The purpose of this post is to explain why the rich have money in a way that other people have never explained it.
Why do I know about why the rich have money and wealth?
I grew up in a fairly wealthy family in New England. Going to an elite boys boarding school and rubbing elbows at the country club and golf club from my early days I was able to observe why and how people got rich. At my parent’s great Gatsby parties I meet both old money and some rags to riches stories, like Horatio Algiers. You might say my family was on the tangent of the super-rich. Here I observed first hand why the rich have money and how they make money.
I earned a Master’s degree from Trinity in Economics. I worked on Wall Street, however, it was not until I moved to Eastern Europe did I fully become aware of the secret to wealth. Yes, there is a secret, but not like you find in most books.
There are countless scores of websites, books and coaching programs that tell people how to get rich. However, most of these are recycled information and do not get you anywhere. If they did then the people who read them would get rich. I used to read these books, get all pumped up, they have nowhere to go.
The following is the way the world works in any capitalist society. What you do with the information is up to you. I do not sell anything here and do not care even if you believe what I write. Apply the ideas or not.
The idea of how the wealthy make money are close to how countries get rich.
Why some people are wealthy
The real theory of wealth creation is focused on how people work rather than some abstract list of motivational ideas. In a capitalist economy work is the heart of wealth creation. Without work, nothing can be done. I believe in work. All work is noble.
I believe in earning money rather than money just being plucked from a money tree. There may be cases where this is so, but highly unlikely as it is based more on the circumstance. Here is the secret for wealth creation.
There are four types of workers or ways to earn money and explains why the rich have money. Which type of worker are you?
- People who earn money by selling intellectual goods
- People who earn money by selling intellectual services
- People who earn money by selling physical goods
- People who earn money by selling physical services
The people who sell intellectual good generally make the most and the workers of physical services generally make the least. Let’s look at these four groups of money earners.
How workers of physical services make money. People in this category work in a shop, clean office buildings, work construction, etc. These are great people and I have been in this category for many years. However, since the service they sell is a commodity, that is you can get anywhere, the price they get paid is relatively low.
How people who sell physical goods make money. These are people who sell things themselves from eBay to apples on the street to computers or washing machines. It does not matter, they all make a better profit for their time than workers of physical services.
How people who sell intellectual services, the almost rich, make money – These people make reasonable money but are not often the super-rich. Rather they live comfortable middle class or upper-middle-class lives and sometimes lower upper-class lifestyle (If they get a very large amount of stock options, and thus become owners). These are lawyers, doctors, accountants, teachers, consultants. That is these are your professionals.
However, the problem is most professional people sell their intellect to corporations. Further, they sell their intellect on an hourly basis (a salary is still an hourly basis). Read my lips, the issue with this is in a capitalist economy the only way to get rich is to be a capitalist. When you sell your services to a corporation by being an employee, they will take most of your value-added and keep it as their profit. Further, you are giving up your time to work there. It is your time and life in exchange for money.
A firm will pay and employ a worker when the worker’s marginal product equals or exceeds the marginal product given to the owners or firm. If not the worker (professional selling intellect) is of no value to them and they are let go from corporate America.
You will always be paid less than what you are worth or creating. Otherwise, no company would be in business. The owners of the company take your sweat and toil and imagination and live the lifestyle of the rich and famous.
How people who sell intellectual goods, the rich, make money – They sell intangibles. These are people like Bill Gates or J.K Rowling. These are people who create something unique and interesting and sell it. Authors, actors, people who invent something useful or unique. These people make money by creating something very unique and what people want.
The rich make money by selling intangibles. By selling intangibles you do not need a warehouse or minimal inventory. You do not need capital, just intellectual capital. Write a book, sell software, write music. These are examples of selling intellectual goods or intangibles. Sell an idea. Further, you need to own the idea. In a capitalist economy, the only way to make money is to be a capitalist.
In fact, you basically want to sell air. You could sell rocky mountain air compressed so when people open it in NYC they feel the fresh mountain air fill their room. This is a metaphor of course but it is true. You want to sell things at a high premium for real value that is intangible. Intangible is not connected with surviving or something that has a natural value, but rather only a subjective value., and does not require your time to make money, that is being paid as a consultant. Therefore, you do not have to perform a service or give your time to make money once the product is created.
Then you leverage your intellectual capital to have other people sell it for you and give them the usually rah-rah spiel that you have herd in corporate America your whole life. You use your time to sit on top of things. When I was in management and now have my own entrepreneurship, I would just hire good people to do the work and I would just sit on top of things (something I did not like as I am more hands-on). Actually now I prefer to do the work myself, then hire specialists and experts for various reasons.
Therefore, to get rich create intangibles that are unique and sell them, rather than work in a job. The unique part is very important as explained by the diamond-water paradox. That is value is determined subjectively rather than on pure utility. This is why people pay more for designer labels. Do not sell it as something cheap, the lowest common denominator (like an e-book), but sell it as something that is of value.
Ask yourself again. Where are you spending your time? Which one of those four categories are you spending your life in? Getting rich, unless it is through a stroke of fortunate circumstance, comes from years of hard work. What do you work hard at? Do you work for yourself or someone else?
Getting rich and having money is not important in life, your life is important
OK now I know why people get rich, what are you going to do with this information? People get rich because they work hard for many years to create something interesting or valuable. The question is how do you get the idea? It is easy. Ask yourself what you love to do and work from that. You do not have to make 100 billion dollars, I just want people to get paid more. What did you like doing as a child before you learned about making a living? That is the question. Now, what is your answer?
See you have to be actively indifferent towards money. That means you should not care if you are rich or poor. You should not worry if you are a person of honor or a person of disgrace. You should not prefer fame and fortune to anonymity and poverty. You should be actively indifferent to the things on this world. All these things are in God’s hands. You should focus on the real meaning of life. Take a lesson from St. Ignatius on active indifference.
What is more important, making money or your life?
If you really want to make money it really is easy, just do something that you love and create something unique in this world for others, than you will have a higher probability of being paid more. The best is an intangible product created from your intellectual rather than financial capital.
I have given you some subtle but powerful information about how to make money. I have given you very valuable information on the real secret of how and why people get rich. Write your circumstances life and I will tell you my idea for you. Leave a comment and you will see. I am not selling anything. I simply enjoy economics and had the opportunity to of growing up to observe the rich. This is why I wrote about how the rich earn their money.