Stuff is cheap; people are expensive

March 2000

For me, few emotions can match harvesting a large crop. Big production numbers generate a deep satisfaction. I think this is because I am “stuff-biased”. My value system places physical materials at the very top. Moreover, all my life I have been taught that the most honorable way to wealth was to create tangible goods.

Most people trade labor for wealth. Whether by the hour or year, compensation depends on the quality and quantity of your effort. For such workers, America’s transition to a service-driven economy has been less disruptive. But it is confounding agriculture.

Adding to the difficulty is the surprising output boost that has occurred in most areas of production. From gold to sunflowers, predicted demand growth has not only been met, but exceeded by technology-driven productivity gains.

Stuff is pouring out of farms and factories around the world at unimaginable rates and low costs. Last Christmas I bought tree lights made in China at a cost of $1.99 for a string of 100. How is this possible? That’s what I tip a parking attendant! Computers that cost $2000 last January now can be had for $999.

Meanwhile, my tractor labor bill at the dealer features a rate of $45/hour. Tuition, movie tickets, and health insurance climb relentlessly. This is not simple deflation we are experiencing.

Employment has become the vehicle of choice for fulfilling our social contracts. From day-care to counseling; from pensions to out-placement, a job is more than trading labor for pay. It is an obligation of support by the employer that is increasing pervasive and expensive. Selling a product carries no such extra burden. One transaction type is growing in value (the job) and one is shrinking (the sale)

So we sit in agriculture, outraged that the piles of our production don’t bring us wealth. More worrisome, many of us are betting the farm on a return to a “stuff-based” wealth standard. Unfortunately, convincing the world that stuff is what is important will be a tough sell.

Maybe it is time for our accounting system to change. Human effort now adds much more than just muscle output. The technological level needed for our lives means that those who provide those benefits can command compensation – and get it. How badly do you want your TV to work, or the MRI scan to diagnose accurately, or the plane to land safely? Obviously, enough to pay well.

Consider too, the “throwaway” mentality of modern existence. Fixing appliances has become a questionable effort. The most important and costly input for cornflakes is not corn, but figuring out how to get the consumer to pick your flakes instead of your competitors’. Our indignation at these violations of our value system is sharply at odds with the rest of the world.

The astonishing wealth of the US allows lifestyles filled with what would have been deemed waste fifty years before. Those years were when my parents were forming my value system. Consequently, all the rules I was taught about what is valuable need some scrutiny. Saving broken machinery because “it’s a good piece of steel” doesn’t add much to my bottom line unless steel is relatively expensive. Spending time recovering and storing all manner of seemingly useful stuff makes sense only if your time is relatively valueless. I think unexploited time, not our inventory, could be our most valuable asset.

These facts have forced me to adopt a new principle that I use as a background for my business decisions: Stuff is cheap, people are expensive. I chant that to myself several times a week, like I used to mumble “don’t let them take the baseline” during basketball practice. My goal is to stop being surprised by the world’s new value system.

The hard part is overriding my longstanding economic prejudices. For instance, if I want to grow stuff for a living, I plan on doing it as cheaply as possible – instead of wishfully hoping for increasing prices. Secondly, any time I can decrease the amount of services I buy – fix my own computer, calculate my own taxes, do my own wiring – I can save serious bucks. Third, I am developing services I can sell or incorporate into my output.

Consequently, my life is changing. Marketing often takes precedence over production. Mastering new skills can be more important than saving inputs. In fact, several enjoyable jobs that used to yield big returns no longer do so – like tillage. At the same time, wading through information streams, grappling with confusing crop insurance programs, or tracking down dollar flows can yield “bankable” results.

This economic philosophy means education and the ability to keep learning may be our most necessary tool in the future. I look at time as well as acres as a predictor of income generation. Most difficult, I am changing my pack-rat lifestyle. Throwing away much of my hoard keeps me from seeing wealth where none actually exists.

My new goal: Become an expensive person who can prosper selling cheap “stuff”.