There's a popular question lately that is worth pondering: Assuming your assets go to zero today, do you have the ability to return to your original net worth level within a year? Further, if you increase your assets from zero to seven or eight figures in a year, can you be classified as getting rich?
I've observed that people tend to be interested in how to build wealth quickly or skyrocket in value overnight. However, the realization of huge assets often stems from long-term accumulation and equity exit. A common denominator among those around you who have achieved financial freedom is how to monetize their equity, for example, equity incentives for company employees prior to an IPO, or RSU** rewards for joining a public company, such as Google, Amazon, and Facebook. In fact, the essence behind RSU is also equity. If you imagine if the employees of these companies had the opportunity to achieve financial freedom through ***, let alone the owners of these large businesses. When Jeffbezos founded Amazon, the company had been losing money for nine years in a row, and was ridiculed by the public for it. However, from an equity perspective, through these loss accumulations and tax benefits, Bezos is setting the stage for a huge profit in the future, which will trigger exponential changes or more capital injections. Working part-time jobs has proven impossible to achieve financial freedom, or even vacation freedom. The essence of achieving financial freedom can be summed up in one word: equity. The deeper essence of equity is to achieve liquidity and financial freedom through financing or exit, and with the help of leverage. Surprisingly, according to the data, 88% of the self-made millionaires in the United States do not rely on family background, so the success of those who truly accumulate wealth does not depend on luck or illustrious family background, but on their own money-making system and the four levers of life that we are about to introduce.
So, going back to the question raised at the beginning of this article, even if the rich are stripped of all their wealth and their assets to zero, they have the ability to recover their original net worth in the next one to two years through established mindsets and systems. This conclusion is not original to us, but comes from Glennstearns, the protagonist of the reality show "Undercoverbillionaire". In 90 days, with limited cash resources and $100 in start-up capital, he created a $1 million restaurant business. The four levers of life, what we are going to discuss, also come from the continuous successful entrepreneur n**alr**ikant. His classic quotes and biography have sold millions of copies, and are considered must-read by investors, entrepreneurs, and even those seeking spiritual happiness. Today, we will combine the biography of N**Al, **The Four Levers to Achieve Wealth Freedom and Wealth. This book is actually quite short and quick to read, but I recommend that you read it in conjunction with the Feynman Method. Even though we explain in detail here the four levers of life to be rich, I still recommend that you learn in conjunction with Richard Feynman's books. With the Feynman Method, it will be easier for you to apply the skills you have learned, and it will become easier to master them.
1. Why a part-time job can't get you into the rich class
What does money mean to you? If you have enough wealth, what is the first scenario that comes to your mind? What does wealth mean to you? Based on most of the answers I've gathered, people often imagine the perfect vacation with their family, eating, traveling, and driving the car they want to drive without budget. Further, if I were to ask you how you would achieve this state of life, most people would usually answer a good university, get a decent job, develop a professional skill, and move up the ranks in that career field. Therefore, for most people, money means salary income, i.e. monthly or quarterly compensation, and there are certain trade-offs against this, such as only being able to enjoy up to three weeks of vacation per year and working hard the rest of the time. But beyond that, people dream of having the courage and freedom to travel freely outside of paid vacations, without being bound by bosses and budget constraints, and enjoying life as much as they want. According to big data statistics, to enjoy this freedom, you need about $2.5 million in liquid deposits, which is equivalent to more than 10 million yuan. So, how much time and effort does it take if you want to save enough money? If you missed the opportunity in China's real estate market ten or twenty years ago, there is no longer the opportunity to invest in property and make huge returns as it used to be.
So, how many migrant workers are able to achieve financial freedom? The answer is almost zero. You might say, I work in the Bay Area, I work in tech giants, and every quarter I get a decent RSU as an incentive. But let's not forget that behind the RSU itself is equity incentives, which involve the realization of equity and ownership. So, from a pure wage perspective, wages are not the same as wealth, which is one of our biggest misconceptions about wealth and money. Compared to exchanging time for money, that is, getting paid for active labor, it is equivalent to investing more than 20 working days in advance, and you will be paid back in the form of wages at the end of the month. And if you take time off work or don't work, and don't work hard and take the initiative, then there is no income. When you can't work, your income** stops, and that's not wealth.
Conversely, for the wealthy, wealth is not acquired through one-on-one exchange of their own time for money, but through employment, asset investment, and the realization of dividends and entitlements. Therefore, the wealthy class can use their employment relationships and assets to make money for themselves, whether they are sleeping, on vacation, on a yacht, playing ball, or spending time with their families, which is the real wealth. The dividends enjoyed by the wealthy class are similar to those of the British empire in the 19th century, and through colonial relations, many countries such as Indonesia, Europe and even Australia are equivalent to working for Britain, both in sleep and in wake. The accumulation of wealth today is achieved more through the rationalization of capital than in the colonial ways of the past. As business owners, they make money by hiring employees from other countries or setting up branches in different countries while they are resting or sleeping in their own time zone, and they also earn money in different markets when the world's best markets open.
Second, the four levers of wealth accelerate the pace of getting rich
In the eyes of the average person, leverage is often understood as the use of a bank's lending mechanism to buy a first home or make an investment. However, bank loans are only the most rudimentary leverage. Among the four levers, the first level is also the easiest to understand, namely the employment relationship, the labor lever(laborleverage)To put it simply, labor leverage refers to splitting a person's effective 24 hours in a day into 24 hours for different people through an employment relationship, thereby reducing the time they spend actively working. Assuming we have an ideal working day of 8 hours, if we employ five people, that equates to 40 extra hours a day. If 50 people are employed, it is equivalent to an additional 400 hours of individual time per day. It can be said that employment is an extension of the physiological limits of the human body. Of course, we also know that for a large company, the cost of management is also high, so it is important to use this leverage. This also explains why company executives are often paid dozens of times more than the average employee. They improve the efficiency of reporting and feedback communication at each level through the balance of overall efficiency and flat management at different levels. So, if we have to distinguish one ladder, it's from Junior, SeniorManagement, to Ownership. Within these different levels, the difference in income is often exponential or exponential.
The second lever we want to introduce is:Leverage of capital, i.e. capitalleverage. The essence of the leverage of capital is investment, and its most profound embodiment exists in the financial industry and the real estate industry. For example, if you were lucky enough to buy $10,000 in 1964 when Warren Buffett had just taken over Berkshire Hathaway, you would have a nine-figure fortune 50 years later. Let's take a look at Berkshire Hathaway's share price at the time was just $12, and today, 60 years later, that $12 has become $500,000. Over the course of 60 years, the asset has increased by more than 40,000 times, and even taking into account the stock market crash and financial crisis, the annualized rate of return has reached 20%. That's the power of capital leverage.
Real estate investment is also a kind of financial leverage, and from the perspective of real estate investment, the use of capital as a pyramid leverage also needs to consider timing. If you bought a property in a first-tier city in China between 2000 and 2010, you must know this. For example, housing prices in Beijing have increased by 35 times in the past 30 years, while in Shanghai they have increased by about 50 times. As a result, the city where you were born basically determines your destiny and also determines how many quality properties you are likely to inherit in the future and how high a position you can reach in the company. Of course, who would have the courage to spend $10,000 or even $100 on a purchase in 1964? And how many people were willing to buy a house in Beijing in the early 2000s? At that time, housing prices seemed to be quite high, which was a huge amount for most ordinary families, and few people had the courage and courage to make such an investment. Therefore, although the levers of labor and capital have been proven to be effective levers over hundreds of years of history, they all have certain thresholds that require courage and boldness, as well as the permission of capital and labor. Just like in 2010, when it was widely believed that the price has peaked, do you still have the courage or basic market judgment to continue buying? Therefore, when going through different economic historical periods and business cycles, how to strengthen one's independent judgment ability and get rid of the recommendation of friends and family is crucial for a sophisticated investor. They must have the most basic financial literacy, master the right investment methods, and have certain macroeconomic knowledge to judge the economic cycle and real-time news to improve their independent judgment ability.
The third and fourth levers are similar in a way, they are code and content, respectively. First, let's get to the concept of ***. Many SaaS companies in the United States, including some infrastructure facilities of Amazon, Oracle, Cisco, etc., as well as some of our commonly used deal matching platforms, such as Teachable, have improved the efficiency of their companies through a set of algorithms and solutions.
These SaaS companies, and even some digital currency exchanges, or Bitcoin and Ethereum themselves, are made up of a set of **. These ** require a lot of foreshadowing and preparation in the early stage, and even in the zero-revenue stage, many SaaS companies will almost lose money in the early days to attract more customers to test the product and continuously improve the product to get more customer orders. Once the company grows at scale, the wealth effect of ** increases with scale because the marginal cost is low, because the cost tends to be close to zero, but the revenue can grow indefinitely. One of the most direct manifestations of this is that it can be reused in many companies, one of which is to power some B2B businesses. From another point of view, ** itself also provides the company with the opportunity to achieve capital leverage through acquisitions, so as to achieve better * company. As we've always mentioned, Alexhormozi's first pot of gold when he first started his business actually came by copying the GymLaunch model, where he taught these gym owners how to attract customers and fill their gyms through online channels, resulting in more than $100,000 or even $200,000 in revenue in the first month. He has almost sold this set of successfully proven models and ** through sales, providing a reusable solution for similar enterprises. Comparing the Forbes rich list decades or even a hundred years ago with the current rich list, we will find that the richest people a few decades ago, such as Rockefeller, Andrew Carnegie, George Baker and others, were almost all engaged in industry, including oil, steel, finance and other industries that require a lot of labor and capital. And today, almost all the ten richest people on the planet are upstarts in the Internet and ** fields, such as Elon Musk, Jeff Bezos, Bill Gates, etc., who are familiar to us, and they are actually a SaaS system behind them.
Another lever is content, which is a relatively easy concept to understand. Why did people like Timferris, Alexhormozi and even D**Eramsey start outputting their content on social platforms? They market through channels like YouTube, Instagram, and even Xiaohongshu, which is actually a way of doing content marketing.
In essence, through high-quality content output, with the help of the platform's algorithm, the content will be pushed to a wider audience, increase the degree of its own brand, improve the customer acquisition rate, expand the social circle, and expand the contact range of potential customers with themselves, so as to achieve exponential growth and growth, and finally achieve the growth of sales, word-of-mouth and brand effect. For small players, content creation and editing may start without a team, and a lot of things are done on their own. Your initial investment in content creation and customer acquisition costs are very low, and you almost only need to pay the time cost of what you do. Therefore, in the case of limited funds, I suggest that you seriously consider content entrepreneurship and content leverage, because I believe that after working in a large company or some large factories for a period of time, you must have accumulated your hard skills and knowledge that you can share. Once you keep iterating on your knowledge through lifelong learning, iterating on different products and technologies, such as the current AI era, it is possible to turn it into a more lucrative side hustle than your main business. Because content levers grab what people do most most, which is attention. Nobel laureate economist Herbert Simon pointed out that with the development of the information society, it is not the information itself that is valuable, but attention. Attention is the time you stay reading this article, the opportunity and time when the ad may appear. The amount of time you stay and keep when brushing short**. In this society, whoever can seize people's short attention span will be able to obtain higher business value and leverage wealth. Why has Kimkardashian become a billionaire? Why is every move of the Beckham family, every time they are dressed, imitated by the public, and even form a mature business chain? It's all because as long as you can grab attention, you'll be able to attract advertisers, as long as you're able to catch people's attention, like Google's 80% of its revenue in 2022 came from advertising revenue across various channels.
3. The biggest misunderstanding of ordinary people making money
One of the biggest misconceptions that the average person makes money about is that they need to do everything they need to do before actually starting a business, including setting up a corporate structure, hiring a lawyer, renting an office, creating a formal ** and logo, and so on. This practice actually validates a wrong way to start a business or side hustle. Andrewtate once said it well: "Build it before you legalize." The meaning of this phrase is that you should act before you start, rather than waiting for everything to be ready.
For example, let's say you want to do an e-commerce business**, engage in e-commerce or dropshipping. What should you do in the first place? The right thing to do is to understand the market demand first. Before looking for a merchant, build one and put on the shelves some products that you think might be a hot seller. When a customer places an order, this process is implemented through procurement to minimize the initial cost of setting up a business.
We have a lot of entrepreneurial teams and friends around us, who spent most of the year working tirelessly to make an application, but because the market demand is not clear, the market iteration speed is too fast, and the team division of labor is not good, and finally found that the user experience of the application is very poor, even inferior to a simple small program, and the result is almost no one**. In contrast, some small but elite teams may have only a few people, but can create a profitable product in a very short time with very little effort. This is because they start with market demand, rather than trying to create or validate demand. This misconception actually confirms the old saying, "Choice is more important than effort." ”
Fourth, the output multiplied by the leverage is the secret of your efficient wealth
In the past, learning was often seen as an end in itself. We cultivate habits through mechanical memory, starting with cramming education, which is gradually integrated into our work, thinking, and life. As a result, the skills we learn are often just for a specific exam or task, and lack the ability to reflect and draw inferences. As a result, what we learn, whether it's mathematics, foreign languages, literature, or other fields, is often not applied in everyday life, and we forget about it.
However, numerous studies have shown that knowledge, including Richard Feynman, can only be truly mastered if we export our understanding to others. This means that you only truly understand something if you are able to explain it clearly to others. If you can't explain something clearly to a fourth-grader, then you don't understand it well enough and it's still stuck in your short-term memory, taking up only a very small part of your brain's capacity (about 5% to 10%). Only through output and practice, can you apply the knowledge you have learned from books, ** and other channels to life, so as to exert a more efficient leverage effect.
Feynman was hailed as the "Great Explainer" and Bill Gates called him "the greatest teacher I've ever had" because he was always able to explain complex physics in the simplest of languages. Therefore, for the average person, there is a ladder of understanding knowledge: when we listen to others, we can only understand a small part of it (about 5%); Reading is more efficient than listening, and can understand more (about 10%); When we are able to combine sight and hearing, comprehension improves by up to 20%; When discussing with others, the comprehension ability is further improved, reaching 50%; When we put the knowledge into practice, we are able to understand it to a 75% degree; Eventually, when we pass on our knowledge to others, we are able to truly understand more than 90% of it.
Therefore, the output combined with the four levers that you have just learned is the secret to opening the door to happiness and prosperity in life. It's entirely possible to try to pass on what we've learned to our family members, partners, podcasts, etc. Another important principle is that "beginning is better than perfect", which means that it is more important to start moving than to wait until you are ready to start. Because theoretically, there is never a perfect time to start a new business, and there is never a moment to be the most prepared. It's only when you've started taking action that you can adjust your understanding of the market through user feedback, opinions, and data. Because our assumptions about the market are often incomplete, we can only have a chance to improve if we start to act and start adjusting quickly, otherwise all ideas are just illusions.