Recently, much attention has been brought to the topic of inequality … most specifically, inequality of wealth and income.  Underlying this attention is a fundamental belief that some people are able to earn a level of income that is disproportionately high relative to other people on the economic ladder.  This belief stems from a misunderstanding of the difference between a person’s ability and their production. At first blush, these two attributes feel tightly related … and in many respects they are.

Most people require some measure of ability in order to produce a product or service of value.  The desire to develop ability is why people attend college, and it is what most people perceive as the driver of our ability to earn an attractive income.  The link that many people fail to appreciate is that our total value as an employee or entrepreneur is based on their ability, and amplified by the financial and organizational leverage of their business organization to create production.

This generates an effect that has caused tremendous misunderstanding.  The compensation of corporate executives has received a considerable amount of attention in recent years.  Many news reports show how CEO’s earn a high multiple of the earnings for an average employee at a corporation.  Most people who see this feel that there is no possible way the CEO can be 40, 50, 100, or 200 times as valuable as the average worker.  This is where the difference between ability and production becomes important.  The CEO’s ability to drive value is based on their ability, amplified by the organizational leverage of the business.  The CEO does not possess 50 or 100 times the ability of the average worker, but is able to use organizational leverage to drive 50 to 100 times the results or more.

What Does This Mean For Me?

There is something important that each of us can take away from these insights about ability and production.  In order for each of us to fulfill the greatest potential for our professional and financial achievement, we must find a way to employ organizational and financial leverage to amplify our ability so that it produces exceptional results.  This means that our professional and financial walk should focus on both the acquisition of superior skills and the opportunity to leverage those skills so that they generate exceptional results.

Once we understand the importance of production vs. ability, it becomes apparent that a narrow view of ability misses much of the picture when it comes to driving results.  Unfortunately, this has become fodder for politicians advancing a “class warfare” platform where they attempt to use people’s frustration with the unfairness of life to garner support for their candidacy.  The truth is that life is not fair, and most of us would be very unhappy if it were.  The simple fact that a person is born in the United States of America means that they will have access to more opportunity than nearly 80% of the world’s population.

People who live in the United States don’t necessarily possess any more ability than people from other countries.  However, they are able to leverage their abilities to a much greater extent than those other people to produce greater results.  The dramatic inflow of immigrants to the United States stands as a testament that people seek the opportunity to leverage their abilities so that they produce greater results.  From both our personal standpoint, and from the perspective of the larger economy, this demands a simultaneous focus on both enhancing our personal abilities and figuring out how we can leverage those abilities to generate greater productive results.

Equality vs. Achievement

In the current political environment, much attention has been steered toward equality and the lack of equality in regard to incomes and achievement.  The way that these large inequalities emerge in a free market is by competition for the best business talent by entities who can leverage that talent to produce very large results.  What happens is that the people selected to lead these large enterprises are compensated very highly because the results they can drive exceeds their compensation many times over.  To many people, this feels inherently unfair.  However, it is a necessary component of generating optimal productive output for the economy.

The way that economies grow is by people and businesses creating new products and services.  The way that individuals benefit from this is by the opportunities that emerge to both work for these new businesses and enjoy the new products that these businesses create.  Thus,the path to affluence means that there must be freedom to create, risk of failure, and rewards for success.  This is something that we must understand in our personal rise to achievement.

One thing that we should be careful to avoid is the assumption that all inequality is identical, and all profits are equal.  Some companies profit from creating products and services that people voluntarily purchase, while others “profit” by lobbying the government for special contracts, trade protection, or other regulatory advantages.  The former example is what drives economic growth.  The latter is nothing but a drag on the real output of others.  Unfortunately, the earnings reported to wall street make no distinction where the profits of a business come from.

This represents a conflict for those seeking greater equality, since the graft of people who use the power of government to enrich themselves appear to be the same as those who legitimately create useful products and services.  There is also a cautionary note that we should take notice of, since the great affluence we enjoy in the United States can be dismantled quickly if the capitalist system is torn down.  Similarly, the size of the government-entitlement regulatory system is not sustainable.  In order to reclaim the future, we need to create both people of ability and opportunities to leverage that ability.

In the end, most of us do not possess the ability to singlehandedly alter public policy.  However, we do have the ability to impact the decision we make in our own life.  Thus, we should all seek to simultaneously increase our own personal abilities and seek opportunities to leverage that ability so that it produces greater results.  This represents more than an opportunity to create results for ourselves … it is a channel for growth of the larger economy through our efforts.

 

In the midst of persistent economic turmoil, there is a growing sentiment that somebody should do something about all of these problems.  This is a natural reaction to what feels like an opaque and impersonal market.  The actions of Washington and Wall Street show no semblance of connection with that of the regular people who drive the economy forward.  In light of this clear lack of interest to do anything that is not oriented toward special interests, there is a persistent feeling that ‘somebody’ should do something.  Unfortunately, nobody seems to really know who that person is, since the governing institutions are pervasively corrupt.

This has become a key point of concern for an increasing population of citizens.  These ‘regular people’ are working hard to build a life for themselves and a legacy for their posterity.  As election cycles come and go with repeated broken promises of reform devolving into ever greater levels of corruption, there seems to be nobody that is going to ‘do something’ about the current situation.

At this point of apparent hopelessness, there is a fundamental insight that has the power to set you free from the shackles of dependence and create a life of power and prosperity.  This insight is that the key question is not one of what ‘they’ need to do; it is one of what ‘you’ need to do.  The future of each individual person is the aggregated total of the decisions that they make over an extended period of time.  While the actions of others (or lack thereof) may be eternally frustrating, they are not the determinant of our future.  It is what we decide to do and decide not to do that creates our future wellbeing.

This is the fundamental reason why it is so important to build a personal portfolio of success.  This can take the form of passive investments such as income properties, a small business, multi-level marketing opportunities, or any of the many ways that are available to earn income and create wealth.  By taking personal control of your financial future, it will create the freedom to pursue your dreams and live your priorities.  Many people will have their future dictated by the actions of Washington and the machinations of Wall Street, but you have the power to write your own destiny.  Using this power wisely is one of the greatest legacies that you can create for posterity.

 

Knowledge and power are both deep and influential topics.  There is a popular sentiment that knowledge is power.  This sentiment stems from the fact that people who are educated and skilled have much greater opportunities to influence the shape and direction of their lives.  As time has moved forward, knowledge has become increasingly specialized and increasingly dispersed among a larger number of people.  In short, the power of knowledge comes from specialization and that specialization is no longer concentrated in a handful of metropolitan areas.

This is where the impact of politics creates problems.  Political solutions are frequently created and implemented by a central authority.  This can be a city council, county agency, state, or the federal government.  In each case, a council of experts are gathered by the political authority to study the situation and make recommendations.  In some cases, public agencies become hotbeds for corruption and influence by corporate interests or unions.  These circumstances make for popular news stories and special reports. However, there is a deeper problem that is largely unknown and frequently unreported.  With the world becoming increasingly complex, knowledge becoming more specialized and the people possessing that knowledge becoming more dispersed, it is literally impossible for any central agency to possess enough knowledge to create an optimal solution.

Over time, this problem has grown in scope and impact since the number of government representatives has stayed the same while the population and size of government has grown.  Consider that the the US legislature currently has 100 Senators and 435 Representatives.  This total has not changed for a very long time, so with each passing year the number of people represented by each person in congress increases.  Similarly, the political power of each person in congress increases.  With this trend of more power becoming concentrated in the hands of government, the impact of mistakes becomes increasingly stark.

It is important to consider that when the number of people represented by an individual increases, it becomes impossible to individually know a significant number of the people you represent.  This means that elections become an exercise in marketing and messaging instead of campaigning to people whom you personally know.  This means that large amounts of money are required to spread a message to many people whom you need to influence in order to win the next election.  This phenomenon results in shifting influence away from individuals, toward large contributors such as special interest groups, corporations, and unions.  Even in an environment that is absent of overt corruption, the influence of large organizations will necessarily trump that of individuals.  In most elections, there is a small field of candidates and none of the candidates completely represents the interests of any voter … people simply vote in favor of the person who they believe are likely represent their interests the most closely.  Even then, most elections result in between 1/3 and 1/2 of the electorate (i.e. people who voted for the opposing candidate) are unrepresented.

Thus, the question becomes one of the best way to create results in a world where knowledge is specialized, that specialization is widely dispersed, and decision power is becoming concentrated.  The current situation is one where people in power have far too much power, and create initiatives that are (supposedly) well intentioned, but fail to produce results.  One way to address this issue is to increase the number of representatives in government.  Another option is to decrease the size and scope of government so that market-based solutions emerge.

The notion of increased representation in government is appealing to many, due to the intellectual appeal of legislators who are members of our community.  This is most certainly preferable to the current situation, but still carries the implicit problem of trying to make centralized decisions in a world where knowledge is specialized and dispersed.  It is possible that this these centralized decisions will be incrementally beneficial to those who are currently under-represented, but will not address the fundamental problem of centrally planned solutions.

The idea of market based solutions is appealing to many in the business community, because it allows them more freedom to create products and services that can profitably benefit their customers.  The unique power of markets is that the dynamic process of trial and error allows for ideas and solutions to emerge from the specialized knowledge people possess, and is not constrained to a particular geographic area.  The aspect of markets that many people find unappealing is that the outcomes they create are not always the same ones that they personally desire.  Competition necessarily means that some people will be more successful than others.  Relying on voluntary charitable donations necessarily means less funding than would be available through a government agency that is financed with tax revenues.

The fundamental question that individuals must answer is not one of whether markets are ‘good’ or ‘bad’ … those descriptions are highly subjective, and lack intellectual depth.  The question is whether we prefer to pursue centrally planned solutions that we know to be sub-optimally effective, but are able to be directed.  In contrast to this is markets, where more products, services, and solutions emerge but results are produced that many people do not find desirable.  Fundamentally, the choice is between a sub-optimal solution that we can direct and a more optimal solution that we must allow to emerge.  The question of knowledge, power, and politics ultimately comes down to whether you value the ability to direct outcomes over the generation of greater output and opportunity.  The result of this choice is ultimately less important that the understanding that a choice must be made.

The great fallacy of utopia is quickly becoming revealed.  There is no perfection … only varying degrees of trade-off decisions.  We make these trade-off decisions as individuals, and as an electorate.  As each of us go throughout our lives, it is important to understand these decisions, and their extended implications on our personal, professional, financial (and political) lives.

 

In the 1989 movie “Field of Dreams” Ray Kinsella hears a voice whisper telling him “If you build it, he will come.”  As the story continues, the voice once again urges Ray to “go the distance.”  This serves as a fitting metaphor for the attainment of personal and professional success.  In the sport of baseball, going the distance is the term used to describe a pitcher who plays for all nine innings of the game.  In boxing, it refers to a fighter who continues for all of the rounds.  In the context of success, it is an appropriate term to describe somebody with the persistence to keep working for their goals until they are achieved.

The importance of going the distance is illustrated in many endeavors where it is easy to quit when signs of difficulty emerge.  When attending college, it is easy to walk away when your desired results are not achieved in a class.  When working in a job, it is easy to quit when things get difficult and seek more desirable circumstances.  When building a business, it is easy to become downtrodden by growth and cash flows that do not meet your expectations.  When investing for the future, it is exceptionally easy to allow disruptions such as tenant evictions or market corrections to derail your strategy.

However, in each of these cases it is critically important to “go the distance” and see your goals through to completion.  In the beginning, this must be done completely on faith.  The reason for this is because most worthy goals do not materialize immediately.  Achieving them requires the patience and maturity to visualize future success and make sacrifices so that it can be achieved.  This stands in direct contrast to the juvenile immaturity of popular culture that worships immediate gratification.

There is a simple, but profound way to measure your progress on the road of success.  By engaging in daily self reflection where you honestly assess whether you have done everything possible to create your vision of success in that day.  (Each person should have their own unique vision of success that guides this analysis)  If the self assessment is done honestly, it should regularly reveal actions and decisions that can be made differently in the future.  Over time, this will create a cycle of continuous self-improvement.

Once the result of your efforts begin to become apparent, it will build a series of success that compounds upon success.  The important part for most people is reaching this point where their achievements become visible and tangible.  This provides inspiration for future efforts and victories.  Most people never reach this point of vision, because they quit before any of their efforts produce results.  By a simple failure to “go the distance” it can trigger a lifetime of failure and disappointment.  By seeking the easy way out, it can create a downward spiral of wasted opportunity that is never regained.  Each person must make their own choices.  The question to ask yourself is whether you are willing to pay the price of success through persistent effort?

Fiscal Food For Thought

The current economic difficulties in Greece and Portugal have brought some very important realizations to bear.  The most pronounced is that nations (just like people) cannot spend more than they produce indefinitely.  As debt and deficits mount, there is a tremendous temptation to inflate the currency as a way of financing the deficits.  As confidence in the fiscal health of a nation wanes, the interest rate required on its debt will increase.  For countries that are members of an economic union, their membership could be placed in jeopardy.  Ultimately, what happens is that tremendous reductions in government spending must necessarily occur.  The reason for this is because taxes cannot be raised indefinitely without pushing out a critical mass of productive economic activity that plunges the nation into a perpetual downward spiral of recession.

The way that such profligate and irresponsible spending becomes commonplace for a government is when the political authorities use public resources to influence votes that keep them in power.  This create an ever increasing desire for more public spending so that the government officials can stay in power.  Furthermore, many corporations quickly learn that there are great rewards available if they successfully lobby the government to provide bailouts, favorable loans, or regulations that protect them from competition.  In some cases, businesses discover that they can reap greater rewards from lobbying the government than by engaging in normal business activities.  However, what happens if too many businesses attempt to support their livelihood through favors from the government?

 

With recent news overwhelmed by the financial difficulties of US state and national budget deficits, along with the continued financial difficulties in Greece, Spain, Portugal, and Italy there is a renewed focus on the impact of debt on national wellbeing.  This is especially important because most of the developed world is not far behind the major problems of these European nations.  The most important thing to understand about debt is exactly what it is, and by extension, what it is not.

Fundamentally, debt is a financial magnifying glass.  It will amplify whatever your current financial situation happens to be by the extent of your leverage.  For profitable endeavors, debt makes them more profitable by allowing the investor to expand the reach of his capital.  For example, if you can borrow $1,000,000 at 5% and earn an 8% return you would create $80,000 in returns while incurring $50,000 in expenses.  The $30,000 net profit would belong to you as the investor.  (So what’s the problem?)

But what happens if your forecasts are inaccurate?  If the same $1,000,000 that you borrowed at 5% only produces an income of 2%, you now have $20,000 of income and $50,000 of expenses.  This leaves you with $30,000 in losses.  Now let’s assume that you don’t have $30,000 available to pay for upholding your contract?  Who is going to come up with the difference?  (OK, now we see the problem)

If your name is AIG (and by extension Goldman Sachs, who was the #2 holder of AIG contracts) then the answer is simple . . . the taxpayer will pay for the debt.  However, the taxpayer does not have any money, since the government is running massive deficits.  Again, the answer is simple . . . create the money out of thin air.  In political circles, this is referred to as “quantitative easing’.

This begs the natural question of why anybody would be stupid enough to lend out to a borrower who cannot pay their bills.  The only way such an idiotic thing could happen is if a string of politicians create web of foolish laws that effectively forced the market into these bad decisions.  Only the most hardened of partisans could avoid the conclusion that rational people do not make loans of this nature unless the government steps in to assume all of the risk.  (The terms Fannie Mae and Freddie Mac should be coming to mind)

Getting back to the notion of creating pretend money, whenever the Federal Reserve ‘eases’ the money supply, it pushes more currency into circulation and devalues the currency already in the economy.  Thus, by a feat of financial magic a government that is so incompetent it cannot even pay its own bills can mystically satisfy its debts by reducing the purchasing power of every dollar in circulation throughout the economy.  This feat of financial magic is known in economic circles as ‘inflation’.

Now we come back to debt.  People who have borrowed prudently will find that inflation actually makes them wealthy by increasing the nominal value of what they own while the nominal value of what they owe to the bank remains fixed.  This phenomenon is especially powerful if the asset produces income from rents or dividends.  The most frequent example of this principal is rental property.  It is typically financed with fixed rate debt and produces rents for its owner.  As inflation rolls through the economy, its value grows, its rents grow, but the mortgage payment remains fixed.

Ultimately, what we see is that debt in and of itself is not inherently good or bad.  It is simply a magnifying glass that intensifies the current situation.  When used prudently and intelligently, it can amplify investment returns and protect investors from inflation.  When used foolishly, it can plunge a person into inescapable debt and perpetual servitude to interest payments.  When used by governments it is an implement of massive financial destruction that lays waste to entire generations for the simple purpose of satisfying the egotistical caprices of those in power who wish to be re-elected by spending public resources.

Debt has uncovered the great hubris of people, business, and government as each assumed that their ability to pay would perpetually expand.  This induced them to spend in excess of what they produced under the assumption that there would be a better future that allows them to make good on their obligations.  For some, this fictitious salvation has seemed to be achieved in the form of a ‘bailout’.  However, there is a finite limit to how many bailouts can be undertaken.  When the ability of government(s) to subsidize irresponsibility reaches its ultimate limit, the harsh side of reality will come to bear.  This reality is that many people and countries across the globe have been spending in excess of what they produce for many years.  Some have attempted to save themselves by asking their ‘rich uncle’ (frequently named Sam) to rescue them from their own idiocy.  The fundamental problem with this fantasy is that the rich uncle cannot rescue everybody.

For those of us who wish to enjoy a life of personal, professional, and financial success it should be obvious that nobody will deliver it except for ourselves.  The government can make all the promises in the world, but none of those promises can be kept without resources.  (Incidentally, attempting to defy the laws of economics by granting entitlements in the midst of deficits is akin to creating a law that declares gravity illegal.  Regardless of what a self-obsessed plutocrat writes down on a piece of paper, reality cannot be legislated away.)  The great promise of government has been little more than a great lie to lure unsuspecting fools into sheepish support of self-important politicians.

The only future that awaits is the one we create for ourselves.  The world is splitting into those who create their future and those who depend on somebody else for their well being.  The lot of those in the dependent class cannot go anywhere but down.  The prospects of those who create their own prosperity are fueled by historic opportunities that unfold on a daily basis.  The only question that lies before each of us is which path we will take.  One is easy and one requires disciplined work.  One will create economic bondage while the other creates financial freedom.  The choice is ultimately up to you.  Which path will you take?

 

To people who have attempted business or investment ventures, they quickly discover that simply doing what everybody else does is a recipe for mediocrity.  Both the business and investment world are very competitive.  Simply handing your money to a stock broker cannot be expected to generate exceptional returns, because every other broker is working to find great deals for their clients while yours is trying to find one for you.  This results in competition for deals that quickly dissipates opportunities for exceptional gains.  Similarly, opening a business that is similar to other businesses in the community can only be expected to produce average results, since you will be splitting the customers interested in your products and services with all of the other businesses in the local area.

To achieve exceptional success, we must assemble different pieces of value together and create a new investment or business.  We like to call this process “assemblation” and are looking toward this as a way to create differentiation.  As an investor, we practice assemblation by finding combining value drivers similar to the way that a baker combines ingredients.  When creating a business, there is more value to be found from a ‘complete solution’ than for simply providing a part of what you clients need.  When creating a real estate deal, there is more value to be found by coordinating the purchase of a distressed property, rehabilitating the property, and marketing it to tenants than simply buying one that is rent-ready.

Once the power of assemblation is fully internalized, it becomes immediately apparent that we must find ways to create more value in all that we do if we seek to be successful.  Even people who work a traditional job can practice assemblation in their career.  Most people who work in a particular job have a defined job scope and set of responsibilities that they are paid to perform.  Unfortunately, very few seek out ways to deliver value above and beyond that which is defined in their job scope.  By bringing-in new ideas and using your job scope to create more value for your employer, it will increase the importance of your services as an employee.

Thus, astute investors and businesspeople use the principles of assemblation to assess every opportunity that they see.  A property is not viewed for what it is, but what it could be.  A new business is not evaluated based on how many other people are doing the same thing, but on how the current industry can be improved by assembling pieces of value into a complete solution.  An employee should not analyze a job based solely on how much they will get paid, but on how much they can learn, and how much they can grow.  By practicing the art of assemblation, it changes out viewpoint on all things that we experience in our life.  It takes emphasis away from ‘how can I do my job’ to ‘how can I create value’ . . . this distinction is very important for people that want to create a lifetime of success through assemblation.

Another extension of the assemblation principle is to actively avoid situations where you cannot create value in favor of situations where you can.  For investors, this means to seek ‘deals’ where you are a part of creating value instead of ceding control to an investment manager.  If investing in the stock market, assemblation means to seek opportunities for providing needed capital to small businesses or investing in market indexes instead of trying to piggyback on fund managers.  If investing in real estate, assemblation means finding low priced properties and improving them so that they can be rented to tenants instead of simply trying to ‘flip’ properties without adding any value.  If job shopping, you can practice assemblation by looking for opportunities with ‘head room’ for growth of your job scope.

In the end, our world is quickly evolving into one where success is only available to those who practice excellence.  The days of expecting success after ‘serving your time’ are long past.  We must assemble success if we wish to enjoy a comfortable life and retirement.  We must practice assemblation in our business and investing activities to create value that others have left out.  By mastering this art, it will place you in the top tier of achievers, and place you at the precipice of success.

 

One of the popular sayings in Finance is that “Money Never Sleeps”.  This is a reference to the fact that when money is placed at work for you, it works relentlessly in your favor.  Money placed at interest accrues minute by minute, day by day, week by week, and year by year.  Regardless of whether you are awake or asleep, money placed to work on your behalf continues to produce benefits like a faithful servant that never tires and never rests.

In this way, it is quite possible to create a personal financial empire where the “sun never sets” . . . similar to what was once said of the British Empire.  The important part of creating this kind of affluence is to gain ownership of assets that produce value without the necessity of your time.  In this way, each additional dollar that you place in your service will work tirelessly to make you wealthy.

The other side of this phenomenon is that when money is working against you in the form of debt, then it tirelessly and relentlessly destroys your wealth.  Each passing day brings a larger bill that will be due in the future.  As we can see, money has the power both to create and destroy our financial affluence.  It is a tool . . . a powerful tool that is blind to what ends it is serving.  It makes no distinction whether you are well meaning or evil hearted.  It is because of this blind power that is implicit in money that we must endeavor to understand it more completely.

Consider that not all things you do to make money will help you to become wealthy.  Some activities are extremely time intensive, extremely risky, or both.  Some of these things can be done for a short period of time, but if they are carried out indefinitely, it will be extremely difficult to achieve happiness.  Also consider that not all debt is necessarily destructive.  If you can borrow for a low rate of interest and earn a higher rate of return through business or investment dealings, you have made everybody involved better off.

In the end, mastery of money is ultimately about mastering ourselves.  To place money in work for our advantage, we must become educated and seek out opportunities.  To avoid becoming a servant to money, we must learn to control our desires and delay gratification until it is within our financial means.  By accomplishing this mastery over ourselves, each of us have the ability to create a future of wealth and abundance for both ourselves and the people we care about.

 

A recent report from Reuters reflects reduced economic growth estimates by economists, predicting a 2.7% real GDP growth rate for all of 2010.  Concerns over this slow recovery include the fact that this slow growth is insufficient to make a significant impact to unemployment.  This estimate represents a 0.2% reduction versus last month and a 0.6% reduction versus the estimates released in June.  The reality slowly sinking into economic forecasts is the fact that incentives in the United States are not aligned to spur growth.

The looming expiration of tax cuts from 2001 and 2003 stand poised to raise the tax liability for millions of Americans.  In addition to this, the lending environment with banks remains precarious, as the Federal Reserve is committed to maintain Fed Funds rates near zero so that banks do not loan out their excess reserves and create inflation.  However, this policy is also causing banks to hold onto reserves and borrow short at near-zero interest rates to purchase treasuries for arbitrage profits.  Until this imbalance is corrected, lending will continue to be excessively tight.  However, relaxing the artificially low interest rates is likely to push the economy back into recession.  Thus, the US economy is stuck in an uncomfortable reality with high unemployment, weak recovery, tight lending, and leadership that is afraid to make the tough decisions that will re-align incentives to create long-term growth.

 

When most people think of “creating wealth” it conjures up grandiose mental pictures of fabulous riches and exotic celebrities.  However, the term “wealth” simply refers to owning valuable assets.  There is no particular reason why normal, regular people cannot create wealth using nothing more than their current income and intelligent decisions.  The principal barrier to achieving this goal is a mindset many people hold that “It takes money to make money” and that they do not have enough capital to begin making money.  However, there are two problems with this excuse.  The first is that there has never been a time in the history of mankind where it was easier for a person of limited means to create wealth because of technology.  The second is that people who discipline themselves can slowly accumulate capital reserves until they have enough saved up to begin making money.

Let’s begin with the first notion that there has never been a better time to create wealth.  Consider the fact that the internet now allows people of very modest means to acquire the same information as wealthy investment houses.  This technology for information and communication allows investors to find deals, establish relationships with business partners, and manage a portfolio of business and investment interests while living somewhere different from where their business is taking place.  By learning how to leverage the advantages of technology, it can allow you to build a lifetime of scalable wealth.

Now we get to the problem of not having capital for investment.  It is certainly true that some people can simply draw from a trust fund to invest, but most of us need to save before we can invest.  This is where normal people possess true power to influence their financial future.  In the short-term, most of us do not have much influence over our income.  What we earn is more or less, what we earn.  However, we have tremendous influence over how much we spend.  By becoming disciplined and always spending less than we earn, it will result in the perpetual building of capital for investment.  It is important to note that we should spend less than we earn and not earn more than we spend.  The importance of this perspective is that our earnings should rise before our spending does.  Some people spend based on their expectations of future income.  This is a near-certain recipe for excessive debt and financial difficulty.

The way that everyday people can create tremendous wealth is by becoming educated in the fundamentals of business and investment success, spending in a disciplined manner for the purpose of building investment capital, and then prudently investing their capital.  As time goes by, the returns from your investment can be re-invested to continue driving the total value of your wealth upward on a compounding growth trajectory.  Eventually, the growth and income from your business and investment interests will exceed the amount of savings you add each year from living within your means.  When your wealth grows to a sufficient size, it will generate annual returns that exceed your yearly spending.  This is a point that many refer to as ‘financial freedom’ since you have the ability to live from the returns on your investments and no longer need to work at a job for your livelihood.  (You may still choose to work, but it will be a choice and not something that is done out of necessity)

Consider that every wealth legacy started in this fashion.  At some point, there was somebody who made sacrifices to fund investments or build a business.  Their successes were only possible because of the discipline to sacrifice for the sake of future benefit.  In many cases, this has created a wealth legacy that benefited future generations in both their family and the world at large from the many charitable contributions that have come from wealthy families over the years.

There is a great temptation by many people to exclusively look at the symbols of wealth and not the source.  Large homes, flashy cars and trendy clothes are what wealth enable you to purchase, but the fundamental basis of all wealth comes from discipline, sacrifice, intelligent decisions, and prudent investment choices.  By mastering these fundamental principles, you will be able to create a legacy of wealth for yourself and for future generations.  There has never been a better time to create wealth than right now, so take action today and reap the benefits tomorrow.