A lot of you say you want to get rich, but what you really want is wealth. Here are 3 ways you can chase wealth instead.
You know that moment in Aladdin when he first meets the Genie? Genie meets Aladdin, and he’s surprised. Aladdin is not the usual kind of guy who gets a hold of this lamp.
I know a lot of you say you want to be rich, but what you really want is wealth. Here’s why you need to get wealthy instead of rich, and here’s how to actually do it.
What is wealth?
Let’s get this straight. Everyone talks about wanting money, but that’s not all there is to it.
If wealth is the important thing, why does everyone talk about making money? It’s kind of a shorthand. Money is a way of moving wealth. In practice, they are usually interchangeable, but they are not the same thing. Unless you plan on getting rich by counterfeiting, talking about making money can make it harder to understand how to make money.
Philosopher Alan Watts once said, “[Money] just isn’t real at all because it has the same relationship to real wealth — that is to say, to actual goods and services — that words have to meaning, that words have to the physical world. And as words are not the physical world, money is not wealth. It only is an accounting of available energy, economic energy.”
Money is not wealth. It’s just really a big integer in a row locked SQL database someplace owned by a bank, sitting in a server farm somewhere in the world.
As Paul Graham says, “Don’t get hung up by the money. It only represents wealth.”
If you’re focused on the money, you’re going to get stuck as a cog in the machine. You’ll end up focused on that next promotion or the trappings of upward mobility. What is far more valuable is to create and own that engine, not just be a small piece in it.
Focus on the skills, not looking like you have them
Now that the money myth is dispelled, let’s get into how to create wealth. The answer is skills. People get hung up here and try hard to look like they have skills, instead of actually having them.
Being an engineer, designer or product person is the easiest way to be a craftsperson in modern society. These are the next generation construction workers of our era and the future. These are the roles that are the closest to the actual creation of the product.
When I first started working, I was really excited to get a job. I remember when I was growing up, our family didn’t have a lot of money — at times, I know my parents were really worried about putting food on the table and barely making rent. Sometimes, dinner was just a slice of bread dipped in milk. At 14, I started cold-calling because I wanted to help my parents and our family. I cold-called the internet section in the Yellow Pages.
This is me in 1995. I got my first job at the age of 14. It set me on the path that I’m on now — design coding, product management, marketing, branding… I learned to build my craft. One thing to keep in mind is that not all skills are valued at the same price.
Dennis Rodman started his first job as a janitor at an airport at the age of 18. Now, janitors are really important and needed, but there are a lot of people who can do that job. While there’s plenty of demand, there’s also a lot of supply because it doesn’t require specialized skills to do it. Rodman was lucky. He had a huge growth spurt and gave basketball a chance in college. In return, basketball gave him a chance. He ended up being drafted 27th overall in the NBA Draft by the Detroit Pistons and became a Hall of Fame basketball player. How? Rodman developed a skill nobody else had — rebounding at an extreme level. That won his teams five NBA championships — five rings! He made himself extremely valuable.
Remember not all skills are valued at the same price. If you can do things nobody else can do, you’ll have skills that are literally priceless. This is one of the more brutal facts of capitalism. Venkatesh Rao says, “You’re either above the API or below the API.” API stands for application protocol interface. It’s how programs talk to each other, and now, it’s programs that are governing all aspects of how humans transact business and operate with one another.
As a driver for Uber, you end up having to follow the directions of the app, which means you have to work below the API. It’s useful to society, but because there are a lot of other people who can drive too, you aren’t using special skills. If you create Uber and own it, you’re above the API, and you get to build and maintain the systems that give people what they want.
So, what is most useful is acquiring skills that nobody else has, especially in combinations that are rare. If you can rebound the ball and nobody else does it quite the way you can, you can be a Hall of Fame basketball player. This applies to all the things in your career and in life.
I get approached by a lot of people who want to raise money for their startup. Investors are looking for founders who actually have the skills necessary to build that dream. Why? It’s straightforward.
If I give money to a founder who doesn’t have the skills, they’re going to lose against the people who have the real skills. That’s why it’s so important for people to work on those skills before they raise money and before they start on their startup. This is also why good investors look at the skills of the founders and the teams they fund, not just the credentials. Investors get tricked by credentials all the time, and they lose money when they only look at the credentials in the resume and can’t tell if someone is actually good.
All of these things point to the same place: the best way to look like a good startup is to actually be a good startup. It’s better to be able to build and have the skills of the craftsperson and a manager than to look like one.
Look for leverage, don’t just sell your time
The next big principle is that you have to transcend your constraints as a limited human being. Most importantly, this means getting leverage on your time. Apple started almost by accident.
Here’s Steve Jobs talking about how the company started:
They were making computers for their friends, and then it took more and more time to create them, so they looked to create a company to save time.
Naval Ravikant says, “Wealth is about positive-sum games.” It’s about getting out of the finite games, like selling your time. When I got my first job — cold-calling the Yellow Pages — I was happy getting paid $7 per hour, then $10, then $20 an hour to write code. What I wish I knew earlier was that I have a really finite number of hours in the day and in my life. You can get to 60 or 70 hours per week of work, but beyond that, you run out. If you make a product that can make money for you while you sleep, that’s leverage.
In my Microsoft days, I got into a cycle where my employer was buying my time, and working there was tiring. It didn’t feel fulfilling the way I wanted it to, and with the money I earned, I’d turn around and consume. I’d go buy a new shirt at Banana Republic or a nice martini at the martini bar down the street from my nice apartment downtown. I paid a lot of money to make myself feel better. I was stuck in a consumptive mode. Someone was buying my time, and I was using the money that I got from that to buy things I didn’t need that, in some way, made me feel like something was happening. In reality, I wasn’t feeding my soul. I wasn’t creating.
You can be a creator instead of a consumer. Most people are looking to mainly just make themselves happy by fulfilling various perceived wants that they think they have, but to be truly fulfilled, I now realize you have to generate and create. The path to wealth is through making others happy: make products; find leverage; and solve their problems.
Creating a wealth machine by solving other people’s problems
I want you to visualize this as a concept: a wealth machine. You put money in, turn the crank, and that machine spits out more money than what you started with. A machine like that is incredibly valuable because you can take the money that comes out and feed it back in. You can reinvest that money to create wealth — that’s a wealth engine.
A wealth machine is different because it provides both money and wealth. This is in contrast to a get-rich-quick scheme, which provides you money but no way to get more. There’s no wealth; these are one-time things. Remember Lamborghinis can be bought with money, but they can’t actually be converted into even more money — it’s money without wealth. If you have a business transaction that is a one-time thing that you can’t repeat, that’s money without wealth.
There’s also live action role-play — people who play start-up — and that’s when you can’t make any money, can’t have any wealth. These are a waste of time.
Usually, what happens is: you hire a bunch of people; you spend a bunch of money; and it’s all a waste. Investments are supposed to pay back, and wasting money, by definition, doesn’t pay you anything back. A special form of this is when startups decide to sell $20 bills for $10 or even give them away for free. You’ve got to be careful of those.
A truly great startup has both money and wealth. Money goes in; it can be reinvested; and you get back not just more money but also more of the thing that makes the money — that’s wealth.
You can couple this capital virtuous cycle with two others, talent and customers. The more talented your team is the more likely more talented people will come to work with you. When customers and users love you, they tell everyone else who could possibly use you that they should. That’s another virtuous cycle — more customers. All of that together allows you to raise more money to put that back into the machine. That’s what product market fit is.
That’s the key to this whole startup thing: three virtuous cycles working altogether — talent, customers and capital.
Don’t focus on the money. Focus on the wealth, the thing that people want, the problem and the solution.