It will be easy for some to look back on 2020 as the worst year in recent memory. While there’s no doubt last year was scary for a number of reasons, especially the way fear and anger was reported, as an optimist, I always try to find the good in every situation—and believe it or not, there was good to be found in 2020.
A good person to help me look for silver linings is Ryan Moran, who runs capitalism.com. We spoke on the same stage years ago at an event, then I spoke at some of his events, and later ran into each other at Burning Man: two sober dudes pontificating on the philosophies of life. Yes, it was just as nerdy as it sounds.
Ryan and I talked recently and agreed that now more than ever, it’s critical to understand what money actually represents. Ryan likes to say the purpose of money is to “sustain service to one another.” I love that and would add: money is also a snapshot of a moment in time. It represents value but is not why we’re valuable. It doesn’t dictate our potential or what we’re capable of doing. Last year was a good reminder not to confuse our net worth with our self worth.
When we understand that money is a byproduct of service and offer the world more value than we take from it, we’re capable of going into creation mode, which is where we get fabulously rich.
Contrary to what some people might want you to believe, there’s more than enough money to go around. Money is often compared to pie to make the point that if one person takes three slices, now there’s not enough for everyone to get a slice. That’s a scarcity mindset, the flip side of which is an abundance mindset. When you operate in this mindset, you realize that money and pie are not the same. When you eat pie, it’s on it’s way to becoming… well, you know.
Money, on the other hand, can change hands an unlimited number of times. In fact, the more times it changes hands, the more value is created. Money is not a dam—it’s a river, one that you want to flow because the more it flows, the more economic activity is happening.
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You can wade into that river if you want, no matter what kind of curveballs or setbacks 2020 threw your way. Before you wade in, though, here are a couple things to know.
#1: Effort is No Longer Enough
Effort isn’t always rewarded. My father was a coal miner. So were my grandfathers. They worked harder than anyone I know, so why weren’t they more wealthy? It’s because effort is no longer enough. What gets rewarded today?
Results get rewarded. Thankfully, results are easier than ever to line up because of technology that makes things easier, faster and cheaper to do. Many entrepreneurs struggle with this reality. They assume that if they work as hard as they possibly can, customers will reward them with money. But customers don’t care about your effort—they care about the results.
Instead of leveraging effort to create value, it’s now time to leverage intelligence and learn new skills. A lot of us aren’t equipped with the skills for this economy because we didn’t learn them in our textbooks growing up. Value creation wasn’t a course offered at my college.
Emotional intelligence, communication skills (including speaking and writing), basic business and finance lessons—these are the skills and knowledge that will take you a long way. And unlike what you learned in school, you don’t have to wonder whether you’re ever going to use what you learn.
#2: You’re in the Driver’s Seat
There are new rules of how to be a good steward of money in this new economy. In the past, people could be more passive with their money and be OK. But in the next three to five years, the transfer of wealth will be so substantial that if you choose to “set it and forget it,” “invest early, often and always,” or “put it in a public market and hope it works out,” you’re in dangerous territory.
Here’s why: the landscape as we know it is shifting. In the next decade in the U.S. alone, 50% of the wealth will transfer hands, in large part because 418,000 private businesses on average per year will be sold. That’s almost 5 million businesses changing hands in 10 years. As I’ve written about before, people with cash will be the ones able to buy those businesses.
Second, the stock market has been propped up and overly valued without consideration for technological advance, which will soon start to decimate it. The fact is that 84% of the gains in the stock market go to 10% of the investors like hedge funds. So when you hear that the market did 6% in a year, it might be just 3% for the average investor whose only action is setting money aside.
Inflation is going to decimate that 3%. Anyone who sits on money or saves it without intention will be upset to find out their money is worth less, which means the things they want to buy that matter from an investment standpoint will then be further out of reach.
This is a critical three to five year stretch for people to take responsibility for their finances and do something about it. Otherwise, the middle class is going to become lower middle class in the next five years while the upper-class will become even more wealthy thanks to their focus on investments, leverage and acquisitions—not a focus on savings.
What’s Your Vision?
As we enter 2021, here’s what I suggest: let’s create a new game.
I’m talking about a game worth winning. Many of us, the game we were playing wasn’t one worth winning. We just played it because we felt obligated to do so. A game worth winning is one where we collaborate with others on something that creates value for those we want to serve. When we play that game, we’ve already won because we enjoy the journey.