wealthy

There is an ancient adage that floats around entrepreneurial circles which says, “Your net worth is the average of the five people you spend the most time around.”

We humored that all we need to do is hang around billionaires to become rich. Joking aside, the ability to reach higher levels of wealth is easier when others have blazed the trail. The question that should be asked is how individuals are gaining their wealth and then seek ways to emulate their success.

In our opinion, the single most effective way to build wealth is joining the ranks of entrepreneurs. The best formula for entrepreneurial success is combining your passion that meets social needs via a viable business model. As Peter Diamandis states, “the world’s biggest problems are the world’s biggest business opportunities.” Success is defined subjectively and differently from person to person, some measure success by their quality of life while others point to financial gain.  On the latter, the list is extensive including Mark Zuckerberg, Steve Jobs, Kevin Plank (Under Amour), and Nick Woodman (Go Pro) who all created a product which was born out of their personal passions.

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Market inefficiencies due to non-progressive business models, government policies, and overbearing regulations create tremendous opportunities for new ventures! For example, the banking industry is currently handcuffed due to a combination unethical business practices, oppressive government regulations, and multi-billion dollar fines.  Since the Dodd-Frank legislation passed, banks struggle to get a mortgage or business loan applications approved in reasonable time.  Banks want to lend, and their coffers of 0% interest rate money from the Federal Reserve is swelling.  The result is the boom of on-line non-banking financial institutions that can quickly meet consumer’s need for cash to buy houses to appliances at low-interest rates.  For home buyers, examples of businesses disrupting the bank sector are the on-line mortgage lenders Guaranteed Rate and Lending Tree.

Last week, Nyle and I interviewed, Ram Palanianppan, President and founder of Activehours for our podcast (video to be released this Wednesday).  Ram’s firm offers members the ability to get cash for their day’s wage in advance of their paycheck at no cost, as well as some neat Artificial Intelligence (AI) integrations that will automatically post monies in your checking account if you are going to receive an overdraft fee. America spends more money on overdraft fees than we do on vegetables!

Members of Activehours are encouraged to include a tip, at their discretion, upon receiving their advance. The firm has grown to over 200,000 users, 46 employees, and received over $40M in venture capital funding in less than three years. Activehours was birthed from Ram’s side gig of altruistically lending employees’ money at no interest so that they could cover an urgent need. Now the company is poised to revolutionize the way all businesses pay their employees, and how consumers view their income, debts, and investments.

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Ram’s successful approach to converting a personal passion into a lucrative business that is solving social problems is growing more and more. Startup savvy groups are looking for industries where products are overpriced, poorly provided, and outdated (ideally all three). The cab industry has had a monopoly on automobile hospitality service since its inception. For years, the business has been ruled by heavy handed unions forcing customers to accept poor service at premium prices. On a cold winter evening in 2008 in Paris, Travis Kalanick and Garrett Camp couldn’t hail a cab.  Their frustration lead to the idea of having an app that conveniently connects with drivers who are independent contractors.  In less than a year, they launched their Uber app (March 2009, yes only seven years ago) in San Francisco and now have impacted the entire world, with shared ride services grossing over $1.5 Billion in 2015.

As investors and entrepreneurs, future growth rests on the lens of society which focuses on solutions in the most dysfunctional areas. When we closely evaluate these areas, we quickly find ourselves in the company of successful entrepreneurs.  Recently while I was in San Antonio, I met with a very successful doctor who is doing just that.  One of the most pressing challenges facing America is health care. The Affordable Care Act (ACA), by many analyst’s perspectives, has exasperated an already bankrupt industry.  Since its passage, the costs of health care have skyrocketed. Those costs are attributed to government inefficiencies, overbearing insurance companies, and flailing healthcare providers. Combine that with the unprecedented losses accumulating in Medicare and Medicaid, and we have what appears to be a runaway train towards a canyon without bridges! This doctor and his newly formed company are buying rural hospitals facing financial bankruptcy at very discounted values.  The opportunity for them is implementing cutting edge technology that improves patient care at effective and affordable costs.  One strategy they are executing is virtual care. By utilizing live video between patient and specialist they have can cut costs to patients and grow their business margins. Typically if a patient has critical medical needs that the hospital cannot provide, the patient is transferred by medivac or ambulance to the nearest capable hospital. Outfitting their rural hospitals, sometimes hundreds of miles from a major city, with this live video technology allows patients to have access to the best of the specialist located anywhere in the world.

You may not have solutions for financial, ridesharing or healthcare, but you do have ideas.  Follow the steps of these entrepreneurs by seeking counsel, vetting out your theories and processes, develop a business plan, and then execute. Don’t wait for someone else to solve the issues you observe. Certainly, don’t wait for the government to create new agencies funded by taxing the productive and giving to the unproductive.  At best, governments don’t produce, they regulate.  With any luck, you will soon be a success story featured in media companies like Financial Time Traveler! #shamelessplug. However, if you have zero interest in the burden of becoming an entrepreneur but would still like to participate in the growth of innovative products, keep an eye on the indicators outlined above. We will continue to inform you on the best and brightest for your investing pleasure. If we can help you achieve your goals at a faster rate, we’ve accomplished our goal!

WHAT DOES THIS MEAN TO ME?

Yes, the current economy is suffering from one of the slowest recoveries in recent history. Yes, regulations are stifling, and taxes are rising.  Yes, the worse it gets, the bigger the opportunity.  However, remember that the development of the most impactful innovations is always the result of dysfunctional or excessively priced industries that become too painful to endure. Investment and entrepreneurial opportunities are spawned from environments very similar to the current cycle our economy is inside.

Let us know if this article inspires you! Email us with your plan to become an entrepreneur or strategies to lead your company into new areas of service or products.  The opportunities are there; it is only a matter of finding a solution!