If you want to work for yourself, you need to own the means of production.
What do I mean by this?
When my brother and I started our casting technology business, CAZT, we had a pretty great idea. We figured out how to provide something of value to one set of customers for free, in exchange for something we could sell to another set of customers. Definitely the coolest idea I’ve ever been involved in creating.
The problem? CAZT is fundamentally a technology business and neither my brother nor I know how to code. The result: Our ability to grow our business by innovating was terminally constrained by the fact that we needed to spend money on coders to make every little change to the business.
Fortunately, we hit upon a marginally profitable business model and the company continues to exist and pay us to this day. But I’m under no illusions that we’ve optimized the business. We’re just at a local maxima… with no real way to keep searching for ways to improve it (without putting a lot more capital in).
It turns out that the ability to code is the means of production at CAZT… and since we don’t have it, we’re screwed.
Contrast this with my real estate business. At Adaptive, there are basically two processes that generate all the value:
- Identifying and acquiring assets with potential; and
- Designing and overseeing a renovation which unlocks that potential
Between Jon and me, we know how to do both of those things. In fact, without meaning to be obnoxious, I’d wager we know more about those two processes as applied to sub-institutional scale apartment buildings on the eastside of LA than anyone in the city.
These are valuable skills in high demand. So, we can generate revenue from applying them in all kinds of ways. At an elemental level, I can make money brokering deals and Jon can make money as a GC. Notice that neither of these require any capital… you don’t need inventory, real estate, etc… just your brain.
Because Jon and I can generate value without capital, we don’t need anyone’s permission to make money. And that is the value of owning the means of production… you can always just spin your skills into money, with the only limit being your ingenuity and willingness to work hard.