Prologue
There is only one major principle behind wealth: the power of the crowd. Get five people to give you $1 and you end up having $5. Get one million people to give you $1 and you are a millionaire.
However, there are different ways to realize this basic principle. As far as I could figure out, there are only nine ways to become rich. Every wealthy person on this planet had to walk along one or two of those nine paths.
The following text is an essay about the nine paths to wealth. If you want to become rich, read this text and see if you are capable of walking along one or two of these nine paths.
The fascination of wealth
I was born in Austria, a small country squeezed between Germany and Italy and having less population than most big cities of the world like London, New York and Hong Kong.
I grew up in a middle-middle-class family. We never had financial problems, but we were not rich either. All of my friends and neighbors came from a similar background: working until retirement, going to another country once a year, eating out once a week. Some of the families could make holiday two times a year, some could dine out twice a week, but it was more or less the same.
In my early twenties I started traveling to explore the world. The world was different. Pretty soon I found out that most of the people I met considered me to be rich; and surprisingly, compared to them, I was. Half of the world’s population lives on less than $2.50 a day. And 90% have less than $10 to spend each day. By inference, if someone has an income of more than $300 per month, he belongs to the upper 10% of this planet. I do.
After further travels around the globe, I discovered another class as well. Compared to this second class I was poor, really poor. The people in this class are the rich and the super-rich. I learned that there are 12 Million people on the earth who are worth more than a million US-dollars, more than the people living in my country.
When I moved to Bangkok for studies, this unequal distribution became even more astonishing. Within a day and within a few hundred meters, I had been to two different worlds. In one world I paid $1.50 for lunch. In the other I had to pay $15 for a cup of tea.
This setting made me think about wealth. How is it possible that some people have that much more than others? How did these people become so rich?
And in this setting, between poor and rich, I found the answer. I found that there are several ways to become rich. In fact there are nine ways: nine paths leading from poverty to riches. Nine paths that all of these rich people took and, given the will, most of us can take as well.
In this text, I will show you these nine ways and what it needs to go along one of these paths. But before doing so, we need to talk about what »rich« actually means.
Being rich or poor
Being »rich« is a relative statement. A good way to define this word is to say that someone is »rich« when he can stop working anytime and still live the life he wants to.
Depending on the lifestyle someone might have, this can differ a lot. A hermit or a monk may be »rich« with a net worth of $5. Whereby someone with a luxurious lifestyle will be worried if his incomes falls below $10,000 for a month.
Being »rich« depends on lifestyle. It’s possible to be »rich« or satisfied in every situation of your life. That is what religion teaches us. But, that will not be an article of discussion in this essay.
Our point of reference will be a normal family – husband and wife, two kids – living a good upper-middle-class life in a western country. They have their own house. They dine out a few times a week. They drive a nice car. They can send the kids to college.
To have that kind of life $6.000 per month or $72.000 per year is sufficient. To them, being rich would mean to have more than $72.000 to spend each year without having to work for it.
It gets even more interesting when we calculate it over a whole lifetime. A single person, who plans to find a partner and live the life described above, would need to have $3,600,000 at the age of 30 and he or she would not need to work for the next 50 years (the rest of his or her life).
If you are single with no overwhelming aspirations, you don’t need too much money to be rich. If you want to own a yacht, you do.
Considering one’s self »rich« varies from person to person. Therefore everyone needs to calculate his own threshold to determine at what point he can count himself as being »rich« and stop working.
Do you want to become »rich«? For starters, calculate how much money would add you to the »rich« category.
A way to definitely not get rich
One of the biggest illusions is that having a job, climbing up the career path and saving money will lead to wealth. Let’s have a closer look at this to understand why that is an illusion.
Being an employee means you trade your time with money. If you work for a smart businessman, every second you work will add to the company’s wealth – not yours. The harder you work and the better you perform, the greater increase in the wealth of your company; while your remains the same.
On the other hand, if you work for a not-so-smart businessman, every second you work might contribute to your own wealth but take a toll on the company’s profit. In the long run, the company has to default and you lose your job.
Let’s move further with that thought and imagine that you don’t just have any job, but the current highest earning job in the US: a software developer. In 2014, the medium salary of a software developer was $93,280 per year. With this income you could live the upper-middle-class life stated above. You could even save $20,000 per year. You don’t invest this money, but only save it in a way to protect it from the diminishing effects of inflation. Then you would need to work from 20 to 70 to be »rich« or live without working for the last 10 years of your life. At the same time, you made your company rich, very rich.
This applies to any salary you will get. If your job is not the best paid job, you still have to work 50 years to be able to enjoy the last 10 years of your life without working. The only difference is that your 60 years won’t be those of an upper-middle-class standard, rather a bit lower.
The crazy thing about this is that most people are convinced that working and saving is the right path to becoming »rich«. Therefore millions of people strive to go along this path. Many believe the illusion that they could benefit drastically from higher education. But the reality is different. As long as you are an employee, your wealth will be held down, while you create wealth for the person you work for. How much you earn as an employee does not influence this major fact.
Ways to get rich
Now that you know what not to do, let’s outline the right ways to achieve wealth. There are only nine different ways to get rich. Every rich person, every millionaire had to walk along one of these paths. Six of these ways are primary ways; ways that lead you directly to wealth. The three other ways are secondary ways. Those secondary ways relate to rich people who have already walked one of the six primary paths.
The guiding principle
There is one ultimate truth that lies behind all our six primary ways to wealth: the power of the crowd. Wealth is nothing but the accumulation of small amounts of money. You need to convince people to give you money. If you convince 10 people to give you $1 each you make enough for a small lunch. If you convince thousands of people, you can make a living. And if you are able to convince millions, you are suddenly a millionaire.
The only difference lies in the possible ways of convincing people to give you their money. These differences make up our six primary ways.
The six primary ways
The six methods of convincing people to give you their money are based on two guiding questions: Is the accumulation by pure chance or not? Is the accumulation forced or voluntarily?
The first way is dominated by pure chance: (1) gambling. All the other ways are not entirely based on chance but on reasons.
The second way is by dominated by force: (2) robbery or theft. This is the non-random, forced way.
The last four ways are based on non-random, voluntarily transactions. They depend on your ability to either have (3) more skills, (4) more knowledge, (5) less scruples or (6) less fear than others.
The three secondary ways
These three ways are based on another basic principle. They require having with a person who is already rich or one who is on the way to becoming rich, that is, a person who has went along one of the six primary paths already, or is walking them at present. These three ways are parasitic in nature, for they do not create wealth directly, rather draw it from another person.
Those three ways are: (7) investing, (8) inheritance and (9) gold-digging.
The nine ways to become rich
Now it is time to have a closer look at each of the nine ways by studying some examples. Every example starts with a story of someone who succeeded by choosing that particular path. The story is followed by an analysis to show which principles apply in the background and how that path leads to success. After that, the pros and cons of each path are shown.
… to be continued. Part 1/11