It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. – Adam Smith
Politicians, pundits, and the media try to convince people that wealth is a finite pie. They’ll tell you that someone else getting richer causes you to get poorer. This is now how wealth works.
When you create something people want, you create wealth where the was none before. Building wealth is a product of your productivity plus the ability to scale your productivity. If you can provide a lot of value for many people at once, you create wealth. And the value spreads around.
A business employs people and helps them increase their productivity, which gives them more resources to buy more stuff, which creates wealth for the companies they buy products from, who then turn around and employ people, who buy stuff from companies, who employ people, etc.
Economies grow because more innovative people create products people want and those products help people in a number of ways:
The combination of specialization and trade is a modern miracle. And people squander it.
You see transactions happening every single day everywhere you look. You’re just on the wrong side of them. You focus too much on the consumer side instead of the producer side. If you learn to become a producer, you can build wealth, period.
I’m taking a reductionist view of how an economy works and ignoring the cronyism for the sake of the argument. Of course, capitalism isn’t perfect and many people at the bottom definitely get squeezed. But the people who get squeezed are almost always consumers and employees.
No one is putting a gun to your head saying that you have to be on that side of the equation. If you can switch your mindset to seeing money as abundant, you’ll realize all you need to do is get in between a small handful of the billions of transactions happening every single day.
“I have never understood why it is “greed” to want to keep the money you have earned but not greed to want to take somebody else’s money.” – Thomas Sowell
Many people feel a sense of guilt about creating wealth because they’ve been taught that money is the root of all evil. Funny, the people who often teach this have money.
Politicians will preach this to you when the median net worth of congresspeople is $500,000. Hollywood celebrities peach asceticism while flying in private jets. Millionaires will criticize billionaires and the one percent, including Bernie Sanders — who owns three homes.
Remember the full quote:
For the love of money is the root of all of evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.The money itself isn’t evil. The context you put on the money determines what it means to you. I look at money as fuel. A means to an end. I look at money as a vessel for my freedom.
I’m currently building wealth, and plan to build a hell of a lot more, not primarily because I want nice things, but because I want to do whatever the hell I want, answer to no one, and spend zero time around people I don’t want to spend time with.
It’s true, using money to buy toys will not make you happy. You can make a lot of money only to build a prison with your purchases. Building wealth does make you happy because wealth is having money, not spending money.
When you have money, you have peace of mind. When you don’t have to live paycheck to paycheck in fear that you’ll get injured or lose your job, you tend to have a better disposition. Surprise, surprise.
Don’t be a martyr and sacrifices your long-term health and sanity because you don’t want to appear greedy. You’re not greedy for wanting to build wealth. The Jones are greedy.
It’s funny, I drive around and look on the road at all the people with nicer cars than me. Guaranteed I make more money than 90 percent of them. I drive a car that costs $2,500. Who’s greedy? Me, or them?
“You are not your job, you’re not how much money you have in the bank. You are not the car you drive. You’re not the contents of your wallet. You are not your fucking khakis. You are all-singing, all-dancing crap of the world.” – Chuk Palahniuk
For a population filled with people who say they ‘don’t care about money,’ there seem to be plenty of people who love new cars, big homes, nice clothes, brand name, smartphones, and more. It’s not as if people are living in a monk-like dwelling with no toys.
The same people who subconsciously believe that money is the root of all evil fall for keeping up with the Joneses trap.
Middle-class people who complain about their lack of savings but have homes that are way too big. People Tweeting ‘destroy capitalism’ from $1,000 phones that double as supercomputers. Stressed out millennials suffering from ‘stagnant wages’ who wear Lululemon and drink $7 coffees.
I buy stuff. I’m a slave to consumerism myself. But I try to be cognizant of it and learn how to have enough. If you never have enough, you can never build wealth, because ‘lifestyle creep’ will always cause you to raise your living standards.
Naval Ravikant said it well:
“People who live far below their means enjoy a freedom that people busy upgrading their lifestyles can’t fathom.”
To build wealth, you need to build the skill of not caring what other people think about you. The less you need to flex, the more wealth you can build.
This doesn’t mean you need to be frugal. Not at all. Making money just to watch it sit in a bank account is boring. But having a conscious plan to save your money, live below your means, and spend money wisely on the things you love, will help you build a path to wealth and happiness.
“You can’t go through life borrowing money at 18 percent and be better off.” Warren Buffet
Funny how all the aspects of the American dream are predicated on you being in debt:
You need credit. But this ‘need to build your credit score’ lie is sold to you for you to remain an indentured servant for the rest of your life. If you need to borrow money to buy something, consider that you shouldn’t be buying it in the first place.
This is the disciplined approach that few people take. Most of these points are ultimately about discipline. With discipline, you could escape the rat race and build wealth. Whether or not you do that is on you.
This point will contradict some of my earlier ones but stick with me.
I like personal finance experts like Dave Ramsey, but they do perpetuate a certain lie or at least a fib. You can’t save your way to wealth.
Ok, you can. But the heavily disciplined penny-pinching approach where you patiently save a portion of your money over a long period of time is difficult, to say the least.
Dave Ramsey isn’t rich because he cut up his credit cards, he’s rich because he has a multi-million dollar information product business. Saving money is important, but increasing your income makes it a lot easier to save money.
If you can generate more income, maintain the same lifestyle, and invest the difference, you can be wealthy. I’m not a fan of the ruthless frugality approach to saving because it’s so deeply rooted in constraint. Constraint and discipline are necessary, but you also want to, you know, live a good life and have fun.
Earning more helps you generate cash much quicker than saving and investing. If you want to make an extra $10,000 a year with investments, you’d need $100,000 of capital assuming you get a healthy return of 10 percent per year. It’s much easier to generate that extra $10,000 with a side business.
I’m a fan of balance and I know humans. Rare is the person who will discipline themselves to save 20 percent of their $50,000 a year salary and wait 40 years to get rich. Turn a side hustle into a six-figure business, however, and you have a much better chance of making that dream come true.
You should start saving and investing with whatever you have, absolutely. But don’t stop there.
“Good things happen to those who hustle.” —ANAÏS NIN
If I took the time to do it, I could find several hundred different side business ideas that you could start for a relatively low amount of capital. Hell, I make a six-figure living writing on Medium, which costs me zero dollars to use. Even if you factor in my MacBook and internet access, you’re looking at 100x ROI.
The internet is a great income equalizer in our society. If you’re reasonably intelligent and not destitute, you have no one to blame for yourself. No one. I’ve seen too many examples of success from people of all walks of life to have sympathy for most of the people living in the West.
Hell, I’ve seen freelancers from Pakistan and India build six-figure agencies from scratch using nothing more than internet access. The difference between them and you? They’re hungry. You’re not. Of course, wanting it bad enough still doesn’t mean you’ll actually do it. But, there’s no one blocking you from doing it.
You could do wholesale real estate deals and make money from thin air. You could start an affiliate marketing blog for $15 a month worth of hosting costs.
I could keep going. But this idea that upward mobility doesn’t exist is a lie sold to you by the elites to keep you a complacent employee who never escapes the rat race. And you’re helping them.
Stop lying to yourself.
I never said pulling one of these projects off was easy, but I am saying that you can do it.
“No investment points are awarded for difficulty or complexity. Simple strategies can lead to outstanding returns.” Morgan Housel
The author who I quoted opens his new book telling the story of a Janitor who died with a net worth of 8 million dollars as a result of investing a small portion of his income in blue-chip stocks and index funds.
You don’t need to be a genius to be wealthy. Read the Millionaire Next Door, which says that many millionaires are people who built moderately successful businesses, made an upper-middle-class income, but lived a middle-class lifestyle and invested the difference.
You don’t need to be Warren Buffet to make money in the stock market. In fact, Warren made a bet that over a decade, a simple index fund (a ‘stock’ that tracks the entire stock market) would outperform funds managed by top experts. He was right.
Nothing is stopping you from building a side business, getting a better job, or developing the skills needed to make more money. Nobody is holding you back from putting your money into a simple investing account. Your investment app or brokerage account doesn’t know what you look like so it can’t be prejudiced against you.
For every Mark Zuckerberg or Oprah Winfrey, there are thousands, even millions, of people living wealthy lives who didn’t need to be rocket scientists to do it.
You can be one of these people. The question is, will you?
Money is emotional. Your behavior and psychology matter much more than your book smarts. The harshest truth you must confront is that you are the one in you’re own way. Once you realize that, you’re ready to begin.