How MJ De Marco Became A Multi-Millionaire at 33 Without Sacrificing Freedom

This article was adapted from Medium, where I first wrote this article...

In my Mental Model Mastermind(MMM) Series, I crystallise mental models from successful entrepreneurs, innovators and shakers — extracting out their essence that makes them tick, and how you can apply their principles to improve your odds of greatness.

MJ DeMarco was born to a dysfunctional family in Chicago. His parents went through a messy divorce spanning years.

While his friends were talking about the latest video game, he was wondering how to help his mom put money on the table.

“I delivered newspapers at 3am in bad neighbourhoods. I delivered pizza, flowers and was a day labourer for a commercial plumbing firm in the slums of Chicago. I was a bus-boy at a cockroach infested Chinese restaurant, limo driver, charity can collector and house painter. Hell, money was so tight that I prostituted myself to an older woman to pay for my best friend’s wedding gift.”

Growing up, he wasn’t athletic, I couldn’t sing, and I couldn’t act. He was an average guy without any special skill or talent.

But despite all odds, he became a multimillionaire at 33 years old, selling his company off twice, being a best-selling author of The Millionaire Fastlane which has over 80% 5-star ratings after 1400+ reviews on Amazon.

Even though he is not the type person that would appear on a Forbes 5000 magazine, nor a household name like Robert Kiyosaki, he possess a deep wisdom about time, money and life matched by execution.

After scrutinising all his work I laid my hands upon (more so than any other person), I genuinely believe he walks the talk, despite his lack of other usual “success” indicators.

Here’s 3 core mental models that have made him the man he is today.

1) Distinguishing between the Slowlane and Fastlane

Since young, I never did any financial planning.

I was lucky to have be born into a well-to-do family, and for the most part never had to worry about money. While I have always mentally believed myself to be financially abundant, my bank account showed otherwise.

Much of what I knew about finances then was what I saw from friends and family — generate an income from a job or business, get some insurance to cover your downside, and dump the rest in investments.

Between friends, it quickly became a subtle comparison of who had more income. While it definitely sounded sexy to be making more wages, deep down something told me that it wasn’t the full answer.

Inside, I felt that wealth was more like a system, like a chess board with its own set of pieces and board rules.

Outside, I saw people moving pieces in all directions, ranging from financial investments, business-building, getting better qualifications to speculating about startups.

What was the “checkmate” these people are playing for, and why did they use the pieces to move the way they did?

When were they a piece in their own chess board, and when were they the player sitting behind the board, strategising the approach?

That’s where the Fastlane comes in.

MJ DeMarco has understood this ”wealth chess board” so well that he has synthesised it down into quantitative equations and qualitative personas, with a level of rigour backed by his own success.

After pouring through tons of business books, I have yet to see anyone able to quantify wealth into believable and more importantly, executable formulas.

He calls these the Slowlane and the Fastlane Wealth Equations.

Slowlane Wealth Equation:

Wealth = Job + Market Investments

Fastlane Wealth Equation:

Wealth = Net Profit+ Asset Value

Even if you are not aiming for the lavish billion-dollar lifestyle, knowing what you are trading your energy for is immense if you want fulfilment with your life’s work.

Slowlane

MJ DeMarco describes the Slowlane as a very common path celebrated by the “mediocre” masses:

Go to school, get good grades, get a good job, work overtime, work up the corporate ladder while investing in mutual funds and the stock market.

The Slowlane chessboard has chess pieces revolving around getting higher education, job promotions and a higher salary.

Breaking down the equations:

Wealth = Job + Market Investments

Wealth is the end goal, and everyone says they want to be wealthy, but what exactly is it made up of?

For the Slowlaner, the first component is their job income.

Job = Annual Salary OR (Time X Wages)

This refers to regular jobs, ranging from flipping burgers at Macdonald’s to corporate jobs that pay you to dress up, clock the hours, and check out at 5pm, sometimes later.

The second component is market investments.

Market Investments = Invested Sum X (1+Yield)^time

This refers to returns from financial investments across Forex, mutual funds, Bitcoin and all relatable financial instruments that return an interest after putting your money in someone else’s hands for a period of time.

Combing the equations:

Wealth = Annual Salary + Invested Sum X(1+Yield)^time

Slowlane wealth is the addition of the income you exchange for your time, with market yields from investments.

While this is the common path taken by the masses, the biggest problem with this strategy is that both components of the equation involve the passing of large amounts time before substantial results.

And when I say long I mean 20–40 years, by the time you are old, toiled by ever-increasing life commitments and perhaps even too unhealthy to fully enjoy that wealth.

If you don’t see this as a problem, read something else.

Increasing Annual Salary is dependent on increasing time or wages. No matter how long and hard you work, everyone only has 24 hours a day so we cannot scale our time infinitely, even if we somehow could work around the clock. Increasing time adds more years into making this equation work.

That leaves wages, which can be better scaled by getting more education and in-demand skillsets. However, this process takes time too, not to mention school fees and forgoing years that could be spent earning income.

Wages is difficult to exponentially grow. You can’t make $100k on year and $1million the next. Even when you get promoted, more often than not you are required to spend more time on work in exchange for the extra income.

Are you banking on more time or more wages?

The second part of the equation-increasing Market Investments comes down to increasing your invested sum or yield of the market.

Yield is affected by tons of factors — economic climate, market fluctuations and other people’s business decisions.

Factors outside of your control.

On a good year you could be making 15% returns, on a bad year it could be -10%. You don’t know as you cannot control the market.

That leaves invested sum, which is the amount you set aside for investments. Increasing this goes back to increasing annual salary in the first component of the equation, since you need a large seed amount to actually make substantial yields, which leaves you back to the question:

Are you banking on more time or more wages?

The reasoning goes on an on like a bottomless pit, adding more stress on getting more time out of you to work the equation, taking 10..20..30 years of your life (often your best years) away from you.

While the Slowlane has it’s perceived merits, the problem stems from the concept of having variables outside of your control.

“The Slowlane plan is a failure because the plan is based on time and factors you cannot control.”

How much control do you want over your own life, your finances, your career, your relationships?

Fastlane

The slowlane is the crowded, road-raging traffic jam in a busy intersection. The fastlane is the expressway to abundance, with a potential for breakneck speeds and shortcutting the traffic jams to wealth.

The Fastlane is defined by rapid wealth creation through investing effort in creating business systems over better job performances, accumulating wealth through equations unlinked from the glass ceiling of time.

The Fastlane chessboard has chess pieces revolving around entrepreneurship, lifelong learning and building surrogates for value creation.

Breaking down the equations:

Wealth = Net Profit + Asset Value

For the Fastlane, wealth also has 2 components, Net Profit and Asset Value.

Net Profit = Units Sold X Units Profit

Net Profit refers to how much a business profits, or (revenue - cost), by selling something customers are willing to pay you money for. To increase Net Profit, either sell more units or make more profit per unit.

Note there is no direct mention of time here.

The second component is asset value.

Asset Value = Net Profit X Industry Multiple

Asset Value refers to how much your business is valued at. It’s a multiplication of the Net Profits of your business with an Industry Multiplierdetermined by prevailing market conditions.

For an outsider, Asset Value can be seen as how much this business could be making in the future, should I buy ownership.

Industry Multiplier varies across industries, speculation and market conditions. For MJ DeMarco’s web business, his multiplier was 4. When he increased his Net Profits by 10%, it became 40% more expensive for you to buy his business from him, and make the profits for yourself.

Combing the equations:

Wealth = Net Profit+ (Net Profit X Industry Multiple)

Fastlane wealth is the addition of the net profits from your business, with asset value from the inherent value of what you own.

Comparing with the Slowlane equation…

Wealth = Annual Salary + (Invested Sum X (1+Yield)^time)

…we can instantly reveal the way both chessboards are laid out.

Fastlane’s Net Profit is the analogous to the Slowlane’s Annual Salary, in that it is the driver of the second components of both equations that you can directly control.

While Industry Multiples are up for negotiation, they tend to be more predictable than investment Yields. This is balanced by the fact that building a business with Net Profits has a longer timeline and less certain lifecycle than receiving an Annual Salary.

However, the key differentiation between the 2 is that the Fastlane is not directly attached to time to build wealth.

Sure, it takes time to build a profitable business, but once it is built it does not require time to appreciate proportionally. It can be appreciated through good marketing or technological innovation.

In Fastlane theory, you could sell 500% more products next month, and 5X your Net Profit and Asset Value, assuming a multiplier of 1.

However, could you 5X your monthly wage next month? How would a boss react if someone came in and asked for a 5X pay raise every month?

In essence, both equations takes time.

This is not a magic pill.

However, you now know that one of the equations absolutely requires time to work the equation, and another can be leveraged by other means.

Would you choose to be rich young, or rich old?

2) 5 Commandments of a Wealth-Accelerating Business

There’s a caveat to Fastlane entrepreneurship-not all businesses are created equal.

Imagine you ran a hot dog stand beside a stadium. Sales rise and fall with traffic from baseball fans. On a good day, you sell 500 hot dogs. However, the profits are not enough for you to pay someone to replace you in the sweltering heat. Even if there was a queue from open to close, you could only humanely sell 1000 hot dogs.

One day, you unexpectedly fall sick, leaving no one to man the hot dog store. For the 2 weeks you were bedridden, the store made no profits.

Such a business is not the ideal Fastlane business, as there are low glass ceilings to both Units Sold and Units Profit, and not a surrogate for your time.

Net Profit = Units Sold X Units Profit

Even if you suddenly became the most sought-after hot dog stand in your country, you could still only sell 1000 hot dogs everyday. Compared to an online business that is available to the whole world, you could be selling 500 products a day and 500,000 products the next given enough traffic. The glass ceiling is way higher, resulting in more opportunities to explode wealth in a short time.

Instead of building a business to surrogate for your time, you have created a self-employed job you are stuck in. If you fall sick, get into an accident, the profits from the hot dog stand stop.

MJ DeMarco summarises this through 5 commandments he evaluates any business with:

1. Commandment of Need
2. Commandment of Entry
3. Commandment of Control
4. Commandment of Scale
5. Commandment of Time

Commandment of Need

“The one thing you can count on people being is selfish…you guys are here for you not me, and you believe I can add value to your life. My whole is to align our selfish desires, that’s it.”

Tom Bilyeu

This refers to how much selfish desires your work is actually satisfying.

Do customers want that product or service so much that they would actually pay you money for it?

Outside of your business, are people already consuming and paying for substitutes? These indicate if your idea is already solving a need.

One thing that trips most entrepreneurs is that they mistake the need with their own needs, rather than the needs of the market.

For a long while, I conflated the idea of doing a business I liked with a business that is profitable and sustainable.

Not that the 2 are mutually exclusive, but it is easy for the heart to rule over the head, especially when just starting out.

Commandment of Entry

“The brick walls are there for a reason. The brick walls are not there to keep us out. The brick walls are there to give us a chance to show how badly we want something... They’re there to stop the other people.”

Randy Pausch

This refers to how easy it is to enter a space and start competing as a producer.

For example, writing on Medium has a low barrier to entry. All someone needs to do is to signup for an account, write and publish, saturating the internet with another barrage of words. This is why I don’t fully rely on Medium for my business.

For most MLM/ networking marketing companies, all it takes to join is upfront investment and to sign some forms.

The easier it takes to join, the harder it is for you to stand out-you would need to be exceptional to win the competition.

On the flip side, businesses with higher barriers to entry, such as technological skill, patents, unique partnerships or industry secrets make it harder for incumbents to compete with you.

Mentally, knowing how hard it is to execute an idea can be the same reasons that deter other entrepreneurs from doing it.

Within risk lies opportunity.

Commandment of Control

“Too many kings can ruin an army.”

Homer

This refers to how much ownership you have of your assets.

Are you working as an agent for an insurance company, or the one owning the insurance company?

Sure, working as a cog in someone else’s Fastlane business could make you good money, but it won’t make you big money.

MJ DeMarco calls this cog as the hitchhiker, as you are a passenger and not the driver in full control of where you are driving to.

The biggest downside to this is that your profits can be taken away any moment, effectively kicking you out of the car and leaving you stranded.

Examples include payment processors like Stripe which has the power to withhold your payments for weeks, or distributors like Amazon who for any reason can close your merchant account at the click of a button, effectively removing your store front instantly.

While it may not be always possible to be completely in control for all aspects of your business assets, the key is to identify the who you are at mercy to so you can create contingency plans, such as multiple sales or distribution channels.

Commandment of Scale

“I decided that if I could paint that flower in a huge scale, you could not ignore its beauty. “

Georgia O’Keeffe

This refers to the scale of which customers can buy and receive value from your services.

MJ DeMarco uses the analogy of water habitats to illustrate scale:

• Local/ Community (pool)
• County/ City (pond)
• Statewide (lagoon)
• Regional (lake)
• National (sea)
• Worldwide (ocean)

If you just owned a hot dog stand, your customer base would only be those who ever visits the stadium, a small pool relative to the ocean of people who actually want hot dogs.

For it to have a chance at being a good Fastlane business, one approach is to franchise the business and sell to multiple locations at one time, like Macdonald’s or Starbucks.

The Commandments of control and scale is analogous to building a house.

Look up and down.

Is the profit ceiling high enough within reach? If there is, that’s a problem.

Your ceiling should be as high as possible, best if you cannot even see it.

Look down.

Is the business built on stable foundations? Can some come in and wreck your systems with ease?

Good businesses are built on top of well-controlled assets.

Commandment of Time

“Someone is sitting in the shade today because someone planted a tree a long time ago.”

Warren Buffett

This refers to whether the business can still operate without you being stuck in it, the difference between working in the business, and working on the business.

Can you grow a “money” tree which still offers shade to people long after planting the seeds?

Could you impart your skills to someone to remove yourself from the day-today?

Could technology systemise parts of your business so you don’t need to stand hours in the sweltering heat to sell hot dogs?

“ Jobs are time trades for income, and yes, so are some businesses. The goal of the Fastlane is a disconnection of your time from income, even if that income isn’t millions.”

MJ DeMarco

Here are business examples that generate income exclusive of your time:

• Content systems
• Computer systems
• Software systems
• Distribution systems
• Human resource systems

These systems are able to generate value in a scalable way that can convert you from being a cog in your own machine, to the operator that controls the machine.

If your business satisfies these 5 commandments, you have put yourself on the right route to explosive wealth and time freedom-not from slick marketing, scammy products or maximum profit-minimum value services.

3) Being Selfless For The Selfish Market

Building on the commandment of need, the notion of passion and idea-gasm is very commonly talked about in entrepreneur circles, sometimes more than actual problem-solving itself.

“I love entrepreneurship so I should build a business for entrepreneurs!”

“I just had this awesome amazing idea that could revolutionise the world. Now I just need a tech guy to build it.”

The problem with such motivations is that they do not directly tie to what really matters over the long run — whether your business solves a problem people are willing to pay money for.

There is nothing wrong with feeling excited about your idea, but just because of your heightened emotional state does not mean all the pieces will magically fall into place.

There will be work and sometimes it will be unsexy, unglamorous and plain boring.

These are the moments you should really care about going through if you truly want to pull through and build something valuable.

MJ DeMarco paints the market as a brutal, selfish beast that only cares about consuming what it wants, with little regard for how you feel about it.

You know this too well.

The constant binging of social media, Youtube, Buzzfeed, app notifications and email has enveloped our generation has in many ways has emasculated our ability to produce anything, much less a business since we are addicted to consuming, consuming, consuming.

So how can we accommodate this beast to give us what we want?

We become selfless producers.

Instead of consuming 100 Facebook posts, we produce 1 article.

Instead of binging on dramas and sitcoms, we produce 2 lines of code.

Instead of beautifying social media accounts, we produce something people will satisfyingly consume.

Notice how selfless high-performing businesses are?

They are where they are for the very same reason-they understand this dynamic and are selfless in giving value instead of taking all the time.

It takes two to tango, and knowing how selfish the market is, how would you respond?

Combining The 3 Mental Models

Because MJ DeMarco understands the difference between the Fastlane and Slowlane, he is able to enjoy periods of selflessness for the selfish market. Finally, he leverages his selflessness in a business that satisfies the 5 commandments so that he can selfishly consume what he wants thereafter.

His mental models evaporates the “invisible” waves of limiting beliefs society has drenched us in, leaving us clear to see how deep the ocean really goes.

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