Just 30 years ago it wasn’t unreasonable for employees to expect that they
would spend their entire professional careers with just one single employer.
Now days you are silly if you don’t change jobs every two years, and there is an increasing
trend of people who would have you believe it is silly to have a regular job at all.
The culture of being an entrepreneur, or an investor, or a freelancer is increasingly
driving young professionals to pursue career paths that are truly not in their best interests.
Now starting a business can of course be incredibly rewarding, and I might sound
like a bit of a hypocrite here because of course I started this YouTube channel (at least in part)
because I thought it had the potential to be very profitable… and it has been which is great.
BUT I am also well aware of the fact that I have been extremely lucky,
(like winning the lottery levels of lucky) even to get to where I am today. I am also
aware that a YouTube business is about the easiest possible business in the world to run. The product
distribution, advertising, accounting, server hosting and invoicing are all handled for me.
It’s also incredibly low risk. If my channel never took off,
I would have wasted about $300 in equipment and software subscriptions…
Now I bring up YouTube because it’s one of the defining examples of a business
model that is perpetuating the idea that if you are not a “#Hustler” you are failing at life.
So if you have ever even subconsciously thought that you are destined to be a business owner then
it’s time to learn how money works to find out why it might not be all it’s cracked up to be.
This video as with all video’s on my channel was made possible by the generous support of
my channel members and patrons on patreon. For exclusive content, early access to videos and
other cool perks please consider supporting the channel on either of these platforms.
Alright, so it’s not just you... As someone who is (statistically speaking) in my core
demographic of viewers, (namely, men aged between 18 – 55) you are likely inundated
with ads and recommendations from people talking about how great it is to be a business owner.
This trend has been on the rise in recent years
and there is a really interesting reason why. Or rather three really interesting reasons…
The first is that it is simply a popular content medium.
The second is that it has become far easier to perpetuate
And the third is that there is an ever growing
group of people that need you to believe it’s true.
Now I want to start with that last point first.
You might think that the powers that be would hate the idea of people going into business for
themselves. They just want diligent little employees that work hard to make them rich.
The last thing a business owner wants is more business owners,
because that’s more competition right? Wrong…
While individual business owners might not want their employee’s leaving to do their own thing
(especially at a time with record labour shortages) there is a much larger, much louder
group that actually relies very heavily on peoples desires to go into business for themselves.
Now when I said this you were probably thinking of
the YouTube ad charlatans that’s almost inevitably popped up before this video
to pitch you a course on Amazon FBA, crypto trading, or real estate investing.
Now sure, these guys are certainly the worst offenders, but they are far from alone.
Some of the largest companies in the world have been built on the idea of being your own boss.
Multi-Level Marketing companies were some of the earliest examples of this.
Back in the 1950’s when the American dream was alive and well
the idea of starting your own business sounded just swell to the rapidly growing middle class.
The problem was that starting a business,
especially in the days before the internet was extremely hard. You needed inventory,
a storefront, equipment and employee’s if you had any ambitions of growing.
This was an extremely expensive barrier to entry which meant
that most people preferred to remain as regular employee’s.
The promise of early MLM companies was that people could start their own business by piggybacking
off of the resources of an existing company which eliminated all of these barriers to entry.
Of course these companies have horrendous success rates and most legitimate businesspeople consider
them outright scams. You are statistically speaking more likely to lose money in an MLM
than you are in a totally fraudulent pyramid scheme but that’s all besides the point.
No matter your personal opinion on these organisations it’s hard to
deny that their message hinges heavily on how great it is to be your own boss.
Of course these days MLM’s have been joined by an endless list of companies that all
support the idea of being your own boss, working your own hours and quitting the 9-5.
Some of these companies have a negative public perception, some have a positive public
perception and some fall somewhere in the middle. No matter they still all operate in the same way.
They promote the idea that starting a business is good, but it’s also hard, so start a business
with us and we will remove these barriers (for a healthy cut of any revenue of course)
I used the example of my own experience on YouTube earlier. If I wanted to reach the
audience I currently reach without YouTube I would have basically needed to start my own TV studio,
not something I had the time or money to really do.
By removing these barriers to entry I was able to create a pretty successful little business,
but now almost half of what I make goes to the company that made it possible.
This arrangement in this example is obviously a win-win,
but the average person that really tries to make YouTube work is going
to put in hundreds of hours of work only to make a few dollars a month at best.
At that point they would have been much better off driving for Uber,
although I am sure most people would see that as a worse platform to build a business on.
Now all businesses have risks, so this isn’t even actually the biggest problem.
These businesses all part of what academics are calling the “Platform Economy”, where people will
create independent companies that operate almost entirely under the umbrella of a larger company.
The main problem with these “platform economy” businesses that people start
IS NOT that they take a cut of the revenue, that’s just business,
you don’t get server hosting, marketing and product development for nothing.
No… The main problem is that Platform Economy Businesspeople are totally
subservient to the platform that they build their businesses on.
If Uber decides that a driver’s income per mile is getting halved, they don’t have much of a say
in that decision. If a Fivver freelancer gets kicked off the website, they lose their business
and if YouTube decides to stop recommending my video’s I have to go back to a real job…
This brings us onto the third group that NEED YOU
to believe that being a business owner is just the best thing ever.
So far we have explored the nefarious scammers and the opportunistic middlemen, but perhaps the worst
offenders of all in pushing the idea of starting your own business are the genuine well-wishers.
Now I am not talking about your friends and family here. Sure they might be excited to
hear about your new business venture but so long as they are not financially reliant on
you it’s unlikely that they really care too much about how you make your money.
I am more talking about the people on the internet
running forum threads or creating how to video’s on how to set up an online store.
They might genuinely have your best interests at heart
but they may or may not realise two very important things.
The first is that subconsciously or otherwise,
they are still very dependent on their viewers believing that they can replicate their success.
I covered this in more detail with my video on personal finance influencers.
I don’t want to repeat too much here but if people start thinking that being their own boss isn’t all
it’s cracked up to be then these public figures are unlikely to retain their viewers for as long.
This will mean that they are more likely to omit
or downplay the risks and hardships that come with running a business.
They are also going to be victims of selection bias.
By definition, you are much more likely to watch well-produced and popular videos on YouTube.
The people that have popular videos on YouTube are going to be successful business owners.
You are less likely to sit down and watch a video made by some guy in a derelict apartment talking
about how they re-mortgaged their house and wasted ten years working a business that never took off.
One video is naturally more likely to be recommended to you
and that same video is going to be something you are going to want to watch more off.
The other type of video may be far more common, but people are going to be less inclined to
want to watch it and therefor it’s less likely to be recommended to you in the first place.
Both of these people may genuinely be trying to share their business experience,
but you are only ever going to hear one of their stories.
Of course I have picked on YouTube here because it’s the platform I am
most familiar with but the same rule applies to influencers on tik-tok,
business leaders on Instagram or even your outwardly successful friends on Facebook.
The message that creating a business is good gets
pushed up while the message that creating a business is risky and hard gets pushed down.
…
Now if after all of this you still want to create your own business that’s amazing.
It truly wasn’t my intention to sit on anybody’s dreams in this video.
Rather I want to make people aware of the realities of going into business for themselves,
especially in the context of fake guru’s and platforms that would have you believe it is easy.
There is something of an ease, certainty, reward trade-off in all things.
You can choose something that is easy with a high level of certainty like a regular job or
driving for uber, but you have to realise that the rewards will not be as great.
You could go for something that has high income certainty like being a doctor or a lawyer,
but you need to be prepared to put in a lot of effort.
And then of course there are some roles that don’t require much effort at all but still have the
potential to make you lot’s of money, a YouTuber is a great example because despite what they
will all tell you, they really don’t work that hard, at least not compared to doctors or lawyers.
The problem of course is that you need to be incredibly lucky for this to actually work.
You can’t have ease, certainty and high reward all together because then everybody would be doing it.
The same is true for business.
If someone is making a big deal about how easy it is to get into some type of business, or how you
are guaranteed certain returns, that should not be a selling point, that should be a giant red flag.
A business that’s easy to get into, means it’s easy for your competition to get into.
More competition means less profits and a greater risk of failure.
If you really want to go into business, you want to find something that’s INCREDIBLY hard
to get into, or better yet find something that ONLY you can do.
This could be down to your skills, your network, or maybe even yeah your capital.
Maybe that means you need to take ten years working in the industry first,
maybe that means you need to save up enough money to design that first prototype
or maybe it just means you need to meet the right people before you set up shop.
Whatever it is you are going to be much better off starting a business
that is difficult to get into, rather than one you can “start online within an hour”.
And hey, maybe by the time you get to the point that you actually are ready
you might decide that it’s not worth the stress at all, maybe you would rather just work towards
a nice healthy retirement, or then again maybe not because I have some more bad news…
Most of you watching,
are not going to retire. To find out why go and check out my video from last month.
I again want to say a special thankyou to my channel member
and patreon supporters for continuing to make it possible to learn, How Money Works.