First Lesson My $3.4B Mentor Taught Me…
Summary
- Understanding the money ladder helps to determine who controls the money flow and thus who has power.
- An employee typically works first, fronts their labor and time, then gets paid later, meaning they have delayed payment.
- A self-employed person can be like an employee, fronting work and getting paid later, but as they gain independence, they might receive partial payment upfront, improving their position on the money ladder.
- Moving up the ladder, professionals like doctors tend to get paid before performing a service, reflecting a higher level of control and wealth.
- Banks sit above most professions because they have a capital stack, getting paid first in any event because of their preferred creditor status.
- Insurance companies take an even more advanced position on the ladder since they receive payments for years without necessarily having to provide a service in return.
- Appreciating assets is key, and insurance models demonstrate this by collecting funds upfront and investing over time, possibly without a payout required.
- The ultimate level of the money ladder is symbolic, where entities like religious organizations get a percentage from the top line regularly.
- The position on the money ladder is influenced by demand and the value of services provided; the higher the demand and value, the more likely payment is received upfront.
- Adjusting the approach to agreements based on this understanding can significantly contribute to wealth creation.
- Observing the flow of money and who gets paid when has been instrumental in changing my beliefs and increasing my wealth.
Video
How To Take Action
I would suggest looking at where you fall on the money ladder. Start by understanding who gets paid first and has the most control. For employees, front your time and effort but get a delayed payment. If you're self-employed, try shifting towards getting partial payment upfront. This small change can move you higher on the ladder.
A good way of doing better is following the professional model. Like doctors, aim to be paid before you provide a service. This increases your control over the money flow. As you gain more demand for your services, leverage that to negotiate upfront payments.
Moving up the ladder, consider how banks and insurance companies operate. They get paid first, reflecting their power. Think about how you can adjust your own business model to collect money earlier. Maybe you can offer services that require ongoing payments, like subscriptions, which can bring in consistent revenue before the service is fully delivered.
Lastly, learn from higher levels of the ladder like insurance companies. They collect payments for years and might not even provide a service in return. While it's not about not delivering, the key point is they appreciate assets by getting money upfront and investing it over time.
Adjust your approach. When you make agreements or sell services, push for better terms that allow you to be paid earlier. Observing the flow of money and understanding the money ladder can significantly help increase your wealth just as it has changed my beliefs and helped me grow financially.
Quotes
"One of the biggest beliefs in my life that changed as I got wealthier was how I viewed the flow of money"
– Alex Hormozi
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"Think about it from a concept of work and payment"
– Alex Hormozi
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"If you look at who gets paid when… you can see typically where who has the most control and who's making the money"
– Alex Hormozi
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"You get paid first, now… getting paid first is another level of wealth and kind of control and power"
– Alex Hormozi
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"Insurance companies… get all the money up front and then they get to appreciate the money over time"
– Alex Hormozi
