By Taylor Akin-Alade –
WHAT THE POOR DON’T KNOW ABOUT THE RICH – The difference between the rich and the poor I have come to understand is in how each person prioritizes his time base on choices they both make.
Have you ever wondered why a rich man will rather employ a personal driver while himself can drive even better than the driver he employed?. Have you thought of why Someone chooses to hire a cab or personal driver on a journey of between 30 minutes to 1 hour while he sit at driver’s side doing nothing throughout the journey? Do you know the reason why a rich man will prefer to employ personal cook, Gardener or even Laundry personel while himself can do all these better? Have you ever thought all these could have been done by that man and that paying for them is sheer waste of money that could have been channeled into better use.
My friend, you see, that particular mindset of you trying to do everything for yourself is the key difference between you (who is poor) and that rich fellow who understands the basic economics of comparative vs absolute advantage.
Let me paint a graphical picture of what I meant;
Assuming Mr. A, a young medical doctor knows how to iron his suit with a high touch of finesse and perfection. He is trying to decide whether to hire an Ironer who can also iron the same suit with same perfection like Mr. A would have done. If the doctor does the ironing, it takes him 15 minutes. If the Ironer is hired, the job takes 30 minutes.
Yes, the doctor has an absolute advantage in ironing skills compared to the prospective employee. He is “better at everything” because he is better at treating patients and better at ironing. But absolute advantage is not the important issue. The question is, who has the comparative advantage?
The doctor’s time is worth $100 per hour when he is working as a doctor, whereas the Ironer’s time is worth $15 per hour as a ironer. Even though the doctor is twice as fast at ironing as the person he is about to hire, when we compare what it costs him to do the ironing with what it costs him to pay the ironer, doing the ironing does not give him a comparative advantage.
You see, that’s is the difference between the rich and the poor. The rich understand the power of priority and time purchase. He understands that both the rich and poor are equally endowed with the same 24 hours. He knows he has to shed off some necessities from his priority list in order to accomodate those things that will further give him comparative advantage over the poor. He does this by making sacrifices to accommodate the need of the poor by hiring or in some cases buying off their time to accommodate his own priorities. It is this time exchange that affords him to think, strategize or design new model or concept while thinking on that thirty minutes journey you think he could have driven himself.
I have come to realise that the tragedy of the poor man’s thinking is in the way he thinks he must do everything for himself without placing priority on the time involved.
Before doing that job, ask yourself, “would you have traded off doing it yourself for another item on your priority list that will give you comparative advantage?”. Ask yourself, what is the average value my 24 hours is worth in money value.
In conclusion, the economics of absolute vs comparative advantage is a key principle that has sustained the global financial system since the first century. It does not only give comparative advantage to a prospective rich person but also create further wealth for others who are willing to exchange their time for money. The inability to foster this creative destruction process is why Economists believe that the poor are the reason for their own poverty because they create nothing to add value to the system.
I hope you understand now.
Taylor Akin-Alade writes from Osogbo