Success Indicators and Success

Gary North (www.garynorth.com), “Reality Check” (January 11, 2008)

Success indicators are not the same as success. A student can get an A on an exam by cheating. He is not a success. He can get it by cramming for the exam and remembering nothing a week later. This also is not success. The success indicator is supposed to reinforce behaviour that leads to success, not serve as a substitute for success.

For every known success indicator there is a way to attain it without being successful, unless you define success solely as achieving a success indicator. We do not teach our children this way, so we ought not to settle for a success indicator in place of the intangible goal represented by the indicator. It gets complicated.

Does the name Harold Russell ring a bell? Probably not. But he achieved what no other person has ever received: two Oscars for the same performance. He played a double amputee in “The Best Years of Our Lives” (1946). He was not a professional actor. He had lost both of his hands in World War II. Nobody who saw his performance is likely to forget it.

Years later, he sold his Oscar for Best Supporting Actor in order to raise money for his wife’s operation. He explained: “I don’t know why anybody would be critical. My wife’s health is much more important than sentimental reasons. The movie will be here, even if Oscar isn’t.” That rings true for most of us, I think. The success indicator — the statue — was not the same as success. He did not sacrifice success when he sold it. He did not lose his stature by selling his statue.

Money is the most common success indicator. “Buy low, sell high” is hardly an ethical manifesto, yet it is the basis of how we make our livings. It puts food on the table. Still, we know that to die as a miser dies, surrounded by his ledgers, makes no sense for anyone who is not afflicted with a view of money that we would not like to see our children afflicted with.

We understand the trade-off between money and significance in life. We look at a person who has laboured in a jungle as a medical missionary, yet we probably do not conclude, “He died broke. So, he wasted his life.” We also probably do not have much respect for the plastic surgeon who gets rich by making starlets look better. Yet his income keeps us from saying, “He has wasted his life.” That depends on what he has done with his money.

YOUR CALLING

I have come back to this theme repeatedly for over 25 years. I define “calling” as follows: the most important thing you can do in which you would be most difficult to replace. For women, this is usually their role as wives and mothers. For men, this is probably their role as husbands and fathers. Women recognize their callings more readily than men recognize theirs. We say, “nobody ever said on his deathbed, ‘I should have spent more time at the office.'” When we say this, we rarely think of a woman saying this on her deathbed. Yet in today’s society, it is becoming more likely that American women will assess in retrospect their lifetime trade-off between significance and money.

Most men know that getting fired is not in the same league of horrors as getting divorced. To fail on the job is not generally regarded as being a failure comparable to failing in marriage. When a young man tells his parents or friends that he has just been fired, they tell him, “It happens to everyone. Don’t worry about it. There’s always another job.” They don’t say something similar when his wife walks out on him and takes the children.

I don’t suppose anyone told Jimmy Carter in December, 980, “Don’t worry about it. You can always be elected mayor of Plains.” That is because being the President of the United States is a calling, not a job. Anyone who has lost the Presidency is not going to be re-elected, Grover Cleveland to the contrary. Being elected to the top political office is presumably a man’s calling: the most important thing he can do in which he would be most difficult to replace. Yet Babe Ruth was onto something in 1930, when someone pointed out that he made more money than President Hoover. He replied, “Why not? I had a better year than he did.”

In most cases, the free market is not willing to pay us more in our callings than in our occupations. That is why callings exist. Why is it so difficult to replace a person in his calling? Because his calling doesn’t pay much. If it paid a potful of money, there would be candidates lined up to replace the present occupant of the position.

A few people are irreplaceable because they can make more money than anyone else. Star professional athletes or box-office movie stars are examples. So is Warren Buffett. The barrier to entry is so great that the person can’t be replaced. This is extremely rare. Buffett is wise. He saw that his gigantic fortune was his greatest achievement, and that he was incapable of doing as good a job giving it away as he did building it. He had someone to give it to: Bill Gates.

Gates is the only man richer than Buffett, and Gates says he is going to quit as leader of Microsoft in order to oversee the giving away of his fortune. Buffett watched Gates in action and concluded that Gates’s foundation deserved Buffett’s fortune. Buffett could then concentrate on increasing the market price of his company’s shares. I think both decisions were correct. Gates should quit as a businessman, while Buffett shouldn’t.

Gates recognizes that possessing great wealth involves great responsibility. (I think his wife Melinda was the educator here, making her arguably the most important woman on earth.) This responsibility involves deciding what should be done in a non-market environment: no profit and loss. Compared to a competitive market, the non-profit world is flying blind. Yet Gates does seem to have established numerical criteria for successful giving, such as the cost per children’s lives saved per dollar in sub-Sahara Africa. This does not solve the problem of feeding these surviving children.

Gates has decided that he cannot solve every problem. But the dying child in its mother’s arms is more likely to survive because of Gates’s cost-benefit analysis than if Gates were spending his waking hours trying to raise Microsoft’s profitability. The fact that there is no market for saving the lives of African children does not mean that saving a million lives is not significant. It means only that value is sometimes not the same as price. Value, unlike price, is not measurable on a one-to-one basis on a corporate balance sheet.

YOUR OCCUPATION

We live in a gigantic auction. The allocation principle of every auction is “high bid wins.”

Each person has specific talents. He also has non-specific talents. Human beings are the most adaptable of all creatures. They can adapt their skills to meet new conditions. Reason governs most of our choices. Our instincts are under control, which is why society is possible.

Our specific talents give us our edge in the workplace. Here, we are less replaceable. Our general talents give us our safety net. If the market for our specific talents dries up, we can fall back on our general talents. But these, being widely available, command low wages. We look to our specific talents as the source of most of our wages, which for most people is their major source of income.

Usually, it takes about 1,000 hours on the job or in training to get the skills sufficient for competence. That is not much time: 5 months. It takes about 5,000 hours to become highly skilled. At that point, we are no longer easily replaceable. We begin to be able to ask for raises and obtain them. Our output is worth more, so we can earn more.

Yet at some point, the raises cease. There are several possible reasons. First, we reach the limits of our innate capacity. Second, we cease striving to improve. Third, the market for our level of skills reaches a point when those with similar skills meet the demand. Demand equals supply, so the price of our services ceases to rise. Fourth, we reach our comfort zone and decide not to test the market by seriously offering to quit. Fifth, our employer has reached his limits in expanding market share. In any case, we begin to tread water occupationally.

Usually, this takes place sometime around age 45. This is when men start looking for significance rather than money. They perceive that whatever they have accomplished occupationally is the limit of their capacity or opportunity. They sense that they have not distinguished themselves in their chosen occupation. They are unlikely ever to be in the top 4% (20% of 20%) in their field, let alone the top 1% (20% of 20% of 20%). They start looking for something else to do with the time they have remaining.

They have spent two decades selling their time for money. They realize that this has not been a wise bargain. They believe they have nothing to show for it. They start looking for something to show for it.

The problem is, they are in debt: mortgage. They have children at home who are entering their highest cost period: college. They are unaware of the loopholes that can reduce expenses to such a level that a student working at a fast food restaurant can put himself through college. Their mobility is limited. So, they stick with what they have, or else they go off the deep end and run off with a younger woman to start a new life.

There are a few men who don’t face this because they are in the top 4% or even 1%. They make a name for themselves as masters of their occupation. They get a sense of accomplishment from their status as role models in their profession. They are close to irreplaceable. So, their calling is the same as their occupation. They make their living — a good living, economically speaking — in their calling.

Peter Drucker, the management guru, was such a person. He made a lot of money writing books, giving high-priced lectures, and advising senior managers in large corporations. He was one of the founders of management science. He died in 2005, still writing. He was a week away from 97. He stayed on the job to the end. He did not do this for money.

Not many people can be a Peter Drucker. Not many men need to be. But because most men never succeed in achieving a sense of significance in their occupations, they are ready to be pensioned off at age 65. The problem is, the era of the pension is ending. Rates of investment return are too low. Life expectancy is too long. Levels of competition from pensionless Asians are too high.

The frustration of staying on the job is high for most men. Yet the income available by quitting and finding new employment is low. When you move from low replaceability to high replaceability, your income falls. The archetype example is the Wal-Mart greeter. The job offers little money and little sense of significance.

MAKING THE TRANSITION

If you choose an occupation that offers high income and high significance, that’s ideal. The career of physician combines both, or can. Yet from what I understand, the occupation of dentist does not. Dentists do not get the same sense of satisfaction that physicians do. Yet the physician’s economic constraints and Medicare paperwork and high liability insurance premiums have combined to reduce both net income and significance. Physicians are becoming wards of the state unless they are paediatricians or free market practitioners: no government money.

There are several ways to gain significance in one’s occupation. One is to choose an occupation that offers little money but lots of significance. A medical missionary is one choice. The low pay scale makes them irreplaceable. Their ability to heal makes them significant. Teachers sometimes can achieve both — again, through low pay. But teachers on the state’s payroll are rarely able to eke out much significance. The level of performance by their students is low. They are perceived by the public as clock-punchers and baby sitters.

I have friends in the day care business. They have combined high income, high retirement income (real estate gains), and real significance. The barrier to entry is prestige. There isn’t any. In fact, the occupation has negative prestige for men. “You do what?” This keeps replacement costs high: barriers to entry. I have written about this repeatedly, but the barrier to entry remains too high, even for my subscribers, some of whom say they would like to become millionaires. They could become millionaires. They just won’t do what it takes. It takes:

www.demischools.org

Another way to gain significance is to become dedicated to mastery. This is the impulse to become the best in the field. This requires long hours of work, attendance at seminars, reading constantly, applying what you have read, and either writing or speaking. But if you have no respect for your profession, this strategy will not work.

A more common approach is to limit your occupation to the minimal 40 hours a week and then allocate another 30 hours a week to something that either can become a new occupation or else is a low-paid area of service. The problem here is the time commitment. For a family man, this dedication has a price tag: absence from the home. So, I recommend time spent in family projects that can become income-producing. Art Robinson did this with his family-run sheep ranch business. He also did it with his scientific research and newsletter publishing (Access to Energy). He did it with his CD-ROM curriculum, which his children worked on as producers.

www.robinsoncurriculum.com

If your occupation is so narrow that your children’s interests and skills are not likely to give them a competitive advantage — irreplaceability — then you cannot do what men have done through history: teach your sons your trade. This is why starting a home business on the side can offer a way for fathers to teach their children the basics of running a business. The trade-off here is that the time required to do this comes from the overtime that most professionals allocate to their occupations. Income falls until the family business becomes profitable.

If you think of your occupation as supporting your calling, then you are less tempted to dismiss your occupation at age 45. There is a man in my church who is a lawyer. I don’t know how successful his practice is. His calling is running a Saturday lawn-mowing service. He has hired about ten inner-city boys, ages 7 to 13, to work on his crew. He picks them up, gives them training, and takes them home. Obviously, his time is worth far more money in his practice than it is mowing lawns. But he has developed a small business that gives him a reason to establish contact with these boys. He serves as a male role model for them. They learn the basics of self-discipline on the job. If they goof off, they lose the job. They have no other job options to match it. They know this. Over time, this experience will provide them with the emotional skills they need to survive in a competitive business world. It is unlikely that they could learn these skills anywhere else, and surely not until they qualify for an entry-level job at age 16.

The opportunity to teach can be converted into money. There are private schools that can use teachers. The schools can’t pay much, but for someone on retirement income, a pay check of any size is gravy. It allows you to invest more, on the assumption that Social Security is not as long-lived as you are.

If you can get into a volunteer situation early, you can make yourself indispensable. When your skills in this position are sufficient, you can probably make the transition to a paid position. This is probably the best strategy to convert calling into occupation. It takes a considerable investment of time. A growing organization is always on the lookout for people who have demonstrated their competence and reliability.

Those of us who have been in the business world for several decades, but who are not working with entry-level people, forget just how incompetent most newcomers are. The work ethic has faded. The public schools have declined. So, companies pay a premium for reliable people. There is no question in my mind that a person who has proven in a volunteer situation that he can accept responsibility, perform better than expected, and finish every assignment on time has distinguished himself from the majority of applicants.

I think anything connected with health care constitutes a calling when delivered free of charge and an occupation when salaried. If you are looking for a transition route out of your occupation into a salaried calling, I recommend health care. The obvious growth sector is home health care. To cut costs, the health care delivery industry is going to have to cut the cost of real estate. By using the care recipient’s home and providing skilled labour, the industry will reduce its real estate overhead expenses.

CONCLUSION

I think anyone who serves as the primary breadwinner in a household who does not yet have a calling that provides the bulk of his monthly income is asking for trouble. The unfunded pension is one aspect of this problem. Mid-life crisis is another.

The cost of making the transition from occupation to calling increases as we get older. If a man finds his calling and can make a living at it at age 21, he is in a remarkable position. If I were 18 again, I have no question what I would do. I would major in young child development in college. Then I would start a day care. I would then build a new one every 36 months. Fifteen years after opening a day care, the property is paid off, and it then generates $60,000 a year. I could retire a rich man at age 40 and spend the rest of my life writing. Or I would just keep doing what I had been doing. Increasing your income by $60,000 a year every 36 months is a nice way to escape retirement woes.

A man with children still at home has three time-allocation issues: his job, his family (calling), and his future calling, either paid or unpaid, depending on whether he likes his present job and can keep it. There are not enough hours in a day to allow full success in all three areas. You have to juggle your schedule. If you can find a way to solve the problem of your future income and significance as a family project, that’s ideal.

Here is how I would recommend sorting out these issues, in conjunction with your spouse. You need to get these questions answered.

1. How many years until you retire from your job?

2. How many years do you expect to live beyond retirement?

www.snipurl.com/lifecalc

3. How much money will you need as capital?

www.snipurl.com/retirecalc

4. Do you expect to work beyond retirement, at least part-time?

5. Do you want to retire into a job that is an extension of your present job?

6. Do you want to retire into a job that is an extension of your calling?

7. Are you actively preparing for this transition — intellectually, emotionally, and geographically?

8. Are you actively developing personal contacts with potential future employers?

9. Are you actively positioning yourself to be hired in this field, such as through a website? Too many men are actively ignoring this problem. They will pay a heavy price within a year after their retirement.