The Lure of the Six Figure Income

I peruse the want ads on a regular basis, and I always manage to see one that says this:



There are variations on this theme. Work at home and make a six figure income. Or it may be making a six figure income in some other way. But the one thing remains constant. It is that six figure income. There is something about that amount that makes people get stupid. Yet, we need to consider some statistics.

According to Wikipedia, about 5% of the population make in excess of $100,000 a year on an individual basis. The median income is $39,000 which has probably dropped in this recession. The odds of you busting six figures are slim. But people still try.

The lure of the six figure income makes people do dumb things. To make this kind of dough requires risk. Now, as we see, there are plenty of scams as evidenced by the ad above, but people may not be aware that other avenues have the same effect as those scams which is to lure people with expectations that cannot meet with reality. Here are some of the things people fall for in pursuit of the six figure income:

1. EDUCATION

Glenn Reynolds and others have highlighted the bubble in higher education. People today go to college, grad school, and professional school with their ballooning tuition rates to end up taking jobs that pay what a decent truck driver makes. Basically, this is the median income which isn't so bad, but those debt payments make these folks go back to live at home with their parents. The whole thing is a crock, and you can't count on higher ed to tell the truth about this. They are raking in all that dough. But people are wising up.

2. CLIMBING THE LADDER

Another option is to fight it out in some corporation and move up the ladder red in tooth and claw. Some people pull this off if they are particularly vicious and lucky. But as I've learned from Taleb and from personal experience, the ladder climbers are lucky coin flippers. You either make big bucks, or you get fired. There is no middle ground. And none of them are happy.

3. CHASING THE HOT SECTOR

During the housing bubble, I ran into this dumb blonde in a bar one night, and she told me this amazing story of how she was pulling down big bucks in the construction industry working for some big firm. It wasn't a blue collar job, and she was just a high school grad. I doubt she is making that dough now. I hear similar stories in tech and what have you. One day, some clever economist will come up with an Idiots With Money Indicator and find out where the next bubble is and short it. These folks make big dollars but only briefly.

4. ENTREPRENEURSHIP

Starting a business has dismal odds, and most people would be better off not trying. Less than 5% of startups make it past five years. Not all of those are lucrative enough to yield a six figure income. But people try anyway.

Everyone wants to max out on their income. This is rational. What is not rational is the expectation of making a six figure income. Granted, doctors regularly make six figures, but this is the product of that high barrier to entry called medical school. Spending eight years in poverty racking up debt is a real gut check. The reason so many foreigners come to be physicians here is because they have a lower barrier of entry back in their home countries. Of course, if those barriers were lowered, the incomes would be lowered as well.

People want to make more money because it provides them more material security. The problem with this thinking is that people who make more do so almost entirely out of increased risk to their material security. It is a Catch-22. To be a financial success, you must risk absolute financial ruin. Even the doctor in training is one blown final away from oblivion. The flip side to all of this is that the ones who do make it to six figures do so out of bad habits that become their own undoing. Doctors are famous for being bad with their money to the boon of stockbrokers everywhere.

What is the antidote to all of this? I think the antidote is to have diminished expectations. I recently read an article from TechCrunch that says that tech firms in Silicon Valley prefer younger workers at $60K a year to the gray hairs making $150K. Basically, middle aged programmers end up jobless or taking a significant pay cut. This is because tech is new and always changing. My personal theory is that new comp sci grads or what have you are schooled in the latest which is in high demand for a short while. It is like working in a perpetual bubble factory as it all reverts to the mean again. The answer is to be blue collar.

Blue collar jobs don't pay six figure incomes. Some electricians and plumbers pull down some big dough, but they all do this by running a business which is entrepreneurship. For the most part, blue collar people pull down the median income. Some like diesel mechanics make far more, but this is a result of a shortage. In time, this will revert to the mean as well. But this will be a slight reversion since few of them make six figure incomes.

People think I am crazy for telling people to learn a trade and get their hands dirty with this blue collar advice. But I think they are crazy for chasing the six figures. Over the years, I have been made offers in the hot fields of mortgage brokering, annuities, and management. I turned them down because I know the truth about these endeavors. They involve moral compromise, unhappiness, and eventual unemployment.

My advice is the same one that Daedalus gave to his son Icarus. Don't fly too close to the sea or to the sun. Basically, this myth was a parable about reversion to the mean. You want to avoid the outliers because they seldom last. The six figure earners fly close to the sun.



Blue collar folks excepting UAW workers in Detroit don't make six figure incomes because they don't live in what Taleb calls "extremistan." They fly neither close to the sun nor close to the sea. They are in "mediocristan." Over the course of my lifetime, I have witnessed friends from high school who never went to college go on to comfortable middle class lifestyles while working blue collar jobs. Granted, some have money problems because they can't make the payments on their bass boats or they like to play the lottery. But these are not problems of income but financial mismanagement. This is why I say that hard work needs to be packaged with simple living. But they make the median income or better.

I know this post will get peppered with comments from folks who will denigrate working people, or there will be one wise ass who is making a mint from some hot job he got. But that is the stupidity at work. I'm sure Icarus thought he was hot shit before his wings fell apart. But working a blue collar job beats living at home with mom and dad and servicing student loan debt or getting shitcanned in middle age because you make too much money and/or had a bad run of luck for which you will take the blame. All of this comes from extremistan. Everyone sees the sun, but no one sees the ocean below. They don't take that middle path.

My advice is simple. Forfeit that six figure dream. Walk away from it. This is why my blue collar peers do so well. They didn't listen to the high school guidance counselor because he was too busy telling people to go to college. They took what they could get and learned a trade along the way, and they make average incomes now. Some are slightly above while others are slightly below. When they want to make more money, they work more. As for their skills, they never become obsolete. The pace of change in their industries is leisurely. And older workers are valued for their skills and experience.

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NOTES

1. http://en.wikipedia.org/wiki/Six_figure_income

2. http://en.wikipedia.org/wiki/Higher_education_bubble

3. http://en.wikipedia.org/wiki/Icarus

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