How Leverage Affects Income: Nail Salons vs. Dentistry

It is not surprising at all that a daughter who owns multiple nail salons makes much more money than her son, who is a successful dentist. The theory of leverage explains why such disparities in income can exist between these two professions.

The Theory of Leverage: Why Nail Salons Excel

When a dentist and a salon owner are compared, you quickly realize the significant difference in their earning power due to the concept of leverage. For the dentist, income is typically generated through a time-intensive process. This means the dentist needs to actively perform procedures, from filling teeth to performing veneers, one by one. While this work is highly valued and remunerative, it is also individualistic, making the earning potential more limited.

In contrast, the salon owner benefits from leveraging several factors:

She takes a piece of every nail job performed at all three salons, doubling her potential income. Each salon employs numerous workers, each performing tasks that contribute to the overall revenue. The scale and the number of workers significantly enhance her earnings potential. Even though employees might keep the lion’s share of the fees, the owner gets to aggregate these smaller income streams, ultimately generating a higher total income.

This is where the principle of leverage comes into play. Capitalism often thrives on small shares of revenue from numerous workers rather than large sums from a few individuals. The salon owner exemplifies this approach by actively managing and consolidating smaller, more frequent income streams.

Considerations for Fair Treatment and Employee Satisfaction

Obviously, as long as the nail salon employees feel fairly paid and treated with respect, this model can be sustainable. In nail salons, employees often cater to patrons who prioritize their appearance and are willing to pay for it. Tipped workers in cash form ensure a substantial portion of their income comes directly from satisfied customers. Regular customers frequently invest in their looks, leading to consistent revenue.

Meanwhile, dentistry, despite being a highly specialized and critical profession, operates with relatively lower flexibility. Dental procedures are often time-consuming and carried out one at a time. While these services are essential, the nature of the work makes it difficult to generate a significant, diverse income stream. The high hourly rate for dentists, while beneficial, is also tied to the individual's labor and cannot be easily scaled up.

Personal Insights: A Dentist and a Nail Salon Owner

My personal experience of facing tooth-related challenges further reinforces the disparity. Last week, I had a surgical procedure to save a tooth, which cost me 1800 dollars including a new crown. Earlier in the year, I spent 1000 dollars on two teeth to be drilled and filled. Although my dentist is quite expensive, his expertise and long-term service justify the cost.

Additionally, regular visits to nail salons are an essential part of maintaining my vanity. I have treatment sessions several times a year, especially since my body is aging and I can no longer twist into pretzel-like positions to reach my toenails. While I do not receive elaborate treatments, I still tip generously, acknowledging the value of this service.

Conclusion

The income disparity between a son's dental practice and a daughter's nail salons is not just due to the nature of the work but also the application of leverage. Nail salons enrich the owner through small but numerous income streams, while the dentist's income is dependent on the labor of the individual. Both systems have their merits, and ultimately, the effectiveness of each model lies in how it manages and aggregates these income sources.