Wealth creation and time are strange bedfellows. In fact, wealth creation happens when your time is decoupled from income generation. Yet, most workers are accustomed to getting paid by-the-hour. The “by-the-hour” mindset is fundamentally antithetical to wealth creation.
I give you fair warning. I want to challenge your thinking on a host issues today. You’re going to pissed by the time you finished reading this article. However, it is my sincere hope that you reach a level of “pissitivity” that moves you to think differently about your time and your money. When 45 said the system is “rigged,” he wasn’t kidding. It’s rigged against you and your bank account.
The Time-for-Money Paradox
A few years ago, I ran into to a couple of high school students at a local McDonald’s. The two students were filling out job applications to work there. I invited the young men to my table for a conversation about what they were doing.
I asked the two students a seemingly simple question: “Do you want a job or income?”
The senior simply said, “I want a job.”
I responded, “That’s an interesting answer, I’ll come back to your reason in a moment.”
His sophomore friend sensed that maybe it wasn’t the best answer, so he responded, “I want an income.”
They both had my attention by their unique responses and the fact that they both seemed to be in the same station of life.
I asked the sophomore, “Why did you say you wanted an income?”
His response was selfless, “I just want to help my mom out. If I had an income, I could do that.”
I asked the senior, “Why do you want a job?”
He replied, “Because gas is high! And, I need money for that car our there,” pointing to his white sedan in the parking lot.
I nodded in agreement. At the time, gas prices were on the rise and it was creating an economic cascade of rising prices on everything for everybody.
This became a teaching moment. Before I get into the details of what came next, I must add a disclaimer: I’m not against work, hourly wages, or getting a job. I’ve done all of those things and the experiences have taught me tremendously. It’s out of those experiences that I share these deeper insights with you. Now, back to our young McDonald’s prospective hires.
I can’t remember what the starting hourly wage was for McDonald’s back then; however, I’m confident it wasn’t more than $9.00/hourly. I asked my young Senior friend, if he really wanted to exchange his time for money at the rate that McDonald’s was going pay him. He was puzzled by the question and said that he thought so.
So I pushed him on his answer and I asked, “If the price of gas continues to go up, do you think McDonald’s is going to give you raise to compensate for the inflation?”
He thought for moment and said, “Probably not.”
“So why exchange your time for money…if you can’t negotiate the rate of exchange to be in your favor?”
I could tell that this was a conversation that these young men had never been exposed to considering…yet they were engaged and attentive.
At that season of my life, I shared with them that I exchanged my talents for money, but I had such a high rate-of-return for my talents, that I didn’t worry about money and never seemed to have enough time. That made them curious…
I asked them, “How many hours do you have in a day?”
They responded in unison, “24!”
“Well, how many hours do you think I have in a day?”
A little less sure, they responded again, “24!?”
I let them off the hook and told them that we all have 24 hours in a day, so why are the exchange rates for our time so wildly different? Is that right? Is that fair?
The $50,000 Question
With their applications in hand, the two young students were no longer trying to complete them. They were intrigued by an alien conversation with a man that looked like he could be their older brother. At that moment, I wanted to really see where their heads were, so I asked them “the $50,000 question.”
“What could you do today, based on everything you know and everything you’ve learned, that you could make $50,000 before the end of the year?”
The senior without hesitation, “I don’t know.”
The sophomore was bit more studied and surprised me with his answer, “An inheritance!”
With a stunned look on my face, I asked, “Are you expecting someone to die?”
He smiled and said, “No.”
With a sigh of relief and a smile, I asked the $50,000 question again. Again, they had no insightful answers.
I was a little pissed at that moment. Not at my young friends, but at a system that after thirteen years of education, the best idea they could come up with between the two of them was to get a job at McDonald’s to pay for gas. There’s nothing wrong with working at McDonald’s. McDonald’s does more in a week to educate and develop young minds that most states do in thirteen years. Yet, at the same time, we have Californian fourth graders making apps for iPad and fourth graders in private academies in Dallas learning to code and build websites from scratch. I’ve traveled to schools in Florida where students have built all of the applications that run the school district. These experiences alone guarantees these young minds that they will have careers that provide more than $50,000/annually because their educational journeys included creative experiences that built compelling personal narratives–a brand story. My two lads were only offered a journey that led them to McDonald’s. To my mind, that’s criminal negligence on many levels.
”the more vital the human role is to producing a desired result, the less likely it is going to be paid by the hourCam EvansCreative Executive
The Gig Economy and Hourly-Mindset
If you have a “job” or “career” today, you have most likely never heard of the Gig Economy. You have probably seen contractors, vendors, and temporary workers in your place of business. Allow me to introduce you to a major shift in the nature of work. With the advances of workforce automation, baby boomers holding occupations way too long, and consumers wanting everything on-demand, the modern workforce is becoming quite nomadic in nature. Loyalties to a single-employer are eroding. Today, successful companies layoff workers and restructure their workforce to beat shareholder expectations. Independent contractors and freelancers are finding success by literally moving from one gig to another. Thus the gig economy. It ranges from handyman-style labor to creative projects of with extreme technical acumen to educators teaching courses online.
There are some people who charge by the hour in the gig economy; however, not a lot. In the Gig Economy, people are paid for results. No one cares about your time, they only care about what they paid for–a delivered product, project, service, event, or experience. It doesn’t matter if a task takes an hour or five hours to do, you’re going to get paid for a result. The “giggers” that can deliver that result with quality in the shortest amount of time gets paid. It comes down to who can out hustle everyone else.
Companies like giggers over full-time/part-time employees because they don’t have to pay for benefits or incentives. Giggers can do the same amount of work for less long-term payroll expense and move on to the next job when they are done. This trend is increasing and as a result, the very nature of work is changing.
In contrast, hourly-employees are not incentivized to produce results. They are incentivized to waste time. Now, if you’re an hourly employee, I’d imagine you might take some offense to that statement. Tomorrow, when you’re at work, just try not to look at your watch or the clock all day. Instead, see how much work you can get done and get ahead on new projects tomorrow. If you can do it without looking at the time, I’ll adjust my stance. However, from an employer’s perspective, owners know that people paid by the hour are focused on certain amount money each week. They are incentivized to work overtime and not to produce business results in less time. When working overtime is not possible, work is deliberately delayed so that there is something to do each day.
This is the conundrum of increasing minimum-wage to a livable wage. If businesses had confidence that they could produce more, higher quality results at higher wages that customers would be willing to pay, it would be a no-brainer to give everyone a raise. The reality is we know that productivity will not increase with higher wages and customers are not willing to pay higher prices to support those wages. This was an idea that died with the advent of the self-checkout. Workforce automation makes consumers question why should prices go up at all. The only way companies can truly support higher wages is to have fewer employees to keep prices steady. So are you ready to join the Gig Economy?
Creative Businesses and Wealth Creation
All of this leads me to question why do creatives set hourly rates for their respective business? Photographers have hourly rates. Models have hourly rates. Makeup Artists have hourly rates. It’s common practice. I’m persuaded that a day rate or a half-day rate is better solution. However, hourly rates suggest that you are service provider. Photography-as-a-service may be the extent of what you offer and that’s okay. However, most modern phones offer photography-as-a-feature. How do you differentiate your hourly service from a built-in feature?
Creatives who are focused on producing the best result spend their energies honing their craft so that their time is a premium value-add to their product or experience. They may finish the work in half-the-time it takes a competitor or in more time, but their incentive is not to take longer–their incentive is to delight their client beyond expectation.
Consequently, creative businesses focused on delivering delight and value for money versus delays and time for money, understand that people who pay for high-quality results and delightful experiences are irrational consumers. Price is a factor, it’s just not the primary driver of the buying decision. They are looking at their total value for money and the prestige that comes with the experience. It wouldn’t make sense to this consumer to consider paying for something by the hour unless they view the service or experience as not worth much and it should take the least amount time possible. Let me put another way. You had a customer that would have paid more if they were presented something of value, but since it was billed “by-the-hour,” they only want the cheapest version of it.
Can You Build A High-Value Brand at an Hourly Rate?
In practice, no. The only degree’d professionals that can effectively demand a high hourly rate is an attorney. Yet, successful law firms require huge retainers before accepting a case. The retainer minimizes the hourly rate mindset and focuses on the legal result the client is seeking. Could you imagine your surgeon charging you by the hour for an operation? What if the armed services members were paid by the hour, would wars be prolonged so that troops could get overtime pay? Could conflicts be cut short because everyone clocked out? The point being, the more vital the human role is to producing a desired result, the less likely it is going to be paid by the hour.
In 1995, I co-founded a record label with a great friend of mind. At the time, I was active duty in the United States Air Force. I made a little over $600 every two weeks. When we we set our financial goals, I knew thinking in hourly terms wasn’t going to help us focus on the sales volume we needed to generate to produce revenues and our income. I decided that the ideal income for me would be to make what I made in two weeks—everyday.
It was a radical idea. I only had a high school diploma and a year of college at the time. What experiences would prompt me to think that I was capable of producing an income of $219,000/annually?
Simple. I reasoned that I could out hustle anybody.
In my lifetime, I have generated far more than my $600/day. Two decades later, my time is far more valuable than it was 1995. Today, I hold an advanced degree and I’m constantly learning and sharing new things daily. You can’t put a price on my time. It’s a finite and prized resource. As such, I don’t do anything “by-the-hour” anymore. However, I can put a value on my results that will delight my audience and my clients.
As you look at your business, are you trading time for money? Are your customers paying for your time or do they want your results?
If your customers are paying for your time, tell me in the comments below why your time is a better deal than anyone else. If they are paying for your result, tell me why your results outstrip the exchange of time for money. Let’s continue the conversation here or on my MADEGRANDBYCAM Facebook page.