The 6 Levels of Making Money
In a Nutshell
There are four ways to get money—steal, inherit, marry into it, or trade stuff for it—with trading being the viable option for most. Within trading, six levels escalate from worst (Level 1: W2 employment, trading risk for reliable pay) to best (Level 6: government/tax collection, paid no matter what via monopoly on violence), with higher levels commanding upfront/outcome-based payments, risk-selling (e.g., insurance/warranties), or royalties by shifting perceived risk onto others. Move up by leveraging business ownership for "pay first" structures like retainers/layaway, outcome ties (e.g., rev share), and mispriced bets where upside far exceeds downside, as big winners subsidize failures.
These notes were generated by AI and may contain inaccuracies.
There are only four ways to get money: steal, inherit, marry into it, trade for it. If you have morals, you probably don't want to steal it. If you're watching this, you probably aren't going to inherit it, and even if you are, you probably don't want to wait until your parents die to get it. If you're a guy, you're probably not going to marry into it, and even if you do, do you really want to be owned by your wife's family? This means, if you're watching this video, you're likely left with one option: trade stuff for money. I made a million dollars 106 times in a row in a weekend. I also own a portfolio of companies at acquisition.com that trade stuff for money and did over $250 million in revenue last year.
Within trading stuff for money, there are six ways to structure those trades, broken down from worst to best (in reverse order of bestness). The last two are god tier setups that only work in very specific circumstances.
Scheme number one is I work then you pay. This is a classic W2 employment agreement. The trade is: no matter what happens (outside of getting fired), I get paid. I trade risk for reliability. Being an employee is not riskier than owning a business, because if it were, everyone would own businesses and be rich, which is not the case. Fun fact: almost half of business owners don't make any money at all—they work the whole year and end up poorer than they started. The median business owner income is about the same as minimum wage in California. This is the lowest risk but most reliable way of making money.
Number two is you pay as we go. Work and payment happen in parallel: half now, half later, or paid along milestones. Typical for independent contractors and vendors. Pros: frontloads some money. Cons: people fire vendors way faster than employees. Employees have a 3.9-year average tenure (US Bureau of Labor Statistics) vs. 3-12 months for independent contractors and 1-3 months for temp gigs—five times the annual turnover for vendors compared to employees.
Third tier: you pay, then I work. Example: surgeons get paid in full upfront, then do the surgery—never the reverse. You can only do this when you own a business. The more leverage you have, the further up the pyramid you go, commanding better terms (if you know what you're doing).
Layaway: start payments now, begin work once paid up. Offers unlimited payment structure—e.g., "$600 service, $50/month takes a year, then we start." People often upgrade to faster payments like $300 now, $300 next month. People pay for speed; layaway forces this. If they fall off after partial payment, you lose nothing—you got paid. No risk. Third-party financing works similarly. Use all as tools.
Attorneys use retainers: pay first, draw down, reup when needed—they get paid before working. Leverage and earning show where you sit on this pyramid.
Free Resource: Exact 10-stage roadmap from zero to 100 million+ (less than 1% of companies finish), done multiple times across software, physical products, service businesses, brick-and-mortar. Broken down by eight business functions, constraints/symptoms, and steps to graduate. Free at acquisition.com/roadmap.
Number four: when X happens, you pay me. Payment divorced from time commitment, tied to outcomes. Examples: revshare, profit share, outcome-based bonus, accelerators, equity deal—all percentage-based or milestones. Ownership pays better because if the business does well, I get paid.
Low risk if you know what you're doing—e.g., "don't pay until top three in Google Maps rankings." Compensation based on skills to create outcomes, not time.
Consumer examples: "if you lose 20 pounds, I get paid more"; "bikini show ready by this time"; project finished on date; ads profitable by time (% of spend over X). Agencies: % of spend; consulting: % of profit/revenue.
Through line: compensated in proportion to risk you're willing to take—specifically perceived risk. Do it well by making it risky for others, not you. Market overcompensates for mispriced bets (e.g., Howard Marks made billions buying distressed debt others perceived as risky).
Risk of not achieving what you want in life is unmentioned. Peter Thiel: if Elon Musk had one successful company, we'd call him lucky; two doesn't make sense—what does he know about risk we don't? Smart/hardworking doesn't correlate with pay; risk taken does. In deals, shift risk to your favor to get paid more—even at W2 level: "$100k job for $60k base + upside to $180k if outcomes hit."
Number five: buy and sell risk itself. Insurance industry: when nothing happens, you still get paid—"nothing" becomes profit. No delivery besides risk agreement. Predates tax code; oldest companies (100+ years) survived World Wars, tech revolutions—excel at taking/compensing risk.
Insurance is reverse lottery: pay for ticket where if bad thing happens, others chip in.
Above insurance: physical risk > financial risk monetarily. Government has monopoly on violence (borders, troops). In exchange for biggest risk, we pay taxes—no matter what (if you make money). Enforced by same force repelling enemies.
- Royalties: Paid to royals (top-line, no economics fiddling). Rev share > profit share (revenue harder to manipulate). When you make money, you pay me.
- Risk (Level 5): Sell guarantees/warranties without being insurer (follow laws). AppleCare: paid for "just in case" (gazillion dollars). Inject into any business—home services (warranties), services (delays, difficulty) for premium.
- No Matter What (Level 6): Control money flow. Franchisors get paid first, remit remainder. Payment processors take slice first.
Shift risk: if comfortable with unaccounted risk, take it—typically mispriced. Humans overestimate downside, underestimate upside (Jeff Bezos).
Peter Lynch (30% compounded 15+ years): stock can only go to zero, but infinitely up—lose $10 max, gain $1,000.
People misprice by counting failures, not absolute return. Good entrepreneurs understand/take more risk than most.
Outsized returns come from betting against conventional wisdom. Conventional wisdom is usually right. Given a 10% chance of a 100 times payoff, you should take that bet every time, but you're still going to be wrong nine times out of 10. ... In business, every once in a while, when you step up to the plate, you can score a thousand runs. This longtail distribution of returns is why it's important to be bold. Big winners pay for so many experiments. We take risk to get reward. (Jeff Bezos)
Best rewarded where world perceives far more risk than you really take—happens when lucky or skilled.
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