Getting Rich is Like a Magic Trick

 

A good magic trick blows your mind because it seems utterly impossible. Until, of course, someone explains how it works. Suddenly, the inexplicable becomes easily understandable. What changed?

Your knowledge.

In that sense, getting rich is like a good magic trick.

Now before I go any further, a couple clarifiers:

    1. I’m not talking about people born into wealthy families. This blog post is focused on people who started peasants like the rest of us and became rich.
    2. High paid lawyers / doctors / executives aren’t rich if they still need to exchange their time for money. I’m talking about the kind of rich where you can sit around scrolling through Instagram from your toilet for the rest of your life and still be wealthy.
    3. I’m poor as shit, so these are just my armchair observations.

Now that that’s out of the way, let’s get on with the breakdown.

Rich People See Money Differently

The difference between the rich and us peasants isn’t just resources, but a gap in knowledge and mindset. Most of us find ourselves stuck in the loop of “how can I earn more money”, while the truly wealthy—paradoxically—rarely dwell on that question.

Instead, rich people think “how can I provide more value for society?”

To the average person, money is a wage—compensation for a set of skills. To those with a more fundamental understanding of wealth, money is an IOU from society for the value they provide.

The rich get paid for creating something new, or solving a problem that society doesn’t know how to solve. In the process, these people increase human productivity or quality of life for society at large. Becoming rich is just a byproduct of that process.

Consider it from the perspective of a buyer. Why does money matter? It’s the medium of exchange for something valuable.

You give money to a grocery store for food. This solves your hunger problems.

You exchange money with a beauty store for makeup. This solves your social validation problems.

You pay for parking passes or bus tickets. This solves your transportation problems.

What’s often overlooked is the other side of the exchange—the recipient of the money. How did these establishments get your money?

By solving these problems for you—that is, for you and everyone else with those problems.

Some smart entrepreneurs realized that they could provide solutions to your hunger, social validation, and transportation problems. They figured out that if they could do that at scale—ie, providing society with something it wants but doesn’t know how to get—they would be rewarded with wealth.

So, while most individuals are preoccupied with the thought of “how can I earn more from my employer by increasing my skills”, the wealthy are thinking on a higher level. They’re contemplating “how can I earn more from society by increasing the value I provide at scale?”

In other words, the rich get wealthy through solving a problem society doesn’t know how to solve—and the process of solving that problem is what we call “innovation”.

Conventional Innovation vs Wealth-Generating Innovation

Innovation comes in different levels.

There are conventional innovators, like engineers, researchers, and marketers within organizations who are paid to solve specific problems. These individuals, when given a clearly defined problem with clear objectives, produce innovative solutions.

Then, there’s truly wealth-generating innovation. This is what entrepreneurs and world-changing scientists, like Einstein or Doudna, do. Their innovation starts with identifying a problem that hasn’t been clearly defined yet, and designing a novel solution that scales well. Oftentimes society doesn’t even realize it has this problem.

For example, Sergey Brin and Larry Page recognized the inconvenience of searching for information in physical libraries—it was too slow. Their solution? Google.

Jennifer Doudna and Emmanuelle Charpentier identified the problem with existing methods for gene editing—they were too imprecise. Their breakthrough? CRISPR-Cas9.

Jeff Bezos and Jack Ma identified the problem of buying things from physical stores—it took manual labour, time, and was often difficult to find what you were looking for. Their solution? Amazon and Alibaba.

By innovating on a higher level, these figures drove forward human productivity and living standards, and as a result, were rewarded with a fraction of the wealth they generated for society.

After someone innovates a large-scale solution, a series of smaller problems arise that need solving—technological infrastructure, marketing, finance, talent acquisition, and so on. These issues require a more conventional level of innovation—the kind that most people talk about when describing their skillset on LinkedIn.

Those who become truly wealthy, on the other hand, innovate on a plane with societal consequences. They devise large solutions to significant unsolved problems, and break them down into smaller, well-defined problems. Those smaller, well-defined problems are what we call job openings.

Most of us develop skills for these narrower, well-defined problems. Once we graduate from school, we wave our degrees and qualifications in the wealthy’s faces, in hopes of being hired. And that’s where most people’s conception of earning money stops—a competitive wage from a well-paying job—without really realizing how their skills and compensation fit into the bigger picture of creating value for society at scale.

How the Pieces Fit Together

Here’s a diagram to summarize this blog post:

In this diagram, here are the wealthy:

And here’s most of us:

School trains us for the bottom of this stack. Here, our understanding of money is defined by salaries or hourly wages. The higher you move up this stack, the closer you get to real wealth. You inch towards equity and ownership. Ownership over a business or a piece of intellectual property is the secret to wealth, as businesses and IP are the problem-solving entities.

Of course, there’s the traditional way of moving up the stack—climbing the corporate ladder. This route is slower but more secure, as it usually takes place in larger, more well-established companies. The tradeoff? Since you had less skin in the game in the large scale innovation the company was originally founded on, you’re much less likely to own a meaningful share of the company—unless you literally make it to the very top (think Satya Nadella or Tim Cook).

The less conventional but potentially more rewarding route is starting your own company, or joining an early stage startup. This route is far riskier and takes more work. But if it works, you win big, because you start out with more ownership over the solution you provide to society—which translates to more equity in the business.

Whichever route you pick depends on what you value. There’s honestly no right answer here.

In the 21st century, the structure of wealth generation can also take other forms, moving beyond traditional company structures. Today, individuals like social media influencers, solo app developers, and content creators are defining new ways to generate wealth by leveraging the internet—but that’s a blog post for another day.

Much like a magic trick, once you understand how wealth works, its illusory nature falls away, and the path towards it becomes clear. That’s not to say it’s easy—but it becomes unlocked as a possibility.

Tl;dr

You will get rich by solving a problem people want solved. You need to solve it so well that people will pay for your solution. Then you need to scale that solution so that it can reach thousands, millions, or billions of people.

Now that I’ve gotten my armchair observations out of the way, I can go back to being a peasant and slaving away for my hourly wage. 🤩