Ladders of Wealth Creation; Future of Events; Educating Kids #41
Suthen's newsletter on the future of work, building businesses and financial independence
Happy Monday!
This week I cover the topic of wealth creation and the different ladders we can take to get there. Each ladder has its own risk/effort/return profile.
I also launched my podcast with Ana Fabrega on how we should think about our children’s education. This one is very timely as I’m sure there aren’t a lot of summer camp options for parents during this time. Check it out on Spotify or this direct link here.
🧗♀️ Ladders of Wealth Creation
There's a certain archetype that I see among entrepreneurs - both successful and unsuccessful ones. They inadvertently have prior experiences that they can point to when talking about their life story.
As I speak to business owners on a daily basis, this persona has become increasingly apparent to me. Nathan Barry sums it pretty well in his post on the ladders of wealth creation.
The younger entrepreneurs simply had the opportunity (or were forced to) figure this out at an early age.
Over time, I believe the ladder for wealth creation has just become more accessible (anyone can work anywhere) and consequently more competitive (you need to compete with a global audience).
Making money and building wealth is a skill unlike learning how to play the piano or becoming proficient at a sport.
Like building any other skill, you need to make a trade-off. This may come in the form of less social time, sleep, attention to your health and etc.
The ladder of wealth creation goes something like this.
Ladder 1: Time for Money
This is the stage where most of us (at least historically) have been trained to stay at. You work X hours and you get paid for Y dollars.
Your ability to move up in this ladder is predicated on three things:
Show up consistently
Be reliable
Learn new skills on the job
Generally speaking, if you follow these three steps, the compounding nature of these traits will get you to a local maximum that requires a switch toward a managerial role or an investment in expanding your skill-set. Then, you repeat this process all over again.
This ladder has served most of us. It doesn't necessarily generate the type of wealth we aspire to have but it also provides us with a steady, stable form of cash flows.
To me, the biggest benefit comes from the opportunity to develop my skills whether it's a skill that's hard to learn (e.g. buying software businesses) or surrounding myself with high performers (allowing myself to push harder).
Ladder 2: Your Own Service Business
At some point, a certain portion of us gets tired of doing the same thing in exchange for the same results. It's normally when we have hit a local maximum and the effort required to keep moving apart is similar to the effort needed to change ladders and build your own business.
A service business is the simplest kind of business to run. You're able to do what you did before (complete X work/outcome in exchange for Y payment) at a slightly broader scale.
This includes setting up a company, finding clients, pricing your service, building a team, selling yourself, and doing the boring stuff (accounting, finance, operations).
It's become easier than ever before to do the stuff above. Think how easy a platform like Shopify has made it to run an online shop for example.
The hard part is just being able to have the discipline to consistently talk and follow up with customers and do what you said you were going to do.
As long as you build the trust of your customers, you'll naturally grow and become successful. Again, this will be at a local maximum. Most service businesses are capped on time. Each individual only has so much capacity and so you can't 'scale' the way a technology company would.
Ladder 3: Productized Services
This brings us to the next ladder, which is a productized service. This is when you're able to scale functions like customer success, operations, or sales.
You switch from a mentality of X number of hours leads to Y income to building repeatable processes that help you sell and/or deliver a repeatable quality of the service.
The key focus here is reliability and predictability.
Despite the allure to scale, having a strong and predictable service business is just as great as building a software business. Many industries (e.g. education, real estate, media) still require some form of human touch.
This is where I think there's a massive opportunity for tech-enabled services. They treated the same way as other service businesses despite taking the best of both worlds in terms of scaling non-core functions while providing customized service.
The downside to the service businesses, in general, is that they always require some form of effort. if your team stops working, revenue will not come in the door.
Ladder 4: Selling Products
This is where you get to the holy grail of making money while you sleep. Even though it might require a tonne of effort upfront, each sale/fulfillment of the product requires no effort on the part of the business owner.
The number of tools out there (e.g. think of all the no-code tools that have come up in the past 3-5 years) makes it easier to build products.
However, the abundance of tools for builders and the internet has made it infinitely more difficult to gain substantial traction.
The trough that owners/founders have to experience before seeing some form of success is way too difficult. Most folks need to go through years of discovery and iteration before achieving product-market fit.
Unfortunately, the value of smaller products in terms of revenue is multiples lower than products/companies that are simply bigger (think VC-backed startups and public companies).
Principles to Follow
Nathan summarizes a few principles to follow as we all go through the journey of moving up and between ladders.
Extra time and money need to be reinvested
You can skip ahead, but you still have to learn the lessons from each step
Apply your existing skills in a new way to build wealth
There’s a difference between working for a better wage and truly building wealth
Using an earlier rung on the ladder to fund the next one
Moving between ladders often means a decrease in income
Each step is easier with an audience
It takes longer than you think, but the results can be incredible
As I mentioned before, the internet has made the rewards of moving up the ladder disproportionately high. It has also made the process of moving up the ladder more competitive.
👦 Educating Kids
Last week, I talked about the idea of building your own personal bundle/monopoly.
The reality is that this starts at a very early age when most of us didn't view the world this way. This leads to the question of how do we help future generations build their personal monopoly.
This is where I've been paying attention to the work of Ana Lorena Fabrega - a former teacher turned edupreneur. She is working with David Perell on to launch a summer camp for kids that teaches them on how to be a citizen of the internet.
Whether it's using social media, know how to look for information or building relationships online, kids don't have a go-to resource to learn how to do these things effectively and responsibly. Most parents grew up in an era where these skills weren't really necessary to succeed and so you have a barrier that's very similar to speaking an entirely different language.
Ana's camp along with other resources like The Knowledge Society are working toward solving this problem. As such, I felt it made sense to have a conversation with Ana to see how she's thinking about solving this.
The Future of Education
There's a lot of different avenues for education - whether it's the traditional system, online education, homeschooling. Do you see one channel becoming the predominant form of education? How do you see all of this co-existing with one another?
What should a 10-year-old child focus on doing right now? What does success or failure look like?
Being a digital citizen is a foreign concept for most parents today, especially for those who come from disadvantaged communities. How do kids get around that barrier?
Building a Summer Camp
How have you gone about building a course for children? How does it compare with adult learning courses? What has stayed the same?
Why did you choose to focus on creative writing? How would you go about teaching other skills? (e.g. STEM)
Tell us about a couple of stories from your pilot WOP camp. What kind of transformation have you seen with students?
How do you think about a child's support system? How can parents and caregivers support this system? Not everyone has the time, resources or even knowledge to teach their kid to be citizens of the internet.
Let's fast forward to 2040. What is it about the camp experience that you want your students to remember? What will they have learned that other kids didn't necessarily have the exposure to?
This is definitely a great listen. Check it out!
🔮 Future of Events
While video calls have solved the problem for 1:1 communication, we haven't seen a solution emerge for online events.
This post by Benedict Evans goes into why this is the case.
Most of us don't go to conferences to actually be on the show floor.
If we unpack the bundle of a conference, we get something along the lines of this:
A lot of information (in-person sessions, flyers, posters and etc)
Re-connect with people you know
Opportunity to meet a lot of people interested in a specific topic for a specific time period
A feeling of exclusivity (not everyone can attend every conference)
The internet has solved the first two problems. However, there hasn't been an adequate solution for the last two.
Conferences/network events were built for the age of scarcity. They were built on the notion that one should attend these special events because the bundle of ideas, information, and people will only be together at a specific point in time.
That's simply not true.
If you wanted to learn a specific topic, you can search it up online, read obscure blogs, or follow the right people on Twitter. That's assuming that there isn't a book, podcast, or online course on the topic.
If you wanted to connect with someone, you can do so online via LinkedIn, Twitter and many other platforms (depending on the purpose to connect). Granted, there's still a large subset of the population that has yet to become available online.
If you enjoy the convenience of having relevant information/people curated for you, then you'll likely come across a website that serves that purpose. If one doesn't exist, you may have stumbled upon an opportunity to create one yourself.
This is why all conferences are focused on selling scarcity whether its the people you meet or the ideas/information you get access to.
It's also why the idea of taking the same exact format of a physical conference online is a huge mistake.
So where will we go here from now?
I still think conferences will continue to exist and serve subsets of the population that haven't embraced the internet to the same extent as other industries (e.g. venture capital, tech companies).
They'll increasingly become irrelevant as we shift more parts of our society online.
The reality is that the internet unbundled the idea of events and made its components available 24/7.
Thanks again for reading this week’s newsletter. If you can just comment on what you think is interesting, what you find confusing, and what you think is boring or irrelevant, that would be really helpful.
Until next week,
Suthen