“Jeff Bezos wet his pants!”
“I did not – it was apple juice from before.” – The Simpsons
I hear she ordered more toilet paper through the Jeffbot™ while they were out at Sonic®.
The margin is where life gets interesting.
- Eating: It’s not the first bite of chocolate cake that gets you fat, it’s the last.
- Booze: It’s not the first sip of alcohol that gets you drunk.
- Driving: It’s not the first 65mph that gets you the speeding ticket.
- Elections: It’s not the first 49% of votes that get you elected.
- Safety: It’s not the base load that a bridge can carry that keeps you safe.
Life is interesting and gets more interesting at the margin. When you think of margin, you may think of a soft, buttery spread that will kill you with trans fats. That’s margarine. No, the margin is the edge of the piece of paper, the difference between inside the envelope and the outside. The margin is evident all around us if we take the time to look.
But, you say, “John Wilder, this is Wealthy Wednesday, what does the margin have to do with money? And, I’m not stupid. I know the difference between butter and margarine. One is made from the milk of Peeps®, and the other comes from spiders. But I do forget which is which.”
Be careful to milk the Peeps™ and not the Chihuahua.
This is Wealthy Wednesday, and margins fit right in. When you think about finances, the impact of the margin is especially noticeable.
Businesses depend upon the margin. Let’s take a construction company – when building, say, a new love nest for Jeff Bezos, the first dollars the company receives must cover costs. There is the cost for the concrete, for the plywood, for the anti-ex-wife minefield. Each and every cost associated with building the Alexa® enabled Love Shack Fire 2000™ must be paid before there’s any profit. The only dollars that contribute to profit are the marginal dollars, the last dollars to hit the books. That’s why a building contractor will fight like a velociraptor in a bag of laser pointers for that next dollar. If a contractor got 9% profit for the Bezos Wealth Reduction Chamber© and asks for 1% more, to Bezos it’s just 1%, and he just lost $65,000,000,000 anyway, so that 1% sounds pretty small. But to the contractor, it’s a 10% increase in profit, which is huge. Getting 5% more for Jeff’s Carnal Cottage of Whole Foods Knowledge©? That’s 50% more profit.
When corporate profits are up by 1% of revenue, that can create (in the example above) an increase of profits by 10%. Profits are set at the margin. Our economy is powered by the margin.
I guess that means the orbital laser system is out, too?
Taxes are set at the margin, too. The top tax rate is 37%, which means that every dollar (once you’ve made $500,000) you only get to keep 63%. That 37% in taxes? It’s burned ritually in Washington D.C. every Summer Solstice. They used to sacrifice a virgin congressman as well, but they swear they don’t have any of those anymore, not since Jeff Bezos visited. But you pay more in taxes as you earn more money.
It equally applies to an individual’s income. The most important dollar I make is the marginal one – that last dollar is the one that can be saved, spent on margarine butter or anything I want. The first dollars are spoken for, they have to go to pay the mortgage, to feed two always starving children, to buy electricity. But the last dollars are freedom itself. The margin provides growth, to the extent that it exists. If there’s a negative margin? You’re eating your savings, or, worse, living on credit.
The margin also applies to what you do in life. You can put in minimal effort, and be average or a little bit below average. Or, you can work harder to push the margin, and be great at what you do. As I get older, I’ve become convinced that talent can be a curse – it makes life easy. Easy is not your friend. Easy provides good results with minimal effort. That’s akin to jogging through life while everybody else has to practice sprinting. Eventually dedication overcomes talent and they sprint past you to live on the margin, where all the nice things are.
But if you have extra effort and talent? You can live on the margin. You can create the margin.
So, go create the margin. It’s easier than squeezing Peeps© to make margarine.
