The Law of Productivity states what might be the most basic of all economic principles: all income depends on productivity! Yet many people never figure out that you must increase productivity to increase income. Or, in many cases, even maintain productivity to maintain income!
Perhaps the most common statement I hear from people who operate their own business is that they wish everyone had to try their hand at self-employment for at least a while. The usual reason for this comment is that they want people to learn how an employer's ability to pay his workers depends on their productivity.
Law of Productivity
The Source of All Prosperity
To anyone who has ever tried to make an honest dollar the idea seems so obvious that “even a cave man” could understand it! If you are employed by someone else it is only logical that unless you somehow do something that brings some money into the business there can be no money to pay your salary.
But the fact is, most people just don’t get it. This is evident from the common statements people make like, “My time is worth more than that. I just wouldn’t work for less than $_____ [fill in the amount] an hour.”
The truth is that our time is worth nothing. Only what we do with our time matters. What's the point here? Simply this. If you want to get more money for your work, increase your income, the best thing you can do is to improve productivity.
The truth is that our time is worth nothing. Only what we do with our time matters.
When people waste valuable resources, fail to take care of tools and equipment, and produce products that require redoing before selling, they reduce income to the company they work for. This reduces the money the employer has available to pay their salary.
People may realize that there must be a profit for the owner to come out ahead. Somehow they don’t seem to go on to see that if the owner doesn't have any profit he or she cannot pay the employees!
Only when people achieve tasks sufficiently well to add to the bottom line do they enable their employer to pay their salary.
When you do see this you are on your way to increasing income for yourself as well as your employer. By becoming acutely aware of this fact you will begin to make behavioral choices that will greatly enhance your value to your employer (or to yourself if you are self-employed) and increased productivity means increased income.
Law of Productivity
The Value of Productivity Consciousness
The law of productivity states the concept we need to understand and apply to our personal lives like this:
Each of us prospers in proportion to our productivity as we increase our moneymaking skills and direct them toward long-term personal benefits.
This important truth has many extremely important implications for those who want to become financially successful.
The subject we are considering now may at first appear mundane. But the truth is you may find your life revolutionized by what you learn here when you reflect on it and apply it to your own life.
Once this idea is internalized it is possible that you may make decisions and take steps that will dramatically increase your productivity and thus your income far beyond what you may ever have imagined. This potential is real.
Law of Productivity
Increase Income With Productivity
One of the basic laws of success is the law of management which says that each of us should manage our personal lives as we would that of any important business, utilizing basic management skills such as goal setting, planning, etc. The concept we are looking at here is closely related to that law.
A major goal of any business plan is to make a profit. And just as every successful business maintains a constant awareness of the importance of growing their profits, thinking about how to improve productivity needs to be an important focus for each of us as individuals, too.
Most people think first about getting money by seeking employment with someone who will pay them for their work. Young people usually focus on developing skills that will enable them to earn a living.
Ask yourself specifically what steps you need to take to increase your ability to produce more so that you can earn more.
Often this means attending college or vocational school. Sometimes they join the military or become an apprentice to a tradesman. But too often when people once get into a position they just go on working for decades, accepting promotions or job offers that come along but doing little to increase their earning potential.
Progress will never happen by accident. You need to ask yourself specifically what steps you need to take to increase your ability to produce more so that you can earn more.
Law of Productivity
Steps That Increase Productivity
You can improve productivity, thereby increasing income in your life in numerous ways, but there are three particular areas in which the Law of Productivity is especially significant to you: as an employee, as a business person, and as an investor. Not everyone will be active in all of them at all times but many people are engaged in all three at some point in their lives.
Increasing Productivity on the Job
No matter what your job or what your business, ask yourself the question now: what could I do to increase my income? If you want to continue working where you are, first determine what skills you can learn that will increase your value to your employer.
Look around at others who earn more than you and figure out why they get more. Can you learn what they have learned? Ask your fellow workers who earn more than you do how they were able to get the skills they acquired and move up to the job they have now. Attend night classes. Read. Make yourself indispensable.
If you can’t do these things and get paid for it where you are, learn anyway and then look for a job elsewhere that will pay for your new skills. Don’t be satisfied to stay at your current income level.
Here is a surprising thought. Your boss wants to pay you more money!
Here is a surprising thought. Your boss wants to pay you more money! That’s right, your boss wants to pay you more, but only when you contribute in a way that will generate more income to the business.
Think what would happen if you were to ask your employer, “What can I do to earn a higher wage? I am willing to learn new skills or do whatever you recommend to contribute more to the success of the business. I want to do what it takes to make more money for you and earn any increase I get.”
Don’t try this if your boss has a weak heart! The shock might be too much. A businessman I know has commented that he used to look for good employees to hire, now he looks for someone who will show up. Most employers (all the smart ones) are happy to pay good wages to good employees.
Don’t hesitate to move from one job to another either. Most people now move often, not only from job to job but from one career area to another.
As a young man I worked in a grocery store while I went to college. Later I worked as an officer at San Quentin while in graduate school, a job many made a career. While I earned a reasonably good salary in the latter job I never intended to be there forever.
Always be preparing for the next step in your life plan. It is not unusual to think like this when you are twenty. The trick is to keep doing so when you are forty or fifty.
Increasing Business Productivity
Another approach to earning more money, and one I highly recommend for those who are willing to make the effort, is to start your own business. Once upon a time it was widely believed that in order to do this you had to take great risks with a lot of capital, often borrowing on speculation. Now that idea is largely discarded.
In the middle of writing this article I listened to some extremely successful businessmen talking to someone who wanted to “take the jump,” quit his job and start a new business. They strongly suggested that he should reconsider leaving his current job and instead start small scale from home.
The consistent view of these experienced businessmen was that it is better to learn in a setting with reduced risk and then grow into a full time profitable business. Years ago advice for a young man or woman wanting to go into business for themselves was the opposite. Now success is better seen as a learning process.
Robert T. Kiyosaki, author of Rich Dad, Poor Dad, gives strong emphasis to the fact that our economic and legal systems are stacked against being an employee. The economic system is inherently designed to benefit people who are in business for themselves.
There are a multitude of advantages to be gained by being in business, not the least of which is the increased income opportunity. When you increase income for your employer’s business you may get to share in it, but when you increase income for your own business it is all yours.
You don't really have to “start a business” to start “doing business”
You don't really have to “start a business” to start “doing business”. Many people find ways, some common and some unique, to earn the money they need to fulfill their financial goals.
1. A lady I knew loved dogs and kept three. Every year she raised and sold two litters of registered puppies which provided her all the money she needed to pay her real estate taxes.
2. Another woman I knew grew peonies around her house which happened to be located on a primary avenue. Every year she propagated a number of plants, put out a sign in her front yard, and sold them for enough to pay her taxes as well.
3. A friend of mine I knew years ago built a fairly large business on the side, completely unassociated with his regular job, but which provided most of his considerable wealth. He started investing in rental properties and eventually had a large number of rentals.
In time he profited so much from his rental properties that many people would have given up other work and devoted full time to the undertaking. He liked and chose to keep his regular work while quietly and somewhat anonymously building up his second income.
All of these three were in business. But possibly none of them saw themselves as being a business owner in regard to these activities. You can do the same.
Increase Investing Productivity
Many people don’t realize the extent to which owning your own business has advantages over being an employee. But when it comes to generating income the fact is that the greatest potential to make money comes from investments.
Unfortunately, even many successful business people fail to take advantage of the investment opportunities that are available all around us. Perhaps the fact that most good investments require healthy doses of patience and self-discipline is what deters so many.
Even at average rates of growth, investment income has incredible possibilities. For example, if you follow the simple basic plan of funding a Roth IRA at $200.00 per month in a stock market index fund, it grows to one million in considerably less than forty years. This is a remarkable investment program that almost anyone can achieve.
But think about this. At that point, with the average market growth of 11%, the famous rule of 72 tells us that in just over six and one-half years that first million would double to two million, even without further contributions! How else could you earn a million dollars with so little work?
It does take time, but in the long run investing can produce more income than any other one thing you can do.
It is unfortunate that most of us never get around to serious investing. It does take time, but in the long run investing can produce more income than any other one thing you can do.
Three Reasons People Don’t Invest
There are three reasons most people don’t experience the benefits of investing. First, very few people realize the incredible potential which is available only through investing. In fact it has a potential far beyond earning from a job or a business—if a person learns how and exercises patience.
A businessman I know spends thousands every month on equipment and other items to help maintain and expand his business. He tells me he just doesn’t have funds to invest $200 each month in a Roth IRA. He seems to think he will gain more by putting all his capital back into his business.
The fact is, investing can be more productive than either employment or business. There is considerable information available, some on this site, that demonstrate the powerful potential of investing even over business activity.
Second, our society is dominated by a short time outlook, what is often called the desire for immediate gratification. Most people spend more than they have coming in, indeed increasingly so. Because of this most people think they cannot afford to invest until they have more income.
The truth is that people need to learn how to get in control of their money so they do have enough to invest. One of the clearest characteristics of successful people is that they consider the long term consequences of their actions.
The third reason people don’t invest, of course, is a lack of knowledge about how to do it. Everyone knows that investors can lose money as well as make it! What if you lose?
The answer is simple. Don’t do it! People only lose money when they make bad investments. It is totally unnecessary to do that. Learn about investing before investing at all, then only put your money into investments you know will be profitable.
An Easy Way to Get Started Investing
Now that doesn’t mean you have to wait more than a few minutes before making your first investment! Here is the knowledge you need to get started. There are several money market savings accounts you can access online that now offer rates that are substantially more than most standard bank savings accounts. These are real bank accounts guaranteed by the government.
If you are not yet investing at all, you can open an account and safely start today. If you won’t need your money for ten years or more, consider opening a total market index fund at a low cost major investment company like Vanguard. Then, as you learn more you can invest in ways that may be even more profitable.
The No Fail Approach to Investing
Recently on a news show several “experts” were being interviewed about the housing situation. One man commented about how he was still investing in real estate. Donald Trump was on the panel and immediately suggested that he did not think now was a good time to be making new investments in real estate.
But the other investor explained the kind of deals he was working. Immediately Mr. Trump congratulated him on making some good investments in view of the particular kind of deals he was making. But most important for our learning opportunity, he commented on the fact that even though he was a real estate investor he had no experience investing in that particular niche so he was not prepared to do it himself.
It is all a matter of knowing what you are doing. Even in fields that are not doing well at a given time, as in the case of Trump’s current New York real estate situation at that time, individual niches can be great.
Understand what you are doing and you will do well. Don’t forget—do only what you understand yourself and don’t make blind decisions based on anyone else’s advice. That includes mine.
The point is that investing has such a great potential that it is a real shame so many people miss out simply because they are poorly informed. Don’t make investments you are unsure of, ever. But don’t miss out on the opportunity to become an investor, either. Take time to learn and get started now.
Think Outside the Norm
Think for yourself. If you think like everyone else you will get the same results they do, which are for the most part inadequate.
One concept that I strongly believe in but rarely hear expressed is that there is a great benefit to separating the idea of income from that of having a job. What I mean is that your income is a broader concept than having a job.
It is entirely possible to keep a low paying job that you value because of its contribution to society and make a lot of money from other sources. I know a woman who started selling on eBay and found that she could make more money from that than she did as a teacher.
It is not impossible that an individual could have eight or ten sources of income with only one or two being what might ordinarily be called a “job”. A dramatic change in our income potential begins as soon as we stop thinking about a single job as our only source of income and begin to let our minds go to work exploring the many ways we could bring money into our lives.
Become More Productive
So you see, the ways you can potentially increase your income are many. The important thing is to change your income producing activities so that potential becomes reality. It requires increased productivity. It takes action. Apply the Law of Productivity and get started today.