The Disease of Solo Economic Dependency and How to Cure It
By Mark Podolsky, Author of Dirt Rich
Imagine you’re a dentist. You’re doing well on the face of it—your practice is pretty successful. But your work is the only way you clear your monthly overhead and make a profit. You have a recurring dream that you’re pulling a big wagon uphill. Sitting in that wagon are your dental technician, your office assistant, the hygienist who comes in three days a week, your accountant, your insurance agents, your landlord, your dental suppliers, and the dental equipment reps. And if you unhitch yourself from that heavy wagon, you know it’s going to start rolling downhill, faster and faster. You wake from that dream in a cold sweat.
And you know what? Your attorney may be having the same bad dream, only with the legal profession’s equivalents sitting in her wagon. But her problem is basically just the same as yours.
Now imagine you’re a bit lower down on the professional food chain—a freelance graphic designer and web developer.
You aren’t paying any staff, but you have office rent and bills to pay, especially your phone and internet service—you need premium bandwidth and connection speeds for all those big files—not to mention software upgrades, software as a service (SaaS) subscriptions, and cloud storage. And you’re constantly threatened by “mushroom” companies—the kind that have an office or two poking up in the United States but whose real staffs of dozens of designers and developers are hidden away in Bangalore or Bulgaria, earning pennies on every dollar you charge so that their firms can always underbid you. That means you’re working harder and harder and retraining yourself constantly as you search for niches where there’s still a decent hourly rate for your services.
Finally, imagine you were me before I became the Land Geek. I was an investment banker doing cold calling, a miserable job working for a horrible boss, with a wife and new baby at home—and barely scraping by from month to month. Like so many working people in the United States today, I was in a Red Queen’s race.
The Red Queen’s Race
The Red Queen’s race happens in Lewis Carroll’s Through the Looking-Glass when the Red Queen and Alice are running without stopping, but also without moving forward. “Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else—if you run very fast for a long time, as we’ve been doing.” “A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
In fact, most Americans are now running as fast as they can, working as many hours as they can—and not even staying in the same place, but slowly slipping backward. That’s why so many couples fight about things, such as the price of healthy baby food, that they shouldn’t ever have to fight about. That’s why in most families in America today, both wife and husband are working outside the home, sometimes as many as three jobs between them. And according to a recent study, most don’t even have $1,000 in their checking and savings accounts combined.
That’s the Red Queen’s race, and more and more people are losing that race or barely holding their own. The days when you could go to work for a company in your twenties and count on a job for life are gone. Often, if you did a reasonably good job, advance within the company ranks, you’d have a defined-benefit pension waiting for you at sixty-five; that’s long gone. In most cases, job security is a thing of the past, as is income security.
Solo Economic Dependency: The Trap
To understand how I came to view the implications of all this, let’s flash back to the first job I got straight out of college, when I was twenty-three years old. I was a dental business broker. Most of my days consisted of two activities: I helped dentists grow their practices through mergers, and I helped retiring dentists sell their practices.
At twenty-three, seriously wet behind the ears, I had no real idea what I was doing when I started. However, I was lucky enough to acquire a mentor at the company named Raj, who had both an MBA and a degree in chemical engineering. Raj taught me how to create pro formas—the financial statements and projections prepared by the seller of a business to show prospective buyers—how to recast earnings, and how to appraise dental practices. However, that was just the nuts and bolts of dental brokering.
What I really learned there was that dentists, doctors, chiropractors, and most other people in the business world were afflicted with a disease that I call solo economic dependency. From our perspective as brokers who saw the balance sheets, it looked as if the dentist was working for his staff and suppliers and not the other way around. That’s because if he didn’t have his hands in a patient’s mouth, he wasn’t making any money.
Since then, I’ve come to understand that the same condition afflicts the great majority. If you have a regular job, think about how much time each month you spend on that job working for your landlord or your mortgage lender, how much time you spend working for whoever owns the note on your car, how much of it you spend working for your phone company and your ISP, and so on. A lot, right? So, no wonder that when you have solo economic dependency, there’s a good chance you’ll end up as another contestant in the Red Queen’s race, going nowhere fast and getting older day by day as your life is used up in the endless struggle. Ouch.