Work won't make you rich

Education plus work equals money. Spend time (and cash) studying at a good school, spend skills on a good job, spend workdays boosting your reputation, and you will be rewarded with a nice middle-class life and retirement account.

Well okay, that makes sense, but it may be the least efficient way to get rich.

Dress for the job you want.

Why? Because conversion is leaky.

About ten years ago I realised that I was paying thousands annually in rego and continuing education just to hang up a shingle as a lawyer. In other words, I was trying to convert money into work back into money.

A bunch of life events led to me letting my license expire. I put the money into a few index funds. Now they generate more income than I got from legal work (an admittedly low bar).

There's a bunch of factors at play including luck and control. The range of outcomes was wide, so I know to draw modest conclusions, and not something like:

Vanguard Total Stock 300%! S&P 500 Ride-or-die bitchez! YOLO!  

My take-home was that converting finance directly into more finance was more straightforward and no less effective than first converting it into labour.

Factors of Production over time

Marx proposed land, capital, and labour as factors of production; the ingredients for making stuff. Because they're tradeable for money, I'll also call them assets. Of course, to make stuff, you also need time. Time is also tradeable, so I'll add time to our list of assets. Skilled labour, the kind that often requires (costly) tertiary study and (costly) certification, can also be called 'human capital', which hints at its commodification, if not its tradability.

These factors of production are combined through entrepreneurship to, well, produce.

Ye olde example: buy (financial capital) seeds, sow (labour), land (land), harvest (labour) grain.

As society grows more complex, it takes greater time and capital to bring endeavours to fruition. Agriculture may be an annual project, but pharmaceutical R&D takes years.

People vs Groups

On an individual level, people now tolerate longer timeframes to develop more specialised skills. They don't just get sent to work in fields or factories at age five.

Modern people also use conspicuous consumption to signal status and accrue social capital for the opportunities to sell their hard-won skills.

The conventional professional pathway involves converting time and money into education and status-signalling commodity fetishes, to then convert back into time and money.

"Now hold up," you say, "can you really buy time?"

Sure you can. In the short term, buying a sandwich means you buy a few weeks from death by hunger. A more advanced scenario would be using your professional earnings and upper-middle-class connections to obtain life-saving surgery.

Arguably, to us individuals with our short individual life spans, little is as important as time capital. Most of us will pay handsomely to prolong our lives.

So while theoretically immortal societies and organisations concern themselves with producing stuff, natural humans are different in that they want to amass capital that they can then re-swap for time on this earth. After all, we meat-bags can't directly live off compiled code, or eat customer satisfaction. At the end of the day, we don't care so much about what we produce as much as we care about getting back our inputs of time and money.

As societies abstract away the necessities, we make bigger, more frequent, and more concentrated bets that take longer to pay off.

Conversion Cost

As I mentioned before, conversion between asset classes is leaky. It has friction. Some examples:

• Your labour is taxed as it turns into income.
• You may not remember 100% of a course even though you paid 100% of the fees.
• Transfer costs apply when buying or selling land, i.e. turning it into or from money.
• Your land must be maintained with cash and labour in order for it to produce yield or rent.

As an aside, this is reminiscent of the 2nd law of thermodynamics which describes how energy is lost (not destroyed) as it is transferred or transformed.

Zero Conversion

By working within each asset class, you minimise this leakage.

• So if you want financial gains, buy financial product, not education or some other ticket to labour.
• Doing more of a craft will get you better at that craft. Money and influence may come as secondary outcomes, but they might also not. Gardening only got me better at gardening.
• If you want more time, use time to exercise and stay healthy, instead of hope that your medical fund will cushion years of take-away at your desk.
• If you want social capital, focusing on the quality of your relationships will lead to more genuine, if not more plentiful, relationships. There are plenty of cautionary tales about people trying to buy and sell status.
• If you want more land, clear out your junk, rather than engineer ways of borrowing more to buy more.

You avoid doing or thinking like this because you in your head, you're a good trader. You think you're savvy enough to accurately price time, land, and capital. You think you can multiply your holdings through a circular series of canny exchanges.

And maybe you can. In a simple one way trade.

But once you start stacking conversions those leaks compound along with the returns.

The bigger, more long-term, or more frequent your investments into non-financial capital, the more you will lose converting from and back to money.

Caveats

Of course, trying to work within assets rather than trading them has limitations. 

Returns diminish. There's only so much space you can clear. Only so much cash in hand to invest. Only so skilled you can get. 

And if you've got nothing except time, then you'll have to trade it for some seed in something else.

Got zero land? Well, sellers only accept local currency.

Got zero money? Well, you're going to have to sell something.

We're born selling our time because we have nothing else, but that doesn't mean we need to keep doing so for the rest of our lives.

Particularly because around middle age we realise that our time is scarcer, more valuable, and harder to sell. If you have promised your future time to inflate your lifestyle - let's say, by taking on debt - then time is also a lot more expensive to buy back. You have to finance getting off the treadmill AND your repayments.

Converting between asset classes has its place, but be careful trying to chain conversions to get more of what you started with.

All that being said...

It is not too late to simplify

If you want more of something, first look to see how much of it you already have and the least convoluted way for it to make more of itself.

Land will give you space.

Time will give you longevity.

Labour will lead to labour.

And money will make you rich.