One of the best lessons that I learned in life is from the book the 4-Hour Work Week by Tim Ferriss, where he wrote, “Reality is negotiable.”
There is a way to get what you want in today’s world, and it usually comes from getting better results from your effort. To negotiate with reality, you need to know the rules of reality and develop a skill set that can help you take advantage of those rules. A big reason why I’m always learning is that I want to take advantage of life, so life doesn’t take advantage of me. With the pandemic, many people are starting to question the reality they had accepted and wonder if life still needs to be like it is.
Life can be whatever you want to be, but it has to be earned, rarely is it going to be given since the world is not crazy enough to give many under-deserving people everything they want.
How Results Lead To Wealth
To get the reality you want, you can either minimize your needs where your current resources cover all those needs, like what is going in the minimalist movement, or you can ensure the results from your effort can give you all the needs you desire.
To be wealthy is to have discretionary time, and being rich does not mean you’re wealthy. You can be a lawyer making $300k a year, but if you have to work 100 hours to get this lifestyle and deal with important phone calls at 11 pm on a Saturday, this person is just rich but not wealthy. I would argue that a person making $60k but covering all their needs is more wealthy than the person making $300k. Of course, the lawyer will probably have nicer things, but are they actually using them to the full benefit, or are they just sitting idle and taking up space?
Know the wealthy outcome you want, and then start working backward. A person who works 100 hours per week and makes $300k per year is only making $60/hr. There is plenty of work at $60/hr, but if someone can learn to make $150/hr, instead of working 100 hour weeks, they are doing 40 hours per week to earn the same income.
It takes more skills to earn $150/hr, but it can be done. It just requires someone to show the value that they are creating for someone.
When it comes to pricing goods or services, this can be done in three ways.
- Competitive pricing – pricing based on what the competitors are doing
- Cost-plus pricing – pricing based on the margin you want to have – item cost $10, so you sell it for $20 and is a 50% margin.
- Value-based pricing – pricing based on the value that someone is receiving
The person who works 5000 hours a year and makes $60/hr is pricing their services competitively. They probably can’t demonstrate the value that they are providing to their employer or contractor. So the employer is only looking at this person as an expense in the income statement. They don’t see how this person is contributing to the revenue. People are busy and don’t know if someone is contributing to the value chain. So when value is not understood, people rely on price to determine what they should do.
How To Show Value
To demonstrate value with work, it usually comes in three areas.
- How much can my service lower the expenses?
- How much time can I save the organization?
- How much revenue can I earn the organization?
These metrics are objective rather than subjective, like customer satisfaction. With the right skills, you can turn the subjective into an objective metric to show the value you’re providing.
If you’re providing a service that will make someone 10% faster in how they do things, which will save the person 15 hours a week, or 60 hours a month, which is the person values their time at $50/hr, then the value increase is $3000 for the month or $36,000 for the year.
It’s not enough to be an advice-giver. You have to have the expertise to show people how to take advantage of it and not rely solely on you.
For the subjective, if someone can increase customer satisfaction by 10%, which results in 10 more sales a day, then this result can be turned into an objective metric that can be measured. It requires documentation of the value provided and then translated into a message the employer or customer can understand.
To show this value, it will take work, but if you can show how your efforts are contributing to 25% of the revenue, a good rule of thumb is that you should get a third of that. It is not the entire 25% because the 25% is not entirely your total effort. This usually applies only to direct sales since the sales orders can be tied to your effort and doesn’t require a lot of effort from others in the organization.
Very few people want to work 100 hours, so you have to understand the life you want to have and what activities it will be filled with. If you’re going to go to every available child event and go on four vacations a year and retire at age 65, then this might only take $125k/yr and working 30 hours a week, then you need to average $86.80/hr, or you need to show that you’re providing $860.80/hr in value to your employer. The details will differ in each situation, but here is the framework for getting the reality you want.
If you’re making $40/hr and want to your income from $80k to $125k, you don’t want to work more hours at $40/hr but figure out how to get $86/hr for your efforts. Another way to hit this mark is to learn not to trade your time for money and leverage the internet to make sales. If you sell a monthly newsletter at $20/mo, you need to find 521 people willing to buy your newsletter, but with a newsletter, you need to show you’re providing $200 worth of value a month. If there is no way of showing people how they can implement the lessons and it’s up to them to implement, then going for 100x in value provided is a good start. So in this example, you need to show someone can get $2000 in value each month. It just depends on how strong your brand is as a business or person and how you can market the value.
How To Think About Increasing An Employee Salary
If entrepreneurship is not your thing, then growing your salary is required and if you want to double your salary, you need to average a 25% salary increase every year.
Salary Year 0 – $50,000
Salary Year 1 – $62,500
Salary Year 2 – $78,125
Salary Year 3 – $97,656.25
So you need to learn how to increase your value by 2.08% every month or 0.48% every week. Anything above a 25% growth rate tends to be very unstable, and people cannot keep up with the growth and will either burn out or create something very messy that will fail soon.
Remember, if you go by the yard, it’s hard, but if you go inch by inch, it’s a cinch.
If you’re going for subscribers, ask yourself how to increase your base by 25% every month. How can you get ten more every month, and in one year so that you will have 120 and then 240 in year 2? What usually happens if you’re good, then things start to grow exponentially.
Going For Leveraged Results
In physics, momentum is mass times velocity, so when you’re first starting, you have little mass, and all you have is velocity, but eventually, with enough time, the mass will start to grow. You can’t keep velocity to zero because zero times anything is still zero. So nothing is passive, but if you have enough mass, you don’t need to rely on your velocity as much, and it will give you more free time to pursue other things like family, hobbies, and causes that are important to you.
If you’re in a business and want to double your results, you don’t want to focus on one area and double its results. You want to look at seven different areas and make them 10% better. There is usually a bottleneck, and you could have an area that has the capacity, but if the bottle is only allowing five units to go through instead of 50, you’re only going to be able to process five units.
A big reason why lumber prices increased by 400% over the last year is that there is a bottleneck at the lumber mills. There is wood that could be processed, but the lumber’s capabilities are not there and cause supply to not keep up with demand, and then prices increase.
If you’re only processing five units at $20, your revenue is $100, but if you can process 50 units at $5, you made $250. So getting the highest price for your goods and services might not be the best strategy. You probably want to go for volume. It just depends on how involved you want to be. If you enjoy working one on one with people, you have more time to demonstrate the value you’re providing and charge more. If you’re going to sell a product, the volume game is probably what you want to play unless it is a very niche product.
Playing the volume game requires marketing and focusing your attention on the customer most likely to buy, or otherwise, you’re wasting your time and energy. So spending time segmenting your customers and understanding the needs and wants of your buyers will be crucial to your doubling your results.
Keep The End In Mind
I’m all about getting more results for my time because life is short. Remember that today is the oldest you’ve ever been in life, and today is also the youngest you’ll be for the rest of your life, so take advantage of life and don’t go to the grave with any unfulfilled desires. Even if you don’t get everything, at least you knew you gave your best effort and didn’t settle for the reality that you were given. You took action to make a difference for yourself and chose to pursue your best life.
