Wealth is regularly confused to be the same as money. Wealth isn’t how much money you have, it’s what you’re left with if you lose all your money.
This is why it is important not to focus just on making money, but on creating wealth. By creating wealth, we are then in a position to make money, retain it and give it away in order to make a difference.
The wealth equation
All wealth is built from a basic equation: Wealth = Value x Leverage
Believe it or not, every single wealthy person on this planet has created money flow by creating value, and leveraging it.
The opposites of the equation – Value and leverage
- VALUE: There are two opposites of how value is created. This is based on the way our thinking brain is naturally oriented:
- Some of us have a tendency towards high frequency “intuitive” thinking. We will create value through innovation. The value is in something new – faster, smaller, bigger, cheaper, better and so on.
- Some of us have a tendency towards low frequency “sensory” thinking. We will create value through timing. The value is in time – why innovate anything when you know when to buy and when to sell?
- LEVERAGE: There are also two opposites with how we leverage. This is based on our action dynamic – the way we naturally translate our thinking into action:
- Some of us have an internal action dynamic, meaning that we rely primarily on systems and numbers to interpret and act. We leverage value by being able to answer the question “How can this happen without me?”, and to leverage, we multiply.
- Some of us have an external action dynamic, where we rely more on people and communication to interpret and act. We leverage value by being able to answer the question “How can this only happen with me?”, and to leverage, we magnify.
The eight wealth profiles
The challenge is that people appear to have made their wealth in different ways. They have – but only in one of eight different ways. These eight ways are, in turn, a result of the way in which these wealthy people naturally create value and leverage it.
Each of the following eight wealth profiles create value and leverage in unique combinations:
CREATOR – create wealth from products
Examples include Bill Gates, Richard Branson, Walt Disney.
Creators are big picture thinkers. They have an awesome ability to get things started, although they tend to be shocking when it comes to finishing things. Their drive and momentum can be exhausting for others around them, and they themselves rarely know how to use their drive and intuition to maximum effect.
STAR – create wealth from personal brand
Examples include Michael Jordan, Michael Jackson, Michael Schumacher.
Stars are aware of the strength of their personality. They often use it to their advantage without realising the negative impact it can have on those around them.
Stars have the ability to shine.
However, they can often get burnt out with extreme demands on their time. Increased success frequently means greater stress, and an inability to capitalise on their stardom in a sustainable way.
SUPPORTER – create wealth from leadership
Examples include Jack Welch, Steve Balmer, Steve Case.
Supporters have strong interpersonal skills. They are great at building relationships but generally poor at knowing how to use their ability to create sustainable wealth in a way that’s fun for them. They have little or no affinity for systems so it is easy for the value they create to be lost.
Supporters are the strongest leaders.
They can translate value into action through people. As Jack Welch says, “Information moves so fast today, and everyone has more information than the CEO does. So the only role of the CEO is to be out there energising people and turning this information into action.”
DEALMAKER – create wealth from deals
Examples include Donald Trump, Rupert Murdoch, Li Ka-shing.
Dealmakers are naturally great communicators, influencers and negotiators.
They have a great sense of timing. They may not understand their limits or how to best capitalise on their unique abilities, and may not believe deal-making to be a credible way to build wealth.
Dealmakers will recognise that often the best thing to do is to do nothing.
Trump’s advice in deal-making: “If you walk into a negotiation and you know nothing about the other party, let them talk. Listen to their tone; observe their body language. The best negotiators are chameleons. Their attitude, demeanour, approach, and posture in a negotiation will depend on the person on the other side of the table.”
TRADER – create wealth from trades
Examples include George Soros, Kirk Kerkorian.
Traders are masters of timing.
Unlike dealmakers, who make their money by bringing assets and resources together, traders will buy and sell assets and make their money from the spread. Extrovert traders will do this where they can influence the price through hard bargaining. Introvert traders prefer to trade through analysis rather than face-to-face bidding, and include many of today’s successful market traders.
ACCUMULATOR – create wealth from appreciation
Examples include Warren Buffett, Paul Allen.
Accumulators create wealth by decelerating money flow.
Rather than making money by buying and selling off waves, they make money by buying and holding on rising tides. Accumulators always prepare and the most successful ones can be found doing their homework. As Warren Buffett said in an annual report, “Noah did not start building the Ark when it was raining.”
Accumulators are steady and dependable.
If the profiles were compared to a football team, the Stars would be the strikers while the Accumulators would be the keepers. While Stars are quick to spend, Accumulators are quick to save.
THE LORD – create wealth from cash flow
Examples include John D Rockefeller, John Paul Getty.
Lords are rarely seen, yet rolling in cash.
They are often in control of natural resources and manmade structures. They act slowly and certainly, which frustrates many around them, and inevitably these characteristics may be the source of many of their challenges when it comes to wealth creation.
Lords love certainty and hate risk.
They also prefer to keep to themselves, and those who have not yet found their wealth have often failed to see their analytical skills, risk aversion and need for control as their greatest strengths. When momentum grows, many Lords also cannot resist their tendency to micro-manage, which cash flow responds well to but which people do not.
THE MECHANIC – create wealth from system
Examples include Sam Walton, Ray Krok, Jeff Bezos.
A mechanic has the ability to control and manage people.
This is without necessarily having any charismatic leadership qualities. Mechanics endure and tend to rely on duplication and replication, and love to challenge the status quo.
Successful mechanics remain hands-on.
They continue fine-tuning their systems long after they have delegated many other areas of their business. This is where they see the greatest results, and where they gain the most satisfaction.
Your path of least resistance
Once you know your wealth profile, you are in a position to better understand how you can best create value and leverage to build your own wealth. This is extremely important, because each profile is like a different game, and therefore has its own set of rules.
Without knowing the game that’s natural for you, trying to create wealth is like trying to play soccer, hockey and rugby all on the same field, at the same time, with the same ball and the same coach. The result, whether in sport or wealth creation, is chaos, confusion and frustration.
Not surprisingly, what you do most naturally is also what creates the least stress and the most enjoyment – for you and others. That’s the point: if you’re doing something that feels like hard work, you’re already doing the wrong thing. Identify your wealth profile and get set on your path to sustained wealth creation.