You Have Five Sources Of Power In This World

Every now and then, I like to write “big picture” posts that put my finance articles into the proper perspective of the overall whole. Today, I wanted to talk about the five sources of power that you can acquire while you are here on this earth, and the more of each that you possess, the more others will seek out your presence and companionship:

(1) Skill Set/Economic Power—When Warren Buffett gave a young man at the 2008 Berkshire Hathaway shareholders meeting the standard advice “to invest in yourself”, he elaborated by mentioning that certain skill sets will always command a higher premium in the marketplace, regardless of the country in which you live. The example Buffett used is that a heart surgeon will always make more money than a janitor (regardless of whether you live in 1800s Germany, 1920s Japan, 1950s Great Britain, 1970s Ireland, 1990s Mexico, or 2010s United States). That has to do with the limited supply of competent heart surgeons in the world, the very specific and detailed nature of the work, the high consequences if you mess up, and so on.

None of this is to say that the heart surgeon is a better person than the janitor (doing your job competently without lying, cheating, or stealing is the line that defines a respectable American man in the workplace), but rather, that his skill set is more scarce and valuable, and consequently, he will always be able to make the members of society at large give up more of their wealth for his services than that of the janitor.

And, of course, being a business man falls under this category. One one hand, you can old the local electrical appliance shop and bring in $75,000 per year by owning a business that meets the industrial needs of your local community. But you can also accomplish these same ends by purchasing shares of publicly traded stock—if you buy 10,000 shares of General Electric, you will be receiving the equivalent of almost $21 per day from the dividends alone. Economic power comes in the form of the cash-generating assets you own (and, in some cases, the collection of precious metals or other collectibles) which is usually acquired by judiciously investing the disposable income that your labor (skill set) is able to provide. The more assets you own, and the more useful your skill set, the more valuable you will be in the eyes of others.

(2) Social Capital/Personality/Networking—These are your “intangibles” that are somewhat measured by your standing in your local community. This is the sum collection of the things that you can do that  make people want to be around you. Maybe you’re funny and you’re good at brightening up  other people’s day. If you have that talent, other people will naturally want to be around you. Maybe you’re a kickass listener, and your ability to empathize can help others overcome their feelings of pain and isolation. If you have this skill, you will be incredibly sought after for one-on-one conversations.

Other things that fall into this category are prestige. If you are the CEO of a local bank, you will encounter members in your community that will want the visibility of being seen with you. Essentially, your mere presence is a way for others to believe they are improving their own social standing. And lastly, there is networking—maybe you have a friend who fixes roofs for slightly above costs, a computer repairman who does excellent work at a low price, or whatever—and you can use your name to get other people discounts on goods and services that they otherwise would not be able to receive. In each of these cases, you have a unique set of personal character traits and social networking friends that give other people the perception that you are an important key to improving their lives.

(3) Physical Attractiveness—If half the country, and then some, want you to take your pants off, you can get a lot of things that you want. If you think back to your teenaged self, you can probably think of a long list of irrational things that you were willing to do that were the direct result of a physical attraction to someone else. Unlike the other items on this list, physical attractiveness is not a cumulative asset (after a certain point, maintaining the status quo is the best you can ask for), but while you have it, it can be the most potent weapon in this five-item arsenal. People will be quite forgiving when you forget exactly what the Pythagorean Theorem is if you are able to rock a tight pair of jeans.

(4) Reciprocity Capital—Reciprocity is one of the strongest mental models that can change your life. I’ll try it again: reciprocity is one of the strongest mental models that can change your life. And for the kill: reciprocity is one of the strongest mental models that can change your life. Mark Twain once said that the difference between a man and a dog is that a dog won’t bite you once you fed it. This is one of the few times where Twain was wrong. If you do something good for others, without asking in return, you have planted one hell of a seed for repayment from that person somewhere down the road.

Almost all relationships (unless they are fully cemented) consist of momentum and feedback loops. Unless you have a very unusual psychological wiring, you are probably going to want to build stronger relationships with the people that you encounter in life. If you have three good interactions with the same person, you’re going to want to build on that momentum by making the fourth interaction even better.

Of course, this works in reverse as well—a few bad acts can cause a relationship to spiral out of control in short order. That’s why romantic relationship that have gone on for 1-2 years can end in just a few days. All you have to do is create a negative feedback loop for everything to go to hell. The best way to avoid these situations is to remember what Tom Murphy, the former CEO at Capital Cities, used to say: “You can always tell someone to go to hell tomorrow. You never give up that right.” If you ever find yourself about to increase a tension with someone else, the best thing to do is tell yourself you will wait twenty-four hours before saying it. Odds are, you want do that harmful thing once you remove the heat of the moment.

Always think about the feedback loop that defines your relationship with others, because reciprocity is one of the strongest elements that will define your relationship with others. Doing nice things for other people is the relationship equivalent of buying $1000 worth of Exxon, $1000 worth of Coca-Cola, $1000 worth of Pepsi, $1000 worth of Johnson & Johnson, and $1000 worth of Procter & Gamble. Over time, you will be shocked at how things grow.

(5) Religious Authority/Knowledge/Truth—A lot of this consists of the overlap between skill set and social capital. If you are knowledgeable in a field, there will always be people who seek you out, even if you are generally unpleasantness otherwise. Growing up in St. Louis, there was a guy who ran a running shoestore that was a mean son of a gun. He was the kind of guy that inspired Bruce Springsteen to write lines like, “Sir, there’s just a meanness in this world.” Yet, my dad kept patronizing him for business. When I asked why, my dad said, “He knows more about running shoes than anybody else in St. Louis.”

A more relatable example might be the Hugh Laurie character on the show “House.” If you haven’t seen it, the gist of the story is that Dr. House is a cranky doctor that disrespects his patients at every turn, but he is wildly sought after because he is able to uncover medical ailments that no one else can. This aligns closely with the “skill set” category, but it is much more broad than that: it’s about having a claim on some kind of truth that is not readily accessible to others.

I’ve encountered some terribly socially awkward theologians and seminarians that can be quite difficult to have a conversation with, yet I keep coming back to them because they can explain the teachings of Christ in ways that I can’t figure out by myself, or through a Google search, or by reading a book. We’ve all met those people who have a certain “spiritual” sense to them—if you possess that, there’s always going to be a market of people that seek you out.

That’s it. Those are the big five things that will make you attractive and valuable to other people. The more of those five things you possess, the more valuable you will be in the eyes of most members of society. This is the overall context of the factors that contribute to self-improvement as you try to become the idealized version of yourself.