Wednesday, May 23, 2018 / Perth Australia / By Niekie Jooste
In this edition of "The WelderDestiny Compass":
Today we start considering what skills may be important in the future automated economy. In particular, we will concentrate on the skills that will be important to the micro-entrepreneur, because our thinking so far has suggested that typical industrial era jobs were a temporary phenomenon. We have come to the conclusion that in the long run, free market systems will typically resolve into a micro-entrepreneur structure.
The idea is not to try to identify "business skills". Those can easily be identified by performing a simple Google search. There are many websites that are dedicated to that kind of information. Rather, our objective is to identify skills that will enable us to more successfully navigate the stormy waters of change that automation is sending our way.
How do we even start to predict which job types will be more lucrative than others in the long run? Today we endeavor to answer this question.
If you would like to add your ideas to this week’s discussion, then please send me an e-mail with your ideas, (Send your e-mails to: email@example.com) or complete the comment form on the page below.
Now let's get stuck into this week’s topics...
"In the short run the market is a voting machine but in the long run, it is a weighing machine" - Benjamin Graham
The quote above was by Benjamin Graham. He is often considered the father of value investing. While investing is certainly a skill worth cultivating, our article today is not about investing. Rather, we mention the quote, because within it there is an important principle that can help us in our quest today.
Basically it tells us that in the short term markets are linked to psychology, sentiment and supply and demand. In the long term it is all about the value that is added. The same thinking can be applied to jobs.
At the height of the resources boom in Western Australia, there were many people driving dump trucks on the mines, earning significantly more than a $100,000 per year. This was driven by supply and demand dynamics. Once the boom passed, the availability of these jobs significantly reduced, taking down the typical salaries to half of what they were before.
This boom bust cycle in mining jobs was driven almost entirely by the supply and demand factors, but eventually the earning capacity came back to what value was being added by the job.
So, basically there are two strategies for discovering lucrative opportunities in the market. You can chase the short term trends in the jobs that the market is willing to pay for, or you can chase the high value added jobs that the market should continue to value over longer time periods.
Both strategies are valid, but require different types of people. The short term, high demand jobs are good for the people that are good at adapting rapidly and have no problem with changing career direction when new opportunities present themselves. The longer term, high value added jobs are better for those people that want a more predictable job.
The longer term high value added job does not necessarily mean that you will not be subjected to continuous change. You almost certainly will, because the very nature of the micro-entrepreneur will be one of an evolving jobs market. The difference is that the evolution will be roughly within the same type of work, whereas for the short term jobs, the changes will be extreme. It will be a change in career, rather than an evolution of your job.
The short term, high demand worker will be the person that can always identify a scheme. The street smart hustler type of personality.
Let us now look at the longer term, more predictable approach to choosing a skill base on which to build your micro-entrepreneur business.
Accurate measurement of the value that is added by a job or service is not that easy. The typical measures used by "big company" personnel departments are really meaningless for our purposes. They use measures like "human resources return on investment (HR ROI) to describe what value they derive from each employee, but these measures do not tell us what we want to know.
It is better for us to think of it in terms of the value that is being added by different "steps" within a process in producing a product or service. It is important to understand what the real value is that a job adds.
Let us get back to our mining dump truck driver as an example. Does the dump truck driver add a lot of value to the product that is being produced? Let us say a load of coal. When we think of it, then the answer is that transporting the ore from one location to the other does not add value. It is an important step, but the value of the coal in one location is pretty much the same as in another location. Transporting the load of coal for a distance of 100 km does not make it a hundred times more valuable than transporting it 1 km.
Driving a dump truck on a mine site is therefore an expense more than a value adding job. If this expense can be eliminated, it will be.
Please understand that I am not saying that the job of a dump truck driver is not important or very responsible. It certainly is a very responsible job. The trucks cost millions of dollars each, and their running and maintenance costs are high, making the job very responsible indeed. The value of hauling the coal on the mine site is however not high.
Let us compare the transport of coal on a mine site with a transport service that can deliver a product very rapidly to a customer. Let us say that our micro-entrepreneur business is to do same day deliveries to customers for a retail company. Is this service also just an expense, or does it add value?
Seeing as customers will be willing to pay a premium for such a service, there is a value being added. Whether this delivery is by driving a truck, or using a drone to perform the delivery, is not important. The issue is that the service is adding a lot of value to the customer, resulting in greater customer satisfaction and revenues for the retailer.
In other words, a service of moving coal on a mine site is a much lower value adding role than a service of same day delivery of goods to customers. Still moving "stuff", maybe even using a truck, but the value added is different. Over the long run, the delivery "service" should be a better long term money earner than the mine site haulage service.
While there could be peaks in demand that makes the mine site haulage service business lucrative in the short term, in the long run the mine will try to reduce this cost by automation, or even eliminate the cost by "designing out" the step if possible. While the retail delivery service may evolve to make greater use of automation, the service itself is unlikely to be "designed out", because it is not only an expense. It actually adds value to the business of the retailer.
Let us roll out this thinking to welding. Let us say that you are going to be a micro-entrepreneur that wants to provide a welding service. Where should you try to provide this service to add the most value?
Let us say you think of providing a welding service to a workshop that makes pipe spools for the oil and gas industry. You weld flanges onto pipes, resulting in a product that is salable. This definitely adds value, but is there a way to add even greater value?
Let us say that you decide to provide "on-site" maintenance welding services to factories. Now the welding service not only makes a usable pipe spool, but you are also limiting production losses for an operating plant. In other words, there is a lot more value being added than in the case of "production line" welding in a workshop.
This comparison suggests that while there may be earning potential spikes associated with periods of high demand for workshop welding, in the long run the site welding service should have a better chance at survival than the workshop welding service. At times when profits are tight for the workshop, they will be looking at reducing costs by automating.
In short, as an entrepreneur you should try to understand where the greatest value will be added to your client. The service that adds the greater value will have the better probability for long term survival.
As micro-entrepreneurs we will need to cultivate the skill of identifying the value that our proposed service or product will deliver. In the final analysis we are always selling a solution to a problem. Make it the highest value solution possible.
Yours in welding
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