Joe Mosby's blog

Know where your cash comes from

Most of us are paid in cash. Some of us are paid in cash plus some sort of additional compensation (such as health insurance, or a gym membership, or a parking pass), but the cash is really what we care about. Cash pays for our rent and our groceries and our iPhones.

Businesses are not magical cash engines. Someone decides that they would like to produce something (a book, or pencils, or legal advice) and someone else decides that they would very much like to have that thing. So much that they are willing to exchange some of their own cash in order to have it.

You can take any huge, complex business and ultimately track it back to some initial simple exchange. General Electric, which now makes jet engines and health devices, started off making some light bulbs and handing them over to people for cash. Sometimes, an investment gets involved, like the old Star Oil money taking some cash to pay the expenses associated with hunting oil in California.

There comes a point in time where the person who started the whole business may decide that the whole thing could make more money if Person #1 had more time. So they bring in Person #2 and say "hey, I'll give you a steady stream of cash if you'll do my accounting / keep my equipment running / drive my delivery truck / etc." Person #1 has paid Person #2 in exchange for getting some time back while still seeing the same things getting done.

If the business does really well, Person #1 may just give Person #2 a pile of cash and say "I would like these Big Thing X to happen, I don't care how they get done, here is some money to go do it." And now Person #2 takes on the title of Chief Something, the owner of his own little business that provides Big Thing X with one customer: Person #1.

Huge, complex businesses are just infinite sub-fragmentations of the same set of cash-for-outcomes transactions I've just outlined here. Someone with control over a great deal of resources gives some of them to someone else in exchange for a set of outcomes.

Which brings us back home to the title of this post. If you are anything other than the owner of a business, the cash in your paycheck came because of a series of cash-for-outcomes transactions where somebody with control over more resources allocated a smaller chunk of them to someone else in exchange for a service. You should always know, to the best of your ability, what those transactions were.

Those transactions tend to get revisited on a yearly basis, and how they get revisited can have a big impact on your career path. If someone three levels up from you made the decision "we should build ten new major software features this year," your position may exist to build one of those software features. If next year, the decision is "we'd like to build TWELVE new software features," you have an opportunity for an informed raise if you can say "I can build an extra feature for 1.5x my salary. Or half of what you'd have to pay for somebody else," you have an opportunity. One that you wouldn't have if you didn't even know those negotiations were happening.

The flipside is true as well. If your job is dependent on building new software features, and the bosses decide they only want to build eight new features this year, then two of your team members are no longer necessary. Understanding how and why all those transactions are made gives you an early warning system. It lets you take the early moves to respond.

Know where your cash comes from.