Make things better by making better things.Words by Seth Godin, a huge influence for me.
This entire article was inspired by thinking about how those words translate into economics.
A transaction with a baker may keep the economy going, but not necessarily grow it. Paying a baker $5 for a loaf of bread, he gains $5, you lose $5 and gain the bread. Then you eat the bread, so the economy is left with two transactions, +$5 for the baker and -$5 for you, and a good that’s no longer available for trade or purchase, so the economy stays the same size.
Paying a craftsman $2000 to produce a walnut desk, if constructed well enough, in ten or twenty years, may still be worth $2000 or more for a few reasons:
- People want it due to it’s unique and artistic details.
- The materials themselves have value.
- It couldn’t be done for cheaper in the future when inflation is accounted for.
This same behavior doesn’t hold true for all items that are crafted. Mass-produced desks made from cheap MDF tend to not hold value well. They aren’t unique by default. The materials are cheap. They deteriorate rapidly. They behave much more like the bread, disappearing from the economy.
Currency, like dollars, isn’t the only economic tool we have for storing wealth. We also store wealth in the form of stocks or shares, in homes, in goods, in land, in resources, and the list continues. We don’t store it in bread for a reason. Looking at the real cost of a cheap desk, a mass produced desk made out of MDF may cost $400 vs. the walnut hand-crafted desk costing $2,000 might surprise you. The cheap one deducts $400 from your net worth as it depreciates almost instantly. The other being well-maintained is roughly a $2,000 asset on the other side of the ledger. The change to someones net worth after buying the walnut desk is closer to zero since they spent $2,000, but got an asset worth roughly $2,000. The total economy has grown as a result of this transaction.
How does software play into this?
In the US, we used to be known for making quality goods. That may be one reason the US became so wealthy as a result of the lasting goods. Every family accumulated inheritances bigger than the last because what they inherited was still valuable. That’s not the case as much anymore.
Software is different than making a physical good. It’s generally considered scalable, not requiring more resources to create additional copies, and it’s not something tangible. It can’t be repurposed into something else. For example, if I have a gold ring I can melt it and cast it into a different shape relatively easy, new software has to be built from scratch again.
When a software company sells software, their transaction looks much more like the bread. The purchaser’s account is -$100, the software producer’s account is +$100 and everything is even. The buyer has the software on their computer, but if going out of business, could they sell it?
Possibly not, certainly not for the full price.
First off, many times there are licensing agreements that make this sort of thing illegal. Second, no one is going to pay full price, when they can get it straight from the company in a “clean” manner for that price and likely have a supported copy. Third, and finally, if the software is old and hasn’t been updated, it may not be supported on modern computer hardware making it much harder to find a buyer.
The point of this article isn’t meant to say software isn’t necessary, only that software should facilitate businesses that makes assets and support an economy rather than be it the backbone of its growth. For years, I heard people tell kids to go into software, web design, and all sorts of industries in order to make high earnings, which is a great goal when viewed solely through the lens of providing for your family, but it doesn’t push society forward economically. It doesn’t make things better for everyone. It creates fewer jobs. It doesn’t create wealth like the walnut desk. We need smart, capable people to choose to make good, durable, artistic goods.
There are many people out there that feel disconnected in their jobs. They want to make something instead. See their own craftsmanship, They should do so. Those people are the highest growth drivers of the economy by the nature of their work. It may not be scalable to 100,000 quality desks a year, and that’s the point. Society doesn’t need 1 company making that many desks. We need many people, each bringing their own vision and craftsmanship to the world. By doing that, we can make the world, a more interesting and wealthier place.
Have something better in your head?
Get out there and make it. If you need some help thinking about how to stand out or figure out your customers, here are some resources for that:
If you’re not sure if you can make a living at it, proceed by practicing patience. Make one item, and sell it for as much as you can. Make another, sell it again. Watch your skill rise, until you can make and sell fast enough to turn a profit. Then decide when full-time feels right. Society needs more people doing that. Not everything has to be a race to the bottom, leave that to IKEA, we’re trying to build a better business and society here.
None of this is Right is written by me, Brandon Donnelly. I believe that small business is the backbone of a healthy economy and democracy. Small business encourages competition through generosity, creativity, and skill. Small business provides more opportunity for workers to find a job that works for them. If you believe in small business, generosity, or creativity, my writings are for you.