Developing wealth requires skill, persistence, and discipline. This does not require a college degree, although attending college builds persistence and discipline and also provides structured education in skills.
It is important to differentiate between skills and job titles. Skills are transferable and applicable to multiple job titles. A job title limits you to a narrower scope of perceived abilities and encourages people to pigeonhole you into certain tasks. For example, bookkeeping has a set of tasks associated with the job. However, completion of these tasks also takes a set of skills such as data management and analysis, interpretation and investigation, and presentation and explanation of results. These skills are used in many other career functions as well. For example, a web developer or commodities broker may use these same skills.
Interestingly enough, while the skills may be the same, the pay and perks for jobs may be vastly different. There are a number of factors that make skills more valuable. Some of these include:
- The level of autonomy needed to perform tasks associated with the skill. This is reflected in the typical hierarchical management structure. Job titles like financial analyst, senior analyst, and finance supervisor are good examples of this construct. Usually, the employer has set a predetermined value for each role based typically on the base hiring level and then an additional value for each level based on internal training time and cost. Escalation of pay has little to do with merit, but rather time and task completion. The employer simply “shares” the supervision and training cost savings with employees that advance through acceptable levels of task completion.
- Skills become more valuable when there is a clear mastery above the peer group and particularly in areas of elite performance. Sports would be an easy analogy here, but the principles hold true for every skill. The VERY best negotiators get 10x of the financial benefits they obtain relative to the average negotiator in a purchasing or contracting role. Likewise, the top 5% of sales professionals outearn the average by many multiples in just about any industry. The VERY best listeners earn many multiples of others in their professions. Before you begin to think I’m stretching things, consider that psychiatrists, talk show hosts, judges, and many consultants rely heavily on listening skills.
- Confidence increases skill value. Regardless of actual capability, an air of confidence can greatly increase the perceived value that can be extracted. However, it may be that the person with unfounded confidence has to routinely change clients or jobs in order to perpetuate that perceived value. Duly earned confidence can lead to long-term high-value relationships that can be culled and groomed to provide ever-increasing value.
- Publicity increases the value of skills. Becoming known as a great project manager, decision maker or leader can rapidly increase opportunities that can be evaluated and selected for maximum personal benefit. Interestingly, negative publicity can still provide opportunity, provided it does not affect your reputation for your primary skill set. One of the best ways to become more well-known is to share your knowledge through teaching or mentoring. Offering to teach makes you an instant expert, at least to anyone with less knowledge in an area than you. Each of these students then becomes a promoter if they run into a situation applicable to your expertise. [giving out referrals increases publicity as well, along with declining or declaring what you aren’t good at because it conditions people to only bring you relevant opportunities]
- Narrowing the scope of application. Generally, the more you specialize your skill the greater your ability to extract value. For example, someone with analytical skills may use those skills to assess real estate deals for acquisition and resale at wholesale. This will result in a much more refined and profitable process than trying to also assess stocks for purchase and holding. The caveat here is repetition to boredom. Some people would simply prefer to exercise their skills across multiple venues for the sake of variety, motivation, or challenge. Losing interest can quickly dull your ability to extract value and taking a break to exercise your skill in another environment is preferable to abandoning the skill and losing your edge. This would be comparable to what a fitness trainer would describe as cross-training or active rest to build for a harder push in the future.
- Applying the 80/20 rule always increases value. In the case of skills, it is applicable in two ways. First, apply the 80/20 rule to keep current with your skill set. Experts become experts by studying. However, don’t read the same information over and over once you learn the material. I will skim sections of books on self-improvement looking for new information or creative applications that show different facets of things I already know. I don’t need to read an entire chapter on Maslow’s hierarchy or Demming’s time management experiments. Skip the beginner segments (20%) and look for what is new. The second application of the 80/20 rule is to let others do the “beginner” portions for you. This also helps you avoid burnout. There is a reason all great attorneys have paralegals. There is always some aspect of a situation that can be handled by someone with less skill than you (leverage) and can identify those areas (multiplication) of uniqueness that warrant your time, attention, and interest. Coincidentally, these will be the nuggets that generate the greatest value and will allow you to extract greater financial benefit.
- Limited repeatability. If your skills can be applied to a common situation over and over again, then the value per transaction may be low because a process could be developed to substitute for your skill. This is why the paralegal, along with templates and programs, handles the majority of the casework for the attorney. The attorney, however, must research similar cases and create logical arguments that not only relate to the unique situation of the client but leads to the client’s desired result.
- Experience. The consistent application of your skill to related but unique experiences gives you what would not be readily apparent to someone with less training or skill. Consulting clients pay for this accumulated experience. While paying an expert surgeon’s fee to perform a specialized task might be expensive, it is less costly and frustrating than going to medical school yourself.
