Monday, August 11, 2008

Economic clarity precedes financial security

The next time you go to McDonald's or Harvey's or any other fast-food joint, observe what the teenage cooks are doing in the back of the room: they're usually making hamburgers or any variation thereof.

According to what I could see, they usually can make a complete hamburger or cheeseburger in about 3-5 minutes. Let's round it off to 5 minutes.

So if a hamburger costs $3.00, then the fast-food cook can create value worth 12 X $3.00, or $36.00. That's per hour.

My point in doing the above exercise (which obviously ignore many technical details such as fixed costs, perishability of the product, demand, etc.) is to show that even a teenage cook can, if he wants to, learn about business.

For example, to make his job more intellectually challenging, he could time himself while preparing a hamburger. If he takes only 3 minutes to make one hamburger, then that's 60 / 3, or 20 hamburgers produced per hour. That's value of $60.00 per hour.

He might learn more about business than the typical office worker who is only "pushing paper."

Indeed, most office professionals do not have a clear idea of how they create value, or even how much value they create. This is a very risky position to be in, because you will always feel vulnerable.

Economic clarity is what is needed. It simply means that you've got to know, clearly, what product you are creating, for whom (i.e. who is the client), and how fast you are creating such a product.

You simply cannot trust the boss, or the employer, or HR, or anybody in the organization. The only thing you can trust and rely on, is your own productivity. Incidentally, that's what your boss is focused on also.

In the end, there is no "job security," there's only "economic security." Economic security means knowing, precisely and clearly, HOW much value you produce per hour, and being in control of the process whereby you create value.

Feel free to reread and memorize the above paragraph, because it is truly the secret to succeeding professionally and financially, whether you are an employee, a free agent or an entrepreneur.