Time Is Money

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Benjamin
Franklin wrote this in a letter to a young man over 250 years
ago. It works both ways: money can buy you time, which is why
we pay physicians and pharmaceutical companies after we have heart
attacks. We can trade one for the other. But we can buy more money
with time than we can buy time with money. The system is asymmetrical.
There are people who are worth a billion dollars. No one I know
is going to live 300 years unless a major breakthrough in medicine
takes place. (If it does, Social Security’s "trust fund"
will take another hit.)

A German
man I know used to sell vacuum cleaners door to door. In Germany,
this is still common. He sold the Vorwerk cleaner. He even sold
one to my wife, back when Americans could legally buy them. It’s
the best vacuum cleaner that my wife has ever seen.

The man who
trained him in sales once asked a group of trainees if they would
pay him the equivalent of $10 if he would show them how to earn
25% more money. They all did. Then he showed them how. "Work
25% longer."

Did he cheat
them? No. The man who got that training never forgot this lesson.
For $10, that was cheap tuition.

Most people
are not willing to work 25% longer. That would mean a ten-hour
work day. Businesses are penalized by law for offering extra work
to workers: overtime, a time-and-a-half wage penalty. They offer
this only under special conditions. The workers so benefitted
must be above average in their productivity. Otherwise, it would
not pay businesses to pay them extra.

But 25% more
pay is not the heart of the matter. People who start businesses
are more likely to get rich than anyone else. I have never known
a business owner who worked an eight-hour day. All of them work
at least ten hours, and most work on Saturdays. Yet they make
far more than 25% more or even 50% more. If their business survives,
they move into the top 20% of income earners.

It is not
the fact that they work longer that makes the big difference.
It is that they decide to meet the demand of consumers in a unique
way — a way worth the consumers’ money. To do this, they must work
long hours, because the consumers are demanding. The consumer
says, "Work harder. I’ll pay you a lot more if you do."
So, the business owner does.

He also works
smarter. He makes more money. So, he works longer. The barrier
to entry is three-fold: (1) his ability to work smarter; (2) his
willingness to work longer; (3) his willingness to accept failure.
These are major barriers.

In effect,
he invests his time in his business. He sees that time is money,
so he capitalizes his business with his time. When you’re starting
out, that’s the asset you own. You don’t have much money.

There is
a young man in my church. He is a radio announcer. He has already
seen how the industry works. "The guys driving the BMWs are
the ones who sell air time. The guys behind the microphones drive
Honda Civics." He’s got it. The man who can convert air time
into money is not easily replaceable. The man providing modulated
air time is, unless he is Rush Limbaugh.

I told him
to spend the next two years studying everything he can about how
to sell air time. He is in a good place to learn the basics of
selling in a niche market. He is getting paid to modulate air.
He must learn how to sell it.

He must therefore
give up leisure.

THE
HIGH COST OF LEISURE

In my report
"Count
Your Capitalist Blessings
," one of them that I forgot
was leisure. A heads-up reader spotted that omission.

(If you spotted
any others, send them to me at gnorth@poetworld.net.)

Leisure was
once the major blessing of slave-ownership. Aristotle spoke for
the Athenian ruling class when he praised leisure as the basis
of the good life. The fact that Athenians were slave-owners made
their leisure possible. About a third of Athens’ population were
slaves. The good life, in Aristotle’s view, was civil. It meant
participation in politics and culture. He had contempt for manual
labor and the work of artisans. That was work fit only for slaves.

For most
of man’s history, hard manual labor has been the norm. Men have
had to struggle with the earth to eke out a living. Most of their
children died before reaching adulthood.

The words
of Genesis have rung true:

And unto
Adam he said, Because thou hast hearkened unto the voice of
thy wife, and hast eaten of the tree, of which I commanded thee,
saying, Thou shalt not eat of it: cursed is the ground for thy
sake; in sorrow shalt thou eat of it all the days of thy life;
Thorns also and thistles shall it bring forth to thee; and thou
shalt eat the herb of the field; In the sweat of thy face shalt
thou eat bread, till thou return unto the ground; for out of
it wast thou taken: for dust thou art, and unto dust shalt thou
return (Gen. 3:17—19).

Capitalism
changed all this. Beginning in the mid-18th century,
productivity began its steady upward rise: about 2.5% per annum.
That compounding process, over decades and then centuries, has
multiplied our wealth by a factor of 500 or perhaps 1000, doubling
ever 30 years.

Population
grew, worldwide, as technology improved. World population was
still under a billion in 1800. Today, it is over six billion.
It may hit nine billion by 2050.

The eight-hour
day became a reality when Henry Ford figured out that he could
run three shifts of eight hours each and keep his plants open
24 hours a day. But the eight-hour day was no miracle. Ford had
been running a nine-hour day prior to the change in 1914.

After the
mid-19th century, the shorter working day became a
goal of American and British workers because it became possible.
Output rose. Income per hour worked rose as private capital provided
the tools that made workers more productive.

When men
can do it, most of them take their pay in extra leisure. They
agree to work for a fixed salary per time period: weekly, monthly,
or whatever. Then they negotiate a shorter work week. They don’t
ask for more money. They ask for more time off. Extra money is
taxable. Extra time off isn’t.

OVERCOMING
NATURE

Thomas Edison’s
light bulb turned night into day in the factory as well as the
home. Air conditioning has turned work places into perpetual spring.
The ancient rhythms of night and day and the seasons have been
overcome in homes and work places. We can choose how much we want
to work.

Most people
decide that the battle with nature isn’t worth the extra effort.
The eight-hour work day is sufficient. Then they want paid vacations.
They take their marginal income in leisure.

This is understandable.
Leisure is tax-free income. We can spend our spare time doing
what we want to do. We can break the rhythm of work. We don’t
get paid, but we also don’t get taxed.

The fruits
of our labor are paid in units of "free" time.

Of course,
time isn’t free. It is the least free of all assets. It is non-renewable.
Once spent, it’s gone forever. Yet it’s the form in which we want
to take a great deal of our potential income from time.

Most of us
overcome nature with tools, not with hard physical labor. We overcome
nature with capital and therefore thrift. The division of labor
has empowered us to buy time by reallocating it.

For most
people in history, nature has provided little value above what
was put into it. The net productivity of autonomous nature is
low. Only through capital investment does nature produce sufficient
output to provide lots of excess wealth, which is taken in the
form of leisure.

It is the
energy revolution, more than anything else, that has liberated
mankind. We employ energy rather than slaves to do our work. We
buy machines that run on energy to be our slaves.

Like the
slave-owners of Athens, most people prefer leisure to more work.
They prefer consumption to investment, not just with their money
but with their time.

But there
are a handful of people who prefer work to leisure. They would
rather be creative than leisurely. They are not lovers of leisure.
These people are the engines of creation in civilization. They
do what they enjoy doing, probably because they do it better than
anyone else. Work is more of a game than a burden. They show off.
The goal is winning. The form of reward is money, not gold medals.
If it were something else, these people would still compete for
it.

If you are
in this group, you are unique. You have been given a tremendous
advantage. You will not make 25% more when you work 25% more.
You will make far more. You will become the beneficiary of compound
growth. That extra 25% will not get away from you, as it would
if you took extra income in the form of leisure.

Leisure disperses
capital. Work compounds it. Therein lies the difference between
wealth and poverty.

INVEST
IN YOURSELF

Because most
people don’t like their work, they don’t like to work. The pioneer
likes his work. He understands that the extra hours invested in
his work are in fact invested in himself. He chooses his work
in such a way that he is happy to invest the extra time in developing
his skills and his business.

If you hate
your work, you will find it difficult to work the extra hours
needed to master the field. This is why a young person would be
wise to take less pay in a job that draws him deeper into it.
He will then be willing to invest that extra 25% or more that
it takes to be successful in any field.

If you have
above-average intelligence — that is, if "reality TV shows"
bore you, with the possible exception of "The Apprentice" — an
investment of 1,000 hours will make you competent in any field
for which you have innate ability. An investment of 5,000 hours
will make you a master.

At two extra
hours a day, 300 days a year, it will take you less than two years
to become competent. It will take less than a decade for you to
become a master. But you must not waver. Those extra two hours
must not be skipped. If you make no extra pay, no matter. You’re
paying tuition.

A bachelor’s
degree takes most people five years to earn. If we think of a
work week as 40 hours, that’s an investment of 50 x 40 x 5 = 10,000
hours. Knock off 30% for vacations, where you get a low-paying
part-time job: so, 7,000 hours. When you graduate, you are not
a master of anything except the ability to tolerate boredom.

My friend
Peter Fortunato, the real estate investment guru, once told me
that he regretted having earned a college degree. "I lost
four years of compounding at the beginning of my career, when
the long-term payoff is highest." But most people do not
perform as productively as he does. They are more bureaucratic,
more leisure-driven, less consumer-driven.

If you can
learn a unique form of consumer service, you will gain for yourself
a niche market. Your willingness to work extra hours, to master
a field by investing time, to gain the painful experience of failure
in a world of uncertainty, will pay off.

The cost
of the move from competence (1,000 hours) to mastery (5,000 hours)
is what blocks most people from becoming successful. It shouldn’t.
The day-to-day experience of applying what you have learned is
invaluable.

What most
people do not recognize early enough is that they should find
employment in a field in which the compounding process produces
a sense of personal achievement that lures them back into an ever-greater
investment of their time. The compounding process is what produces
success, but the front-end costs, especially psychological costs,
keep out most people. They willingly serve as salary earners rather
than creators.

THE
PROBLEM WITH SCHOOL

Teachers
are paid salaries. The educational certification process screens
out entrepreneurs. Yes, there are super teachers who are masters.
But the inherently bureaucratic nature of formal education does
not reward these people. They may be great teachers, but they
are not allowed to multiply themselves. They are oddities.

John Taylor
Gatto was such a teacher. He won Teacher of the Year for New York
City three times. He won it once for the state. Then, after decades
of career success, he quit. He realized that he had wasted his
time. The educational system is structured to grind down teachers
and students alike. He decided that students would do better in
business situations or other non-bureaucratic productive environments.
He has a website devoted
to alternative education
. Read
his free, on-line book, The
Underground History of American Education
.

Teachers
do what they are paid to do: baby-sit and give exams. They multiply
themselves. But the system militates against the development of
skills leading to consumer satisfaction. The free market principle
of consumer sovereignty gains little respect from employees who
are paid by taxes and promoted in terms of formal criteria that
have nothing to do with increased output.

Teachers
push for smaller classes. When I went to school, classes of 35
were common. Today, classes of 25 are considered large. Teachers
are bureaucrats. They are taking their pay in terms of less work,
not more money.

The best
high school teacher I ever had once made a proposal to the principal.
He volunteered to teach every class in senior problems (civics/family)
if the school would pay for a part-time assistant to read exams.
He would have had to run classes of 60 students or more. He was
a master lecturer. He could easily have done this, even with disciplinary
problem students. He asked that his salary be doubled. The school
turned him down. It would have saved the district money, but it
would have established a precedent. He could not have been replaced
when he retired. The principal wanted institutional continuity.
He could not personally pocket the money that the teacher would
have saved the school. Why change?

Time spent
in school is money down the drain for creative students. It is
compounding time lost forever. Schools teach to the best and the
brightest a set of skills that are suitable for leisure-seeking
wage-earners. Schools do not teach business skills. This is especially
true of graduate schools of business, which are staffed by Ph.D.-holding
writers of unreadable term papers, which are called scholarly
journal articles.

The educational
system screens in terms of bureaucracy: taking
exams. This is why most of the investment in formal education
is wasted on people who have business skills.

There is
a man in my church who owns and operates motels. Back in the 1980s,
he was in college, earning a degree in physical education. He
was also making $60,000 a year in the motel business. His coach
told him to quit school. "You’re making more money than I
am. Why do you want to teach junior high school boys, whose parents
will be on your back to give their kid more playing time?"
He wisely dropped out of college.

But the person
who wants to be paid in leisure is either a reality TV viewer
— a slug on a couch — or he has a hobby. I would recommend
that he convert his hobby into a part-time business. The goal
is to replace his job with his hobby, only get paid for it. He
has information that others don’t possess. They will pay for this
information.

LEARN
HOW TO TELL YOUR STORY

Why don’t
more people do this? Because they don’t like marketing. They are
amused or delighted by their hobby, but they are unskilled in
sharing this delight. These people should work on telling their
story. Most people like to talk about their favorite subject.
Once they begin, you can’t politely get them to stop talking about
it. The art of salesmanship is the ability to convert a good story
into a stream of income.

Toastmasters
International
is an organization that teaches people how to
tell their stories. I recommend joining if you want to learn public
speaking. Or teach Sunday school to teenagers. That will show
you what it takes to keep people alert. You can learn how to tell
a good story.

If you have
no story to tell, that’s your biggest problem. You don’t like
your job. You are in a career that does not lure you into greater
service to consumers. You are trapped by a career that does not
tempt you to invest an extra 1,000 hours over the next two years.

CONCLUSION

Time is money.
You can’t slow down this outflow of capital. But you can get it
to work for you if you can learn how to convert it into money
or the things money can buy.

September
16, 2004

Gary
North [send him mail]
is the author of Mises
on Money
. Visit http://www.freebooks.com.

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