Why 20 Year Olds Stay Poor Ep 491



In this episode, the host emphasizes the importance of recognizing the "season" one is in during their 20s, particularly the distinction between a learning phase and an earning phase. He cautions against the allure of short-term gains at the expense of long-term growth, using two contrasting examples: Logan, who prioritizes immediate income over learning opportunities, and Smekup, who values learning and growth, leading to greater long-term success. The host underscores that young people often misjudge their knowledge due to the Dunning-Kruger effect and that true respect and wealth come from hard work and continuous learning, not from displaying early success. He advises listeners to invest in their skills and experiences early on, as this will compound over time, leading to real earning potential and respect in their field.

Summary Notes

Understanding Life Seasons

  • Recognizing the phase you're in during your 20s is crucial.
  • Avoid comparing your earnings to others; they might be prioritizing short-term gains.
  • Emphasizing the importance of long-term earning potential over immediate financial success.

"So the most important thing you have to realize when you're in your 20s is what season you are in."

This quote highlights the necessity of self-awareness regarding one's current life phase and the importance of focusing on long-term goals.

The Journey to Success

  • The speaker wishes successful entrepreneurs had documented their journeys.
  • The speaker is documenting their own journey to build a billion-dollar venture with acquisition.com.
  • Encourages sharing and enjoying the process of building businesses worth owning.

"I always wish Bezos, Musk, and Buffett had documented their journey. So I'm doing it for the rest of us."

The speaker expresses regret that notable entrepreneurs didn't share their growth stories and reveals their intention to provide that insight for others.

Misconceptions of Young Entrepreneurs

  • Young adults often misinterpret the relevance of business advice, applying it at the wrong time.
  • They focus on earning immediately rather than learning, which is a crucial mistake.
  • Consuming content without context leads to misapplication of business lessons.

"20 year olds stay poor because they think that their side hustle has to become their main hustle."

This quote explains a common pitfall for young people trying to build wealth, emphasizing the misplacement of focus on immediate earnings over educational growth.

The Game of Cash Flow

  • The board game 'Cash Flow' is used as an analogy for life's financial journey.
  • The game illustrates the trade-off between immediate earnings and further education.
  • The principle of delaying earning for learning can lead to greater long-term success.

"This may be a game that was before your time if you're 20 and you're watching this, but basically it was this little board game where everybody starts at the same you roll dice and you keep moving along the board."

This quote introduces the game 'Cash Flow' as a metaphor for life's financial decisions and the importance of education in enhancing earning potential.

Education vs. Immediate Earning

  • College and other forms of education are increasingly seen as overpriced and undervalued.
  • Despite this, the concept of compounding learning to increase future earnings remains valid.
  • Delaying gratification through education can significantly enhance one's career and financial trajectory.

"The fact that nowadays, college is massively overpriced and undervalued, and some other career paths are as well, doesn't disprove the idea that the longer you can delay your earning cycle, the more you are compounding your learning unto itself."

The speaker acknowledges the high cost of education but maintains that the principle of prioritizing learning over immediate earnings is still fundamentally sound.

Case Studies: Logan and Smakeup

  • Logan and Smakeup represent two different approaches to career development.
  • Logan pursues video editing, learning enough to get a job offer based on a burgeoning skill.
  • Smakeup, lacking skills at 17, is advised to start in sales at the lowest business tier due to a natural inclination.

"One of them, we'll just call him Logan, is a young guy, ambitious ish, started listening to some of my stuff, went to another guy who was a little bit older, and then tried to learn the basics of editing video."

This quote introduces Logan as an example of a young individual trying to quickly acquire marketable skills to enter the workforce.

The Pitfalls of Overvaluing Earnings Over Learning

  • Logan's mistake was to negotiate for a higher salary instead of valuing the learning opportunity.
  • His approach demonstrated a lack of understanding of his leverage and the employer's perspective.
  • The Dunning-Kruger effect is cited as a reason why inexperienced individuals overestimate their knowledge.

"But what did he do? He asked for $3,000 more because he's a fucking idiot. Because what he thought he had to do was earn rather than learn."

This quote illustrates Logan's critical error in prioritizing a minor salary increase over the opportunity to learn from more experienced professionals.

The Dunning-Kruger Effect

  • The Dunning-Kruger effect is a cognitive bias where people with limited knowledge overestimate their competence.
  • This effect can lead to a disconnect between young individuals who think they know a lot and experienced professionals who understand the depth of their own ignorance.

"And it's something called the Dunning Kruger effect, which is that the more you learn in a specific skill, the more you realize you don't know."

This quote explains the Dunning-Kruger effect and its relevance to young professionals who may not yet recognize the extent of their own knowledge gaps.

Maximizing Long-Term Net Worth

  • The speaker's advice aims to maximize the listener's long-term net worth and career success.
  • Emphasizes the importance of learning from others and recognizing the value of mentorship and experience.

"This is me trying to prepare you for what I think the best career path is. And it's not necessarily what you think. This is me maximizing for your long term net worth, all right?"

The speaker asserts their intention to guide listeners toward a career path that will maximize their long-term financial and professional success.

The Consequence of Choosing Earnings Over Learning

  • Logan's decision to lead video editing at a smaller company halted his learning process.
  • By not having mentors or more knowledgeable colleagues, Logan's growth and future potential were limited.

"Logan goes wheels and deals and then eventually gets a job to be the lead head honcho of video editing and whatever at some small business that has no idea how to do this at all. Guess what he's not doing anymore? Learning."

This quote describes the detrimental impact of Logan's choice to prioritize a leadership role over an environment where he could continue learning and growing professionally.

Career Strategy

  • Early career decisions can significantly impact long-term net worth.
  • Starting at a lower position allows for learning and skill development.
  • Maximizing long-term gains often involves learning from more experienced individuals.

"He took the right hook in his career twelve weeks after getting into it, and now they are the ones who are trying to extract as much from him rather than coming into a business where he's the small man on the totem pole and he can learn from everyone else, which would maximize for his long term net worth."

The quote emphasizes the importance of a strategic approach in career progression, highlighting that starting at a lower level and learning from others can be more beneficial for long-term wealth accumulation.

Perception vs. Reality of Wealth

  • Many high school seniors have unrealistic expectations about becoming millionaires.
  • Actual statistics show that becoming a millionaire by age 25 is extremely rare.
  • Making life decisions based on highly improbable outcomes is not advisable.

"52% of high school seniors believe that they will be a millionaire by 25. You are sadly fucking mistaken. It's delusion. That's what it is. It's delusion."

This quote points out the stark difference between the perceptions of high school seniors regarding wealth and the reality of wealth distribution, emphasizing the prevalence of delusional thinking about quick financial success.

Work Ethic and Skill Development

  • Doubling or quadrupling efforts in core activities accelerates skill acquisition.
  • Learning from top performers in a field is crucial.
  • Consistent and increased practice leads to mastery and respect in any profession.

"So he was required to do 100 calls a day, and so he did 200 calls a day."

The quote exemplifies the commitment to going above and beyond the minimum requirements, which is a strategy to improve skills and achieve success faster.

Respect and Professional Growth

  • Respect must be earned, especially when younger and less experienced.
  • Hustle and hard work gain respect across different demographics.
  • The sequence of gaining respect is to hustle first, then receive recognition.

"And the thing is that at the end of the day, with enough proof, everyone will respect you. Hustle across age, gender, culture is always respected."

This quote emphasizes that consistent hard work and proof of success will eventually lead to respect, regardless of age or background.

Authenticity and Learning

  • Sharing the learning journey can be more valuable than posturing as an expert.
  • Authenticity can lead to more respect than pretending to have more experience or knowledge.
  • Providing value and learning openly is a better long-term strategy than faking expertise.

"Rather than pretending to be the authority, he's just sharing the lessons he's learning, which doesn't make him sound like he's an idiot, because everybody who's ahead of him says, oh, that makes sense. That's cool."

This quote highlights the value of being genuine about one's learning process and the positive reception it can receive from more experienced individuals.

Supporting Entrepreneurship

  • The podcast aims to help entrepreneurs succeed without running ads or selling products.
  • Listeners are encouraged to share the podcast to support the entrepreneurial community.
  • Success stories in entrepreneurship often start with a strong work ethic and love for the work itself.

"The only ask that I can ever have of you guys is that you help me spread the word so we can help more entrepreneurs make more money, feed their families, make better products, and have better experiences for their employees and customers."

The quote is a call to action for listeners to support the podcast's mission of aiding entrepreneurs, emphasizing the importance of community support in entrepreneurial success.

Growth Through Learning and Reinvestment

  • Individuals excel in sales by learning from experts and putting in extra effort.
  • Long-term career growth can benefit from prioritizing learning and experience over immediate financial gain.
  • Taking a pay cut for a more prestigious job can offer better long-term opportunities and respect.
  • The Dunning-Kruger effect highlights a lack of awareness about one's limitations in knowledge, emphasizing the importance of continuous learning.

"He was able to learn from them because he was hungry and he did extra hours."

This quote illustrates the individual's commitment to growth by learning from experienced salespeople and working beyond standard hours, which contributed to their skill development in sales.

"He's going to get paid less than he was making at his current job. Why would he do it? Because he's smart and he's thinking long, not thinking short."

This quote explains the individual's decision to accept lower pay for a job with greater long-term benefits, demonstrating strategic career planning.

"The more I know, the more I realize I know nothing."

This quote references Socrates' philosophy and emphasizes the importance of acknowledging one's own lack of knowledge as a catalyst for continuous learning and growth.

Employer Perspective on Learning vs. Earning Seasons

  • Employers can identify if an employee is focused on earning or learning, which influences their management approach.
  • Employees in a learning phase are seen as investments and are provided with opportunities to grow.
  • Those in an earning phase are expected to provide immediate value to the company.
  • A smart business owner will maximize the value extracted from employees, especially those with higher salaries.

"If you come in and I know you're in a learning season, and you've said, I'm in a learning season, then we will be so generous with how much we can give and reinvest in you."

This quote underscores an employer's willingness to support and invest in employees who are focused on learning and professional development.

"If I have to pay you top dollar to come in above what you really should make, then all of it comes back to squeezing as much out of that investment as I can."

This quote reflects the employer's need to justify high salaries by expecting a significant return on their investment, which may limit the employee's opportunities for learning.

Career Strategy and Long-Term Thinking

  • Choosing to earn less in the short term can lead to greater long-term gains and career success.
  • It's important to recognize the stage of one's career and avoid premature focus on earnings.
  • Comparing oneself to others can lead to anxiety and misguided career choices.
  • Adjusting one's lifestyle to high earnings too quickly can be detrimental to long-term growth.

"So the most important thing you have to realize when you're in your 20s is what season you are in."

This quote advises young professionals to be aware of their career phase, whether it's a time for learning or earning, and to make strategic decisions accordingly.

"If you make the first jump real fast, then it flatlines, and then you have a real hard time."

This quote cautions against rapid early career advancement without proper foundation, which can lead to stagnation and difficulty progressing later on.

Recognizing and Correcting Career Mistakes

  • Acknowledging a misstep in one's career path is the first step towards correction.
  • Decoupling self-worth from income is necessary to make beneficial career changes.
  • Taking a pay cut to join a company that invests in employee growth can be a wise move.
  • Comparing job offers should consider more than just the salary; the potential for learning and mentorship is also crucial.

"Step one is admitting that you have a problem, which is good. If you're thinking that, then good. Step one is there."

This quote emphasizes the importance of recognizing when one's career strategy may be flawed, particularly if it prioritizes short-term gains over learning and development.

"You have to decouple your self worth with the current amount of money you make."

This quote suggests that personal value should not be tied to earnings, especially for those early in their careers, to allow for opportunities that prioritize growth over immediate financial reward.

Time Horizon and Career Choices

  • The decision between two jobs should be based on your time horizon.
  • Short-term thinking favors immediate high salary, while long-term thinking favors potential skill growth and future earning potential.
  • Young people often prioritize immediate earnings over learning, which limits their long-term success.

"If you only live one more year of your life, then you should do the 80 grand. But if you think you're going to live longer than a year or two, then you should do the 40 grand, increase your earning potential, and then later, you right hook life, and you can maximize or realize the potential you've had over the skills you've stacked."

This quote emphasizes the importance of considering your lifespan when making career decisions. A short lifespan justifies immediate high earnings, while a longer lifespan suggests investing in skills for future gains.

The Importance of Learning in Early Career

  • Early career stages should be focused on gaining experience and skills rather than maximizing income.
  • This approach builds a foundation for higher earning potential in the future.
  • Starting with a lower salary at a reputable company can offer valuable experiences that pay off in the long run.

"20 year olds stay poor because they start trying to earn rather than trying to learn."

This quote highlights a common mistake young people make by prioritizing immediate income over skill development, which can lead to a plateau in career and earnings growth.

Compensation in Skills and Experience

  • Compensation early in a career should be primarily in the form of skills and experience, with a smaller focus on monetary earnings.
  • As one ages, the balance should shift towards higher monetary compensation and less emphasis on gaining experience.

"Your compensation right now should be majority skills experience. Learning minority money."

The quote suggests that early career compensation should heavily favor the acquisition of skills and experience over financial gain.

The Long Game in Career Development

  • Recognizing the value of experience and skills over immediate financial rewards is key to long-term career success.
  • Successful individuals often under-monetize in the short term to build goodwill and increase their value to the marketplace.

"The only way you win this game is by being able to play it forever, because it's the only way you don't quit."

This quote conveys the idea that career success is a long-term endeavor, and persistence is crucial for achieving and maintaining success.

Skill Compounding and Earning Potential

  • Skills acquired over time can compound and lead to exponential increases in earning potential.
  • Jay Z's career is used as an example of how developing and combining various skills can lead to significant financial success.

"Skills will compound. If you have one plus one plus one, it doesn't equal three. When it comes to skills... the earning potential stacks like that."

The quote illustrates the concept of skill compounding, where the combination of multiple skills leads to a greater sum than the individual parts, resulting in increased earning potential.

Avoiding Early Career Pitfalls

  • Early cashing in on potential earning power can prevent awareness of higher-level opportunities.
  • Maintaining a balance between earning and learning allows for future growth and higher earnings.

"If somebody who is an accountant who could eventually become a rainmaker takes too early and doesn't have other rainmakers around them early on in their career, they won't know it exists."

This quote warns that settling too soon for a high salary without surrounding oneself with more experienced professionals can limit one's career trajectory and knowledge of greater opportunities.

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