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#The Indispensable Janitor Fallacy
Imagine a business owner, Ellen. She employs a janitor, who we’ll call Simone. Without Simone's cleaning there would be an unacceptable build up of mess at Ellen’s premises. Is it the case, then, that Simone the janitor is indispensable to Ellen’s business?

On the face of it the answer would seem to be yes. After all, without someone like Simone, who's going to do the sweeping up? But what if we look at the bigger picture?

Consider these three ideas:

1. Entrepreneurs like Ellen are in the money business first and foremost. Their efforts to make money might lead them to manufacture widgets, cook meth, or employ janitors, but their primary concern is to make a profit. So, while employing Simone is crucial to Ellen's current business model, she will only stick to that model so long as it is profitable to do so.

2. Making a profit involves weighing potential gains against costs and risks. As a prudent business owner, Ellen will constantly be weighing Simone's contribution to her business against the cost of employing her. Ellen might value Simone's contribution at about £3 per hour, or at about £300 per hour; the exact figure isn't important to us. With so many things to consider – Simone's promotion potential, the cost of replacing her and so on – Ellen may only have a rough idea of her value. But we can say for sure that Ellen will only keep Simone on as long as she considers her overall value as an employee to outweigh the cost of employing her.

3. All costs are _opportunity costs_. When we decide to spend a certain amount of money or time on a thing we effectively give up all the other things we might gain using that time and money. If I spend £5 a week on Yakult, that's because I consider the health benefits of doing so to be worth more than the small amount of Kale and blueberries etc. I have to forgo in order to keep within my budget. But if the price of Yakult were to increase such that I had to give up an unhealthily large amount of kale and blueberries, then I would switch to a different diet: one containing less, or even no Yakult.

So, when Ellen is weighing the pros and cons of the Simone-employing business model, she isn't just asking whether it turns a profit, but whether it is more or less profitable than other business models. To the extent that the cost of maintaining the Simone-employing model increases, other possible business models become increasingly attractive to Ellen. As soon as Ellen judges some other business model to be more worthwhile than the Simone-employing one, she will switch to that model. That is, she will let Simone go.

Among these alternative options might be to simply reassign Simone's duties to another employee, or even to herself. Alternatively she might invest capital in technological solutions to her problem, or even relocate her business to a region where it's cheaper to employ janitors. She might even decide to set up shop in a completely different industry.

To be sure, all these alternative models come with their own costs in time and money. But if, having taken these costs into account, Ellen sees any of these alternative models as preferable, in the long run, to maintaining her current business model (that is, the one that includes employing Simone) then she will invest the necessary time and capital to pursue this new model. The more costly the Simone-employing model becomes, the more appealing these other models become.

Of course, this all requires that Ellen _has_ the necessary time and capital to play with: if not she might see no other option but to give up entrepreneurship altogether, preferring to seek the relative security of employment rather than waste her time on an unprofitable business. In any case, Simone would be out of a job.

So is Simone the janitor indispensable? If we bear in mind all the different ways Ellen can choose to restructure her business and her life, the answer is no.



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## The Indispensable Janitor Fallacy 2

Imagine a business owner, Ellen. She employs a janitor, who we’ll call Simone. Without Simone's cleaning there would be an unacceptable build up of mess at Ellen’s premises. Would it be fair to say, then, that Simone the janitor is indispensable to Ellen?

Now imagine that Ellen also happens to be a health nut. She believes firmly in the benefits of Yakult and has taken to drinking one portion of the elixir each day. Would it then be fair to say that Yakult is also indispensable to Ellen?

On the face of it the answer to these questions would seem to be yes. After all, without someone like Simone, who's going to do the sweeping up? And without a ready supply of Yakult, how is Ellen going to enjoy its unique health benefits?

But what if we look at the bigger picture?

Let's say the price of Yakult increased for some reason. To keep on buying it, Ellen would have to cut down on other things to keep within her health food budget. Do you think Ellen would continue to drink Yakult regardless of the amount of leafy greens and tofu she had to give up to do so? Or, to put it in more technical language, regardless of the opportunity cost of doing so?

As I'm sure you agree, there must be some price for Yakult at which Ellen would consider the cost – that is, the opportunity cost – of maintaining her habit to be too great. After all she can't _only_ drink Yakult, can she?

The key point here is that Ellen's _ultimate_ objective isn't to drink Yakult for its own sake, but rather to stay healthy and live long. Drinking Yakult is just one of the ways she can pursue her goal.

At its _current price_ Ellen believes that drinking Yakult does more to help her in her pursuit of good health than would the small quantity of blueberries, brown rice and so on that she has to forgo in order to keep within her budget. But if Yakult's price continues to increase there comes a point at which Ellen decides that buying it is counterproductive to her effort to stay healthy and live long. After all, Kale and tofu are important too! 

Ellen might draw this line at around £3 per bottle or at £300 per bottle; the exact figure doesn't concern us. It may be difficult for Ellen to precisly evaluate Yakult's contribution to her health, so she might have a nutritionist help her. All we need to know is that, with a sufficient increase in the price of Yakult, Ellen would cease to consider it worthwhile to keep drinking it. So she'd give it up.

But what about Ellen's employee Simone? Is she really indispensable to Ellen?

Remember these three points:

1. Entrepreneurs like Ellen are in the money business first and foremost. Their efforts to make money might lead them to manufacture widgets, cook meth, or employ janitors, but their primary concern is to make a profit.

2. Making a profit involves weighing potential gains against costs and risks.

3. All costs are _opportunity costs_. That is, to decide whether it's worth spending a certain amount of money or time on a thing is to consider all the other ways in which that money or time could be used.

It follows from these three premises that, although Simone's janitor work _is_ indispensable to Ellen’s business _in its exact current form_, (i.e. the form that includes employing Simone) there is a limit to Ellen's attachment to this particular business model. Being a professional and, let's assume, competent businesswoman, Ellen's going to be constantly weighing-up the pros and cons of maintaining this model relative to the alternative ways she could pursue her ultimate goal of making a profit.

Ellen needs to take all sorts of things into account when evaluating Simone's contribution to her profit-making endeavour: her future potential, her effect on the morale of other employees and so on. And she will certainly take into account the time and expense of switching to a different business model (i.e. one that does not include employing Simone).

Ellen might value Simone's contribution to her profit making endeavour at about £3 per hour, or at about £300 per hour; the exact figure isn't important to us. With so many things to consider it may be difficult for Ellen to precisely evaluate Simone's contribution; she'll probably need her accountant to help her. Nevertheless, we can be sure that there is going to be _some_ limit to how much Ellen's willing to pay her: a point at which the opportunity cost of employing Simone becomes too great. If the cost of keeping Simone on were to rise above this level – for instance due to minimum wage legislation – then Ellen, being a prudent business woman, would switch to an alternative business model: one that does not include employing Simone.

Among these alternative options might be to reassign Simone's duties to another employee, or even to herself. Alternatively she might invest capital in technological solutions to her problem, or even relocate her business to a region where it's cheaper to employ janitors. She might even decide to set up shop in a completely different industry.

To be sure, all these alternative models come with their own costs in time and money. But if, having taken these costs into account, Ellen sees any of these alternative models as preferable, in the long run, to maintaining her current business model (that is, the one that includes employing Simone) then she will invest the necessary time and capital to pursue this new model.

Of course, this requires that Ellen _has_ the necessary time and capital to play with: if not she might see no other option but to give up entrepreneurship altogether, preferring to seek the relative security of employment rather than waste her time on an unprofitable business. (A lot of aspiring entrepreneurs end up taking this route.) In any case, Simone would be out of a job.

The central concept here is that business models can change; in this way they are analogous to lifestyle choices. Ellen will drink Yakult only as long as health benefits outweight the costs of getting hold of it. And Ellen will employ Simone only as long as it is profitable to do so relative to the other ways she might make money.

So is Simone the janitor indispensable? If we bear in mind all the different ways Ellen can choose to restructure her business and her life, the answer is no.