How Money Works: Value Created, Reach, and Personal Satisfaction

My young friend was telling me: “If it wasn’t because of the stupid money…”. I realized that nobody had really explained to her how the world actually works. A lost player in the game of life, she did not know the rules and felt that life was just rigged against her.

I use a 3-dimensional model to explain how money works. My model has the following 3 axes:

• Value created: Every activity that you do has the potential to create some value. On one end you have the barista making lattes for a few bucks. On the other end, you can have an exceptional painter creating artwork worth millions

• Reach: This kind of depends on what you are creating. A barber can only cut the hair of one person at a time. Digital products can be multiplied in unlimited amounts at almost no cost.

• Personal satisfaction: How much internal value does what you do bring to you? Are you bored by what you do and just waiting for the bell to ring, or does your work fulfil you such that it feels like a hobby?

  
  

Such a model can help explain why some people and activities get rewarded the way they do:

• The struggling artist: She sings in Jazz venues in a few clubs. Great voice but unknown and thus earns scraps for each event. She gets lots of personal satisfaction, but since she is not yet well known her to reach is limited and the value that she creates is small.
• The depressed musician: I still am a big fan of Avicii, the Swedish DJ that created hit after hit but tragically put an end to his career. He had great reach and created lots of value with his music. But the lack of personal satisfaction with what he was doing became too much for him.
• The digital creator, AKA software developer. Earns her living by writing something that is virtually unlimited in reach. Depending on the niche she is working on she will generate enough value to allow her to live comfortably. Software developers are usually quite satisfied with what they do.
• The high octane lawyer. One case at a time, usually medium to high value created for her. Unfortunately, the amount of lawyer jokes tells a lot about their personal satisfaction.
• The rock star. And I am not only talking about musicians. In a way, the Bezos, Zuckerbergs and Musks of the world fit in here, same as the Bono’s and Elton Johns. These are the lucky individuals that manage to create something with wide reach, where the many people touched by their creations are happy to pay and that get lots of satisfaction from what they do.

Bashing money

Money is just a tool that humankind created. If it did not exist we would have to invent it again. Many young liberal students think it is the root of all evil. Philosophical discussions by side let’s start with the basics. There are many definitions of money. My favourite is the following:

**money
**/ˈmʌni/noun
The promise of future work

Money is just a way we have to exchange services and goods. You get remunerated with money for work you have done for your employer or your customers. You use that money to buy services from other people. These services might include buying goods that were harvested or produced by other people.

Idealism apart, money is allocated depending on what we as a collective deem valuable. There are things that almost anyone can get and have no value, like dirt. Hence the “dirt cheap” saying. There are others that have taken lots of work from many people to do and are valued higher, like your smartphone.

Our collective decisions are the ones that make the time that a doctor spends treating patients more valuable than the time of someone shelving merchandise in the supermarket. And we reward people accordingly.

What to do about it

A few years ago a friend of mine was complaining that her daughter who had just finished her psychology master’s degree with honors could only find a summer job as a babysitter. These last months I’ve seen stories like this and it has moved me to write down the rules that I have figured out for the benefit of other travelers in this game we call life:

• The first thing is to know what you like. Like the old Greek philosophers said. Know yourself. But just as with food, it is hard to know what you like if you have not tried it. So I suggest young people try summer jobs or internships in different places. This will help you know not only what you like, but what you do not like.

• The second thing is to realize the importance of reach. You wanna be a musician? Fine, just make sure you start recording and distributing your music early. The times when someone would discover your great voice and turn you into a world traveling opera singer are over. You will have to promote yourself and create your own following.

• And the last thing is to look at the value you are creating. If you have reached, the value can be low since your economical success will be a number’s game. If you can’t find a way to achieve reach, try to create something of higher value. If all you like doing is milking cows, make sure the milk they produce is bio and thus can be sold at a higher price.

  
  

Follow one of the passions you have that has good market value

When you get on a plane the flight attendants will explain to you the safety rules aboard the aircraft. One of the demonstrations they do is with the oxygen mask. An important point they make is that you should get your mask on before trying to help other people.

Choosing a career path that will enable you financial solidity is the equivalent of getting your mask on first. Only if you are not struggling day to day to pay your bills, you will be able to move on to the next step on the pyramid of life.

Life is a game where the rules keep changing all the time. Make sure you enjoy what you are doing and find yourself a comfortable niche where to play. Money is not happiness, but not having enough is not fun.