How to Be a Capitalist Without Any Capital: The Four Rules You Must Break To Get Rich

by Nathan Latka

It’s because they’re part of the “New Rich,” as Tim Ferriss calls the segment of the population who have figured out how to maximize everything in their life—even if it’s not much—so it becomes an asset that works for them. The New Rich are resourceful with their time, their money, and their energy. They get what they want when they want it. They travel however much they want. They have blank calendars. And they have very, very few expenses.

Focusing on one thing gives you a single point of failure—whether it’s a job, an investment opportunity, or an entrepreneurial venture. When engineers design a bridge, they never want to have a single point of failure. If the wind picks up to two hundred miles per hour and a cable fails, the bridge still has seven other cables to back it up. Likewise, you’d never want to build your wealth around one endeavor. If that one thing fails, you’re destroyed, and you have to start again from scratch. Ignore the conventional wisdom that says it’s impossible to multitask.

The key is to analyze a business and pinpoint a need it’s not meeting for its customers—and then meet that need yourself.

Pay attention to what’s blowing up today. If weekly food delivery is big, don’t try to compete with HelloFresh and Blue Apron. Rather, figure out the infrastructure that those businesses rely on and offer it to them.

Joining the New Rich has only two requirements: a desire for more free time to do what you want while making money on your terms, and ambition. I can’t teach ambition, so you’ll need to bring your own.

Often when founders have meetings with investors and advisers, they’re told to “pick an idea and go all in.” This advice goes way back—there’s even a proverb that says, “If you chase two rabbits, both will escape.” The problem with that guidance, at least from a business standpoint, is that it’s only relevant if you’re going for a huge, billion-dollar hit.

However you start out, my only rule is that you’re always pursuing three new opportunities at the same time. Once a venture is up and running, you’re going to set it on autopilot so it only takes an hour or two of your time per month.

That’s why the rules of baseball allow three chances to swing at a good pitch. The same goes for your business ventures. Sometimes you’ll miss those good balls because you’re not looking; or you’ll have other life emergencies that keep you from calculating that perfect swing. It’s OK to miss, but it’s important that you actually swing at those good balls.

Another big reason it’s so important to swing at those good balls is that when you swing and miss, you get to diagnose why you missed. Any venture you attempt and then shut down accelerates your learning. Swinging at each good opportunity sets you up to learn three times faster than if you’d never tried.

You won’t have time to work on three huge, time-consuming projects at once. So focus 80 percent of your time on one project—the one that brings in the most money or that has the potential to be your biggest earner. Split the other 20 percent of your time between the two remaining ventures.

I’m an investor in a hostel where I live in Austin, Texas. One thing I’m betting on is that as we move into the next four or five years, people are going to hate the idea of paying rent. They’ll much rather pay a monthly subscription fee to live anywhere they want in the world. If I want to tap into that demand, I’ll have to own hostels in multiple cities around the world. People will pay me one fee of, say, $1K per month and they can choose to stay in whichever one of my properties they want, whenever they want. They’ll have location freedom.

That’s essentially what you’re doing when you’re copying—you’re looking for the patterns that got your competitors to the top. Then you’re using that information to match or beat them. When you do this, you’re essentially getting a free business lesson. If you don’t copy these free lessons, you’ll have to do what those with less knowledge do: pay to learn the lessons yourself.

“I’ve always thought that each person invented himself . . . that we are each a figment of our own imagination. The problem is, most people have no imagination.” —David Geffen

Imagine how your life would change if you didn’t buy these items unless you could actually afford to buy one every day. This is a good rule to use, and it’s also why most goals are so dangerous. When a goal is small enough to seem doable, even if it’s hard, you focus on the win and never put effort into mastering the process that will get you that result plus more (over and over again).

Systems thinking requires you to give up making money today in exchange for taking the time, energy, and sweat equity to set up systems that will do the work for you in the future. It’s a lot of up-front work, and that’s the problem for most people. They prefer the short-term win. They need the instant gratification.

Build systems around the things that take up most of your time. Sadly, most people don’t even know what those things are. How many of us are constantly busy but can’t look back on our day and say what we did? It’s all a blur. If that’s you (and even if it’s not), spend a week documenting what you’re doing. This kind of awareness forces you to be reflective and intentional, not reactive to whatever thing is in front of you.

This is the essence of systems leverage. If you have a clear system, it can be done faster and cheaper by somebody (or even something) other than you.

Getting your system set up is more important than deciding you want to make $1M per year. That’s because once you have the bones of your system set up, the way you crank up production is by changing your inputs and outputs, better managing your stocks, and creating feedback loops that give you a true unfair advantage against your competitors.

Think about all of your expenses right now. Now go negotiate all of them down using hard and soft power (hard: “I’m canceling my account unless you give me a $100/month discount”; soft: “I’m trying to save money and it would mean a lot if you could decrease monthly payments for two months until the business regains its footing”).

a tool called Acuity that lets the CEOs pick a time from my calendar. No need for a middle person to deal with scheduling. Immediately after the interview happens Acuity sends the CEO an email to thank them and let them know when the interview will go live.

Make sure the systems you’re spending most of your time and money on scaling have a direct correlation to additional cash flow, whether that’s downloads that translate to sponsor dollars, website impressions that convert to an increase in your average cart checkout size, if you’re an e-commerce brand, or a system for marketing the newspaper that drives more people to your brick-and-mortar location.

People often get stuck working on systems that suck up their time but don’t bring in cash. It’s so tempting to lie to yourself because a system feels good when it isn’t actually accomplishing anything. So be hyperintentional about where you’re spending your time and ruthlessly kill any systems that don’t have a direct correlation to growing your bank account.

I came up with a very simple “Decision System” I filter these kinds of purchases through. It saves me energy every time this sort of purchase comes up, and its simplicity gives it a very high utility value. If, with my current monthly income stream, I couldn’t afford to purchase one of these things every day, I don’t buy it. Simple as that. That’s the rule. For cars, houses, vacations, dinners, everything.

TOP SEVEN BOOKS ON SYSTEMS Thinking in Systems by Donella Meadows simplifies what makes any system work and how to build your own. Mastering the Rockefeller Habits by Verne Harnish is the easiest blueprint to follow to clearly define what outputs you want in your business—the first step to figuring out the process and inputs. Business Adventures by John Brooks highlights CEOs and companies that created the most shareholder value over their tenure. You’ll start to notice business models and their underlying systems that will set you up for success. The Outsiders by William N. Thorndike Jr. is a collection of eight stories from eight CEOs who set up systems that provided the highest capital returns in history. Thing Explainer by Randall Munroe visually diagrams how things work using only one thousand of the most commonly used words in the English language (forces simplification and makes pattern recognition easier). McDonald’s: Behind the Arches by John F. Love helps dissect one of the most replicated, valuable systems ever built: the burger stand. No matter what industry you’re in, you’re guaranteed to learn systems tidbits. The 4-Hour Workweek by Timothy Ferriss will help you find ways to systematize your business and your life to save time, energy, and money.

That’s the beauty of what I call “selling pickaxes to gold miners.” You let the gold miners do all the work and then siphon profits off the market they’ve created. This works in B2B selling and on the consumer side, too. So while everyone’s spending money on fidget spinners, you might sell the “Fidget Spinner Sticker Kit.” While Amazon pulls a profit from third-party sellers, you might create an inventory-tracking program for those sellers. Pickaxes are hiding behind every popular marketplace. They can be hard to spot at first, but the more you start thinking this way, the more they’ll show themselves to you.

Study the greats to find history’s lucrative patterns. Read biographies of successful businesspeople and identify the behaviors and strategies that got them to the top. You can also turn to documentaries—like American Genius and The Men Who Built America—to learn how pioneers built businesses.

Whatever your business or industry, remember that the gold mine is the hot trend. That’s the part of the iceberg above the water that everyone sees and wants. The pickax is the part of the iceberg below the water—the part nobody can see but that the hot trend relies on to function.

Victor Levitin created CrazyLister in 2013 in response to sellers’ frustration over the complicated process of posting items on eBay.

Tucker Max decoded a pickax to book publishing when he became an author. He realized there’s a huge market of people (gold miners) who want to establish themselves as thought leaders so they can charge higher consulting and speaking fees (gold mine). Publishing a book is a silver bullet to accomplishing that. The problem: most people don’t have the time or expertise required to become an author. Max immediately spotted his pickax cash cow and got to work launching Book in a Box (now Scribe Writing) in 2015. Since then the company has worked with more than five hundred authors and passed $11.3M in revenue as of September 2017. They charge clients a minimum of $25K to write their book for them, in their voice. All the client has to do is answer a few interview questions. Max realized that Book in a Box had the potential to be more lucrative than his own best-selling books, which is why he spends more time on the business these days than on his own writing.

There’s rarely a magic bullet for immersing yourself in a new industry—but Toptal is pretty close. You can know nothing about a particular business area, but post your project on Toptal and they will recommend experts for you to work with. So let’s say you want to develop an app that helps salons book appointments more efficiently. You can post that exact sentence on Toptal and they’ll help you find mobile developers. It’s that simple.

That’s a big blind spot for people. They shut down opportunities they’re not interested in rather than letting the conversation play out. But remember, your best analysis is done when you have people’s best and final offers in hand, whether that’s employees you want to recruit, CEOs you’re trying to sell your company to, or customers you’re trying to sell a product to. You want to be as close to the finish line as possible before you decide on anything so that you have the best and most accurate data possible. Do this even if you don’t want the deal. Remember, your best position in a negotiation is when you don’t need it to work out. Your upper-hand approach may get you terms so good that you’ll change your mind.

Most people, though, won’t accomplish anything. They’ll get charged up by a project’s potential, obsess over their to-do lists, then feel paralyzed by the enormity of it all. Or at best, they’ll get through 10 percent of what needs to be done before they quit.

To-do lists ruin us. We try and fail to cross things off them, then we think: If we can’t get through one day’s worth of tasks, how can we get that giant life-changing thing done in just a few months? It’s because we overestimate what we can do in a day and underestimate what we can do in a year.

Dream in Decades → Think in Years → Work in Weeks → Live in Days

Every time you switch tasks it takes five to ten minutes to reengage with the thing you were doing beforehand. If you switch tasks ten times during the day, that’s one hundred minutes, or almost two hours of productivity you lose every day.

use a tool called Acuity Scheduling to batch my time (you can see it at NathanLatka.com/schedule).

Snappr.co,

“Men acquire a particular quality by constantly acting a certain way.” —Aristotle

ClaimCompass.eu and AirHelp.com.

FundedToday.com

Flightfox.com and have their experts figure out the most efficient and most luxurious way to fly you around the world. I paid $50 for the service, and they ended up basically handing me a $4,800 check.

Door knocking gets me better prices, but it also uncovers details that online listings can never capture, and that owners and real estate agents may fight like hell to keep from you.

As far as scouting locations, I only buy within ten miles of a college (I currently own in Austin near the University of Texas and in Blacksburg near Virginia Tech) because students keep those rental markets nearly recession proof. A quick way to confirm this is by researching whether a town’s rental rates and property values dipped in 2008. Just Google “property data” + 2008 + the city or county in which you’re looking to buy. Browse the results until you find the Property Search Map.

Real estate agents have access to deals via their multiple listing service (MLS). Because agents want to represent you when you buy, their goal is to help you find a deal. So ask your agent: “Can you add my email to your MLS for any multifamily deals that come on the market anywhere in the county?” When listings come in, you’ll automatically see the data, which will include rental information.

So aside from door knocking, target pocket listings. These are properties that a real estate agent knows are for sale, or might soon be for sale, that aren’t listed on the MLS. That means the public hasn’t had the chance to see them and spoil your chances at a sweet deal.

You can get a more realistic sense of what a unit is worth, and whether it will make you money after expenses, by searching public records. Every county in the United States posts property records in its online tax portal. The particulars vary from county to county, but you can usually find your county’s tax portal by doing a Google search for “Your County Name + Your State + parcel ID.” My first deal was in Blacksburg, Virginia (Montgomery County), so I searched “Montgomery County VA parcel ID.”

Once you have the owner’s contact info, invite them to coffee and see if they’d be willing to sell. Offer 100x what they are making on rent per month. If their unit makes them $2K per month, offer $200K.

According to WalletHub (https://WalletHub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585/), the states with the lowest real estate taxes are:

If the worst-case scenario does not generate cash flow (monthly income greater than $0), do not do the deal. This is called “stress testing” a deal.

Use a site like Revestor.com to see cash flow opportunities in your area.