Everyone has the same 24 hours a day, but we all have different outcomes in life.
This imbalance fascinated me when I was growing up.
I remember everyone telling me that hard work was the secret to success. But my mother worked two jobs when I grew up and we didn't get rich.
And then, later, everyone told me the secret was education. If I study hard and go to a good university, I would be successful.
I knew that was not true. Why are there doctoral students who have difficulty finding work?
Something was wrong.
I didn't know rich people who grew up, so I started tons of books. Everyone would give me a little gem.
These reading gems weren't enough. I've had to gain first-hand experience over the past 13 years to understand.
I haven't figured everything out yet. I have developed special framework conditions to learn more about success and the creation of wealth.
Do you know what's ironic? My parents told me that if I continued to play video games it would harm my future. It's playing games like Starcraft and Age of Empire that gives me an "Ah-ha!" Moment.
If you win this video, you have to develop the skills of Manage your resources.
The same concept applies in real life.
Think back to high school. Some children have wasted their time partying. Others studied and did extra-curricular activities. I know there are exceptions, but generally those who have studied hard are more successful.
They have better managed their resources.
Today I want to introduce you to a framework that I call the productivity flywheel.
The flywheel effect is a concept from the book Good to Great. It is an analogy to set a huge, massive flywheel in motion. A lot of effort is required at first, but over time the wheel gains enough momentum to turn independently.
Have you ever heard the phrase "the rich are getting richer"?
I have examined the flywheel effect. I then combined it with the resources we have: time, energy, attention and money. Resources are an opportunity for us to leverage, which then gives us more resources than before.
With the productivity flywheel you can maximize your leverage in life.
Understand and use the productivity flywheel
I will explain how this system works.
Step 1: Use your time / energy / attention better
Each of us has the following resources.
- Time. You have 24 hours every day.
- Energy. This is your ability to do work. Have you ever tried to get through the day without sleep? That's how it is to have little energy.
- Attention. Your ability to concentrate at all. This is an underestimated resource that we are giving away too freely. It's hard to do a meaningful job if you feel the need to check social media every few minutes.
All three resources are important if you want to get something done.
It's fashionable to say that we all have the same 24 hours a day, but that's not true.
You could spend three hours in a traffic jam. I work from home. That's an additional three hours I've got about you.
I plan to have children in the next few years. I will not have as many free resources as now.
It is helpful to visualize your resources as if they were status bars in an RPG video game. Instead of health and mana, we have time, energy and focus.
And just like a video game, certain activities can improve our stats.
Let's look at two people.
Sarah is a single mother who spends three hours a day in traffic. You can imagine how exhausted she is every day.
John graduated from college and his parents subsidize his expenses. What a nice life.
John has a higher ability to do shit.
Here's a fact: life is not fair.
Someone could be born into a terrible family situation and grow up in poverty. Someone else could have been born into a privileged life.
Life is like a poker game: You cannot control the hand you are dealing with, but you can control how you play it.
Don't disadvantage yourself at a young age.
If you get six-figure student loans up to the age of 22 and can't find a job, keep playing the game hard mode. When you grow up single at 16, you play life in hard mode.
Every day you make dozens of decisions about whether to invest or spend your resources.
What is the waste of your resources? Drink a ton of alcohol. Wasted hours a day on social media. You get the picture.
Sure, they're fun, but they're consuming your resources.
What does that mean? invest Your resources? This means that you devote your time, energy and attention to activities that help to replenish or generate new resources.
These are the “quests” in an RPG that will help you ascend.
- Use your calendar
- You use an app that blocks annoying websites while you work
- They spend time preparing meals and cooking in large quantities.
- Eight hours of sleep a night
- Exercise at least three times a week
- Healthy eating
- Meditate at least ten minutes a day
- Manage your phone and social media usage
- Use timeboxing or pomodoros when you work
Sarah, the single mother, doesn't have a lot of free resources. But she can practice some better habits and build some systems to put her in a better position.
This is productivity 101 and requires some discipline.
I will be the first to tell you that it is not easy.
Sometimes I want to skip the gym and play video games instead. Sometimes I want to stay up late and watch Netflix instead of sleeping well.
What disciplines me is keeping an eye on my goals. I realize that certain behaviors and habits rob me of the future that I want for myself and my family.
The first step is to maximize existing resources.
What are you doing with all this time, energy and attention?
You turn it into the 4th resource: money.
Step 2: Use your resources and your job to generate money
You put your resources (time, energy and attention) into a machine (a job or a business) and that is spent money.
Not all jobs pay the same amount. Two people can do the same effort, but pay different amounts.
One advisor can charge $ 100 an hour while another can charge $ 10,000 an hour.
Getting paid can't happen overnight. Here are some strategies out of my head.
- Invest in more education like an MBA (Hey, I didn't say this is it best path)
- Negotiate for higher wages in your current job
- Switch to another company that pays more
- Incidentally, invest time to improve your skills.
- Get a piece of the upward trend (commissions, equity in the company, etc.)
Once again, Life is not fair.
I work with a programmer from Romania and pay him about $ 25 an hour. This guy is damn smart.
I can't help believing that if he was born and raised in the United States, he could make over $ 200,000 a year plus stock options at a FAANG company.
Step 3: use your money better
I hate it when people say that money doesn't buy happiness or that money doesn't matter. It is a virtue sign and a sign that someone is uncertain about his situation.
Money is neither good nor bad, it is a resource.
Unfortunately, nobody teaches us how to handle money. It's not that easy to run numbers in a table.
Money means different things.
- Money could be an opportunity.
- Money could be a way to brag.
- Money could serve to secure your future.
To be responsible with money boils down to that live under your means.
It doesn't matter how much income you get if you can't control your expenses. It's cliché to hear from a broken rapper, athlete, or lawyer. They have a high income, but it doesn't matter whether their spending is higher.
If you can save money, you can access something that I “The difference.”
It is income – expenditure.
Here is an example from my life.
2008 Charles Ngo
- Monthly income after taxes: $ 2400
- Monthly expenses: $ 1800
- The difference: $ 600 a month
When I was 22, I had an additional $ 600 a month.
I could consumed this $ 600 a month for clubbing, new clothes, a new iPhone 1, video games, or a nice apartment.
Instead, I chose it invest this additional $ 600 for affiliate marketing.
This is difficult for many people because they cannot think easily in the long term. Why invest in retirement in 40 years when you can use that $ 100 for a nice dinner?
The people who think long term victory.
Most people have no leverage. They exchange their time, energy and attention for money. Then they spend the money.
And most end up in this cycle forever and cannot withdraw with dignity.
Step 4: Invest your money in creating more leverage
Lever is a superpower – This way you can achieve more with the same or less effort.
Think about how much effort it would take to move a 300 pound box. But if you can put the box on a dolly with wheels, you can move it with so much less effort.
The dolly with wheels is leverage.
You can use money to leverage.
The three main routes are investments, systems and people.
You know what an investment is.
Various investments can include the stock exchange, real estate, cryptocurrency, bonds, gold and starting your own business.
(Money) x (time) x (investment method) x (risk) = More money.
With every investment, don't forget to think about how much resources you need to invest in them.
I love to invest Vanguard index fund.
I spent an hour built a system a few years ago that invests money for me. I check my performance once a month when I calculate my wealth.
(If anyone is curious, I am 100% equity. 70% USA, 30% international. Vanguard Admiral Fund with the lowest cost ratios)
I don't think about it. I don't waste time on it. This frees up my resources to focus on my strengths and my business.
However, I've seen other people invest in things they don't know much about, and that's catastrophic.
For some reason, a friend of mine invested in a night club. I think he wanted “status” to be a night club partner.
It was a terrible investment financially. He also wasted resources on working in the nightclub. It took some time from his main business!
Systems and technology:
We live in the age of technology. You can invest your money in machines / technology, which frees up more resources for you!
- People wash their clothes by hand. Now you can buy a washer and dryer.
- If you have a company, you can invest in various automation technologies. Think about how much money a restaurant saves through a reservation system like OpenTable.
- Self-driving cars. I don't have a Tesla and I'm not sure what autopilot technology is like these days. But I soon imagine that a self-driving car can save a lot of resources.
You can take a nap or answer emails in the back seat while your car takes you anywhere.
Other people's resources:
You have limited resources.
The good news is that you can spend money to borrow other people's resources.
Some examples from my life.
- House cleaning: My maid comes every Sunday for four hours. The $ 100 investment I make directly saves four hours of cleaning and allows us to spend that time on more leverage activities like planning or just for the day off.
- Future Live in Nanny / Daycares: I want to have children one day and I know exactly how much effort is required to raise children. We are already planning and considering how hiring different employees can help with our responsibility.
- Employees: The employees are an enormous leverage. Imagine hiring someone for $ 40,000 a year. Now you get time, energy, attention and expertise.
Step 5: Use your leverage to generate more resources
The previous one is a picture of me a decade ago.
I worked 9 to 5 jobs and pretty much exchanged time for money. The only resources that I had were those that I generated for myself.
The after is a "rough" look at where I am today. I have more resources than I did a decade ago.
That's because I used my money to create systems and borrow resources from others.
Now imagine what it looks like for you billionaire. Holy shit.
Think about what's going on when Jeff Bezos is hanging out with his new Mamacita.
It uses the resources and knowledge of over 750,000 people.
Thousands of nerds work in Seattle, thousands of UPS drivers ship his packages, and you have people like us who make his fortune more valuable by leaving Amazon ratings.
There are many companies where you can exchange your time for money, for example as a consultant or lawyer. You can, of course, get rich.
But your resources are limited. You have to go to sleep.
There are no limits to the performance of machines, technologies and systems. And there will always be a weakness because you could be hit by a bus or catch the corona virus.
The last step of the flywheel is where you have all of these additional resources compared to the past.
Now you can work on another level:
- You have time to plan, strategize and think.
- You are more robust as a person because you are healthier and get more sleep
- You have time for other important areas of your life, e.g. B. Time with your family and time with your hobbies.
There are Levels To leverage.
Each additional level releases more power.
Level 1 maid is someone who comes to clean once a month.
Level 5 maid is someone who comes to clean every week.
Level 10 maids are several maids who live in your home.
Level 1 encoder hires someone on Fiver for a task.
Level 5 encoder hires a great encoder on your team.
Level 10 programmer hires a top talent who leads a team and who owns the project.
The rich get richer.
Where the flywheel effect breaks
Let's talk about where this can go wrong.
You can lose if you play the status game
In status you show the world how well you are doing. You know what I'm talking about, the guys who always show their cars or go on dream vacation.
Listen, it's fine as long as you can afford it. But the majority of the people who play the status games are people with a net worth of $ 100,000 who buy $ 70,000 cars.
You could invest that $ 70,000 in creating more leverage. You could buy the car years later if you are in a better position.
Playing the status game distracts you from building wealth.
Don't try to look wealthy … be wealthy.
The next trap to watch out for is an overinvestment that doesn't pay off.
You spend $ 65,000 a year on an assistant. They save you an enormous amount of time and energy.
With that time and energy that you save, you don't do anything productive.
It is a waste of money.
The job or business does not compensate you well enough
You devote 14 hours a day to your job. You give your blood, your sweat and your tears. But you have a $ 50,000 salary for years.
Or you dedicate all of these resources to your business, but it bleeds year after year.
The flywheel will not work if the resources and the job do not spend enough money.
Understand and use the productivity flywheel
It will not be easy to understand some of these concepts at first.
I grew up with a frugal mentality that kept me from spending. Hire a cleaning lady? I can already hear a family asking why I'm wasting my money. Why doesn't my fiance clean the house every day?
If you are an entrepreneur, you are used to acting as a lone wolf. It will be difficult to entrust your baby to employees. But there is one border how much you can do as an individual.
Sometimes I look at people like The Rock or Elon Musk. I wonder how is it possible that they can do so much?
I then step back and look at that frame and see how much leverage they have that we don't see.