Normal Profit

What's your hassle worth?

Do you think the place where you buy donuts is making a ton of money? Well, if they are just another donut place, then they are probably making a “normal profit.” In economics there’s this idea that if things are competitive, then the profits you’ll make will be limited (zero economic profit). Profit = Revenue - Cost. But Costs could include lots of things like opportunity costs and hassle. If you had a ton of profit, then more competitors would come in and reduce your profit. If no one is making money, then people will quit and the remaining people will make the normal profit.

Normal profit abounds

I’m convinced that a lot of things operate on a normal profit basis. I used to see a deal on an item and think, wow this is underpriced, maybe I should resell it. However, after the hassle of listing it, shipping it, subtracting eBay fees, maybe I made $40 if the item was a few hundred. Nowadays I value my time much more, so I’m no longer interested. My theory is that there are lots of side hustles which are essentially trading your time for money at a normal profit.

One area where I still put in a lot of time is my points hobby. It is a constantly changing landscape, so there is always more to learn. In fact, there is so much to learn that I have to limit myself. The constraints keep me sane and make it so I can have more depth of knowledge in a few things.

The points game involves earning points, often through credit cards and spending. I choose to leave points on the table by not maximizing every transaction, but remembering which card to use in each situation can be a part time job. As long as I’m making sure to hit the spend for a sign up bonus I think I’ll earn plenty of points. I focus on optimizing, not maximizing.

The other side of the equation is spending the points. I’ve been able to fly business class several times on points alone. Sometimes it costs over 100K points one way, but doing research enabled me to get that flight that may have cost $3000 cash. Yet when you factor in all those hours of learning and searching for a given flight, it may have only amounted to $50 an hour. My normal profit. For now I’ll continue doing it because it is quite the thrill to find the deal and we sure love to travel.

Making more profit

There’s nothing wrong with making a normal profit, but if you are aiming to build some empire then you should probably go for a monopoly. To be a monopoly you have to be unique and have a moat. Some content creators have found a niche that is similar to having a monopoly. There’s only one Mr. Beast, while millions of others are trying to gain enough attention.

So, what am I saying with this article? Maybe your side hustle is something that you are simply get paid for your time. If so, assess whether you are doing something you enjoy or perhaps there could be something out there that is a better fit. You don’t have to sell your time, but if you think the rewards are worth it then go for it.