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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.

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. If I spend 50p on a can of cola it means that, at that particular moment, I value having a can of cola more than anything else I might feasibly gain with my 50p or the few moments it takes me to get the cola from the vending machine. All those other potential uses of my 50p and time, that I give up when I buy the cola, are collectively the _opportunity cost_ of buying the cola.

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 in which she might feasibly make a profit.

Ellen will try 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 quite difficult for Ellen to precisely evaluate Simone's contribution. Nevertheless, we can be sure that there is going to be _some_ limit to how much Ellen's willing to pay her: a limit determined by the net benefit of doing so; that is, the benefit relative to the other ways in which she might structure her business. And if the cost of keeping her 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. Imagine Georgina has decided to drink one portion of Yakult every day to stay healthy and live longer. While Georgina is firmly committed to drinking Yakult every day, Yakult is only indispensable to her in a very narrow sense. That is, at its current price Georgina believes that buying Yakult is a good idea given the benefits she thinks it will bring her. But there's a limit to how much she values these benefits. If the money or effort required for her to procure her daily portion of Yakult were to rise above this level, she would adjust her habits accordingly. After all, she can't devote literally 100% of her grocery budget to Yakult, can she? Similarly, Ellen will adjust her business model rather than knowingly pay Simone more money than she believes her work generates for her.

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. Wouldn't 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 the Yakult, how is Ellen going to keep drinking it every day?

But what if we look at the bigger picture?

Let's say the price of Yakult increased for some reason, such that maintaining her habit now demanded Ellen divert funds away from other things on 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 per se, but rather to stay healthy and live long. And to that end drinking Yakult is just one of a variety of strategies she might use.

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 maintain her habit. But there is is a limit to this: a price for Yakult at which Ellen would regard maintaining her habit as counterproductive in 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 effort to stay young, 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 in which she might feasibly achieve her ultimate aim of making a profit.

Ellen will try 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 doing so becomes too great. And 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. Just as Ellen is only willing to drink Yakult as long as its price is such the opportunity cost of doing so doesn't outweigh its health benefits, so she will only continue to employ Simone 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.