A misconception about rich people working long hours

Hi there, in today's post, please allow me to deal with a misconception raised by one of my readers recently. Stargazr wrote: "Studies have shown that after a certain threshold, say around $150K in the US, increased income does not actually improve life happiness. Guys on Wall Street are rolling in it but they work 24/7, have no time to do anything, are divorced, etc. It's extremely rare to find a job that pays a lot of money AND allows you the time to enjoy all of said money. If Money is your key to happiness, you're probably screwed unless you were born independently wealthy."

Well, I beg to differ. I think that as a society, we urge our children and young people to work hard by promising them that they would be rewarded for their efforts with not just great results at school, but a good job that will pay them a lot of money. Thus there almost seems to be this assumption that people who do make a lot of money must have done so by working hard - that anyone raking in over $100k a year must be working ridiculous long hours, that no one who is lazy would ever be rewarded with that kind of success, right? Well, allow me to speak as someone who does actually that kind of money: it is not so straight forward. Why do people make such assumptions anyway? Is it a fair assumption? Why do we assume that hard work would somehow always pay off? To understand this issue a bit better, let's look at this list of the 30 best and worst paid jobs: the list may be British but the basic principles apply anywhere.

Do rich people always work longer hours?

The lowest paid job in the UK is that of a waiter: poor waiters take home just £266.40 a week on average and that's about £38.06 a day. Imagine if they worked 8 hours a day, that works out to be a pay rate of £4.76 an hour - ouch. Oh and unlike the US, British people rarely tip waiters - not unless the waiter has done something really extraordinary. Mind you, even if the food was really amazing, I would want to tip the chef, rather than the waiter. Granted this article was dated 2015 November, I can't imagine the pay of waiters to have risen much in the last year and a half. Waiters are often paid by the hour and so if a waiter wanted to increase his pay by 10% next week, he could simply work 10% longer and so he would be paid 10% more. Wanna double your pay? Sure, just work twice as many hours but it it gets to the point whereby a waiter working 70, even 80 hours a week would probably have an adverse effect on his health and his family/social life. So simply working more hours is not a viable solution for waiters who are serious about improving their financial situation - say they want to get married and buy a house, well you're not going to do that earning £4.76 an hour. The long term solution would be for the waiter to retrain for another skilled job that would command a much higher salary, rather than simply working yourself to an early grave.

But let's contrast this to the best paid professions at the top of the list: can a CEO double his money by simply working twice as hard, say 70 instead of 35 hours a week? No, it doesn't work like that. How much the CEO earns actually depends on how profitable his business is and that's a pretty complex issue that's not solely dependent on how many hours worked by the staff. Likewise, for some of the highly skilled professions on the list such as pilots and doctors, there are laws that actually limit how many hours they can work in a week because fatigue can have fatal consequences: can you imagine a doctor trying to do a delicate surgery when he is so tired and prone to mistake? Or an exhausted pilot making a grave error when it comes to landing a plane with 300 passengers? No, for the people at the top of the list, simply working longer doesn't increase their income - they rely on different strategies to boost their earnings. So how do they increase their income then? Let's look at a case study from a field I am familiar with: sales.

In a recent post, I talked about my friend Lisa who worked as a beauty consultant - she works on the shop floor for a high end cosmetics company, selling directly to the public. The more she sells, the more she earns. It is pretty much a numbers game - she knows she will earn more on a Saturday afternoon compared to a Monday morning, because the shop will be far more crowded on a Saturday. In sharp contrast, I broker distribution channels for complex financial instruments, I can spend days, even weeks working with just one distributor because that distributor can potentially distribute tens of millions, even hundreds of millions of pounds worth of investments for us. Whilst Lisa is attempting to speak to as many customers as possible to maximize her sales, I am focusing 50% of my time on my top distributor - nurturing the quality of the relationship I have with his company, I then spend about 25% of my time with another partner who uses our complex financial products to create model portfolios - he is a highly respected financial planner with loads of experience and many useful contacts: we are using the quality of his reputation and relationships to reach investors whom we'll otherwise have challenges accessing. So 75% of my time is spent talking to two people at work, whilst Lisa rarely ever speaks to the same customer twice on the shop floor. Heck, once someone buys a good product from her, they will probably buy it online next time for a cheaper price - as demonstrated by the clip below.

Would spending more time with my top distributor and financial planner partner increase my profits? Well, it isn't that straight forward at all, sure the quality of our working relationships are important but simply sitting together in twice as many meetings a week wouldn't automatically double my revenue. I need to work smart, not hard. That means coming up with more inventive strategies to get my company's products to market, to reach new segments of the market where we have yet to distribute into, to come up with new ways to package up our products so it would appeal to different investors. In short, I need more good ideas and simply spending longer hours at work wouldn't automatically make those good ideas just pop into my head. It is all about developing meaningful relationships with the right people:  I recently got talking to a potential distributor and was warned by a mutual friend, "don't bother talking to him, he's about 65 years old and he is a dinosaur about to retire. He doesn't understand the complexity of your products and he really only deals with very old fashioned, straight forward, plain vanilla investments." Such are my challenges when I am dealing with complex financial instruments - they are so complex that even some in my industry do not understand them so I have to be careful whom I try to build relationships with. Thus I typically clock in between 30 to 35 hours a week, because I work smart, not hard. I worked out that I clocked in exactly 32.5 hours this week.

Managing directors of successful companies understand this concept - you cannot try to micromanage every aspect of the company, especially as it grows quite big. Instead, successful bosses assemble a very good team and hire the best talents, so they can depend on their team to deliver in their areas of expertise. Good management means choosing the right people for the jobs (hence the important role played by gatekeepers) - hire the right person and they'll just get one with the job, hire the wrong person and they will need constantly monitoring and frustrate the hell out of you when they keep making mistakes. Thus top MDs/CEOs are rewarded not so much for the sheer number of hours they work, but rather for their ability to assemble such a team and their foresight as such. By that token, they do not get rich by simply working crazy long hours, but by working smart: making strategic decisions to create the best possible business plans that will create healthy profit margins. That's not to say that some MDs and CEOs don't work long hours - that is their choice, some indeed do work long hours whilst others choose not to, but their success isn't directly correlated to the number of hours they have put in at work. There are other factors at play when it comes to working long hours.

Do you work hard or work smart?

Some people get paid more because they are specialists: take brain surgeons for example, that is an area of expertise that is so rare brain surgeons usually command a very high salary for their skills. Compare that to say a primary school teacher - now that is not a particularly highly skilled job and there isn't that much of a scarcity for primary school teachers, so primary school teachers earn a lot less than brain surgeons. Even if a very kind primary school teacher puts in extra hours to help her students, guess what? That just makes her a hard working, dedicated teacher - it isn't going to help her earn a penny more. But there's another way you can command a very high salary without working long hours - that's by having a unique combination of skills. When I worked for Google, they needed someone who was fluent in English, French, German and Mandarin for their project and I negotiated a very high price for my services on the basis that they could either hire two guys for the job (a French + German speaker, rare but not impossible to find and a Mandarin speaker), or they could just use me but I was going to cost them more. I worked out how much it would have cost them to hire two language specialists and offered to do the job for just under that figure - so it would work out to be cheaper to hire me rather than two specialists, but only just. I was handsomely rewarded for my unique combination of skills, rather than the number of hours I had worked at Google. Such is the way specialists like me get paid a lot more than others without actually having to work my butt off. So do you want to work hard or work smart?

In some countries such as Singapore, Hong Kong, South Korea and the US, people tend to work very long hours compared to say most European countries along with Australia and New Zealand. In cultures where the boss expects everyone to work such long hours, s/he would typically hang around the office until it is 'acceptable' for the rest to leave on the assumption that if the boss leaves early, the office will be empty five minutes after the boss leaves. I have a colleague in Singapore who told me that in his company, it is considered somewhat unacceptable to leave the office before your boss (not unless you have a good excuse like, "I'm visiting my mother-in-law in hospital who is recovering from open-heart surgery after a heart attack and visiting hours end at 7.") Some societies have a culture of conformity - so if everyone works a certain number of hours or dresses a certain way, you'll feel a sense of peer pressure to do what everyone else in your company does in order to fit in and you'll worry that if you do not fit in, there may be consequences for daring to be different .So if this is the case, people may work 70 hours a week not because it somehow makes them more money, but it is more a case of peer pressure as a result of the work culture.

The fact is work cultures do vary country to country, industry to industry, even company to company and how long you ultimately end up working depends on the kind of company and environment you choose to work in - of course, there is a good reason why some very rich people working long hours: it is because they simply enjoy their work so much! I think it is just plain ridiculous to assume that people who work long hours resent it because they'll rather be home spending quality time with their families: some people actually do enjoy their work a lot and that is why they don't mind putting in such long hours as they are having fun at work. Having worked in the IT start up environment last year (before giving that up and moving back to finance), I have met some extremely ingenious IT experts who are so totally passionate about their projects that they are working late into the night six day a week. Nobody is forcing these guys to work so hard - they are doing it out of their own free will but even then, that doesn't even guarantee the success of their projects. Their hard work does increase the chances of their success, but it takes more than just hard work to bring a new project to market: you also need an extremely sound business plan, investors and a healthy dose of luck.

Some people are indeed passionate about their work.

Furthermore, if you were to look at how the work culture affects working hours, different countries have vastly different approaches to the issue of paid-leave. There is a useful formula to use to calculate this: we simply add the number of paid-vacation days to the paid public holidays to get the total figure for total paid leave. In Singapore, that figure is 18 - that is half of what the French, the Spanish and the Finnish enjoy, they get 36 days. But before you feel sorry for Singaporeans, the figure for Japan is just 10, whilst in the USA, there is no statutory minimum paid vacation or paid public holidays! It is pretty much left to employers to decide how much paid vacation days they wish to offer and some offer none at all, whilst others who do offer some vacation days tend to offer on average 10 vacation days after one year of service. So the total number of hours worked in a year is going to be much higher in countries like Japan and the USA compared to Spain or France because of these huge differences in their laws. So yes, whilst Stargazr pointed out that the professionals who work on Wall Street work very long hours - my response to that is most Americans do anyway but their counterparts who work in finance in London, Paris and Frankfurt actually work far fewer hours because the work culture in Europe is vastly different. Those professionals on Wall Street are not working such long hours because they earn a lot but because they are American and Americans on average work much longer hours than Europeans. No thanks, I'm quite happy with working about 32.5 hours a week, I have no desire to work like that."

I would like to also discuss the role of passive income: imagine if you are earning $100,000 a year, what do you do with all that money if say you have already bought your house/flat? Well, there are a range of choices, but you start creating a nest egg which starts generating passive income. So in my case, my partner and I own several properties in central London and which we rent out: we are landlords who collect rent from our tenants every month and without even getting out of bed in the morning, I know I am already making quite a lot of money from those properties already. The bigger your nest egg, the more passive income you have, the less incentive you have to work very long hours. But all this depends on your personal circumstances of course: my parents had three children and their income as primary school teachers didn't go very far, so they were forced to spend their free time giving tuition to make some extra money: we even took in some foreign students from Malaysia and Thailand and my parents acted as their guardians.

My family wasn't rich when I was a child.

So you see, how much you need to earn depends a lot on your personal circumstances: do you have any dependents, if so, how many? I have a friend from university who has two children already and his wife is currently pregnant with their third child - as you can imagine, they are hemorrhaging money because of their children. This friend earns about the as much as me (which, modesty aside, is a lot), but he is spending almost every penny he is earning at the moment whilst I am actually in a far more comfortable position financially as I have no dependents, so I can afford to save a lot more then spend the money either on more property investments or simply go on more exotic holidays. So my friend does have the motivation to work harder, to earn more for his family especially with another baby on the way, whilst I do wonder sometimes why I bother working so hard for, especially when I am already quite comfortable as it is financially. In fact, I could retire today if I wanted to. Imagine if a taxi driver has a pregnant wife who needs money for medical treatment: the only way he can earn more money to pay for it is to drive his taxi for many more hours a day - your personal circumstances such as your dependents can force or motivate you to work a lot harder.

I do sense that there is the whole concept of sour grapes. I am seeing a friend tonight who is a model - she has done some highly lucrative ad campaigns where she gets paid a lot of money for a few hours work, posing for some photographs or doing some ad - it is such easy money. She gets paid an obscene amount of money for working a few hours - how do you think that stacks up with Stargazr's theory about rich people having to work very long hours to make that kind of money. I think there's definitely an element of sour grapes there, "oh I don't want to be that rich because I value my leisure time, I value spending quality time with my family and friends - what is the point of making over $100k a year if I am practically living out of my office, working 80 hours a week? I'd rather be a bit poorer but have my free time. It is just not worth it." Well, my supermodel friend makes a lot more than that and we barely works a few days a month - the rest of the time she spends having exotic holidays, going shopping, dining in fine restaurants, posing for cute pictures on Instagram. So indeed there are some people like her who are earning an obscene amount of money whilst working very few hours. She is having her cake and eating it, living the supermodel dream lifestyle.

So there you go, that's it from me on this topic:  I hope I have explored this issue thoroughly and done it justice. How many hours a week do you work? What kind of work life balance would you like to have? Are you happy with the work culture in your current employment? Do let me know what you think, leave a comment below. Many thanks for reading.