Level 1 - Foundations of Wealth

The blueprint to becoming a millionaire

Level one is the fundamentals of wealth creation

We're going to start with what even is a millionaire

It's someone who's net worth excluding their primary residence is an excess of a million
dollar assets minus liabilities.

for example:
Right now let's call this a $1 million house and then you owed nothing on it
your net worth would be a million dollars.

Now there's a difference between having a liquid net worth versus a net worth.

A liquid net worth is assets that you can trade in and out of so if I had
million dollars in cash in my bank account versus owning assets that were
worth a million dollars.

step two in this little journey of ours which is equity

because there's two ways that you can become a millionaire: you can earn your way
there or you can own your way there and the faster way is to own your way there.
If I want to earn my way to a million then I'm going to need to make $2 million over X
period of time and then divide that by two because of taxes to get to my $1 million let's
say making $200,000 a year and I make $200,000 a year for a decade. That's assuming
that you saved 100% of your income you'd be able to earn your way to $1 million in liquid
net worth.
On the other hand you can own your way meaning that you own assets either you know
which could be businesses or real estate which are probably the two most common
assets that people own that are trying to invest when I say invest when you are an
entrepreneur you are investing you're just heavily indexed on one stock which is your
own. let's say that I create a business uh that gets to $250,000 per year in some
instances I might be able to sell this company if it was truly automated and had a team
of people that worked without me needing it, I could sell this at probably a four times
multiple and this is again that would be a very good multiple for a business that is doing
that kind of profit because this is actually a small amount of profit for when we're talking
business sales but that would get us to a $1million net worth all right because we own
100% of this business that makes $250,000 a year in profit without us working at all and
we could sell that for $1 million.

So you can see the difference here. It's like okay well one of these takes 10 years.

this one is just how long does it take me to automate the creation of $250,000 a year.

So what's interesting here is that almost the actual income between the two
is almost identical but as soon as you achieve it you almost already have
the the net worth because here time is working against you because you
have taxes and you have your living expenses that are cutting out of this
every single year whereas here you get the multiplier without your living
expenses with time being an ally for you.

The next step on our journey don't diversify

Diversification is for weenies. Diversification to quote Uncle Warren: is a hedge
against ignorance; you only diversify if you don't know what
you're doing the more you know the less risky it is.

I actually am approaching diversification from a focus perspective which is what's the

one thing that you're going to invest your most valuable resource because when you're
early on you don't have that much money so your most valuable resource isn't your
money it's your time and your attention there's two ways we can allocate it.

V1 we do little allocations like this I'm going to look at crypto I'm going to look at day
trading I'm going to look at forex I'm going to look at flipping houses I'm going to look at
long-term investing in real estates I'm going to look into Airbnb I'm going to look into
starting an ATM business.
So let's say this is you and this is your time and attention that you have to pursue any
new opportunity so you say I need seven income streams because the average
millionaire has seven income streams so I'm going to spread myself thin between seven
different opportunities and while I do that I'm going to be multitasking trying to fill
different cups at the same time with different colors and I'm somehow going to wait
until one of these things takes off right I have to see which one of these will work!

but the reality is it's not which of these ones will work any of them could
work if you put the work in but you have to reach a threshold.

once you get to the top the extra cash starts spilling over and you actually
have a profitable opportunity which one of these cups is closer to spilling
over you going in on one thing or you spreading yourself between seven
and the reason that this myth continues to proliferate is because it's
absolutely true that people who are the wealthiest have multiple income
streams but what's not true is about how they got there the wealthiest
people in the world go all in on one income stream and they keep adding it
up over and over and over again until it overflows and then once it
overflows because they're making so much money from their one
opportunity they then start diversifying back between the other different
ways but they made their wealth focusing on one thing and then they
maintain their wealth by Distributing it you don't make money by by
splitting your attention up you make it by focusing on the one thing that
matters most.
V2 you say I do have experience doing this one thing and so I'm going to ignore all of
these other opportunities and just go all in on one thing it's solely based on which one
you work on so it's not which one will work it's which one will you work on you want to
go as fast as possible through the I have no idea what I'm doing phase so you can get to
the I do know what I'm doing phase and I understand the risks that are associated with
this and that's why I don't want to diversify because I actually get outsize returns.

here there's five stages that you go through as an entrepreneur when

you're considering a new opportunity.
Now we go to the last part of level one of becoming a millionaire; the long
game.
if I told you to build the tallest tower you possibly could in 10 seconds here's what you
might do :

How flimsy is this right like how stable is this do you think this is going to last a long
time probably not.
Now imagine I told you to build the tallest building you possibly could in 10 days you
would probably say you know what I can probably get some more boxes so I might build
it piece by piece from the ground up with more stable bricks from day one and I would
keep doing it this way right and I'd keep adding and keep adding and keep adding and
then when 10 days came I might be five stories high.

and so the reason this is such an important frameshift for people is that the fact that
they're in a rush causes them to build the thing they want to build differently the fastest
way.

to get to this tall is to build it the exact way I did earlier

stack it end to end up to this point but if I then said I need
you to build something that's 10 stories tall you would never
get there and what happens is people get stuck right they get
stuck at this level and they can't add another one on top and
they stay here and they're like why can't I get my million
dollar business to $10 million and it's because you built it the
wrong way.

This sounds painful sometimes the fastest way to to get to 10 million is to

start back at zero and build it right.

So the hardest thing about building something right is that in the beginning you need
to have something to sell you need your amazing valuable thing and then that's a
megaphone it's terrible but then you need to advertise it to let people know about stuff
and then you start making sales.
but the problem is that people get to this point and then think oh I need to do more
marketing and sales right because that's what made me money but the problem is the
more you market and sale the more people actually find out that this is not a gift
and this is actually a big pile of Shi***

and so what happens is now you've got people who buy this thing and tell their friends
this thing stinks and then over time it becomes more and more expensive for you to
advertise because your reputation stinks.
and so the right way to build it is to understand that you have to build the thing first and
then you gotta let people know about it but then you don't crank on this(marketing) you
keep fixing this thing until this guy becomes a happy camper and tells his friends.

and until that happens you keep making this thing(product) better and this is the same
thing as if I did this and just kept gassing it that's me vertically building the tower and
then reaching a Max that I can't go past anymore versus building it so that I get people
to say wow this thing's amazing and so then they also tell people for me so that when I
get to that point I actually built it with a huge base of foundation and I can keep stacking
on top of it and that's the difference in terms of mindset and perspective of how you
actually build something that's going to last.
Now we have our foundation built for level one of wealth creation.