You’re only stuck when you stop planning for the next level.
If you’re not planning where to put your wealth to generate more wealth, you have reached a local maximum.
Local vs Global Maxima
This is a common analogy for nerds in the startup world. When Y is “good stuff” (usually money) and X is usually effort.
A local maximum is the best you can make of your situation right now.
The global maximum is the best you can make of yourself.
Common Local Maxima Traps
You know you’ve reached a local maxima when you are eking out incrementally smaller gains.
- If you have zero money, get a job
- $0 to $40,000
- Infinite % gain instantly
- If your job sucks, get a better job
- $40,000 to $120,000
- 200% gain over 2–3 years
- 55% (ish) per year increase
- If you like your company, work hard and move up to take on more responsibility.
- $120,000 to $500,000 over 5–6 years
- 33% per year increase
Half a million is nothing to sneer at. However, if someone is not content with that, then it may not be the optimal path.
To be clear, it’s not a “bad” choice. The trade-off is you are approaching an asymptote. You are getting higher and higher, but at smaller rate.
Orient Towards Equity Building
For wealth-making, the curve is generally observed to be the opposite. You start small and stay small potentially for years. Like anything with compounding interest, the majority of gains come at the very end.
As always, the best way to build this kind of wealth is by holding equity, either as a business owner or something similar, like an early-stage employee or investor.
Optimizing your day job will also take you far, but with increasingly diminished returns. Short-term optimizations do work when you need you are pivoting those short-term returns into long-term work.
For example:
- Work for years towards that half-million dollar title and experience (e.g. as a VP)
- Also take on board positions in industries where you want a stronger foothold
- Take the experience as VP and pivot by starting your own company
That’s one possible path.
Essentially, yes, do your day-to-day B-level tasks. But orient the fruits of your labor towards your next A-level task to actually move the needle on your life, not just this month’s or year’s budget.
