Scalable vs Non-Scalable Professions
Doug is looking for a job. He has just graduated with a liberal arts degree from a decent university, and realizes that he has developed no tangible skills that could be translated into value. Having considerable student debts and high-demanding parents, he is pressured into finding a job. On the cusp of desperation, he suddenly gets a phone call from his uncle who is a framer, asking him for help. Of course Doug has no skills that could help his uncle. But with the shortage of labour in construction, and pennies on the dollar that the uncle could be paying for the inexperienced help, he decides to give Doug a go. Doug starts out working $18 bucks an hour since the job is labour-intensive, and very physically demanding. But all he can do is move rocks and lift wood, since he has no skills, and so he keeps earning his mere $18 bucks an hour. His uncle likes Doug’s character and so decides to invest into him. He teaches him how to use the drill, the hammer, how to measure and cut wood, and Doug, being more skilled, goes onto earning $25 an hour. He buys a nice new apartment, gets a small, cozy Honda, and goes off trying to build as much frame as he can. Time passes and he amasses more experience. Before he knows it, he is earning $40 bucks and hour! He tries to convince his uncle to teach him more, but after three years of hard work, Doug seems to know just as much as the uncle. And the uncle is earning $40 bucks an hour as well! He starts looking around for other framers, hoping that they could teach him something that could translate into higher income for Doug. But unfortunately he realizes that no-matter how good a framer he becomes from this point on, he will not be able to break the ceiling of $40 bucks per hour. Even with a liberal arts degree, he understands the simple math that in order to earn $100,000, he needs to work 2,500 hours. In order to earn $200,000, 5,000. And so he goes on building frames.
Doug is not alone in his pursuit of linear income — that’s the way majority of people earn money, and if you work for someone else, that’s the only way they can really pay you. It makes sense, its predictable — Doug doesn’t have to worry if he is going to earn $40 per hour tomorrow, or five years from now (Unless he resides in an economy with sever inflation, then he would just immigrate to Canada and build frames there! Which is exactly what majority fo Ukrainian framers I know have done.) The job is safe, predictable, and the output is directly correlated with the inputs. It’s linear.
The first time Charlie set foot on stage was at age 8. His father was a traveling actor, and used to do impressions of Elvis Persil. Charlie loved watching his father turning himself into this character in front of his eyes. Inspired by his father, and sharing the same passion for the performing arts, Charlie decided to follow in the artistic path. He got training and auditioned for a few community plays. The pay checks weren’t great, and he had to find other means of financially supporting himself. Even though Charlie was a great actor, almost anything else that he did contributed to bigger financial gains. Being a waiter earned him more money, cleaning floors earned him more money, being a helper for framers on construction sights earned him more money than the craft and skill which he has been best trained in — acting. Soon, things began to turn sour for Charlie, his girlfriend was sick with him not being able to support her, his family members encouraged him to pursue some sort of an education to increase the value of his labour, Charlie began to doubt himself. But his desire was so strong that he decided to leave everybody behind and come to LA. Putting on one of countless stage plays around the city, he caught an eye of a major studio head of casting. Which gave him the opportunity to audition for a great role. Being a great actor, he got it, and his success rolled off. Instead of earning $20 bucks per play, he was making $3 million per film. Even though he worked the same amount of hours, not being particularly more skilled than he was before, Charlie was being able to earn considerably more. One hour of his time equaled not to a few bucks but to thousands.
Charlie had a scalable profession, one which is unpredictable, non-linear and his output does not correlate with his input. He can put in much less work and get much more out of it than say a linear earner like Doug.
Here’s the thing with scalable professions — for every Charlie that makes it, there are hundreds that don’t. I chose the example of an actor because its so obvious to demonstrate and understand, but it’s also true with every other scalable profession — the majority earn the most, and everybody else gets pennies. Scalable professions have huge wealth gaps — one actor can be worth a million, a hundred others can be worth shi*. Unlike linear, non-scalable professions, where majority of framers that have the same skills and work-experience, relatively earn the same amount of money.
What is better to pursue a scalable professions or non-scalable one?
We live in a world where the once that think and make decisions are much better paid than the once that produce the labour of the decision maker. What I mean by that is that an airplane technician will make much less than head of Boeing, the framer will make much less than the head of the development company, and the executive at Nike will make much more than those that assemble the shoe. Our capitalistic society rewards those with amazing talents, and the once that hold the risk. By making the decisions Executives at Boeing, Real Estate Developers, and Nike will have more expertise, and responsibility, than technicians, framers and factory workers (their expertise is valued more). And their responsibility will carry into them having the ability to earn more. A key characteristic of scalable professions is responsibility.
I want you to take a look at the following chart taken from 2016 Rio Olympics 100 Metres:
In scalable professions, little change in the performance can translate into dramatic outcomes on personal success and networth. Which leads to immense competitions and the hostile environment of winner-take-all. In scalable professions, your success is never guaranteed, you are always competing. Therefore in scalable professions, you will always be forced to work harder, trying to maximize as much of your labour and improve the quality of it, because a slight difference in performance can yield astronomical difference in networth’s.
It’s easy to point at athletes, singers and actors as examples of this, but I believe that all scalable professions share this characteristic. That’s why we know of the Rockefeller’s and not the second most affluent oil family. That’s why Carnegie has his name on buildings, and countless of other’s steel tycoons didn’t get a chance to fund a university. That’s why Mark’s Facebook earns much more than the other second similar social media of the kind (and they own it too). Scalability leads to monopoly.
The upside towards scalable professions — other than the possibilities of earning substantially more than any other non-scalable worker can imagine, is that the work itself is more exciting since it depends so much on your performance and it being unpredictable. It is more rewarding if done write but its just much harder to do.
Patrick is a young professional working for an insurance firm. Having just a regular office job he has a hard time making rent in the overpriced — on the verge of a bubble prices of Vancouver. Suddenly his uncle Jim dies, being nice to uncle Jim paid off when Patrick gets $40 grand inheritance money. He heard from a friend that it would be smart to buy a house, fix it up, and live in the basement to break-even on the living expenses. Taking the $40 grand, he uses is it as a downpayment, figures out how to get financing from the bank, organizes a construction crew, does market research to buy a house, and finds and leases it with tenants. In a year the prices appreciate (like they always do in Vancouver) and Patrick realizes he has made $100k! He enjoyed the process and is intrigued by real estate, and so he tries to repeat the process. Over the course of a few years he buys properties and sells them at a profit. His average take home is $50k and he wants something bigger. His friend is trying to buy a parcel of land, assemble it and build a small condo. Patrick realizes that he has all of the skills needed for the project — he was just playing with smaller numbers before. And so he does the same exact amount of work he did with single family homes, just with condos this time — making $300k. He likes it, and organizes an LLP, gets a few partners and starts buying land and building stuff on it. Year after year he begins to earn more and more money. $500k first year. $1 million the second. $5 million the third. Until one day a recession hits and Patrick goes bankrupt.
And that’s the upside and downside of scalable professions. Risk and reward is most acute in scalable professions.
To maximize our happiness, it is better for us to enjoy bits of joy at a mild levels throughout a long period of time, rather than to have a huge blast of dopamine during a short period of time and then be deprived of it for a long time. Non-scalable profession produce more happy individuals since more people achieve success within the profession and are stable in their earnings. The predictably of the job further reduces the stress and the pressure from constantly being on your A-game. It allows you the freedom to come home after work and relax. While scalable professionals grind for long periods of time, sometimes with no prospects and no encouragement from peers around them, hoping for a big hit and their labour to pay off disproportionately.
Scalable professions: once which inputs do not correlate with outputs, where there is no cap on how much you can earn per hour of work, where the same skill can earn you more money if you play with bigger numbers, where you don’t work for someone else (mostly), where you have more responsibility and hold more risk with your decisions, where you are a thinker rather than a builder, where you can’t really learn in school, and where there is more competition.
As a side note, non-scalable professions have tons of competition as well, mainly because those type of profession are school taught, which result in herds of people graduating with the skill to do your job. Your labour therefore becomes undifferentiated commodity as the result of this huge supply in the market. If the framer decides to quite tomorrow, then the construction crew will just go find another framer and pay him the same. It won’t be a big loss. That’s the thing with all non-scalable professions — they are easily to replicate. No matter if you are a framer, lawyer, doctor, engineer, or astronaut. If it can be taught in a school, it’s highly competitive.
At the end, here are my final thoughts on the topic: It’s more rewarding to pursue scalable professions with the write personality — they test you more, they provide interesting daily opportunities and make you learn something new every day (you are pressured to learn something new everyday or you won’t survive). Before pursuing a scalable profession make sure that your existing talents and skills are there so that the only variable your output will depend on is hard work. No matter how much ball I play, I just won’t get to the NBA, and no matter how much calculus I do, I won’t practice algebra at MIT. I need to work with what I got. Sometimes you can identify your talents by understanding what comes like leisure for you, what you derive joy from, but seems like hard work for others. Second — you have to maximize your concentration and time on the task that you are pursing. You need to maximize the only variable that matters — hard work hours. That means minimizing entertainment time, hanging out less with friends, spending more and more time focused on your craft. If you are able to make these sacrifices than you should pursue a scalable profession. But otherwise don’t, because you need to maximize your chance of success and well-being. You want to be successful 999 times out of a 1000 simulations of your life. And usually such high degree of success can only come when you follow a non-scalable profession. After all, there are more successful framers than there are actors.
