Photo by Annie Spratt
Leveraging your time? Or trading hours for dollars? That’s really what it is when you get right down to it. When the book “Rich Dad Poor Dad” from Robert Kiyosaki came out, now many years ago, this idea became a central theme of conversations about how individuals create wealth.
As expected, many people at the time questioned whether this was a message that fairly conveyed the available options due to the fact that it challenged the ‘conventional wisdom’ of working for somebody else for 40 years and then hope to be in a position to retire.
There’s only two options in the world of generating income
For myself, I can now well appreciate one of the more simplistic lessons in the book. We really only have two choices in the world-of-work; we can either trade our hours for dollars and work for someone else, like most W-2 workers do, or we can own the system that creates wealth and leverage other people’s time on our behalf.
Although I used to think that this was too simplistic a description of the ‘world of work’ and there had to be much more to it, I’m now pretty convinced that’s about how simple it really is.
Now this is nothing to get depressed about, I assure you, but you can’t escape the fact that if you work for someone else you do not normally share in any of the ‘profit’ that is generated even by your great work.
The owner(s) of the company share in the profit that is being generated. You get paid an hourly wage for your contribution to the creation of their profit.
Trading hours for dollars
As a practical perspective, this seems to be a pretty fair exchange; you aren’t taking any of the risk in generating the profit, just your time, and you’re also being fairly compensated for your involvement in the enterprise.
Fair enough! However, the dilemma is that you only get paid when you show up, someone else decides how much money you can make no matter how much magic you create and you are not building equity in your job…you can’t sell it and you can’t pass it along to your kids. Huhhhhh…
That all being said, if you’re going to continue on with your plan for trading your precious hours for money wouldn’t you want to make as much money per those hours as possible? Humm. I’m pretty sure you don’t value your precious time on this earth any less than I do, so why would you want to get paid any less for those hours than the next person?
I’m also pretty convinced that not one of us starts out by saying “my time just isn’t as valuable as someone else’s, so I’m okay with making less money per hour than they do” but that’s EXACTLY what ends up happening to many of us.
We forget that we made a conscious decision to trade our hours for money when we decided to work for someone else and by doing so someone else gets to value how much those hours are worth.
Own the thing that creates the wealth
On the other hand, when you work for yourself you get to own the entity that creates the wealth. The true value in that is when other people are hired to work on YOUR behalf.
As a result, you get to leverage their time and by doing so, literally ‘multiply’ the amount of hours that others get to work on creating profit and equity in your enterprise.
In addition, if you are then able to work “on” your business and not “in” your business (thank you Michael E. Gerber, “E-Myth Revisited”), you can leverage your time doing other things that add additional value to your business while others do those tasks that either you are not as good at or that are not as valuable with your time.
The magic in owning a business is to make sure that you are able to maximize the leverage of other individuals time along with having systems that these individuals operate. In this manner, not only is the business owner multiplying the amount of time that is being worked in a given hour, these hours are being deployed as efficiently as possible.
There’s no leverage working for someone else
Although it’s arguable that working for yourself is better than working as a W2 employee, all things being equal, if you’re not able to leverage other people’s time utilizing systems you’re just not getting the benefit of what owning a business is all about. The only benefit that remains may simply be the lifestyle value beyond being able to call your own shots.
So faced with the choice of either trading hours for money or leveraging time, what are some things to think about? Truthfully, the probability of building wealth in a short period of time starts to decrease if you choose to trade hours for dollars. You simply don’t have any form of leverage working on your behalf. In order to make more money, you need to spend more of your time; a one to one relationship.
One of the essential wealth building ‘levers’ that we get to pull is participating in owning a business where there are several sources of leverage, the first being other people’s time. Giving that up makes building wealth a much, much harder pursuit due to the fact that we have to do it entirely on just the hours that we have available to us.
However, even if you choose to take the entrepreneurial path and work for yourself, make sure you are taking full advantage of all the advantages of leverage that this allows.
Conclusion
First and foremost make sure you work on developing automated systems within the business for everything that can be systematized. A business truly must be a ‘system of systems’ in order to create the type of benefits that a business can provide.
In addition, as was already identified in order to get the biggest benefit from a business, you’ll want to hire others so as to multiply the amount of time being worked on your behalf in order to make profit.
This just boils down to simple math; we only have 10 to 12 hours that we can work in any given day but if we have employees we get to multiply this ‘output’ by the number of others we hire. Maximum leverage!
If you really want to build wealth, strive to be on the right side of the ‘Quadrant’ (Shout out to the Rich Dad!) and be a business owner and investor and stop trading hours for money!
