Economists’ Little Secret

One of the first courses I took in my MBA studies was economy 101. This course lightly dabs into the realm of Micro-Economics and Macro-Economics. A great part of the course dealt with the supply and demand curves, which looks something like this:

Most of you with scientific backgrounds scratch your heads. Isn’t the quantity sold is a function of price? When prices go down, demand goes up. More items are sold. When prices go up, more manufactures want to produce. More items are created. The axis are backwards!

Only they aren’t. In China, there are factories producing as fast as they can, so quantity goes up, which forces the price to go down, which drives quality down but pushes demands up. Quality of life has risen in the past fifty years as never before, because we can get more for our money. Many families have two cars. Many of us have more than one computer at home. And a laptop. And a smart phone. HDTV in our living rooms. And in the bedroom. And in the bathroom. Heck, we even have high speed internet connections on airplanes and buses now. Life is good, and we take it for granted.


Louis CK WIth Conan Oct 2, 2008

Quality of life as a function of work hours

Here’s the thing nobody tells you: you don’t need all this stuff. You may want it, so you won’t have to fight with your kids over the remote, or so you could complain about when it breaks, or to brag to your friends about how much it costs. But you don’t need two cars. You can manage with one. You don’t need three TVs. You can manage with one. Who knows, it might force you to spend more time with your family. That’s not too bad, is it?

We are missing out on life, because we need to pay for things we don’t need, but think we want. Don’t have time to deal with the kids fighting? Buy another car, buy another TV, just keep them quiet because you are busy making money. Or you could not buy anything, and make more time by having less bills.

The more money we make, the harder we work and the more we spend.

It’s a capitalistic misconception. If you get paid $3 an hour, and you miss an hour, what happens? Nothing much. Motivation to work many hours is basically non existent, because the change in quality of life is non existent. OK, but what if it was $50 an hour? Now that’s a tasty burger. Just a couple more hours would get you the new PS3 game you’ve been dying for. Motivation went up, hours went up, productivity went up. Time to play PS3 went down. Now, what if you’ve earned $1000 an hour? How many hours would you work each week?

I might be able to pull 10 hours a week. Maybe less. The rest of the time, I’d be too busy playing my X-Box 360, going to the beach or spending time with my friends. I’d do things I want to do. I’d probably still be coding, but for me. Not for you.

Who’d hire you for that job?

Only one comes to mind. You.

Build a business, make money, control your income and work hours. You don’t have to be rich and famous. You can do just fine with being happy. Also, you get the advantage of setting your own clock, and working on things you find interesting.

Don’t think it is possible? Here‘s an example by Darla, a chef who wanted to have time for her family:

I took active steps to limit the growth of the business. Advertising and press releases stopped. Order capacity was capped—we began to sell out each week rather than grow revenue. Menus became more limited, the delivery area severely restricted. Some customers were (understandably) pissed off.

I started to take plenty of breaks, completely closing the business at times to travel with Jason. I took very long Thanksgiving and Christmas vacations, with plenty of time to visit my family in another state. Fork In The Road was the definition of a lifestyle business—small and based on values other than just making the most money. I had attained my goal of having time for fun and family and kept making a very nice profit, even though there was no growth.

It may not be as easy to get there, but it is your only life. Stop wasting it on work.

  • Gal

    Amazing! I’m absolutely agree with you.
    The capitalism became the new dictatorship. the race after the money became your mind control: reducing your spare time=reducing your thoughts.

    As you said, this is our option, but….what does make the majority of the society to run after the money? and only the minority of the people understand that they are able to stop it…maybe the root of this problem is much more deeper than what we actually see.

    We both understand that if some “money chaser” make 50$ per hour, someone else loss 50$ per hour. and what if this person really need this money for surviving?

    The offer, of course, is not communism. you still want to encourage the people to be productive. but still, have we thoughts about all the other options? maybe we missed something…

    Or maybe we didn’t miss a thing, someone believe that this is a good way to control us.

  • http://omergertel.com Omer Gertel

    I actually intend to get paid very well for my abilities.

    It dawned on me recently that there is a true possibility for people in my profession to work for two or three days a week and still make a decent living.
    That’s awesome.

    So, sure, you’d have to cut back on your expenses, but it will allow you to invest in the things you love. Write a book, start a company, be a teacher, learn a new profession, eat a sandwich. Whatever you WANT (not what you need anymore).

  • ofri.raviv

    @Gal – “We both understand that if some “money chaser” make 50$ per hour, someone else loss 50$ per hour” – that’s such an incorrect understanding of how economy works! we actually make more value of the world all the time, and that’s where most of those $50 come from, and not from someone who lost them.

    @Omer – as I think I told you, a while ago I thought of a cool thing: I would change almost nothing in the way I live if I had won the lottery. I think that a good indication :)

  • Avner

    Well, I agree with you too. I could be happier if I could take more control of my life and do more of what I really like to do rather than just work.

    However, I also remember something you posted on another blog of yours. It was about people having too many choices and getting depressed because of this situation. More time for myself means more decisions I have to make about what I want to do and how I want to do it. For most people it is much easier to get instructions from other people about what to do and how to live their lives. A regular job as an employee of someone is a way for most people to avoid deciding hard decisions about their everyday lives.

    You have to be gifted with some unique personal properties and skills in order to be successful at a more “free” way of life. That includes being self-employed, doing what you want successfully while maintaining a reasonable quality of life.

    Unfortunately, most people, even most intelligent ones, are not like this.

  • http://omergertel.com Omer Gertel

    @Ofri – That’s awesome.

    @Avner – yeah, you are probably correct. Here’s a different idea: push the age of pension to 70 (there are plenty of jobs that you could do at that age, if you had to work). The extra three years are paid vacation, deducted from your pension fund. You can take a couple of months of vacation every three years or so. It’s just a way to spread your leisure over your lifetime, so you can make the most of it when you are still young and able.

  • http://jenkov.com Jakob Jenkov

    @Gal:
    You said:

    “We both understand that if some “money chaser” make 50$ per hour, someone else loss 50$ per hour. and what if this person really need this money for surviving?”

    This is so wrong. Wealth creation is not a zero sum game. The more we all work, the cheaper everything gets, the more everyone is able to buy. EVERYONE.

    Don’t think \Zero Sum\. That’s what socialists do.

    Thinking \Zero Sum\ makes people obsessed about \wealth redistribution\.

    Think \Plus Sum\ (variable wealth) makes people think \wealth creation\.
    And \Plus Sum\ is how economics work. Not Zero Sum.