For some, 2020 will be easy to look back on as the worst year in recent history. While there was no doubt that the past year has been scary for a number of reasons, especially the way fear and anger has been reported, as an optimist I always try to find the good in every situation – and whether you are Believe it or not, there were good things to be found in 2020.
A good person who helps me find the silver lining is Ryan Moran, who runs capitalism.com. We spoke on the same stage at an event years ago, then I spoke at some of his events and later ran into each other at Burning Man: two sober guys thinking about the philosophies of life. Yeah, it was just as nerdy as it sounds.
Ryan and I had a chat recently and we both agreed that understanding what money actually represents is more important than ever. Ryan likes to say that the purpose of money is to “serve one another.” I love that and would add: Money is also a snapshot of a moment. It represents value, but it is not why we are valuable. It doesn’t determine our potential or what we can do. The past year was a good reminder not to confuse our assets with our self-worth.
When we understand that money is a by-product of service and provides the world with more value than we derive from it, we can enter the mode of creation where we can become fabulously rich.
Contrary to what some people ask you to, there is more than enough money to get around. Money is often compared to cake to indicate that if one person takes three slices, there is now not enough for everyone to get one. This is a scarcity mindset, the flip side of which is an abundance mindset. When you work with this mindset, you will find that money and cake are not the same thing. If you eat cake it’s on the way … well, you know.
Money, on the other hand, can change hands an unlimited number of times. The more often it changes hands, the more value it creates. Money is not a dam – it is a river that you want to flow because the more it flows, the more economic activity there is.
You can wade into this river if you want no matter what kind of curveballs or setbacks 2020 threw your way. However, before you jump in, there are a few things you should know.
# 1: Exertion is no longer enough
Effort is not always rewarded. My father was a miner. My grandfathers too. You worked harder than anyone I know. Why weren’t they richer? This is because the effort is no longer enough. What is rewarded today?
Results are rewarded. Fortunately, thanks to technology that makes the job easier, faster, and cheaper, the results are easier than ever. Many entrepreneurs struggle with this reality. They assume that customers will reward them with money for working as hard as possible. However, customers don’t care about your efforts, they care about the results.
Instead of using the efforts to create value, now is the time to use the intelligence and learn new skills. Many of us are not equipped with the skills for this economy because we did not learn them in our textbooks. Value creation wasn’t a course offered in my college.
Emotional intelligence, communication skills (including speaking and writing), basic business and finance lessons – these are the skills and knowledge that will take you far. And unlike in school, you don’t have to wonder if you’ll ever use what you’ve learned.
# 2: You sit in the driver’s seat
There are new rules on how to be a good money manager in this new economy. In the past, people could be more passive with their money and be okay. But in the next three to five years the transfer of wealth will be so substantial that if you choose to “set it and forget it,” “invest it early, often, and always” or “put it in a public market and hope it works, “you are in dangerous territory.
Here’s why: The landscape as we know it is changing. In the US alone, 50% of wealth will be transferred hands over the next decade, in large part because an average of 418,000 private businesses are sold each year. That’s almost 5 million companies that will change hands in 10 years. As I wrote earlier, people with cash can buy these stores.
Second, the stock market has been supported and overvalued, regardless of technological advances that will soon decimate it. The fact is that 84% of profits on the stock market, like hedge funds, go to 10% of investors. So if you hear the market hit 6% in a year, it might only be 3% for the average investor whose only action is to put money aside.
Inflation will decimate that 3%. Anyone sitting on money or unintentionally saving it will be upset when they find out their money is worth less, which means that the things they want to buy from an investment standpoint are further out of reach.
This is an important three to five year period when people can take responsibility for their finances and do something about it. Otherwise, the middle class will become the lower middle class in the next five years, while the upper class will get even richer thanks to their focus on investments, leverage, and acquisitions – not because of savings.
What is your vision
At the beginning of 2021, I propose the following: Let’s create a new game.
I’m talking about a game worth winning. For many of us, the game we were playing was not worth winning. We only played it because we felt obliged to. A game worth winning is one where we work with others to create value for those we want to serve. If we play this game, we have already won because we enjoy the journey.