There is no doubt that hard work is a key to success. However, this character trait is not one we can teach. Some people become harder workers as they mature, but seldom does a zebra change its stripes. There are generally hard workers and not-so-hard workers. The goal of this section on Leverage is to help you get the most out of any level of effort. Whether you fancy yourself hard working or laid-back, Leverage can help you get more out of your desired amount of effort. In this chapter, we will discuss the capacity problems of Leverage, how education can increase your ability to Leverage your effort and then suggest ways physicians can overcome the barriers of capacity.
You Can Leverage Hard Work…But Effort Is A Capacity Problem
The basic and inherent problem with effort is that you only have two hands and two feet, and there are only 24 hours in a day. If we consider the case of two landscapers (Lazy Larry and Manic Mike) with very different work ethics, we can illustrate these physical constraints we all have.
Let’s assume that Lazy Larry and Manic Mike earn $50 per house per week. If Lazy Larry works five days per week and landscapes 8 houses per day, he will earn $2,000 per week before paying overhead, staff, equipment, taxes, etc. Manic Mike can work seven days per week and landscape 10 houses per day. This would give him precious little time off for family or personal time, but he would earn $3,500 per week before all of his expenses.
Both of these landscapers might consider themselves successful (depending on their goals and values). But if hard working Manic Mike wants to make more money, there aren’t enough hours in the day or days in the week unless he does something that earns him more money per house or he finds a way to Leverage something other than his own effort. The next application of Leverage could help Mike do just that.
The idea of leveraging education to create wealth is no secret. In fact, it has become part of the American Dream. For over a century, immigrants have come to America and have taken advantage of the educational system. They have pushed their children to do well in school in hopes that they would get a good job and enjoy a higher standard of living. They have also pushed their children to find careers that pay them more money than a career like Manic Mike chose.
Leveraging education is a key element of building and protecting wealth. To prove this point, consider the following salaries of highly educated professions. When considering the earning potential of these professions, keep in mind that the median U.S. household income for the year 2007 was $48,201, which means that half of all United States households earned less than $48,201 per year. (US Census Bureau’s 8/27/07 Current Population Survey (CPS)). According to a USA Today article on 1/18/06, the first year salary plus signing bonus for an MBA (2 years of graduate school) was $106,000.
According to MD Salaries (www.mdsalaries.blogspot.com), the first year salary of a neurosurgeon ranged between $350,000 and $417,000 in each of these cities: Houston, New York, Miami, Los Angeles and Seattle. Neurosurgery requires the completion of four years of medical school, a one-year internship, and a rigorous 5- to 7-year residency. Thus, there is no doubt that leveraging education can help you earn more money per year and increase your wealth faster than if you had a job with a lower level of education. Physicians use this type of Leverage quite well.
Education And Effort Are Not Enough
Would you be surprised to hear that the neurosurgeon mentioned above and Manic Mike have the same problem? While we are not saying that Mike is performing brain surgery, we are suggesting that they both have the same fundamental problem—albeit at a different level of income. Mike doesn’t have enough hours in the day or days in the week to increase his business. Similarly, a neurosurgeon’s income is limited by the number of surgeries he can perform as well as constrained by the number of hours in a day and days in a week. Even if you assume that there is an endless supply of patients who need brain surgery, and there is an endless supply of lawns to be mowed, the surgeon is limited just like Mike. In other words, a landscaper earning $50 per house has the same capacity problem as a neurosurgeon earning $500 per hour because:
1. They are limited in the amount of money they can earn until they figure out how to Leverage what they do
2. They only make money when they are actually working
This is a lesson that savvy business owners and investors figured out long ago. As a result, the most successful business owners:
· Always focus on the Leverage of any business.
· Never consider increasing effort as a legitimate, long term means to increasing income.
· Never enter into a business that requires them to constantly “work” to make money.
For these reasons, we prefer to focus our articles, seminars, books, and personal consulting recommendations on strategies that help Leverage assets and Leverage people.
All teenagers have parents, teachers and coaches who tell them to work harder. We prefer to tell you—and show you—how to work smarter without having to work harder (or having to clean your room or take out the trash). The Lesson applies to anyone—no matter how hard working or lazy you may be. If you want to work less and build more, you can do it. Applications of this “smarter working” lifestyle will be the focus of the next two chapters.