Acting is not an important job in the scheme of things. Plumbing is. – Spencer Tracy
It is not always clear what kind of relationship exists between the work one does and what one is paid.
I have a book upstairs about the wealth distribution in the UK and while I haven’t read it in a while, some of the points it makes are probably still relevant.
For example, a quarter of the fortunes made in this country are in property and another quarter in finance.
The change from a nationalised set of industries to deregulation and free enterprise created a host of well paid jobs – what the book calls “fat cat” jobs.
These are the ones heading major enterprises, industries, institutions that came out of public ownership and went into the private sector.
The way one decides how to pay people that run these organisations is by hiring advisers who look at what other organisations pay and suggest an equivalent salary – something that results in a ratcheting up of salaries.
Then there are the people in the professions – what the book calls the “professional poor”.
They’re several rungs down on the wealth scale.
Now, while we’d all like to be fat cats one needs to be careful about labels.
Arguably, one of the most important inventions of modern times is the invention of the joint stock company.
This is where people who don’t know each other put in money for a share in an enterprise and of its profits.
This replaced entrenched interests, family concerns and cartels with an institution – something that was its own legal entity and that was served by its Board of Directors.
So, in that situation you would expect them to be competent and pay them accordingly.
But say you aren’t at that level yet – you don’t have a business that’s listed on an exchange – you’re just starting out with something new.
What do you need to have at the core of your business?
Well, the single best thing is to have a monopoly – be in a business where the barriers to entry are so high that you have no competition.
If you can’t swing that then make sure that at the core of your business you fix something that’s broken.
Let me explain.
Lots of people will help you make money. Play the markets. Find you investments. Save you cash. Get you compensation.
Few, however, really fix problems.
Take the job of a plumber, for example.
Most of the time you don’t really think about your plumbing at home – it works and there is hot water and something to drink.
But what happens when something goes wrong?
You’re willing to pay almost anything to get it fixed.
And that’s the point – you’re always more willing to pay money to fix a broken thing than pay money to avoid costs or make more money.
We’re very cautious – we don’t like to spend money if we’re not sure and we’re worried about losing money betting on the wrong thing.
In fact, we’re much more likely to hate the idea of losing money than the idea of making lots from a bet.
But when something is wrong – we’re a customer.
People look for you not because you’re nice or because you can help them – but because you can fix a smelly, dirty problem for them.
That’s the second best driver to bring in business – after being the only game in town.
Imagine listening to two pitches.
One says here’s a great way for you to make loads of money – you just need to hire me and I will do amazing things for you.
The other says you’ve got a smelly, dirty, messy problem in your house and your carpets are going mouldy – and I can fix that for you.
Which one are you going to hire first?