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Comment by pmorici | Hacker News Reader

When I was old enough to have some experience and felt like I knew what I was doing but not quite as old as I am now I had an idealized notion of self-employment. Mostly because of the flexibility I imagined it would provide, partly because of ego. It took some dabbling and dealing with horrible clients before coming to the realization that self employment and employment are really two sides of the same coin. The goal if you want true flexibility and freedom should be to put yourself in a situation where you are no longer dependent on selling your time for money as your source of income.

Now whenever someone asks if I want to do contract work for them I remind myself that I don't want to be in the business of selling my time for money.

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It's unfortunate that darig's reply to your comment is being so heavily downvoted that I can't reply to it because essentially they are correct.

Most people only know how to sell their time, which is why most people are employees and many self-employed people have no free time. It's entirely possible to be self-employed and sell something that is not your time, or maximizes the investment of your time so that you can do something once and sell it more than once.

You can click the time of the post, then vouch, another might help bring it back from the dead.

Indeed, I did vouch.

How do you sell something that is not your time? Money is just crystallized work time. If you don't sell your time, you got to... sell other's time (by having employees)?

The idea of making something once and selling it multiple times (like software) is nice, but the way I understand the market works is that competition will push down the price so much that even with your one time work investment, you'll only get the "average" rate in the end. So that means, find a niche where there is no competition yet?

Your notion of competition in the free market is sorta like the frictionless spherical horse in the physics joke. A successful product will produce more profit than your hourly rate.

Yeah, of course it is idealized. You know the joke: two economists are walking down the street. One sees a $50 bill on the sidewalk and says to the other: "Did you see that $50 bill on the ground?" - "Can't be, if it was there someone would have picked it up!"

Long term I think it is true, though. If you don't have any unique advantage, competition will drive down your revenue to "market" rate. But that's kind of idealized equlibrium, of course there are successful products, innovations, and so on.

You should absolutely have a unique advantage!

You only really need a brief period of profitability to start building up capital though, and at a certain point that become self sustaining in itself (again in an idealise world, but a fairly reliable one).

> Money is just crystallized work time.

The value of a currency is a representation of the faith the holder has in the issuer. Consider QE: a government issues digital payments to banks for billions of currency and the work involved is roughly as complex as sending SMS text messages, and yet for $1B you can buy a really nice yacht and a trip to space.

A paradox? No, we just believe the currency has a value unrelated to any notion of work required to produce it.

As a physicist I learned that different, contradictory theories can be complimentary because they approach the truth from different sides.

As an employee,´I cannot buy a yacht. I am free to choose many different jobs that all pay about the same for the amount of effort (or less, if I am unskilled in that field for example). So I think at least at the micro level, the labor theory of value still has some explanation power: It explains why there is no free lunch (for employees), but also why you'll want to have people work for you if you want to make more money.

Or maybe find a niche where competition doesn't affect price so much?

Vinyl records? Text editors? User-hostile "Enterprise" software?

What we call time here is sometimes better understood as attention. Attention is the one true currency.

i sell outcomes and expertise. for 2.5k a month i promise my client that i will be available whenever there is an issue. last month this client called once (actually he just sent a message), checking if i am available in case something that he was working on would blow up. it didn't blow up and i earned my monthly fee literally just for holding hands. the time i invested is the time it took to respond to his message. there is no hourly rate that can measure that.

clients will not only pay the least that they can get away with, they will pay what it takes to achieve their goals. what my client needs is assurance that problems will be dealt with. so in effect it's like insurance. you pay for insurance but hope that you don't need it.

another way to earn money without an hourly rate is fixed price projects. the goal here is to figure out what is the value of the project is to the client. you may charge 50k to build that custom website, but if the client earns 500k from using it the next year, then it was totally worth it, even if you could have charged less.

the challenge here is to find those clients. the answer is generally reputation and referrals. you won't find them on upwork. at least not at first. finding a niche with little competition can help.

the client i mentioned above i started out with as hourly rate, continually raising the rate each year until i suggested we simplify the process and agree on a fixed monthly rate. i let the client choose the rate. figuring that if the rate was to low for the amount of work, then we'd renegotiate. it wasn't. i even get bonuses if there is a particularly busy month.

There's a large number of people who make a living basically selling access to their industry contacts...making introductions.

There are a lot of creative ways to make money out there that most people don't realize.

Like any investment they don't always pan out, and you don't start making money right away. It's easy to say you should invest your time, but I think that's going to be tough for someone trying to strike out as a freelancer for the first time. You have to pay the bills right away. It's hard enough to build up contracts without the added concern of trying to productize your time. I think you need to balance them at first, unless you have a year of runway in savings to blow and a fallback job at the end of your runway.

Every contractor at my startup has a full-time job that they're seeking paths of escape or diversification from.

Full-time employees who double as hourly contractors are a difficult balance. Generally, if they were seeking to escapes their full time job they’d quit and do more contracting.

It’s tempting to try to capture the best of both worlds: A full time job with benefits and steady pay where they work on minimizing their workload, combined with hourly contracting work where they focus their efforts to capture those extra contracting paychecks.

It works for a while when things are slow at work and the contracting effort is fun and new, but eventually they start cutting corners in one or both areas to avoid burnout. If they really want to contract, they’ll go that route. However, it’s common to simply realize how low-stress and predictable a full time job is and just stick with that.

I’ve done freelance work on the side in the past. It’s a difficult balance. I’ve also had employees who tried to contract on the side, usually with an associated decline in day job output. The worst case is when someone goes all-in on contracting but tries to keep their day job paychecks as long as possible, doing the bare minimum to delay getting fired for as long as they can get away with. That situation is miserable for their teammates and coworkers.

Do paid tasks, not hourly. Hourly work, as a whole, is desirable for slow, inefficient people.

I think they're just shadowbanned.

> It's entirely possible to be self-employed and sell something that is not your time

Yes, it is possible, but more difficult. Clients will often try to find out how much time was really spent on the project, even if they are officially paying for the outcome and not the effort.

To go this route it's much better to build a product, a SaaS for instance, that you can sell many times with zero or negligible marginal costs.

> Clients will often try to find out how much time was really spent on the project, even if they are officially paying for the outcome and not the effort.

That's when you respectfully remind your client that you're not a contractor but a business and that you're dealing business to business. Asking you how the sausage gets made is asking you about how you run your business -- it's none of theirs.

If they feel like they aren't getting a fair deal, you are happy for them to shop around.

If the client is trying to get a sense of your time then it's a mistake in how the relationship was framed. You want them to think that you're a business with employees, even if you're the only employee. Use more "we can" instead of "I can" language in your deals. They also aren't your only client.

I absolutely agree with everything you say... And yet it doesn't change the facts that 1/ some clients are a pain and 2/ it's usually the ones you can't aford to do without.

(And yes, you should not depend on just one client.)

Indeed. /knowing sigh.

It does feel good when you get around to firing those clients later though.

This is true. When you are a consultant or contractor, you still have assess to kiss and jerks to take orders from. You actually have to work a lot harder at keeping the folks in charge happy. And worse, they can fire you in two weeks instead of 6 months.

The upsides are that A) you're hopefully making more money as a consultant and B) you at least get a change of asshole scenery every 18 months or so.

C) Incentives are clearer. As an Asperger, dealing with corporate games and social games and the fakery of managing everyone’s mood is unbearable. Now founded a startup, the only job I have kept more than 2.5 years… and 8 in fact, and going strong. Either a customer is happy, or he isn’t because we don’t fulfill his need, and that’s easy to deal with for me.

> And worse, they can fire you in two weeks instead of 6 months.

In the US regular employees can be fired in two weeks most commonly, though big companies traditionally give a few months severance in good economic times.

The upside of this is you can also walk away from a crappy job/boss/etc with two weeks notice. With contracting, you may be on the hook for the contract duration plus being pestered for support help forever.

Umm...not quite.

Most US states have at-will employment, so an employee can be fired for any reason, at any time, effective immediately.

For an employee, the implied social contract is to give two weeks notice.

By "can" do it I mean are able to without burning bridges or feeling like you've betrayed people. A big difference from walking away from a small business you run, by contrast.

When you are a consultant or contractor, you still have assess to kiss and jerks to take orders from. You actually have to work a lot harder at keeping the folks in charge happy. And worse, they can fire you in two weeks instead of 6 months

You can choose between the illusion of security or the illusion of freedom, that’s the choice

I kinda wonder if there’s a growing number of people who recognize this, hence the emergence of the FIRE (Financial Independence, Retire Early) movement. Anecdotally I’ve noticed more of my friends having this same mindset that you’re having whether they’re entrepreneurs or corporate employees.

It seems like the system is rigged no matter which way you look at it. The only option really is to amass enough fuck you money.

> It seems like the system is rigged no matter which way you look at it. The only option really is to amass enough fuck you money.

It's not actually rigged though. People just sell themselves short due to information asymmetries and a just plain crappy business model (work for hire). Customers see it as a risk so are reluctant to pay much, but it's your skillset so from your perspective there's actually little risk. Better to license technology but maintain ownership so you can sell it again to others. And now that the risk is gone, the hotter the technology the more you can ask for working technology you can demonstrate. Of course this isn't possible in all technology niches but I'd say your goal when self-employed should be to maneuver into areas where it is possible. Business is a game of avoiding being the commodity that others profit from by building into wealth. Work for hire is a commodity.

> Better to license technology but maintain ownership so you can sell it again to others. And now that the risk is gone, the hotter the technology the more you can ask for working technology you can demonstrate. Of course this isn't possible in all technology niches

This is great in theory, but in practice it’s rare to develop something that can be passively licensed off. Usually it becomes a business that requires constant attention as it scales. I know a few people who have developed apps that sold well initially and looked like easy money, only to be buried under a flood of copycat apps as soon as the market realized the opportunity was there. The best success in cutting the cord seems to be building a company which is then sold off, but that’s hardly an easy path.

This feels a bit like the “passive income” pipe dream that is frequently touted in FIRE forums but rarely comes with practical, real-world examples.

Before the app economy was a viable option it seemed like real estate or dividend investing was the way to go. But even then rental income isn’t as passive as people make it out to be.

> Usually it becomes a business that requires constant attention as it scales.

You seem to be talking about the typical solo entrepreneur story where someone tries to guess at a consumer product, makes it on their own time, then tries to sell it? No, I was talking about contractors keeping ownership of the code, for example, that people are paying them to make under contract. Give them a license not full rights. Now you can sell it again. It still takes work to sell, and work to deliver on each sale. Just less than the first time. And you can ask more since you have a demo. To make early-retirement money it still takes being in the right place at the right time, recognizing that, and setting a high price you can get. The point is the system isn't rigged to the point where heads you lose and tails someone else wins. It's in your hands.

I certainly wasn't thinking of apps either way. I am only familiar with b2b markets requiring specialized skills (where I'd think contracting is most lucrative anyway).

> No, I was talking about contractors keeping ownership of the code, for example, that people are paying them to make under contract.

Great in theory, rare in practice. Usually when someone reaches the point where the code they’re writing for a company is self-contained and re-usable by other companies, they’re building a product rather than writing code.

Not strictly an app, but it’s still a product that must be maintained, supported, and sold.

I’ve hired many contractors and contracting companies to build code, features, or even products over the years. I can’t imagine a scenario where I’d willingly give any of them a license to maintain ownership of what I’m paying them to write and, even worse, a license to resell it to companies that are likely to be my competitors.

It's not rare at all. Any field where the company or person paying for the code has absolutely no ability to do anything with it themselves anyway. And frankly people tend to keep and reuse their code anyway, but I prefer to be honest about it.

Here's an example I did: fast linear algebra algorithms in C to run an algorithm on a customer's device. They wanted the high level algo working, not my matrix code. I used it in other stuff for a really long time.

One doesn't need everyone in the world to unanimously agree to one's license terms. It's fine if you're repulsed by the idea. That's a important flag when considering potential customers.

But it's artificial to a point: how can everyone be financially independent and retire early yet provide no tradable work?

Someone has to grow the soils, cook the pizza, maintain the electric grid, wipe the asses of the elders, etc. In a way, if more people manage to find ways to retire early and forever, others will find ways to stop this bliss and make them work for them, and it sounds fair no?

There's always going to be people who spend their entire paycheck and then some before it even hits their account.

> others will find ways to stop this bliss and make them work for them, and it sounds fair no?

This statement assumes humans love having control over others and keeping them in a system of pseudo-slavery. But if you look at it closely humans are the faulty, unreliable pieces and if you can get them out of your business's equation it's hugely beneficial.

And don't forget automation which seems to be looming closer and closer as time goes on. Theoretically, this results in fewer jobs for the non FI-ed people to compete for. You need something to assure their future least they become restless on the streets and adding to social unrest (that preferably doesn't include some kind of bullshit job). Food, medicine and affordable housing for a long part of their lives within a few years of working and saving would be a good start. The UBI talk is something to take note of too.

> don't forget automation which seems to be looming closer and closer as time goes on. Theoretically, this results in fewer jobs for the non FI-ed people to compete for

This has been the consensus since the assembly line was invented. Yet, there's new jobs popping up all the time that still require people to do them. People used to work in the fields, then they moved to the factories, now they're in services. I have no clue what's next, but I don't think it's nothing.

Just because one is retired, doesn't mean they stopped working completely and they're just partying non-stop. If you're always on vacation you're never on vacation. Being retired means one chooses how much to work, with whom, for how long etc.

In my opinion, the emergence of FIRE mostly has to do with influencers selling the idea of FIRE on social media. These people show themselves chilling with a laptop on some Thai beach and tell you that you can do the same thing if you just buy their FIRE course. These people only became FI because they sell the idea of FIRE to people who hate their jobs and possibly their life in general.

While FIRE is of course a possibility, it's a possibility for a very vocal minority. Survivorship bias is huge in the FIRE communities.

FIRE may have started out as a reasonable discussion about retirement planning and personal finance, but the current influencer-driven FIRE world has become a pipe dream about people fantasizing about escaping jobs they hate by being extra frugal and quitting as soon as they’ve saved barely enough to coast through the remainder of their lives on a shoestring budget.

I get anxiety reading FIRE posts from people in their 30s who have saved $1 million or less and have concluded it’s sufficient to carry them for another 5-6 decades of life. The cFIREsim results might support that conclusion, but only if they assume their frugal expenses will never, ever change as they age

That’s where I wonder about the FIRE calculations, cause it assumes the S&P 500 will return a 7-8% gain YOY which, while historically true, may not necessarily be the case moving forward.

Going back on-topic, it still seems like the biggest way to build wealth is either 1) kick ass at your job as an employee, or 2) hustle when starting a new business. Entrepreneurship has been romanticized this last decade with hustle porn and Silicon Valley’s mentality, but there’s nothing wrong with being a corporate employee where they hopefully pay you perfectly well.

Each have their advantages and disadvantages, and it really comes down to personal preference.

The return calculations are a red herring for many younger FIRE people, IMO.

I think the real issue is the assumption that their spending will never change. At the extreme young end of the FIRE discussions the people in their mid-30s have barely been independent adults for 15 years yet are setting fixed budgets for the next 50+ years of their life.

Many of these budgets have obvious blind spots, like the people who paid off their cars before setting up their FIRE budgets, so they forget to include future costs of replacing that car some day. Likewise, many of the frugality stories come from people who were high spenders in the past but recently became frugal, which ignores the fact that much of their current lifestyle (furniture, clothing, electronics, tools and equipment) were funded by their pre-frugality spending and therefore not accounted for in their current budget. Things decay and must be replaced eventually.

Selling your time for money being self employed is the first step, and dealing with horrible clients is a prerequisite to acquire the experience to learn to choose clients and manage their expectations. Like you I had an idealized notion of self-employment, but I pushed through it and don't regret it. It's two sides of the same coin because in the end you work for customers, but at least being self-employed you have to deal with 0 office politics and organization accidental complexity, you carry directly the value to the client with the tools you want, being fully responsible. You have freedom and flexibility because in the end you make the proposition that suits you. But it's definitely not easy at first.

Odd that this article (and this comment on it) use a definition of “self employed” that still involves having an Employer. I’ve always considered the term to mean running your own product business. I certainly never used it to describe my consulting work.

The author’s points all hold up, but it would make more sense to change the title so that it was cleat that it was comparing W-2 salaried positions to 1099 contracts.

Self-employed is usually synonymous with a contractor, someone that's working for clients and typically trading time for money. A business owner on the other hand would be a more apt description for someone that is running their own product business or running a services business where they have employees or outsource the service work.

In the US it's a common term for what the IRS calls you, regardless of what you actually do.

Own an S-Corp selling toothpaste? You are self-employed.

Have a sole proprietorship mowing lawns? You are self-employed.

Have a C-Corp mowing lawns? You are an employee! But then your corporation has to pay taxes too.

I decided long ago that for me to be fully self employed, I would either need to make 3x my current salary or have no other immediate options. Currently the only consulting I do is via retainers to mid-sized businesses, where I average 5 hours of work a month, get paid for 10, and occasionally go over when necessary. I am not immediately on call for anything and my clients are aware that I have a day job that takes precedent. My rate for any additional clients is also much higher than my rate for existing clients. It's what my extra free time is worth to me.

another way of putting it would be that your new boss is/are your clients so yes it is another form fo employment in the guise of self employment. True freedom would be when you can take yourself out of the picture and still earn income.

Yes, the most obvious way is to save enough to live off income from your investments but I would also include building a product business where you sell the product and there isn’t a direct correlation between your hours and your income.

> True freedom would be when you can take yourself out of the picture and still earn income

In this case the "boss" is the cash cow and keeping it alive; also maintaining marketable skills incase the thing dies.

Having too much time and money on your hands can also pose certain social and mental health challenges. It seems everyone has a job whether they like it or not.

I would generally agree with you, except:

- as a self employed person you can pick your clients, if you are good

- self employment often can be a path to something where you stop trading time for money. But it takes time to figure this out.

As always there are trade offs to everything.

Solution is kind of straightforward: Work said 100k job for 5 or 7 years, perhaps with safe investments e.g. the S&P, get 200k+ to your name. Use that to then support years of establishing your own business, own terms, own freedom.

Have the business fail after putting all of your money in it, lose house, lose self-respect, burn out, go back to working for 100k a year (or less because you have nothing to show for the last couple of years).

Everyone always assumes that if you work hard, you will succeed... It's the American dream. But it's far from the truth for many people who try this type of stuff. Most small business owners end up working 70+ hour weeks for maybe a bit more than the 100k some people might get working for an employer, with the added weight of having to run a business and losing everything if it fails.

How to limit the danger of losing everything if it fails? Isn‘t that just the issue if you invest everything you have or stop too late (kill the business early enough if it does not work)? Am I missing something?

I was doing the opposite of the previous commenter. There's of course a lot of options in the middle. The previous commenter just presented it like it's easy to just become your own boss. My point was that it isn't and yours does the same, just in a less depressing fashion.

How are you no longer trading your time for money?

There are two known ways to do that, a) Sell things instead of your time. b) Sell other peoples time.

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