In the last several generations, a lot has changed.
The days of a clear distinction between labor and capital in all circumstances are long gone.
Consider any “everyday millionaire” you’ve ever met. We’ve all met someone like this. They could be a recently retired teacher or accountant.
They became multi-millionaires by purchasing stocks or real estate in the correct place in the 1960s or another decade, and they simply purchased and held.
The heavy lifting has been done by compounding. They did it either by chance or by figuring out a simple fact: capital outperforms labor over time, even if not every year or decade.
According to various research, smart investing is the third most essential component in wealth accumulation:
As a result, according to the aforementioned survey, hard labor is ranked first.
There’s a good explanation behind this. Unless they come from a wealthy family, wealthy people start out as working-class or middle-class people.
The first $100,000, and especially the first $1 million, were extremely difficult to come by. Many risks (rated as number 5 above) had to be taken, and hard labor was a part of that.
Getting to $2 million or even $10 million after the first $1 million is significantly easier than the initial $1 million.
At this point, “letting your money work hard for you” and anticipating obvious mistakes such as falling out with business partners and getting divorced a lot will help a lot.
However, working hard and taking chances can help you get your foot on the first rung of the ladder.
It’s also worth mentioning the bit about taking chances. Working hard is most beneficial when it is paired with a variety of other activities.
Working hard in the proper industry while taking chances and remaining persistent, for example, is more likely to lead to success than simply working hard.
Let’s have a look at a simple example. If someone is earning minimum wage, working hard will only result in more hours worked and a linear income, at least until they are promoted.
