This is a short post, it is not about investment strategies, or wealth creation techniques. This post is addressing the simple aspect of categorizing the wealth creation process. I am not addressing the active – passive income approach here. This post is a general global view of the entire work/wealth creation process. Thus, without further ado, i present to you the 3 classes of wealth creation.
I- The Working Class Wealth Creation:
As a working class, you are exchanging your time and knowledge for money. In some cases the pay might very pretty high, in others the pay is low, but whatever the pay is, the wealth can not scale up. A worker can get a bonus, find a better job, for double the pay, triple the pay, 10 times the pay … but there is always a limit. The wealth for working class is not scalable. Mathematically i would describe it as: y= a $.
Working class will not create wealth for the majority, some small percentage with high paying jobs and strict discipline manage to do so, but this is not the case of most.
II- The Business Class Wealth Creation :
As a business class, or entrepreneur/businessman, you are exchanging your employees time for wealth. Wealth here is scalable, because if planned properly and managed correctly, each additional employee can lead to increase of wealth generated by the company. There are obviously some risks here, and some fails and successes. But in general for business class, wealth is scalable.
PS. Some entrepreneurs do all the work themselves, without hiring an employee, these solo-entrepreneurs are more in the working class classification.
Mathematically i would describe it as: y= (a $)x. Thus f(x) = bx what is called in mathematics an exponential function, or growth.
Business class will create wealth, but not in all cases, business is risky and you never know when a competitor pops up or a natural disaster ruin your business. Thus in general business class has great potential of creating wealth for many.
III- The Investor Class Wealth Creation :
The investor class is to business class what business class is to working class. You are exchanging the company growth for wealth. Here wealth is very scalable, each time you invest in a new company gives an additional scalability of a business class. Here risks are mitigated, more companies less risk on the total portfolio. Mathematically i would describe it as: y= [(a $)x ]z a faster exponential growth function, means wealth grows faster.
Investor class is the real wealth creation class. Most investors will be able to create wealth. In some cases there are some unlucky investors, but in general, it is safe to say, investor class is wealth creation class.
Obviously anyone interested in creating wealth should progress through the classes of wealth creation. There is also the possibility to stay in one’s class, but that won’t work well for most. A smart individual would start dabbling with the upper class as soon as possible, launching a side hustle while employed, investing in other business while running a business, till reaching the investor class where you are only dedicated to investing.