If something is easy to get, it holds little economic value. Not only this, if a lot of people hold the same skill, it doesn't even matter much about skill variation between holders, it still doesn't hold much value. Think about driving for example, there are between 1.4 and 2 billion drivers in the world, but how many earn on their skill? Of course, there are taxi drivers and truck drivers, fork lift drivers and racing car drivers that earn, but what is the difference in salary?
In New York, there are 40,000 taxi drivers, but does the cost of the fare depend on how good their driving skill is? Are truck drivers paid based on their skill to drive, or as long a they get a shipment to location undamaged and on time, the driving skill doesn't matter much? Racing car drivers however....
The difference between having a skill and being able to push at the edge of the limits of what is humanely possible are two different animals, but even at the pinnacle of the skill, the difference between getting paid well and getting paid obscenely high amounts is huge. Then of course, there is the willingness of the audience to pay for the skill through giving it enough support that advertisers are willing to pump cash in. Advertising is what pays the NFL, NBA and NHL players so handsomely and the ones who get paid the most are those who's skills capture the attention of the crowd enough to warrant paying them more. At that level, personality and the ability to generate conversation is often just as important as the skills of the game.
I don't know anyone who has earned a lot who has earned it easily. For instance, the father of one of my friends sold his metal work company a few years back for 60+ million euros and retired. He retired at 62, but he started the company at 26 years of age and poured thirty five years of his life into it. Another and one of my clients, is a property developer and in the top ten richest in the city. He is 55 years of age and started the business when he was 27 and again, has poured his life into it and even today, works longer hours than any of his employees.
Sure, some get lucky, have a good idea, get some rough start and happen to be in the right place at the right time to sell to someone who is willing to pay for ideas, not performance. Skill however needs to be backed up with performance, it has to be proven.
People don't pay a taxi driver on their ability to drive, but rather pay a flat rate on their ability to get them from location A to B, something that pretty much any taxi driver should be able to do. What people are however willing to pay for is special, unique, original, standout. They want to be made to feel that they are part of the game, that they have a dog in the race, that they are partly responsible for helping someone succeed. People buy jerseys, scarves and flags to wave at a football game to feel that they are a supporter and when their hero strikes the winner and the game is won, they feel that "we" won the game together. The attention that player attracts from the supporters, attracts the advertisers, the stars get offered larger contracts than those who aren't.
But, how many can compete at the pinnacle of any skill?
As the highest paid Formula One driver, Lewis Hamilton will earn about 45 million euros in 2021. Not bad. A taxi driver in New York will earn 35,000 dollars on average. However, the 40,000 of them will generate 1.4 billion dollars in the city on their salary alone, not to mention what the cab companies and license holders make on top of that. In 2018, there were over 200,000 taxi drivers in the US, which means about 7 billion in driver incomes were generated. There are about 3.6 million truck drivers in the US earning about 45,000 a year or 158 billion dollars.
My point is, this is where the numbers matter in order to pay highly for the skill. A LeBron James Jersey costs about 90 dollars US and assuming that half the truck drivers are sports fans willing to buy a jersey, that generates 192 million in jersey sales from truck drivers alone across the sports. If half the US buy a jersey a year, that is 14 billion in jersey sales. What the stars get paid is ludicrous, until looking at what we are willing to pay to see them play.
Skill level works on a normal distribution, but the pay for that skill suffers from a massive asymmetry at the skilled end, especially if it is a skill that is in demand from the masses. Everyone wants to see the biggest diamond, but if DeBeers released all of their diamonds, the markets would be flooded and diamonds would have no value other than for making tools. They wouldn't even have sentimental value, as the sentiment around diamonds is because of the belief they are rare, that they are precious.
The money is in the masses of average, but we focus our attention on the pinnacles, the standouts looking on in awe and in jealousy. Yet, when it comes to our ability to affect the economy, we feel powerless, as if what we do doesn't matter, because we aren't getting paid like the stars. The stars that we fund daily, ticket by ticket, play by play, jersey by jersey. These days, we are willing to famous people billionaires for their selfies.
And we wonder why we struggle.
We spend our time following the rich and famous , hoping that their fortune will rub off on us, as if liking their photos on Instagram increases our chances to climb the ladder of success, whilst ignoring the people close to us, the people we say we care about and love.
Then we wonder why we are lonely and depressed.
Depressed people spend more. Not only that, depressed and self-absorbed people spend even more.
How are your saving habits looking?
I make connections to things in society that perhaps a lot of people do not see, but I pay attention and everything is connected. It has to be, it is the law of nature and when we look at the economy, we see a lot of people struggling, whilst there is more than enough to go around. However, the amount of resources matter less than how those resources are used - they can generate value or it can be wasted.
The masses of value that gets pushed to the few doesn't care about the supporters, they don't care about the followers, they just care about the numbers. It is a numbers game, that is it. Every person is crunched through algorithms and targeted for advertising and value extraction in some way or another, while the majority of those numbers value themselves as "the biggest fan".
We could do more with the potential we have, but most of us never will. Instead, we will avoid even trying by diverting our attention to people and products that do not care who we are or whether we live or die, driving our value into their pockets, complaining about their earnings - wishing it as us.
Time isn't the most valuable resource we have. Attention is. Spend it wisely.
Taraz
[ Gen1: Hive ]