Rich People Create Money Printers. They Don't Save a Dime.
Level 2 - Value Investor
Welcome Avatar! One of the biggest psyops in human history is that rich people run around with a lot of cash and big bank accounts. The masses also assume they have huge incomes (another big no, no).
In reality, the cash balance is kept as low as possible. While the wealthy have $100,000+ in bank accounts, you have to look at it as a percentage of wealth. If you are a billionaire and have eight bank accounts with $250,000 in it… is that a lot of money? It is only 2% of the wealth. Not a lot.
What do they do instead? They try to decouple their time from money. While you can’t start a new federal reserve and print money, the concept of a “business” is actually quite simple. You need to get more money out of it than you put in.
Part 1: How to Decouple Time and Money
Before anyone gets offended, we loosened up our stance on this over the past 5-10 years. A lot of people will start in a time for money exchange. It’s actually completely fine to do this. If your first whiff of making money for yourself requires you to exchange time for money on some internet platform, so be it. Just know that the long-term goal is to remove that set up. It’s entirely fine to sell your time for $50 to $100 an hour on the internet if it is day one. If you plan on getting rich, you cannot exchange your time for money 10, 15 or 20 years from now.
Money Printer is simple. Put $10 in, get >$10 after.
We gave out a simple example years ago. Every single biz person got the answer correct.
You run an ad with a guaranteed net profit after all costs + taxes of 1 cent (per dollar)
You can put infinite money into it and you will receive the one cent per dollar in 24 hours
How much should you spend?
Answer in this fake situation is every single dollar you have at all times.
In the real world spending $100 to get $1 is not sustainable. You would run out of customers quickly, you would likely lose money after a small part of the TAM was saturated. The concept is what matters.
If you can find any system where $1 enter = more than $1 out, that is a great business since you don’t lose any time at all.
How Do I Remove Myself
In the corporate world, a lot of the game is taking on more responsibility and more workload to be noticed. This sounds good until you realize that it is not scalable. Once you flip the switch to running a business, you are constantly asking “how do i remove myself”
If you don’t do anything but generate money, that i an incredible business. This is also why people obsess over investing. They want to make money without having to do any actual leg work
Stocks they are getting part of the earnings without working for the company
Rental units = they want someone else to manage it and collect part of the profit while sitting at home
Running a business is generating income while you are asleep
Intellectual property/royalties = making money without being physically present
Once you see it like this, everything should start to click. Anything you’re building needs to have two things: 1) it needs to earn money if you invest money into it and 2) it needs to run without your presence in the long-term
How Most People Get Trapped
The majority don’t put all of this together. They typically spend their entire life reliant on a time for money exchange. This isn’t scalable because your time is finite. No matter what you do, you cannot create more hours in a day. It should look more like this:
Beginning taking money and shoveling it into a scalable business
Eventually scalable business makes real money
You stay and help it grow working absurd hours (typically 3 years) and eat glass for breakfast, lunch and dinner
Few years pass you realize you have a lot more money than you expected (overshot)
You start delegating work to other people
You realize you should have delegated earlier, sit back and focus on redoing the process with less hours entirely on your shoulders (second, third, fourth or fifth biz)
The above is extremely rare. Usually what happens is people only see the end points.
Poor/lower class = take all money and just consume
Middle = Take all money, consume and leave 5-10% for retirement/savings
Wealthy = “Doing nothing” and generate large spending power. (No one sees the using labor to build an asset part).
Once again, if you’re not rich yet, the goal is simple. “How much time am I spending building an asset I own?” Really critical question. You’re building your own money printer, or you’re helping build someone else’s money printer. Better make sure you’re doing more for yourself over the long-run.
Good Example Here
What this post actually misses is that the banker is doing it wrong. All the hours are spent building someone else’s dreams. If someone can get promoted quickly and survive the absolute grind and brutality of Wall Street, they can make it in the biz world. Problem is that they end up becoming ultra risk averse due to the pain of losing the high paying W-2.
Part 2: Wealthy People Target Ownership and Control
Most people see this and ignore the last part. If you take all your money and only invest in various mega cap stocks, how much of the company will you actually own? The answer is “a minuscule amount”
Wealth and wealth creation is always relative. This is why humans are designed with deep envy and comparisons. If everyone gets 5% richer tomorrow, the only thing that happens is a price increase of 5%. We saw this during COVID. If prices go up 20% but you’re up 200%…. You’re blowing past everyone.
How to Target Ownership and Control
Since the path to wealth starts with ownership and control there are two viable options: 1) you’re born rich and you get a huge head start with $1M in diversified stocks and a paid off condo in Miami and 2) you have to create ownership by owning 100% of something you’re building and either keep it for the income or sell it at a multiple.
Since you’re reading this website, we’re going to wager there is a 99% chance you’re in group two.
Step 1: Build your first asset. This is by far the hardest. People refuse to try. The system is set up to make you quit. You won’t make real money for ~3 years. This is the case for the vast majority. If you wait and start tomorrow instead of today, the opportunity cost just goes up. If you start a 40 your opportunity cost is hundreds of thousands, if you start at 21 your opportunity cost is your entry level base salary. Hard to be motivated if your first E-com sale is a $500 profit month and you earn $400,000+ per year
Step 2: You realize that a dollar made in your own business is worth MULTIPLES. If your income goes up $10,000, that is it. If your business income goes up $10,000 but the industry trades at a 5x P/E you amde $10,000 + the new valuation improvement of $50,000. Not even remotely close to the same (oh and you own 100% of that increase)
No matter how hard you work you can never sell your job/career at 10x
Step 3: Every single sector/market grows and matures. By the time you have scaled up your company, you will learn that you’re generating far more income than you can spend. We’ll say that again. By the time you have hit your groove, you’re generating far more money than you can spend. This means that you don’t even know what product to launch since there is no obvious “next new”
Step 4: Instead of sitting on cash going down with inflation, you end up buying a wide variety of assets: crypto, stocks, real estate, private businesses etc. This is simply a version of you becoming a partial owner of something else. Since you’re a partial owner, you know that the person who owns the majority will become excessively wealthier than you even if you are right about the investment.
Step 5: You realize the only way to generate more wealth is by going back to step 1. The assets you own are simply placeholders until you find something better to do with it
If you internalize all of this, the way rich people think begins to make sense.
They don’t view primary homes as part of net worth because it doesn’t generate any income for them. They also have to buy another if they leave. It’s largely a lifestyle choice (right place they want to live long-term) and reduces long-term costs
As soon as they have excess money, they ship it straight into assets. Not going to battle here and simply say “any asset that appreciates long term”
They hate the idea of money earning nothing. They will always have a low percentage of wealth in cash
Unless they are extremely bored, the chances of ever exchanging time for money is slim
Then It Simply Snowballs
Once this process is run a few times, the income generated from investments > your annual spending.
We know that $10M is peanuts on X app but look at the rough numbers.
If you had half of that ($5M)) and that generated $250,000 it means you would spend $20,000+ a month. Chance are slim you’re consistently burning through this money for 99% of the population.
Said differently, you don’t need cash because the cash gets rebuilt by the end of the month anyway!
For most people, they have about three income streams: 1) main biz that is 80% of their earnings, 2) second biz that is about 15% and then 3) the investment return/asset appreciation that is the remaining 5%. If you look at it from that lens you can see why cash isn’t something they hold. They money they earn from dividends, interest and capital gains already exceeds their spending
Part 3: Audit Your Life
Most millionaires are first generation. There is a lot of cope and seethe around this comment but the statistics back it up.
In fact, if someone argues that this isn’t possible they are already showcasing qualities that will make them unsuccessful. Smart (future millionaires) ask “how did they do it” instead of trying to fight the reality (that America is the easiest place on earth to get rich)
Here Our Own Audit List Unrelated to Your Background
Are you doing what you are good at? If you can’t answer what you’re good at, this is already a natural disaster level emergency. You should not care if you enjoy the task. Ask what you are good at, find something that pays the most for the task and start there.
If you are not doing what you are good/talented at, you do not deserve anything. You’re depriving the world of your natural calling. This is like a 7’0” 300 lb man with a 50” vertical deciding to become a horse jockey because he likes horses. Good luck
How are your priorities? You have a thin window of time to take extreme risk and burn the candle on both ends. As long as health is good enough, you should guard your time like Fort Knox. If it isn’t helping you build ownership/equity, it isn’t worth it.
How High is Your Self Awareness? “Make your weakness a strength”. Yep. You guessed it. More nonsense. Some of you are new, some of you are long-term readers. Would any of you come to us for “emotional support?” Exactly. Something we don’t have and gave up on years ago. If you’re not great at something just move on. You can improve the level to where it is socially functional and simply move on
How Are Your Friends? Are they all on the same page? Be honest about it. Much like high school when there is a big split after graduation an even bigger split happens in 20s and 30s. It’s easy to forecast once you think about it. Would someone who lives in a Beverly Hills mansion have constant contact with someone who lives in a studio in New Mexico? Highly unlikely to have any significant consistent contact. The cliche of your five contacts highlighting who you are is true
Do You Keep Contact With Winners? Once again, be honest about it. If you’re the jealous type or big ego type you’ll see the problem in this question. How will you create a good list of contacts if every successful friend you have is hit with “must be nice”, “you got lucky” or “you changed man”.
None of these questions are remotely related to “knowing the right people”. If you’re grinding and building stuff you will meet successful people along the way. The probabilities are in your favor as proven in this book.
Just up to you to believe in the laws of mathematics!
Summary
Hopefully this post will resonate and be taken seriously. If you’re living up to your max effort + focusing on ownership/control, the math says you’re going to get there. The problem is priorities, consistency and conviction.
Besides, it’s not like you have another choice. Your boss is not going to hand you a 100% raise. You’ll probably underperform inflation long-term.
Your boss is hoping to move 1% of your raise into his pocket! He’d do your job if he could take your salary (that’s how corporate is, they prefer more work in exchange for time!)
On that note, back to the tent.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by an anonymous group of Ex-Wall Street Tech Bankers and software engineers who moved into affiliate marketing and e-commerce.
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