Happy day to you. This is Ken Kaufman and I’m thrilled you’re here for Episode 64: Your Competitive Advantage. So just to reset quickly around net worth, we know that net worth is one of the main ways that we measure our success with our personal finances. It’s a very simple subtraction formula that says what is the total value of all your assets, bank accounts, investment accounts, retirement accounts, home, even cars, and then we subtract from that the total amount of debt that we currently owe and that tells us what our net worth is or, in essence, if we liquidated all of our assets and paid off all of our debts, what would we have left? That is our net worth.
When we think about this, obviously the bigger we can get our assets, the better off we’re going to be in this formula. And obviously, if we can minimize debt or get that paid off, that has the effect of also driving our net worth up. So, on the asset side of this equation, which is what I’m going to focus on today, where do we generally get these assets from. Most of us aren’t inheritors of huge estates or huge windfalls or lottery victories or anything along those lines. Generally speaking, we don’t have some big lump sum of assets that are available for us. We go to work, we start saving money, we might buy a house, or make other investments, and maybe those will go over time, but generally it’s on the back of the income that we generate and then what we do with that income.
When you think about your ability to earn income and then obviously there’s the discipline of saving it and having it be a long-term asset and it’s invested and it can grow and do all those things, there’s a lot of pressure on, “Well, then how much income can we make because life’s expensive? Kids are expensive. All the phases of life just seemed to keep getting more and more expensive,” at least from my perspective.
So, the thing that I want to focus on here and the most critical things is really it comes down to each of our ability to earn an income and then maybe we have a business that we grow and maybe we can sell that at some point down the road or we can be a partner in a business or get stock options or restricted stock of some sort or profits interest units from the companies where we work, and that’s certainly a viable way to build our assets and ultimately those can be liquidated or redeemed and that can also put money in our bank or keep our net worth growing.
The basis of this is our ability to earn an income and save that money. Now, it puts pressure then on, “How can we with the amount of time we have and the skills and whatever we’ve been blessed with and whatever education we’ve tried to go get?” which is not necessarily mandatory to create a great income for yourself, but whatever these things are that you’re doing to try to set yourself up to be able to drive income in, you have to stop and ask yourself, “Am I going to love what I’m going to do? Is it going to create the income that’s going to allow me to live a comfortable life and a happy life? Is it going to allow me to also save money?”
I want to be clear. There’s no clear connection between happiness and money. Lots of studies show that there isn’t but, in terms of meeting some basic necessities and comforts, we can set ourselves up to be a little bit happier, a little bit more comfortable with our circumstances, and with things around us, and safety and those sorts of things.
But here’s the key point that I want to make today, and it’s around your competitive advantages. See, in a business, when you start a business, you are looking for a competitive advantage where your product or your service is going to be amazing and solve a problem for your customers in a way that nobody else can. When you create that type of business, a product or service for sale, you can have a competitive advantage.
So, I was listening to Mark Manson speak just recently and he’s written some famous books and things. I won’t share the title of one of them because it’s completely inappropriate. He was speaking from this philosophical perspective and this just jumped off the page when he said this statement. He said, “Competitive advantage. This is when you love solving problems and challenges that you’re both ridiculously gifted of solving and almost no one else wants to solve.”
Say it again. This is when you are ridiculously gifted and you love solving these complex problems and challenges that most other people or no one else wants to put in the time and effort to solve because it’s too hard, it’s too complex, or it’s outside of what they understand and what their skill set is. That is his definition of competitive advantage, and each of us has the ability to look inside of ourselves and say, “What am I gifted at doing? What do I love doing? What am I passionate at doing? What problems and challenges are there that…these gifts that I have and the things that I love doing, what problems can I solve for other people or other businesses? “
When you start to see that and then you start to look around and say, “Hey, maybe I’m kind of unique with this. Maybe I do things a little bit differently. My perspective is a little bit different, and I come at this a little bit differently, all of a sudden, you can start to see that you’re very unique and you have the ability to create a competitive advantage. You could say, “Wait a minute. There’s x number of, I don’t know, fill in the blank of nurses in the world. There’s a certain number of, I don’t know, car salesmen in the world.” Whatever it is, whatever your job is today, and it may be your job or maybe you’re designed to do something different than what your current job is. Maybe you’re designed to be an entrepreneur and go start a business where you can capture what are these unique gifts you have and passions and things you enjoy doing that could be packaged up so that you can solve problems and challenges that nobody else really wants to. That’s your competitive advantage. The more competitive advantage you have, meaning the fewer people there are out there in the world like you that do what you do and love doing it and are ridiculously gifted at doing it, then the more income most likely you’re going to be able to generate.
When we think of this overall picture of net worth hacks, one of the great hacks is to figure out what is your competitive advantage, meaning what is it you’re so amazingly gifted at and what problems and challenges does that mean that you’re able to solve and that you enjoy and you’re passionate about doing it where there are very few other people or businesses out there that do it. The more you can hone in on that, the more you can really tune into that. Generally speaking, the higher income you’re going to be able to earn. In the model of building financial net worth, which again we all get to determine our own definition of success but net worth is a big part of whether or not we’re driving growth and we’re improving our net worth. Our income is so, so critical to that.
So, there it is. That’s what your competitive advantage is. It’s up to you to figure it out and find it. It’s up to you to find that passion and find what it is that you’re just so gifted at and how that can solve problems for different people. You might not be looking at your current situation just quite right to be able to see it. This episode’s intent is just to help you pull back for a few minutes, have a bigger picture, a broader perspective, assess where you’re at, what you really enjoy doing and what you’re just ridiculously gifted at where other people say, “Man, I am so amazed by your ability to do this. Think about feedback that you’ve gotten from managers, bosses, co-workers, customers, vendors, anybody and everybody you’ve interacted with.”
There may be something there. You may find that there’s something there, and there may be some risk involved and you’ve got to obviously entertain what that would mean if you’re going to change a job or ultimately try to start a business or do other things. This is all within the context of finding happiness, enjoying what you do, not because necessarily you have more money but you remember part of this competitive advantage is you love doing it. You love the challenge of solving whatever these problems are that you’re just gifted at taking on.
And so you’ll be fulfilled in your life and in your work and in your contribution to your world from that perspective and you most likely will be able to benefit financially so that you can build the financial comfort that will allow you to get and accomplish whatever it is you’re setting out to do. Many, many thanks to you for joining today. This is a wrap for Episode 64. Happy day!