The fiscal cliff continues to loom and panic has set in. While unemployment is steady at 7.9%, real median wages have been falling (and the distribution of real wage losses are heavily skew right). Much of this is a function of the structure of the economy. For most employers, well developed, specialized skills are in greater supply than demand, so companies are able to be fastidious and will usually not hire based on potential. No need for long term investment in training; just hire someone with the skills in the present that can be thrown right into the field.
Like most strategies in the corporate world, this makes significant short term sense at the sacrifice of long term benefits. But that is not the point of this post. This is a reality that no institution or powerful individual can change – a force much like demographics; long term cyclical progressions without recurrence at the same state due to dynamic parameters of economic existence. The more appropriate response is to accept this fact, and develop skills and cash flows accordingly. While many in the “9-to-5” grouping tend to never think of themselves as “entrepreneurs” or “business people”, these are ultimately just labels for difference cogs of the same general machine/system. They are simply the group that has traded time for money in a linear fashion. This is often a great idea- nonlinear functions tend to have regions where the response functions grows (or decays) much more slowly or with more uncertainty than a linear function. While the goal in entrepreneurship is to reach the point where input time is almost decoupled from profit output, it often works against you where a massive input of time can lead to very small, uncertain profit output. I consider “risk” to be simply the transformation of money as a nonlinear mapping of the time=money function.
Yet the two are not mutually exclusive. A steady income is important, and should be sought after for educational purposes, discipline and capital. However, do not fall into the trap. The wanna-be entrepreneur who dreams of starting their own business simply to “be their own boss” will probably lock his or herself into a comfortable, low-risk track. However, the true entrepreneur-at-heart will simply see his or her “9-to-5” or at least steady employment as a moat of safety, a further education, and a means of building capital. They will parlay all these resources into other ventures, assets and cash flows. This is in a sense the ultimate form of diversification – a portion of your “time” portfolio is dedicated to a linear occupation (hopefully one that is selected to grow the individual) while another is dedicated to the nonlinear pursuits.
So how does one do this? I am not an expert – I am merely in the thick of the journey. First, build you core competency and skill-set. Try to not tie your degree toward a direct career path, but toward a specific skill that will serve you in an uncertain world – one with economic value that you can turn to when needed to scrounge up meals and stay liquid. Build a tree of skills around this core competency and integrate. This will make you more adaptable in finding a job that will suit both you and the employer. For example, I gained a B.S. in Economics and a minor in applied math, but have focused heavily on the mathematical skills to parlay my education rather than let it go to waste. I made the mistake of student loans for an out-of-state school, so I need my education to at least pay me knowledge dividends. If the ability atrophies, it was all for naught. Keep my mistake in mind and go forward accordingly. I am doing independent research in a variety of fields and spend time learning R, Python and Excel for data analysis and SQL for database management. This tree of skills fits well into both personal pursuits and the skill requirements of employers with a core of mathematical understanding.
Further dividends can be extracted if one is resourceful and hard-working, with a heavy dose of creativity. I tutor part time, which allows for a very flexible schedule, gives me a skill I can turn to in order that I may pay bills and build capital , is fulfilling, and keeps my mind sharp. I also build a de-facto network that, if I add significant value, is more than willing to listen to me about other things (for example, I have had referrals for other businesses from satisfied tutoring clients). This is just my personal example – be creative and choose to spend your time building your “skill shell” around your “core competency”. In my next post I will list some possible examples for a few different possible “person-states” I can think of that are congruent to my model. The only requirement is to be hard working and strong willed, not lazy or easily discouraged.