German economist Wilhelm Roscher provides us with a simple example to understand the correct production structure and from this understanding I will show you some important practical applications to most aspects of our life.
You live on an island and survive by fishing. For the last few months you have caught 2 fish each day with a spear you made. This provides you and your family with just enough food to survive each day.
After spending some time thinking how you can improve on your fishing skills, you come up with an idea. However, there is a trade off like so many worthwhile things in life. You figure if you could build a fishing net which will take a full days work you will be able to catch many more than just 2 fish in a day. You do the calculation you and your family will need to survive on 1 fish for two days so that you can dedicate a full day to making the fishing net. You decide to make the sacrifice.
The family are not too happy with you there is a fair bit of groaning, why are you making our lives so hard, etc.. but you persevere and you make the net. Now you are catching around 10 fish a day from two days of halving your daily food intake.
Carl Menger the father of the Austrian School of Economics calls this fishing net a higher order good and gives you a fundamental understanding of how the duration of production can have a very positive affect on future consumption.
The practical message I want the readers of this letter to take is that you should invest in yourself. Spend time and money developing higher order goods. It could be learning about technical analysis, fundamental analysis, how to code, money management or many many other activities that will have a large payback.
I write this to all stakeholders in PsyQuation. That is our team of developers, investors and our users. We have been through a tough bumpy road developing an entirely new backend stack. The transition has been turbulent as well. I am expecting us to switch the new backend on this week. I know there are many who are moaning and wondering why I as the CEO took this bold move and my answer is simple. We are building a higher order good that will produce many more fish than we are currently enjoying.