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The Game w/ Alex Hormozi

The Ultra Rich Playbook [Legal and Tax-Free] | Ep 718

Fri May 31 2024
wealth accumulationwealth generation$10 million goalsuccess in wealth generation

Description

This episode explores strategies for wealth accumulation, different approaches to wealth generation, strategies for achieving a $10 million goal, factors influencing wealth accumulation, and tips for success in wealth generation.

Insights

The ultra-rich use four main strategies to accumulate wealth and minimize taxes legally.

These strategies involve generating income and reinvesting it, selling businesses for substantial profits, private equity investments, and options like ESOPs.

Different strategies for achieving a $10 million goal include pure income method, passive investing, active investing, and private equity.

Other options include owning a business that generates significant distributions or becoming an employee/partner in a billion-dollar company.

Luck plays a significant role in achieving extreme wealth as an investor.

Factors like unique circumstances, zip code of birth, and leveraging opportunities contribute to long-term success.

To succeed in wealth generation, one should focus on income generation, learning skills, setting goals aligned with longer time horizons, and surrounding oneself with successful individuals.

Being selective with opportunities and having the confidence to act on personal conclusions are also important.

Chapters

  1. Strategies for Wealth Accumulation
  2. Different Strategies for Wealth Generation
  3. Strategies for Achieving $10 Million Goal
  4. Factors Influencing Wealth Accumulation
  5. Tips for Success in Wealth Generation
Summary
Transcript

Strategies for Wealth Accumulation

00:00 - 06:48

  • The ultra-rich use four main strategies to accumulate wealth and minimize taxes legally.
  • One strategy involves generating income and reinvesting it at a high rate to reach a billion-dollar net worth goal.
  • Another strategy is selling a business for a significant multiple of earnings post-tax, leading to substantial wealth accumulation.
  • A third strategy involves private equity investments and selling businesses to institutional buyers.
  • A fourth strategy includes options like ESOPs (Employee Stock Ownership Plans) where owners can sell minority stakes tax-free while maintaining control of the business.

Different Strategies for Wealth Generation

06:22 - 12:20

  • Version A involves trading equity for cash while still retaining ownership of the asset.
  • Version B, dividend recap, allows taking a loan against the entire business as collateral.
  • Going public with the company enables selling a small percentage of shares and using the remaining stock as collateral for loans.
  • Different strategies involve retaining ownership and control while leveraging bank or institution capital.
  • Tax implications vary across strategies, with ESOP being tax-free, dividend recap possibly tax-free, and loans against public equities being tax-free due to interest payments.

Strategies for Achieving $10 Million Goal

12:04 - 18:36

  • Qualified dividends result in lower taxes at 20% compared to income tax.
  • Different strategies for achieving a $10 million goal include pure income method, passive investing, active investing, and private equity.
  • Owning a business that generates $1.2 million in distributions can lead to a $10 million profit after selling the business.
  • Becoming an employee or partner in a company that goes public for a billion dollars can provide access to liquidity through stock loans.

Factors Influencing Wealth Accumulation

18:08 - 24:53

  • Warren Buffett's success is not just about slow investing but also about unique circumstances and luck.
  • Luck plays a significant role in achieving extreme wealth as an investor.
  • Generating income is crucial for making successful investments.
  • The zip code one is born in can significantly impact long-term success and opportunities pursued.
  • Wealthy individuals leverage opportunities to get more value for their time and investments.

Tips for Success in Wealth Generation

24:29 - 27:29

  • Among rich people, the slang for a million dollars is 'two sticks,' which means two million dollars.
  • We should be selective with opportunities and focus on maximizing the return for the effort and time invested.
  • It's important to have a plan, see how things ladder up, and set goals that align with longer time horizons.
  • To succeed, one should focus on income generation, learning skills, saying no to unimportant things, and surrounding oneself with people who have bigger measuring sticks in terms of time and money.
  • Making obscene amounts of money requires coming to one's own conclusions and having the confidence to act on them despite going against the norm.
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