A few months back, I published this post about money. It describes what money is, how put it to it work for you, and many of the common opinions regarding money. What I didn’t write about was where money actually comes from. This post is my answer to that question.

Money, wealth, riches, treasure, we’ve amassed a collection of words for a subject that’s fascinated humans since its inception amidst the dawn of civilization. But there’s one very important distinction I must make. Money isn’t wealth, it’s a product of wealth. I frequently hear the two used interchangeably, and it’s one of the primary sources of confusion in understanding how the whole system really works.

Silicon Valley’s wonderkid and angel investor Paul Graham wrote this must-read essay about the creation of wealth. Wealth is anything that holds some kind of value for society, and as Graham notes,

 “Until a few centuries ago, the main sources of wealth were mines, slaves and serfs, land, and cattle, and the only ways to acquire these rapidly were by inheritance, marriage, conquest, or confiscation.”

Fortunately, there are now alternative sources of wealth besides marriage, conquest, and confiscation. Most of today’s wealth derives from companies. The father of economics, Adam Smith wrote about the value of specialization. As populations grew, specialization of labor emerged as a method to capitalize on the newfound ability to pool both knowledge and resources. Today, as marketing guru Seth Godin notes that there isn’t a single person who knows how to make a computer mouse from scratch, and that’s just the mouse—forget about the entire computer!

So you specialize to create something valuable. That’s step one. The next step is scale. Arguably the richest man (financially) to ever live was John D. Rockefeller with a net worth of $663.4B after adjusting for inflation. His company? Standard Oil. He was among the first American industrialists to monopolize a product that became an absolute necessity. Other industrialists like Andrew Carnegie (steel), Henry Ford (automobiles), and J.P. Morgan (finance) followed suit, but there’s no better example of capitalistic industrialism than J.D. Rockefeller.

How’d these “tycoons” make so much money? They improved people’s lives. They provided a service or product that consumers demanded. In Henry Ford’s case, they didn’t even know they wanted an automobile. Ford is famous for saying, “If I would have asked my customers what they wanted, they’d have asked for a faster horse.”

Modern mass wealth creators include Steve Jobs of Apple, Bill Gates of Microsoft, Sergey and Larry of Google etc. These visionaries also invented products that improved the lives of consumers, and when you’re able to do this at scale, money will absolutely flow your way.

So what’s the secret to making a lot of money? Create a lot of wealth. How do you do that? Think about what might make someone’s life better. Artists make wealth through entertainment: paintings, books, songs, movies, etc. Doctors create wealth by curing the sick. Academics create wealth by researching the unknown. Laborers put their bodies to work to generate wealth. There are so many ways, but the person with the most money will ultimately be the person who figures out how to provide the most wealth.

If you want more money focus on creating more wealth. Often times this involves establishing a company that enables you to scale your product or services. Wealth creation takes tremendous focus. You can’t be all things to all people. Figure out what you stand for, how you can help improve lives, and then scale that to as many people as possible.

Summary

To summarize, money flows from the wells of wealth creation. Where you create value, money will follow. Money is a product of wealth, not wealth itself. I should also note that money will not buy you happiness, nor is it a necessary ingredient for fulfillment. As John Candy says in Cool Runnings, “If you’re not enough without it, you’ll never be enough with it.” That said, most people enjoy having a reasonable amount of money to support a lifestyle that affords an education, a safe living environment, and the invaluable time to indulge in the innumerable wonders of our crazy, magical world.