I offer my thesis, the “Idols Framework for wealth creation”, for your review. Calling for 25% Buffett, 25% Walton, 25% Bogle, and 25% Thorpe, it’s a recipe for you to absorb, adopt, and adapt.
I have refined my formula for smart wealth creation in the last five years. Is it a secret formula? No. Is it prescriptive or one-size-fits-all? No, and no.
But, the formula has merit. And I wish I had known it earlier. The Idols Framework is foundational. With it in place, I can enjoy the adventure of life.
Enjoyable, stress-free wealth accumulation
You can determine the value of your time by calculating your earnings per hour worked. It makes sense to hire out jobs costing less than this measure. Unless you enjoy the job for other reasons (a hobby, for instance)…
Successful individuals like Ed Thorpe drive the measure higher: What is the most money you could earn for the least amount of work?
My variation on personal earnings per hour adjusts the factors slightly.
- Instead of earnings, I’m interested in wealth.
- I redefine time spent (per hour) to stress-level.
My measure becomes wealth created per stress endured. The goal is a high score.
Two scenarios produce a high score:
- “The Bezos” This is extreme wealth with significant stress. The high score is due to a large wealth factor.
- “The Vagabond” This is modest, even minimal wealth, with near zero stress. The high score can be attributed to a small stress factor.
If I had to pick one, I prefer “The Vagabond”. Stress is real, and it shortens lives. In the end, all we have is time. Also, does extreme wealth make us happier?!
But, I’m shooting for somewhere in the middle. Likely, we all are. We would like enough wealth accumulated for the least stress. (Enough means financially independent.)
Idols Framework for wealth creation
We will create wealth using the Idols Framework. It is a loose business and investment portfolio that I will dissect in great detail in future posts. For now, know that the Idols Framework starts with equal parts Buffett, Walton, Bogle, and Thorpe:
- 25% Warren Buffett, of Berkshire Hathaway fame [margin of safety]
- 25% Sam Walton, from Walmart [micro-business]
- 25% John Bogle, founder of Vanguard [buy & hold indexing]
- 25% Ed Thorpe, math genius who beat Vegas and Wall Street [quantitative trend]
The prerequisite to employing the Idols Framework is simple. You must be great (top quartile) at two or more skills that you combine to provide unique value to a niche market.
The perfect example is Scott Adams, cartoonist. He combined his skills of 1) drawing 2) comedy and 3) corporate experience to produce the successful “Dilbert” cartoon series. Here is his take.
Early in life, you will build your skills and also your margin of safety. Also called an emergency fund, this is the Buffett slice of the Idols Framework. It provides work flexibility.
Later, use this money to be opportunistic. With it, you can take advantage of major market declines (black swan events). Buy when everyone else is selling.
Next, create a micro-business. Walton is the second slice, but not because Walmart is so giant. I choose Walton to emulate because he’s claimed he didn’t create anything original. Sam Walton learned his best ideas from others. Then, he combined and aligned the ideas with his vision.
I love this fact because it means anyone can start a business. Keep it very small (micro) to maintain sole control. Then, you alone can steer the business to low-stress waters.
Real estate investment makes me anxious. I fear waking from a deep slumber to replace toilets in the middle of the night. But many disagree with me. Small-scale real estate investment also qualifies as a micro-business. In fact, I’m advising my son to buy two four-plexes early in life.
At last, the Bogle and Thorpe slices work together to compound your savings. I invest in two Vanguard index funds: 60% in VTI (US) and 40% in VXUS (non-US). These percentages align with the market capitalization of the world stock market.
The Idols Framework’s last slice is my Fast Follow Investor strategy. It replicates quantitative trend models built on Ed Thorpe’s early work. The strategy provides deep diversification alongside market-based, passive, buy & hold indexing (VTI/ VXUS).
These investment models need no investment expertise. But you must stay diligent. This is easier said than done. In fact, it’s the human side of investing that is the most difficult.
One can practice a level-headed temperament with good planning, habit-building, and support. I write a lot about this.
I list the four slices of the Idols framework at 25% each, but percentages do vary for me. And they will for you. In fact, they should flex as you move through life. They will vary based on life stage, the economy, and when opportunities or risks present themselves.
Putting it all together
Now, let’s revisit our wealth created per stress endured measure. We achieve a high score by accumulating enough wealth with very little stress:
- The Bogle and Thorpe investment models are proven and mindless to use.
- With Walton, you stay small (micro!) and navigate your work life as you see fit.
- And Buffett’s margin of safety provides additional padding… so you can “be greedy when others are fearful”.
Great wealth with little stress. Magic.
Follow the Idols Framework to run a self-directed, micro-business with cash on hand to take advantage of undervalued assets all the while producing high investment returns that are fully diversified.
That sentence is long. But, I’ll keep this post short. I have so much more to share. Please stay tuned.
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