There’s a gulf between your hourly work and your worth as a human being.

You should always pay people by the hour when available. When dealing with independent contractors you can put a value on their time based on what the
the market is paying. 

On the other hand, if there are no short term substitutes, then you don’t pay what the market will bear, instead, you pay what someone is worth. Big difference.

Consider, for example:

I could seek out a pretty good Beacon Hill real estate agent and imagine paying them $100 or more per hour – that would be fair compensation. After all, that’s more than a season Beacon Hill agent gets.

But when they find another Boston real estate broker, someone who will either make it easier for them to sell or rent Boston real estate properties. or will bring a client and tell them, the question isn’t how much time it took for the Boston real estate broker to do her closing, the question is what did she bring in terms of value, right? An indispensable person, someone with a rare asset, has few substitutes and an hourly rate makes a lot less sense.

I had a college professor who did engineering consulting. A brand new office tower in Boston had a serious problem–there was a brown stain coming through the drywall, (all of the drywall) no matter how much stain killer they used. In a forty story building, if you have to rip out all the drywall, this is a multi-million dollar disaster. They had exhausted all possibilities and were a day away from tearing out everything and taking a loss. They hired me in a last-ditch effort to solve the problem. I looked at the walls and said, “I think I can work out a solution, but it will cost you $45,000 if I succeed.” They instantly signed on, because if I succeed, the project would be saved.

The professor asked for a pencil and paper and wrote the name of a common hardware store chemical and handed it to them. “Here, this will work.” And then billed them $45,000. That’s quite an hourly wage. It’s also quite a bargain.

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