The Pareto Principle recognizes that only a few inputs (about 20%) determine the majority of the outcomes (about 80%). Richard Koch used this simple idea to hack his exam prep and ace his finals when he was at Oxford. I use it to boost traffic on Wealest.com. What will you do with it?
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Albert Einstein once called compound interest the most powerful force in the universe. When applied to your finances, compound interest will certainly make you rich. But most people don’t know it can also make you smarter, and more connected with the people you love, and more comfortable in business.
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Naval Ravikant has a great quote that says what you work on and who you work with is far more important than how hard you work. The extension of this is that you want to work in areas where you have an obvious advantage. Why? To avoid getting wiped out. You want to avoid losing everything and starting again from zero. The Kelly Criterion is a simple mental hook to remind you not to risk everything in one go.
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To build wealth, you need to believe you are capable of doing it. This belief isn’t trivial. Only those who are convinced they can create wealth for themselves and their family will do it. You need the right mindset for the long haul. Naval Ravikant has a useful model for this: rational optimism. If you want to create wealth, it will be easier if you become a rational optimist.
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If there exists a single "secret" to wealth creation, this is it:
You must own *equity* to get rich.
What Is Equity?
Equity is just a fancy word for owning a piece of a business. You can get equity in a few different ways:
You can own equity in a business that you start.
You can own equity by buying a piece of a publicly-traded company (a stock) on the open market.
You can own equity in a start-up company that you invest in privately (via Angel.co, for example).
You can own equity in a product or a piece of intellectual property (IP) like a book, script, or other artwork.
The internet gives everyone with a WiFi connection the opportunity to catapult themselves into soloprenuers (solo + entrepreneurs). These are creators who leverage ever-cheaper software, digital infrastructure, and creative tools to build monster businesses on the backs of their audiences. The most critical part of building a solopreneur business is authenticity. People will ONLY buy from you if they trust you. And authenticity is the backbone of trust.
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Smart people talk themselves out of potentially life-changing opportunities all the time because they try to eliminate risk. I know this because I’m one of them. I’m constantly inverting opportunities to see how they could blow up in my face… and then I often pass. But, no matter how much analysis you do, there is no reward without risk. Nothing comes for free.
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Most people want to talk about their best day. The day they made a bunch of money, launched their business, or replaced their income with their side hustle. And it’s incredibly important to celebrate these victories. But what these winners don’t talk about is what they did on their worst day. This is the day that matters the most because their story didn’t end. They survived to keep playing the game.
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The ability to produce and scale media online has created an unprecedented opportunity for non-technical "creatives" (writers, artists, performers, visual designers, etc.) to build and monetize an audience. For the average person, this is the most accessible path to wealth creation in their 20s, 30s, and 40s.
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Take a moment and think about the last three products (or services) you bought that you were really pleased with - either physical or digital. Now, think of all the pleasure and joy you’ve gotten out of your products. Ask yourself: would you have paid 5% more for any of these products you’ve enjoyed? How about 10% more? For me, the answer is yes. If the answer is yes for you, then you, the customer, is the winner of all these sales transactions! In ethical sales, the customer is the biggest winner.
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