In this way rich earns money without exchanging their time for money
Princess Leia owns an apple farm.
Luke is the CEO of the farm.
A team of one hundred Rebel Troopers works the farm.
Rebel Troopers earn $20 per hour worked.
We use this formula to calculate their income: Paycheck = (hourly pay) x (hours worked)
If Troopers work 40 hours per week, that would be 20 X 40, which equals $800.
Rebel Troopers are commonly encouraged to save their extra money by depositing it into a bank.
Their investment follows this equation: Savings benefits = investment X annual interest
The problem with “the paycheck formula” or the “bank-savings formula” used as mechanisms to wealth is that the variables are limited and out of the Troopers’ control.
- Troopers cannot work 3,000 hours in one week.
- Troopers cannot force Luke to pay them $1,000 per hour.
- Troopers cannot ask the bank to give them a 3000% return.
There are only 24 hours in a day and only a few active years in a lifetime.
Solution?
Young Troopers are told to go to college so they can increase their PER HOUR rate from $20 to, say, $100 or $300.
The problem remains because TIME CANNOT BE SCALED.
So, how do the rich earn money if it’s not exchanging their time for money?
The rich exchange scalable units of value that are not linked to time.
Let’s return to Princess Leia’s Apple farm.
Leia’s income equation is: Profits = Profit per Apple X Apples Sold.
This is where things change.
Princess Leia can SCALE a part of her income equation. There are millions of people on the planet that want/need apples.
Additionally, Leia can CONTROL her farm operations. She can instruct Luke to play with pricing, sourcing, and other operations of her farm.
So if Leia sells 100,000 apples at $0.50 profit each, she just earned $50,000.
- If Luke does a good job and improves efficiencies, Leia can increase her profit per apple from $0.50 to 0.60, turning an $10,000 additional income.
- If they have a good season and trees produce 10,000 more apples, she just made $5,000 more.
- If Leia can buy her neighbor’s farm, she can duplicate her income in a matter of months.
This is a very simple example, but the same scalable variables exist in everything Princess Leia works for which usually come from these three main categories:
- Owning a Business
- Real Estate
- Stock Investing
Notice, these are NOT earned income (job).
There are seven common streams of income:
- Earned income
- Profit income
- Interest income
- Dividend income
- Rental income
- Capital gains income
- Royalty income
All of these, except earned income are scalable and controllable in one way or another.
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