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THE LAW OF EFFECTION: THE SECRET TO CREATING MILLIONS

Source: Ferrari

As human beings we tend to continuously support a person, an idea or a product that evokes our subjective preconceived emotions or match ideas embedded within our belief system. For instance, you prefer voting for “the devil you know” because they match your pre-existing ideologies, or you prefer consuming Coke over Pepsi because of your pre-existing quality standards. Fact is we are value driven and by addressing those positive value skews anyone can make millions.

The law of effection is a concept I came across in a book and it basically states that the more lives you affect in an entity controlled by you, in scale and/or magnitude, the richer you will become. Essentially to generate a relatively large amount of money, you would need to provide value to large numbers of people (scale) or provide a large amount of value to few people (magnitude).

Put simply; think of scale as being the number of units sold and the magnitude as the price per unit. If you can provide a large amount of value or charge a higher price per unit then you don’t have to sell as many units to make the same amount of money. This concept gives the demand and supply theory of economics a heighted meaning as it can be mathematically proven.

It’s important to note that this article is focused on entrepreneurship simply because being employed requires you to exchange time for money and time cannot be scalable. For example, if you work $70 per hour and are required to work 8 hours a day, thus to make a million in a year is humanly impossible since a typical work year is only 2080 hours. Besides time and mortality being a constraint to wealth creation, a salary is also not scalable because one cannot just ask for a 4000% pay raise.

Below is a Wealth Equation (WE) for an employee, notice how rigid these variables are as they cannot be scaled nor manipulated.

WE= ($70 X (hours worked) – taxes

The point is to make millions you must get out there and make an impact by providing value in scale and/or magnitude. Align your choices and behaviours to include variables that can be scaled or manipulated. An entrepreneur’s Wealth Equation (WE) looks a bit different.

WE= Net Profit + Asset Value

Net Profit = (Units Sold) X (Unit Profit)

Asset Value = (Net Profit) X (Industry Multiplier)

This proves that when you remove constraint variables, your ability to generate millions rests with you. Provide value that adheres to the following:

Control: Ensuring that no one can end your business over night, as well as owning all execution decisions.

Entry: Choose a business with a higher barrier of entry, where you either need capital or specific set of skills.

Need: You have to solve a problem that caters to a need in society or create value that people willingly pay you for it.

Time: A business must be detached from your time, through automation and systematizing it or hire employees.

Scale: The ability to expand your business from local to worldwide and affect millions.

In conclusion, the law of effection is not a philosophical theory that one cannot prove or implement. It basically attests to the notion that “affect millions and make millions”; however, it all depends on you and your choices. We all want wealth and the different between those who attain it and those who don’t is their ability to create value in systemized manner.

Reference

Demarco, MJ. (2011): The Millionaire Fastlane : Crack the Code to Wealth and Live Rich for a Lifetime. Viperion Corporation. United Kingdom.

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