the tax base of the country but it's easy to understand a lot of why people do it. There are a lot of impediments in life despite whatever anyone says whether you're working at the top or bottom end of the scale
- throw in some wierdness like strange pay for seemingly unskilled jobs and everything looks bizarre. A good example of this is a nightfill worker (stock stacker) at a supermarket in Australia. He can actually earn a lot more than those in skilled professions. It's not just about skills or knowledge when it comes to earning a high wage
- there are a lot of overqualified people out there (but there are a hell of lot more underqualified people out there are well. I've worked both sides of the equation). If you are lucky someone will give you a chance at a something appropriate to your level but a lot of the time you'll just have to make do
- you may be shocked at how, who, and what makes money and vice-versa (how, who, and what doesn't make money). For instance, something which you can get for free you can sell while some products/services which have had a lot of effort put into them may not get any sales
- there are very few companies that you could genuinely say are 100% technology orientated. Even in companies that are supposedly technology orientated there are still politicial issues that you must deal with
- by using certain mechanisms you can stop resales of your products/services which can force purchase only from known avenues. This is a common strategy in the music industry with MIDI controllers and stops erosion/canibalisation of sales of new product through minimisation of sales of used products
- it's easy to be impressed by people who are simply quoting numbers. Do your research. People commonly quote high growth figures but in reality Most aren't impressive as they seem. They seem even less impressive when you factor in inflation, Quantitive Easing programs, etc... In a lot of cases companies/industries (even many countries if you to think about it) would actually be at a standstill or else going backwards.