Chefs, Actors and Leverage

What’s the difference between bus drivers, chefs and surgeons on the one hand, and football players, actors and Web site operators on the other?

The answer is leverage, or what Nassim Nicholas Taleb refers to in The Black Swan as scalability. Whether, and how much, to leverage is one of the biggest decisions to face in choosing a career.

A bus driver can only drive one bus at a time; similarly a surgeon can only operate on one patient at a time. The income of both, and countless others engaged in many non-leveraged professions is proportionate to the time and effort devoted to their work. Of course there are variations within a particular trade, the more skilled the surgeon (or accountant, plumber, gardener…) the higher the unit fee that can be expected. But in all cases, once they stop doing it they stop getting paid.

In contrast, consider the case of most actors. When they’re not waiting tables or driving taxis they might be playing to a few dozen in a community hall. But a few actors get to star in movies, and for the same amount of acting get to be seen by 100s of millions, not to mention DVD sales etc. That’s the power of leverage. (more…)