by MJ DeMarco
Same stories, different people.
No matter where you work, office politics play a part. The stage is different but the actors are the same. And, unfortunately, as an employee immersed in the work environment, you have to play the game. You have to be obedient or face retribution from coworkers or your boss.
I can remember my friend’s after-work rants as she toiled at a high-fat corporate environment. Everything had a process. Got an idea? Great, send it to the boss, the boss sends it to his boss, who then hands it off to legal, who then sends it back to her boss’s boss for revisions, who sends it back, blah blah blah! By the time the “idea” gets anywhere it’s either stale or four other people have staked a claim to it.
Who needs this entangled web destroying your sanity?
The only defense to office politics is to control the playing field, and to do that, you have to be the boss. And to be the boss, you not only need to run the show, you need to own it.
Suckage #5: A Subscription to “Pay Yourself Last”
“Pay yourself first” is a Slowlane doctrine. The problem is that it’s near impossible in a job.
Local, state, and federal governments heavily tax earned income and your options to shield that income from taxation is limited to contributions to 401(k)s and IRAs—which are also limited—10% of your income or a maximum of $16,500, whichever is less (as of publication). If you diligently trade your life and ascend into corporate management, expect 50% of your money to disappear before it touches your hands.
As an employee, you immediately receive a subscription to “pay yourself last,” and yes, that subscription arrives even if you don’t subscribe. If you are paying yourself last and everyone gets your money first, don’t expect to build wealth fast.
Suckage #6: A Dictatorship on Income
Ever get hit with a 1,000% pay raise from your boss? Imagine this: Impressed at the obvious returns you’ve provided at your job, you confidently stroll into your boss’s office and demand a raise. “I bring value to this company,” you argue. “I’m reliable and rarely call in sick.”
Your boss takes a defensive posture, crosses his arms, tilts his head skyward, and leisurely reclines in his big, red executive chair. You take a deep breath and let it loose. “Therefore, sir, I’d like a 1,000% pay raise.”
Your boss unleashes a guttural groan. He lurches forward, ends his recline and hammers his hands to the desk. “OK, what’s the joke? I’m busy” he snipes.
You reply, “No joke. I’m serious. I make $9 an hour. I want a raise to $90 an hour.”
“How about this? You’ll get nothing and like it. Get out of my office, quit wasting my time, and if you do it fast, I won’t fire you. How’s that for an offer?”
You stammer out. I guess the boss didn’t think the 1,000% pay raise was doable.
This scenario would never happen. As an employee, you can’t demand a pay raise greater than 10%, let alone 1,000%. Yet, as an employee of any company, this is your playing field. This is the road you’ve put yourself on. Your value is dictated, diminished, and delimited. Therefore the job becomes a delimiter on what’s important: wealth, freedom, and self-growth. And their limitations cannot be subverted.
A job seals your fate into a criminal time trade: five days of life traded for two days of freedom. A job chains you to a set grade of experience. A job takes away your control. A job forces you to work with people you can’t stand. A job forces you to get paid last. A job imposes a dictatorship on your income. These limitations are counter-insurgencies to wealth.
Still want a job?
Chapter Summary: Fastlane Distinctions
➡In a job, you sell your freedom (in the form of time) for freedom (in the form of money).
➡Experience is gained in action. The environment of that action is irrelevant.
➡Wealth accumulation is thwarted when you don’t control your primary income source.
[12] - The Slowlane: Why You Aren’t Rich
Somebody should tell us, right at the start of our lives, that we are dying. Then we might live life to the limit, every minute of every day. Do it! I say. Whatever you want to do, do it now. There are only so many tomorrows.
~ Michael Landon
Exposing Slowlane Ineptitude
If the Slowlane is your “get rich” strategy I can make a likely assumption: You’re not rich and you never will be. Wow, how could I be so sure? Simple. The Slowlane strategy is rooted in Uncontrollable Limited Leverage, or ULL (pronounced “yule”). If you need help remembering this important concept, just think, “If the Slowlane is your plan, ‘ULL’ never get rich.”
Uncontrollable Limited Leverage is the disturbing evidence that proves the Slowlane’s futility. How do you get rich in the Slowlane? You get a great-paying job, save money, live frugal, invest in the stock market, and repeat for 50 years. If you mine this strategy into its mathematical constructs, you’ll find that the variables that define the plan cannot be controlled or leveraged.
Uncontrollable Limited Leverage (ULL) – Part 1
Why is ULL so important? To accumulate financial wealth, you need to attract and earn a large sum of money, relative to the average person. To attract a large sum of money, two things are absolutely required:
(1) Control
(2) Leverage
The Slowlane has neither and that truth is exposed when you reverse engineer the strategy into its mathematical equivalent, or its wealth universe. Uncover the mathematics behind the plan and you uncover its weakness!
When the Slowlane is deconstructed, you find two variables:
(1)The “primary income source” (defines how income is earned)
(2)The “wealth accelerator” (defines how wealth is accumulated)
The Slowlaner’s primary income source comes from “a job,” while the wealth acceleration vehicle comes from “market investments” like 401(k)s and indexed-funds. Put it together and you arrive at the Slowlaner’s wealth equation:
WEALTH = (Job) + (Market Investments)
The primary income source The wealth accelerator
Under this plan, income from a job funds both lifestyle and market investments. However, to uncover the prohibitive ULL within the plan, we have to factor these variables further, starting with the job variable.
The Warden of Wealth: Intrinsic Value
How is money earned in a job? Intrinsic value.
Intrinsic value is determined by the marketplace and is the price at which you can trade your time for money. Intrinsic value is what you earn working a job. How much is someone willing to pay you for what you offer to society?
Intrinsic value is measured in units of time, either hourly or annually.
If you’re paid $10/hour to flip burgers at the neighborhood grill, your intrinsic value is $10 per hour. If you’re an accountant and earn a $120,000 annual salary, your intrinsic value is $120,000 per year.
JOB [Intrinsic Value] = Hourly Rate of Pay × Hours Worked
~ or ~
JOB [Intrinsic Value] = Annual Salary
Notice that intrinsic value is measured in units of TIME. This “time attachment” introduces the Slowlane’s first punitive element of wealth creation.
Can you control time? Can you leverage time?
You can’t.
Your time is limited to 24 hours of exchange. If you earn $200/hour, you can’t miraculously demand to work 400 hours in one day. If you earn $50,000/year, you can’t miraculously demand to work 400 years in your life. Time has no leverage.
For the hourly worker, your maximum upper limit is 24 hours, and guess what. There’s nothing you can do to change this limit. In theory, you can trade 24 hours of your day for income, but you can’t trade more. Of course, working 24 hours a day is humanly impossible, so 8 to 12 hours per day are traded.
For the salaried worker, the prohibition is the same. You can’t work more years than your normal life expectancy. What is the upper limit of this exchange? Forty, fifty years? In all of recorded his
tory, no human has ever worked 10,000 years of his or her life. Whether you’re paid hourly or annually—it doesn’t matter—you can’t leverage time!
Consider this. Is 12 a large number? Or 50? Are these numbers predisposed to create millionaires? They aren’t, and it exposes why the mathematics of a job are wealth punitive: Your time is limited to small numbers and cannot be leveraged. “Hours worked” or “annual salary” are mathematically inept because they’re based on time measurements that cannot be controlled or manipulated.
Mathematics doesn’t lie; 12 will always be less than 10,000,000. If leverage is limited, so is wealth creation. Small numbers do not make millionaires.
Behind limited leverage is another corrosive wealth killer—no control. Can you control your employer? Can you control your salary? Can you control the economy? Can you earn $50,000 one year and next year bank $50 million? Can you control anything about your job, including your measly 4% pay raise?
You might think you can by job-hopping, but you can’t.
Control is weak, if not absent.
Compound Interest: What “They” Don’t Tell You
The second variable in the Slowlane wealth equation is the “primary wealth accelerator,” which comes from market investments like index-funds, 401(k)s, and other traditional investments touted by gurus and financial advisers.
These investments use the financial strategy known as “compound interest,” which is a mathematical construct that outlines the power of interest accumulation over great periods of time.
The fundamental sell of compound interest is the old guru swan song regurgitated ad nauseam: $10,000 invested today will be worth gazillions in 50 years. Invest $250 a month for 50 years and you will retire rich!
Used correctly, “compound interest” is a powerful ally to wealth; used for Slowlane purposes and it bogs the wealth road trip to a crawl.
Why? Again, the puzzle is solved if you exploit the math—the answer plays sibling to why a job won’t make you rich: time.
Wealth creation via compound interest requires the passing of time and lots of it. Like a job, compound interest, or market investments such as stocks and indexed-funds can’t be leveraged nor can they be controlled. They rely on deficient math to create wealth.
Inasmuch as job income is measured in an hourly rate or an annual salary, the wealth acceleration process of “compound interest” is also measured in time (years) multiplied by a yearly yield. Let’s again review the physics, the mathematical formula for the Slowlane pathology to wealth:
WEALTH = (Job) + (Market Investments)
The primary income source The wealth accelerator
Or factored:
WEALTH = [Intrinsic Value (Yearly)] + [Compound Interest (Yearly)]
Factored further:
WEALTH = (Time × Hourly or Salaried Value) + Invested Sum × (1 + Yield)time
Like a job, the flaw in “compound interest” lies in the same mathematical restrictions in which numbers work AGAINST you instead of FOR you. Take a look at this chart, which highlights the effect of compound interest and that $10,000 investment.
$10,000 Investment
Time
(Years) Rate of Growth
5% 10% 15% 20%
5 $12,763 $16,105 $20,114 $24,883
10 $16,289 $25,937 $40,456 $61.917
15 $20,789 $41,772 $81,371 $154.070
20 $26,553 $67,275 $163,665 $383,376
25 $33,864 $108,347 $329,190 $953,962
30 $43,219 $174,494 $662,118 $2,373,763
35 $55,160 $281,024 $1,331,755 $5,906,682
40 $70,400 $452,593 $2,678,635 $14,697,716
A Slowlane guru preaches that a $10,000 investment grown at 15% will be worth over $2.5 million dollars in 40 years!!! Hooray!!!
What don’t they tell you?
They don’t tell you that a 15% return year-after-year is impossible unless you invest with Bernie Madoff or Charles Ponzi. They don’t tell you that in 40 years you’ll be dead, and if you’re not, you’ll be close. They don’t tell you that in 40 years, your $2.5 million will likely be worth $250,000 in today’s dollars and that a pack of gum will cost $6.00. They don’t tell you that this method of wealth acceleration is NOT what they use. They don’t tell you plenty, and yet you’re supposed to believe it without question.
Uncontrollable Limited Leverage (ULL) - Part 2
For compound interest to be effective, you need three things:
(1)TIME, as measured in years.
(2)A favorable YEARLY INVESTMENT YIELD within those years.
(3)An INVESTED SUM, repeatedly invested.
These three variables make up the latter portion of our Slowlane wealth equation:
Compound Interest = Invested Sum × (1 + Yield)time
Although this is a simplified version of a more complicated equation, the point of this analysis is its variable components.
Compound interest demands that your investments yield a predictable 10% return per year. Good luck with that 40-year gamble. Have the markets ever lost 20% in one year? Or 40%? They have, and when they do, your hard-earned savings evaporate.
You see, wealth acceleration via compound interest is deficient because its variables are deficient. Neither time nor yield can be leveraged or controlled. Again, meet my friend Uncontrollable Limited Leverage.
Can you demand a 2,000% return on your money this year? Can you demand your investment time horizon increase from the standard 40 years to 400 years? Again, the numbers can’t be leveraged. Your upper limit of time investment horizon is 50 years. Yield is worse—6%, 8%, or 10% yearly investment returns are typical standards. Time is restrained by the years in your life, yield is restrained by the average yield of typical market investments, and sum is limited because your means of creating income comes from a job—also limited! The only way to subvert the mathematical weakness of compound interest is to start with a large number, and large numbers require leverage!
Additionally, like a job, you can’t control compound interest.
Can you demand your bank pay 25% interest on your savings? Hey, Mr. Slowlane Bank, I demand a 25% yield on my savings account!
Can you control the economy? Hey, Mr. Economy, can you guarantee me low unemployment and a business-friendly tax environment?
Can you control the average yield of the stock market? Hey, Mr. Stock Market, I’m tired of 8% returns, can you give me 250% this year? Funny stuff!
Can you control anything in this equation other than a furious, labor-intensive search for the best investments to ensure you eek out another marginal 1%?
You can’t.
Why Indexed-Funds and 401(k)s Won’t Make You Rich
In 2008, I went to a fixed-income investment seminar given by a major brokerage house. Fixed-income investments are instruments like municipal and corporate bonds. Approximately 50 people attended the standing-room-only seminar. I sat in the back and surveyed the crowd. Remove the gray hair, the socks-n-sandals combos, the canes, and the wheelchairs and what was left?
Just me.
I was the youngest person in the room (and I’m not even that young anymore). How does a thirty-something get in a room full of retirees?
The people in the room were Slowlane success stories. They used time to accelerate wealth, and what it got them was old age. I don’t say that to be mean-spirited to older folks, but to cast light on the point: Compound interest (indexed-funds, mutual funds, the stock market) cannot accelerate wealth fast.
According to research and marketing firm The Harrison Group (HarrisonGroupInc.com), only 10% of pentamillionaires (net worth $5 million) report that their wealth came from passive investments. Age data was not provided but you can guess that none of the 10% were under 30.
Think about it. Have you ever met a college student who got rich investing in indexed-funds or his employer’s juicy retirement program? How about the guy who bought municipal bonds in 2014 and retired in 2018? I wonder if that guy driving a $1.2-million car can because of h
is well-balanced portfolio of mutual funds?
These people don’t exist because the youthful rich are not leveraging 8% returns but 800%! Has your wealth ever grown by 800% in one year? Probably not, but guess what? MINE HAS because I’m not shackled to the Slowlane wealth equation. My wealth acceleration vehicle isn’t dependent on Wall Street.
Yet, you’ve been domesticated to believe that these tools accelerate wealth. Index-funds, stocks, bonds, 401(k)s, dollar cost averaging, and compound interest are perfunctory orthodoxy for Slowlane wealth acceleration.
Unfortunately, without control or leverage, they’re impotent wealth accelerators.
Buy-and-Hold Is Dead
In college, I was taught “buy and hold” was the safe investment strategy that made millions. Buy stocks in solid companies, sit back and wait decades, and voilà, I’d be awash with millions. They’d shove that graph in your face and say “A $10,000 Investment in XYZ Company in 1955 would be worth $5 million today!” Thankfully, I ignored it.
In 1997, I opened a Roth IRA with $1,000 and invested the monies in a growth mutual fund at a major investment firm. Yes, I let the “professionals” manage it for me. For the next decade, I didn’t touch it. Essentially, I forgot about the account.
In the 10 years that followed, I made over $10 million dollars by following a Fastlane roadmap and leveraging Fastlane strategy. And what about that Roth IRA opened years ago? I never touched it and let it ride the ebbs-and-flow of the Slowlane. When I finished this book in 2010, that account was worth $698. $698!
