Book summary: The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime!
One day during my one week break from work, I felt really restless at home and I googled online “How do people become rich?”. This Google search led me to a few YouTube videos and eventually I discovered this book through an online forum where someone commented that this book changed his way of thinking about wealth. Out of curiosity, I decided to spend some time reading this book.
While a lot of the things mentioned in this book were things that I “kind of know already” about wealth, I do agree that it has been a good read. This book helped to clarify some questions I had initially and structure my messy thinkings and understanding about wealth into neat chapters. Most importantly, it got me seriously evaluating what my financial goals are and how I want my life roadmap to be like.
All these while, I hadn’t given a whole lot of thoughts about my own financial status as there isn’t an urgent need to. I am still living with my parents where everything is taken care of for me and I have no financial woes. Although since graduation, I have tried to learn more about the world of finance through Udemy courses and reading a few articles here and there, I am still mostly a passive observer of my own financial status. The sole contribution I have made to my own financial plan is to mostly just work hard at my day job as a Software engineer and feel good about the earnings I get from my current investment portfolio (managed mostly by my father since day one).
One anchor to the Sidewalk is to entrust your financial plan to others, to believe that there is a chauffeur to wealth and that someone else can drive that journey for you. This mindset makes you vulnerable to victimhood.
Thanks to the quote above, noting especially on the part “vulnerable to victimhood”, I got inspired to stop being such a passive bystander. I made it a goal to spend the following days during my work break to brush up on my financial literacy. As a result, I spent some time looking at the details of the actual stocks and unit trusts in my current investment portfolio and also drafted up an excel sheet for managing my own financial earnings and projections. I plan to monitor the performance of my portfolio more actively and be keep track of the latest news. I also toyed with some ideas on the projects I can potentially do to generate potential side income and have fun at the same time. (Although I have not arrived at a good one yet)
In this article, I would like to share some of the key points from this book. I hope that it will be useful to you :) and maybe even urge your to take a more active attitude towards managing your own finance (if you are not already doing so).
(1) About Wealth
Fame or physical talent is not a prerequisite to wealth.
Being wealthy does not happen overnight. It is not an event that just happened. All millionaires create their wealth by a carefully orchestrated roadmap.
Broadly speaking, there are 3 types of roadmaps. Each roadmap is governed by a wealth equation and “destined” to a financial destination — Sidewalk to poorness, Slowlane to mediocrity, and the Fastlane to wealth.
(2) Sidewalk to poorness
Well, obviously nobody wants to be on the sidewalk to poorness. However, it is easy to fall into the trap of being on the sidewalk simply by NOT HAVING A PLAN.
Not having a financial plan is to be myopic where you are inclined to spend your money on things that are unaffordable but can bring you instant gratification. With no savings or any planning for future big ticket (necessary) expenditures such as housing purchase or health hospital bills (touch wood), you will soon fall into debt and victim to your never ending hedonistic desires.
You may think, well this only applies to people without an income or earning low incomes. No, poor financial management cannot be solved with more money. You can be income rich and be on the sidewalk.
If your financial plan is being managed by someone else other than yourself (like myself :P), you also fall at risk of being on the sidewalk. By relinquishing the responsibilities of managing your financial plan to someone, you are making yourself a victim. Nobody in this world is as concerned as your wealth as yourself. We are all selfish beings and hence, it is important to manage the financial reins yourself, drive your own journey to wealth and shield yourself from being cheated (purposely or not on purpose) by others.
(3) Slowlane to mediocrity
While the Sidewalk delays worries of the future to quench desires of today, the Slowlane is the exact opposite: To sacrifice today to yield a wealthier tomorrow.
Since young, we have all been conditioned to think that getting a 9–6 Job and dabbling in Investments as a side stream of income is what will get us rich one day. Work hard, Scrimp and Save, Invest 10% of your income today to exchange for a Richer Future!
While there is nothing wrong with it, the Slowlane is a plan that takes decades to bear fruits. It also makes a lot of assumptions such as that you will still be around and alive after 40 years, that you won’t be fired from your job or that the stock markets won’t crash and cause you to lose all your money. It is ultimately a plan that hinges on time and external uncontrollable factors.
Following the Slowlane path is to destine yourself to a life of mediocracy and not to a life of wealth. If you have great dreams of being an extremely wealthy or want to be a philantrophist one day, you will need to wake up to know that this is not the path you should be on.
To understand why, lets’ look at the wealth equation that governs the Slowlane.
WEALTH = Job + Market Investments
The Slowlaner’s primary income comes from a Job. The amount of income that you earn is determined by the value that the market places you at. Income is also capped by the amount of time you have. For example, if your job places you at $10 per hour, the maximum amount of money you can earn in a day will be limited by the amount of time you have in a day. No matter what, even if you sacrifice sleep, you won’t be able to go beyond earning more than $240 a day. Therefore, there is neither leverage nor control on your part.
The second part of the wealth equation comes from Market Investments, also known as the acceleration vehicle. However, this vehicle depends on compound interests which in effect is equivalent to waiting for a long period of time to pass before you see substantial wealth creation. By then, you will be a Millionaire in your grey hair and failing organs and wealth is best enjoyed when young! Even so, the wealth returns from investments are not guaranteed as nobody can predict the volatility of the stock markets.
As seen, the two variables of a Slowlaner’s wealth equations are constrained by time and depends on variables outside our control. If you want to get rich, you will need to be able to control and leverage the variables in your financial plan rather than wait or hope for something beyond your control. If you don’t control the variables inherent in your wealth universe, you don’t control your financial plan.
Your time should not be an expendable resource for wealth because wealth itself is composed of time.
As a result of this, Slowlaners try to exert power by cutting down on the “expense” variable which is the one thing they can control. However, in truth, exponential income growth is not achieved just by curtailing expenses.
(4) Fastlane to wealth
Lets take a look at the Fastlane.
The risks associated with that of a Fastlane strategy is actually not much different from the Slowlane and it promises much bigger rewards.
In the Slowlane, you are always looking to grow your muscles so you can lift heavier stones. In the Fastlane, you construct a system that does all the heavy lifting for you and allow you to get more done with lesser effort.
Instead of being the Consumer, to be in the Fastlane, you will need to be a Producer.
You will need to be an entrepreneur and an innovator. You need to be a visionary and a creator. You need to give birth to a business and offer the world value. While the centrist theme to the Slowlane is a job, in the Fastlane, it’s a business.
The Fastlane wealth equation is not constrained by time and its variables are unlimited and controllable.
Wealth = Net Profit+ Asset Value
Net Profit = (Units Sold) X (Unit Profit)
Asset Value = (Net Profit) X (Industry Multiplier)
To make the best out of this equation, you will need to have an unlimited range of values for Units Sold.
The primary wealth accelerant in the equation is asset value, which is defined as appreciable assets created, founded, or bought. Wealth creation via asset value is accelerated by each industry’s average multiplier. For every dollar in net income realised, the asset value multiplies by a factor of the multiple.
A word of caution is to know that not all businesses are Fastlane. Many of them are in fact jobs in disguise and will not be transformed into money trees. To generate money trees, you will need to divorce your business with the factor of time. The primary objective is to create a business system that can operate passively without you.
(a) Money-tree seedlings
Money Tree seedlings breed to become money trees. The 5 money-tree seedlings are rental systems, computer systems, content systems, distribution systems, and human-resource systems.
- Rental Systems. Real estate is the old way and a road to wealth. Leases, royalty payments, and licensing are other forms of “rental systems” that can produce reoccurring monthly income.
- Computer/Software Systems. Software enjoys plump margins because it is can easily scale to millions at a little cost.
- Content Systems. Content systems are systems of information found on the Internet and physical distribution systems such as books. Content survives time and the owner can continue to gain profits over a long period of time after the content is created. Moreover, contents are easily scalable and can reach masses.
- Distribution Systems. A distribution system is any structure or organization designed to move products to the masses. Amazon.com, “App Stores” for softwares, franchising and/or chaining are examples of distribution systems.
- Human Resource Systems. Good employees nurture money trees. Bad employees pluck the fruit of money trees and require pruning. If you want to make millions of dollars, invest in your human resource because you can’t do everything yourself.
(b) Impact millions
In the Slowlane you explode intrinsic value (become incredibly good at something, be famous), become enormously indispensable, and earn millions. In the Fastlane, you create a company that has a massive impact on millions of people’s lives, if not billions.
Money trees are businesses that can need to impact millions of people.
Affect millions and make millions.
For example, if your business involves selling hot dogs from your hot dog cart in front of a hardware store, you have no accelerative leverage. The variables are limited because your reach is confined to a small area where perhaps less than 500 people will walk pass. Realistically, you will never be able to experience a day where you sell 200 000 hot dogs.
Similarly, If you spend your days in a store selling $10 haircuts, can you reasonably expect to serve millions?
Again, this isn’t much different from the 24-hour cage on intrinsic value. Small numbers tends toward mediocrity.
(5) How do you know you are on a Fastlane?
A road satisfying the following five commandments can make you rich fast.
- The Commandment of Need
- The Commandment of Entry
- The Commandment of Control
- The Commandment of Scale
- The Commandment of Time
The Commandment of Need
Businesses that solve problems and meet needs of society win.
Help one million people and you will be a millionaire.
Nobody cares about your dreams or passions. The advice that is often given, “Do what you love and money will follow” is often ill-fated unless what you love doing just so happens to solve a societal need and that you are exceptionally good at it. Most of the time, if you love doing something, there are bound to be thousands other who have the same love and you will be prepared to face big competition.
Instead, the advice that should be given ought to be “Start chasing needs and money will follow”. If you can provide good solutions to big problems that impact millions with your business, then you will add value to millions of people and convince people to throw money at you.
More concretely, make 1 million people achieve any of the following:
- Make them feel better.
- Help them solve a problem.
- Educate them.
- Make them look better (health, nutrition, clothing, makeup).
- Give them security (housing, safety, health).
- Raise a positive emotion (love, happiness, laughter, self-confidence).
- Satisfy appetites, from basic (food) to the risqué (sexual).
- Make things easier.
- Enhance their dreams and give hope.
The Commandment of Entry
As the entry to barrier to something lowers, expect the competition to increase and for the road to weaken. Businesses in low entry to barrier markets are often saturated and face huge competition to stand out and earn big money. If you see that “everyone is doing it” or that it only takes 10 minutes to start, it is an even better evidence for you to not do it especially if your goal is to make big money. The only way out is to be exceptional, bearing in mind that it is a very difficult task.
There’s an old saying, “In a gold rush, don’t dig for gold, sell shovels!”
The Commandment of Control
There is a difference between good money, big money, and legendary money.
By giving control of your business to another party, it is likely that you are only a part of someone else’s Fastlane plan. In a driver-hitchhiker relationship, the driver always retains control and is the one earning big money. On the other hand, the hitchhiker is at the mercy of the driver and only earns a portion of the money. When the driver chooses to end the journey and stop at somewhere else earlier than the intended destination, the hitchhiker can only alight from the truck helplessly and watch his or her revenue stream get killed.
Therefore it is important to make sure you are playing in a habitat where you have full control if you want to be rich.
The Commandment of Scale
As explained earlier, you will need to impact millions. To break out of the speed limit, leverages can be introduced in the form of replication: Open more stores, sell franchises, or sell on the Internet.
The Commandment of Time
A business attached to your time is a job. A business that can operate independently of your time satisfies this factor. They are often systems that uses a money system seedling (as explained above).
Always try to ask yourself if you could automate the system? Can you introduce a money system seedling? How can you introduce passivity to your business?
(6) That’s all!
The remainder of the book focuses mainly on giving advice on running an actual business, taking note of customer’s feedbacks, managing a business partnership as well as marketing branding strategies. I think that it is beyond what I want to share in this article and hence, will not be going through it.
I hope that this short article has helped you to understand more about the path to wealth especially if you harbour a Millionaire/Billionaire dream! Personally, it has certainly changed how I view having a Job + Investments as an income.
On a side note, although the book might make it seem that following the Slowlane is something terrible, I think that ultimately it depends on someone’s life goals to do the judgement. Although wealth can enable us to DO A LOT OF THINGS and bring SOME MOMENTS OF HAPPINESS, wealth is NOT EVERYTHING. You can earn an ordinary salary wage, but still be pretty satisfied and live a not-too-bad “medicore” life. Life isn’t great, but it isn’t so bad either. It’s a matter of asking yourself about what you want for yourself.