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What class do you belong to?

I come from England, where that question comes loaded with all sorts of assumptions and consequences.

In Britain it opens up a whole Pandora’s box of issues about status, cultural values, background, accents, behaviour and much more besides. In fact one of the reasons I migrated from the UK to Germany was to escape all that.

In Germany, most people regard themselves as middle class. There’s much less of the class conscious “working class versus middle class” thing that you traditionally find in Britain.

Until fairly recently, the majority British people defined themselves as “working class”. They were even proud of the fact.  It’s a sort of tribal folk thing for them,  a way of differentiating themselves from the aloof and stuffy “middle classes”.

By comparison, the class thing is pretty weak in Germany. There calling someone “working class” – a “Prolet“, is taken  as an insult.  

Someone I knew at university used to say “The working class can kiss my ass”. I wouldn’t go that far. And I don’t want to talk about class in the British sense of background, culture, accents or how you hold your teaspoon.

I want to talk about a definition of “working class”which I think is much more relevant to us…

Are you working class – or entrepreneur class?

In the past I’ve been both an employee as well as self-employed. So I’ve been able to contrast the differences between the two.

The other day I was listening to a podcast by Dan Andrews who was talking about entrepreneurship.

Dan made the point that if you want rise above the average and achieve things in life, then you need to think “entrepreneur class” instead of “working class”.

When you are a worker, an employee, a salary man, relating to your work and profession in terms of nine to five and receiving a salary – this is what keeps you “working class”. It’s not about background, culture, education or even profession or income.  You can be in the high earner bracket, as I was as a freelancer, you can be an accountant or lawyer – and still be “working class”.   But there’s more to it than that.

Do you have control over your time – or does someone else?

There are also two or three more things that determine whether you are working class or entrepreneur class. Firstly, how much control you have over your own time. You’re “working class” if you earn your income by selling your time to others. In particular, if you hand over control of your working time to one single employer.

Many people regard being an employee as being “secure”. It’s the old feudal mentality that sits deep in our genes – particularly in Europe.  Yet being an employee, being a worker, even with large blue chip corporations is anything but secure in practice. Jobs with these companies are continually being cut back.

The present day system of employment is based on a modified concept of serfdom

You hand the right of control over your time and presence to an employer, who effectively assumes the role of your lord and master. This requires you to be confined nine to five as a worker at their manor under their patronage and protection. The skyscraper buildings of the large corporations are the modern day manor houses of the local lord.

If you wish to switch domains – to work for the lord at the manor in the village down the road, then you must first obtain permission from the “human resources” people concerned. And you must “justify” why you want to switch from one master to another. Working in the corporate sector is basically a form of feudalism under another name. Companies love employees who just sit there and do as they are told year in year out. They call it “loyalty”. In reality it is serfdom.

I even had a colleague in my last salaried job who actually referred to his contract of employment and job at the company as a “slave serfdom”.  He was a bit of a joker, but it spoke volumes about how he saw himself – namely as “working class” – or in his case, a “serf”.

Do you have multiple sources of income – or just one source?

Secondly, you should aim to earn your living through business and developing projects by yourself, for yourself and also for others. If you’re just ticking over on a salary year in, year out and not creating any assets for yourself, just working for “the man”,  then you are a wage or salary slave. In other words, a worker.

Do you accumulate capital – or do you accumulate debt?

Thirdly, it’s about attitudes to consumption and capital accumulation. In order to achieve financial independence, you need to accumulate capital. This means you have to be able to save. Which means spending less than you earn.  A lot of people with “working class” attitudes spend money on big ticket consumer goods, they purchase cars, they purchase a house. Often this is done with borrowed money. Other people’s capital. For which you have to work to pay interest on.

What’s interesting is how workers tend to get themselves into debt regardless of how much money they earn. It reminds me of a fellow IT freelancer at the last company I contracted at. He was in the high earning bracket, probably in the top 10 percent or so of the tax-paying population, lived in Paris and commuted to Brussels – and yet he said he couldn’t afford to take even a single month off work from his highly paid job to have a break.

I also heard a podcast interview with a well-known Internet Marketer who used to work in middle management in a large company. He had a very high salary – and at the same time also had debts of almost $1 million. It was only when he quit being a worker and became his own boss that he became debt free. He actually referred to it as “getting out of the debt cycle”.

It’s important then to be capital rich and not just time rich. It’s difficult to do this when you’re a worker. But it’s precisely being and staying a worker that encourages the debt-consumer mentality. Consumer credit is a product for the working classes. Once you switch from a worker to an entrepreneur attitude, you think in terms of capital, instead of debt and consumption.

It should be you that lends out the money and receives the return, the interest, the profit on it – not the other way round, with you consuming credit and paying interest on the debt to someone else.

I’m actually opposed to all consumer debt – mortgages, loans, car finance, credit cards. Partly this is the result of my having lived for a long time in Germany. Most people there rent their housing long term and they don’t tend to use credit cards much either. The German word for debt – “Schuld“, also means “guilt”. That alone says a lot about German attitudes to credit and some of this outlook has filtered down to me.

Credit can have a valid purpose when running a business. For example for leveraging, in the start-up phase or helping with cash flow or for expansion. But that’s a different concept to the serfdom debt or consumer credit of the working class. Having debt is the very opposite of having capital.

Entrepreneurship is less about consumption – whether of consumer goods or debt, and more about production – of goods, of assets and of capital.

Home owning is for the working classes

About the furthest most workers go in accumulating a capital asset is to purchase a house. To become a home-owner by means of a mortgage. Many people regard home-ownership as a symbol of leaving the working class. In fact, I would argue that it’s more the opposite.

Real estate is actually a relatively poor investment. Despite dinner party talk of rising house prices that people love to hear and love to take part in, compared to stock market investments in business and the wider economy,  the upside potential of home owning is comparatively modest.

The other thing is that mortgage-financed house purchase makes you a debtor. It involves you consuming debt again, which is the opposite of the entrepreneurial approach of creating capital. It ties you in to a long term cycle of debt obligation and interest payments.

Even when the mortgage is paid off,  it’s hard to release the capital because you’re sitting on it. It’s the roof over your head. If you want to release the capital, you can only do it by downsizing. And as long as you live in it, sitting on that capital, even when it’s paid off, you are foregoing a return on the investment that you could be getting if it was invested somewhere else with greater upside potential.

Becoming a home-owner can still be worthwhile for other reasons. It gives you more control over your living space, with no landlord, fewer restrictions, and it’s at least an asset for later in life. Emotional issues also play a role in why people want to be home owners rather than tenants.

Being a tenant on the Continent is a more viable proposition long term than in the UK. The sector there is poorly regulated, the property is often low standard, rents are high and there’s tenant security. Rented housing in Britain is also more often associated with social  ie low-income housing and lower social status. 

Parking your starting capital into home-ownership with a mortgage does not create a business. You aren’t being entrepreneurial. Taking on a mortgage means you are using your capital to consume debt. You are still thinking like a worker.

Are you producing or just consuming?

Instead of having a consumer attitude to money, you should cultivate an investor attitude. Instead of consuming real estate and taking on debt for which you have to pay interest, you should invest your capital in business projects which have a strong upside to generate revenue as well as increase capital value.

When you spend your money on big ticket items, you forego the return on investment you would receive if you used that money as capital. Say you purchase a car for $20,000.  That car does not just cost you $20,000 – it also costs you the lost return on that money if it was invested. Every year. Even worse if it costs you say $30,000 – and you take out a car financing plan to finance the extra $10,000. Yet this is exactly what so many workers do. As a result they never accumulate much capital and they stay working class.

Are you investing?

I’m a fan of stock market investing.  The important thing with stock market investing is to make sure that your investments are diversified. It’s liquid and flexible, there’s an enormous range of opportunities and it yields a high level of profitability and capital growth over time. I think investment in the stock market is something you should always have behind you as a support.

But the most important thing when it comes to investment, after diversification – is to invest in yourself.

This is something people who are working class often forget. They think they must look elsewhere to generate income, find and apply for jobs that other people have created. Workers are held by and beholden too much to their masters. Many employment contracts (this is certainly the case in Germany) even prohibit employees from starting businesses in their spare time! No clearer evidence of serfdom than that.

You need to create your own assets in the long run, to contribute to the community and the economy with something of value, rather than remaining on the treadmill of working nine to five to pay the bills, pay the interest on debts, continuing to consume and keeping yourself in debt.

Have an entrepreneurial attitude

Don’t just spend your time working, being a worker and consuming goods and debt.

Your time and your working capacity is too valuable just to use being a worker. You should be doing more with your life-time and your abilities.

But I’m now aware and I resist it. I will never work as an employee for anyone else again. I value my abilities, my capabilities, my freedom, my future and my time on this earth far too much to just stay a worker.

It’s a fact that our culture of society, education, university and so on still does not teach people to think and act entrepreneurially. We are still mostly only taught how to be and behave like a worker.

It can be difficult to resist this thinking. But it can be done. I for one believe in doing things differently to the mainstream. You can too if you wish.

You have to start thinking in terms of producing instead of consuming, of creating capital and credit, instead of borrowing and debt. Of investment in your future, in yourself and in others.

You have to leave the working class and join the entrepreneur class.

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