Essay: The Rule Of Three

I realize the title of this essay sounds very Wiccan or New-Age, but it's not. It's completely secular. My Rule Of Three is that every professional musician needs three independent sources of income. I'd go farther and say that the rule applies to every household and possibly even every adult, except that it would go over like a lead balloon especially in the USA.

So how does it work?

You, the musician, need three independent sources of income. "Independent" means that one sorce of income isn't directly related to the next. For example, if you're a recording artist your touring income and royalty income are probably related. But income from teaching, gigs that aren't related to a record, session work, or endorsements aren't related.

Music careers have ups and downs. Sometimes we're hot, and there are a lot of customers who want what we can do. Sometimes customers are scarce or interested in things besides what we have to offer. A lot of our work is seasonal, and even when times are good income isn't steady or predictable. So in addition to saving when the times are good, we have to make sure we have more than one source of income. That way, when things are a little lean in one area you can rely on another.

Why three?

Every source of income takes energy to create and manage. Don't believe the get-rich-quick gurus: there's no such thing as purely passive, risk-free income. Even investments need to be supervised and managed, and so does real estate. The more income sources you have, the more your attention is divided. It takes time and energy to switch your attention from one thing to another, and the more sources of potential interruption you have, the less productive you will be with whatever isn't interrupting you. So more than three independent income streams is too many.

Two sources of income, on the other hand, don't provide enough stability. If you lose one, it's hard to build the other into something that can support you full-time overnight. If you have three income streams, however, you still have options. Also, if you have only two sources of income, when you lose one you're likely to lose the other since you're more likely to try to force it into more productivity than it can sustain.

What kind of income?

Not all your income needs to be through music. The Day Job is a noble tradition and not to be sneezed at. The idea is to have three different things that you do for money. At any given time, you'll be getting at least a small amount of income from each source.

For a list of possible ideas as to how you can make money in the music industry, see my essay What Is The Music Industry. If you choose income sources from three different areas of the six I talk about in that essay, your music related income will be mostly independent (which means if you lose one, it doesn't necessary mean you lose another).

Why does having three sources of income increase stability?

If something happens to one source of income, you aren't completely cut off the way you would be if you bought into the single-employer, single-paycheck model of doing business. The people who lose their jobs when a big company like Enron collapses, or when an airline or computer chip manufacturer announces big layoffs, see their personal income (and sometimes their household income) go suddenly to zero and stay there until they find more work. Sure, there are employment insurance programs and sevarance pay laws designed to help ease the transition, but for the most part people are suddenly forced to start living off of savings. Those savings may not last long.

Compare this to the person who, in addition to a full-time job with whatever bankrupt company is about to lay him or her off, has a part-time job on the evenings and weekends and also rents out two spare rooms in his or her house. If he or she loses the day job, things will be a little tight but at least most of the monthly bills will be covered until more money starts coming in.

Why does this increase freedom?

You never have to sacrifice your principles or your basic human dignity simply because the person who controls your income is jerking you around. Although losing a source of income is never fun, you're in a position to fire a customer who mistreats you instead of tolerating abuse.

Can I count income from a significant other as one of my income streams?

No. Accident, disease, divorce, and other bad things happen, even to good people.

Is there any historical or economic precedent for this rule?

Yes. Throughout history, individuals and families used to have to do more than one thing to survive. People weren't "just" hunters or gatherers in hunter/gatherer societies. Human burial sites show that there was some division of labor but people did everything from tool-making to child-training to cooking to medicine, and most people did several things. Agrarian societies, where most people were involved in food and textile production, required that people be mostly self-sufficient. There was some bartering or exchange of services or goods for money, yet the economy wasn't big or organized enough to allow people to have just one cash crop and pay for everything else in currency. In "The Prospect Before Her" by Olwen Hufton, evidence is presented to show that even in a married couple with children both the husband and wife cooperated to earn income, and that the income often came from different, unrelated sources especially in farm families.

During and after the Industrial Revolution, only people who were outright slaves (such as the ones in Haiti or the Americas), indentured servants, or the lowest class of factory workers could reasonably expect to do only one kind of work and to be employed for life. Generally this kind of lifelong employment was not considered a good thing. The life in question was not long or prosperous. What people wanted for themselves, and for their own families, was to own a business of some sort. Working for someone else, for a wage, was considered several steps down.

The 1950's were a brief period of time in which, because of some unique social and economic conditions, it briefly became less of an effort to work for someone else than it was to be an entrepreneur. The conditions that produced that blip were an exception, not the rule. Those conditions have since gradually gone away, to the point where it's once again hard to get by in life as an unskilled wage slave. People who don't read history believe it's a catastrophe, but in reality social and market forces are going back to a more normal state and a period of unusual prosperity is wrapping up. The evidence suggests that the party's over and that the rules and dynamics that have been in place since the dawn of time are still in effect, and things are reverting to normal.

What was so special about the 1950's?

In the USA, during the 1950's, there were some very unusual social and economic conditions. The American participation in World War II had ended, the economy had been shaken out of the Great Depression, and the USA had the only industrial economy left standing. Most of the European and Asian manufacturing facilities had been bombed back to nothing, and although the USA had significant military losses there was no significant price paid in civilian lives. The infrastructure was still intact, and since the USA didn't start participating in the war until it had already been raging for several years, the healthy American working population hadn't been decimated to the extent Canada's, China's, Japan's, or Europe's had. Demand for manufactured goods was high and the USA had the wherewithal to produce. This meant that for a good decade the USA had the only game in town and the rest of the planet was playing catch-up. Economically speaking, it was a great position to be in.

Suddenly, if you were in the USA, white, middle-class, male, reasonably well educated and located in the right part of the country, there was massive demand for your services. You could expect to work only forty hours a week doing just one thing for the rest of your life, for a single employer, without ever upgrading your education. Even if you had no special skills, in forty hours per week you could still earn enough to support not just yourself but an entire family at a comfortable standard of living. Your wife could live a life of relative leisure that, up until now, was the birthright of only the wealthiest aristocrats. You could afford to educate your children to the same level as yourself, or perhaps even a higher level. Finally, after twenty or thirty years, you could expect to retire with a pension that guaranteed you an income for life. Your company could afford to promise you this pension (and deliver it) because of the massive global demand for goods and services and the relative absence of competition. There wasn't much competition for your job because segregation and institutionalized sexism kept women and minorities from getting the kind of education and experience it would take to compete with you. So it was a great time to be a young adult starting out in life or an older adult getting ready to retire. It was also a good time to be a little kid because unlike children in previous generations you didn't have to work on a farm or in a family shop. Aside from school a few hours a week, it was playtime. So people who were children from families like that during this period of time tend to idealize it.

Does this mean you don't?

I don't idealize the 1950's, chiefly because I didn't benefit directly. Neither did anyone closely connected to me. If I'd been among the people who did well in that era, you bet I'd be fond of the Golden Age.

Not everyone did well in the 1950's. A lot of people lived in poverty and fear. If you were on the receiving end of segregated schools or Jim Crow policies and your school was shut down so that you couldn't get an education, or if you or a member in your family was attacked and murdered for being the wrong color, the wrong gender, or of the wrong romantic orientation, things weren't so rosy. If you were in a rural, depressed part of the country that for some reason didn't benefit from the big boom, things would have passed you by and you'd have been stuck with the same squalor and lack of opportunity you'd have had if people had been actively restricting you. Part of what allowed so much of the country to be "up" for as long as it was, was the fact that another group of people were being pushed down, kept down, or simply left down and ignored. I'm not sure the ends justified those means, so I wouldn't care to turn back the clock.

Aren't the 1950's, well, over?

I hope so. I'd look awful in a poodle skirt.

Seriously... a person who got a good start in the 1950's was in for a long run of good luck. All the up-and-coming competition was being sent to Korea and Vietnam: two amazingly convenient wars, provided you weren't in the set of citizens being disposed of. The result was not just years but decades in which you'd have been able to get pretty much everything you needed and wanted in life with just forty hours a week in effort. The rest of the time was playtime. With a lifestyle like that, who would want to be an entrepreneur working sixty or eighty hours a week? Even entrepreneurs tended to want "better" lives for their children, which usually meant more leisure. That's why parents steered their children into the kind of education where they could "get a good job" and jump on the gravy train. In just one generation, we went from a culture of entrepreneurship to a culture of employment by others.

Do you believe that was a mistake?

The poodle skirts? Absolutely. The culture-wide decision to go to work for someone else? Yes, although it worked out well for the first generation that did it, the second generation is getting kicked in the shins.

At this point I'm sure you understand just how freakish that run of good economic luck was, and why it couldn't last forever. But somehow as a nation we didn't get it. We believed that this was the new status quo. The luxury of a single-employer income, and a single-income family, became our new standard of "normal". Maybe it's because so many of us grew up that way. We felt entitled to what we saw around us growing up, and it became our gold standard. Any deviations from this (such as the two-income household) have been seen as less desirable or even immoral. The last thing most right-thinking parents want for their children these days is for them to be entrepreneurs. Also, many people consider moonlighting, that is to say doing something besides their official job duties, to be degrading. The same goes for renting out a room, planting a garden, keeping a couple chickens, or doing many other practical things.

Some people bucked the trend, but not enough to avoid this Great Reality Check of an economic downturn.

It could be worse. We could have a situation like they do in France, where if you have a business and need to lay some employees off so that the company can survive, you will be taken hostage in your office and the police will do nothing.

I take it you favor self-sufficiency and are suspicious of single-source income?

Yes. I decided to not have an economic downturn; it sounded like a bore. I get away with it because I make my own jobs for the most part.

The way I see it (and you're welcome to disagree provided you do it intelligently), the single-employer, single-income concept is a lot like Communism. It looks good on paper, and under the right conditions it can exist and do very well in practice provided nothing goes wrong. But in real life, it doesn't work well because things do go wrong. Yet that doesn't keep its devotees from defending the ideology to the death.

The competition-free glory days of the 1950's couldn't last, and neither could company pensions or long-term employment. Nobody expects to keep a job more than a few years anymore. So we all need to plan as though we're going to lose our jobs eventually. It's not just a question of "whether" your job will be cut or your company will fold, it's a question of "when". A hundred years ago, losing a job was a lot more commonplace, so people knew they'd need supplementary sources of income to fall back on for a while. As a group, we need to revisit that mentality.

I'm also not a big fan of the notion that big corporations have my best interests at heart regardless of whether I'm an employee or a shareholder. I don't think it's supported by fact. Maybe it's just me being a cynical Generation X-er, but it seems pretty silly for me to bet 100% of my household income that some high-powered muckety-muck I've never met will 1) be competent and diligent in doing his or her job instead of spewing whatever hype will lead to the next big bonus, 2) be basically honest, and 3) do a reasonable job of looking after my best interests. I could understand betting "some" of my income or savings, but all of it? That sounds like a pretty stupid gamble to me.

Why would the Rule Of Three be unpopular?

We Americans like to fall in love with ideas. It's our national hobby. Our system of government and our economy was set up so as to let us do it as much as possible. So we do. We never really get tired of falling in love with ideas, and if a sexy idea comes along, we can't resist. With some ideas it's just a mad little fling, but we love other ideas enough to make a permanent commitment.

One of the ideas we've walked down the aisle with is the single-employer, single-income way of doing business. We're convinced bigger businesses are smarter, more reliable, more secure, and more ethical, legitimate, and honorable than individuals. We're also convinced that people who want to go into business for themselves and provide a service directly to a customer are somehow bad, or defective, or wrong, or low-class.

We've also married the idea that laziness, conspicuous consumption, and effort-free income getting are the signs of a morally and social superior class, whereas frugality, hard work, and the ability to do math and assess risk are low-class values. We're committed to the notion that it's not only possible but honorable and desirable to get income or reward grossly out of proportion to the service or value we create for others. To that end, most of us have an appetite for money we don't earn. We also, collectively, don't like to work too hard and we're not fans of personal responsibility. This is why we consistently shove responsibility onto schools, governments, or institutions.

We've also tied the knot with the idea that history doesn't have to repeat itself, and that it's possible to change the outcome of events by choosing and doing new and different things. That's an idea that's been mostly good for us because it has led to so much scientific discovery and development. But it's also encouraged us to stop believing in cause and effect, and to believe that it's possible to change or suspend basic laws of mathematics or probability such that we can keep doing a thing that has always produced outcome A, while expecting it to produce outcome B instead because "the rules have changed". That isn't so good.

Individuals, of course, are free to think and act differently, and they often do, so that is why we've got industrious, hard-working, frugal people out there. Yet when you get enough of us Americans in a group, how we think and act collectively tends to follow these ideas we're in love with. So in the USA, we're wedded to the notion that entrepreneurship is bad (chiefly because it's too much effort) and being a sheep is good. Nothing I can do will change that.

For this reason, I confine my advice to musicians only. Have three separate, independent sources of income throughout your life, no matter what.