From: alexhormozi
While traditional financial strategies often focus on investing in assets like the S&P 500 or real estate for long-term growth, a different perspective emphasizes prioritizing investment in one’s own earning capacity [00:28:00]. This approach suggests that the greatest return on investment comes from enhancing one’s skills and ability to provide value in the marketplace [01:41:20].
Investing in Earning Capacity
Rather than solely focusing on external investment vehicles, the most significant “investment” an individual can make is in themselves [06:54:19]. This means acquiring skills that directly increase one’s ability to earn money by solving problems and providing value [01:43:40].
For example, a high school graduate with no specific job skills could spend 25 an hour ($50,000 annually) [01:11:00]. This immediate increase in income far outweighs the potential returns from passive asset investments in the short term [01:24:00].
Strategic Financial Allocation
To maximize this personal investment, it is suggested to:
- Live as cheaply as possible, especially in younger years [02:19:00].
- Take 100% of excess money and invest it in education that increases earning capacity [02:21:00]. This aligns with the role of longterm investment in personal growth.
- Allocate funds monthly to courses, coaching, mentorships, workshops, and seminars [02:50:00].
- Focus on active income generation rather than solely passive income, recognizing that even wealth built in areas like real estate often involves active time and effort [03:06:00].
A New Perspective on “Investment”
The conventional understanding of “investment” often leads people to believe that putting money into traditional assets is the “biggest investment” [01:34:00]. However, a more effective long-term strategy, particularly for younger individuals, is to invest in oneself, or “SNME” (Self/Me) [06:52:00]. This personal investment can compound significantly faster than typical market returns, potentially doubling, tripling, or even tenfold increasing one’s earning capacity [06:58:00]. This reflects a financial mindset of wealthy individuals.
Learning and Skill Development Strategy
- View Learning as an “Entrepreneurial Degree”: Each course, coaching session, or mentorship should be seen as a “class” contributing to an ongoing entrepreneurial education, rather than a single, guaranteed path to riches [04:01:00].
- Replicate Before Iterate: Learn from experts by duplicating their methods first, then earn the right to make personal iterations [05:35:00].
- The “Bridge” Analogy: Skill acquisition is like building a bridge with many bricks. One must lay all the bricks to see the first dollar, even if it means being 90% complete before any visible return [05:47:00]. Many people fail by constantly starting new “bridges” (skills) instead of completing one [06:10:00]. This highlights the importance of commitment and setting priorities.
- Skill Stacking: Skills stack exponentially. For instance, a videographer can add editing, social media messaging, copywriting, branding, management, operations, and leadership to become a Chief Marketing Officer (CMO) or entrepreneur, dramatically increasing their pay [06:20:00].
Conclusion
Financial discipline involves making conscious decisions to not spend money on “stupid stuff” [06:42:00]. The long-term plan should then shift from passive investment in external assets to aggressive investment in personal education and skill development, leading to a significant increase in earning capacity [06:52:00]. This approach ensures greater control over one’s financial future and accelerates wealth generation beyond typical market returns.