When I started coding, it was partially because I thought it’d be cool to make a computer do my bidding.
“I can make a computer do things for me!? Awesome!” – Me
It was also partially cause I was in a band and wanted to get famous and the internet seemed like the only possible place where I’d even have a shot of doing so.
I was lucky to have a computer since I was 4 years old in 1992.
I honestly don’t remember exactly when I started making websites, but by the 6th grade I was teaching my computer class how to write HTML and CSS, including the teacher.
Sure, I fell in love with the coding part, but it was never really just about the code. It was about the power of reaching others through the internet. It was about leveling the playing field – probably the same reason so many of us are also drawn to cryptocurrency.
It was also gaining freedom and at some point also became about making money.
It seemed to me at the time, as a kid struggling to get through his parent’s divorce from hell, that if you were just rich, all those other problems could be easily dealt with.
I’d seen the DotCom bubble come and go, but the overall growth and trajectory of the internet was fascinating, addicting, and I figured someone statistically had to figure this out, so why not me?
That’s when I decided I’d get rich, and I’d use the internet to do it. There was a huge problem with that though – I didn’t know the first thing about money or wealth, so I took the only path I knew – going to college to get a Computer Science degree, and then getting a software engineering job.
Listen, being a software engineer is a great job. The problem is it’s still a job. You’re either a boss or an employee.
It wasn’t until my late 20’s that I’d finally learn even the basics of money, when I discovered Robert Kiyosaki’s famous book Rich Dad, Poor Dad.
From him I was introduced to the true definitions of the words “assets” and “liabilities” and how most people without a rich dad’s lessons had the meanings wrong.
For example, many people classify things like their cars or even their homes as assets, when they are in fact liabilities.
This was shocking news to me! I thought of that car I bought with the money from my first engineering job as an asset!
Here’s why it is not:
An asset is anything that you own that produces money for you on a consistent basis.
A liability is anything you own that you can expect to take money away from you on a consistent basis.
Even if you outright own a car, there are ongoing and even unexpected maintenance and repair costs, insurance, and if you don’t own it yet, car payments as well.
By definition, you expect these things to take money away from you consistently… and they do.
He then explained how his poor dad, and most people, have a big list of liabilities they’ve accumulated that they think are assets! Uh oh! That was me!
It turns out, if you want to get rich, you need to collect assets instead of liabilities.
Actual assets are things like investments and business ownership, but there is a big “gotcha”.
If you have a business and you can’t leave for a few months without it growing without you, you have actually created yourself a job, not a business.
Assets are things that work for you. Meaning you’ve employed your money to go out and make more money. In other words, you want “passive” income streams. Kiyosaki also goes on to explain how real estate investments can be a good way to create passive income streams as well.
So, there I was, realizing the advice from my poor dad – “get a job” – wasn’t very good advice if I actually wanted to obtain the freedom I desired. My dad had other priorities, and one of them was to sacrifice anything for his children, and I love and respect him very much for that. He’s also nearly 70 years old and unable to retire yet.
I don’t necessarily want to not work into my 70s, but I sure as hell don’t want to do so on the whims of others. I need it to be on my terms.
Thanks to my new “rich dad” advice, I knew what I had to do – create some assets. Specifically, I decided that I needed to create a business. Easier said than done, of course.
I’ve had my share of failures throughout my attempts to achieve that… such as my first company, PlusMore, which failed because we really sucked at marketing. Turns out if you build something they won’t come.
I’ve also had a few successes including being a CTO and Co-Founder of a startup in an accelerator that taught Lean Startup principles funded by Anheuser Busch InBev which was merged into their e-commerce division, and making marketing funnels that have sold millions of dollars of products.
But before we get into all that… I want to talk to you about something called “the Cashflow Quadrant” and how to move through it in a way I hope isn’t completely mystical or overwhelming…
I came across this way of thinking about a year ago after listening to a presentation in a private business mastermind I am a part of and it was one of those lightbulb moments for me.
If you ever read the book “Think and Grow Rich”, Napolean Hill basically ends the book saying one of the most powerful ways you can think and grow rich is as a group known as a mastermind. If you aren’t familiar with the term, a mastermind is when you get a bunch of like minded people in a room and think through each other’s toughest problems together and everyone shares all of their biggest wins and breakthroughs. It’s an insanely powerful tool for collapsing time frames. I love attending masterminds now. I just went on a one week cruise mastermind at the beginning of January.
So what is this Cashflow Quadrant I speak of?
And what do microservices have to do with business?
Answers to both of the questions incoming!
At a high level, a microservice is a tiny system. In a microservice architecture you have a bunch of tiny systems that each do one thing concisely, and they are then composed together to become a part of the whole – a part of “the system”. The system as a whole is made up of many smaller systems.
Turns out this approach to building scalable architecture also applies to building businesses.
Business systems as a whole are composed of small systems that each have their own special purpose.
But before we get into what those systems are, we need to get on the same page about understanding what a system is. Still, before we do that, let’s take a step back, and add some more fuel to the fire of desire of systems.
You know why you want a business – freedom.
The goal of creating businesses is to have assets. Assets create money for you, meaning when you have enough assets you are free to do what you want. Now let’s talk about the you part of that equation – specifically what is the path you are on, and where are you on the path?
The purpose of the Cashflow Quadrant is categorizing the stages individuals pass through to earn their money. Robert Kiyosaki determined there are four main buckets in which a person could fall:
What stage are you in now? If you’re job title is “Software Engineer”, likely the first, and there are some major problems with that… Being an employee, or even self-employed involves trading your time for money. There is a built in ceiling to your potential. This is because there is only so much time, and you are only able to serve a single client or employer at a time. It is not scalable.
Don’t feel bad though, that’s what most people are taught to do. Turns out though, if you want results that most people do not get, that means you’ll have to do things that most people will not do.
Most people take that traditional path taught in schools – they get educated, and get a job, which makes them an employee. The employee strives for security and finds success through climbing the corporate ladder.
If they’ve become highly specialized and in demand, they may have transitioned into looking for “gigs”, “freelancing”, “consulting” or “contracts” that let them work more on their terms.
If you’ve made this shift, this makes you self-employed.
Self employed people like to be compensated well for their time as they understand it is valuable. However, they are still limited by the fact that time is itself limited, and can only serve one client at a time.
Before we talk about how to escape this rat race let’s talk about what makes the other two stages different.
Next, as a business owner, you strive for freedom. You know that your business needs to be able to grow and thrive on it’s own so you are able to actually experience that freedom.
In order to do so, business owners create business systems. Business owners are looking for people, processes, and tools that can run their businesses for them.
Lastly, is the investor, whom also strives for freedom. Being an investor takes money, which is often obtained through owning business systems. An investor allocates money to work for them rather than working for money.
Something huge about investors that many people miss, however, is that investors don’t just have money… they also have systems. If you’ve ever watched Shark Tank you know this to be true. Lori, for example, has a sales system called QVC that she can plug products right into.
Back to the Cashflow Quadrant…
E > S > B > I
There are a few other rules and distinctions, such as being on the left side (E, S) you are using your own time, and your own money, while on the right side of the quadrant (B, I) you are using other people’s time and other people’s money.
E: You have a job
S: You own a job
B: You own a system and people work for you
I: Money works for you and you have systems that you can plug things in to
This information was pretty compelling to me when I learned it. I’d been working as a consultant for some time already when I came across it, and was getting frustrated with the inability to get my income much higher, settling for incremental increases instead as I sold my time. I understood I needed to work my way through the quadrant, but was still pretty fuzzy on the details of how to do so.
Well, luckily, last year I joined a business coaching program, and as a part of a private mastermind with other members I learned from James P. Friel the following concept:
There is a key difference at each stage of the Cashflow quadrant. That key difference is increased leverage.
As an employee you have very little to no leverage. As a self employed person, you have some leverage. As a business owner you have a lot of leverage. As an investor you have the most leverage.
By this logic, one could reason that gaining leverage helps to move you through the Cashflow Quadrant.
So how does one create leverage? To create leverage, one creates systems.
Let’s take a very simple example:
How much weight can you lift on your own? 50lbs? 100lbs? More? Think about it – go ahead and say your answer out loud even.
Notice I never said that you could not use a system to do so.
We know as engineers that the answer depends very much on your system for doing so. If you have a pulley system for example, you can lift far greater amounts as a single individual by using your system. By using a system, you have increased leverage. Which means creating or obtaining systems moves you through the Cashflow Quadrant.
As a software engineer, it’s literally your job already to create systems every day… systems to give other people leverage.
But what happens when you start making systems… for you?
You get the increased leverage.
Which, by definition, begins to move you through the Cashflow Quadrant. It’s kinda like leveling up in a video game – you don’t get enough experience points all at once, but by getting more experience each day, eventually you get to that next level!
Now the only question is – which systems do you need? Maybe ones that were specifically designed to make money? Maybe a bunch of tiny specialized ones that we can compose together? You know… kinda like microservices…
So, in conclusion… if your goal is to be the best software engineer, you are aiming way too low. “Software engineer” is a job title. A job where you give others leverage using your skillset. Instead, use your engineering skills to create systems for yourself! Give yourself increased leverage!
How would you like for me to just tell you?
Patrick Lee Scott