Everyone has the same 24 hours in a day, but we all have different results in life.
This imbalance fascinated me growing up.
I remember everyone telling me that hard work was the secret to success. But my mom worked two jobs when I was growing up, and we didn’t grow up rich.
And then, later on, everyone told me that the secret was education. If I studied hard and got into a good university, then I would be successful.
I knew that wasn’t true. Why are there people with doctorates who are struggling to find jobs?
Something wasn’t adding up.
I didn’t know any wealthy people growing up, so I started tons of books. Each one would give me a little gem.
Those gems from reading weren’t enough. I had to gain some first-hand experience for the past 13 years to understand.
I haven’t figured everything out yet. I have developed specific frameworks to help me understand more about success and wealth creation.
Do you know what’s ironic? My parents told me that if I kept playing video games, then it’d harm my future. It’s from playing games like Starcraft and Age of empires that gave me an “Ah-ha!” moment.
Winning at those video means meant you have to develop the skill of managing your resources.
The same concept applies in real life.
Think back to high school. Some kids wasted their time partying. Others studied and did extracurricular activities. I know there are exceptions, but in general, the ones who studied hard are more successful.
They managed their resources better.
Today I want to share with you one framework that I call the Productivity Flywheel.
The Flywheel effect is a concept from the book Good to Great. It’s an analogy about getting a huge, massive flywheel to move. It takes a ton of effort at first, but over time, the wheel gains enough momentum to spin on its own.
Ever heard the phrase, “The Rich Keep Getting Richer?”
I studied the Flywheel Effect. I then combined it with the resources that we have: time, energy, attention, and money. The resources are a way for us to gain leverage, which then gives us more resources than before.
The Productivity flywheel is a way for you to maximize your leverage in life.
Understanding and Using the Productivity Flywheel
I’m going to explain how this system works.
Step 1: Using Your Time / Energy / Attention Better
Every one of us has the following resources.
- Time. You have 24 hours each day.
- Energy. This is your capacity to do work. Ever tried going through the day with zero sleep? That’s what it’s like to be low on energy.
- Attention. Your ability to focus and concentrate at all. This is an underrated resource that we’re giving away too freely. It’s hard to get any meaningful work done if you feel the need to check social media every few minutes.
All three resources are vital if you want to get anything done.
It’s fashionable to say that we all have the same 24 hours in a day, but that isn’t true.
You might spend three hours stuck in traffic. I work from home. That’s an extra three hours I have over you.
I plan to have kids in the next few years. I’m not going to have as many free resources as I do now.
It helps to visualize your resources as if they’re status bars in an RPG video game. Instead of health and mana, we have time, energy, and focus.
And just like a video game, certain activities can level up our statistics.
Let’s take a look at two people.
Sarah is a single mom who spends three hours a day in traffic. You can imagine how exhausted she is every day.
John finished university, and his parents are subsidizing his expenses. What a nice life.
John has a higher capacity to get shit done.
Here’s a fact: Life isn’t fair.
Someone could be born into a horrible family situation and grow up in poverty. Someone else could’ve been born into a life of privilege.
Life is like a game of poker: you can’t control the hand that you’re dealt with, but you can control how you play it.
Don’t put yourself at a disadvantage at an early age.
If you get into six figures worth of student loans by the age of 22, and you can’t find a job, you’re playing the game on hard mode. If you become a single parent when you’re 16, then you’re playing life on hard mode.
Each day you make dozens of decisions on whether to invest or spend your resources.
What does wasting your resources look like? Drinking a ton of alcohol. Wasting hours a day on social media. You get the picture.
Sure they’re fun, but they sap away at your resources.
What does it mean to invest your resources? It means you’re using your time, energy, and attention towards activities that help replenish or generate more resources.
These are the “quests” in an RPG that help you level up.
- Using your calendar
- You use an app that blocks distracting websites while you’re working
- You spend time meal prepping and cooking in bulk.
- Getting eight hours of sleep a night
- Exercising at least three times a week
- Eating a healthy diet
- Meditating at least ten minutes a day
- Managing Your Phone and Social Media Usage
- Using timeboxing or pomodoros when you’re working
Sarah the single mom doesn’t have a lot of free resources. But she can practice some better habits and build some systems to put her in a better position.
This is Productivity 101 and requires some discipline.
I’ll be the first to tell you that it’s not easy.
Sometimes I want to skip the gym and play video games instead. Sometimes I want to stay up late watching Netflix, instead of getting a good night’s sleep.
What keeps me disciplined is to keep my eyes on my goals. I realize that certain behaviors and habits are robbing me of the future that I want for me and my family.
The first step is to maximize existing resources.
What do you do with all this time, energy, and attention?
You transform them into the 4th resource: money.
Step 2: Use Your Resources and Job to Generate Money
You put your resources (time, energy, and attention) into a Machine (a Job or business), and that outputs money.
Not all jobs pay the same. Two people can put in the same amount of effort but paid different amounts.
One consultant can charge $100 an hour, while another one can charge $10,000 an hour.
Getting paid more isn’t something that can happen overnight. Here are some strategies off the top of my head.
- Invest in more education such as an MBA (Hey, I didn’t say this was the best way)
- Negotiate for higher pay at your current job
- Jump to a different company that will pay more
- Invest time on the side improving your skill sets.
- Get a piece of the upside (commissions, equity in the company, etc.)
Once again, life’s not fair.
I work with a programmer from Romania and I pay him around $25 an hour. This guy is fucking smart.
I can’t help but think that if he was born and raised in the USA, he could earn $200k+ a year plus stock options at a FAANG company.
Step 3: Use Your Money Better
I hate when people say money doesn’t buy happiness, or that money isn’t important. It’s virtue signaling and a sign of someone insecure with their situation.
Money is neither good or evil, it’s a resource.
Unfortunately, no one teaches us how to manage money. It’s not as simple as running numbers on a spreadsheet.
Money means different things.
- Money could mean opportunity.
- Money could mean a way to brag.
- Money could serve as a way of safeguarding your future.
Being responsible with money boils down to living below your means.
It doesn’t matter how much income you generate if you can’t control your spending. It’s cliched to hear about a broke rapper, athlete, or lawyer. They have a high income, but it doesn’t matter if their expenses are higher.
Being able to save money means you get to access something that I called “The Difference.”
It’s income – expenses.
Here’s an example from my life.
2008 Charles Ngo
- Monthly Income after taxes: $2400
- Monthly Expenses: $1800
- The Difference: $600 a month
I had an extra $600 a month as a 22-year-old.
I could’ve spent that $600 a month on clubbing, new clothes, a new iPhone 1, video games, or a nice apartment.
Instead, I chose to invest that extra $600 into affiliate marketing.
This is hard for a lot of people because they can’t think long term easily. Why invest for retirement 40 years from now when you can use that $100 for a nice dinner?
The people who think long term, win.
Most people do not have any leverage. They trade their time, energy, and attention for money. They then spend that money.
And most end up in this cycle forever, and unable to retire with dignity.
Step 4: Invest Your Money into Creating More Leverage
Leverage is a superpower – it’s a way to get more done using the same or a lesser amount of effort.
Think about how much effort it would take for you to move a 300lb box. But if you can put the box on a Dolly with wheels, you can move it with so much less effort.
The Dolly with Wheels is leverage.
You can use money to create leverage.
The three main ways are investments, systems, and people.
You know what an investment is.
Various investments can include the stock market, real estate, cryptocurrency, bonds, gold, starting your own business.
(Money) x (Time) x (Investment Method) x (Risk) = More Money.
Whenever you’re making an investment, don’t forget to think about how much resources you’ll need to pour into it.
I love investing in Vanguard index funds.
I spent an hour several years ago building a system that invests money for me. I check my performance once a month when I calculate my net worth.
(If anyone’s curious, I’m 100% stocks. 70% usa, 30% international. Vanguard Admiral funds with the lowest expense ratios)
I don’t think about it. I don’t waste time on it. It frees up my resources to focus on my strengths and my businesses.
However, I’ve seen other people invest in things that they don’t know much about and it’s disastrous.
For some reason, a buddy of mine invested in a nightclub. I guess he wanted the “status” of being part owner of a nightclub.
It was a horrible investment financially. Not only that, but he wasted resources working on the night club. It took time away from his main business!
Systems and Technology:
We’re living in the age of technology. You can invest your money into machines/technology which frees up more resources for you!
- People use to wash their clothes by hand. Now you can buy a washer and dryer.
- If you have a business, you can invest in different technology for automation. Think about how much money a restaurant saves because of a reservation system like OpenTable.
Self-driving cars. I don’t own a Tesla, and I’m not sure how their autopilot technology is these days. But I imagine soon, a self-driving car can be a tremendous resource saver.
You can be in the backseat taking a nap or answering emails while your car drives you everywhere.
Other People’s Resources:
You have finite resources.
The good news is you can spend money to borrow the resources of other people.
Some examples from my life.
- House Cleaning: My maid comes every Sunday for four hours. The $100 investment I make directly frees up four hours from our cleaning and lets us spend that time on higher leverage activities such as planning or just taking the day off.
- Future Live in Nanny / Daycares: I want to have kids one day, and I’m fully aware of how much effort it’ll take to raise kids. We’re already planning and thinking about how hiring different people can help with our responsibilities.
- Employees: Employees are enormous leverage. Imagine that you hire someone for $40,000 a year. Now you’re getting their time, energy, attention, and specialized knowledge.
Step 5: Utilize Your Leverage into Generating More Resources
The before is a visual of me a decade ago.
I worked a 9 to 5 job and pretty much traded time for money. The only resources that I had were the ones that I generated for myself.
The after is a “rough” look at where I am today. I have more resources than I had over a decade ago.
It’s because I leveraged my money into creating systems and borrowing other people’s resources.
Now imagine what this looks like for a billionaire. Holy shit.
Think about what’s going on when Jeff Bezos is hanging out with his new Mamacita.
He is leveraging the resources and knowledge of over 750,000+ people.
He has thousands of nerds working in Seattle, thousands of UPS drivers are delivering his packages, and you have people like us who are making his asset more valuable by leaving Amazon reviews.
There are plenty of businesses where you can trade your time for money, like being a consultant or a lawyer. You can get rich from doing this, of course.
But your resources are finite. You have to go to sleep.
There are no limits to the outputs of machines, technology, and systems. And there’s always going to be a weakness because you could get hit by a bus or catch the Coronavirus.
The final step of the flywheel is where you have all these additional resources compared to before.
Now you’re able to operate on another level:
- You’ll have time to plan, strategize, and think.
- You’re more robust as a human because you’re healthier and getting more sleep
- You have time for other vital areas of your life, such as spending time with your family and spending time with your hobbies.
There are levels to leverage.
Each additional level unlocks more power.
Level 1 maid is someone coming once a month to clean.
Level 5 maid is someone coming every week to clean.
Level 10 maid is multiple maids living in your home.
Level 1 coder is hiring someone on Fiver for a task.
Level 5 coder is hiring a great coder on your team.
Level 10 coder is hiring a top talent who heads a team, and they own the project.
The rich get richer.
Where the Flywheel Effect Breaks
Let’s talk about how where this can go wrong.
You can lose if you’re playing the status game
Status is where you’re showing off to the world how well you’re doing. You know what I’m talking about, the guys who are always showing off their cars or dream vacations.
Listen, it’s ok as long as you can afford it. But the majority of people playing the status games are people with $100k net worth, buying $70,000 cars.
You could invest that $70k into creating more leverage. They could buy the car years later when they are in a better position.
Playing the status game distracts you from building wealth.
Don’t try to look wealthy…be wealthy.
The next trap to be careful of is over-investing, and it is not paying off.
You spend $65k year on an assistant. They save you a tremendous amount of time and energy.
But you’re not doing anything productive with this time and energy that you’re saving.
It’s a waste of money.
The job or business isn’t compensation you well enough
You’re devoting 14 hours a day to your job. You’re giving your blood, sweat, and tears to it. But you’re stuck at a $50k salary for years.
Or you’re devoting all these resources to your business, but it’s bleeding money year after year.
The flywheel doesn’t work if the resources and job are not outputting enough money.
Understand and Using the Productivity Flywheel
It’s not going to be easy to understand some of these concepts at first.
I grew up with a frugal mentality that discouraged me from spending. Hire a maid? I can already hear some family asking me why I’m wasting my money. Why is my fiance not cleaning the house every day?
If you’re an entrepreneur, then you’re going to be used to operating as a lone wolf. It’ll be hard to trust employees with your baby. But there’s a limit to how much you can do as a single individual.
Sometimes I look at people like The Rock or Elon Musk. I wonder, how is it possible that they’re able to do so much?
I then step back and look at this framework and realize how much leverage they have that we don’t see.