There Are 2 Types of Jobs: Selling Your Time vs Selling a Product
All jobs fall into one of these two categories.
I played different roles over my career: I worked as an employee at Google. Then I worked as a solopreneur, making and selling apps to make a living. Then I ran a startup. Along the way, I advised multiple others. Then I worked as a consultant. I now work as CTO.
I realised that all these jobs could be classified into two kinds:
Working as a time-seller
When I was a consultant, quoting an hourly rate, it was explicit that I’m selling my time. But employees also sell their time — they just sell all of it to one client [1]. Both employees and consultants receive a fixed fee for their time, decoupled from the ultimate business value of what they’re creating, which could be much more than their fee (resulting in a profit for the company) or not (resulting in a loss). In either case, the company insulates them from risk, paying an amount known in advance. This goes for both employees and consultants, who’re selling their time.
Working as an investor
When I was a founder, I wasn’t paid a rupee [2], but a product and company were being built up. If they succeeded, the returns they’d generate would go to me. This is no different from any other kind of investment, like a solar power plant, that requires an upfront investment and may generate a cash flow later.
In addition to working as a founder, I worked as a solopreneur, building an app by myself. But there, too, I was an investor, investing in building a product that may pay later.
I also advised startups, remunerated by equity, and I was again investing in building a company that may generate cash flows. I was an investor.
At the end of the day, if you’re being paid solely via equity, whether a founder, solopreneur, advisor or any other form, you’re an investor [3].
What’s right for you?
Working as an investor comes with risks of various kinds:
Risk can be cash flow — you may lose money you’ve invested. Or, even if money doesn’t flow out of your personal account, you may not earn enough to meet your monthly expenses.
Risk can be losing the equity you’ve worked for because you left before it vested [4].
Risk can be illiquidity, where you have own a percentage of a company, worth a certain amount of money, but you can’t cash it out to meet your expenses.
Risk can be being cheated, such as your equity not resulting in a payout when your company is acquired. Or the company forgetting to account for your equity on the cap table, resulting in you losing your equity. Or VCs taking higher than proportional payout using a clause called a liquidation preference. There are all these ways in which you’re cheated, at worst, or play on a non-level playing field, at best.
Risk can be emotional — if you’ve faced years of professional setbacks, you may want some wins for a while to recharge your morale battery.
Risk can be work-life balance: Working as an investor screws up your work-life balance, preventing you from taking an year off to focus on your hobbies. Or to work a few days a week and in the remaining time, upskill yourself by doing side projects.
You need to understand these downsides or risks before you decide to work as an investor. A person who doesn’t recognise the risks they’re taking, or their capacity for it at a given time in their life, is foolhardy. A person who takes on risk after understanding its risks and whether they’re in a position to incur them is smart.
In my case, given where I am, I concluded that selling my time is right for me.
[1] If you’re an employee, you can calculate your hourly rate by dividing your annual salary by the number of hours in a week and subtracting vacations, sick leave and public holidays. If your gross salary is ₹900,000, you work 40 hours a week on average, and take 25 days off plus 10 days sick leave plus 10 days public holidays, then your hourly rate is
900,000 / (365 * 5/7 - 10 - 10 - 25) / 8 = ₹521.
The point of this exercise is to recognise that at a high level, both employees and consultants are selling their time, doing the same thing, just structuring it differently.
[2] If anything, I was paying others out of my pocket.
[3] We often operate as partly a time-seller and partly an investor. This happens we’re paid paid both cash and equity. An employee who’s receiving his market salary plus equity on top is mostly a time-seller. Whereas an employee who’s receiving half his market salary and equity is half a time-seller and half an investor. A founder who’s earning a small salary is perhaps more of an investor than a time-seller.
[4] And companies issue fresh equity by the time your equity vests, manipulating you into always being on the treadmill.