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Making Money Datasheet: The four multipliers of wealth and income
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Datasheet: The four multipliers of wealth and income
Passive Income is more of a myth than anything else. Money has never been made doing nothing. The only people who have passive income are trust fund babies. If someone is on this site, it is a guarantee that you aren't a trust fund baby. Trust fund babies don't need game to get laid, they already have all the time in the world.

Most money is only made in four ways, Time, Risk, Productivity and Scarcity(Law of supply and demand). Usually some combination of the two is usually needed.

Money made through Jobs

Wage Based Jobs: Time x Productivity
Wage based Jobs:(EG: Burger Flipper, Cashier, Waiter) This is usually something close to a minimum wage job. Your wages can be represented in terms of productivity. As you become faster and more skilled at these jobs, generally your wages will go up, albeit marginally at best. Don't expect to make $30/hr as a landscaper unless you work for a government union or something with some sort of edge. But it is possible to negotiate a wage with an employer if you can get your work done faster

Trade based Jobs: Time x Productivity x Scarcity
Labor based Jobs(EG: Plumber, Iron Worker, Electrician): The difference between the previous category and this one is scarcity. In fact, some aren't even that productive. I once had a welder tell me he made $68/hr not doing much of anything. The reality is not many people can do the work these jobs do.

Salaried Jobs: Productivity x Scarcity
Salaried Jobs: (EG: Engineers, Doctors)-Most often these jobs usually aren't paid by the time but by the fact that you have to perform some work regardless on the time input and the fact that few people can do what they do.

Sales Job: Risk x Productivity
Sales Job: (EG: Salesman, Car salesman, Telemarketers)- Anybody in the world can do this job, but not everyone can do it effectively. The money isn't guaranteed even if you are salaried. If you are salaried or work for wages, you'll quickly be fired for not performing, so your salary and time doesn't matter. Your sales aren't guaranteed and you may have to work 120hrs/week to meet your quotas or 10 hrs/week. The upside is if you become effective at it, you will always be able to negotiate rates for your work and transfer to nearly any private sector job as salesmen are ALWAYS needed.

Management Job: Risk x Scarcity
Management Job: (CEO, Board of Directors, Hedgefund manager)- Very few people are good at these types jobs. But those who are worth their money in gold. Much of this is based on the fact that not many people can actually do these jobs. Even if the work hard at their jobs, it may not matter because your duty is leverage the labor of those to make money and decide how to allocate resources.

Money made through Ownership

Royalties(Intangible Assets): Time x Productivity x scarcity:
Royalties: (Musician, Author, a Roosh): This source of income is going to be a unique from the other sources of money made through ownership as effort is critical for its success. Royalties usually are made from some creative medium. While you are not paid based on the amount of time you put in, you usually need to continue putting effort even after you sold the content. The Star and the content are a packaged deal that requires constant promotion from the star. Roosh still has to make an effort in promoting his works to this day even after he wrote it.

Securities(Financial Assets): Time x Risk
Securities: (Stocks, Bonds)- Usually what most people are looking for when looking for "passive income." These instrument are easy to liquidate into cash. Unlike money made through jobs, Time matters because "Interest compounds over time." This is a game a patience. Because it requires waiting on the future and the future has unpredictable factors, risk is also involved. The company can go bankrupt and now you own a worthless business or bond that cannot pay coupons or the principle back.

Property and Equipment(Fixed Assets and capital assets): Time x Scarcity
Property and Equipment(Real Estate, Equipment): Time is an interesting factor as it can have a negative impact on the value of the asset you own through a process called depreciation. The cash value of these assets are produced in the future in the form of rent or operation. Scarcity matters as it hard to reproduce these assets and are intended for long term holdings.

Mental Gymnastics(Intangible Assets): Time x Scarcity x Risk
Mental Gymnastics(Patents, Trademarks, Copyrights, Brands, Goodwill): This is the craziest of them all. Unlike Royalities(another intangible asset) which can be measured in cash flow, mental gymnastics cannot. Most of the value is psychological. It is subject to time because the value has to be built over a LONG time. The value it produces needs a great deal scope of money. You cannot create a company called Knockoff Cola generating $100k a year in revenue and try to sell your brand as being valuable. Ever drive by a business with the banner "Under new mangement" and keep driving? A failing McDonalds will never do shit like that because most people expect McDonalds food and service at a McDonalds regardless of mangement. While the local fancy Italian Bistro might do that despite being more upscale service. Its value of scarcity is truly what makes it valuable. It is one of a kind, It is unique. I can always make Soda company to compete with Coca Cola but I cannot produce a company called Coca Cola and produce soda and compete in the market. Risk is also a factor to consider given that operations can ruin a brand. "Did you hear about the pink slime made in McDonald Hamburgers?" "Did you know facebook is leveraging your information to make money?"

Money and easily liquid assets(Current Assets)-Time x Risk x Scarcity
Money and easily liquid assets(EG: Money, Cryptocurrency, Precious Metals, Inventory): The most commonly owned asset out there. The majority receive this through their jobs. The problem is they spend on other assets, such as inventory, that do zero work in value for them. The needle on these items rarely move by much and the only way to get a large impact on them to have large amounts of them. The usually lose value overtime, except for cryptocurrency and precious metals. Deflation is the only time the value of money goes up. Inflation can increase the price of inventory(but doesn't go up in real value, but a fair hedge against high inflation for poor people).

What is important to note is time is not a great benefactor to your job. In fact time is shitty multiplier to making money through your job. The guys expected to make the most money are when their time doesn't determine their income. The irony of course means your time is not as valuable as you are told despite what the majority of the world tells you. People just happen to live their lives in a miserable manner. Consider no one would ever say watching TV or Youtube is giving you a great sense of satisfaction.

However, when talking about assets, Time is worth its own value. You'll notice every single asset weighed in time. The difference between the a job and an asset is that you have to still actively work for the money while with an asset most of the money is built with patience.

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The four Multipliers of wealth and Income
(This post was last modified: 05-03-2018 04:12 PM by PolymathGuru.)
05-03-2018 03:52 PM
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