Money. The omnipresent store of value we all rely on. To a big extend it defines what we do just as well as what we might not be able to do in life. We all know how to make money. Some with thriving success, some just barely make enough to survive. I lately challenged myself to look at the process of creation from another perspective. Inspired by MicroStrategy CEO Michael Saylor who, among other things, aligned money (and specially Bitcoin in this case) with the laws of thermodynamics in multiple interviews.
#Google is what happens when we pool information energy on a software network. Everyone understands this. #Bitcoin is what happens when we pool monetary energy on a software network. Few understand this. -Michael Saylor
While this is not a story about bitcoin, I still think we can learn a thing or two about money in general from the assumption. By viewing money as monetary energy we grow some room to take a different approach. But be warned: this story could motivate you to bring your monetary energy to the next level. At least that’s what it did for me!
If you break it down, most people are essentially exchanging time for money. You go to work, you get paid. Basic concept, right? It’s the reality for the majority of people and they are also not keen to change that, because they feel safe doing so or don’t know how to change it. For our little thought experiment we’ll change the narrative to the following: From now, on instead of exchanging time for money, we exchange personal energy into monetary energy. This will help us to understand the differences between different models of earning money.
The concept most people follow. You get your hands on a fancy degree (or not) and go work for someone else. You may specialize, change your field, change companies, differ in salary but in the end the creating your own monetary energy will also create monetary energy for the owner or shareholders of the company or the clients you work for. While you will get paid for the energy you put in, you can be sure someone else also profits from the work you do. Your work may be processed, assembled, marketed and finally sold. That’s classic value creation.
Let’s have look at the equation I put up above. A minimum wage worker would have an x = 1. The personal energy he puts in is directly and linear associated with a minimal monetary energy output. These people often live their life paycheck to paycheck or tend to get into debt because they can’t create enough monetary energy to support their needs and wants due to the linearity of the equation. Extra monetary energy would require extra work 1:1.
The good thing is there are ways to enhance your personal outcome. If you are a specialist in your field, a great networker or a long-time employee for the company you can potentiate your personal energy to change the result of the equation. You can raise the value of x depending on education, skillset, loyalty, responsibility and other external factors such as the good ol’ luck. So congratulations if your x > 1. You will create more monetary energy by potentiating your personal energy.
Creating monetary energy this way is fine and not wrong at all. It will be the best concept for most people. Just be aware that it won’t scale. To create monetary energy you’ll always be required to give your personal energy as an input and your output depends on how much you can potentiate your personal energy.
After you could have easily described the type of creation above as ‘time is money’, here is where the fun begins and the advantage of our model will become visible. The second type is what I’ll name ‘the investor’. This type is characterized by reinvesting energy to create monetary energy. For most people this is the second step in their journey. You have to create first before you can invest.
But how exaclty is this group distinguished from the first and what do I mean with reinvesting energy? We keep your personal energy, as in the first example, but now we work in a second component. In addition to your personal energy, that is converted into monetary energy directly, you now implement additional sources of income. Let’s see some examples for clarity:
- You build an online course teaching your knowledge. Maybe you are a designer or photographer and you’re employed or do freelance work. You could easily set up a course that teaches people photoshop, or the significance of the golden ratio, or how to get freelance gigs. Important to understand: you invest personal energy which could’ve gone into creating monetary energy directly but instead choose to put it into a project that will earn you passive income in the future.
- You reinvest some monetary energy into tradeable assets like index funds, bonds, precious metals or, in the spirit of Michael Saylor, Bitcoin. If you have knowledge in other areas it could also be art, cars or jewellery.
So we see that already created energy, as well as present energy can be used to raise your future monetary energy in a passive way. Isn’t that beautiful? Investment always comes with temporary sacrifices. You create an online course to sell? Sacrificed your time for it. You bought a machine that will help with your work? You sacrificed your money for it. You bought a stock that you expect will perform a good ROI in the future? You sacrificed your safety of just holding cash for it. Your success as an investor is also determined by your timehorizon. Some investments will take time to unfold their true potential. The way to your goal could take a while and decisions won’t always be clear. So if you decide to create your monetary energy this way and it works out, never let anyone tell you that you were lucky or that it was easy.
Now we’re getting wild. The queens and kings of monetary energy creation are the entrepreneurs. The smart, hard-working, visionary people that decided to let energy work for them. How do they do that and what exactly is their key to maximizing monetary energy?
The equation has once again changed and the personal energy of other people is now in the mix. Entrepreneurs employ the people described above to create value for their company. This is by no means a bad thing because they provide security, careers and stable income for those people by shouldering the entrepreneurial risk themselves. Before doing that they of course have to put in a massive amount of their personal energy and their ‘x’ will most of the times be significantly > 1. They might also need to (re)invest their personal and monetary energy without getting an instant or safe ROI. Essential for scaling your business is investing energy to teach the right employees to do the right things, in line with your company’s strategy. They will then be able to use their personal energy for the best outcome for the company.
The entrepreneurs pool a ton of energy in their companies and use it to their advance. Controlling and guiding this energy is the real skill of this group. If you are successful in making good decisions for all the energy you amassed you will create exponential monetary energy.
What can we learn from this?
All three groups have their pros and cons and their right and necessity to exist. It comes down to your level of determination of input of energy to maximize your output in energy. Also the level of risk increases with every step down the ladder. You include external energy, which will be out of your control. The next thing to keep in mind is that we only described creation of monetary energy. It may not be your number one priority to increase that and forget about other things like time for your family and friends or your spirituality and mental health.
For me the shift to this holistic model which includes everything essential under the one term of energy has made it so much easier to understand the mechanisms of wealth creation. That your wealth is your stored energy, aswell as (potentially) the energy of other people that decided to work with you and the (potential) assets that appreciated in value after you put your energy in them.
The biggest takeaway for me was that it’s even more important to care about your money, because it’s a result of the energy you put in. You owe it to yourself to treat it like that. Don’t let your wealth diminish by buying useless stuff, making bad decision or let your wealth be printed away by inflation. Educate yourself to value your own energy.