Assets vs Jobs
Since I’ve come across the idea of being financially free about a year or so ago, thanks to Nassim Taleb’s idea of “F U Money” and Mr. Money Mustache’s writing on how much easier it actually is, I have been reading a ton about investing right now.
Which is kind of funny, because I don’t have a ton of extra capitol at this point. Between reinvesting in businesses and paying off my student loans, there’s not a lot to do besides working to max out my Roth IRA.
I know I should probably wait to pay off my loans since I have a decent rate there, but as Taleb says in Anti-Fragile, debt is one of the most fragile things you can have. Especially if I am not ending up with anything in the end, when comparing to say a business loan or a mortgage.
Defining my North Star
What this reading and research on investing has done was help define my North Star. By North Star, I am talking about the guiding principals I use to make decisions in my life.
While I feel like a 5 year or 10 year plan is a waste to have, I believe in having a North Star of principals that help me make shorter term decisions that are apart of the bigger picture.
The way investing has helped me define my North Star and see a path towards it was through the teachings in Rich Dad, Poor Dad by Robert Kawasaki. It was the idea of acquiring assets that cover your living expenses, which opens up freedom; and freedom is my North Star.
Freedom is My North Star
Freedom of finances, time and location. Basically Tim Ferriss’ triangle of what currency actually means in the age of the internet.
However, I should have seen this path years ago when I read the 4 Hour Work Week. Build a business, that is an asset, and have it cover my living expenses.
But this is only half the North Star. I can’t live the 4 Hour Work Week. I have the desire to build an actual business, one that solves a much needed problem in society.
However, with this idea of acquiring assets to cover my living expenses, I feel like there is a smarter way than the all or nothing mentality of building a big business. It could take out a lot of the mental struggle of needing the business to make money earlier.
If I build up and acquire assets enough to give me the freedom I need, I am then free to give a ton of effort into the business I would like to be my “Job”… the work that I trade my time for.
Assets vs Jobs
To me, the distinction between what an asset is and what a job is has been the slight turning point that I needed to start seeing this path. I believe there is a gray scale, between an asset and a job.
At one end, you have an asset, that completely makes you money without you ever having to touch it. I don’t think anything is or should be, a 100% asset. That would mean you don’t monitor, research, or put anything thinking into it, which is basically impossible, or if it is possible, then I don’t think it’s smart.
The only thing that comes to mind for that is if someone had a trust fund from their parents or an advisor monitored and dolled out.
At the other end of the scale is a job. This is something that has a money to time return of 1:1 (or worse I guess if you are underpaid).
For every 1 unit of your freedom, you only earn 1 unit of currency or less. This is not an asset. It doesn’t mean you couldn’t turn it into an asset and is actually where most assets start. It is the scale that is important though.
I am now starting to look at projects in front of me and wondering:
1) Do I want this to be a job or asset?
2) If it were an asset, what would that look like?
How I Evaluate my Opportunities with these Questions
These questions have shifted my thinking on business ventures that I look at. For example, I am building some authority websites. Are these my jobs? No. I wouldn’t want them to be. I wouldn’t enjoy myself if they were.
So the next question is, how would these look like as fully built out assets.
Well, I am making my base income with them as Amazon Affiliates and info products. So the sites would need content fully automated and optimized, along with the intricacies of creating and launching products. For this I am working on hiring people to research, write, format and publish our articles on that site.
The goal is to have consistent articles coming out that will make money based on of SEO. I’ve also started creating SOP’s for content distribution and link building (white hat).
The ratio of these niche sites right now is actually 1:-1 for time and money. These aren’t assets.
But when they start ranking for the keywords we are optimizing for, along with our contractors working more without our input or tweaking of SOP’s, this ratio will start to change. And soon, we’ll have sites that bring in income without us working on them.
I will simply be checking in with our project manager for updates and to give them new projects that will grow the assets. I see this being a couple calls.
That is an asset. And to me, an asset that makes more sense than me investing in the stock market.
I know SEO, content marketing, sales funnels, and website monetization. I understand the stock market, and think I could actually do well in it (or am just ignorant). What I do know though is I’m better off building business assets than even investing that money into index funds.
What This Asset Thinking Looks Like Long Term
So as I build these assets, I should get to a point where the income from these outgrows my expenses. It wouldn’t take much now, as a 24-year-old who doesn’t own much and dislikes shopping. But I think at the height of my spending, say with a family to provide for, I think $4K would be a very high bar of my spending.
With a merging of Mr. Money Mustache and Ramit Sethi’s philosophies, I see it being about there.
Which is not much for financial freedom from a 1-dimensional asset standpoint. But that seems fragile to me, especially if it’s based on websites mostly relying on SEO, which I don’t plan it being.
I want multiple businesses, index funds, possibly individual stocks (buy and hold), and maybe even real estate.
That’s my idea of diversification and working to mitigate downsides and take advantage of upsides. If one thing crashes, I’m fine.
What all This Means for My Job
While this sounds like the talk of someone who’d like to just create passive income and so I can retire, this is actually my plan of opening me up to work even harder and longer at my “job”.
I can’t imagine not working on something. A project that would help solve something big. The way it’s looking now, it’ll probably be a software company with my friend. He’s a great programmer and I’m a marketer. We have similar visions on this.
Acquiring and growing my assets allows me to dive in further into whatever my “job” is, but also gives me the freedom to control my “job” more.
While I may be trading my time for it, it’s voluntary. Financially, I’ll be free due to my assets, and I picture my business being location independent.
That way, I still get my North Star principals.
Let me know what you think of this whole philosophy. I’m interested to get it critiqued, and for it to become more solid along the way.
Casey,
I really enjoyed the authenticity of this post and the topic is one I can very much relate with…please keep us updated as things progress. No critiques but I will offer a few thoughts with regards to the prioritization and application of the concepts of asset diversification/risk mgmt vs antifragile tinkering. While these concepts are all very applicable when choosing which assets to invest in…I would caution against seeking diversification of asset classes “too soon” at the expense of first building a diverse set of antifragile assets. By that I mean, with limited funds you may want to prioritize investing in the asset classes that offer a larger degree of antifragility and cashflow (business, real estate) before funding retirement or seeking the diversity of other capital assets (stocks, funds).
Hey Bob,
Thanks for the comment. I would say that’s about where I’m at with my plans. I’m going to try and build out multiple online businesses, turn them into assets, and down the line diversify more.
[…] to my other post on assets versus jobs, I wanted to share the game plan for growing my assets over the coming […]
I like the idea of a sliding scale from job to asset. I’m picturing it as a way to measure the leverage of an asset class. I.e. stocks are highly leveraged, jobs highly unleveraged. It would be interesting to try to work out an algorithm where you measured how much you enjoyed doing something and how leveraged of an income stream it was and you would make decisions based on that algorithmic score. I.e. If you really liked it, it wouldn’t have to be super leveraged. If you were kind of meh, it would have to be super leveraged. I suspect a lot of people have an internal equation for this but it would be super interesting to externalize it. There would have to be some measure of fragility as well i assume. Highly leverage but highly fragile (sucker hedge funds?) is no good.
My two critical thoughts:
1. People typically undervalue how much liking and being good at something will increase leverage. I’m fairly sold on Dan Sullivan’s unique ability concept and that less globally leveraged income stream could, assuming they are unique strengths to you, be very highly leveraged locally.
I.e. writing books is not a globally leveraged income stream and my plan a year ago was to do something more leveraged to get to the point that I felt it was more feasible to write. Basically the deferred life plan. I’m glad I didn’t do that. I wonder what your natural strengths are and how could you double down on them sooner than seems globally reasonable?
2. I think diversification is over rated. This might be because I’m actually a fragilista/sucker that hasn’t seen his own black swan yet, but my sense is that most people diversify too early. I find myself moving in the opposite direction. What’s working? What am I good at? How can I double down and invest more in that?
P.S. Subscribed and excited you’re blogging!
Asset / Job Algorithm: It’s funny you say that. I started to actually map this out after writing this and working on it more is in my to-do list now. Basically a way for me to make quicker decisions on if I want to undertake new projects.
1. I am in complete agreement with this. I enjoy systems, sales funnels, SEO, and all that, which I am using as my leverage for building those assets. I’m having my apprentice learn those from me, then in turn go and implement them on the smaller businesses while I focus on my new e-commerce one.
2. Yes, this is basically a scenario of where for some reason I haven’t internalized the necessity of focus… which is ironic since my post next week is about focus (which I reference your article on the “one word” all your reading has pointed to). Even though everything is pointing towards focusing on one thing, I seem to think building these side sites are a good choice. All my reading has basically said to focus, Mark Cuban says “diversification is for suckers”, and Tim Conely told me to my face to stop building those sites ha… But I’m still not listening for some reason. Probably due to over-optimism and sunken-cost bias.
However, I do like to look at the other side and think what if a black swan event were to happen. What if my main focus source of income hit a wall that I didn’t see coming. I would then be fucked. However, if I have some side stuff going on, my safety net is way higher than it would be without them. But maybe I’m just handicapping myself… it’s tough and something I’m unsure of.
I mean, the non-sucker hedge funds win by diversification. The way people did will in the last recession was gold / silver investments (which could now be Bitcoin investments FYI). So… I’m undecided. And will proceed on with my asset game plan to perhaps kick myself in a year for not focusing more on one thing.
And thanks man! It’s nice to be back writing since I haven’t done much since college, besides specific writing for work.
One way I think about diversification is something like “diversification of opportunity.” I want to be diversified in having lots of choices/optionality but not exercising them all at the same time. I.e. I know five people I could email tomorrow that would work with me while I slept on my mom’s couch if all my shit fell apart.
That’s true. The optionality is what’s anti-fragile, but is there a way to make your current lifestyle anti-fragile? It seems like the “shit falls apart, call people to get work” is more robust than anti-fragile. But then again, is my plan anti-fragile or just robust? Probably not fully anti-fragile
Hey Casey,
Interesting concept and thoughts. All these points you mention are something that I’ve been working on since 2008. Striving to achieve Financial Freedom is just requires at of patience and time. You’re on the right track.
I’m going to post this blog on my Facebook page. I like the tone and direction this blog is heading. At least for the time being. 🙂
Hey Steve,
Thanks for reading. I appreciate you sharing it.
[…] Now let’s look at some of the things that go into starting your own business, which is similar to my article on assets vs jobs. […]