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Value Extortion

A society that continues to raise the bar for those trying to create value independently, and instead ushers individuals into a life of corporate servitude, is something worth avoiding.

One of the key components of capitalism is value creation - the idea that if one individual can produce value for another in some way, they should be renumerated for their work. This is what creates the foundation of an economy. It provides an incentive to work, as individuals create value in the areas they specialise in, in exchange for money, which they spend more diversely in other areas.

For example, if you were selling a physical product, and materials only cost £5, you may well end up putting it on the market for considerably higher (say, £20), because through your innovation and production process, you've managed to create something that brings a higher value to the consumer. Offering a freelance service is another example - you'd set the price near the value you felt you were offering, and let demand in the free market decide your customers.

Things are different when you're employed by someone else. In this situation, any value you create goes straight to your employer, with a percentage being given back to you in the form of a wage. Now, when it comes to value, all leverage and bargaining power sits with the employer - they can choose how hard to make you work, but have the ultimate say on salary, no matter how much value you may truly be creating. In fact, most corporate hierarchies seem to operate with an inverse correlation between the absolute amount of value created, and salary, where the highest levels of executive management are simply wrangling the value creators below, yet reaping the vast majority of the benefits.

Naturally, such a controlled renumerance system has many benefits for the employing company. Management can entice employees with the prospect of climbing the corporate ladder, essentially hoping to bind them to a dedicated life of servitude (unless, of course, conditions change and it suddenly becomes more effective for the company's bottom line to lay off the employee). This situation is made even worse by external factors like technological unemployment1 that are creating an astonishingly competitive job market, which the employed will do everything they can to avoid having to compete in. As employees begin to take out mortgages, and make downpayments on cars, against their salary, they're given very little room to reflect on this exploitative position they're placing themselves in, and often gloss over it as a given that they should spend their working life accepting back a fraction of the value they're creating for their employer.

On the other hand, by working for yourself, you can retain all of the value you create. Instead of being implicitly capped by your salary, you're financially free to earn against the value you're creating for society.

I believe that the vast majority could be in a position where they're creating value for society. Everyone has something they're interested in, and by having the time, and access to the right resources, they can likely develop this to a point where others are willing to pay them. This could be mastering a skill to a level where they can offer it as a service, or maybe even developing a creative talent to the point where others are willing to pay in masses to appreciate their work, or perhaps simply solving a real-world problem that they feel strongly enough about that they can solve it better than others have. Either way, I feel like there are endless opportunities in the world ready for individuals to provide value.

One of the obstacles faced by individuals trying to make a living through this approach is the ever-growing dominance which large corporations have gained over society's purchasing power. An individual trying to break into a market will often have to face a generation of consumers who know nothing other than to head to their supermarkets and pick the product with the lowest price tag, or most rigorously advertised brand name. The materials may be extracted from unregulated mines with deplorable working conditions2, assembled by an exploited workforce3 under the command of a manufacturing company that pollutes the planet with illegal waste from their production process, but hey, as long as they've gained brand recognition by purchasing some billboard and TV spots, right? A societal shift to pay more attention to independent retailers over mass-produced products (and heavier regulations against the immoral practices carried out by big corporations4) would help here. In a world where corporations control the media, perfect information5 is a bit of a fantasy, but you're a lot more likely to find transparency via independent retailers, as opposed to through brands and corporations.

However, the real problem is that working for oneself is extremely difficult without capital. Being entrepreneurial is seen as a risky move, and even for those with few obligations (e.g. no family to support), the prospect of failing, with no safety net, can be extremely daunting. Especially when would-be entrepreneurs are coming out of the education system with increasingly high student debts already weighing them down.

One solution on the horizon is the introduction of a basic income - a replacement of all welfare schemes with a fixed monthly allowance paid to all adult citizens.6 I can see this acting as the ideal safety net for someone who wants to experiment with providing their own value, without the added pressure of knowing that business failure could lead to catastrophic financial failure. Unfortunately, there's certainly a long to go before we can hope to see something like this implemented. In the mean time, building up savings which can act as a runway, or working with some kind of startup incubator, may be the most common ways of adding security behind an attempt to create value independently.

Anyway, regardless of the less than ideal societal context around working for yourself, it's still a highly popular choice, and there are many success stories of those who have found true financial freedom by pursuing it. A lucky break for this generation is the advent of the Internet, which has greatly reduced the barriers to entry in certain sectors, and will likely continue to help gain back control after the corporate takeover of the past few decades (as long as we retain net neutrality7).

If you're currently in employment, I would recommend taking a moment to consider the value you're currently creating for your employer, and thinking carefully about the value could truly be creating for society by working for yourself.

This article is the first in an on-going series. You can keep up with the latest installments as they're posted by following me on Twitter.

  1. http://www.youtube.com/watch?v=0SuGRgdJA_c

  2. http://www.monbiot.com/2013/09/23/apple-turnover/

  3. http://edition.cnn.com/2013/11/06/world/asia/china-labor-camp-halloween-sos/index.html

  4. Of course corporations have economies of scale in their favour. But we don't need to also make it profitable to act in an immoral and exploitative way.

  5. http://en.wikipedia.org/wiki/Perfect_information

  6. http://www.reuters.com/article/2013/10/04/us-swiss-pay-idUSBRE9930O620131004

  7. http://en.wikipedia.org/wiki/Net_neutrality