There Are Only 5 Modes To Make Money: The Upsides and Downsides To Each
Alright Heroes...
Did you know there's only 5 modes to make money? Ever?
That includes legally or illegally. There are only a few modes in which money can be exchanged and in order to accelerate your net worth, you need to understand them.
Now, within these 5 modes, there is unlimited ways to implement these. But that's different.
There is a convenient acronym to remember what they are so we'll go through that and the upsides and downsides of each.
PAIDS - The 5 Money Making Methods
Product
The creation of a good, physical or digital, that someone can purchase.
The upside and downside of goods varies on the good itself. It's important to understand the differences.
A digital good like a song or video only has to be produced once and can be distributed for extremely cheap. This is why software companies are worth so much and can go so quickly.
But if your good is apples, then you have a harder time selling them the more demand grows.
If you need to sell 50 apples a week, then you need a few trees or can outsource the growth of the apples, package them and sell them rather simply.
But if your brand becomes popular and you need 5,000,000 apples, then you need farmland, equipment, labor, trucks and distribution agreements. You also need good weather and no natural disasters like insects or hurricanes to destroy the crop.
But while a song will likely go in and out of popularity quickly and demand will die fast, apples will remain in strong, consistent demand in perpetuity.
Money is a good too. It's worth noting that loans and mortgages are considered by the IMF to be a financial good. So even monetary products fall in this category.
When choosing your product, be sure to do extensive research on the different factors that impact their upside and downside.
Advertisements
The average human experiences anywhere from 8,000-10,000 ads PER DAY.
We live in the attention economy and its only borders are language and platform.
Whether its a billboard or an audio ad in a podcast, companies spend billions of dollars to get your attention in hopes that a fraction of people who experience it will convert and buy something.
So if you have any kind of platform that has a regular audience, you can work with brands to sell ads.
The upside to that is its money for something that's minimally invasive (if done right).
The downside is that its up to you to maintain the audience's attention. Considering goldfish have a longer attention span now than we do, maintaining attention for long periods of time can be harder than fighting off a raging bull while wearing a red onesie with your hands tied behind your back.
Information
The invisible power that changes the course of history isn't money, it's information.
What do you think was more impactful hundreds of years ago? A stockpile of gold or a well-placed scout that warned you of a surprise Viking attack to give you a chance to prepare defenses?
Management consultants make billions every year just "telling" businesses what they should do. They don't usually do it, they just give information on "what" to do and "how" to do it.
Online courses is on a massive growth streak and won't slow down. Why? Because people know things that are valuable.
Would you pay $20 if someone could show you a tried and true way to do something important to you? I would and do! And so do millions of others.
The right information at the right time can change lives. I once told a friend to buy Ethereum at $50. He invested $8000 without knowing what it was and forgot about it for years until I reminded him about it recently. The crypto was worth over $300,000 when he looked it up.
It's a low cost to start a business based around information so that's another check mark for the upside.
The downside is simple. There's too much misinformation out there and building credibilty is difficult. But if you do that, you're golden.
Deals
This category is a bit more complicated than the others. It's an agreement between two or more parties who want to do business together by exchanging goods, services or information for money under certain terms and conditions.
In normal terms, its an agreement to exchange something someone wants for money with strings attached.
An example would be someone renting a property. They are being provided with housing (a good) in exchange for money under the terms that they live there for only 12 months and have to move out or renew when that time is up.
Obviously, there's a lot of other conditions which is why deals can be complicated.
The upside of making deals is that you will get paid. The downside is that, in order to make a deal in the first place, you have to have something that someone else wants.
The other downside is if one of the parties doesn't honor the deal itself. What is the fallout to that? That can get quite messy.
Also, this is why we hate and love lawyers, but the law can significantly impact deals and that can mean hiring an attorney is often an additional expenditure that has to be considered.
Services
The fastest route to cash is through services. The world is full of these.
Whether it is visiting a healthcare professional to fix your broken arm, hopping in an Uber, or paying the kid down the street to walk your dog during the day, we love to use services.
One of the biggest pluses of services is that it can be easy to exchange your time for money.
It's also worth noting, fame and notoriety are usually found through services. Lebron James, Tom Brady and Zendaya all provide the same service...
Entertainment. They are at the top of their respected fields and are compensated quite well for them.
The big downside to services is that they can be very hard to scale. Celebrities can only be in one place at one time. A plumber can only unclog one sink at one time.
For the majority of services out there, the biggest issue they'll have is scaling. It requires finding and managing talent, training and strong infrastructure grow quickly. Something easy to talk about and hard to do.
What does this have to do with growing my net worth to $100k and beyond?
To accelerate financial wealth, we have to understand the basics on how money is made.
First, you need to evaluate what it is that you do in order to make money.
The most common way the average person understands to make money is to exchange their time and labor for money.
Using that formula (there are others we'll talk about later), time and labor are not created equal. So to accelerate your wealth, you either have to increase what your labors are worth, cut your time down without impacting your income, or both.
So if you sell a product, how can you use your time to sell more of your product OR sell a different product for more money?
If you have an audience or information, find the RIGHT people to pay you for it and create a beneficial relationship that can continue long-term versus a one-time deal.
If you have something of value and make money through deals, can you invest a little in what you have or change your social circles to increase revenues with the same amount of deals?
If you provide a service, are you in a position to maximize your skills? Can you get better at what you do by upskilling? If so, then you can charge more for those skills or find a job that will pay more for them.
And lastly, can you combine what you do right now with any other of the 5?
- Have access to information that you could turn into a product?
- Any goods that you could sell for more if you made deals?
- Can you take an existing product and build a service around it?
Doing this will multiply income streams and allow you to increase your net worth incredibly fast.
Until our paths cross again...
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