The Five Types of Wealth
and why people chase only one at the cost of others
What would you pay to have the freedom to do
what you want, when you want, how you want?
Usually, the answer is more than 35 years of your life,
until you’ve earned enough to retire.
A lot of people don’t have a choice in making this decision. Until you earn enough money to cover your basic needs of food, shelter and security, it’s hard to think about anything else.
There are people who have plenty of money, who chase after more at the cost of their former dreams.
There are people who have little money, yet chase their dreams over money.
Last year I quit my full-time job in an Investment Bank for a part-time, fully remote gig.
From working more than 70 hours a week (including weekends side gig), I went to working less than 25 hours a week.
I got a Time raise.
What I did was transfer wealth from one form to another, from prioritizing financial wealth to prioritizing time wealth.
In this essay, I will discuss the different forms of wealth to understand why society at large values financial wealth above all the other forms of wealth.
Lets show wealth on a 2x2 grid based on
X- Axis: Who it benefits
Beneficial Only to you
Beneficial to Others
Y-axis: Convertibility to other forms of wealth
Convertibility to other kinds of wealth
Non-convertible
The framework will make it easy to understand why some forms of wealth are more preferred than others. Anything high in transferability as well as beneficial to you & others is a coveted form of wealth in society.
We will start from the form of wealth that makes all other forms possible i.e the wealth of time.
Time Wealth
Would you trade places with Warren Buffett in 2023?
You would instantly become one of the top 10 richest people in the world.
But you would also be 92.
Being a dollar billionaire is great, but being a time billionaire may be better. If you have more time, you can earn more money. If you have billions, you still can’t buy more time1.
This excerpt from Tim Ferris’s interview explains it well.
Tim Ferris: So time billionaires. What does that refer to?
Graham Duncan: I was listening to a guy introduced a speaker a while ago. And he was saying people don’t really understand the difference between billionaires and millionaires. He said a million seconds is like 11 days. A billion seconds is 31 years.
…..
And I was thinking of time billionaires that when I see, sometimes, 20-year-olds – the thought I had was they probably have two billion seconds left. But they aren’t relating to themselves as time billionaires. And I was thinking about how if you could – what would Rupert Murdoch, who’s worth $20 billion – he’s 87 years old. What would he pay if he could take the next five years of someone’s 20-year-old healthy body, mind, etc.?
Time is the most irreplaceable form of wealth. Without it no other wealth exists.
You can use your time to benefit yourself or others through the work you do.
You can convert it to other forms of wealth by investing your time in it (e.g getting a job to earn money, exercising to become fit, spending time with friends and family for relationships, or learning new skills)
Your free time is most precious only to you. Everyone wants to maximize it because of the optionality it brings. The more free time you have, the more possibilities you can explore.
Yet, everyone wants a piece of your time.
From the online marketers trying to sell you a pair of new sneakers, to engagement farmers looking to grow their online following by baiting you with never-ending clickbait, to your own family, who just want to spend time with you.
Your free time is not beneficial to anyone else unless you give it to them.
Unlike money, which you have to spend (i.e give to others) to live your life, you can be far more selective in who you spend your time with.
Your free time is one of the most convertible forms of wealth, yet it is beneficial only to you. You can’t transfer it to any one else, only you get to enjoy its benefits.
Physical and Mental Wealth
"A healthy man wants a thousand things, a sick man only wants one." - Confucius
Good genes are inherited physical wealth.
Bad genes are inherited physical debt.
You can squander health just like money.
You squander good genes with a bad diet, poor lifestyle and no exercise.
You overcome physical debt with exercise, rest, a good diet and a healthy lifestyle.
Physical wealth is a form of insurance. It is insurance against the frailties of old age. It is resistance to the inevitable degradation of the body.
Good Physical health, especially in old age is may be even better than monetary wealth.
But good physical health without good mental health is worth little.
Being physically wealthy, but mentally plagued by worries, anxiety, fears, future meetings robs you of the ability to enjoy the happiness of the present.
As Nassim Taleb recently tweeted, a good chunk of true wealth consists of being mentally wealthy. Worriless sleeping, clear conscience, gratitude, absence of envy, frequent laughs, nothing to hide are all forms of mental wealth.
Without health, you can’t do anything else. Physical wealth might be even more valuable that time wealth, because without it you can’t enjoy any of the your wealth (including time).
Physical wealth is not really convertible to any other form of wealth (unless you are a gym trainer or fitness influencer). It is only an enabler to acquire and enjoy the other forms of wealth.
Physical wealth cannot be traded or transferred to others. You being physically health is beneficial to society at large as it means you can contribute to society without being a burden on others. But only you can truly enjoy the day-to-day benefits of peak physical and mental health. No one can transfer it to you and you can't transfer it to others. But you can use it to inspire others.
Relationships Wealth
A wealth of relationships combats the poverty of loneliness.
Family, close friends, friends and acquaintances. All of them contribute to our emotional well-being.
The number of friends and acquaintances does not matter. You don’t get to choose your family and after a certain age, you also don’t get to choose who your close friends are.
Transactional relationships are akin to monopoly money. They are not going help you in real life. Only the quality of relationships matters, not quantity.
A wealth of monetary assets with a poverty of relationships is a special kind of hell. Having the means to enjoy all the material pleasure of life, but no one to share it with.
The point of money is to use it to get what you want of life and share the joys with the people that matter to you.
Prolonged loneliness actually kills, as found out by the National Institute of Aging
According to the National Institute on Aging the health risks of prolonged isolation are equivalent to smoking 15 cigarettes a day.
Social isolation and loneliness have even been estimated to shorten a person’s life span by as many as 15 years.
And old people are the hardest hit as they spend most of their time alone.
You don’t need dozens of friends to avoid the effects of loneliness, just 3 close ones are enough. Numbers don't matter, quality does.
Researchers have also managed to assign a dollar figure to the value of a close friend. Apparently, a close friend provides a life satisfaction boost similar to $150k additional income.
But good friends are far better than any amount of money.
Friends are better than money. Almost anything money can do, friends can do better. In so many ways a friend with a boat is better than owning a boat.
While recording my first single, I paid a producer a tiny sum of money to produce the song. Drums and more instruments meant paying every additional person, even for small sections.
A friends of mine, a college student, got his first single done for almost free, because his close friends, producers and musicians, helped him out.
The impact of close friends and family cannot be overstated.
“You are the average of the five people you spend the most time with.” — Jim Rohn
You can’t buy quality relationships. The value of your family and friends to you is far more to anyone else.
The joy of a warm, healthy relationship cannot be bought, it cannot be transferred, it cannot be traded, it can only be enjoyed by you, and can only be built up by you over a long period of time time by your own actions.
But you can transfer relationships to a small extent. You don’t really transfer relationships, but the trust both parties have in you. If you introduce a work colleague to a friend who’s hiring for a job, you’ve transferred and expanded your network by providing value to both of them. To that extent, your relationships are valuable to others as well.
Skills Wealth
We’re now increasingly moving to wealth that is both convertible and beneficial to society at large, not just you.
Being wealthy in skills is usually a precursor to becoming wealthy in terms of money.
Skills can be easily traded for more money and prestige.
The rarity of your skills and the demand for it determines how much you get paid for them. There were over 1.2M artists on Spotify with more than 1000 listeners in 2021, out of which just 870 made more than $1M in royalties i.e less than 0.8% of artists made more than $1M in royalties.
You might be blessed with genetic gifts that make make it easier to excel at certain skills. You don’t need to be tall to play basketball but being 6’5” certainly helps.
But there are no shortcuts to getting rich in skills. You must put in the work over a long period of time to build and perfect any skill. While skills once learnt usually stay with you, they may perish if unused. Unlike money which can keep growing, even if you don’t use it, you must continually work on your skills to remain sharp.
Skills can also help you in making friends, entertaining friends & family and gaining status.
Skills do compound to an extent. The more you learn, the better you become at learning, which makes it easier for you to learn new things. Learning the guitar is slightly easier if you already know how to play the piano (and the basics of music theory).
In addition to being convertible to other forms of wealth, skills are also transferrable to a greater extent. While you can’t fully transfer your learned experience in a particular skill to someone else, you can teach skills to others. The entire education industry is built to teach people the skills they need to succeed in life.
Of course, not everything can be taught, but it can usually be learned.
Skills are highly valued because they can easily be converted to financial wealth, and they are beneficial both for you and others.
Financial Wealth
Financial wealth is the most sought after form of wealth in the world.
Money, investments, assets make up financial wealth.
It is the most convertible form of wealth.
You can use it to get almost anything you want (directly or indirectly). Buy the car you want, travel to the most exquisite places in the world, eat the finest food and much much more.
You can convert financial wealth into almost any material things you desire. You can also use it to an extent to buy more time by hiring others to work for you.
You can also convert it to physical wealth (indirectly) by hiring the best doctors, trainers and best chefs for the healthiest food.
You can also convert financial wealth to status & power through means of philanthropy, funding, become a politician and more.
But your wealth is not just beneficial to you, it is also beneficial to everyone around you. When you spend money, you’re transferring wealth to other people (in return for their services). People can sell you things, swindle you, get you to invest in their venture or charm you out of it (sometimes all of it together).
The reason why financial wealth is so coveted is because of the optionality it provides to the individual. Being financially wealthy does not mean just having money, but also the ability to do what you want, when you want, how you want to. Being financially wealthy also means having almost no external obstacles to acquiring all the other forms of wealth.
You don’t need to predict the future, or know what you want in life if you have enough money.
Financial wealth is the most convertible and most transferable form of wealth. It is also the one that provides the most optionality to the individual and the one that is most valuable both to the person who has it and to society at large.
Conclusion
I think one underrated reason why financial wealth is the most coveted form of wealth is because it is also the most visible and measurable form of wealth.
The value of anything is usually measured in terms of money.
The problem with that of course is that is you only see the benefits i.e what you have earned, not what you paid to acquire it.
The price of anything is the amount of life you exchange for it.
Its hard to quantify the value of waking up without an alarm, or roaming the beach on a Tuesday afternoon, or spending the entire weekday with your child at the park. It is much easier to know how much money you have in the bank.
Having money means you are wealthy, but you ideally want it with all the other forms of wealth.
Money and the time to enjoy it.
Money and the health to enjoy it.
Money and the people to enjoy it with.
It makes sense to prioritize financial wealth because of the benefits it provides. But it also makes sense to measure what you are paying to acquire it.
Whether you prioritize money above other forms of wealth or not, depends on what you value and what amount of life are you willing to pay for it.
As Naval says,
“Money will solve all your money problems, but it doesn’t get you everywhere”
…
“A calm mind, fit body and a house full of love; these things cannot be bought, they must be earned”
This essay is influenced in part by one of my previous posts called The Life Framework.
References: Naval, Nassim Taleb, Morgan Housel
Buy more new time. You can buy time by hiring people and doing things for you
Special Thanks to Nimo and Agrani for reading drafts and giving feedback
Thank you for this essay...finding true wealth is a mission we all are on (even if we don't know it).
Appreciate the viewpoints from more than just the monetary angle.