Why Information Work is “Expensive”

“I know a lawyer that charges $750/hr. At that price, I would only pay for the 3 minutes it took for him to give him the advice I needed and I would expect that he would already have the answer to the question I asked.  If he had to look it up, that would be on his time.”  – a friend

In the industrial era, time was an easy way to measure productivity. A person working on the assembly line produced some number of widgets in a certain amount of time. If we were to compare the most talented widget maker and  the least talent widget maker, we would certainly find a difference but the distribution of all workers could be plotted ona bell curve. Everyone could make at least 1 and noone made more than 1,000,000.

But information work is not limited by physical constraints. The variance between one information worker and another can be several orders of magnitude, possibly even infinitely different.  Within information work, a typical hour may yield zero useful results, and the next hour may invent the cure to cancer.  How does one put on a scale the measure of value on an hourly basis?

Perhaps this is why so many companies use salaries instead. It accounts for the lumpiness of value provided by a typical information worker. One hour is incredible, the next is filled with the frustrating sound of rebooting their computer. Hourly wages don’t make much sense when we pay someone to think for a living, but it doesn’t stop us from using this measure of evaluation.

We hired a UX designer to help us out with our last project. It bothered me that we paid him by the hour but this is what he preferred – it was easier to account for his own time.  He delivered way more value than we ever paid him, but when we got the invoice, others who reviewed it asked me why it took so long to do some particular part of work. Because that’s the nature of information work! It took him half an hour to come up with some ideas that we would never have come up with, but doing some of the more manual work to show the implementation took more time.  It still was highly valuable and he delivered big.

At the same time, those who do this kind of work can delude themselves into thinking a few minutes of their time is worth the world. A friend had a business partner who was working on 4 different ventures at the same time, while my friend was really focusing only on the one between the two of them. When confronted with the lack of focus on this project, the business partner explained that his ideas and insights were not measurable by the hour.  This is just lazy. It’s true that a specialized worker can provide valuable ideas but usually this only happens through dedicated focus.

Information workers are specialized. No one pays a talented architect $350/hr to break ground, but neither should one be astounded that he makes $350/hr doing architecture. Nevertheless, sometimes an architect must spend some of his time doing work that is below his ability so that he can also deliver the ideas that make him worth his rate. The key is to deliver good ideas and execute on them. This is what every information worker should strive for and it’s why salary works better than hourly pay.

So is $750/hr a ridiculous pay for a lawyer? Well, how much is it worth for the idea no one else could find that causes you to win the case?







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