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Like nations, individuals will be able to achieve higher income levels when they
specialize—that is, concentrate their efforts on those things where they have a comparative
advantage. Think about the relationship between your skills and opportunity costs. To pick one
extreme, suppose that you are better than everyone else in every productive activity. Would
that mean that you should try to spend some time on each activity? Or to go to another
extreme, someone could be worse than everyone else. Would that individual be unable to gain
from specialization because he or she would be unable to compete successfully in anything?
The answer to both questions is no.
No matter how talented you are, you will be relatively more productive in some areas
than others when opportunity costs are taken into account. Similarly, no matter how poor your
ability
to produce, you will be able to produce some things at a lower cost than others. You
will be able to compete successfully in some areas and can gain by specializing where you
have a comparative advantage.
Your comparative advantage is determined by your relative abilities, not your absolute
abilities. For example,
Mark Zuckerberg, cofounder of Facebook, has the skills not only to be a
highly successful innovator and business entrepreneur, but he also has what it takes to be an
outstanding computer programmer. It took a lot of programming skills and creativity to jump-
start the popularity of a social media network in his dorm room at Harvard. While Zuckerberg
was
a highly skilled programmer, his comparative advantage was nonetheless in the
development of the innovative, social media features of Facebook. Similarly, even though the
computer programmers working at Facebook are probably less skilled than Zuckerberg, their
comparative advantages still lie in programming rather than in management (or dealing with
investors).
Individuals will always be better off if they are really good at something that is highly
valued by others. This explains why people like Zuckerberg can make incredible amounts of
money. In 2007, at the age of just 23, he became the world’s youngest self-made billionaire.
(92)
Some people may feel that they are at a disadvantage when they trade with others who
earn far more money. But remember that trade benefits both parties. Generally, the more
accomplished and wealthy the people with whom you trade (working
for someone involves
trade), the better off you are because your service is typically worth more to them than to those
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who are less accomplished and wealthy. For example, if the authors were entertainment agents,
we would rather work for Björk, the Rolling Stones, or U2 than for other musicians because
we would almost surely make more money that way.
The worst thing you can do is convince yourself, or be convinced by others, that you
are somehow a victim and therefore unable to achieve success through your own effort and
initiative. Some people start out with fewer advantages than others, but even those who are less
advantaged can do extremely well if they make the effort and apply themselves intelligently.
You need to take charge of your career development and plan how you can best develop your
talents and use market cooperation to achieve your goals. No one else cares more about your
personal success than you do. Neither does anyone else know more about your interests, skills,
and goals.
We usually perceive of costs as something that should be kept as low as possible. But
remember, costs reflect the highest valued opportunity given up when we choose an option.
Thus, when you have attractive alternatives, your choices will be costly. Should you take that
job at Starbucks to have more money while you’re a student?
Or should you take an extra
course so that you can complete your college degree more quickly? Both options are attractive.
Furthermore, as you improve your skills and your opportunities become even more attractive,
the choice among options will be more costly.
In contrast, your costs will be low when you have very few good choices. For example,
a very effective way of reducing the cost of reading this book is to get thrown in jail with it so
that reading it is the only opportunity you have other than staring at the walls. This is
obviously a bad idea. It would reduce the cost of doing one thing (a very desirable thing in our
opinion) by eliminating your opportunity to do many other attractive things. You make
yourself better off by
increasing your opportunities, not by reducing them.
Young people are encouraged to get a good education so they will have more attractive
opportunities later in life. A good education will generally increase your productivity, and the
amount employers are willing to pay you. This will enhance your earnings, but it also means
you will have to turn down some attractive offers that may come your way while you are
hoping to qualify for even better ones later.
Sound career decision-making involves more than figuring out those things that you do
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best. It is also vitally important to discover where your passions lie—those productive
activities that provide you with the most fulfillment. If you enjoy what you do and believe it is
important, you will be happy to do more of it and work to do it better. Thus, competency and
passion for an activity tend to go together. Moreover, real wealth
is measured in terms of
personal fulfillment. For example, the authors of this book (all economists) have found it
satisfying to find answers to economic questions and to express what
we know in ways that can
help others better understand the corners of the world that we have examined professionally.
Even though the hours are sometimes long, we find most of those hours enjoyable. What we do
is not for everyone. But for us, with our interests, the joys of what we do more than make up
for the rough patches.
