Widgets vs. hours
Let’s talk economics for a moment. Let’s say you sell widgets. They cost you $1 to make, and you sell them for $5. That’s a profit of $4 per widget.
Luckily, your widgets are very popular, and you keep building factories to increase production. Each factory can make 10,000 widgets per day. You’re making a profit of $40,000 per day per factory. Assuming they remain popular, you can make more and more widgets — and more and more money.
Now let’s say you’re a consultant who bills $5 per hour. Because you don’t have to buy any raw materials, that hour costs you nothing to “make.” You keep the whole $5!
But there’s a problem: Assuming you never eat or sleep, you can only bill 24 hours per day, which means your maximum profit per day is $120. To match the profits of your widget-making competitor, you must hire 333 more people — assuming they’re willing to work 24 hours a day without a salary! — or raise your rate to a lofty $1,666.67 per hour.
