This article shares a few observations about creating wealth. These seven principles also fall squarely into the category of things I wish I’d known sooner. Perhaps, by reading them now, you will know them sooner – and find them useful to position yourself to create wealth over your lifetime.
PRINCIPLE #1 – The further you get from the actual work, the more money you will make.
To illustrate this principle, consider the hierarchy of wealth potential across various roles within the construction industry. Imagine we…
- Dig a ditch with a shovel.
- Manage a crew of four people digging ditches with shovels.
- Operate a bulldozer or a backhoe to dig ditches.
- Supervise teams of people as a manager or Vice President at the company that manufactures bulldozers.
- Oversee the entire corporate strategy as the President of the company that manufactures bulldozers.
- Own the company that manufactures bulldozers.
- Allocate financial resources as an investor in the company that manufactures bulldozers (and other companies as well).
Apart from the last two, we can clearly see the increasing pay scale as we move down the list.1 Why is that?
PRINCIPLE #2 – The greater the duration in time between your thinking/planning/decisions and the outcomes, the more money you stand to make.
Digging a ditch with a shovel produces initial results in minutes. I should start digging here. Dig.
Deciding where to dig, how deep to dig, and along what path, requires planning, with results measured in days or weeks.
Marshaling the tools, equipment, people, coordination, and regulatory compliance yields results in months, possibly years.
High-level strategic thinking to create and finance projects like roads, buildings and dams that require some digging produces results after several years.
Deciding how to deploy capital (asset allocation) based on future customer needs, expected industry trends, and a viewpoint of future macroeconomics might involve a 10-year investment thesis.
Here’s the progression…
- Individual Contributor
- Project Manager
- Team Leader
- Manager
- Vice President
- Entrepreneur / Creator / Systems Builder (Cash Generator / Wealth Creation)
- Capital Allocator
Of course, there’s an important caveat: around steps 6 and 7, it’s not just about taking action – it’s about being right. Right in your assumptions, right in your execution. And you may not fully know the outcome’s success for years. The feedback loop at these stages is slow and uncertain, making judgment (and patience) essential. The potential rewards are therefore significant and somewhat commensurate with the risk taken, because the downside can also be substantial.
PRINCIPLE #3 – The more you leverage skills, systems, assets, and capital to scale, the more money you will make.
Wealth builds faster when you can amplify your impact by leveraging people, technology, intellectual property, and/or capital. The more scalable your model, the more wealth is generated as output with each unit of input.
Corollary: The same leverage that builds wealth can also destroy it – quickly.
PRINCIPLE #4 – The greater your network and relationships, the more money you will make.
Relationships create opportunities – deals, partnerships, talent, strategic insights, expertise, etc.
The opportunity set in front of you is something like the size of your network squared.
Opportunities = ~(Network)²
Consequently, there’s a significant difference between the opportunity set of a 25-person network (Opportunity Score = 625) and a 200-person network (Opportunity Score = 40,000).
PRINCIPLE #5 – The more asymmetric your bets, the more money you stand to make.
Wealth is often built from skewed, nonlinear outcomes – businesses that scale, investments with outsized potential, intellectual property creation, or ideas that create new categories.
Continually look for opportunities where risking $X provides the potential to make $10X. A few high-conviction, asymmetric bets might lead to extraordinary returns. These opportunities can be difficult to find, especially in efficient markets, but they do exist.
The reverse strategy is continually chasing small wins while hoping a massive risk does not catch up to you (even if it has a low probability). This model is akin to picking up pennies in front of a steamroller. Bet on the steamroller.
PRINCIPLE #6 – The more you invest in yourself, the more money you will make.
Read. A lot.
PRINCIPLE #7 – The quicker you put your money to work through ownership of appreciating assets, the more money you will make.
As you progress through the stages outlined in PRINCIPLE #2 above (perhaps skipping a few along the way), aim to acquire ownership in appreciating assets that scale and outpace inflation (like corporate equity, real estate, and intellectual property), especially in your youth and early career. Though it requires discipline and delayed gratification, owning appreciating assets accelerates the shift in how you spend your time – from individual contributor efforts into investor / capital allocator strategic decisions.
As a capital allocator, you are not making money with your time. You are making money with your money.
When your money consistently earns more than you do with your time, this is effectively the definition of retired… except you’ll still “work”, just not primarily for a paycheck. You’ll work on those things that are most interesting to you, whether they make money or not… because you can.
Caveat – It Isn’t All About Money
Financial wealth is a powerful tool. It can buy time, reduce stress, and expand options. But the deeper forms of wealth – relationships, health, purpose, peace of mind, service to others, joy, wonder, and gratitude – are what give life its richness and meaning. Be careful not to prioritize financial wealth at the expense of the life assets that matter most.
The allure of financial wealth sometimes clouds a broader, more fulfilling life vision.
This is where it becomes essential to periodically monitor the allocation of your time – your most precious asset – to ensure it reflects not only your pursuit of financial wealth, but also the deeper forms of wealth that give life its meaning.
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FOOTNOTES:
My husband was the one who wanted and has developed into top leadership. I think it sometimes baffles him that I don’t. I’m constantly reading, learning and teaching med students, docs, nurses etc. I have absolutely no desire to manage. I’ve developed programming…..for my patients and myself. I developed the first endoscopic program in Tulsa for my profession. I love advancing science. I hate managing people. Happy to clock in….see my patients….then go home. My short stint in management was torture to me. Can I do it? Yes. Do I want to? Not a chance in hell. I want to see patients not sit in meetings.
I agree whole heartedly with you that work and success whether it is a one man/one woman show or a giant cooperation is a good virtue and impressive to others, but in my experience the real success in life is to not only better my families’ situation but many others along the way. How is this done? Being available, helpful and caring toward others whether it’s a listening ear, a helping hand, education or financial. These things have been very beneficial to my mental health as well as helpful to others. PAY IT FORWARD
Enjoyed this as always!
A good high level synopsis of good financial advices for those young in their career (like me). I was lucky to have parents and an education that taught me a lot about this sort of thing early on, and in all honesty i think most people are generally knowledgeable about the concepts outlined here; Putting the ideas into more actionable practice i think is what most tend to struggle with more.