The Economics of Truthiness
Examining the reality that an entreprenur should never be afraid to ask for what they're worth.
When you study economics for the first time, two of the first few things you’ll learn are that trading should benefit everyone involved, and that very few commodities in this Universe have any intrinsic value whatsoever. These two rules stick out as primary, or core rules in economics, commerce, and trade, because they are foundational to the very concept of ‘the flow of goods and services’ itself. In fact, understanding these two principles, particularly in relationship to each other, is even more important than getting a feel for supply, demand, and equilibrium positions, because without understanding how correlations between investment and cost actually determine values, you’d be hard pressed to understand how these values fluctuate through the principles of supply and demand in the first place.
With that, let’s start with the first principle listed, that trade should benefit everyone involved. In my opinion, it is of paramount importance to understand that all trade, everywhere, should always benefit everyone involved to some degree, because without understanding this concept, it becomes rather difficult to understand how pressure builds within an open system to force equilibriums throughout the market. The fact that any consumer, for any reason, can simply choose to abort one trade directive for another, regardless of purpose or pride, forces everyone at the table to always be considerate of everyone else at the table, as well as themselves. Remember in an earlier article that I wrote, I mentioned that nothing is ever worth anything until it actually gets sold? This is why. In a market driven scenario, where there are always innumerable choices that every consumer can make in order to fulfill their consumption needs, any player who makes a habit of ‘bucking’ the equilibrium is likely to be ignored by the other players in the game at some point. This works from virtually every direction: from having prices too high, to not charging enough in the first place, to just being a generally rough player, consistently avoiding signs that you are not reaching a state of equilibrium against your overt purpose, within a given trade environment, is likely to cause your removal from that trade environment in one of several fashions.
Next up, the idea that virtually no commodity, anywhere in the Universe, has any intrinsic value, whatsoever. This one is both technically challenging to rationalize, but also crucial in understanding how that old ‘invisible hand’ of the market even works. The philosophy conveyed through the idea that no commodity has any sort of intrinsic value is that of unlimited agency. Because the ‘real’ value of any given object (thought, product, or service) is actually zero, the only way to obtain a value for that object is by deriving it. This is fundamentally the starting point as well as the overt purpose of the aforementioned ‘market’. It’s not so much a real place, though that often matters, as it is a list of perceived forces, real or otherwise, that are, or are being used as, determinant factors in assessing the value of a given commodity. All sorts or cards get played at this point, and one can envision the floor of the Toronto Stock Exchange just as readily as a lemonade stand on a hot day in your local Calgary suburb, and more or less arrive at many of the same conclusions about both. Regardless of your particular imagination, these determining factors are what eventually gets simplified into the concepts of supply and demand, long after the need to trade in order to progress is formally recognized in the first place. What follows is a look at some basic concepts in economics (don’t kid yourself here, none of this is basic), as well as how these concepts interact with each other in the development and maintenance of a ‘market’. My hope is that people learn to value their own labour more, and maybe even walk away with some practical advice on how to deploy it industriously, towards a long and profitable career. Enjoy!
Paying for the Opportunity
In a rudimentary sense, the way that an economy actually works is that each participant within that economy has both a set of needs, and then a set of advantages and disadvantages by which to achieve those needs. Generally speaking, the needs of a society converge, and lead to the development of markets through demand, while the relative advantages and disadvantages of societies diverge, and lead to the development of industry to produce supply. The divergent aspects of societies leads to specialization, where competition along the same frontiers takes a toll which is reflected by the prices of a given commodity within a market, while competition along divergent frontiers leads to more products for a given market (which can also affect prices). When you purchase a good or a service from a market, you are exchanging your labour for the perceived labour of developing the good or service which you are purchasing. Most often, this exchange takes place by one party expending money to acquire the object they desire. It also takes place through several other methods, however, with direct trade being the other method which most immediately comes to mind. The primary reason why markets benefit society is because of an economics trigger commonly referred to as ‘opportunity cost’. The idea behind ‘opportunity cost' is that specialized goods cannot actually be produced by an individual at anywhere near the quality or price that a specialist could produce that good or service for. When you’re buying something, whether it’s a toy around the holidays, or two hours of an accountant’s time, what you’re actually paying for is vastly more complex to arrive at than what you could accomplish on your own at that point in time, and also significantly less than what it would cost you to do so. This happens because of industry competition in the background, and the term ‘opportunity cost’ is derived from the idea that you are paying for the opportunity to leverage the existing market equilibrium to your advantage for the purpose of progressing your unique set of needs forward. This happens across the economy, both for every individual person, as well as each business and corporation actively participating in the market, all the time.
So, while I laud the DIYer, and believe me, I went and learned JavaScript on my own, so I have a lot of respect for people going the extra mile to better themselves and trying to spend less doing it, I wanted to point out that if you did this for each and every activity of your life, you wouldn’t really have too much time left over for yourself. At some point, you will run into some things that you really are better off paying for the opportunity to have or to acquire at a professional capacity, than to do it on your own. And this is a very good thing. It creates a demand which is then brought to a market and supplied, suitably, according to the means of the individual carrying the demand, against the supply of the commodity by the industry to which that commodity is generally beholden. When this exchange happens, satisfaction on the side of the demand reinforces the drive to continue to supply that demand by means of the currency traded in its acquisition. This currency is used by the shopkeep to restock, paying a supplier to reacquire, and on and on, back to the hands of the very labourers who make the product, and then send it on its journey in the first place. At this point, I’ll drop a quick line to point out that my purpose is not to dwell on the plights or issues of anyone involved in any particular supply chain, or demand consortium, but merely to explain, in brief, how these forces actually interact in tandem to drive an economy. Essentially, what each side is trying to do is to maintain equilibrium across an imaginary frontier, which is likely the most efficient in servicing demand, while simultaneously, likely, the most profitable towards developing supply.
What gets interesting about these forces is that, the more frequently this interaction takes place for a given commodity, the better each side becomes at maintaining equilibrium. This is where competition within a market, represented by the choice of the consumer on the demand side, meeting with the capacity of the industry on the supply side, drives the price for a given commodity. This is also why the idea of ‘shopping local’ is very important to the overall health of a specific economy. When you ‘shop local’, the currency exchanged in the satisfaction of demand reinforces industry specialization at a local level, leading to more varied (because industry competition pushes agents along divergent paths) and higher quality (because market competition forces suppliers to add value in some form or another to beat out rivals) products. When this happens locally, everyone locally involved benefits. Prices stay stable and quality stays high, with market equilibrium tending to last longer, because everyone is content with the status quo. When this does not happen locally, local issues can spring up, particularly during times of industry extremes. Note the application of what is called ‘Dutch economics’ here. You can look it up for a more accurate definition, but the gist of it is that resource rich environments which do not trade often tend to fare poorer than non-resource rich environments which frequently trade. The point is, it is the act of competitive trading which produces specializations at the local level that strengthens a given economy, not the apparent resources of that particular region. When you spend your labour locally, your labour stays local, longer, and this helps an area flourish by keeping local talent engaged in activities which benefit their immediate community. You might literally be paying for the opportunity for everyone in your immediate area to get better, but when viewed as a type of community investment, that’s actually a far superior option than reinforcing talent elsewhere.
Why the World is Better 'Flush'
Remember the CERB cheques during the pandemic? The idea was simple, and generally would be the correct path for a nation to pursue, following the outbreak of such a force of nature. As businesses were shutting down to accommodate public health concerns, there was fear of a ripple effect spreading throughout the economy, this ripple being the ability of the market to reinforce industry through currency, and thus shutting down the supply side of the Canadian economy for lack of enough monetary incentive to effectively reinforce the industries supplying it. The government of Canada, as many others around the world, made the decision to keep its population ‘flush’, so as to keep its economic machine powered throughout what it believed would be the duration of the ordeal. Now, one can debate any number of facets about how this all rolled out, but to the extent that it was the superior choice to make, at the point when federal and provincial public health orders went out, assuming that our government didn’t predict a rise in mortgages fueled by temporary cash (which is not unreasonable, however incorrect this assumption proved to be), there should be very little doubt that it was the right call to make. Now, why do I bring up CERB cheques during the pandemic to illustrate my point about the world being better off flush? As we saw with the continued rise in housing prices throughout the pandemic, when people have money, they tend to spend it. Generally, this is a good thing from an economics point of view. It’s what you want to see in a healthy, participatory economy. The inflationary period that Canada experienced during the aftermath of the pandemic, as well as the nature of the crisis in the housing market dubbed ‘the Canadian Housing Bubble’ (I avoid this pretty name where I can) actually have more to do with existing economic conditions in Canada, rather than the CERB cheques themselves. They were just a catalyst.
Now, metaphorically, money acts as a type of oil to keep the economy flowing, keeping in mind that the economy is actually the exchange of labour in the form of money, and not the exchange of money for its own sake (this is where proponents of the ‘Universal Basic Income’ theory fall short in the debate. It’s labour that drives an economy, not money). Following this, virtually all the popular economic issues that you hear about (and this generalization is for expediency, not simplicity) have to do in some way with the intentional or unintentional constriction of the flow of money or labour towards a desired or undesired equilibrium. At this point, I’m going to move away from Canadian examples so as to stay focused on the effect of money on the economy itself, as that is my intended direction here. Every country has a unique set of economic controls for its own reasons, but we're here to understand why a richer population is more useful to a nation than a poorer one. The reason for this is largely because wealth and capital remove constraints to investment at an individual level, which increases the frequency of market exchanges, which, as we looked at earlier, makes everyone more efficient in how they are serving their local communities. When you consistently shop local, and you pay appropriate prices for the goods and services you purchase relative to your community standards, it reinforces local talent. This is where the concept of ‘honest work for honest pay’ takes hold and truly shines. When local talent succeeds, if they are not paid sufficiently to cover their labour and reinvest in themselves through market participation outside of their actual jobs, it does a disservice to the community as a whole by trimming the ability of local participants to engage with their local economic community for their wants and needs. Over time, this results in stunted industries through lowered economic activity, and is not good for the health of a given population.
On the other hand, when the people of a given community are flush, that community will tend to flourish. The reason for this is because, outside of their basic needs, the people of the community are able to start reinvesting in their community for the sake of improving their experience of it. Generally speaking, investment does not devalue existing commodities, except in rare situations where investment causes an entire population to abruptly shift its habits over a relatively short period, and then that population stays in the new habit without reprisal going forward. This is generally how the world progresses in large steps, and these situations tend to be fairly marked and well documented. Now, there are obviously a plethora of situations where the wrong type of investment can make something worse, but, generally speaking, investment is good for a community, and not investing is bad for it. Furthering that logic, wealthier communities have more to invest in themselves, and therefore, tend to stay wealthier. Poorer communities do not, and so on and so forth... Where people tend to err here is in the assumption that only governments, charities, and large corporations invest in communities. This isn’t true. Every person or business that commits to transacting within their local environment is actively contributing to both the markets within that environment, as well as the industries which support those markets. Every idea you have that you develop to some degree, whether it’s taking on a coaching role for your daughter’s hockey team, or just that iconic tree-fort in the backyard for fantasy stories with the dragon lover in your house. If it involved your labour, it was an investment in your community. And it mattered.
Honestly, it's Worth It...
There’s a running joke in JavaScript, the programming language that I write in. When writing conditionals, there are three concepts which each fall under the umbrella of ‘equals’, and they are expressed with either one, two, or three equals signs. The joke is that, while the first and the third (one and three equals signs) are relatively easy to understand and deploy properly, the second one, which evaluates a concept called ‘truthiness’, tends to be quite a bit trickier to grasp. The reason for this is because the term truthiness covers a range of abstract concepts in math and programming that can all start to wash together as your scripts get longer, while the first and third are simply declarative and ‘for exact representations’, in that order.
I wanted to pull this concept out of my day job and evaluate it more broadly, because I think it’s important that as a society, we start to understand what all goes into solopreneurship, or even just operating a business at large. The truth is, while every labourer adds value to an economy, not every labourer takes on either the load or the risk that an entrepreneur does, and while it is ultimately the entrepreneur’s choice to persist in their endeavour, there is an inherent truthiness to the idea that these people really do have a heavier workload, as well as a higher burden of responsibility to bear, at least relative to their continued employment. Yes, Capitalism enables an individual to exert control over the assets they develop for themselves, and yes, this can make some people fabulously wealthy, but it’s also important to understand that the world we live in is dynamic, and constantly fluctuating. There are forces which entrepreneurs must contend with that a great deal of ordinary labourers will simply never encounter throughout their entire careers. This is why, to me, Capitalism works best when viewed through the lens of truthiness. Truthiness, as a concept, allows a group of individuals to make evaluations based on systemic inference, rather than declarative assertions. This means that, in an open system, where each individual is imbued with unlimited agency, truthiness acts as a type of guarantee for overall quality. And, furthermore, I posit that the more people who are engaged in trade with each other within an open system that are able to employ truthiness to correctly infer from each other, without overt explanation, the healthier that system is, overall. This is because trust exists within that system, and it exists because the people within that system, even if they don’t trust each other personally, tend to be able to trust each other professionally, in order to maintain the system.
I bring this up because I find that many entrepreneurs often sell their accomplishments short, particularly at the outset of a new venture. I used to do this as well, and I have some experience with straightening this issue out, but it’s not a pleasant problem to have to go back and solve. It’s also a potentially fatal flaw to an otherwise excellent idea if you don’t get it right, so, always start by selling high, and letting the market work you down to its equilibrium. The truth is, in almost all scenarios concerning your business, you will know your own strengths and vulnerabilities better than everyone else around you. Your job, once your business is up, is to maintain your status or priority within the system you belong to, and you will find this feat easiest to accomplish by charging an amount for your labour that never makes you consider leaving one client unsatisfied to pursue another client, just for more money. This type of planning is disastrous to relationships, and seriously hampers your ability to plan for the long haul with your new venture. It’s easiest to be truthy upfront, and to make sure that your clients know that you won’t leave them caught in a state of disequilibrium on their projects because you didn’t plan your time or your business for your own success. Perhaps I’m being optimistic, but you should actively engage with the people you are working with to help them understand what they’re paying for by engaging with a professional, or what your time will eventually yield. The truth is, if everybody races to the bottom, nobody wins. Think about it. You don’t want to work for drastically less than what you’re worth just to get contracts done, and you also wouldn’t buy the work from someone who’s working at their bottom line, just to get the contracts done. Now take that to the next step. If all you charge, or all you pay someone is the exact cost of getting a project done, and nothing more for re-investment, of what benefit is that to the larger economy? No one is getting further by just making ends meet, and while an entrepreneur might be early enough in this process to still be turning out quality products, everyone burns out eventually, and at some point, you burning out will be a detriment to the larger community. And thus, we arrive at the economics of truthiness. It turns out that when everyone is honestly selling high, well, everyone just wins. Cheers!
