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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 when we look at the bigger picture we can see that Simone the janitor is not indispensible to Ellen the entrepreneur. Here are three important ideas to help understand why:

      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 paying a certain amount of money for a thing is to consider all the other ways in which that money 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 buy with my 50p. All those other potential uses of my 50p that I give up when I buy the cola are collectively the _opportunity cost_ of buying the cola.

      It follows from these premises that, although Simone's janitor work _is_ indispensible to Ellen’s business _in its exact current form_, 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 make a profit.

      Ellen might 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).

      With so many things to consider, it may be difficult for Ellen to put an exact figure on Simone's contribution. She might value it at about £3 per hour, or at about £300 per hour; the exact figure isn't important to us. All we can say for sure is that there is going to be _some_ limit to how much she's willing to pay Simone: at some point the cost of maintaining the Simone-employing business model would be such that some previously less profitable alternative way of making money became the more profitable way. Among those alternative ways of making money might be to shut down her business and set up shop in a completely different industry, or even to give up entrepreneurship altogether. Ellen will sooner seek employment than throw money at an unprofitable business. If not, it would fail regardless of her stubborness.

      To put it another way, think of a business model as analogous to a lifestyle choice. 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 indispensable to her in a very narrow sense. But how much does Georgina value this particular habit? Infinitely? No. 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 the expected benefits are worth to her. If the price rises above that level she'll adjust her plans and do without.

      Similarly, Ellen will adjust her business model rather than knowingly pay Simone more money than she believes Simone's work generates for her. And with any increase in the wage Ellen must pay to employ Simone--for instance due to minimum wage legislation--the more likely it is that Simone will be judged to be unprofitable to keep employed.

      So is Simone the janitor indispendible? If we bear in mind all the different ways Ellen can choose to restructure her business and her life, the answer is no
      Many will say yes, because without Simone who's going to do the cleaning up? But what does Ellen say? Here are three important things that Ellen uses to decide her answer:

      1. Ellen wants to make a profit, so that she can stay in business.
      2. Making a profit means keeping her expenses low.
      3. All aspects of her business have an expense attached to it.

      Ellen likes to give coffee to her employees because it makes them more productive. Ellen also likes to give other free things to her employees because those also make them more productive. She likes to give free lunches and television in the breakroom, all to make her employees more productive. Simone also makes her employees more productive as well since he keeps the mess from building up. Aren't coffee, lunches and television also indispensible to Ellens business?

      Ellen must decide which of these contributions are important to her business. The future product cost, the effect on the morale of other employees, how quickly each new product is made and so on. Maybe a different business model is better, one that does not include free coffee, lunches or Simone.

      With so many things to consider, it may be difficult for Ellen to put an exact figure on Simone's contribution. She might value it at about £3 per hour, or at about £300 per hour; the exact figure isn't important to us. All we can say for sure is that there is going to be _some_ limit to how much she's willing to pay Simone: at some point the cost of maintaining the Simone-employing business model would be such that some previously less profitable alternative way of making money became the more profitable way. Among those alternative ways of making money might be to shut down her business and set up shop in a completely different industry, or even to give up entrepreneurship altogether. Ellen will sooner seek employment than throw money at an unprofitable business. If not, it would fail regardless of her stubborness.

      Ellen will adjust her business model rather than knowingly pay Simone more money than she believes Simone's work generates for her. And with any increase in the wage Ellen must pay to employ Simone--for instance due to minimum wage legislation--the more likely it is that Simone will be judged to be unprofitable to keep employed.

      So is Simone the janitor indispendible? If we bear in mind all the different ways Ellen can choose to restructure her business, the answer is not any more than the other things free things she gives her employees
      .