If you want to get wealthy, you have to create value AND expose yourself to the upside of the value you create.

Most people who work a 9-5 job create value in their position. But they’re usually not paid proportionally to the value they create. If they were, the employer wouldn’t make any money off the employee and the work they do.

The key to wealth is simple: create value, then capture it.

To Create Value, Do Things Other People Can’t Do.

Entrepreneur and visual designer Jack Butcher has a great thread on what it means to create value. There are a few ways to do it, but the one that will make you the most money is by doing things other people can’t do.

As Elon Musk says: “You get paid in direct proportion to the difficulty of problems you solve.”

This is one reason why I’m so drawn to writing and producing film and TV. It’s really hard. Not many people can write hundreds of pages of emotionally engaging, well-structured, entertaining stories that are also commercially viable AND then get those stories sold, produced, distributed, and profitable. Those that can get paid very well - both up-front and on the back end with what are called residuals.

The harder and more complicated the problem, the more money you’ll make for solving it.

To Create Value, Escape Competition Entirely.

But if we want to get wealthy, we have to go one step further.

I’m not just focused on writing and producing all kinds of film and TV. I’m focused only on comedy. It’s the genre that matches my sensibilities, and it’s what I like to watch. So now I’m not competing against all TV and film writers. I’m only competing with those who write comedy.

And the more ultra-specific you can get on the problem you solve, the fewer competitors you have and the more money you make.

The ultimate goal is not to create a small pool of competitors. The goal is to eliminate competition.

See, writing comedy is highly creative and very subjective. The storylines, characters, and comedic situations that my writing partner (who is also my wife) and I come up with are totally unique to us. We are using our judgment to make subjective decisions about what we think works and doesn’t work. What we think is funny and what isn’t.

We could hand our best idea to 1,000 different people and not one of them would come back with a script even remotely similar to ours. And that means we aren’t competing with any of them.

Writing comedy is so subjective, my wife and I have escaped competition entirely.

And that’s the whole point. You want to use your unique sensibility and judgment to escape all competition. As Naval Ravikant says: “Escape competition through authenticity.”

This is your goal. And you achieve it through solving highly difficult problems that come down to the quality of your judgment.

To Create Value, Use Your Judgement.

Any success my wife and I will have will come down to the creative decisions we make. It will come down to our judgment about what works and what doesn’t work in terms of the commercial viability of our idea and execution.

And if we make the right decisions - the decisions that get a script sold, produced, distributed, and profitable - we will get paid very well for it.

Here’s Naval Ravikant talking about the importance of judgment in getting paid by the market:

“Decision-making is everything. In fact, someone who makes decisions right 80 percent of the time instead of 70 percent of the time will be valued and compensated in the market hundreds of times more. I think people have a hard time understanding a fundamental fact of leverage. If I manage $1 billion and I’m right 10 percent more often than somebody else, my decision-making creates $100 million worth of value on a judgment call. With modern technology and large workforces and capital, our decisions are leveraged more and more.”

In an industry like film and TV - which uses all the forms of leverage: capital, code, media, and labor - you ultimately get paid for your judgment. You get paid for the highly creative and subjective decisions you make about what projects to write and pitch to the market.

Creating Value Isn’t Enough. You Must Capture it.

But to get wealthy, you can’t just create value. Most people who work a 9-5 job create value. They are just exchanging that value for a steady income.

To get rich, you must capture the (uncapped) upside of the value you create.

Here’s Derek Sivers talking about this in his book How To Live:

“The world is full of money. There’s no shortage. So capture the value you create. Charge for what you do. It’s unsustainable to create value without asking anything in return. Remember that many people like to pay. The more something costs, the more people value it. By charging more, you’re actually helping them use it and appreciate it. Charge more than is comfortable to your current self-image. Value yourself higher, then rise to fit this valuation.”

The only way to capture the upside of what you create is to own equity in the business or project. You must own a piece of the pie so that as the pie gets bigger, the amount of money you make gets bigger too.

But remember - when you own the upside, you own the downside as well. That’s the risk most people are unwilling to make.

So, create value, own equity, and reap the rewards. There’s lots of money out there. Go and get some.

Thanks for reading.

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ARTICLE SOURCES

Derek Sivers. How to Live. Hit Media. Kindle Edition.

Jorgenson, Eric. The Almanack of Naval Ravikant: A Guide to Wealth and Happiness. Magrathea Publishing. Kindle Edition.