I’ve talked in the past about earning more money. I’ve blogged about blogging, dividends, rental income, and getting a raise. What I haven’t explicitly talked about is what earning money really means. I’m a capitalist in the Adam Smith kind of way. I believe that capitalism adds value, and funadamentally we are only paid when we add value to the world. There are of course nasty externalities and market power problems that make capitalism not as straight forward as some would like to believe, but that’s a topic for another day.

Too often we approach a money making venture, be it our day jobs or be it our alternative incomes with a focus on the numbers. How much rent can I get? What’s the dividend yield. These are not the wrong questions to ask, but they may not be the questions that truly need answering. We I really should be asking myself is, “What value am I adding?”, “What value can I add that someone else can’t or doesn’t?” Being able to answer these questions is more important than figuring out what the payday is.

For example if I think I can make money picking stocks, I shouldn’t be worried about making 20%. I should be worried about what makes me more skilled at picking stocks. Do I understand the industry better than other people, and therefore can identify companies that the general populace doesn’t properly value? Am I skilled accountant who understands balance sheets and income statements far better than the average investor? Do I associate with CEOs and know which ones are principled and disciplined? When I take the time to answer those questions, I realize I don’t have very many of the necessary skills. And that’s why on the most part I try to avoid making individual stock picks.

The same principle can be applied more generally to any endevour. People who have successful careers are people add significant value in their work. In some cases as with a salesperson, this value is easy to discern and quantify. A good sales person sells more than his or her peers and that’s the value. However for most jobs, the distinction is harder to quantify. However, to be successful it’s not just about doing your job. Almost anyone can be trained to perform a given set of tasks. Succeeding is about creating value. Too often we think of our jobs as about finishing in assignment when we really should be thinking about new ideas. We live in society that rewards those who think of and implement new ideas.