38 Weeks to Get Rich
Welcome to the “38 Weeks to Get Rich”, where each week we’ll break down a section from Naval’s iconic tweetstorm and interviews on the topics of wealth, freedom, money, status, and happiness.
The full PDF is available here.
What follows is my summary & key takeaways to help you digest the 127 page document.
Week 6: You Won’t Get Rich Renting Out Your Time
You won’t get rich renting out your time, because you can’t earn non-linearly.
You won’t get rich trading your time for money.
The biggest reason is because you can’t earn non-linearly (exponentially). When you get paid by the hour, and even when you’re salaried, your inputs (hours worked) are very closely tied to your outputs (paycheck). Even in high paying jobs like a lawyer or doctor, you still only get paid for when you’re working.
So, when you’re sleeping, you’re not earning. When you’re retired, you’re not earning. When you’re on vacation, you’re not earning. And you aren’t able to earn exponentially.
If you look at the doctors and lawyers that are really wealthy, it isn’t because of their hourly-rate; it’s because they own the practice. And when you own the business, you aren’t just earning for your time, you are also earning a little from every person that works for you. That’s earning non-linearly. You’re not just earning on your time–you’re earning from other peoples time. And if you retire or go on an extended vacation, those employees at your law office still earn you income.
You need to own equity, a piece of the business to gain your financial freedom.
Renting out your time means you’re essentially replaceable.
Typically, when you get hired for a job the employer pays you to perform a service or task. And more often than not, that task is learnable, repeatable, and doesn’t require much creativity. Which means that someone else could get taught and could replace you. Or a robot or AI could do it better/cheaper without ever calling in sick.
You want a career where your inputs don’t match your outputs.
In addition to having ownership (stock, equity, intellectual property, etc.) you also want to do work where the time spent doesn’t directly match the value produced.
Software engineering is a great example.
Tina could work for a year during her nights and weekends to create the next AngryBirds, Minecraft, or Slack. And in doing so create a product with a billion dollars.
Bob could work for that same measure of time and build an app that only his mom and roommate ever download. A year of hard work pays out only two dollars.
That’s an example of a profession where the input (hours worked) and outputs (payment) are highly disconnected.
The opposite example might include lumberjacks. Think about a lumberjack that only has an ax; not any heavy machinery. His inputs and outputs are very closely linked. Even if he’s a really good lumberjack there’s a limit to how many trees you can cut down in an hour. He could never earn more than that when you’re being paid per tree.
Use leverage to disconnect inputs and outputs.
What if that lumberjack went out and bought a bulldozer and professional, hi-tech, high powered equipment? Now all of a sudden, that same hour of time cuts down far more trees. He’s still limited if it’s just himself, but there’s a huge difference between the payout for one hour of work.
If that Lumberjack hires a team of people to work the machine, he’s now using equipment as a form of leverage, and employees as an additional form of leverage. Now, his input (time) and output (money) is even more disconnected. He’s making way more money during one hour of time.
Even if you can’t switch careers or professions, there are still ways for you to use leverage and creativity to disconnect your output (pay) and your input (hours worked).
Next week we’ll cover addictive lifestyles and narcotics in the section, “Live Below Your Means for Freedom”.
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