Profitable Business Decision-Making

Once upon a time, a professor with a degree from the prestigious London School of Economics offered myself and another librarian extra employment to put together a resource list for his students.

We were thrilled. Then the professor let slip to me that he was also hiring an English professor to edit his workbook. My reaction, as someone who had all but three courses needed for a PhD in English, was to think (a) you didn’t need a PhD to edit, and (b) many English professors had no idea how to edit writing.

Then the economist dropped the real bomb. He told me that he had to pay his English professor buddy twice a much as the other librarian and me.

When I asked why, the economist said, “Because he can get a lot of work editing. But you girls’ opportunity costs for outside work are far less than his.”

I was stunned. I knew what an “opportunity cost” was. It’s the cost of foregoing the “road not taken.” I was outraged at this excuse for paying two women less than a man. When I explained what happened to her, so was the other librarian.

Here’s the thing about economists. Economists tend to draw a rigid line between “work” and leisure.” They learn that wages are payment for “giving up leisure.” To economists, leisure is mainly of interest when studying consumer-buying preferences. That’s not a glamorous part of their field.

So it’s understandable that the economics professor forgot there’s always an alternative to work. That alternative is leisure. One can just say “no” to a low-ball offer of a job.

And that’s exactly what the other librarian and I did. The “smart” professor wound up compiling his resource list in what would otherwise have been his own leisure time, but for no pay.

So, does the economists’ definition of wages as a reward for giving up leisure time mean anything for self-employed people? I think not.

Self-employed people are self-directed. We have the opportunity to mix and match personal and work life at will. For many of us, it can be hard to draw a hard and fast line between work and leisure the way a factory shift or a 9 to 5 schedule at the office does for those who work for a single check from an employer.

And self-employed people do much that is not directly compensated by our clients. To survive, a good chunk of our time has to be spent on thinking about our work and designing better and more efficient ways to do it. No one pays us while we improve our skills. No on pays our benefits like health insurance, and retirement. We have to take care of those kinds of things ourselves.

So, for self-employed people, opportunity cost often boils down to choosing to do one thing over another, period. Something that may seem like leisure or fun may well turn out to be invaluable to our business. And something that may feel like work may be an utter waste of time.

As self-employed people we have to:

Not accept the things we’re used to,
Have the courage to try something new,
And find the wisdom to know when to do what.

Each of our decisions about what we’ll do and what we won’t determines how much we profit from our businesses.

The money we get is not a wage. It is not payment for giving up leisure. It is not even for the work we do. It’s for our talent, expertise, and experience.  Leisure isn’t something we give up. It’s something we gain from putting our talents to better use.

Copyright © 2009 Nancy K. Humphreys