How to build wealth

TL;DR: There are two things required to build wealth – leverage and attribution. Leverage of people, zero-marginal-cost products, and money can help you create massive value for others. The ability to attribute that value creation back to yourself will allow you to capture a good share of it. The best paths I know to achieving leverage and attribution are through corporate management, investment management, and entrepreneurship. In most cases, the best advice to pursue these paths is to get a degree in business or STEM which will kick start a career down these paths. All of this requires getting into a great undergraduate school, which means busting your ass off in high school. Entrepreneurship is a great path, and it is open to almost anyone, but you’ll be helped along if you’re able to first build some career capital and depth of experience. With all these things, the path is clear, but not easy. It will require hard work and sacrifice.

I spend a lot of time talking about how to invest your money in order to reach Ramen Retirement sooner. But before you can invest your wealth, you first need to build it. How to do that? Too often, investment sites and gurus just skip to the part where they’re laid out on a beach soaking in their passive income, but as Brandon Hall’s great article points out, you don’t actually create massive wealth simply through buying and holding real estate or other businesses:

…you need to understand what “investing” means. Investing is meant to be slow and deliberate—a steady increase to your overall net worth. Investing is not fast paced, nor is it speculative.

Brandon Hall

Buy and hold is an excellent strategy to help protect and grow the wealth you already have, and once you’ve got a few million of equity successfully invested, then the growth of those investments can have a real impact on your wealth over time. But you won’t get your initial stake by making solid 15-30% returns on a small base. Nope. To get the fly wheel moving, you’ll need to get your hands on some money to feed into your investment machine. If you’re not a trust fund baby, then that means you’ll need to earn your stake one way or another.

The best ways I know to create massive wealth is through one of three broad career paths:

  • Corporate management
  • Entrepreneurship
  • Investment management

I say this having had direct experience with each. I recommend this because I’ve seen it work, and I understand the fundamentals. The best way to create massive wealth for yourself, is to create massive value for others. As noted by Tony Robbins:

The secret to wealth is simple: Find a way to do more for others than anyone else does. Become more valuable. Do more. Give more. Be more. Serve more. And you will have the opportunity to earn more—whether you own the best food truck in Austin, Texas, or you’re the top salesperson at your company or even the founder of Instagram.

Each of these paths allow you to do just that. But how? One word: Leverage.

The power of leverage

The fundamental concept of leverage is that an individual who applies the right action, using the right tools, will be able to have an outsized impact on the world than they otherwise would if they were operating on their own:


This is self evident when we see someone use a fulcrum to create the leverage needed to move a rock that would be otherwise impossible to budge.

But how does this apply to the real world? Well, in the same way that you can move a physical rock with leverage of a fulcrum, you can also move metaphorical mountains in the real world through the leverage of three things:

  • People
  • Zero-marginal-cost products
  • Money

Each of those things will allow a single individual, operating with skill, to have an outsized impact on the world. Often, they’re used together, overlapping.

In contrast, most conventional careers and jobs lack leverage. A factory worker can only assemble a certain number of parts per day. A nurse can only take care of so many patients. Dentists can only perform a certain number of procedures. There’s not much opportunity for outsized gains. Value creation is linear based on individual effort.

The solution to having greater impact, creating more value, and capturing more wealth is to apply leverage.


One way to apply leverage is through people. The same dentist mentioned above can expand their practice and hire associates. Ideally every patient an associate serves adds additional money to their bottom line. They achieve leverage through hiring more people. They can create more value for others, and capture more wealth for themselves, than if they were operating on their own. In doing this, they effectively become an entrepreneur, having started their own business.

Much of corporate America runs on people leverage. Large corporations hire people for less than the average value they create for the company. In this way, the firm is able to grow the amount of value it creates for customers, and the amount of profit it generates.

Zero-marginal-cost products

Another way to apply leverage is through the creation and sale of zero-marginal-cost products. There is tremendous leverage with this approach, as you make an upfront fixed cost investment for a theoretically unlimited amount of future value creation. The best examples of things like this are software, and media (music, film etc.). With software – virtually all costs are up-front investments, with an almost zero marginal cost of delivery. Build once, sell a million times. That is the definition of leverage, and an explanation of why technology companies can generate such incredible profits, and receive such high valuations, making their owners wealthy beyond measure.


The last form of leverage is money. One way money is leveraged is by turning it into people or technology. For example, the right operator, empowered with a big check from a venture capitalist is able to pay people to build technology that they then sell for a ton of money at virtually zero marginal cost.

Another way to leverage money is to do it more directly through capital markets. Hedge Funds are the prototype of leveraging money to have outsized impact and gains. A great investor with a phenomenal track record might raise a billion dollar fund. If they’re able to double that money through their great investing insights, they’ll be able to capture a good share of those gains. As a younger investor who might not have much money to their name, this is a fantastic way to leverage their expertise by marrying it with other people’s money to grow the pie for everyone involved.

Put another way, Naval Ravikant had some good things to say on the topic of leverage:

There are three broad classes of leverage: one form of leverage is going to be labor, which is the oldest form of leverage… which is other humans working for you and that’s actually not a great one in the modern world. It used to be great in the old world but in the modern world people are on to it… so everyone’s always playing a status game and trying to become the lead monkey in the tribe and so having people work for you is a difficult form of leverage.

Then there’s capital which is a more recent invention, it’s only about a few thousand years ago. It goes back to the agricultural age and so that’s money. If you have money as a form of leverage that’s a good one it means like every time you make a decision now you multiply this with money and that’s why fund managers and venture capitalists and so on seem to do well.

Then the final form of leverage is a brand new form of leverage and the most democratizing one and that is products that have no marginal cost of replication: books, media, movies, and it would include code. Code is probably the most powerful form of leverage that is permissionless. All you need is a computer. You don’t need anyone’s permission, so if you want to make the maximum amount of money possible and if you just want to get rich over your life and you want to do it in a deterministic predictable way:

What you would do is you would basically stay on the bleeding edge of trends and you’d study technology, design, art and you’d become really good at something. You would basically be waiting for your moment until something emerged in the world where they needed that skill set and you’re uniquely qualified. You would build your brand in the meantime on Twitter on YouTube by giving away free work so people have heard of you would make a name for yourself.

You would take some risk in the process and then when it was time to move in on that opportunity you would do so with leverage the maximum leverage possible. Maximum leverage would mean that you would have people working for you and it would mean you would have a fund or you would have capital it would mean that you would be writing a book it would mean that you’d be writing code and then to building a media presence.

Be the source of value creation

But it’s not enough that there is leverage being applied. Leverage creates the conditions for the creation of massive value. But to capture that value for yourself, you need to be in a position to command a good share of it. The best way to command a good share of value created is to be one of the responsible parties for creating that value, and to make sure your contributions are measurable. In short, be the one who helps bring home the bacon. Be as close as possible to the actual value creation and leverage as you can. Position yourself so that without you, or someone like you, that value creation won’t be possible.

An example of a job with both measurement and leverage would be lead actor in a movie. Your performance can be measured in the gross of the movie. And you have leverage in the sense that your performance can make or break it.

CEOs also have both measurement and leverage. They’re measured, in that the performance of the company is their performance. And they have leverage in that their decisions set the whole company moving in one direction or another.

I think everyone who gets rich by their own efforts will be found to be in a situation with measurement and leverage. Everyone I can think of does: CEOs, movie stars, hedge fund managers, professional athletes.

Paul Graham – Wealth

Take the case of the hedge fund manager: their great investment ideas are the source of value. That’s what brings home the bacon. It’s no surprise then that they get paid enormous compensation packages for great performance. They have tremendous leverage, and direct, measurable impact on that outcome of that leverage.

Or, the entrepreneur: They take investor money, and turn it into something more valuable – a profitable, growing business. They have massive leverage, and a very measurable outcome – the value of their business. It’s no surprise then that founders maintain a sizable share of the companies they create, making some of them fabulously wealthy when those companies succeed.

So what should you do about this?

First, think long and hard about what you want in life. Money and wealth isn’t everything, but it sure is something. Money can’t buy happiness, but it can solve problems. A lack of money can become an incredible stressor. So consider carefully how much you value a future that is financially abundant and secure. If you ask me, it should rank pretty high on your list.

If you think building wealth is a priority in life, then I would recommend pursuing one of the following paths:

  • Executive level management
  • Investment management
  • Entrepreneurship

Outside of those fields, it will be hard to amass material wealth. Doctors, dentists, lawyers and accountants will do okay – they will live very comfortably, and probably pull together a nice little nest egg over 30-40 years. But there’s no chance of major wealth creation.

Most other ‘careers’ offer just a decent living. Pay down a mortgage. Vacation once a year. Sure, there are some articles out there suggesting a middle class salary can eventually save a million dollars by old age, but scrimping and saving until you die isn’t a useful outcome either.

There are a few other fields where you can make big bucks – professional athletes, musicians, movie starts etc. But those paths are a mirage. They are hyper competitive, winner-takes-all markets. Unless you are going to be the very best of the best (Michael Jordan, Drake, Matt Damon), you will likely limp along with a mediocre career and modest financial outcome. Unless you’re a child prodigy in one of these fields, your odds of really making it are quite low. By all means, if you enjoy one of those fields, continue pursuing it as a hobby in your free time. But doubling down on a path like that seems reckless given everything I know now.

Executive level management

Becoming a leading corporate executive is a very common way of amassing wealth. CEOs make tens of millions a year. Their top lieutenants aren’t far behind. Between base pay, bonuses and stock incentives, compensation really adds up. Generally speaking, executives move up from the lower levels of a given organization. They will typically come from the areas of the organization that are the core of their business, the place where the real value is created: sales, technology development, marketing & product development.

To get on to such a path, I recommend one of two approaches:

  1. Technical route: Go deep on an area of STEM for your education, get hired as an individual contributor at a major corporation, move into a management position over time, at which point you can spruce up your ‘business skills’ through some supplementary reading
  2. Strategy & business route: Study business for your education, work a few years as a generalist strategy consultant then transfer over, or move directly into an individual contributor role at a corporation, working in the key value generating area of a given business – i.e. if you work for P&G, make sure you’re in marketing. If you work for Amazon, make sure you’re in product management

Both of these paths are good ones. Both offer flexibility in future career trajectory. This path requires hard work, but will allow you to have a life at the same time. The corporate pace is manageable.

With each of the above paths, you’ll need to make sure you study at a great undergraduate institution that is known for being recruited into the top employers for a given field. This means you need to bust your ass in high school to get the grades and extra curricular credentials that will get you into the right school. Yes, it’s a bit of a treadmill, but the rewards are real, so get studying today.

Investment management

If you want to get into the world of investment management, then there are a few paths:

  1. Study business (focus on finance), and get hired by a top tier investment bank coming out of school. After a few years at the bank, jump over to an investment firm where you can start out busting your ass doing all the legwork on deals
  2. Get into the right Ivey league school, and get hired by a top tier investment bank coming out of school. After a few years at the bank, jump over to an investment firm where you can start out busting your ass doing all the legwork on deals

This path is pretty straightforward, but tough as hell. Because the potential compensation is so high, and relatively certain, competition for this path will be tremendous. You will meet a lot of people along the way who are super competitive, and purely motivated by money. You will be expected to sacrifice pretty much everything in your life to make this path work. If you can survive the first 10-15 years in the industry, then you’ll eventually make it to a place where things are a little more manageable, but nonetheless still crazy by any conventional career standards. If you make it that far, you will be guaranteed a shot at multi-million dollar annual compensation. This path offers high certainty of wealth, but requires you to ‘mortgage your 20s and 30s’ to get it.

Much like the previous discussion, to make this work you’ll need to get into the right undergraduate program, and get hired out of college into the right bank. This means, again, that you need to bust your ass off in high school to set yourself up for success.


Last, but not least, entrepreneurship. This is perhaps the most open path there is. You can literally be an entrepreneur in almost any industry. The key with entrepreneurship is about finding an unserved need and filling it. To do that, you will really need to go deep in an industry such that you truly understand the problems and needs of those customers. Entrepreneurship offers great rewards, but also great uncertainty. Often times you will be wandering through the wilderness before you find the right problem that you can solve well. It can be a great path, particularly for folks who don’t follow some of the conventional paths outlined above, but it also brings with it greater risk and uncertainty. My advice with entrepreneurship would be to get some experience and career capital first, then go deep on a specific industry so you can identify the real problems, and have a credible chance of being the right person to solve them.

Given the need to amass some career capital and experience, I recommend a similar approach to the executive management path:

  • Technical route: Go deep on an area of STEM for your education, get hired as an individual contributor at a major corporation, move into a management position over time, at which point you can spruce up your ‘business skills’ through some supplementary reading
  • Strategy & business route: Study business for your education, work a few years as a generalist strategy consultant then transfer over, or move directly into an individual contributor role at a corporation, working in the key value generating area of a given business – i.e. if you work for P&G, make sure you’re in marketing. If you work for Amazon, make sure you’re in product management

At any point in this journey, when you’re ready you can jump off the ‘corporate’ path and into entrepreneurship.

Of course, the beauty of entrepreneurship is that you don’t really need any credentials to do it. When you’re serving a customer, they don’t care what school you went to, they only care that what you’re selling them solves their problem at the right price. The only gatekeeper is the marketplace. This means that if you don’t end up pursuing a path of higher education, you can still be an entrepreneur. Just go deep in an industry, understand a problem, then start pulling together the requisite pieces to solve that problem. Anyone can do it at any time. You just need brains, hustle, and perseverance.

What if university isn’t for you?

Now, if you’re not the type to go for secondary education and you don’t have a rich uncle, you’ll need to find a different way to get your start in the world. More than anything, a little smarts and motivation will go a long way. But you’ll likely need a less conventional route. I’m not an expert in this because it wasn’t the path I took, but from what I can tell, there are some pretty good options to make moves in the world that don’t require a business or STEM degree. They include:

  • Sales
  • Real estate brokerage (a kind of sales)
  • Small business creation
  • Franchising
  • Construction and contracting

Each of these paths are general areas where you can be useful, and where you can scale up a skill set that can create wealth over time. These paths will not be easy either, but success is very achievable. With all of this, just remember that you want to be building out skills that are valuable to others, scalable, and attributable to your performance. Whether it’s leveraging people, technology, or other people’s money, each of the above mentioned paths can offer a leveraged approach to create and capture value.

The path is clear, not easy

With all of the career paths mentioned above, there are some pretty direct routes to achieve them. While the path is clear, it won’t necessarily be easy. It will require hard work and sacrifice starting in your teens. You’ll likely need to get good grades, get into the right school, graduate top of your class, and get the right job coming out of school to put you on one of those paths. The real question is how badly do you want this? What are you willing to sacrifice to make it happen?

What about your passions?

Dreams and passions are overrated. Focusing exclusively on ‘passions’ is bad for a whole bunch of reasons that Cal Newport expounds on (See book review here). Ultimately I would argue that you should focus on things that are uniquely easy for you, that other people want, and that you enjoy doing:

Screen Shot 2018-01-26 at 9.02.10 AM

But, part of the problem with that advice is that at the age of 18, it’s really hard to have any idea what you’re uniquely good at, let alone enjoy. You’re just a baby. Six years ago you were 12! Given this, the best advice I can give to someone starting out is to pursue the path that will maintain the greatest number of options. If you keep your options open, you buy yourself the time to explore the world, and understand yourself a little better. I had ‘explored’ three career paths before I was 30, and while I’ve spent almost a decade focused on the world of tech, I still have my options open, and still consider alternative paths. As I see it, you can increase your option value in two ways:

  1. Choose a career path that has a high degree of flexibility in the future
  2. Pursue options that have high earning potential (all things equal, having high earning potential puts you in a good negotiating position)

From my experience, pursuing a degree in the general area of business or STEM is probably the best path to maintain flexibility, and maximize earning potential. An education in ‘business’ can prepare you for work in almost any industry, and across a wide array of roles. STEM skills will be universally valuable across industries. In 2018, it’s clear that every company is now a technology company. Software is eating the world. A degree in computer science or math will position you well to start out as an individual contributor building software, and eventually move into management positions where you can have a huge impact.

Contrast this with pursuing a career in medicine – by the time you graduate residency, you are deeply trained to perform one very specific role. Switching careers at that point is possible, but also very costly in terms of time and opportunity.

Perhaps more important than the specific discipline you study, remembering that you can learn something new, and learning how to learn are a critical skill you need to develop and grow throughout your entire career.

Charting your course

So to summarize, I would recommend pursuing an education that will set you up for a career with a high degree of flexibility and earning potential. At the same time, if you have side interests and hobbies, continue to explore those, but just as hobbies. If you somehow start seeing signs of success with your hobby, then you might consider doubling down on it and trying it out for a few years, but in the absence of clear signs (market validation, demand) for what you’re doing as a hobby, stick to the plan and make sure you get a good education and job that sets you up for future success.

By the time you’re in your 30’s, if you’re still in debt and have no trajectory to change that or make a meaningful amount of money, then life is going to be hard. You can fuck around in your 20’s on a shoestring budget and that can be great fun, but if you think you might want any sort of conventional life that involves ‘settling down’, having children, raising a family etc. then you will wish you had laid the foundations for that in your 20’s.

Everything is a trade off. A good friend of mine who buys and sells companies for a living often quips that he mortgaged his 20’s to get to where he is today. It’s true, he sacrificed a lot in his 20s, but he’s also crushing it now, and will be for the rest of his life.

Feel free to use your time at college as an opportunity to explore your interests, but while you’re at it, get a degree that sets you up for success upon graduation. That pretty much eliminates any sort of philosophy, arts, music, history etc. The only prospect of employment for most of those fields is as a part time professor or TA teaching those classes. Feels like a ponzi scheme.

Stick to something practical and useful. If the prospect of business turns you off, then there are other paths that will maintain optionality and offer high earning potential. Anything in the STEM fields is a good start. Thriving in those fields will prove you’re pretty bright, and jumping from an individual contributor role to a management level role from the technical side is a common path to executive level management.

Future proofing your career

As a final thought, with any path you choose to build wealth, consider deeply what the next 20 to 30 years will look like. Technology is shifting the foundation of countless industries. How will technology impact the area you’re interested in? Consider that and make sure you’re focusing on something that robots and AI will have a tough time replacing. That will naturally tend toward more creative, integrated thinking. As an example, it seems a safe bet that building software will be one of the last thing that software actually replaces, which makes working in tech a good place to start.

There are many paths to building wealth, and many more that will not get you there. Perhaps the most important thing is having an interested mind, an ability to learn, and the perseverance to plow through until you find your own path that works for you. It’s all possible, you just need to keep at it until it works for you.

To your health, wealth & happiness!


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