How much wealth do you think exists in the world?
Is it a trillion dollars?
How about 100 trillion dollars?
It's difficult to imagine, but the total amount of wealth has surpassed $464 trillion.
Think about that number for a moment, $464 trillion.
If we were to distribute that wealth equally among the 8 billion people that inhabit our
planet, each person would have a net worth of $58,000.
At first, this might not seem like a lot of money, but considering the fact that most
Americans can't even come up with a thousand dollars in case of an emergency, it starts
to appear like a reasonable amount.
The United States is the wealthiest country in the world, in fact, it's the wealthiest
country in human history.
However, even in this prosperous nation, 60 percent of people live paycheck to paycheck.
So, it raises the question: where exactly is the half a quadrillion dollars of wealth
hiding?
The problem isn't that there isn't enough money in the world, but rather that most people
simply don't understand how money works.
I went from barely paying my bills to becoming financially independent, and as I climbed
the economic ladder, I realized how my perspective on money changed.
When I say I was barely paying the bills, I mean I was renting a room and budgeting
every penny because otherwise, I would have been homeless or end up starving.
Even when I started earning over 100 times more money than I spent, I still found it
difficult to overcome the psychological barrier to start spending money.
But what I've realized is how my perspective on money has evolved over time.
I want to make it clear that I have never been lazy; I have always worked hard.
When I went to college, I graduated at the top of my class while working two jobs and
was determined to find a job at a large company when I graduate and climb the career ladder.
However, I discovered that's not how you get rich.
So, here are the seven biggest money secrets that keep the rich getting richer.
Money is nothing but information
Most people have the wrong idea about what money is.
They think that having a lot of money will make them rich.
While that is true to a certain extent, it's not entirely accurate.
Money is just information through which we exchange resources.
I like to bring up an example that Elon Musk once gave.
Imagine you are trapped on a tropical island with a trillion dollars.
You can't buy food with that money, and your trillion dollars won't protect you from the
wild animals that are there.
So, are you really rich or powerful?
The lion in the jungle doesn't care about your billion dollars; it will just eat you
alive.
In reality, money is a tool that measures your output and stores it in a database so
that you can conveniently exchange goods and services without engaging in barter.
Let's say you make delicious cookies.
If we want to avoid barter, we first need to measure how much your cookies are valued,
or in other words, how much people value your output.
When you start looking at money from that perspective, suddenly you realize that the
more you produce, the more money you can make.
This may sound logical and not like breaking news, but as they say, obvious things aren't
always obvious.
People are constantly looking for ways to make money.
Just go on YouTube and search for "10 ways to make money online," and you'll find videos
with millions of views.
Some of them have solid advice, but essentially, that's the wrong question to ask.
The question you should be asking is, "how can I maximize my output?"
When you view money from that perspective, you stop looking for easy ways to make money
online and start thinking about how to manage your time and resources in such a way that
you produce as much as possible, maximize your output.
and that takes us to the second idea which is focus on increasing your Output.**
The easiest way is of course to learn one specific skill such as accounting or law or
plumbing or making coffee.
Your output becomes the specific service or product you provide.
But the problem is that, we are restricted by time.
So the question you should be asking yourself is: how do I manage my resources better so
that i increase my output within the same time frame.
Let’s say you have a billion dollars: its easy to increase your output, you can just
buy a solid, reliable business and let it generate an X amount of output.
Lets say its a coffeeshop and your output is a certain number of delicious coffees.
But if that billion dollar is sitting somewhere doing nothing, then its a billion dollars
of useless money.
But lets say hypothetically that you don’t have a billion dollars.
I know that it could be difficult to imagine that, but lets just assume you are living
paycheck paycheck and you dont have a billion dollars.
Can you still have a coffee shop?
Of course you can, if you can allocate the resources you have effectively.
What do you need?
A place to make coffee, the equipment, a waiter, a barista good marketing strategy to attract
clients and an investor.
Let’s say this place rents for $120K a year, hiring 3 people would cost $150K and the rest
would cost another $100K which makes it a total of $370K.
And lets assume your coffee shop will make $500K a year which leaves you with a $130K
of profit.
So, what you are essentially doing is effectively allocating the resources.
You are deciding how to use and manage different things, like time, money, materials, and people
to create a better outcome.
Making more money is like playing a game where you have to figure out how to use your resources
in the most efficient way.
When you're good at resource allocation, you can accomplish more with what you have.
So instead of focusing on how to make more money, focus on increasing your output with
the resources that you have.
And that takes us to the next point: how do you raise your output?
The easiest way to increase your output is to learn a specific skill.
Let's say you know how to turn a bunch of wood into a table by investing your time and
skills.
While it may seem like a silly and obvious example, the reality is that this example
is no different from someone who is making millions of dollars.
In fact, the person making the chairs might actually end up making millions of dollars
by allocating his resources more effectively.
Instead of building the chairs himself, he hires people and provide them with the tools
to build the chairs, while finding a supplier that offers competitive prices for wood.
There are skills that can immediately increase your output, such as plumbing.
On the other hand, there are skills that may not immediately result in an output but help
you allocate your resources more effectively, such as managing your time better, learning
how to hire and manage people.
These skills that can help you go from being a designer to starting a design company, where
you have a team of designers working for you.
Public speaking can help you raise funds for your venture, leadership skills can help you
attract talented people to your team, and accounting skills can help you manage your
money more effectively.
Knowledge is important, but if you don't use that information frequently, you are likely
to forget it, just like everything you learned back in school.
However, if it's a skill that you practice often, it stays with you and continues to
maximize your productivity.
That's why rich people focus on building new skills.
Let's say you want to build a cool treehouse in your backyard.
You can allocate your capital by using your money to buy wood, nails, paint, and other
materials that you need.
You can spend a lot of time figuring out how to build it effectively, and if you become
really good at it, so that when your neighbor would want a similar cool treehouse, he might
be willing to pay you to teach him to build it faster instead of spending countless hours
figuring it out.
That becomes your output.
To increase your output even further, you can build the cool treehouse and sell it to
him.
If the entire town wants the same cool treehouse, you can maximize your output because there
is more demand for it.
If everyone wants the cool tree house by the new year’s eve which is in 2 weeks from
now, you simply don’t have the time to get it done in 2 weeks, however you still want
to exploit that opportunity so you decide to hire your friend john who will help you
to build the trees in exchange of sharing with him a portion of the profit.
Congratulation you have made yourself rich.
Now do that on a massive scale like in a country with 320 million people, you will earn a couple
of billion of dollars.
Congratulations, you are now a billionaire.
When you start looking at money from this perspective, suddenly your whole perspective
on money changes.
suddenly it makes sense why Elon Musk is worth 200 billion dollars while your uncle who is
complaining that his boss is not paying enough is poor.
rich people get richer because they don’t consume as much as they produce
How much do you think Elon Musk spends per month?
A million dollars?
Maybe 10 million?
Perhaps 20 million dollars?
He definitely spends a lot of money.
The fact that he flies private all the time already means that he spends tens of thousands
of dollars per flight.
But that's still a tiny fraction of what he produces.
When I hear people say that if they had as much money as Bill Gates or Elon Musk, they
would buy this or that, that's the difference.
Rich people don't just produce in order to consume.
They produce much more than they consume, and they keep producing even if they don't
end up consuming all of it.
There are so many people who passed away leaving behind dozens of billions of dollars.
Of course, there are different types of rich people, like the ones who inherited their
money, so they consume significantly more than they produce.
That's why 70% of families lose their fortunes by the second generation and 90% by the third
generation.
But I am talking about self-made people, not necessarily billionaires, but people who have
made at least a few million dollars.
Instead of buying expensive cars or luxury items, they choose to invest their money in
businesses or assets that can generate income over time.
So, they continue to produce wealth through their investments, which allows them to accumulate
more resources and become even richer.
And that takes us to the next point.
Don’t be motivated by money
The problem is that most poor people are motivated by money, and there's nothing wrong with that
because it's difficult to be motivated by anything else when you can't even put food
on the table.
However, if you operate solely from that perspective, you will increase your output only to meet
your consumption needs and not beyond.
If you want to get rich, you should be motivated to keep producing even if you don't want to
consume more.
Not being motivated by money doesn't mean you should not be making money.
You should be making money because your output is measured in money.
But the goal should not be to make money just for the sake of consumption.
You don’t want to make money to buy another Ferrari, or eat 6 times instead of 3 but rather
be able to produce more.
And as long rich people have that perspective and the poor have the perspective to produce
just in order to consume, the gap between the rich and the poor will be growing.
Especially when we have this thing called debt.
The rich use debt to increase their output.
For example, if they have a business that makes a million dollars a year, they can borrow
$200K and make 2 million dollars instead.
On the other hand, the poor person will borrow $50K to buy a nicer car, and now they have
to work more aka produce more because they are consuming more than they are producing.
embrace capitalism
Capitalism is not perfect and has many flaws, but it is the system we have.
The means of production in capitalism are land, labor, and capital.
Whoever controls the capital controls the system, which is why it is called capitalism
and not landism or laborism.
The entire system is designed to make the best use of capital.
For most of human history, even if you had all the gold in the world, there wasn't much
you could do with that capital.
You could build an army, invade a neighboring country, and exploit their resources, but
it was a risky bet that few dared to attempt such as Kings.
However, today we have built the entire economy around the idea that as long as you have capital,
it can be effectively used in the economy to generate production.
This is why we have the stock market, bond market, and real estate market.
The purpose of the stock market is to connect those who need capital with those who have
capital.
We have even created companies like Vanguard S&P 500 index fund that invest in the safest
companies in the market, generating a decent return.
That is why learning how to invest, especially in the stock market, is one of the best ways
to maximize your output.
There is literally not a single millionaire and a billionaire, probably in the entire
world who doesn’t actively invests his money.
If you want to learn more about the stock market, checkout the links to the videos that
explain how the stock market works and how to start investing.
Thats it for today.
If you guys enjoyed this video, make sure to smash the like buttom and I will see you
in the next one.