190. How to print money

How did Bill Gates become rich? How was he able to surpass his good friend, Warren Buffett, as the richest man in the world?

Simple: whereas Buffett is good (actually great!) at moving money around (a process called capital allocation), Gates is great at "printing money."

Money, of course, doesn't exist. Only poor people think that money exists.

Only value exists, and Gates became a master of the art of printing value.

How?

Take a look at Windows 95, for example. It required $100 million dollars to create the FIRST copy of that software application. The second copy costs... $1 (perhaps even cheaper).

The ratio 100 million to 1, is called the "sunk-to-marginal cost" ratio.

In other words, wealth is made in the "original creation," not in the "standardized production."

Similarly, Nike makes a lot of money from its product designs, and actually outsources the manufacturing and distribution to other companies. It's funny that Nike's slogan is "Just do it" whereas in real life, Nike just won't do it and will outsource it instead!

My point is that the key to wealth seems to be:

1. Design value / money
2. Print value / money

Value is best defined as something that someone will give up a part of his / her life for.

For example, imagine a woman named Julia. She gets paid $30 an hour as project manager. In other words, she gives up one hour of her life in exchange for $30.

If you want her to buy your product and it costs $30, then you are basically asking her to give up one hour of her life.

When you look at it that way -- that value is something people will actually agree to give up a part of their LIFE for -- you realize immediately how "value design" is a highly sophisticated skill that requires training, refinement and continuous improvement.

There is one author, however, who wrote books about how to design value. (The name of this author is emailed only to subscribers of this blog).

No one can become rich unless he/she masters value design. Once a person learns how to design value, he/she can then easily "print" that value. That is, he/she will have the supreme ability to print money.