What You Should Know about Money
The first and most important thing you must come to understand is that money, while it may be the lifeblood of your lifestyle and ability to function, it’s really nothing more than a concept or a simple idea.
One thing I pondered on for a long time: what exactly is it that makes money valuable, anyway?
Originally, before there was money of any sort, the first system of trade was barter. Barter is a very simple system: trading a product or service for another product or service. If a blacksmith wanted a cow, he’d make something in his shop for the farmer who owned the cow and they made the trade.
Obviously, this system has very tight constrictions. So as people evolved with the increase in wants and need of certain things, the idea of money evolved along with them.
To increase economic freedom, people mutually agreed that certain tangible items were of value to all. Among these items were food, cattle, colored gems, goats, gold and silver. Rather than the blacksmith making something in his shop for the farmer, he merely had to give the farmer silver coins for the cow, thereby speeding up the process of exchange. Then people came across a new problem.
What happens when these circulated items become scarce in certain regions?
That was when certificates were made, which are like what dollar bills are today. The wealthy held the bulk of the gold and silver. Since they didn’t want to constantly carry that around with them all the time and make themselves a target for thieves, they’d leave it with someone they trusted, who’d write them a certificate or receipt that they could use for exchanges.
This was the start of banking. It started out simple and was very convenient for all in speeding up the process of business. Then the process got complicated when fractional reserve banking hit the scene.
The Honorarium Theorem
Most people think that the golden rule states that “He that makes the gold dictates the rules.” But I insist it is “Do unto others as you’d have them do unto you.” This honorarium theorem is very similar: “give and you shall receive”. This is the ultimate law of rewards. If you want to get what you want, you must give others what they want.
If I want someone to smile at me, I smile at them first. If I want my hand shook, I extend it out. If I want a friend, I have to first be one. If I want money, I have to first offer value. You perform work for your boss first, then collect your pay check. This is the honorarium theorem. Give and you shall receive.
When you buy a cup of coffee, the kid behind the cash register says “Thank you” and you return “thank you”. The benefit is mutual. You both won.
One Rule for Money
You do not amass wealth by taking. You amass wealth by giving (through producing and creating).
This formula of giving to receive works in exact parallel. An employee, such as cook or a clerk, provides service only to so many people a day. Since they can only be in one place at a time, they can only serve one person at a time. A waiter or mechanic knows this as well.
However many people they serve dictates how much they will receive for their service. But their earning potential is limited because they can only serve one person at a time.
A doctor cannot perform two surgeries at once. An anchorman can not cover two stories at the same time. That one patient or one story is figuratively their employer. So in order to expand their earning potential, they must find a way to serve more people.
A business owner obviously makes more than their employees because they are serving more people. Especially now with the expansion into the world market, profits are record breaking because businesses are able to serve more people going beyond borders and overseas.
Mark Zuckerberg became a billionaire for this reason. Originally, Facebook was just for Harvard students. Then he decided to serve more people and now millions of people all around the world use Facebook.
Employees for the most part trade their time for money, but the real rich people, the business owners, create things of value and trade them for money. The trouble with trading time for money is that you
have a limited amount of time, thus you have a limit on what money you can make from that. But there is absolutely no limit on what you can create.
In some cases, you won’t even have to create it, but just come up with the idea and sell the idea. That is why I said money is just a concept, because concepts alone can be sold for money.
Napoleon Hill titled his self-help book Think and Grow Rich. The key word is Grow. The key is expanding your reach of how many people you can serve, how many needs you meet and how many problems you can solve. Expanding like the roots and branches of a tree. All of these things are directly proportionate to how much money you can make.
Some people assume that the rich work harder than everyone else. The truth is they don’t. They just found or created something of value and sold it to the masses.
Some people also assume that the rich are way smarter than everyone else. But they are not. They just have better money managing habits.
They have it down to a formula.
What is your formula?