What does capitalise your knowledge, expertise and experience mean?
Thanks for asking, allow me to give you a quick overview.
“Don’t capitalise on your knowledge, expertise and experience, capitalise it.”
The first can make you a living, the other could make you a fortune. Here’s how.
Capitalising on your knowledge, expertise and experience, KEE for short, is to “use your KEE for your own advantage”; “she capitalised on her experience to get a better paying job” (Cambridge Dictionary).
In other words we use our KEE to secure better jobs, consulting contracts or coaching clients; exchanging our time delivering our expertise for the client’s money. The priority is cash flow.
To capitalise KEE is different.
To capitalise something is to “record it as an asset”, in other words, as capital. And the purpose of capital is to generate an income, cash flow, without further input from the owner of the capital. The priority is capital.
One simple, but not easy, way to capitalise KEE is to write a book. The writing of the book is an investment of the author’s time and KEE but, once published, the author owns the copyright to the text which entitles them to a royalty on any sales of the book. The author’s KEE is capitalised in the copyright.
The Cashflow Quadrant.
Here is Rober Kyosaki’s Cashflow Quadrant. The people on the E/S side of the Cashflow Quadrant are ‘capitalising on’ their KEE while the people on the B/I side are capitalising their KEE.
The E/S side focus on cash flow while the B/I side focus on capital.
Think of two couples with identical KEE having exactly the same value. If one couple is on the E/S side and the other couple on the B/I side, their short- and long-term outlooks will be very different.
Let’s say the couple on the left are Elvis and Sue while the couple on the right are Betty and Ian.
When they get started, Elvis and Sue will take off like the Hare in Aesop’s fable, while Betty and Ian will start out more like the Tortoise. But, let us not forget the lesson from Aesop’s fable; it’s not how you start that matters but how you finish. Let’s see how it works out.
Phase 1. The Early Days.
Elvis and Sue capitalise on their KEE and get off to a fast-start by landing high-paying jobs at Fortune 500 companies. Their hard work and KEE earn them periodic promotions with corresponding higher salaries. They are climbing the corporate ladder with a vengeance. As their incomes increase, so does their lifestyle and their debts. Every salary increase enables them qualify for more ‘credit’ (read debt); with every promotion they can ‘afford’ to buy bigger houses (for the kids) with bigger mortgages and they can afford to finance more luxurious and expensive cars. With debt, the possibilities are seemingly endless.
Betty and Ian on the other hand, appear to get off to a much slower start. Betty starts her own business while Ian gets a high-paying job at another Fortune 500 company. At work Elvis and Ian appear to be in a race to to the top; matching each other on promotions and salary increases. But, when it comes to earning power, Betty is eating Sue’s dust and it isn’t long before Sue is earning two, three and even four times more than Betty.
While Elvis and Sue upgrade their houses, cars, friends and schools every three to five years, Betty and Ian remain in the same house in the same neighbourhood with the same friends, adding a few more friends each year. While they buy second hand cars and drive them for longer, they live a very comfortable lifestyle; comfortable, not flashy.
Let’s be clear here, Elvis, Sue and Ian are capitalising on their KEE earning great salaries, while Betty is capitalising her KEE by growing her own business; she draws a small salary from the business and reinvests all the profits.
Phase 2. The Middle Game.
Elvis and Sue continue to capitalise on their growing KEE as they climb the corporate ladder, earning higher and higher salaries. It’s not long before they are in the top 0.1% of salary earners.
In the early days Ian’s income supported the family while Betty focused on growing her business into a scaleable venture. But now Betty’s business is making bigger and bigger profits. Instead of increasing their lifestyle, Betty and Ian chose to increase the ‘Gap’ between their income and expenses. They invest their surplus income. They become Intelligent Active Investors.
With Betty’s business and their other investments delivering a secure income, Betty and Ian decide that it is time for Ian to stop capitalising on his KEE and start capitalising it. Ian resigns from the Fortune 500 company and even an offer of promotion to the board of directors can’t entice Ian to stay on; it is time to capitalise his KEE.
Ian recruits a high quality team and starts a boutique investment company focusing on specific niches in which he and his team have a deep understanding. While the company’s success attracts the attention of numerous high nett-worth investors, Ian ensures that he retains the lion’s share of the equity in his company.
Meanwhile Betty’s company has grown in leaps and bounds. A successful IPO quadrupled the value of Betty and Ian’s equity in the company and it’s not long before Betty stands tall as the president and CEO of her own Fortune 500 company.
Phase 3. The Finish Line (at least the first of many)
Things are not always what they seem. (Chinese proverb)
Betty and Ian decide to purchase a holiday home in one of the country’s most prestigious seaside resorts. This house is a reward for their achievements and not intended to be an income producing asset; they decide to pay cash for the property.
And, by a complete coincidence, a few months later, Elvis and Sue purchase the house next door. And, with their huge salaries they easily qualify for a 90% mortgage bond, of course.
But things are not always what they seem, remember?
From the outside looking in, both couples appear to be equally successful. They own very similar holiday houses on the same street. Both couples drive luxury cars. Their lifestyles appear very similar. But that is only the appearance.
It is only when you look beneath the surface that the true picture emerges. While Betty and Ian’s lifestyle is built on a solid foundation of investments, Elvis and Sue’s lifestyle floats precariously over the quicksands of debt.
The true picture looks something like this; can you guess which home belongs to Elvis and Sue and which belongs to Betty and Ian?
A Wealth Diamond Perspective.
Betty and Ian, as Intelligent Active Investors (a Wealth Diamond designation), have grown a well-structured Wealth Diamond portfolio with a sensible mix of Secure Assets (their ‘nest egg’ investments), a number of Cash-generating Assets and a few Speculative Assets.
Their financial security is firmly established on the solid foundation of knowledge, expertise and experience as Intelligent Active Investors. By living a debt-free lifestyle, they are financially resilient. Even in the unlikely event that their investment portfolio were completely wiped out, they have both the business and investor KEE to bounce back and start again.
Elvis and Sue on the other hand, have mastered the art of buying lifestyle toys but have acquired no financial skills as demonstrated by their insatiable addiction to lifestyle debt. They are a hair’s breadth away from disaster; even a temporary setback could knock them down, possibly permanently.
What lifestyle would you prefer? Or rather, I should ask, which of the two couples do you think sleeps more soundly?
Now it is your choice.
Will you capitalise on your KEE or will you capitalise it?
If you decide to capitalise your KEE, what game will you choose?
And here is some good news, the greater the value of your KEE, the faster it can capitalise.
In other words, if you have accumulated decades worth of valuable KEE, you could be sitting atop a goldmine of untold proportion.
Isn’t it worth finding out how to unlock that value?
Talk to me, prospecting for gold is my specialty.