Transcription
In 2003, boxer Mike Tyson filed for personal bankruptcy with over 23 million dollars in debt, even though he had earned over 300 million dollars during his career. But how can that be? Many of our daily actions are motivated by money. But what if the problem isn't how much we can earn, but also what we do when we receive it. What if our idea of how people truly get rich is completely wrong, and what if the truth lies elsewhere. A third of adults have no money set aside and live from paycheck to paycheck. Approximately 20% of all those under 30 have consumer debt. We all have a different relationship with money. For some, it is the source of suffering and insecurity. For others, it is a fun means to buy things. And for yet others, it is almost worthless by now. But what does money mean in your life? Is it something that comes easily and goes just as easily? Has it always led to you feeling stressed or helpless? Have you ever played with the idea of becoming rich or even paying someone who promises you exactly that? And have you ever wished to understand how money really works? I certainly have, because while we learn in school how to analyze poems or the mitochondria, I don't even remember what that is anymore, um, we learn almost nothing about finances. The topic is simply left out. But the deeper we understand this system, the more we can decide how much money we generate and how much of it we can keep. The thing is, our brains are wired in such a way that they naturally make very poor financial decisions. To truly build wealth, we almost have to act against this primal wiring, and that's what makes it so difficult. But the more we understand money, the clearer the path to true wealth becomes. Strange question, right? It's just a medium of exchange. It's the stuff we all agree we can trade for other things. But while this definition is correct, in my opinion, it doesn't really provide insight. In my opinion, a better form is to see money as a pure form of value. You buy things because you think the value of that thing is equal to or greater than the sum of money you pay for it. And it's not you as a consumer who decides this, but all consumers decide it, as well as availability. In short, supply and demand. But it's important to understand that money is exactly value. It is neither morally good nor bad. Often, when we see someone who has a lot of money, we think they've ripped someone off or they got there unethically. And that can sometimes be true. But the right question is usually, what value has this person created to be in this position? Okay, Dominik, nice and good, we now know that money is value, great. It hasn't brought us anything at all so far. How can we get more of it now and spend less of it? And that leads me to Chapter 2: Production and Consumption. Money comes, money goes. Each of us has income and expenses. Each of us produces value and consumes value. Money comes into your life because you produce a form of value. The amount of it usually depends on how large this value is and how many people benefit from it. I used to work at the reception of a gym and served coffee to people who were training there. That was a relatively small number of people who received relatively little added value. Today, I hopefully make more valuable videos for a lot of people, and my income is accordingly higher. But what is just as important at the beginning as the production side is the consumption side. We all have to consume. We need a roof over our heads, warmth, things to eat, basic needs. But our consumption doesn't stop there. Many of us want a Netflix subscription, a vacation, an expensive car, a nice watch. There are no limits to either side, but our wealth is made up of the difference between these values. I personally always thought I just had to make the income side so high that the consumption side simply wouldn't matter anymore. But even when I started earning a lot of money, the difference between them didn't necessarily get much bigger, simply because both sides grew proportionally to each other. This is a typical phenomenon. Think about the money you once had and what you might not have now. It's neither in your account nor in your investments. So, where is it? Only when I honestly asked myself this question did I find out that my approach was only half right. This is a term that is often used nowadays to sell people some crap on the internet and to make them feel guilty if they are in a normal 9 to 5 job. But the definition of it is as follows. The hamster wheel describes a cycle of high workload and duties, where one doesn't progress despite constant effort. It symbolizes a feeling of stagnation, of routine, of lack of progress. But the thing is, the guru who desperately tries to get the next customer to pay off the coveted Lamborghini is just as stuck in the hamster wheel as the one who can barely cover basic needs with the income from their job. Many self-employed people and many entrepreneurs are even more stuck in the hamster wheel, much more so than most employees. [music] Believe me, I've been there. My point is, this is real, but it exists in all income classes. A higher income class doesn't free you from the hamster wheel. Many people build a company that is in reality just a better-paid but much more stressful job. And then after expenses and taxes, often just as much or less is left with much more stress and much more workload again. Believe me, I've been there. The real hamster wheel is living on the financial edge, one expense away from zero. And the more responsibility we carry, the more stressful and dangerous this dynamic becomes. The more things we want to own, the more these things own us. But what is the solution? I asked myself that years ago too, and I started consuming finance channels. Graham Stephen, all those Americans, whatever their names are, they preached all the time that you should live frugally. Don't buy coffee out, look for the cheapest groceries. Try to spend as little money as possible. And for me back then, that was solid advice. I wasn't earning €1000 a month back then, so it made sense to really cut down my standard of living as much as possible, because back then it made a difference whether I spent €10 or €20 a day, but my goal was always to get away from that. The first step is, of course, unspectacular, but important. Know your numbers. You need to know what's coming in and what's going out. You also need to know exactly how much you need and how much is left over each month. Try to live below your means and set aside a fixed amount that goes away when you receive the money, and not only when something is left at the end of the month, because there never is. We need an emergency fund that can perhaps cover a few months of living expenses, so that we have security. But then we come to the uncomfortable truth. Setting aside €500 a month, €1000 a month, €2000 a month, will not make you rich, or at least not for a very long time. But doing so anyway forces you into a consumption system where all the money doesn't just go somewhere. But to be honest, this is step one, this is the advice that works best for most people. That's why these big finance channels always preach exactly that. But as I said, it won't make you rich. All these finance channels that preach that you should buy groceries at a discount, that you shouldn't drink coffee out, they make millions a year. I'm a YouTuber myself, I know the numbers, they make so much money, you can't even imagine. Living below your means and all these things, that's step one. That's the first part of the puzzle. But the puzzle is so much bigger, and nobody ever talks about that. Another part of the solution lies in mechanisms that most of us don't really understand. We've all heard of inflation. Money is worth less and less. In 10 years, your money will be worth less than today. You get fewer things for the same money. But while inflation is literally robbing the average consumer of their money, and doing so silently, other people benefit from it, and that's with debt. There are types of debt. The first type is consumer debt. You buy the new iPhone on installments and then pay more than it would have cost. You buy a car that immediately loses value when you drive it off the lot, or you go on vacation. The thing for which this debt is incurred is worth less immediately after, or it no longer exists after it's purchased. This is the type of debt that I personally fear a lot, and that one should fear a lot. But there is a second type, productive debt. You buy a property, you rent it out. The rental income not only covers the interest, it gives you positive cash flow. The appreciation of the property makes you truly wealthy in the long run. You have leveraged other people's money to buy an asset. That generates cash flow for you. You have risked little of your own capital. This is how wealthy people truly become wealthy. The crucial difference between the two worlds is also income. That is also significant, but it is even more so the understanding, because income is quickly high enough. Example: Suppose you take out a loan of €100,000 today at 3% interest. Term 20 years. In 20 years, you will pay back the €100,000. In 20 years, this €100,000 will be worth significantly less than today, significantly less valuable. So you are paying off with devalued money, and there is a player who does this on a large scale, namely the state. It is the world's largest debtor, and inflation is not a problem for it, but a feature. In plain English: "Whoever doesn't borrow money and keeps everything in cash loses purchasing power in the long run. Whoever, on the other hand, takes out low-interest debt to buy assets wins on two levels simultaneously. The problem is, this mechanism is reserved for a certain income limit, or rather, a certain wealth limit. And that brings me to point 5. The funny thing about the whole game is that to benefit from inflation, we need a certain amount of capital. And today's economy is quite interesting because we have something that previous generations never had, namely extremely good opportunities for huge asymmetries [music], and they are accessible to everyone of us. Let me briefly explain what I mean. If my parents or grandparents, for example, wanted to create value in the market, they had to do it face to face or through some employees. That was the only leverage they had. There was no way to reach masses of people [music] or sell massive amounts of things. Later, there might have been billboards or TV commercials, but they were incredibly expensive and reserved for absolutely huge companies. [music] But nowadays there is the internet. There is AI, we can, if we play our cards right, reach extremely many people without [music] money. And that, for example, also leads me to the sponsor of today's video, buildstore.ai. This is a typical example of good asymmetries. With Buildy Your store.aiai, you can have an online shop created by AI for free. You simply go to buildystore.ai, first link in the description, create an account and choose a niche, find the best selling categories, create a high-converting Shopify shop, automatically add trendy and in-demand products to your shop, and that completely for free. The only thing you need is the Shopify subscription. It also costs only €1 per month for the first three months. And the second step is automatic order processing. While you sign up for Bill Auto, you will be prompted to register with Autods. This is an automation platform that handles complete fulfillment and shipping. The price and stock levels are adjusted in real-time, and you really only have to select the products. The trial access for Autodesket only 99 cents, meaning for €2 you get really good added value and can start right away. Back to the video. Nowadays, each of us has the opportunity to communicate with the world. We can all potentially reach extremely many people. This is an incredibly powerful asymmetry. We no longer have to spend money to gain attention. We just have to learn the game. We can either provide little value to many people, or we can provide a lot of value to a few people, but we always have to reach and find the people. Distribution and attention are nowadays [music] the true component that determines how successful something is. And that brings me to the next chapter. To make one thing clear, I'm not saying that buying a nice watch or a nice car is stupid or a waste of money. I personally also find it important to reward yourself for your work at some point, but most people fall into the lifestyle hamster wheel. Believe me, I've been there too. And it portrays a lifestyle that you have to work all the time to maintain. Of course, if the watch, the car, or rent for a nice house is easily affordable, then go for it. But we want to put the whole thing in proportion. We want to elevate our lifestyle, but in the right proportion. And therefore, we also need to talk about another part of the equation. Production. Let's take finance channels as an example again. They are often helpful when you want to talk about the consumption side. But if you don't pay attention to what these people say, but to what these people do, a much clearer picture emerges. As I said, these channels speak to the masses, so it's smart to give such tips. But the side that really makes the difference is the production side. Of course, we can save diligently our whole lives and then have money at 70, but if you're like me, you want to have opportunities in your younger years at best. Therefore, we need to increase the share of value that we provide to the market. And the approach is relatively simple. Find a problem that people are really willing to pay for and that people also really have. Build a solution for exactly this problem and try to sell it as often as possible. Then focus on showing this offer to as many people as possible. This is the path I've been following for the last few years. I make videos on the internet. I have to produce a video once, and potentially thousands of people can watch it repeatedly. We have a brand that sells journals, productivity planners, tools with which you can change your life. We design products once, they sell thousands of times. The formula of the new rich, cringey word, but it's just like that, is attention times value. It was like that before, but with the internet nowadays, you can turn this attention component to infinity. And your production doesn't have to be identical to mine. Everyone has different strengths and weaknesses. Maybe you build an app that solves a problem, or you help people solve a problem one-on-one. Or you build a brand in a niche and then make it known there, like for example Band Francis. is one of the youngest billionaires in the world. I met him recently in London. My point is, production can surpass a regular job, and that's often where the real money is. If you can create value on a large scale, you will also be paid on a large scale. In the past, you needed distribution networks and complex supply chains for that. Nowadays, you need a smartphone and a few emails to set up the logistics. If you play the game right, your income will increase, and then it's important to maintain the ratio we talked about earlier in the video. If you earn €2000 and you set aside 50% of it, do that even if you earn €10,000 or €100,000, or even increase the percentage increase even more. So here again is the complete blueprint summarized. Control your consumption side. Set a clear percentage distribution, stick to your budget, but then use all your energy to increase the production side. Focus first on the quality of your problem-solving, and then only on distribution. Speak the attention for your problem-solving. See where it takes place. For my products, it's on social media. For you, it might be in forums or if you build an app, GitHub or programmer forums or whatever, but at the end of the day, the more people know you, the more people like you, the more people will buy. That's why a personal brand is so overpowered nowadays, in my opinion. By the way, if you want to learn how to build a personal brand, check out the second link in the description. I think I have something for you there. That's all I have for today. Stay healthy, may all your dreams come true. See you in the next video. Peace. M.