The Right Mindsets To Build Wealth Like the Ultra Wealthy
Recently, my wife and I got away for the first time since our third kid was born. We were laying on a beach soaking up some sun when asked me what I was listening to.
“I’m listening to Grant Cardone’s 10x Mentor. It’s really inspiring. This guy was like a drug addict for ten years and now he’s a billionaire.”
She rolled her eyes and mumbled something about always thinking about work. Then she asked me why I was so obsessed with billionaires. She’s right, I AM kind of obsessed with studying billionaires and trying to understand what it is that allows them to turn the same 24 hours into way more economic impact than the vast majority of us. Below are 5 key attributes I’ve seen in every person who is ultrawealthy:
The Ultra Wealthy Delegate and Outsource
Most folks think about hiring someone once they can afford it. The ultra-wealthy think about how they can’t afford NOT to outsource work to others. If you want to make $1 million per year and you work 2,000 hours a year, you have to make $500/hr. That means that any work you are doing that can be outsourced for less than $500/hr must be, or you have to work more. But there’s only so much more time you can give.
As part of this delegation mindset, the ultra-wealthy know where they add value and where it’s not worth their time to try to become an expert. They are smart and hardworking and could become proficient at almost anything if they put their mind to it. But it’s not worth the TIME it would take to become proficient. Time is their most precious resource. They only have 24 hours in a given day, and they need to spend it maximizing their earnings and outsourcing everything else. Rather than watching a YouTube video of how to fix the leaky faucet, they hire a plumber. Rather than trying to understand a complex legal issue, they hire a lawyer. Rather than trying to follow the Fed, economic reports, earnings releases, tax code changes they hire a financial advisor. They know they need to leverage other people’s time in order to make their time more valuable.
The ultra wealthy use other people’s money to magnify their returns. Just about every billionaire I’ve ever studied has used this concept of “other people’s money” in order to increase the ROI on their own capital. Many of the ultra-wealthy got there by investing in real estate. The reason real estate is so lucrative over long time periods is because you can use other people’s money (i.e. the bank’s) to buy a property that is 4-5x bigger than you can actually afford with your own money. But it’s not just real estate. Warren Buffett used insurance “float” (premiums that are paid in that don’t need to be paid out in claims until much later) to magnify the returns on his equity. Elon used VC investors’ money. Ray Dalio used money from pension funds and insurance companies that invested into Bridgewater. As the old saying goes, it takes money to make money, but there is only so far your own resources can go. Similar to leveraging other people’s time, to create multi-generational wealth, you also have to figure out how to leverage other people’s money.
The Ultra Wealthy Focus on Scalability
Businesses that can’t scale have limited upside and can be demotivating for owners. They can keep growing but margins don’t expand. They require more work as they get bigger, but it often doesn’t translate into substantially more cash flowing through to owners. The ultra-wealthy recognize when a business is not scalable, and they switch vessels. In order to get out of the business of trading your time for dollars you need to be in a business that is scalable. Then you can leverage other people’s time and money to scale it more rapidly.
The Ultra Wealthy Think in Decades Rather Than Years
Jeff Bezos has frequently mentioned the advantage Amazon has by planning out 7 years rather than the typical 2-3. Many of the ultra-wealthy think in even longer time horizons than that though. I can’t even count the number of conversations I’ve had where someone says “I wish I had just bought XYZ property 15 years ago…” but why didn’t they? Because it wasn’t going to be life changing at the time. Buying a property that throws off $1000/mo of cash flow doesn’t do much for you right now, but in 30 years it probably will. When you’re 25, it’s really hard to think about what you need to do today to set yourself up for when you’re 50. It seems so far away, the benefits of those decisions are too intangible. This is what causes people to chase the next hot thing, in search of life-changing profits that often results in losses slowing multi-decade compounding.
On an inflation-adjusted basis, Warren Buffett was a multi-millionaire by the age of 27, yet he has made 99.9% of his net worth since the age of 59. How is that possible? He was thinking in decades when he was 27. Now that he’s in his 80s, he is often talking about how to ensure Berkshire is setup for the next 50 years after he’s gone. This concern for what things will look like many decades in the future occupies a substantial amount of his brain space.
The Ultra Wealthy are Obsessed with Learning and Improvement
You might be tempted to think that since someone is a billionaire they obviously have it figured out and don’t need to learn anything new. The reality is that’s just not how any of them think. They not only seek out learning but are downright obsessed with it. While it makes for a very boring marriage, Bill Gates is said to have read 13 books on a one-week vacation with his then wife. Elon Musk taught himself rocket science by reading textbooks. Charlie Munger has said that in his whole life he’s never met a wise person who didn’t read all the time. Some might even be surprised to hear that, despite how busy they are, the average public company CEO reads over 50 books per year!
Nowadays though, the medium of information consumption has expanded to include podcasts, blogs, newsletters and even (gulp) certain threads on Twitter. But the bottom line is the same: The ultra-affluent are constantly consuming new information, seeking to learn from those smarter than them and figuring out how to apply this new info to their life.
The ultra-wealthy come from all different walks of life, different industries, different cultures and different times in history. The vast majority share many of the same mindsets or mental models, for how to grow their wealth. While not everyone may be able to adopt all of these mindsets, incorporating some of these principles into your own approach to wealth creation can be highly beneficial and increase your chances of achieving financial success and building multi-generational wealth.