On increasing income – Why does Madonna earn more than a heart surgeon?
Posted August 10, 2010on:
If Madonna sings and record an album on one hand and a great heart surgeon work for three hours on one patient, who is going to earn more?
Can you guess?
If your answer is
As per the youngest millionaire of Singapore, Adam Khoo, you are right.
In three hours, Madonna sings, gets a song recorded and earns more than a heart surgeon.
Now the question is: WHY?
Please note that this post is not being made to offense anyone. My doctor friends should not lose their heart or think that I am criticizing any one. This post is being made to bring out some important point which is generally not taught in schools and colleges and that relates to financial literacy.
Earning / Income is component of a few factors and to increase income, people need to understand what constitutes income.
Income is a product of three factors:
2. Time; and
In other words, Income = Time x Value x Scalability
Both Madonna and the heart surgeon invest three hours (time) and give great value. The factor which makes Madonna (or any other celebrity / artist) richer is the scalability factor. (Please note that there is no comparison of Madonna and any heart surgeon. This is an example only.)
A heart surgeon is great as he / she saves life which is too precious to be compared with a singer’s work. However, this is just to give an example and to answer the quesion: Why some people earn more that some other people?.
Artists earn more as their value spreads across many countries around the world and this is called the ‘scalability’ factor. If a singer records an album or a video, it reaches out to more people than a person who is working on a limited scale. People who are working as employees do invest great value and a lot of hours but the businessmen provide scale i.e. the business person’s product reaches many people as compared to an employee.
This can be explained by the real life example of Colonel Sanders – The Kentucky Fried Chicken’s founder. After retirement, he thought to start a business. He had a recipe – Recipe of Fried Chicken. He opened up his shop and it ran well. His income was due to the effect of his time and the value he was giving to the customers. However, one good day, Government changed the express way route. Consequently, customer were not coming to his shop and as a result, he got broke. What did he do?
He decided to ‘scale’ his business and sold the technique to the restaurant owners. He went to various restaurant owners and asked them to buy his recipe of a fried chicken and there you go!
KFC become a world-wide phenomenon. This is why franchises earn more – the scalability factor!
How can a doctor scale up his or her services? He or she can do so through website, by writing books, by online sessions and seminars etc.
I thought to share the above ideas while reading Adam Khoo’s book: Secrets Of Self Made Millionaires