MJ DeMarco, in his book The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime, talks about 5 types of businesses that one can do to accelerate wealth in the “Fastlane”. I like it because I have a bias towards software businesses and he recommends it as one of the fastlanes to wealth, but it’s not the only one. He includes also some pretty ‘old/conventional’ ones, like real estate. The key to these 5 businesses that can generate wealth fast is the scale and magnitude, and a certain level of passivity.

Sharing them here as reference for myself, and for anyone who might find it useful. This is not a book review, just raw notes lifted directly from the book, with some minor edits, interpretations and categorisations of my own.

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5 Fastlane businesses

Not all businesses generate passive income. Fastlane businesses create passive income and make financial freedom a reality. More passive income doesn’t mean higher income, though.

1. Rental systems 

2. Computer/Software systems

3. Content systems

4. Distribution systems

5. Human resource systems

1. Rental systems - real estate is the old one. It’s 95% passive, and value can appreciate. Leases, royalty payments, patents, licensing are other forms of rental systems. You create once and it survives time and continues to generate income long after. Passivity scale: A

2. Computer/Software systems - it works 24/7, not fallible, easy to replicate with potential huge distribution, doesn’t necessarily require talent. Passivity grade: A-

3. Content systems - systems of information, distributed via online or offline channels. Authors, publishers for example. Blogs, social networks, ebooks are the new content systems. Content is an asset that survives time, re-sellable over and over. Effective time cost declines while the hourly rate of return expands. Passivity grade: B+

4. Distribution systems - distribution is the means to move a product to the masses, e.g. Amazon. Franchising is another way, e.g. McDonalds. Passivity grade: B

5. Human resource systems - relying on employees erode passivity, because humans need management. It’s the most expensive to manage and implement. Passivity grade: C

6. Plain ol’ money - lending money is 99.6% passive, if you have big amounts of it. Being a lender isn’t complicated - anytime you buy a bond, mutual fund, deposit money in a bank, you’re a lender. But the key difference is you need to start with a huge sum, because compound interest isn’t noticeable till a certain large amount. Fastlaners use compound interest differently from Slowlaners - instead of using it being to get rich over decades, Fastlaners use it to create another income stream. Slowlaners start with $5, Fastlaners start with $5mil. The real heavy lifting of getting the first $5mil comes from Fastlane business. So saving has it’s place; compound interest has it’s place, just not in the usual narrative.

Law of Effection, not Attraction

“Impact millions and make millions.” Positive thinking and visualization has its place (attraction), but thinking never made anyone rich, unless that thinking manifests itself into consistent action. 

Scale and magnitude is key to these Fastlane businesses

Effection is scale, magnitude, or both. Fastlane wealth equation includes scale and magnitude:

• Net profit = Units sold (scale) x Unit profit (magnitude)

Wealth comes from scale, not magnitude. But with high magnitude, you scale up your scale by multiple factors. Retrace the source of millionaire money and you will find millions of something. Effects of scale and magnitude always precedes money, either directly or indirectly. The more lives you impact, the more wealth you’ll attract.