The Formula For Wealth:

Here is another short section from my new book 'Money' which is available for pre-order now on audible: https://adbl.co/2tyjTUW

The formula for wealth:

There are laws that govern money. The wealthy understand and leverage these laws and the poor are a victim to them. Because money moves from those who value it least to those who value it most, wealth will always move to those who know the laws. The formula for wealth is a formula I developed that has stood the test of time and been consistent through every part of the cycle, and can be seen through every titan of wealth over the last 6,700 years. It has been modelled on the obsessive and enthusiastic study of the wealthiest people on the planet through history that is a great passion of mine. It is actually quite simple, and it is shared below. You can leverage this formula for wealth just as much as anyone else:

W = (V+FE) x L

Wealth = (Value + Fair Exchange) x Leverage

Let’s look at each one to help our understanding.

Value – (V)

Value is the service you give to other people, as perceived by them. If you serve and solve, and show care and concern, then people will receive value and benefit that they will desire more of, pay for, and refer you to others.People are looking for their problems to be solved, pains to be alleviated, and for things to be made faster, easier and better for them. Time is a scarce resource and most valuable commodity, so anything that leverages or preserves it will hold value that is convertible into cash. If you’re ever struggling financially or emotionally yourself, look more at how you can serve others and solve their problems, and you will have part of the formula for wealth solved and more money will flow to you. 

Fair Exchange – (FE)

An exchange or transaction has to take place for you to receive money and wealth. You have to offer a product, service or idea that someone else perceives valuable enough to pay for it, and you have to be open and have high enough self-worth to receive fair payment. When you gratefully receive financial (or other) fair compensation, you have a fair transaction, and repeatable business and referrals. Your gratitude will convert to value, and that will be perceived by the buyer. Value without (fair) exchange or transaction will create a financial void in your life, because you will be giving but not allowing receipt. There will be unfair exchange, you will have high overhead to revenue ratios, and your business and income will be unsustainable. You will also build resentment and bitterness. Guilt, lack of confidence, imposed religious or social beliefs, perceived market ceilings and extreme emotions make a transaction too one-sided and unsustainable, on the side of low pricing. This will result in a reduction of value creation, and again will self-fulfill. 

On the other extreme, if you charge high prices in comparison to the value you give, you will be perceived as unfair, greedy or worse ripping people off. You may be able to temporarily surge sales because of the big claim, but it will reverse once the reality of the lack of value is perceived. In the end your overhead will rise as you have to compensate in the forms of extra customer service, refunds, PR and damage limitation. This is also unsustainable for the long-term, and could lead to insolvency. It is easy to look at others and think they are ‘getting away with it’, but like Enron, Madoff and Leeson, in the end the balance will be redressed. 

To balance this fair exchange, test your prices and get feedback. Price elasticity is ‘a measure of the effect of a price change or a change in the quantity supplied on the demand for a product or service’. There are sweet spots that merge and balance the maximum amount a buyer is prepared to pay, and the maximum value creation from the vendor that scales. Interestingly, sometimes that sweet spot is higher than you are charging, or you might believe. You also want to test the amount of value you create. An increase in value creation will drive prices up. There are ways to increase the perceived value to the buyer with a low actual cost to deliver, such as online-hosted information. Continually seek feedback from your ideal client demographic to keep the value and price exchange in perfect harmony. When you get fair exchange right, the buyer feels they get more value than they pay for without becoming greedy or demanding, they will refer others to you which lowers your marketing cost, and you have gratitude and a service focus which in turn attracts more buyers to you. You value your service, so take care to keep it valuable and improve it. 

Leverage – (L)

Leverage is the scale and speed of service and remuneration, and the impact it has. The more people you can serve and solve for, the more money you make. The bigger the problem, the higher the transactional amount (as fairness is dictated by the scale and size of the problem). The more valuable the product, service or offer, the quicker it will spread. 

You will only leverage and scale wealth for the long-term if you have value and fair exchange. You could get transient spikes and viral sharing of a big claim or promise, but anything that doesn’t serve and solve won’t continue to scale because once unfair exchange is discovered, you will be humbled and brought back into balance. In fact it can be very dangerous to scale too fast, because what is broken will exaggerate, or things may start to break if you are not prepared for scale. Also, if you are promising undeliverable value, that will exacerbate with scale and your overheads will increase and margins may even go negative. This is why you hear smart business advisors suggest not to scale too early or quickly. 

Referrals are a sign of Value + Fair Exchange x Leverage (V + FE) x L working effectively. As is leveraged media such as video, TV and other far-reaching media shared by others on your behalf, or going viral. In the world of fibre optics, social media and newer tech disruptions, your Value + Fair Exchange (V + FE) can leverage very quickly. Your business and service can grow quicker than ever before. This is why I believe now is the best time in history to create vast and lasting wealth. You can get 10million views on YouTube, go viral across multiple social media platforms, get millions of likes and shares and get national or global TV coverage. This ‘one to many’ is leverage in great effect. In the future AI, VR and QE may increase the velocity of scale even further.

V + FE but no L

If you have great Value + Fair Exchange (V + FE) but no scale (L), then you don’t create vast wealth. The size of your customer base and the reach of your impact will be relative to the scale of your wealth. You may have a great little business, or have no business at all. If you desire more wealth then you must embrace scale. 

V x L but no FE

Conversely, you could have great Value (V) and Leverage (L) but no Fair Exchange (FE). If so you will exaggerate negative margins and unsustainability. You will work harder and longer with more bitterness and resentment, bending to the will of your clients. Your passion and profession will turn into desperation and disillusion. Something will break – either you or your bank. 

FE x L but no V

You can have Fair Exchange (FE) and Leverage (L) but no Value (V), and you won’t sustain wealth for the long-term. This can be one of the most dangerous variations of the formula because you can scale fast on an overpromised claim. In the end, your reputation for not giving value under fair exchange will leverage (scale), and wealth will be rebalanced as stated through reputational costs, defensive costs, refunds and extra service that puts margins in the negative. 

An example of the formula in action could be the Post-it note from 3M. Value is created by solving a problem many of us have. Then need to write something down quickly without having to carry a book around. The need to put it somewhere we won’t lose it, quickly, but where it won’t damage anything or get lost. Fair exchange is created because the price is equal to and worthy of the value. Leverage is achieved with 6,050,000,000 sold each year. 

You now have a proven, scalable yet little known formula to build, sustain and scale vast wealth and riches. Focus on the three parts to the formula equally, but in the right order (Value, then Fair Exchange, then Leverage) and hire or partner with the best people in the two areas you are less strong at. You can then take on the part you enjoy the most. Once you fix or build whichever part of the formula is broken or not created, the floodgates for wealth and riches will open up. You need to keep testing, taking feedback and tweaking as you scale. What worked will change, markets will evolve and new challenges will present themselves perennially. 

If you embrace this rather than become a victim to it, it gives you the best competitive advantage you could wish for. 

Rob