Ep 334 | A Simple 4 Part Formula for Wealth

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Today I want to get better at wealth. We talk around wealth quite a bit here at the No Days Off podcast. We've got a lot of hard-charging entrepreneurs individuals looking to grow in their respective worlds, grow their relationships, grow their health, grow their businesses, and grow their finances, grow their wealth. And so we focus a lot, a lot of time on this particular subject, and I'm always looking for ways or strategies to simplify the, the path of developing or growing your wealth. And I recently came across a book written by a guy I like a lot. His name's Scott Galloway. And he, he just recently came out with a book called The Algebra of Wealth. And in The Algebra of Wealth, he gives a really simple formula for financial security. And I want to run through that formula here today. I think it's something we can all have top of mind. We can literally turn today's episode off and put into practice immediately. So Scott's formula for wealth Wealth equals focus plus stoicism times time times diversification. Wealth equals focus plus— now think parentheses around stoicism times time times diversification, end of the parentheses. There's an interesting word in there, right? Stoicism. We're going to talk about that here in a moment, but let's break down these variables, these 4 variables that make up wealth. So he says first, wealth equals, right, focus. What does he mean by focus? Here's what Scott's talking about. He thinks that people conflate a lack of focus with a lack of talent, and intelligence and talent are correlated with success, but the strongest signal of future success is your ability to persevere, is your ability to be resilient. It's what, it's what we would call here at No Days Off Grit. Grit is going to be the strongest signal of your future success. Now, what Scott points out is when he's talking about focus, he doesn't necessarily think you should focus on your passion. As a matter of fact, he's kind of an anti-passion guy. In other words, you get this advice sometimes like, go follow your passion, go get a career, you know, that you're passionate about. He'll tell you that people who tell you to follow your passion are already rich. Instead, you need to follow your talent. Be great at something. Be relevant. Be admired. Get paid well for something. And when you're great at something, it's going to make you passionate about whatever it is. So as it pertains to focus, Scott would say focus on putting yourself in a position to be financially successful first, and then again, You'll figure out the passion from there. Also, focus on other things that impact your wealth. One thing he talks around is focusing on your relationships. Your family and your friends are, you know, incredibly essential to your long-term happiness. But the most important relationship that you have to be focused on is your spouse. It's, as Scott would outline and research would show, the most essential economic decision you'll make is who you in fact decide to partner with and who you decide to have kids with. The net worth of married people grows 77% larger than that of single— of a single person. So marrying the right person and then investing in that relationship every day, you know, there's lots of upside of course to that, but from a financial perspective, from a wealth-building perspective, It is massively— is majorly important, right? So focus, focus on what impacts your wealth. Focus on creating income and what it is that you can be great at, and passion will come. Focus on your relationships. Now, wealth equals focus plus— and then it's multiplication of these next 3 things— stoicism. Bottom line, determine what you can and can't control. As Scott would tell you, you can control your reactions to temptation. And what is temptation? It's really just a lack of discipline, a lack of discipline that undermines your economic security. That's because our society is one of super abundance. There are literally billions of dollars spent every year on ways to separate you from your money. Get on Instagram, you know what I'm talking about. Drive by a billboard, you know what I'm talking about. Turn on the radio, you know what I'm talking about. The idea that you are going to be peppered non-stop with ways to spend more money means that you've got to have control over how you're going to react, how you're going to react to these temptations. So Stoicism is about remaining calm in the face of temptation. It also is about having good character. Succeeding in life is a lot easier if people want you to succeed, and people are going to want you to succeed if they like you, if you have good character, if you have high morals, if you're kind, right? So economic security is impacted by all of these things, and your ability to avoid temptation is incredibly important. Now, time. Time is the next thing that Scott mentions that's multiplied by stoicism. Time is something we've talked about here quite a bit because we refer to Warren Buffett and Charlie Munger quite often. Time is simply your ability to invest for the long term. The long term is our ally, and the short term is really our nemesis, right? So you've heard about compound interest many a time here. Albert Einstein supposedly said that compound interest is the 8th wonder of the world. But our brains are not really wired to understand this, right? And why is that? Because when you were in in your 20s, you looked at your mid-40s as such a long time away. It was almost an irrelevant future. And now, like for me, you know, 25, 45 felt like an incredible distance. Now I'm 45, right? We're not wired this way. So long-term is our ally, short-term is our nemesis from a wealth-building perspective. The power of compound interest. We don't have to run through it. You all know it. And compounding, by the way, is not just a financial thing. The most important returns in life come from, come from compounded effects of our investments over our time, over time. And whether that's in our finances or it's in our careers or it's in our relationships or it's in our hobbies. So change the time scale of your life and you change your life. Lastly, diversification, and it means exactly what you think it means. Scott talks about diversification, uh, as you know, the, the standard— make certain that your money is spread across a number of different investments. So he would say Plan A for financial security is being great at doing something the market values highly. So Plan Plan A for financial security is make a lot of money in your job and then leveraging that income or equity in a business to, to build wealth. That would be Plan A squared. Plan A squared are your investments. And with investments, you're not focusing like you are on your job— focusing in the sense that concentrating all of your dollars— focus is actually avoided here. You want to diversify and be sure that your time is not spent tracking or trading your investments so it doesn't distract you from what should be your source of income and your savings. So investing over the long term pays out. There's going to be dips, as we know. There's going to be highs and lows, which is why diversification is so important. So bottom line here, Scott says wealth equals focus. So your ability to focus on what drives income and focus on your relationships plus stoicism, your ability to remain calm and not get sucked in to spending your money by the machine that's out there to part— have you part from your money. Stoicism times time— play the long game— times diversification— get your money allocated across multiple assets so as to limit risk. And again, let time play out. I love this equation. I want you to think about this equation today and figure out where are you not performing at the level that you probably should be. Is it in focus? Is it in your ability to remain calm, stoicism? Maybe it's your short-term mindset versus long-term, or maybe it's, you know, the diversification or lack thereof. Wealth equals focus plus Stoicism times time times diversification. One thing you could do is rank where you stand on each one of these respective areas from, say, a scale of 1 to 10 and measure that today. So on focus, with respect to the, you know, my definition of focus here, 1 being I have none, 10 being I am absolutely focused on my income, my job, and I'm focused on my relationship. Where do you fall? Focus Plus, and then rank yourself in stoicism, in time, and diversification. Figure out what that math looks like today, jot it down, make a plan around improving your score, and come back in 3 months or 6 months or whenever it may be and see where you land. That's all I have for you today, the No Days Off podcast. Thank you so much for listening, and remember, every single day brings a new opportunity to get better. So let's get after it.