"How to make wealth"

Key concepts from @paulg essay from 2004

I write this thread because @paulg evergreen wisdom is worth resurfacing on Twitter.

If you look for another (insanely smart) perspective, there's @naval thread from 2018.


**What is wealth**

Wealth is not money.
Wealth is the ability to do and have what you want.

Money can buy you what you want, but it isn't wealth in and of itself. Having your needs met is wealth.

**Generating wealth**

You can create things you (and others) want.
Creating these things is creating wealth.

People think they need to generate money, but they actually need to create things other want. Wealth.

Others will pay money for the products generated because money is the easiest and most efficient way to trade value.


To create this wealth, one must create something end-to-end that can sell.

Most of us working at a company are creating something in synergy with others but lack the craftsmanship of creating something whole.

To create wealth effectively, you need to learn how to be a craftsman.

Either by yourself or by operating other people with you in a group to create something that is yours.

**Companies are the average of their employees**

To generate revenues, a company must create wealth.
It does that by having all its employees work together such that the end result is a product people want to buy.

An individual in a company might not realize he does things that other people want.
His contribution might be indirect.

But in the end, the company must generate wealth, and the amount they pay you is the *average* wealth contribution of your job.

**Companies can't compensate over the average**

Because of the structure of companies, and how hard it is to measure bottom-line effect with the operation complexity -

Companies can't compensate you much more than the average for your job.

You can't tell your boss you want to work 10 times harder, so he should pay you 10 times what he's paying you now.

Similarly, you can't work much smarter in a way that'll generate much more revenue and expect to take a piece of the extra revenue.

Some jobs are easily measured and tied to the bottom line, like a salesman.

And companies do compensate salesman at a percentage of their generated sales.

But that is an exception because it is easily measurable and performance depends entirely on the salesperson.

**Measurement and Leverage**

To get rich, what you do needs to be measurable, and you need to have leverage.

Measurable - what your produce is easily quantifiable.

Leverageable - you control the outcome in a scalable way.

A farm man collecting fruits at a farm is measurable but not leverageable. The only control he has is at the speed of his work.

Collecting fruits faster can optimistically get to 2x. Nothing more.

A farmer owning the farm is measurable (farm output) and leverageable.

By managing resources better, reinvesting, and hiring great employees, he can virtually grow the business without a limit.


Wealth is people's needs.

Be a craftsman able to generate wealth in a measurable and leverageable way, and there will be no limit to how much wealth you'll eventually create.

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