We all need money to survive. There are only two broad ways we can make money — using our capabilities or renting our assets.
A capability is an ability, skill or knowledge that you possess that others value. For example, when you go to a doctor, you pay him for his capability in diagnosing and then treating any illness you may have. You value this capability, hence, you pay for it.
The more value people place on the capability, the more expensive the service is. To earn a lot, you need to have a capability which is relatively less common. A gardener does not get paid much as it is relatively easy to build that capability.
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The problem is that building any rare capability takes years of practice and hard work — there is no short cut. Students striving to obtain those elusive degrees or those working hard to obtain difficult skills should realise this. If it is easy, then you will not get paid well. Every time you choose an easy path over a hard one, remember that what you will learn will be typically of less value and hence will later reflect on your earning potential.
Assets?
The nature of using capabilities to make money is that once you stop working, the money stops coming. Once she retires, even the finest surgeon does not get paid anymore. Here is where “assets” come in. An asset is something tangible that you can rent out, and you earn money even if you are not directly working. The easiest analogy is owning an apartment in a prime locality in a city. Many people would want to rent such a place and hence you can get a good return. Even if you do not work, the money will keep coming. What many do not realise is that an asset does not have to be just property — it can also be the brand that you have built. For example, MacDonalds is a brand everyone knows and is now franchised to others across the world. It can be any service or product — people will seek your organisation out (or you) once the brand is built and gets known for quality.
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Branding
Capability-building and asset building are not mutually exclusive. In fact often there is progression. When starting off on a career, the focus has to be on capability-building for sure. It is consistent delivery of high quality using your capabilities that results in the development of a reputation or “brand.” Immaterial of the work you are doing, you have to build your “brand.” The brand stands for a promise — a promise that you will deliver high quality, consistently. Every time you do not deliver, your brand value goes down. Even within organisations, whenever a challenging task comes up, the person who gets it allocated is the one who has built his brand.
This will enable you to earn above-average compensation. For the more ambitious, you can extend the brand and become an organisation or a company. For example, say you start out as an independent auditor.
Over time as you build your reputation, you can hire others to work for you under your “brand.” The returns you earn will then increase as the total amount of work done in your organisation increases.
The starting point is to build those great capabilities first. Then deliver fantastic service using them consistently, thus building your brand. Your brand will be your asset which you can then use to build a sustainable income into the future.
The writer is a director, Thinking Palm. E-mail: Vikram@thinkingpalm.com