I recently had the pleasure of sitting down with Josh Cadorette for an episode of his podcast, Building Out Loud. We discuss creating a personal definition of wealth, learning from mental models, and building leverage online. Enjoy!
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Nassim Nicholas Taleb, in his book, The Black Swan: The Impact of the Highly Improbable (Incerto), tells us that a scalable profession is one “in which you are not paid by the hour and thus subject to the limitations of the amount of your labor.” In other words, the input of your labor is disconnected from the output. If you want to get rich, work in a scalable profession.
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What you work on matters far more than how hard you work. At the same time, how long you work on something depends almost entirely on the amount of time you have to do it. That is Parkinson’s Law. And if you are going to get rich working moderately hard, you need to know about it.
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It is possible to save and invest your way to wealth. Over the long term (30-40 years), with consistent investing, you can likely build a retirement fund large enough to live off once you turn 65. But, if you want to do it faster than that, you can’t save your way there. Instead, you have to spend money to save time in the pursuit of wealth creation.
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A challenge network is a group of people in your life who provide you with radical transparency and feedback to help you improve.
Growth and change are uncomfortable. Most people will not lean into discomfort on their own - they need a push. That's what a challenge network does. It pushes you in the right direction when you don't want to push yourself.
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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.