You’re probably familiar with the common ways people end up wealthy.
An entrepreneur starts a business. The entrepreneur puts in countless hours of labor and accepts the risk of failure. Eventually, the business gets 1,000,000 clients to pay 5$ a month for a service; That’s $60,000,000 in revenue a year. The entrepreneur takes a cut and becomes rich.
The rapper creates music. They upload their music to Soundcloud. People love it and share it, and it goes viral. The single becomes a hit and lands the Billboard Hot 100. The rapper earns $900,000 for it.
The professional spends many years in higher education to land a lucrative job. They work hard, fall in favor with management, and climb the ranks. The lawyer makes $200,000 a year. A managing director at an investment bank makes $300,000 a year. The neurosurgeon makes $600,000 a year. An E9 at Facebook makes $1,000,000 a year.
The gambler invests in assets with a high probability of failure. This includes lottery tickets, penny stocks, and low-rated initial coin offerings. Unlike the other roads, this kind of road doesn’t take much effort but has high upside.
You’ll fail if you follow people that make it.
The limelight always goes to the people that make it. We’re fooled to think it’s easy to get rich because we’re inundated by success stories. In reality, the “conventional way” to getting rich really only works for a handful of people.
You won’t read stories about the dozens of entrepreneurs that put a decade of their lives to build unprofitable businesses. There’s a common saying that 90% of businesses fail within five years.
You won’t see the story of the Soundcloud rapper who composed hundreds of songs, only to get a few hundred plays on each one. Most rappers fail.
The numbers are against you. You’re no different from the other 7,000,000,000 people in this world. Following the handful of people that made it won’t make you rich.
People fail because they neglect risk
Every choice we make comes with risk. People that attempt to become rich conventionally make a series of decisions. If you combine these smaller risks, it simply becomes a larger risk with a larger loss.
In every conventional road to riches, there is an obscene amount of risk with no guarantee of success.
The successful take on high risk and come out with a reward proportional to the risk. The failures receive little compensation and lose the time, energy, and resources they invested into the venture.
This makes sense, especially if you’ve heard of the phrase:
“Don’t put all your eggs in one basket”
The basket is your venture, the eggs are your efforts. Conventional roads require you to put your eggs in the same basket. If your basket breaks, all your eggs will fall out and break.
You’re back to square one.
Diversification is the nemesis of risk
Imagine you have 5 baskets and 100 eggs. You put 20 eggs in each basket. One basket breaks along with all its eggs. You still have 80 eggs. You lost 20% of your eggs. You’re still in the game.
Diversification lets you reduce the risk associated with your portfolio of assets. You want to reduce your risk of failing by investing your time into a variety of wealth vehicles (websites, apps, cryptocurrencies, etc).
We’ll work through an example of successful diversification.
Investment A (Dropshipping):
You spend two months building a Shopify website to sell products from overseas (dropshipping). You market your website through automation. Once you get your first sale (and don’t stop until you do), you’ve validated your business model. You repeat your formula, delegate work to virtual assistants, automate it with tools. Let your business grow. Investment A generates 100$ a month.
Investment B (Dropshipping):
Little effort is left to maintain Investment A, so you begin working on Investment B. You essentially do the same things you did before, but target a different market. It takes one month to build this one, because you learned from Investment A. This one generates 300$ a month.
Investment C (Tutorial):
At this point you have Investment A and Investment B generating 400$ a month. You try something different; you work on Investment C which a course on dropshipping. You list it on Udemy for 100$. You market it and get 10 clients; that’s 1,000$. This investment consistently generates 1,000$ a month.
Investment D (Cryptocurrency):
You take 1000$ off of Investment C and buy the cryptocurrency Stellar Lumens (XLM) at 15 cents.
Your foursource of income make you:
- Investment A — 12 months * 100$ = $1,200 annually
- Investment B — 12 months * 300$ = $3,600 annually
- Investment C — 12 months * 1,000$ — 1000$= $11,000 annually
- Investment D — XLM goes up to $0.60 in 12 months = $1,000 * 4 =4000$
- Total: $1,200 + $3,600 + $11,000 + $4,000= $19,800 annually
Your investments are likely to grow throughout the months. And you also now have investments that you can sell. If Investment A or Investment B fail, you still have two other sources of revenue.
Spend your time investing horizontally (more baskets) and spend less time investing vertically (one basket); You’ll reduce your risk of failing.
There’s a misconception that scattering your efforts into many things, will result in complete failure. This isn’t true. You don’t need to be building the next Facebook or iPhone; those are the snowflake products built by snowflake people.
It’s dangerous to focus on building a single idea for extended periods of time, because it creates a tunnel vision that prevents you from seeing a new perspective. Your time investment doesn’t need to be towards the “the next big thing”. It just needs to be valuable to a person willing to pay money.
Slow and steady will make you rich
It’s common to gravitate towards opportunities that claim to make you rich quickly For example:
- Bitcoin craze: People who had no idea what Bitcoin was, invested into the Cryptocurrency.
- Lottery tickets: People pay thousands for lottery tickets to get rich quick.
- Creating content quickly and hoping it goes viral (apps, music, etc).
Patience is necessary if you choose to diversify your investments. $19,800 a year isn’t hefty. But if you continue to diversify and grow your assets, the growth is exponential. The valuation of your assets appreciate with time (exposure, growth, track record).
The Risk Free Road to Riches
The formula for guaranteed road to riches is simple:
Wealth = Diversification + Patience
The guarantee comes from the reduced risk from diversification.
The wealth comes from being patient with committing time, energy, and resources into those assets.
Generating a stream of revenue isn’t easy. It may take weeks for some people, and years for other people. You need to be persistent, hardworking, and patient. That doesn’t change regardless of the road you take.