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The Wealth Flywheel
1 min read

The Wealth Flywheel

Building the Wealth Flywheel.

I came across this insightful tweet by Jack Butcher that said,

  1. Turn Ideas into assets
  2. Assets generate cash
  3. cash buys you time
  4. Time helps you - create more ideas

I'd add a 5th layer to it, where success of the first venture also opens up a ton of opportunities and adds momentum to your flywheel. As they say, making the first million is the hardest.

This is of-course super simplified, but has a core to it that rings true.

Elon musk didn’t start off building rockets, he started with Zip2, a company that essentially sold software for companies that were printing city guides. If we were to hear that as a pitch for a startup today, it doesn't really wouldn't excite anyone at all, would it?

However the success and exit of Zip2 (yielded $22m for Elon Musk) led to Paypal (yielded $165mn for Elon Musk). The $165mn became the startup capital for Tesla and SpaceX.

Start somewhere and succeed. The problem with most of us is that we are often attempting to skip a few iterations of the flywheel and trying to jump way too high, fail and then give up. Jumping higher than we can also often requires that we have to raise outside capital (a spring beneath our heels) - often from a position of weakness - and give away precious equity, that even when there is a successful exit, our yields are much lower, leading for us to dredge the cycle longer - without leveraging momentum or being able to tap into the opportunities that open up.

I've lately realized that Flywheels are powerful - and the least spoken about arsenal for startup entrepreneurs to reverse engineer, understand and leverage.

Startups are all about building Flywheels. It is not one shot, big pot strategy - but building something that garners value over each cycle and cracking the means to accelerate that flywheel - and when it works, it is usually a flight to the stars.


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