Variable income exposes risk, stable income hides risk

Published on Nov 5, 2020

@dvassallo is quickly becoming one of the few Twitter influencers who I enjoy reading, especially when he talks about antifragility:

One of the benefits of variable income is it forces you to adapt. An decline in earnings makes you try something different. Variable income exposes risk instead of hiding it, and reacting to the variance builds antifragility (you gain long-term benefits from short-term stressors).

He had previously talked about how having a variable income is thrilling and something that is a pleasant surprise when the day doesn't end in zero income, which I then built on and wrote about how entrepreneurship can be a daily practice in gratitude

I love his deeper insight into a variable income is less risky than a stable pay check. You hear about how entrepreneurship is risky but this completely flips it on its head. Basically, a variable income exposes the risk that entrepreneurs face on a daily basis. Knowing the risk is there mean that you can try to understand it, and most importantly, do something about it. The fast action-reaction iterative feedback loop of variable income is actually really empowering, if you ask me. Yes it's not always clear what buttons to push to ensure your day's income is non-zero, but at least there's observable and fast feedback on your actions. You can learn quickly what to do and what not to do. 

A stable income that comes from employment, on the other hand, bears lots of hidden risks. You often don't know how to perform until your annual appraisal. In fact, your performance might often be less about the hard outputs but how much your manager likes you. These metrics of success are often not found in your company's HR documents, or your personal work targets, or even anywhere. It's held by your manager and your manager's manager, and all the way up. The feedback loop is usually too few and too slow to create a adaptive response. 

Exposed risk gives immediate feedback, hidden risk hits you like a black swan. The way I see it, variable income surfaces the risk regularly yes, that's why it seems more 'risky', but it does so in smaller dosages over the days and months, while stable income accumulates and hides risk until it's too late.