1 – Fools and their money are soon parted:
In the digital landscape, you will see many people selling courses. To put it bluntly, the three so called evergreen niches are generally: 'how to get rich quick', 'how to attract a supermodel partner using THIS specific pick up routine', and 'how to get a six pack in six weeks'.
This is a simplification but is not far off the mark.
Of course, there are some experts in certain fields providing specific and high quality information at a reasonable price – but this is the exception rather than the rule.
Possibly the most lucrative evergreen niche is “How to Get Rich Quick” and by the way this is not a new phenomenon – it has been going on for many years before the Internet.
However, the scale provided by the Internet means that it is more lucrative today than ever.
For example, if you are selling a $1000 course, you need to sell 1000 courses to generate a revenue of $1MM. You have to give a chunk to Uncle Sam, or you can set up shop in a more tax friendly nation if you are not an American citizen.
Using ad campaigns on social media platforms like Facebook and YouTube and getting it out to millions of people, you can see why some have raked in the cash by selling thousands of these courses.
So remember that just like the Wild West, there are many scammers who want to part you from your money. If it sounds too good to be true, it is.
2 – Understand what money is:
Money of course has specific characteristics, but to simplify money is just the mechanism by which we transfer time and wealth. Provide value at scale by applying leverage (code, people, capital) and you will become rich.
3 – Money can't buy happiness:
Having enough money to be financially independent and avoiding financial stress is important though – studies have actually shown that financial stress can temporarily lower IQ. Not good.
In terms of happiness, some prefer to view it using the lens of excitement = happy, and boredom = sadness. This is generally more practical, as doing things that you enjoy and are aligned with some sort of purpose leads to a greater level of fulfilment (or happiness).
4 – Beware of the Diderot Effect:
In the words of Warren Buffett:
“If you spend money on things you do not need, soon you will have to sell things you need.”
Now, we can probably think back to numerous occasions where we've bought something, and cringe thinking about how unnecessary the purchase was, and more importantly what he true opportunity cost is if it had of been invested instead.
We of course live in a consumer driven culture, whereby material possessions are the Holy Grail of one's achievement in life. This is starting to shift with the emergence of trends such as minimalism and FIRE, but it is still prevalent in popular culture and advertising.
In terms of consumer goods, there is an interesting social phenomenon called the Diderot Effect.
It is named after the French philosopher Denis Diderot.
Diderot was the co-founder and writer of Encyclopédie, one of the most comprehensive encyclopedias of the time.
Diderot lived in poverty for most of his life, but all that changed in 1765 Catherine the Great, the Empress of Russia, heard of Diderot’s financial troubles and offered to buy his library from him for £1000 GBP (which is the equivalent of around £178K today).
Suddenly, at the age of 52, Diderot had money to spare.
He acquired a new scarlet robe. And that's when the spiral began…
He noticed this is beautiful robe was out of place when surrounded by the rest of his common possessions.
According to Diderot, there was “no more coordination, no more unity, no more beauty” between his robe and the rest of his items.
He felt the urge to buy some new things to match the beauty of his robe. He replaced his old rug with a new one from Damascus. He decorated his home with beautiful sculptures and a better kitchen table. He bought a new mirror to place above the mantle and his “straw chair was relegated to the antechamber by a leather chair.”
These reactive purchases have become known as the Diderot Effect.
The Diderot Effect states that obtaining a new possession often creates a spiral of consumption which leads you to acquire more new things. As a result, we end up buying things that our previous selves never needed to feel happy or fulfilled.
This spiral of consumption is one of the reasons why many former Sports stars go broke after they retire. When they got their big break and signed their first contract, they had more money than they knew what to do with. Then, they buy a huge mansion with a colossal mortgage and numerous Super-cars. Their lifestyle expenses then inflate to obscene levels such that once they retire and lose their main income source, they go broke. They were rich, but they weren't wealthy.
5 – Avoid the Lifestyle Inflation Trap:
Speaking of lifestyle inflation, this applies to mere mortals and not the Sports stars we see on TV.
In his best seller The Four Hour Work Week, Tim Ferriss, examines the concept of 'the New Rich'.
The essence is the following: “Who is better off: the person on $40K per year but working 30 hours a week, living well within their means, investing aggressively and spending the rest of their time pursuing other passions, or the Investment Banker on $400K working 100 hours a week, sacrificing their long term health, and living a very expensive lifestyle.” Of course, this is a simplified example: the Investment Banker could of course come from a wealthy family and have an eight figure inheritance, there are exceptions – but generally lifestyle inflation is a trap and something to watch out for.
6 – Money is not necessarily the route of all evil:
It is possible to become make a lot of money ethically – you don't have to turn into a super villain to obtain it (although it does help!). But if you view money as evil, it will probably allude you forever.
Money just exacerbates what type of person you naturally are.
If you a decent person without lots of money, at your core, you're still a decent person in the long term with lots of money. In the short term you may see some people change for worse, but over the long term you'll find they're fairly consistent.
If you are a…not so decent person without lots of money, you'll still be a not so decent person with lots of money.
Also, unless someone is a genuine psychopath, humans are generally not completely “evil” or “good” anyway – it is a complex and dynamic situation, where the very definitions of good and evil vary depending on culture and period in history.
So, don't view money as completely evil, otherwise it may prove elusive.
7 – Remember the Goal is Wealth:
Finally, something that the wealthiest individuals understand, is that money is emotionless. It doesn't care how hard you work, it doesn't care about the sacrifices you make to obtain it, it doesn't even care if you don't buy avocado toast, it has no emotion.
It is more about realising that the real goal is to acquiring assets and diversifying to create genuine wealth, and having sufficient cash flow to maintain whatever sort of lifestyle you prefer.