How To Get Rich in 4 Steps

There are many different ways to become wealthy. Some ways are easier than others. But all of them ultimately boil down to some simple steps.

• Start a business
• Earn with your mind, not with your time

1.  Recognize that you're not going to become rich working for someone else

If you're working for someone else as an employee, receiving a W2, you're not going to become rich from doing it. There's a variety of reasons for this, but the core reason is that you don't own the output of your work.

• If you work really hard, you earn the same amount; maybe getting a slightly better performance increase.
• If you put in low effort; maybe you get a poor or no performance increase or possibly fired.

Ultimately, you're employed to produce a certain threshold of value for your employer and will be managed out if you fall below threshold.

As long as you're an employee, you are trading the security of income for the absence of positive upside convexity. You can at times renegotiate better rates by getting a raise or changing employers, but you still receive only a monthly salary and possibly a bonus.

Worse, you're exposed to significant downside concavity if you are to get fired, your employer goes bankrupt/restructures/embezzles funds/etc. Being an employee provides the illusion of security, not actual security.

2. Expose yourself to upside

To get ahead you need to be exposed to positive convexity. Where the cost of doing something is little, but the potential upside is big or unlimited.

The simplest example of this is stock options. If you buy (go long) a call option, it costs you premium up front but offers potentially unlimited upside until expiry. Buying options can pay off big if the underlying equity makes a big move.

However, we can find better options than stock options in real life. In particular, by owning equity in a business we start ourselves.

There's a number of simple businesses that you can start with relatively low skill and capital. Nick Huber at Sweaty Startup has a list of good ideas. Many of these you can do as a side hustle in your free time outside of your 9-5 job.

You don't have to quit your job immediately, but you do have to start turning your brain on outside of work.

If you evaluate how you're spending your time, you should be able to allocate 5-10% of your time a week into something that only you own. The exercise of doing this alone helps to change your mentality out of that from being merely an employee into that of being an owner.

3. Iterate and respond to feedback

Eventually you're going to find something that starts to get traction. Continue to try different things and don't merely research - you'll get more valuable feedback from trying things, seeing what works and what doesn't, as well as failing.

4. Let things compound

Once you have a profitable business, you have the problem of deciding if/when to leave your job to focus on it. Depending on the type of business you've established, it may require more of your weekly time to continue to grow. But once you've established a system that creates value, you have options.

You can focus on it and try to make it grow - after all, you can always go back and get a job if you decide you don't want to do it anymore.

Or you can sell the business to someone else for a multiple of the annual revenue.

Once you have income that is in excess of your expenses, these savings can be put into other investments or reinvested back into your business. Over time your wealth is going to grow, and you're now free to pursue other opportunities.

Conclusion

If you've had a pretty good career working in corporate, you likely have saved up a bit of money from your job. But you'll never make it to the next level without either a lot of luck in investments or by starting a business.

Starting a business is the better way to go.

Start working.