Although it may sound cryptic, the words above are the key to one of the most important breakthrough one can have in this lifetime. I know these are big words, but I stand by them.
The most affordable way to generate value is to sell your skills. Most of the time there is an immediate transaction and value is fluid and visible. If you work for someone, you get paid. As simple as that.
You can improve this process in a few ways. You can improve your skills, and that will generate a higher payment. You can choose rare skills, that are in high demand, and, again, generate a bigger payment. You can also negotiate your position and talk your employer into giving you more money. Or you can choose employers who are more generous.
By “delegating capital” I understand buying stake in other companies, investing in startups, providing liquidity, etc. It’s a process in which you are not selling your skills, you just give access to your capital to other people. So basically, when you delegate capital, you are empowering other people to generate value for you.
You can own capital in many ways. You can inherit it, if you’re lucky. You can borrow it, if you’re very risk prone. You can accumulate slowly, by selling your skills (my favorite way). You can even win the lottery (supposedly, you should also have a bit of financial education for that, in order not blow all those millions on parties and luxury).
The Mindset Shift
Like I said, going from selling skills to delegating capital is one of the biggest breakthrough you can have. But it requires a very significant mindset shift.
We are wired for survival, so our first reaction is to sell skills. We need food, we need shelter. In this process of selling skills, once we acquired security, we tend to stop. We’re not going further. Instead of shifting towards delegating capital, we tend to increase the safety level, slowly shifting into comfort and luxury. All the extra money we can make after reaching a certain lifestyle safety goes into more lifestyle improvements, and very little, if any, into capital accumulation.
This mindset is very disempowering. Although it seems it gives us a better life, it just creates a more comfortable cage.
And that’s because the selling skills process is time bound. When we sell skills, we’re also selling our time. And that’s a very scarce resource.
On the other hand, if we are delegating capital, even if the returns aren’t as fluid and as visible like when selling skills, we’re freeing the scarcest resources of all: time. If we can give other people access to our capital and empower them to generate more value, in exchange for that, we’re free.
This is a very difficult jump, and very few people are actually prepared to make it. Because it really goes against our survival instincts. It asks us to wait for a future payment, although we already provided the capital, lowering the fluidity of the value and generating friction. It forces us to mitigate risk. It imposes a humble lifestyle (by favoring capital accumulation over lifestyle improvements).
And yet, once you made that jump, and solve the free time anxiety that comes with it, life will suddenly be very different. In a good way.
You’ll be free.