In a perfect world, everyone produce something.
Farmers grow plants, feed chickens, fishermen catch fish, builder made homes etc. So we can sit together at night and enjoy a complete dinner in our nice homes. It was easy to know who is suppose to do what, who produces what.
When there are too many fish caught, it has to be sold out of town. The fisherman doesn't have time to travel that far. So a delivery boy is helping the fisherman. The fisherman save time, hence catch more fishes and therefore its worth him paying the delivery boy. It is a value added chain, so service has become a part of perfect world too where everyone produce something, everyone produce some values.
It gets a bit complicated cause service is not as easy to quantify as materials. But its still ok.
A $1 fish may cost $2 in out of town because there are delivery cost incurred.
Soon more delivery services are needed. It is not easy to decide which of the 100 delivery boys is most reliable. So a manager came and organize a delivery company. The fisherman no longer need to worry about delivery, the delivery company will handle and be 'responsible' for the delivery part. If any single delivery boy does not perform, the company will immediately replace with a better one. Fish still reach destination on time. The fisherman doesn't need to worry a thing. What the management provided is a service on a service, there is still value provided.
Now the fish is $3 in out of town. The manager needs to eat too.
The fisherman's business grow much larger thanks to the great leveraging techniques. One day, the fisherman's primary school friend drop by and have a nice chat with the fisherman, asking the fisherman to let him handle the delivery part. Because he is more trust worthy, that they have known each other for so long etc. The fisherman agreed, perhaps due to the drinks or due to the flowery talks.
The primary school friend simply take orders for the fisherman and pass to the delivery company. Jobs still get done as usual but while doing that, he has raised the fish price to $5 in out of town. He gets $1 just for the deal he made. The fisherman gets $1 extra simply by letting his primary school friend take over the delivery part. The delivery company has nothing to loose.
Now it gets really tricky.
What did the primary school friend produces ?
What value has he added ?
What service has he provided ?
You can't say he has done nothing. He is instead smart, creating something from nothing. Is creativity really worth nothing ? He capitalize his relationship into a real asset.
The fisherman gets more value ( money ), the primary school friend earn something, the delivery company didn't loose anything. So theoretically speaking, the primary school friend has added value to the fisherman and himself. So it doesn't really break the law of perfect world.
The smart you may have already spotted the difference.
But at whose price ? Out of town folks used to pay $3 for a fish. $1 for the fisherman, $1 for the manager to make sure fish reach them on time and $1 for the delivery boy. Now the fish is $5! What is the other $2 for ? Well, that has nothing to do with any value received by the people in out of town. That was just a deal made between a primary school friend and the fisherman. The fisherman and the friend gets the whole $2!
Smart yes, add value to one or two persons yes, nothing wrong was done yes .... but whatever the primary school friend did, should NOT be included in the formula of 'PERFECT WORLD'.
In a perfect world, everyone produce something
Sounds familiar yet ? If not, may be you haven't read about Malaysia's GST yet.
This article was suppose to be read in this sequence.