Everyday Economics For People, Chapter 10: You, The Savvy Producer

Now that we have talked about you as a consumer, it’s time to talk about you as a producer. Have you ever had a job or been the primary homemaker for somebody who has or will have a job? Then you are a producer. Take pride in this title; you have earned it through labor.

Now, there are three kinds of producers: those who generate profit for others, those who generate profit for themselves, and those who pay others to generate profits for them. You are probably thinking that you would like to be the third kind, but the problem is that you don’t have a profitable business to which to hire people. So, the second best option is to work for your own profits, so that at least you reap the full value of your own labor, and once you have figured out how to make money at something, you can hire somebody else and teach them to do it for you.

That is, unless the people who are hiring pay a sufficiently high proportion of their production to workers such that you’d make more working for them, even giving them a cut, than working for yourself. This occurs when a company has a vast productive apparatus available to them. In such cases, you may want to work for somebody else rather than strike out on your own.

The most likely situation is that you would be best served by spending much of your time working for others while you lay the groundwork for your own business venture, with the intention to launch it at a moment of hope at the end of a recession. So, how exactly should you allocate your time between these efforts?

The first question is how much money you can make working for others, and how much money you realistically estimate you can make working for yourself. If you have very highly paid skills, then it is possible you may never find it profitable to operate a side business. However, if you believe that you have a business idea that could potentially generate exponential income growth, then it would likely be worth your time to develop it even at a short-term loss.

Now, other than stressing the importance of holding off on launching business ventures until periods of low start-up costs and rising consumer spending power, and taking out any loans when credit is cheap, and to be conservative as a speculative self-investor, and to do extensive market research before investing significant funding, I have little advice as to what self-business you should think about starting. That will depend on you and your skills and interests and passions and the insufficiently met needs of those around you.

However, when it comes to dividing up your labor efficiently between working for others and developing your own business, once again, we can turn to macroeconomic factors. Once again, you must recognize your primary competitors as other laborers, not the companies that hire you. Businesses have such high demand for laborers during an economic boom that labor hours become much more scarce, and thus are higher paid. In contrast, during a recession, when unemployment is very high, workers must compete brutally against one another for an insufficient number of job openings, and so they must be willing to accept lower wages.

The implications for you, the savvy trader of your own time, are that you want to spend all of your time working as much overtime as you can handle during the peak years of an economic cycle, and you should allow yourself to work many fewer hours during economic recessions. Instead of working for others when wages are low, you should work on yourself and your earning potential. Your time as a laborer is less valuable when wages are low, but the value of your work on yourself is based on future economic conditions rather than present, and has greater value the younger you are. So, if you are ever going to work on improving your earning potential, you should do it earlier than later and during periods of high unemployment.

And so, in grand summation, in order to profit from macroeconomic cycles without having any current savings, all that you must do is carefully time your consumption and labor such that you pay minimal prices per item purchased and receive maximum wages for each hour worked, and time your debt-taking with low interest rates. If you have an entrepreneurial streak, you’ll want to start your business as close to the bottom of a recession as possible. If you follow these steps, you will be able to increase your spending power and earning power dramatically without changing the amount of stuff you buy or the amount of hours you work, although you will of course change the times at which you do each and perhaps the type of work you do to take advantage of the best opportunities at any given time or across time. Not only is this the best for you, but it is also the best for everyone; if everyone were to modulate their economic activities in this way, the entire system would be much more tightly self-correcting, and the cycle of boom and bust could actually be permanently ended. A win for you, and for everyone!

Section I: Building Wealth Through Financial Habits

Chapter 1: Credit and Interest Chapter 2: Rent and Ownership Chapter 3: Budgeting & Reducing Expenses Chapter 4: Bargain Shopping Chapter 5: Optimizing How You Allocate Your Productive Time Section I Conclusion

Section II: Taking Advantage of Factors Bigger Than Oneself

Chapter 6: Crash Course In Microeconomics Chapter 7: Crash Couse in Macroeconomics Chapter 8: Why Businesses Sometimes Sell At A Loss Chapter 9: You, The Savvy Consumer Chapter 10: You, The Savvy Producer