Bullish: Thinking More Productively About Money

When I was nine-years-old, I discovered that my allowance was the lowest of all the girls in my class (embarrassing!) and sometime later, started a small business making friendship bracelets and also reselling all the best (i.e., grossest) Garbage Pail Kids trading cards.

My classmate Crystal was rifling though my wares, which I kept in a Zip-loc bag in my backpack. She questioned my business model – how come I was selling the good cards for more than they would cost in the store? (Seriously, don’t people’s parents explain these things to them?)

I said that, obviously, when you buy a pack of Garbage Pail Kids in the store, you don’t know which ones you’re getting, and also that marking things up was how all businesses operate. Stores, of course, buy things and then sell those things for more than they paid.

“That’s not true!” she said, incensed.

“Of course it is,” I said. “How else would they pay the rent and the people who work there?”

“You’re stupid,” she said, leaving without Harry Carrie, Adam Bomb, or Babbling Brooke.

I think now, all the time, about how we live in a world in which the prices of goods are completely unrelated to their actual “value.” It used to be the case that only royalty could wear purple because, well – only royalty could wear purple. That is, the only means of making purple things were rare and expensive. Now, Kim Kardashian can receive a $2 million engagement ring, and then protect it by having a cheap copy made and wearing that instead – the point being, of course, that the two rings will look identical to anyone with less than 20/0.000001 vision.

Today, most of the things we buy are completely unnecessary to our survival, produced in factories abroad for pennies on the dollar of what we pay, and often indistinguishable to the untrained eye from goods at price points a full order of magnitude higher or lower. If you hadn’t seen a fashion magazine in five years, you would be largely unable to distinguish $70 shoes from $1,200 shoes (a talented carpenter and furniture maker I was dating once, while contemplating my shoe rack, picked up a Louboutin and noted that it was shoddily constructed, pointing out at least three places where it could have been finished more skillfully).

Your job skills and freelance services are really a lot like those shoes – not that they’re shoddy, of course, but that they’re worth whatever people think they’re worth at the moment.

I think a lot of us are at a disadvantage in thinking about money too literally – as though it really were a fixed, time-for-dollars or physical-matter-for-dollars equation rather than an already-artificial way of keeping score in a system long since divorced from bartering for survival needs.

I wrote this week on TheGloss (Bullish Life: Be Broke Without Going Crazy) about using a lack of income as a motivational tool. I’ve got some ideas here for thinking about money in a more productive way.

Using Price Malleability to Your Advantage

I recently received the following email (abridged and anonymized):

I just spent an hour flipping through your Grindstone columns… Thanks to the recent software boom, I’m freelancing again. I’m charging about five times my former salaried rate (not every day, of course–having two young kids means I need more down time), and I’m desperately in need of a vacation. So the next step is obvious: It’s time to raise my rates until I get time off.

Too busy? Raise your prices until you get a vacation. (See Bullish: What to Charge for Your Work – and What to Pay Your Assistant.)

If you work in a regular job, it’s obviously pretty difficult to do that, which is one reason I regularly encourage the highly competent to remove themselves from large, regimented corporations; even if freelancing isn’t quite for you, start-ups and smaller companies are much more likely to be members of the “make us some money and we’ll give you some of it” school of thought. You don’t want to be employed in any place where, no matter how amazing a job you do, you can’t ever be paid more than people at your “level” or at levels above you. You do not want to do business with an irrational bureaucracy.

If you feel stuck in the corporate world for now, it’s time to branch out and develop additional streams of income. (You might enjoy Bullish: How to Go to There and Bullish: How to Run Your Career Like a Business.)

Frugality Can Be Responsible or Irresponsible

Do you feel guilty when you throw food in the trash? Why?

Yes, people are starving in the world, but you couldn’t have helped them by eating the food, or even by not buying it in the first place. If it’s somehow “disgusting” to throw away food when people are starving, well … they don’t know you’re doing it, of course. This is a completely irrational attitude based on some leftover cultural consciousness circa the Great Depression.

A lot of people have similarly irrational attitudes about thriftiness.

The kind of frugality in which you just don’t buy things – it’s hard to imagine how that could ever be wrong. Sure, cut down on shopping. But then there’s the kind of frugality in which you are spending time to save money. This is usually not a good use of resources for a capable young person.

Every time I am tempted to do my own laundry, or to cook a big meal when I can get healthy takeout food within blocks of my apartment, I do the math and think: my future children will be better off if I drop off the laundry, eat a salad from Cosi, and get to work for real.

If your skills are more valuable in the marketplace than towel-folding, you are not being thrifty at all by doing the towel-folding yourself. Have a double espresso and plot your next move.

(See Bullish: Personality Qualities Way More Important Than Anything on Your Resume.)

Money Now is Less Important Than the Ability to Make More Money Later

Oh, it might be good to have an emergency fund. But if you are an ambitious young person, your own career should be a better investment than any retirement plan, ING account, or piece of real estate.

Once your basic needs are taken care of, always sacrifice money now for the ability to charge more later. To me, this means not over-filling my schedule with more and more people who need to be tutored; I need to be writing books in my field, rather than dispensing information to one person at a time. Would you be able to take your career to the next level by paying your own way to conferences your job won’t pay for, flying somewhere to woo a mentor who would help you out, or putting on an event that features you as an expert?

Look at it this way – there is someone in your field who makes ten to twenty times as much as you do, and she does this using skills that are better – but not actually ten to twenty times better – than yours. That woman was born a drooling, incontinent baby just like everyone else. So, there’s nothing she’s done that you can’t. But you won’t become her if you keep doing the same damn thing for the same damn amount of money all the damn time.

(See Bullish: Are You Under-Reinvesting In Your Career?)

When I was a child, a relative of mine once commented – with much vitriol – that no human being should ever be paid more than $100 an hour.

It didn’t occur to me to ask, “What if you could pay a supermodel to have sex with you for just $105 an hour?”, but it did occur to me to ask, “What if you ran a business and there was a guy who could help you for just one hour and you’d make a million dollars and he charged $10,000 an hour? Wouldn’t that be worth it?”

This question made my relative substantially angrier. Price malleability is a hard thing for some people to take. (Money should be doled out at a constant rate based on how many hours you show up someplace and suffer!)

But yes, if you can make other people millions of dollars, you can charge $10,000 an hour. And I think you’ll get ahead faster by thinking of money as an absolutely unnatural, contrived, artificial way of collecting points in a complicated and largely unsupervised game of providing unnecessary goods and services to one another within an enormous social network largely ruled by perception and popularity, and in which you may make your own inroads and opportunities through diligence and cleverness.

originally published on The Grindstone