How To Build Wealth Like Billionaires
How To Build Wealth Like Billionaires
It's Not Just About Making Money (6 min read)
Throughout my life, I've been influenced by many people who have different views on wealth creation.
The definition of wealth from Oxford is “having an abundance valuable possessions or money”.
But I’ve seen many people who make 6, 7, and 8 figures and beyond either quit, go back to zero, feel sorry for themselves and are still unhappy.
Looking back again at the definition, I discovered one thing.
The word that stood out for me, and probably for many readers, was “abundance”, "money", and “possessions.”
I went on to look up the definition of wealth again from a different source. This time, Merriam-Webster - “the meaning of wealth is the abundance of valuable material possessions or resources.”
The second definition opened up my mind.
The word money is being replaced by resources, and I think that resources are the ultimate key for anyone who wants to build wealth.
Studying wealth and wealthy people
Reading all textbooks on science, math, technology, and business does not guarantee wealth.
In order to study wealth, you must study from wealthy people.
Study what they did in the past.
Study what they did on the way up to building wealth.
If you're lucky, get direct experience from hanging out with them and talking to them.
You can do these things by reading autobiographies, watching video recordings, or gaining direct experience from hanging out with wealthy people.
One mistake people make when studying wealthy people is focusing solely on what they do now that they are already wealthy.
Instead, you should study their materials from when they were on their way up.
Study the mistakes they made, the major decisions they took, their daily habits, and you can gain valuable insights into how they got their wealth.
Understanding Money
Let’s start with the topic of money - it’s useful to understand money thoroughly because it’s one of the primary objects that you interact with on the way to build wealth.
Let’s dive into economics and understand the principles of money.
Money existed in the following forms:
As a medium of transaction: people use money to exchange goods and services
As wealth storage: people store money to justify wealth.
As a unit of measurement: It is much easier to measure 1 dollar against 100 dollars than it is to measure 1 apple against 1 car.
Of the 3 forms, the most important is the first one - money is only useful when it’s being used.
If you keep your money stored, it will become worthless.
$1,000 can buy you an iPhone today, but it may not be enough to buy your kids groceries 100 years from now due to inflation.
That means saving your last penny isn’t going to make you wealthy.
Making Money vs. Creating Wealth
If there's one thing I've learned over time, it's that building wealth and making money are completely different things.
Society blurs the lines between the two, but let me draw a distinction from here.
Making money refers to spending your time and skills in exchange for wages.
Building wealth, however, requires shifting your perspective away from trading your time earning money, and towards leveraging resources to build assets in your life and businesses.
These assets often worth more than money - like businesses, robots, and real estates.
Being wealthy means a lot more than just making $1 million a year in income, even though that’s a lot of accomplishment for many people.
Being wealthy also refers to the quality of your health, relationships, networks, personal well-being, and many other factors.
Hustling for that next paycheck can make you feel accomplished, but does it contribute to your wealth if you sell cocaine? Or if you're earning $1 million with a body full of health issues, would that be an addition to your wealth?
In order to understand wealth creation, we will step aside from the hustling mindset and step into the billion-dollar mindset.
We will assign the billionaire group as wealthy individuals (feel free to prove me wrong).
There are around 2,640 billionaires in this world.
If you’re in this group, you’re in the top 0.0000334% of the world population.
There must be something that these billionaires do that 99.99% others don’t do.
And one of the clearest things they do is that they understand leverage.
Doing business or Owning a Business
The CEO of Apple, Tim Cook, earned a salary of $3 million in 2022. Warren Buffett, the 3rd largest shareholder, earned $832 million from Apple's dividends without doing anything for the whole year (dividend: a distribution, or passive income, from owning a stake in a business).
Simply put, billionaires like Warren Buffett don’t focus on running businesses like CEOs but on owning the businesses that work for them.
It's the ownership of resources that matters most.
When you own a business, you own the resources that the entity possesses. The building, labor force, office desks, kitchen, deals flow, contracts, and many others.
You make major decisions about what to do.
You attract other talents and capital in the market.
These things allow you to build other businesses and create wealth much faster.
My College Boss Who Ran The Show
Like many of us, I’ve been involved in a lot of random businesses.
I’ve got to work for many great bosses and great workplaces throughout my career.
I've tutored thousands of students across the world.
I’ve done business with many entrepreneurs and exchanged a lot of values with them.
For instance, during my time as a tutor in college, I was part of a leverage system.
My supervisor employed over 50 tutors, including myself, to help thousands of students across campuses.
Fun fact: she couldn't tutor any college courses, but she was great at hiring great tutors and running a successful tutoring program.
She has full control and ownership of the program.
The key to creating wealth surprised me when I realized the value of owning a business system.
Consider this: if you're working at a job – essentially, you're trading your time for money.
Now flip the script.
Instead of trading your time working for a business, you own the business, spend less time working, and have it generating results for you.
How unfair?
This means giving up on being a one-man show and being the owner of the resources available (people, money, systems, etc.).
4 Different Leverages To Build Wealth
Leverages exist in 4 different forms.
Labor: Historically, the first form of leverage was used by kings and emperors during times like the Roman Empire and Chinese dynasties. The kings and queens leveraged labor forces, where workers performed assigned tasks, thus generating wealth for the kingdom.
Capital: Introduced as a new form of leverage during the Industrial Revolution. Business magnates, such as the Rockefellers, Warren Buffett, and Charlie Munger, leveraged capital and other people's money to build wealth. Their skilled allocation of capital also facilitated wealth creation for others.
Technology: An emerging form of leverage in the internet era, with code and media as the primary components. The backend code, once set up, can generate returns repeatedly without incurring additional costs. Bill Gates' creation of Microsoft Windows is a prime example of leveraging code to create immense wealth.
Media: The face of code. Media is a powerful form of leverage in the digital age. People like Joe Rogan, Mr. Beast, and the Kardashians have exploited their media influence to generate significant wealth.
One person who’s leveraging these 4 tools supremely well is Elon Musk, one of the most innovative businessmen on Earth.
Labor: Elon surrounds himself with other exceptional skills and talents to build Space X and Tesla.
Capital: Elon has raised all money from the US government, Morgan Stanley, Bank of America, and many billion dollars in institutions to build his dream. You may not pick up his phone call, but all banks do.
Technology: Tesla factories across the world are 75 percent automated.
Media: Elon owns Twitter, on Twitter, and has the most followers on Twitter, and he’s doing much major news frequently throughout the year to promote his brand and businesses.
You can argue that it’s a stressful life to live but consider the wealth the person is creating for himself and other people in his inner circle.
Artificial Intelligence - The 5th Leverage in Future Wealth Creation
As for what the future holds, artificial intelligence is the next wave of leverage, or it may have already arrived, and business people have figured it out.
That means two things:
It means you have the option to capitalize on the technology to build wealth for yourself.
Wealthy individuals will use AI as a fifth leveraging tool for themselves. They’ll take everything at their disposal to build the wealth they want.
The more leverages you learn to use, the more you are better off.
In essence, wealth creation is a combination of skill acquisition.
You acquire skills in working with people, capital, technology, and perhaps artificial intelligence.
Leverage everything that you can use to multiply your outputs, and you will slowly accumulate wealth around you.
Key Takeaways
Wealth is More Than Money: Wealth isn't just about having lots of money. It's about having invaluable resources and knowing how to use them. It also means having good health, strong relationships, and a good life.
Learn from wealthy people: If you want to be wealthy, at least learn from people who are wealthy. Focus on what they did to become wealthy, not just what they do now.
Owning vs Running a Business: It's better to own a business than to run one. As an owner, you control all the resources and can make them work for you.
4 Ways to Build Wealth: There are four main ways to build wealth: by getting other people to work for you (labor), using other people's money (capital), using technology, and using the media.