4 Reasons You’ll Never be Rich
…and what you can do about it!
Getting rich is actually easier than it has ever been. Unfortunately, the odds are you will never be [rich]. If that doesn’t make you mad, curious and/or filled with a deep desire to prove me wrong then you should probably just stop reading because it won’t do you any good. To put it in context, when I say rich, I am really talking about being independently wealth and not simply the ability to spend a lot of money like some out-of-control YouTuber.
For those of you that choose to read on, you’re currently indulging in the first of the top four factors — Consumption, Production, Action and Execution — holding you back from real success. In this article, we’ll be taking a high-level look at consumption by defining it and contrasting it against a cursory look at production. We will explore production, action, and execution in greater detail in future articles.
According to Wikipedia, Consumption is defined as “spending for acquisition of utility”. What the heck does that mean? Well, simply put it is when you spend money or time to acquire goods, services and/or content for your use. By definition, we are all consumers. How much time have you spent today on Facebook, TikTok, WhatsApp, iMessage, Steam and/or YouTube? How many items did you buy from Amazon this week or did you happen hail a ride from Uber? Did anyone pay you to do any of those activities or did you spend money and/or time to acquire their goods and services for your personal use? That’s consumption. In its most basic form, consumption is money going out [of your pocket] to indulge your particular lifestyle — key point to remember.
To help better understand, we also have to look at the other end of the spectrum — Production. According to Wikipedia, this is a process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (output). So, all of the activities listed above exist because someone produced them so that we can all consume them. Production is money coming into [your pocket] from the consumer — key point number 2. Which do you think it makes more sense to be — a consumer or a producer?
Obviously, this is a simplistic look at consumption and production. However, having a basic understanding of the ratio between the two can help identify why you are or are not headed for countless riches. Well, at least maybe it might help slow down your progress toward unrecoverable debt.
The fact is there are two basic types of people in the world — consumers and producers. Don’t get me wrong, it’s not just an either-or scenario. In fact, we are all simultaneously both consumer and producer. The problem is in the fact that most people consume far more than they will ever produce.
Jeff Bezos and Bill Gates are both celebrated as being avid readers (which is consumption). However, they use the knowledge they acquire to magnify their wealth instead of showing off a diamond encrusted watch or uploading a selfie on a rented Lambo with bikini-clad models in the background. So, being a consumer is not what is holding you back. But if you consume more than you produce or simply consume for personal utility than you have more money going out than you have coming in.
“The formula is quite simple: Consuming = money out and Producing = money in.”
Speaking of the mega rich, let me ask you a question. Why do you think we have recently seen the proliferation of mega wealthy individuals? In the year 2000, Forbes reported that there were about 360 billionaires. Today in 2021, there are over two thousand people in the world that are considered to have a net worth over one billion dollars. Speculators are now talking about who will be the first Trillionaire. Sorry, but I don’t think your name has been mentioned in that discussion, yet. All kidding aside, I want you to think about that question for a moment and come up with an answer before you read on.
Ok, now let’s discuss an answer to my question which is actually very simple. We, those of us in the industrialized world, have become mega consumers. Remember production is money in and consuming is money out. It stands to reason that the more we consume, the more money we have going out. This relates directly to the more someone produces (for your consumption) the more money they have coming in. You take money out of your pocket and put it in their pocket in order to use whatever they have produced. Smart producers then take that money and improve/increase production (known as scale) so you can consume even more.
Again, this is an oversimplification meant to simply illustrate the point. Obviously, you cannot run out and produce a ton of whatever’s and expect to miraculously be rich. There actually has to be a market for your goods/service — someone has to be willing to pay you for it.
So, what is a mega consumer? Most of us now have the ability to consume anytime from anywhere thanks to our smartphones, tablets, watches, etc. Instead of going to the store or video rental shop we simply swipe a few times and boom we’re consuming content in the car, at home, at work or even sitting on the toilette. We’re streaming songs, video games, and audiobooks, or making an in-app purchase, or one-click buying something from an internet retailer 24 hours a day. It’s all so much fun and has made things so convenient. Right? Actually, yes! But it has also made it so much easier for producers to reach more people, more often. Even if you downloaded an app for free, odds are you have paid money to stop seeing annoying adds or bought a cool battle pass in a game to improve your experience or show the other players your avatar is draped in a super expensive rare skin. Consume, consume, consume.
Still a skeptic? Try Googling the term, “How many items are in an average American household?” I won’t keep you in suspense any longer. According to the site becomingminimalist.com, the answer is 300,000. Even though they site the LA Times as their source I’m not quite sure I buy that number. However, it did make me start to look around my own house and wow I have a lot of stuff that I surely do not need but have acquired over many years. Either way, who actually needs this much stuff? No one. But advertisers get better and better every year and there are continually more and more ways to reach each of us on a very personal level.
Hopefully, you are starting to see a picture emerge. Some individuals have harnessed the power of the internet to magnify their production reach. In so doing, they have created the opportunity for you to amplify your rate of consumption. What do you think the wealth gap is going to look like when most of us are walking around wearing smart glasses that pop up advertisements (or whisper messages in our ear) based on where we are walking or looking? Even more alarming is that all you’ll have to do is say “buy now” or tap the side of your spectacles instead of the oh so arduous task of swiping with your finger. Yes, I’m being a bit facetious but consuming will become easier and easier. I’m sure they are already working on a pair of smart socks, the tech space is called wearables, that will automatically reorder themselves when a hole is detected. As such, the money trap we call the rat race (I think of it more of a hamster wheel) will be harder and harder to get out of because of the instant gratification our brains seem to crave.
How many times have you heard wealthy people say that they make money even while they are sleeping or lying on the beach? Most of the time these claims are related to real estate investing wherein no matter where the owner is or what he or she is doing, the tenants are still paying rent. It’s true, that appears to be a way to produce a steady stream of income. In this scenario, the renter is the consumer, and the property owner is the producer.
But did you know there is a way to apply this concept to the mega consumer/ mega producer relationship? There is. Have you ever selected the option to automatically renew a product such as laundry detergent or vitamins at preestablished intervals? You know, when you are on your “go to” retail website and it gives you to option to choose “auto-replenish” instead of just buy now. When you choose this option, you have told the producer that they can charge you for the product without asking you again. Heck, you may actually be asleep when the system determines it is time for your auto-replenishment. Congratulations, you (the consumer) are now sending money to the producer while she is playing shuffleboard on her yacht. Good for her, maybe not so good for you.
When you start adding up the gym memberships you don’t actually use, the app subscriptions you forgot you signed up for, all the auto-renew items attached to your profile, music streaming memberships, monthly clothing subscriptions, software licenses, cell phone bills, etc. you won’t have a hard time understanding why the rich get richer and you don’t. It is all very convenient but is it necessary.
The world will always have and need both consumers and producers. Neither is inherently bad nor good. The fact is we live in a world where we are constantly exposed to a plethora of products and services that we didn’t even know existed let alone knew that we “needed.” And those products are easier and easier to buy. Heck, you can’t even read a news article on your phone without watching an advertisement first. Or why you constantly get breaking news alerts with a teaser bit of information (e.g., child kidnapped in front of her school… find out where in the app) that is designed to funnel you to an app or website? Really? That seems like important information that would benefit us all if you simply told us in the alert where the kidnapping took place so we can all be on the lookout or know our kids are safe. Unfortunately, that wouldn’t drive traffic to their app which means they couldn’t charge as much for advertisements. Remember, the more you consume, the more they earn.
Now that you are thinking in terms of consumption and production, maybe it’s time to start thinking about how to stop being a mega consumer and start being a producer. You don’t even have to be a mega producer to be successful and wealthy. But, let’s be honest, simply thinking about it isn’t going to hurl you off the hamster wheel this very instant. You will actually have to take some affirmative actions. What if you reduced your consumption to a level less than your production? What if you changed what you consume away from unnecessary retail goods to materials and knowledge that you can then use produce something that the market is willing to pay you for?
If you are ready to slow down the hamster wheel by changing your consumer habits, then you may very well be ready to talk about the other three factors holding you back — Production, Action, Execution. We’ll cover these topics in parts two, three and four of this series.
