Personal Finance: Managing Income Streams

Rita Gunther McGrath makes this point in her book “The End of Competitive Advantage”.  In the old days, one could reasonably expect that a competitive advantage would last for an extended period of time. This was true of firms and individuals.

So, for example,GM sustained an amazing competitive advantage in the auto industry for half a century. At the same time,  my father was a surgeon. He sustained his competitive advantage in his field for his entire career.

But things are changing. We can still find competitive advantages — things that we can do better that add value for clients. But it is less likely that these advantages will be sustained for the same length of time.

This has a huge impact on the reasonable expectations firms have about revenues and on our expected career income.  Rita suggests — and I find the suggestion to be reasonable — that we think in terms of project cycles rather than expect long term steady increases. We get into a project, we find a niche there, and we plan to move on from there into another niche that builds on what we have learned.

To do that, we need to think carefully how to manage our money. First of all — it is critical to have resources available as a fall back when income falls. Second, it is critical to nurture project niche development rather than just “have a job”. And that nurturing will require investment — not just asking for salary.

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