Making money
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The end goal of business is to utilize your time better: for profit, for pleasure, and for family. Time for family and time for pleasure come after you've made a profit and found a consistent return, so profit must be the primary goal to meet.
Profit comes from getting more money out of an action than you had put in. It is a pretty basic word to define. Yet what is money?
Money has been debated for thousands of years by people with many more degrees than I would ever want, yet the basic definition of money is simple, and it is not complicated by any means. You'll often hear it defined simply that "time is money." This is completely wrong, though.
Money is a way to store productive labor. In essence, money is time (not the other way around). When you get paid to mow a lawn, the person with the money is paying you to mow the lawn so that they can save the time to do something more productive. They can't give you their saved labor though, so they give you money that equates to less than the value of the time they saved. You, on the other hand, performed the work because it was the most valuable way to spend your time -- you gained money worth more than the time you worked!
If your fee for mowing the lawn was more than the person would save doing it themselves, they won't hire you. If they offered to pay you less money than you could have made elsewhere with your time, you wouldn't accept the job. This is the basic exchange of trade -- both people in any trade must profit in some way (money, time saved, etc).
To explain it in a more simple fashion, you can look at money as such: the price of any service or product is directly related to how much time it saves a person or how much pleasure the person gains. That's it.
In any exchange of goods or services, both parties in a trade have secrets. This is the way it has to be. The person with the money won't tell you how much money they have, and they won't tell you how much money they're saving by buying your service or product. The person with the product or service won't tell the person with money how much profit they're making by selling the product or performing the service.
These secrets are good things -- they allow each party to walk away from the transaction ahead. Mutual profits are the only way we make any barter or exchange.
When you go to price your product or your service, you need to do so by thinking about what the other person might gain from it. If they are saving money, you have to try to figure out how much they're saving. If they're gaining happiness, you have to think about what other things can make them happy at a similar price. As a businessman, you learn these things naturally from competition and from time preference. If you sell a T-shirt for $20 that can be bought at the mall for $15, are you more expensive or cheaper? You can only discover that fact by also looking into the time needed to drive to the mall, the gas spent, and the time spent wandering around looking for the T-shirt. Prices do not have to be the same unless everything else is equal: time driving, gas, frustration levels, etc.
Money is time. Don't look at it any other way. When you have more money, you can afford to spend your time in the best way possible by paying others to take care of tasks that you wouldn't do yourself at that price. When you have more money, you can afford to purchase products that can make your life easier to handle, allowing you to gain even more time in the future.
When you deal with businesses now and give them money, consider if the money you're spending is gaining you time or gaining you pleasure (making your time more valuable). If it isn't, don't make the purchase.
Profit comes from getting more money out of an action than you had put in. It is a pretty basic word to define. Yet what is money?
Money has been debated for thousands of years by people with many more degrees than I would ever want, yet the basic definition of money is simple, and it is not complicated by any means. You'll often hear it defined simply that "time is money." This is completely wrong, though.
Money is a way to store productive labor. In essence, money is time (not the other way around). When you get paid to mow a lawn, the person with the money is paying you to mow the lawn so that they can save the time to do something more productive. They can't give you their saved labor though, so they give you money that equates to less than the value of the time they saved. You, on the other hand, performed the work because it was the most valuable way to spend your time -- you gained money worth more than the time you worked!
If your fee for mowing the lawn was more than the person would save doing it themselves, they won't hire you. If they offered to pay you less money than you could have made elsewhere with your time, you wouldn't accept the job. This is the basic exchange of trade -- both people in any trade must profit in some way (money, time saved, etc).
To explain it in a more simple fashion, you can look at money as such: the price of any service or product is directly related to how much time it saves a person or how much pleasure the person gains. That's it.
In any exchange of goods or services, both parties in a trade have secrets. This is the way it has to be. The person with the money won't tell you how much money they have, and they won't tell you how much money they're saving by buying your service or product. The person with the product or service won't tell the person with money how much profit they're making by selling the product or performing the service.
These secrets are good things -- they allow each party to walk away from the transaction ahead. Mutual profits are the only way we make any barter or exchange.
When you go to price your product or your service, you need to do so by thinking about what the other person might gain from it. If they are saving money, you have to try to figure out how much they're saving. If they're gaining happiness, you have to think about what other things can make them happy at a similar price. As a businessman, you learn these things naturally from competition and from time preference. If you sell a T-shirt for $20 that can be bought at the mall for $15, are you more expensive or cheaper? You can only discover that fact by also looking into the time needed to drive to the mall, the gas spent, and the time spent wandering around looking for the T-shirt. Prices do not have to be the same unless everything else is equal: time driving, gas, frustration levels, etc.
Money is time. Don't look at it any other way. When you have more money, you can afford to spend your time in the best way possible by paying others to take care of tasks that you wouldn't do yourself at that price. When you have more money, you can afford to purchase products that can make your life easier to handle, allowing you to gain even more time in the future.
When you deal with businesses now and give them money, consider if the money you're spending is gaining you time or gaining you pleasure (making your time more valuable). If it isn't, don't make the purchase.
posted by A. B. Dada at 9:31 AM
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