TL;DR
To truly own your upside, you need to understand your value profile as a mix of commodity skills (common, replaceable) and bespoke skills (rare, hard to substitute). Commodity skills make you a price taker; bespoke skills give you leverage — the power to share in risk and reward. The right commodity:bespoke ratio depends on your risk appetite and external conditions. Ultimately, lifelong learning and combining diverse skills is the best way to expand your bespoke edge and increase your leverage in the game of value creation.
In Owning your upside, I tried to make a case that to be “wildly successful” one had to pursue mastery AND own their upside. I promised to elaborate in a subsequent post, how to frame the quest to own oen’s upside. I will now try to keep my word.
A few hours after publishing the previous article, I stumbled on an article by Nosakhare Ugiagbe that equally explored the insufficiency of mastery through a critical analysis of a Derek Sivers’s. The first sentence of his concluding section stood out to me.
Capitalism almost always rewards the individual who dares to combine the different factors of production or who owns factors of production more handsomely than it does individual contributors (masters) within the production process.
I immediately felt that he had said in one sentence, and in an even more global sence, what I had sought to say in two articles. My preceding article pointed out the importance of owning one aspect of production (labour/mastery)1 as opposed to perpetually renting it out. In doing so, I had focused, although in a limited sence, on the importance of ownership. My intention with the current article is to present a model of thinking about labour (mastery), that allows for the combination with other factors of production. Nosakhare achieves both in one sentence.
Nonetheless, I think it is still important that I write this sequel. First, because simply knowing that one is better off owning their upside AND combining their mastery with other factors of production does not provide actionable insight. Secondly, because I think emphasis needs to be placed on labour (mastery) because it is the factor that is most accessible.
The foundational idea is that everyone’s value profile has two components; a commodity that is abundant and easy to substitute in the labour market, replacable, and a bespoke component that is rare and almost impossible to substitute. Those with a fully developed commodity aspect of their profile can sufficiently participate in the labour market, and the market often pays them a “fair” and often non-negotiable rate for their contribution; these are the price givers. On the other hand, those with a uniquely developed bespoke aspect dictate their rate to the market; these are the price givers. Subject to external conditions, we have “sugar sellers” on the one end, and “saville row houses” on the other end, and combinations in-between. While in both cases scarcity creates leverage2, it goes without saying that there is very little leverage to be had from the commodity aspect of a labour profile, and almost an unbounded amount of leverage to be had from a bespoke aspect.
Leverage is crucial because it enables the labourer to introduce (and hopefully capture) an element of risk into their labour offering, and can offer a pathway to weilding the other factors of production in their favour. For example, a heavily commodity profile like a data entry officer takes no individual risks when they participate under their employer’s supervision in the labour market, and consequently cannot easily negotiate to be given a stake in the bet; they have no share in the potential upswing of the invested capital under whose cover they provide their services, and they can hardly strike out in entrepreneurial fashion. On the other hand, an almost completely bespoke profile like Elon can successfully negotiate a $1 trillion package with a counter offer that is essentially a threat to start a competing company.
Given this, one might infer that the best course of action will be to develop a fully bespoke profile. It is not that simple. While it is strategic progress to appreciate the manner in which the commodity and bespoke aspects of one’s profile come together to offer leverage, the even more strategic question is in determing the right mix of these profiles and how to change them based on an appreciation of both personal and broader external economic realities. Should the commodity:bespoke ratio of your profile be 1:0, 1:1, or 0:1, or better still, 1:50? It is very fundamentally, a question of risk appetite, and depends on your ability to determine your ideal risk appetite based on an appreciation of internal and external factors. You can decide to play at 0 leverage and have nothing to worry about, but if you choose to play at 50:1 leverage, remember that no one is an atheist at 50:1, you will need faith!
Having clearly stated that we can own our upside through leveraging the right commodity:bespoke ratio to stake greater3 claims on the value we create, I will like to point out in conclusion that lifestyle choices go a long way in determing the feasibility of this approach. Every now and then, a wave of progress makes a fringe skill a bespoke skill 4. However, there is endless opportunity for one to combine several skills to grow the bespoke aspect of their profile. Scott Adams has written an excellent blog post on this 5. Lifelong learners have an upper hand in this regard because they never stop mixing competencies. It is a lifestyle choice that has implications across the board. The ease with which you can own your upside is proportionate to the amount of leverage you create for yourself, which in turn is dependent on your ability to never stop learning.
Footnotes
Here I used the two terms interchangably but acknowledge that they are in fact different, and suge usage is enabled by the fact that mastery can be considered a subset of labour.↩︎
I used the term leverage here in the investment banking sense.↩︎
I hope you take greater to not just mean asking for a bigger pay check. Capitalism rewards risk takers. You may be better off using your leverage to ask for a sit at the poker table; ask to play the game, and not just to keep score.↩︎
As of the moment of writing, some AI researchers are being traded for more than NBA players. In Africa, it was once Accountants and Electrical Engineers.↩︎
Adam’s original blog post seems to be down, so I linked to a hackernews discussion with the hope that it will have a longer digital lifetime. I hope you can still get the essesne of Adam’s argument from the summary and the ensuing discussion.↩︎