Creating more than you consume

I’ve hammered on financial radio host Dave Ramsey before, but I’m impressed with his mastery of his show. I don’t listen to it, but I have in the past, and I know a lot of people who do listen to it. The gist is:

1. Don’t ever go into debt.
2. Pay off any debts you do have.
3. Invest in mutual funds.

There’s more detail to it, like the percentage of money you should invest and so forth. But the simplicity of his message distills to “Don’t spend money you don’t have and earn more money”. It makes for entertaining radio.

I was thinking about his format this weekend because the “earn more” bit is grating. A person with $150,000 in debt and a $35,000 a year income will call in and he’ll tell them they have an income problem. They do, but the way to get into a better job never comes up much. That’s for the caller to just figure out.

It’s always about finding a better job though. Ramsey rarely encourages people to go into business themselves. That could be self-selecting because callers looking to go into business often have a bunch of other financial or personal problems.

Here’s the funny thing about all this, though: his advice to grow wealth is tied to the stock market. “Invest in good growth-stock mutual funds” …and wait 60 years. I get that for a lot of people that’s the safe, tried-and-true way. But did Dave Ramsey make his millions investing entirely in the stock market?

No, he did not.

Dave Ramsey made a business out of selling other people advice he wouldn’t settle for. If he called his own show 20 or 30 years ago he would have told himself to “Find a better job, chip away at debt, and invest.”

That’s not bad advice. But what did Ramsey actually do?

• He wrote a book that simplifies a complex problem on an issue that impacts millions of people.
• Started a series of talks and classes in churches (soft targets for people to speak about anything to a captive audience) to push that book and his name.
• Published that book and worked into the syndicated radio show business to finally expand his reach to millions of people.

That’s all very impressive. I’m genuinely impressed at his ability to grow that and keep reinventing the wheel to expand into all kinds of different markets. He’s in the business of lecturing at middle and high schools, writing children’s books and faith-based books, plus podcasts, web series, and designing financial planning services that compete against Mint.

You have to do something else

If I hosted a competing radio show, I’d be telling callers another hard truth on how to achieve wealth: you must create more than you consume.

What you create must be able to scale up and reach millions of people (this is the fundamental flaw with my business).

My three steps would be:

1. Turn off the TV and video games and spend that time building, writing, drawing, cooking, or creating something.
2. Ensure what you’re creating can be reproduced or consumed by 10 people or 10,000 people.
3. What you do consume should be related to your craft (like books on the subject).

This is somewhat antithetical to the notion of getting a job. People who grind at a job all day don’t have much mojo left at the end of the day to work on a book or a wood lathe. It can be done, but realistically most people just don’t have that ability. There’s also something to be said for “all work and no play” making people into dullards or worse.

Ramsey’s advice is an indication of another uncomfortable truth: the path to wealth in American is less and less through a job unless you’re in a highly credentialed field (law, medicine, etc.). It’s more through creation of your own business where you own the means of production.

In a capitalist society the whole thing would fall apart if everyone was a company owner. Eventually you require laborers. Creating a business is always a huge risk for people, too.

Just as Ramsey’s advice is to never go into debt and “make more money”, mine would go above that: “consume less and create more world-class stuff.”