Skip to content

How to 10x Your Income - The 4 Ladders of Wealth

2024-04-30 · Long video (solo, talking head or whiteboard) · Ali · recording, 21:08 · watch on YouTube

Topic: Business and entrepreneurship (also: Money and investing) · mode: Explanation and tutorial · tags: His own numbers, Lesson from a book, His medical past, His own products discussed, Sponsor segment present

Ali walks through his friend Nathan Barry's four ladders of wealth creation: trading time for money, a service business, productised services, and selling products, software and platforms; each ladder is taller but needs more skills, so skipping straight to products misses the sales skills a service business teaches.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — The four ladders of wealth creation from Nathan Barry's 2019 blog post

  • ★★★ To answer what it takes to become financially free, Ali uses the ladders of wealth creation, a framework from his friend Nathan Barry's viral 2019 blog post that changed how Ali thinks about building wealth. — 00:00:00 · work optional
  • ★★★ In the four ladders of wealth creation, ladder one makes the least money and ladder four the most; you can climb as high as you want on any ladder, but some are much taller than others. — 00:00:00

00:01:04 — Ladder one: time for money, from Sara Blakely's babysitting and Kumon to an NHS salary and its cap

  • ★★ Sara Blakely started her first business in 1990, just out of high school, charging $8 to babysit children at a local Hilton hotel; in 2021 her clothing company Spanx was valued at $1.2 billion. — 00:01:04
  • ★★ Ali says most people who become financially free started on ladder one with some kind of hourly job. — 00:01:04
  • ★★ At 14 Ali was on the bottom rung of ladder one, paid $5 an hour for four hours a week at Kumon, a maths and English study centre, teaching children maths and English. — 00:01:33
  • ★★ From 24 to 26, as a junior doctor in the NHS, Ali earned a salary of around £36,000 a year, working 48 hours a week on average with around 28 days of paid annual leave. — 00:01:33 · NHS
  • ★★★ Ladder one, trading time for money, is how most people make their living, but it is the shortest ladder because it is really hard to become financially free that way, Ali says. — 00:02:22 · work optional
  • ★★ In a handful of jobs paying millions, such as well-paid software engineers, US doctors and finance, people can save and invest a large share of their salary, the method most of the FIRE community follows. — 00:02:22
  • ★★ From what he hears from people in that position, Ali says 15 years in an investment bank, from 21 to 36, may do so much damage to life, health and relationships that retiring at 36 might not be worth it. (hedged) — 00:03:09
  • ★★ On ladder one, Ali says, income grows by raises and promotions, small step changes in your income graph. — 00:03:09
  • ★★ Had he stayed in medicine, Ali estimates he would earn about $40,000 in foundation year one, maybe 48,000 in year two, 54K (as heard) in core training, 58 to 60K as a registrar and 100,000 to 150,000 as a consultant from about 35. (hedged) — 00:03:54 · NHS
    • a number in question (doubtful): "50, 4K" — check against the recording
  • ★★ In the UK, Ali says, an annual salary of £160,000, about $200,000, puts you in the top 1% of earners. — 00:04:23
  • ★★ However much a job pays, Ali says, trading your time for money inevitably caps how much you can make. — 00:04:23
  • ★★★ Ali thinks most people privileged enough to move beyond ladder one stay there largely because they do not consider that they can move to the other ladders. — 00:04:52
  • ★★ Applying to medicine, Ali never thought of making money other than through a salaried job until he read Tim Ferriss's The 4-Hour Workweek at 18, which opened his world. — 00:04:52 · The 4-Hour Workweek, Tim Ferriss

00:05:32 — Sponsor read for Epidemic Sound

  • ★★ Retelling David Foster Wallace's story of young fish asking "what the hell is water?", Ali says the water most people swim in when it comes to making money is ladder one, trading time for money. — 00:05:32

00:07:00 — Ladder two: your own service business, from hourly freelancing to an agency

  • ★★ At around 12 Ali discovered he could make money online by offering services: he learned to make websites and advertised on freelance platforms at about $10 an hour. — 00:07:00
  • ★★ Ladder two is a freelance service business; on platforms such as Fiverr, Upwork and People Per Hour anyone can list a skill and be hired by anyone in the world. — 00:07:30
  • ★★ The core skill for a wage or salary job, ladder one, is being reliable, performing well and showing up consistently, Ali says. — 00:07:30
  • ★★ At the bottom of ladder two, hourly freelancing, you need at least the skills of finding clients who will buy your service, writing proposals and pitching, and pricing your service. — 00:07:59
  • ★★ The next step on ladder two is per-project pricing, such as $200 for a website instead of $10 an hour, which gives the freelancer an incentive to deliver in as little time as possible. — 00:07:59
  • ★★ Higher up ladder two is a service-based agency, where you sell the work and hire other people to deliver it. — 00:08:42
  • ★★ Managing a team that delivers service work, Ali says, you will probably need to learn to set up a company, handle accounting and finance, and hire employees. (hedged) — 00:09:11
  • ★★ Ladder two has a limit, Ali says: freelancers and agencies customise the service for each client, and a business providing such bespoke services is very difficult to scale. — 00:09:49

00:10:09 — Ladder three: productised services, the YouTube Shorts starter kit and HeyFriends

  • ★★★ Ladder three is productised services: a video editor, for example, could sell a YouTube Shorts starter kit of one hour-long Zoom call a month, 10 hours of editing, five videos of 60 seconds or less with one revision each, for say $2,000 a month. — 00:10:42 · Zoom
  • ★★★ Selling one product with a defined scope and price and turning down custom requests lets you build systems and processes and hire help, so a productised service is much easier to scale, Ali says. — 00:11:11
  • ★★ Ali recommends his friend Robin Waite's book Take Your Shot, about going from a service business to productised services, calling it fantastic. — 00:11:11
  • ★★ HeyFriends, another company of Ali's, is a super expensive done-for-you productised service that does everything for people's YouTube channels except filming the videos. — 00:11:11
  • ★★★ Ali calls the shift from a service business to productised services one of the most important for wealth creation, because a service business risks scope expansion that limits income growth. — 00:11:57
  • ★★ Selling a productised service without talking to each customer needs new skills, Ali says: writing sales copy, designing sales pages or hiring someone to, and processing online payments. — 00:12:26
  • ★★ In Nathan Barry's ladder three, the rungs go from fixed scope for a fixed price to recurring services delivered by employees to recurring productised services, which is what HeyFriends is. — 00:12:55
  • ★★ On ladder three income grows linearly rather than in steps, Ali says, because the more leads and sales you generate, the more of a productised service you can sell. — 00:12:55
  • ★★★ Having an audience is a massive hack on any ladder, Ali says: people who know, like and trust you make it far easier to drive leads and traffic to a freelance business, a productised service or a product. — 00:13:54

00:14:16 — Ladder four: selling products, from online courses to software and marketplaces

  • ★★★ Ladder four is selling products: the wealthiest people typically got rich selling digital or physical products or software, or owning the platform on which such transactions happen, rather than selling services. — 00:14:16
  • ★★ Ladder four front-loads the work into creating the product: an online course such as Ali's Part-Time YouTuber Academy takes a huge amount of work to make but none to deliver to each buyer. — 00:14:41 · Part-Time YouTuber Academy
  • ★★ Ladder four lets you climb highest but needs the most skills, Ali says, such as customer support and lead generation at scale, and supply chain and shipping for physical products. — 00:14:41
  • ★★ Ali made his first online course around 2016 and has been selling online courses for the last eight years. (hedged) — 00:15:10
  • ★★ Above digital products on ladder four come products sold in an existing ecosystem, such as an iOS app or a WordPress plugin on Envato's ThemeForest, and then physical products and e-commerce. — 00:15:40
  • ★★ As his example of a physical product, Ali shows version one of the Lightmode keyboard, available at lightmode.com. — 00:15:40
  • ★★ The next rung is subscription software with a consulting service: a consultancy running Facebook ads for businesses could charge a recurring fee for its own ad-management software. — 00:16:08 · Facebook
  • ★★ Above that is software as a service, where people buy software from you, ideally with recurring revenue. — 00:16:08
  • ★★★ Ali is developing VoicePal with his friend Pablo, now in beta: an AI creative tool against writer's block that turns what you speak into your phone into a first draft of a newsletter or YouTube video. — 00:16:08
  • ★★ VoicePal has around 2,000 beta users and will launch publicly; meanwhile there is a waitlist. — 00:16:53
  • ★★ Software as a service needs no additional capital expenditure to serve more customers, Ali says, and the marginal cost of onboarding a new customer is basically zero. — 00:16:53
  • ★★ The final rung of ladder four is marketplaces and social networks such as Amazon, Facebook, Shopify and Uber; Ali calls them very difficult and says he is nowhere near building one. — 00:17:22 · Amazon, Facebook
  • ★★★ Ladder four also offers exponential income growth, Ali says: a good product's word of mouth makes each sale ease the next, especially in marketplaces and social networks, where more members make the network more valuable. — 00:17:52

00:18:21 — Final thoughts: skipping steps, learning from content, the map to financial freedom

  • ★★ Ali mostly agrees with Nathan Barry's four ladders of wealth creation and calls them a nice map of the ways to make money and the skills to learn along the way. — 00:18:21
  • ★★★ The more you consume content about business and actually try things out, Ali says, the more its language makes sense and the easier it is to plan your way to financial freedom. — 00:18:48
  • ★★★ It is fine to skip ladders, Ali says, but jumping from a job straight to selling products misses the skills of talking to customers and selling directly that a service business or productised service would teach. — 00:18:48
  • ★★ Software people who go straight to building software mostly struggle with sales, distribution and talking to customers, Ali says, which is why second-time founders spend loads of time on customers and distribution. — 00:19:26
  • ★★ Besides running a service business, Ali says you can learn sales and distribution skills by surrounding yourself with a community or content of people who teach them. — 00:19:26
  • ★★ Thanks to the content from Y Combinator, Startup School and podcasts, every software founder Ali knows, even first-time ones, knows to spend loads of time talking to customers. — 00:19:53
  • ★★★ The journey to financial freedom gets easier every year, Ali says, because people who have done it write books, record podcasts and make videos about it: the map is now out there. — 00:20:17 · work optional

Threads in this video

Where the stories that moved here went next

Mentioned

Central: ladders of wealth creation · Nathan Barry · productised services · The ladders of wealth creation

Also: People: David Foster Wallace · Pablo · Robin Waite · Sara Blakely · Tim Ferriss · Tintin

Projects: Ali's tech, keyboards and bags product brand · Part-Time YouTuber Academy

Works: Take Your Shot · The 4-Hour Workweek

Organizations: Amazon · Facebook · Fiverr · HeyFriends · Kumon · NHS · People Per Hour · Shopify · Spanx · ThemeForest · Uber · Upwork · Y Combinator

Concepts: FIRE movement · four percent rule · lead generation · work optional

Products: iOS · VoicePal · WordPress · Zoom

Also centred on productised services: How I Built 9 Streams of Income By 23 · How to Start a Business from Nothing

Replies to

← Previous: The limiting factor to productivity ⚡️ · Next → The biggest misconception about starting a business 🙄