How to acquire wealth during your lifetime
By not being an exception.
Current social media and marketing around the world promote the idea of perfection and uniqueness. Each time the exceptions are highlighted and made the norm. This tactic is normal because the human brain remembers the best, the unusual, and not the average. Companies compete for customers’ attention, so they use any tactic that works. But remember: you see and hear what THEY want to see and hear. Everyone will write articles about the next great startup with $100 million in seed capital and 21-year-old founders … but they will not report on the other 1000 failed companies. Remember, if you see 10 successful articles online, multiply that by 1000 and you get the total number of startups that have tried to get into business.
Imagine you are in Venice and you see a street with parked cars. There are 2 situations: In the first case all the cars are bright red Ferraris and people start taking pictures of them, and in the second case all the cars are randomly painted black and white. Which case would you best remember and talk about with your friends?
If we want to gain wealth, we must act and think that we are average. Trying to convince ourselves that we are “the exception” or “the chosen” is just an anchor for our success. I know … some people are born wealthy and have access to a large network of influential people, but those are exceptions. The following advice in this article is aimed at middle-class people who want to get rich in a safe way.
Let us define wealth. As Naval said in his podcast, there is wealth and status. Most people who think of wealth think of luxury cars, large mansions, and other high-class goods. Unfortunately, these are items that show status. Most goods in our lives have 2 main components, a utility component, and a luxury component. For example, the only difference between a Toyota Camry and a Lamborghini Aventador is the luxury component. With both cars, you can drive from A to B but in different comfort (I would say the Camry is more comfortable) and have different practical utility (again, the Camry is much more practical). The true meaning of wealth is to maximize the utility of the goods you buy and minimize the luxury aspect. If you are wealthy, you have enough resources to buy the goods that meet this simple rule, and you have a constant mechanism that brings in enough resources to sustain your lifestyle. For simple understanding, you have a lifestyle like someone in the middle class or upper middle class, but you no longer have to trade your time for money.
The following aspects are personal conclusions from experiences I have made in the last years. A few of the aspects described here are also mentioned in the Naval podcast. Please note that these are personal aspects. For each person, there are specific unfair advantages that may make the following advice superfluous.
Become a specialist
Do not be the in top 1% in one area
Trying to get to the top in any industry is tough. You are always competing with people who are naturally more intelligent, wealthier, or luckier than you. The effort you put in increases exponentially, while the result of your work increases rather slowly. I am talking about the Pareto effect. After you overcome the 20% of effort, you only get 20% of the result. Some people are competitive and would do anything to get first place. It becomes a game of status rather than wealth. These people will put you down and destroy you just to maintain their status.
Find to be in the top 25% in 2 different domains
At first glance, this idea seems undervalued. Being in the top 25% in any industry is attainable for the average person. Variables like luck, intelligence, or money do not count as much. Trying to be above average in 2 different fields can catapult you into the top 6%.
For example, a chef who is in the top 15%, but also in the top 25% of computer scientists, is technically in the top 4% of people doing these types of jobs. The math is simple: 0.15 * 0.25 = 0.037 (3.7%). This simple representation is not entirely accurate due to factors that are not taken into account, but it is a good example to help people understand this important concept that can increase your chances of becoming more prosperous. (We also need to consider the probability that a chef loves computer science and vice versa … and I believe the probability is low).
Exposure yourself to events/activities that a few do
This life is a marathon between individuals competing for limited resources. The same is true for your career or business. Your natural path is to become unique in terms of your abilities. In this way, you will be of great value to others and society. By dedicating yourself to events or activities that few do, you will gain knowledge that few have. You can use this as leverage in your career. You will become “special” compared to other people and as you know, humans are seeking to possess or be around “uniqueness”.
“With great power comes great responsibility” … but it is otherwise
This quote is old, but I think it is somehow wrong. When people take on great responsibility, they are automatically gifted with power. The decision to take on this responsibility is ours alone. In the short term, we may be presented with more opportunities that can open a path to success. If we are good at what we do and have power, we can exponentially increase our chances of accumulating wealth.
From a macroeconomic perspective, specialized production is the key
In every economics book, the concept of specialization is explained. If we take a theoretical model in which countries have 2 different production lines, each country should specialize in only one production process. First, it increases the country’s overall productivity because the limited resources it already has are only used in one direction. Second, it provides a competitive advantage in today’s international markets. The same concept can be applied to careers or in the business world.
The environment for opportunities is created
Opportunities are not searched but found
Trying to find opportunities is the worst thing anyone can do. The effort is astronomical and you are trying to shape the world to your needs. Even God has his limitations. Social media is useless because you are trying to find opportunities that, by definition, will be noticed by a few people. If you see a post on Reddit or Twitter about the “next big thing” … I am sorry, but you are too late. The current information channels out there are having the role of a megaphone, to amplify someone’s idea. Try to find that person before he has spoken to the world.
Also remember that most publications (CNBC, Bloomberg, Forbes, …) get paid to publish an article on a topic (that’s their business model). With a few thousand dollars, you can be the world’s next young billionaire.
Opportunities are the foundation of your career/business
The high entrepreneurial risk and failure rate should be a warning sign for most people. The self-help industry, along with the “entrepreneur” industry, is worth over $25 billion a year worldwide. Some people make their money by encouraging the average person to take this risky path. A business is started when several factors are met. Opportunities are a good place to lay a foundation for the long run.
In this Ted Talk, Bill Gross talks about the key elements that can lead to startup success. The first element correlates highly with opportunity, and it’s called timing. If you build the right thing at the right time, you can be almost certain to succeed.
Acquire or create equity in a business
Try to be among the first in a trend
There is a famous quote from the movie “Margin Call” …
Be First, Be Smarter or Cheat
It is not advisable to be first, because you will go to the trouble of breaking the ice. Try to be in the first quarter of Early adopters. This is the crux of the matter. You need some validation beforehand so that you have a higher probability of success.
The “It is already implemented” quote
Everyone has one or more friends who say this quote incessantly. The explanation is simple. The ideas they have are in most cases average and are already taught/implemented by millions of people. To develop unique concepts, you need to be in a situation where others are not. (See the topic on specialization). Think about it … if 1 million people are already thinking about a concept, what new thing can you bring to the table? The only way is to be in the top 1%, which means 10,000 people … a lot. On the other hand, if you are in a new trend and a maximum of 1000 people are interested and involved in it, it is not impossible to develop a new concept for this area. Developing a social media app was the perfect time in 2005 when a few people were thinking about it, but nowadays it’s almost impossible to get to market with a new app without massive resources (in terms of capital and labor).
Remember that you make a bet from the moment you enter a trend early. There is a possibility that the trend will die and all your efforts will disappear with it.
Renting your time is not the solution
Our time is limited. Let us do some basic calculations. Think of our time as a variable X. The formula for a worker is always F(X) = X + c.
Since our time is limited, this means we will have limited wealth in this lifetime. The solution is to decouple input and output and set up an exponential equation like the following: F(X) = X³ + (Y1 … Yn) + c, where Y are other forms of income. Our goal is to decouple X from the equation and make our time completely irrelevant. This is the definition of passive income. Do not get me wrong, we need workers in this world, but there is a percentage of people who have higher desires in life. We need to use the compound effect to increase ourselves and what we build. A human being has an average lifetime of 692,040 hours. Your time is the most important asset you have. Spent it carefully.
However, do not try to start a business for its own sake. Realize that in most cases, you would have a better work-life balance, paycheck, and other benefits as an employee. It must be worthwhile to start a business … so carefully and realistically measure the possible outcomes and benefits you can have.
I highly recommend reading this scientific paper. It talks about entrepreneurship and the cons of doing it. I know … it is pessimistic to think about the cons, but as I will talk about later in the article, hedge life and don’t try to believe you are “the chosen one”.
Use leverage
Labor is the oldest leverage and the worst one
Time rental is an ancient concept and the easiest for the population to understand. Humans are complex beings that are not yet fully understood. Therefore, the interaction between multiple people is often a real nightmare if there is no leader or mission. Human resource management is a vast subject and one of the biggest problems in companies today. If we reduce the human factor, we can focus our resources on what is important … our business or our career.
Capital as leverage
Money is used to strengthen something already built. If the foundation is poor, the capital will only bring the idea down; if the foundation is strong, the money will have a positive effect. Pursue funding for your business after you have discovered the majority of the variables. Over the past 20 years, VC funds and angel investors fostered the trend of fast-growing startups that lived on funding without making a profit. In these cases, it is an even riskier bet that the company will be self-sustaining in the future. Future rewards are high for both founders and investors, but the number of these types of startups that succeed is very small. Try to make profits from day one and validate your business concept as early as you can. Try to do things as you are “average” and not the exception.
Third-millennium leverage … Code & Content
We live in 2022 and today the easiest way to use leverage is to write code or put information online. Production costs are approaching zero, and expansion costs are zero as well. That is practical a hack in the matrix. The software can be easily accessed without needing additional people and has no “personal” desire to go vegan at launch. It is more predictable and stable in the long run. When I write this article, I only make the effort once. If people find my thoughts interesting, they will read them and share them with others, earning me more popularity and giving me more leverage over time that I can exploit.
Joe Rogan puts the same effort into each podcast, but each has a different result. The first podcasts were a losing proposition, while the current ones are making him millions of dollars. He has found a solution to get variable results by having a constant input.
Networking as leverage
Try to connect with people who are similar to you and have more experience and knowledge than you in your chosen fields. Build a network of people and keep it in the drawer until the right time. As a famous quote goes:
Your net worth is equal with your network
People
People do not remember much about you
People have short-term memory when it comes to interacting with others. They will always remember extraordinary things but forget the average. Being a generalist can be a complicated concept for individuals while being a specialist is easier to digest. Try to describe yourself in a few words and make sure people think of you when they hear those words.
They seek their benefits
People focus on their problems and hopes. They will never focus on anyone else unless there are benefits for themselves involved. We are animals and we seek our pleasure and comfort. If something is in our interest, we will work for it. In most cases, employees are only looking for a good paycheck and work-life balance. They do not give a damn about your business and what you want. Working with them is complicated and becomes frustrating with time. To obtain common sense you need to combine their wishes with your long-term desires.
“If you want something done, choose one man … if you want nothing, let the group decide”
No one knows nothing
The future is unpredictable. Most people talk about it as if it were the past, but it is not. The great financial analyst can not even predict what might happen tomorrow, but he tries to predict what will be in the next 5 years. The only certainty you have about the future is the plans and actions you want to take. You can also analyze past trends to infer future outcomes. Usually, a trend maintains its course and the chances of catching a trend reversal are unlikely.
Risk Management in Life
Do hedging
Use your mind when taking risks. Look for opportunities with a high risk-reward ratio. Having a job while you build your side income is the best way to manage risk. Everyone criticizes hedge funds because they give less return per year than an index fund … but they do not understand what a hedge fund does. Its main job is to hedge in the financial markets. Even if the market goes to infinity or crashes into the abyss, hedge funds will give the same return every year. Try to live your life according to this concept. Even if you experience ups and downs, try to stay on the same path with the same consistent results and you will never be influenced by external factors.
Have a long-term vision
Before you start your journey, you must know the direction in which you are going. If a sailor does not know which port to sail to, no wind is favorable. Your plan should be to make a career and accumulate wealth. The business world and life are strategic games, so a plan is needed. As Benjamin Graham said:
If You Fail to Plan, You Are Planning to Fail
Assume Formlessness
As the 48th rule of power states, open yourself to attack if you are tangible. If you are malleable, adaptable, and in motion, you are not tangible. Accept that everything is changing everywhere, and embody that truth. By being as fluid as water, you protect yourself from the ever-changing nature of reality. If you refuse to adapt and change, you cannot evolve and your power will be snatched away.
Roadmap
I will present you with a roadmap for achieving wealth. You shall take this one as it is and keep in mind that every person is different.
- Try to specialize and master a skill that is the result of the union of 2 fields. Find a job that also gives you some free time and uses your specialization (40-hour work week, preferably remote).
- Hedge life and live below your means… save money and invest some of it. In case you do not make it have a contingency plan that can help you a lot.
- Create a presence on social media and try to attract the attention of people around you. You need to be yourself and offer something that few do (in terms of content).
- Go to conferences, meetings, and other activities where people with the same interests and more experience than you go. Create a network of people and use it when the time calls for it.
- Try brainstorming and observing problems. Develop your ability to “find problems” and put yourself in situations where others are not. Talk to customers. They are the heart of any business. When you build a product, customers pay for it, not you… so stop building things you think they “want” or are “the future.”
- When you have a lead or have found an opportunity, build on it until you have some small results. If you do something right, you will find very quickly that it works. Use your social media and network as leverage. Remember, we need a strong foundation to start a business.
- When your company/startup overcomes the job, you go fully into it.
- If you fail, get a job and go back to point 2.
- If you succeed, I congratulate you, you have gained wealth in this life. Your only task now is to preserve it.
This roadmap offers a clear, low risk (compared to what other individuals are trying to promote) to succeed and obtain wealth. There is no secret formula for success, but my persona has this ability always to try to systemize and parameterize actions/concepts 😁.
The End
What is your opinion about this article?
Let me know in the comments.
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