Hard Work WON’T Make You Rich

The notion that hard work makes you rich is asinine. It matters far more what you work on rather than how hard you work.

If hard work doesn't make you rich then what does? Do you still have to work hard? How do you get rich if not by hard work?

That's what we'll go over in today's post.

Why hard work doesn't make you rich

The opportunity vehicle you pursue matters infinitely more than how hard you work.

The guy who owns the corner store works harder than most people, but the pay is not proportional to the magnitude of work. Some guy has bought crypto and profited hundreds of thousands because of a few clicks.

The opportunity vehicle dictates the pay, not subjective difficulty.

Many people live paycheck to paycheck, even when that paycheck is huge. The culprit is lifestyle inflation. As they get more money they spend more money proportionally.

They decide to eat out more, start payments for an expensive car, and buy more things.

Did their need for those items change? No, their spending power did. If as soon as your spending power increases you proportionally use more, you’ll never have a significant amount of money.

Wealth is the ratio between income and expenses. When you get the pay raise, if you spend the same or even less than before you’ve become wealthier.

But because of lifestyle inflation, most people lose wealth after a pay raise.

What makes you rich

If you are looking to get wealthy you need leverage. Leverage is a force multiplier on work. Leverage is the disconnect between your inputs and your outputs.

As Buffett said in the prior quote “You need to find a way to make money while you sleep”. You also can’t get rich renting out your time. Even doctors and lawyers aren’t actually rich, the rich ones opened up their own practice.

What does this tell you? It means the idea that society pushes to “get a good job” and after all your problems will be solved is a lie.

The people who make real money are mostly entrepreneurs or investors. You need equity.

The people who get rich off their “good job” become entrepreneurs with their specific knowledge.

Equity gives you the opportunity to make non-linear returns. Employment gives you the safety and security of a “stable” linear income.

The entrepreneur(s) employing you still take the risk, and the “stability” is an illusion. It’s not stable, if the entrepreneur goes under you lose your income source, and you’re at the discretion of the chain of command in the business; you could be fired at any moment.

There is no real stability in life, but people latch onto the illusion of safety a paycheck provides.

You’ll never save yourself rich either unless you choose to live with next to 0 expenses until you retire while saving consistently you won’t make a living income.

If you live for 90% of your life with no expenses you’re already rich enough right now. No need to work a job you hate. If you're going to live like a monk then be a monk, not a capitalist.

We've established that equity and leverage are needed to create wealth. There are 4 types of leverage: Labor, capital, content, and code.

Labour is the oldest type of leverage, think Genghis Khan. He has a force multiplier on the outcomes of his decisions.

Capital leverage is using money to create outsized returns on your judgment. Many of the old fortunes were made this way. Think Warren Buffett, Charlie Munger, and Ray Dalio.

The newest types of leverage are content and code. All the recent fortunes are made this way. Amazon, PayPal, OpenAI, YouTube, Google, Microsoft, Netflix, etc...

The new types of leverage are distinct from the old ones because of two qualities.

First, they have no marginal cost or replication. This means it costs the same amount for 1 person to watch a YouTube video or 100 billion. Same with code and software.

Second, they are permissionless. The old types of leverage (labour & capital) need permission from somebody to have them. You need people to agree to work for you if you want labour leverage. You need somebody to give you their money if you want capital leverage.

With code and content, there are no barriers to entry other than an internet connection.

Conor McGregor is a great example of leverage in the modern day. He had massive amounts of content leverage because of his brand.

Recently, he sold a majority stake in his whiskey company Proper 12 for 600 million.

What's the difference between him and you owning a liquor company? It's not knowledge, he's a cage fighter, it's leverage.

How do I get leverage?

Now for the practical.

The modern forms of leverage are what you should try to integrate if your goal is wealth.

Your career should be in two parts:

First, acquiring as much leverage as possible.

Second, using that leverage carefully with your best judgment to convert it into long-term wealth.

You can learn to code, using software as leverage. Or, as the entrepreneur you can organize the opportunity for somebody technical to work in your business. If you're going to do the latter you'll definitely need some basic technical expertise at a minimum.

Content leverage in the form of a personal brand is making fortunes for people too.

It used to be the case that to make significant money as a basketball player you'd need to be one of the best in the world. But now, a top 70% player can create content and make more than some NBA players.

The creator economy is projected to double from 250B to 480B by 2028

You want to get into a good market too. Don't invest all your time, attention, and money into the newspaper industry, or any dying industry for that matter.

The ideal industry to get into is one which is growing, has starving customers, customers with purchasing power, and who aren't too hard to find.

It's also a good idea to get into spaces with network effects and economies of scale.

Network effects are when each new person adds value to the system. Facebook is a good example since the more people join the more content there is, and also the more people you know are on it.

Economies of scale happen when the production/fulfillment of a product or service gets more efficient at higher scale output.

These are all principles and heuristics for wealth-building, and I can't give a step-by-step plan to everybody since everyone has unique goals and circumstance.

However, over the course of your life if you navigate with these concepts in mind you'll be better off financially.