Four Laws of Money
I thought it would be really great to talk about the true nature of money. A lot of people have a very skewed perspective of what money is, what it means, and how it behaves and as I've gone through the world and I've seen my own money situation change as I've gone from just working regular jobs to starting different businesses, getting venture funding, and building companies with multiple different sections, and employees under each section, and doing online courses in sales, and all this different stuff. I've seen kind of how money flows and my perspective of it has changed a bit. One thing I'll note before we go into these slides is that as you get deeper into the field of entrepreneurship, your perspective of money will change because you won't attach as much personal value to it since you see how it's used as a tool, and not necessarily as a barometer of personal importance. A lot of people who are just getting money for the first time use it as a strong barometer of personal impo...
rtance and personal significance, but as you make more of it especially and especially as you grow in other areas of your power, you see it's really only one barometer and not the barometer. Money is an invisible structure. It's an emotional wave that vibrates at a specific frequency and that frequency reflects its value at any given time. So, is money a paradigm, a pendulum or a program?
Pendulum. Money is a pendulum. And there are some aspects of what money should and shouldn't be which is like a paradigm but really it's a pendulum. And you can think about that in terms of think about again, we can talk about bitcoin, the stock market. Think about how money flows in and out of accounts and how people feel about it as a result. Think about how we see the news of money being reported and how that affects the markets and think about how you feel when you lose money how it affects you emotionally. Think about how you feel when you gain money how it affects you emotionally. Money is a construct that we've created in order to make transactions. It didn't exist before it existed. It's not a natural resource. It's an artificial resource that we've made part of our natural environment. And it's almost so ingrained in us that we don't realize that it's been created. Does that make sense? It's not actually real. In fact, in order to become powerful financially, you're gonna have to rethink the story you tell yourself about money. And just like any invisible structure, like a religion, a political ideology, a cultural phenomena, money doesn't have any real or intrinsic value except that that we assign to it. And once you realize that, it's not going to immediately lead to you making more money but what it will do is it will free up the space that you have around money in your brain to create the possibility for new perceptions of money to come through so that when you do make it as you make more, you become less attached to it and that attachment actually opens up space for you to make more of it. So you find that people who have the most money they care the least about it. And not that they don't treat it seriously or shepherd it well, but they don't treat it as their sign of personal fulfillment. So four laws of money: Law number one is that money isn't real. And that money represents potential and nothing else. So if you think about the way that the American financial system works and we'll just talk about the American financial system as it makes the most sense in this context. We have many different ways that we record how much money is in the world, how many dollars are in the world. So we have what's called the M System and it goes M-zero through M-two. M-zero is all the physical cash in the world so we have coins, dollars. M-one is all the physical cash plus everything in checking accounts and saving accounts of American dollar holders. Right, and then M-two would be all the above plus money markets, mutual funds and other vehicles like that. And basically that makes up the American Monetary System. And there are about 10.5 trillion dollars, US dollars, in the world economy. Now, of those 10.5 trillion dollars, 92% of that wealth is digital. It's not actually a physical currency. And so we know that if you look at just the history of economics and cultural history over a period of time at one point we were tied to the gold standard meaning that we had a certain amount of money that was correlated to how much gold we had in various banks in the reserve. And then over time we distanced ourself from that gold standard and now we basically make money at will. We don't really have a physical connection to money in terms of the amount of money that's actually in the economy. It's representative of basically our needs. And money essentially, it represents potential. So if there are 10.5 trillion dollars in the global economy. If you think of each dollar as a shred of potential for people to do work 'cause you think a dollar can be exchanged for someone to do a certain percentage or portion of work, then there are 10.5 trillion units of potential for humans to create things in the world. We're talking US dollars here. So if you think about it like that, if you think about the fact that money is potential but the money in the world is not necessarily evenly distributed, you can see that the potential for humans to do work and for people to do work is not all equally aligned because the money itself gets hoarded into different accounts, gets distributed in different ways. Not everyone has an equal share of it but the fact that it's there and represents a potential is the main key. And it's not actually real. Most of the dollars we have, if 92% of them are digital, means that only 8% of the money that we think is there is actually there. And we know that with the way loans are created and we know with the way that banks and the government creates money, they're allowed to create much more money in the system than is actually available. So when a bank takes in a thousand dollars, they can loan out $10,000. Right? And so that's why inflation goes up, that's why it's really easy for big corporations and organizations to create lots of money that wasn't there before. And if you think about money not being real you also have to consider law number two, that it's not rare. You should act like money is flowing through you at all times 'cause it quite literally is. If we go back and we zoom out a little bit if you think about the fact that most of the money isn't real, 92% of the dollars in the world aren't real, and we think about the way that they're being transacted. How are they being transacted? They're being transacted through radio waves because we're sending them and transmitting them digitally and those radio waves are WiFi towers, cell phones all these transactions. Or even if you get more granular think about the fact that we all have apps like Venmo, Cash App, PayPal. We're always sending money and receiving money at all given times. And that money is literally crossing an invisible field and passing through your body. Right now there are signals that are being sent that you can't see, because your perceptions can't register them. That means that money itself and currency is being passed through your body which is why it's called currency. It's literally a wave which is crazy to think about because it's so weird to think about money not being physical and not being real. But there are dollars, euros, pounds, drachmas. They don't even do drachmas anymore, being passed through your body at any given time because it's being transacted. And what I like to do is I like to wake up in the morning and think to myself, there's billions of dollars being passed through me right now. Imagine if you could just tune in your brain to the right frequency and just collect some of those dollars. That's the advanced lecture, right? (laughs) But it's really interesting to think about money in that way and to really consider the fact that there is money floating around at all times. And we think about money at a very finite sense. We think of the things that have become catchphrases in our house, or clipping coupons or your mom or your dad will say, turn off the lights. You think we own the electric company. Or a stitch in time saves nine. Or, a penny saved is a penny earned. These are all things that create scarcity around money and show it and view it as a finite resource. But if you were really to step back and say it's not finite as a resource it's actually abundant, 'cause it's always being created and it's all around us, it changes the way that you think about the money. And of course that lends itself to the fact that money is manmade, which is law number three. So the way money is made is that money is created by governments and banks, okay? These organizations create and circulate the money. Corporations create essentially the products that normal citizens use to exchange for the dollars. So what ends up happening is lets say that the corporations or that the banks and the governments want to make more money, what can they do? They can loan it out and collect some, then create some debt. They can create a bond or something that we have to pay into. They can even create a war that creates more money just because it's something for us to fund money into. And of course if you think of things like maybe a big casino, the players are as such. You have the government and the banks who are kind of like the house, and then you have the corporations who are like the star poker players who understand how to play the system. And then you have us, who are kind of like the regular patrons who lose most of their money in the casino. And the cool thing to think about or maybe the scary thing to think about is that no matter how big a company gets, whether it's Apple who just broke their first trillion and then you can see Amazon was close behind them with a trillion dollar valuation. No matter how much money you make as a company, the money always has to go back to the bank. So Apple doesn't keep its own money. It always goes back to the bank and the government. And the money always circulates from that back splash back to the corporations and then back to the people and it drips down and we buy the products that the corporations create and then the corporations then take out loans and do transactions with the governments and the banks. So if you think about it like that you have to realize that just because the governments and the banks are the ones creating the money and the corporations are the ones creating the products, we the people, the average citizens, quote on quote, and the entrepreneurs are the ones who are still creating all this momentum. It's always us who has to create the widgets and finance the rocket, or pay back China and we didn't create these obligations to ourselves but we have to. The government can say, yeah, we tested out, we decided we wanna make 15 new fighter jets, they're gonna cost a billion dollars each and someone needs to pay for them. So that's you. And we're like, I didn't want 15 new fighter jets, but you don't have a choice, because they create these obligations for us and their the ones that make the money, and their the ones who tax us. So, we have to pay into that system. So as long as we're understanding what money is and how it's made, it becomes a little bit less personal because we understand the game that's being played around us. And of course, you go through all this stuff and you think, okay, money's not real, it's all around me but I can't catch any of it, and it's manmade but I don't have any of it, so what do I do, right? Well, first of all, you gotta change the way you're thinking about it and you have to realize that money is inherently good. Money is inherently good and in order for you to wield this power, you first have to agree that it's good. And you have to agree that you deserve it and I think about this often when I think about just the way that I have approached money in the past and I think about some of the internal dialogue that goes on that I have to still consciously change. For instance, I walk into my friend Tom's house and Tom owns this big nutrition company and he has this huge house in Beverly Hills, and I walk in there and my initial thought sometimes when I walk in, until I've started to reprogram the way I see this is I'll say, I would never want a house this big, that's too much marble. I would never want a house with this many awesome windows or my own gym in it, like it's too much space for me. I'm cool with a smaller house. I'll start to downplay the effect of wealth because I will wanna protect myself from the possibility of not having it. Does that make sense? Can anyone else here relate to having money mindsets that are designed to protect you and not to let you flourish? Yeah, any examples?
I remember we were at work and we saw a Lamborghini drive by. I was like, dang, that motivated me right? But then my coworkers were like, I don't need that type of car, you know? (laughs) They were just hating, I was like awe okay.
Yeah, and a lot of times it's almost subconscious or it's an unconscious response because their not even going deeper to think why they would say they don't need that type of car. 'Cause there's nothing wrong with the car, right? It's just a car.
I know for myself, it was actually hiring someone to do something for me. As you know, I'm really big on doing everything myself and I realized what I was telling myself like, "Oh I should just save money and teach myself "how to do Google ads now, instead of just "everything else I know how to do". It's much better and much more beneficial for me to hire someone to do them for me.
Yup, yeah. And a lot of times we feel like we don't deserve to either have the money or to be able to pay for things that cost money. So we'll either try to do it ourselves and we'll frustrate ourselves or we'll just put off the thing that we want or need because we don't feel like we deserve it. And many of us literally outright reject wealth. We outright reject money in our lives and when we do it unconsciously it's even worse. In fact if you look in the Bible, it has the whole phrase about money is the root of all evil. And of course that's not the true phrase. It's the love of money is the root of all evil but we never stop to consider this stuff. And in the early days if you think about how the feudal lords created things and you think about medieval times, we were never really taught to become financially powerful, we were never really taught to feel like we deserve to have money because that didn't serve in the interests of people who had the control over us. Whether you're talking about African-Americans in the slave times, you're talking about people in Europe, European Serbs, if you think about in periods where there was royalty and nobility on one corner and paupers and poor people on the sides of the street. We weren't taught to appreciate or to look for our own wealth, because that type of mentality is bad for people in power. Because as soon as you accept that it's possible for you to have wealth, people who have more power than you feel like it negates them. But of course this is not true. Of course there's an unlimited amount of wealth in the world.