I read an interesting concept in a book the other day regarding the income levels of various job positions. I have talked plenty about being frugal and living on less but not all that much on increasing income, which essentially has no ceiling. So, let’s dive into it.
When you get a job at a company, the amount of income you can bring in on a daily or annual basis is typically fixed, or capped in some way. For example, I’d say 90% of jobs have a set salary (i.e. $50,000 per year) or if you work based on commission, more often than not, you’re total earnings cannot exceed a certain threshold (let’s say $100,000 per year). In each of these cases your income in no way can go above this (we’re not including benefits, bonuses, etc in this discussion for the moment). And if you’re reading this right now I’d be willing to bet you fall into this category of job where your income is fixed.
In many ways, this is a good thing for people as it provides a steady and reliable source of income. However, by committing yourself to this type of work you are literally trading hours of your life every week in exchange for a set amount of money. There’s really no way you can make more, even if you have an extra productive week or provide significant value to your company on a particular day. Before you start yelling at me I realize that if this were in fact the case and you did something amazing, you’d likely receive some type of promotion or bonus for your hard work, but in reality these are generally not all that substantial, do not happen very often, and still lock you in to a fixed income, even if it is higher than what you were previously making.
Where am I going with this?
I think when it comes to making money, it is important to have a stable income especially if you have a family and need to know you can put food on the table every night. However, if you want to accelerate your path to higher income you’re not likely going to do it with any of those fixed income jobs. There is quite literally a minimum time period you must work in order to reach a certain savings or net worth goal. But, imagine a world where the quality of work you do dictates how much you get paid. If you put value into the world, you get that back in the form of a fatter paycheck. The better work you do, or the more people you sell to, or the more you get done in general, the more you will be rewarded for your efforts.
That’s the difference between a scalable profession (variable income) versus a non-scalable profession (fixed income), at least in my eyes. The hard part about scalable professions is that income can have extreme variation from week to week or month to month, making it difficult to plan and control your financial picture. The other thing is that it can be very stressful on people because it is possible with scalable jobs to make no money at all, not to mention there are very few in existence.
Let me paint the picture for you a little bit more clearly. Nonscalable professions might include, teachers, engineers, retail workers, and so on. Scalable professions would be authors, entrepreneurs, artists, comedians, etc. The key difference here is that scalable professions generate an audience by trade. Granted, at first it may not be a large one, but over time it will likely grow if they are doing the right things. This in turn puts more money in their pockets. If they make it big enough, they could be making more in one day than they could have made in a year working a “normal” job. As they accumulate fans of their work, those people tend to stick around if they like what they see. That person has a stable and growing audience the entire way, much like a snowball growing in size as it rolls down a hill. But, once again, the extreme volatility that comes with this kind of work can be very dangerous if you don’t have anything to fall back on.
Let’s look at Dave Chapelle as an example. I’d say most people know who he is, but if you don’t he’s a comedian and I’d recommend checking out his new specials on Netflix. Anyway, he recently sold the right to those specials for $20 million a piece. He’s a big snowball. However, if he were to say or do something in the public eye to defame himself and his character he could potentially lose all future deals and shows he has planned for the future. A poignant recent example that comes to mind is Bill O’Reilly. At that point though when you’ve already made millions of dollars it’s not such a big deal to lose your profession. Of course it may still hurt, but they have a lot of money to do whatever they want with. If you’re doing something similar to this (working in a scalable profession) but aren’t making tens of millions, a big mistake could cost you dearly.
After having said all that, here’s what I’d recommend when it comes to scalable vs nonscalable income. If you have a day job providing good money and benefits like I do with my engineering firm, by all means stick with it. But I’d also recommend looking for a side hustle that could provide you with scalable income, which is exactly like what I’m doing with this blog. Of course, I’m making a whopping $0 from this site at the moment but if I wanted to throw up a couple ads or something I could probably make some money off of it. And as the traffic to the site grows, so too would the income from ad revenue or whatever else I’d use to monetize the site. This provides the best of both worlds in my opinion, where you have your day job to fall back on if you make nothing at your side hustle but you also have the potential to make a fortune if your other platform makes it big!