Course:
Money
Imagine earning over $300 million in a career, only to end up bankrupt. That was the reality for heavyweight boxing champion Mike Tyson, and it’s a cautionary tale about our relationship with money. The video “Escaping the Rat Race: What School Failed to Teach You About Money” explores why so many of us struggle with money management, even when we’re earning well above the average. But more than just a financial pep talk, this video dives into the heart of what money represents, how our consumption habits trap us, and, ultimately, how we can break free from the vicious financial cycle known as the “rat race.”
As we examine these ideas, we’ll also look at how cryptocurrencies and blockchain technology fit into the equation. Could crypto be the ticket out of this relentless financial loop? And what can we learn from traditional money management techniques that still apply in this brave new world of decentralized finance?
The video presents a familiar scenario: individuals who earn a steady income yet find themselves living paycheck to paycheck, constantly chasing after the next financial milestone, only to fall short again. The core argument hinges on the idea that our inability to manage consumption and production—how much we spend versus how much we produce in value—is at the root of this problem.
The video emphasizes how we perceive money as something more than a medium of exchange. It’s framed as an expression of value, which we often misinterpret. For example, buying a luxury car or a bigger house may seem like a marker of success, but it may also be a sign of poor financial habits. We chase material goods, not realizing that we’re often stuck in a cycle where consumption outpaces production.
A particularly striking statement made is the idea that “production means nothing if you have a problem with consumption.” This encapsulates the idea that regardless of how much we earn, if we spend more than we produce, we are perpetually trapped. The video then proposes an alternative: a shift in mindset and financial habits that allows for budgeting, saving, and smart investing.
Money as Value, Not Evil:
One of the strongest points made in the video is the notion that money is not inherently good or evil; it’s simply a tool for representing value. This is a refreshing take in an era where wealth is often demonized. By viewing money as value, the video encourages viewers to rethink their emotional relationship with money. This concept resonates deeply in both traditional finance and the crypto world, where decentralized currencies like Bitcoin are seen as tools for reclaiming personal financial autonomy.
Supporting Data: In the crypto space, Bitcoin has become synonymous with digital gold, a store of value that transcends national borders and banking systems. In 2020, institutional investors flocked to Bitcoin as a hedge against inflation, much like traditional investors used gold.
The Consumption Trap:
The video correctly identifies overconsumption as a major flaw in personal finance. Living beyond our means, fueled by credit and debt, is a widespread issue. The “keeping up with the Joneses” mentality can lead to financial ruin, whether you’re a Hollywood star or a middle-class worker. In crypto, this consumption trap can manifest as buying into the hype of speculative tokens, hoping for quick profits, only to lose everything in market downturns.
Supporting Example: Consider the 2021 Dogecoin boom. Many retail investors, drawn by social media hype, bought into Dogecoin at its peak, only to see its value plummet when the hype faded. This mirrors the consumption-driven mindset highlighted in the video.
Production vs. Consumption Balance:
The core of the argument is that financial stability hinges on balancing what we produce (earn) versus what we consume (spend). This point is highly relevant and well-articulated in the video. Financial independence comes not just from earning more but from managing consumption through budgeting and saving. In the crypto space, this translates to disciplined investing and the wise allocation of assets, whether through staking, liquidity mining, or long-term holds.
Over-Simplification of Debt:
While the video critiques debt as a financial pitfall, it fails to acknowledge that debt, when used responsibly, can be a tool for growth. Many businesses leverage debt to finance expansion, and in personal finance, mortgages or student loans can be seen as investments in future value. The blanket criticism of debt lacks nuance, particularly in the crypto world, where decentralized finance (DeFi) platforms offer crypto loans that can be used to increase liquidity or earn yield.
Counterargument: In traditional finance, responsible borrowing—such as taking out a mortgage on a property that appreciates in value—can lead to significant wealth. Similarly, in crypto, borrowing against assets on platforms like Aave or Compound can lead to higher returns, provided the borrower understands the risks.
Lack of Discussion on Inflation and Purchasing Power:
While the video focuses heavily on consumption and production, it overlooks the impact of inflation on purchasing power. In traditional finance, inflation erodes the value of money over time, making it essential to invest in appreciating assets. Cryptocurrencies like Bitcoin are often viewed as a hedge against inflation due to their deflationary nature (limited supply). The absence of this discussion leaves a gap in the overall analysis of how to build long-term wealth.
The concepts of consumption, production, and value that the video discusses translate well into the world of cryptocurrencies, but with some important differences. In traditional finance, the rat race revolves around working a job, paying bills, and struggling to save or invest. In crypto, the rat race can involve speculative trading, chasing quick profits in volatile markets, or falling victim to hype-driven tokens.
DeFi and Financial Independence:
Decentralized finance (DeFi) offers a potential escape from the traditional rat race by enabling users to earn passive income through staking or yield farming. These methods allow crypto holders to “produce” value by contributing liquidity to decentralized markets, earning rewards in return. Platforms like Uniswap and Compound exemplify how the crypto world can offer new avenues for financial growth that don’t exist in traditional systems.
Volatility and Risk:
However, the crypto rat race comes with its own dangers. Just as overconsumption can ruin traditional finances, poorly timed trades or excessive leverage can devastate a crypto portfolio. The 2022 collapse of Terra’s stablecoin (UST) is a stark reminder that even “safe” crypto assets can fall apart, leaving investors with massive losses.
Storing Value in Crypto vs. Fiat:
Bitcoin’s appeal as “digital gold” reflects the idea that value can be stored outside the fiat system. For those looking to escape the fiat-based rat race, holding cryptocurrencies like Bitcoin offers a way to store value that isn’t subject to inflationary pressures. But crypto’s volatility means this store of value isn’t as stable as traditional assets like gold or real estate.
The lessons from the video on money, consumption, and production don’t just apply to personal finance; they’re increasingly relevant in a world where financial systems are undergoing massive transformation. Cryptocurrencies and decentralized finance offer new ways to think about money, and these technologies could reshape the future of finance in profound ways.
As blockchain technology evolves, more people may shift away from traditional financial institutions toward decentralized systems that offer greater control over their assets. The rise of DeFi is just the beginning—blockchain technology could eventually disrupt everything from loans and insurance to how we store value and exchange goods.
One of the most exciting potential impacts of crypto is its ability to democratize finance. In regions with limited access to banking services, cryptocurrencies offer a way to store and transfer value without relying on traditional banks. This could fundamentally alter global financial systems, providing new opportunities for people in developing countries.
Having observed both the traditional financial world and the evolving crypto ecosystem, I believe the video’s message about financial awareness is more relevant than ever. While traditional finance emphasizes budgeting and saving, crypto introduces new ways to think about value creation through decentralized systems. But with these new opportunities come risks—especially for those who jump into the crypto space without fully understanding the volatility and complexity of digital assets.
From my perspective, escaping the rat race requires a blend of traditional financial discipline and a forward-thinking approach to new technologies like blockchain.
The key is not to overextend yourself in either world—whether it’s through credit card debt in fiat or leveraging too much in crypto. In both, it’s about maintaining a balance between consumption and production, while using tools that align with your financial goals.
The video’s exploration of money, value, and the rat race offers crucial lessons that apply to both traditional finance and the rapidly growing world of crypto. Whether you’re budgeting your paycheck or staking Ethereum, the underlying principles remain the same: produce more than you consume, invest wisely, and always keep a close eye on your relationship with money. As cryptocurrencies continue to reshape the financial landscape, these lessons will only grow in importance.
In the end, the potential for blockchain and DeFi to offer new paths to financial freedom is exciting—but as with any financial system, the key to success lies in understanding the rules of the game. And for now, whether you’re using dollars or Bitcoin, the goal remains the same: escape the rat race and build a future of financial independence.
In this lesson, we’ll dive into the core principles of money, debt, consumption, and production as they are traditionally understood—and how these concepts evolve in the world of cryptocurrency and blockchain. By connecting the dots between traditional finance and crypto, you’ll learn why so many struggle with money management and how the crypto world offers potential solutions. We’ll explore fundamental ideas, from how money functions to how you can break free from the financial “rat race,” all while considering crypto’s unique role in shaping the future of finance.
Key Points:
Detailed Explanation: Traditional finance views money as a tool to exchange goods. In crypto, tokens such as Bitcoin are not just currency but also store value based on trust in the network. For example, Bitcoin’s value derives from its decentralized nature and limited supply.
Crypto Connection: Cryptocurrencies add a unique twist to the concept of value. Bitcoin’s deflationary model, where only 21 million coins will ever exist, contrasts with the unlimited supply of fiat currencies. Projects like Ethereum introduce the idea of utility value, where tokens power decentralized applications (dApps).
Key Points:
Detailed Explanation: The rat race is more than just working a job. It’s a financial trap where consumption outweighs production, leaving no money for investment or savings. In the crypto space, this can mirror buying speculative tokens without strategy, leading to constant chasing of the next big win.
Crypto Connection: DeFi (Decentralized Finance) offers alternatives like staking, liquidity mining, and yield farming, which can allow your assets to generate passive income without constantly trading. For instance, staking Ethereum in a liquidity pool may provide better returns than holding cash in a traditional savings account.
Key Points:
Detailed Explanation: To break free from the rat race, you must produce more than you consume. Traditional solutions include budgeting and investing in long-term assets. Crypto offers different routes, such as staking or participating in governance tokens, where you can potentially earn passive income.
Crypto Connection: Decentralized lending platforms like Aave allow you to earn interest on your crypto, providing an income stream similar to dividends or interest from traditional financial products. However, crypto’s volatility makes it a double-edged sword if not managed well.
Key Points:
Detailed Explanation: Debt in traditional finance often grows through high-interest rates and credit mismanagement. In crypto, borrowing against assets through DeFi can be profitable if markets rise, but devastating in a downturn. Margin trading in crypto adds a new level of risk, where a 10x position can either make you rich or bankrupt.
Crypto Connection: Platforms like Compound allow users to borrow or lend crypto assets, but unlike traditional loans, crypto collateral can be liquidated during price crashes. Understanding these risks is crucial for maintaining financial health in both realms.
In traditional finance, money has been a reliable medium of exchange, but in crypto, the question of value becomes much more complex. Bitcoin derives its value from decentralization and scarcity, whereas newer tokens may derive value from the utility they provide within decentralized applications (dApps). Projects like Chainlink offer oracles that connect smart contracts to real-world data, thereby generating value through utility.
In traditional finance, breaking free from consumption might mean setting up a budget or cutting expenses. In the crypto world, the solution often comes in the form of staking, yield farming, or holding assets that appreciate over time. However, this also comes with its own risks, as the volatility of crypto markets can undermine even the best-laid plans.
Mike Tyson’s bankruptcy despite earning $300 million is a classic example of overconsumption and poor financial management. This mirrors many people’s situations—making good money but mismanaging it due to overspending and debt.
In the 2020 DeFi boom, many individuals earned significant returns by staking or providing liquidity. However, those who didn’t understand the risks saw their portfolios diminish during sudden market downturns. Understanding crypto’s volatility is just as important as managing fiat money in traditional systems.
Living paycheck to paycheck, relying on credit cards, and not building financial security.
Volatility and mismanagement of assets can leave newcomers broke just as easily as poor budgeting can in traditional finance.
In 2003, professional boxer and heavyweight champion Mike Tyson filed for bankruptcy with $30 million in debt, despite accumulating over $300 million during the course of his career. This poses a great question about money itself because a great deal of our actions and motivations in life have an underlying desire or need to acquire it. But what’s the point of acquiring it if the great issue seems to be our ability to manage it?
Americans now have the highest credit card debt in history. Translation: you didn’t learn anything. Debt is an invisible burden being carried by the country’s most vulnerable. Of course, these statistics are reflective of both the UK and the US, but consider for a moment your own attitude towards money and how money exists in your life. What is money to you? Does it seem to enter your life and immediately leave once you have it? Has it ever placed you in a vulnerable position? A vulnerability that drew you closer to a get-rich-quick scheme or a guru telling you that you can get rich if you just bought their course?
Whilst my entire channel aims to tackle these topics to some degree or another, I realize that our perceptions of money are sometimes more crucial than our ability to generate it, especially when our very brains are wired in such a way that prevents us from being financially sensible. Does it really matter if you’re earning more than six figures a year if by the end of that year you have nothing left to show for it? Where is the disconnect? It’s time we solved that mystery and, not only that, but explore a better framework for understanding money. A framework commonly taught in personal finance but oftentimes missed in formal education.
A question: what is money? Or rather, what does money represent? When you make a purchase from Amazon or when you’re paid for your time working a job, what is the significance of money in these transactions? Money is commonly defined as a medium of exchange—an instrument that facilitates the sale, purchase, or trade of goods between parties. But I don’t think this says much about what money actually represents. I think a better way of looking at money is as an expression of value. You hand over a certain amount of money to purchase something because you perceive its value to be equivalent to the amount of money you handed over. Of course, the price is often not determined by you as an individual, but by the market as a whole. But hone in on this one point: money equals value.
Why is that so important? Because often, we give money a moral significance. A quote I’m sure you’ve heard: “Money is the root of all evil.” We look at someone who seems to have a large amount of wealth and think they got lucky. Who did they take advantage of to get to that position? Who had to lose in order for them to gain? We never ask, “What value was created in order to generate that money?”
Understanding that money is simply value is the best way to understand that money is not necessarily evil, nor does it make a person evil. Sure, there are scammers who convince you that what they have to sell is worth value, but that doesn’t say much about money as it does about their own morals. Money simply opens your options and broadens your horizons. The choices you make with that money have everything to do with your own moral dispositions. So, money is an expression of value. Now what?
How does this change the reality of a person living paycheck to paycheck or someone consumed by credit card debt? The simple mention of “money equals value” changes nothing. It may make you see money in a different light, but what part of that is actionable advice? To answer that question, I’ll pose you another question: what is your relationship with money?
Money will come into your life, and it will leave. This is a relationship often expressed by your income and expenses. Another practical way of expressing this, which I particularly like, is your production versus your consumption. For the most part, money will enter your life because you have produced some form of value, and for most of us, this value will come in the form of labor—a job. Money will leave when you have consumed something—a Netflix subscription, a new car, a house.
In many ways, we can look at the net worth of an individual as a metric for determining their relationship between consumption and production. Now cast your mind back to the statistics I mentioned at the start of this video. What part of the consumption versus production relationship do you think is at fault here? Consider yourself for a moment. Think about all the money that has entered your life and left. How much of that do you still have in possession today or invested into some sort of asset? Which part of this relationship do you feel is unbalanced or needs improving? The likelihood is both, but for most of us, the biggest issue lies in our consumption.
Remember the CareerBuilder study that found that 78% of American workers were living paycheck to paycheck? Well, it also found that of the workers who made $100,000 or more a year, one in ten of them were living paycheck to paycheck. Now, you could argue that someone earning six figures a year may still like to earn more, but when you are paid a figure well above the average wage and cost of living, yet you still somehow find a way to spend it all, I’d argue that your relationship with consuming must be fixed before you even consider your relationship with production. As any wealthy celebrity who has filed for bankruptcy can show us, production means nothing when you have a problem with consumption.
A rat race: an endless, self-defeating, or pointless pursuit. Sometimes the rat race is conflated with working a nine-to-five job. It’s a comparison often used by certain individuals to guilt you into buying programs and books from them. But this seems extremely unfair, mostly because it aims to villainize a job and excludes the fact that there are those who either love or are perfectly fine with their jobs or have other aspirations aside from their nine-to-five.
A real rat race is living on a financial edge—being one paycheck away from broke—constantly feeling as though the moment money enters your life, it immediately disappears. And the more responsibilities you have, the more dangerous this relationship becomes. The loss of a job, an unexpected health accident, or any unexpected circumstance, for that matter, can throw your entire financial position into turmoil.
Consider the mental consequences of living on this financial edge. Your job no longer becomes an option; it becomes a necessity in order to keep funding your lifestyle or keep paying off debt. To quote Tyler Durden from Fight Club, “The things you own end up owning you.”
What’s the silver lining? It doesn’t have to continue like that. The first stepping stone in personal finance is drawing awareness to your relationship with money. This is often done by journaling your monthly expenses, categorized as housing, transportation, food, utilities, entertainment, and so on. It’s about understanding yourself as a consumer. But this part is tough. In behavioral finance, this feeling is often labeled as the “ostrich effect,” which is our tendency to want to avoid negative financial information. It’s that feeling you get when you refuse to look at your bank account after a night out, fearing what it might show. And yet, once you pass this stage, it’s time for you to take control over your behavior as a consumer.
This often involves the idea of budgeting—deciding each month how much you aim to spend on each of these categories and sticking to it. It’s about systematically looking at what you consume and finding ways to minimize these things to ultimately live below your means. In other words, having a lifestyle that still leaves you with enough money to save and invest in some form or another. It’s also important to note that before you ever decide to invest, one of the most common practices in personal finance is to keep an emergency fund—a specific amount of savings that you hold onto in case of an emergency. This fund would typically hold three to six months’ worth of expenses.
The idea of living below your means is an important one because, why would we choose to do otherwise? Why would we choose to live a lifestyle that we cannot afford, or one that places us on this financial edge? I could make an entire video on our cognitive biases—the ostrich effect is just one—which can affect your financial position. Then there’s hyperbolic discounting, a tendency to favor short-term rewards as opposed to greater rewards in the future. This is you choosing to purchase a new pair of shoes instead of saving that money towards a future investment. Or there’s social proof—our tendency to think and act as others around us think and act. When the people around you are buying one thing, you buy it too. Or when the people around you establish money as a means of evil, you’re likely to assume the same thing too. The phrase “keeping up with the Joneses” summarizes this great problem of consumption. It’s a phrase defined by Google as trying to emulate or not be outdone by one’s neighbors—they buy a new Porsche, you buy one too; they have nice clothes, you get some too; they renovate their home, you do it too—all in the attempt of impressing or trying to keep up with others due to some form of social pressure.
Only in today’s world, the Joneses are not literal neighbors—they’re far more present than that. We are all vulnerable to social approval. We really care what other people think of us, but the problem is we’re measuring our self-worth by how many people like what we’re posting. The governor of the Bank of Canada stated it succinctly: “For most Canadians, debt is a fact of life, at least at some point.”
To be clear, I’m not saying that purchasing an expensive piece of clothing, jewelry, or a sports car is a bad thing, nor do I think consuming is a bad thing. The aim of this video isn’t to philosophize about the repercussions of a
materialistic view of the world. It’s about drawing awareness to who you are as a consumer. Do you care more about appearing as though you have money or actually having money?
The rat race isn’t about working a nine-to-five job, but living life on such an edge that it means you are chasing the next thing—whether a paycheck or a material possession—such that your greater life goals and ambitions are placed in the background in order to continue this race. A budget and keeping account of your expenses have proven time and time again to work and draw you out of this race. It’s fun to talk about making money or imagining having as much wealth as possible, but what’s the point when your relationship with money as a consumer means losing it all or having to work non-stop in order to fund that lifestyle? That is the real rat race.
But with all of that being said, let’s talk about making money now. The stuff we teach here and have for almost 30 years is proven.
What’s up, you guys? It’s Graham here. So we’ve got to take a moment and talk about what’s going on in the stock market because as we’re finishing up the week, stocks…
Personal finance channels like Graham Stephan or Dave Ramsey are great for learning how to work on your consumption side of the equation. But if there was one thing I wish they spoke more about, it would be their ability to make money. And I understand why they don’t do this—it’s easier to reduce your expenses and the amount that you consume than it is to increase your income. When speaking to a mass audience, giving advice that will work for most people is typically the best choice. We see that there are entire communities built up around focusing on frugality. The FIRE community is one example of this—a movement that adopts the strategy of living extremely frugally, saving, and investing as early as possible with the intention of retiring as early as possible. Minimalists also share a similar view to the FIRE community, although more deep-rooted in philosophical positions about the world and materialism at large.
People like Graham Stephan or Dave Ramsey promote strategies that fall on the spectrum of living frugally, saving a lot of money, and investing in the long run. And there’s nothing inherently wrong with this strategy—it works for a wide range of people with varying degrees of income. But let’s be honest—Graham Stephan doesn’t rely on cutting coupons or living an incredibly frugal lifestyle to make $100,000 to $200,000 a month from YouTube, nor does Dave Ramsey rely on these strategies to have an estimated net worth of $55 million. These people are utilizing a means of production at mass scale.
In my video, “The Untold Truth About Money,” I talked about money being equivalent to your perceived value in the market. The most impactful way of increasing your value is finding a problem in the market, creating a solution for that problem, and selling that solution to the market at scale. This is the entrepreneurial route. A successful business at scale is able to produce a large amount of value to a society, such that your production side of the equation grows exponentially in comparison to a standard job. But this isn’t a route that everyone can take, nor should they try to. It’s about reflecting on your own capabilities and whether entrepreneurship is best suited to your direction.
With that being said, increasing your production doesn’t have to come from the strict definition of a business. Graham Stephan uses YouTube as a vehicle to produce something—in this case, videos about personal finance—at mass scale. It’s one reason I chose to create videos on YouTube as well. It’s a vehicle to produce something—in this case, documentary-style videos—at a mass scale, to a point where I can now do it full time and build a business around it.
Producing is about providing relative value to the market in some shape or form. I utilized my skills with acting, presenting, storytelling, and video editing to create videos that I hope are somewhat entertaining and educational. And thankfully, the market responded positively. Your form of production may be developing an app or software that is solving a problem you believe the market would pay money for its solution, or perhaps a fitness brand that is branded extremely well and utilizes its community better than most other fitness brands, as I believe is the case with Ben Francis and what he did with Gymshark.
For most people, labor in the form of a standard nine-to-five job will be their means of production. But this doesn’t mean your ability to produce stops there. Understanding yourself as a producer is about understanding ways in which you can produce value to the market. If you can produce value at a large scale, it means earning money at a large scale. The internet has thankfully provided a great deal of opportunity for us to produce something and put it out to the market. Whether the market actually wants what you’ve produced can only be determined once you’ve released whatever it is you’ve produced.
So, to summarize, it’s first important to bring awareness to yourself as a consumer—understanding what you purchase and why you purchase—by journaling your consumption and then giving yourself a budget to manage and control that consumption. Producing then becomes a matter of maximizing the amount of value you can bring into society through a job, a business, or some other means of production. This is a framework that has helped me greatly, as I’m sure it’s helped countless others who have a vested interest in making money.
This isn’t just sushi we’re talking about anymore—this is substantial. And then to go from that to this…
Focusing… is that $170,454? Yeah, that’s insane!
Hello, hello, my friends. Before you click off the video just yet, I want to say one thing: thank you so much for watching to the end of this video. You watching to this point is hopefully proof that I’ve provided some kind of value to you in some way or another. So, be sure to hit the like button. And if you want to see more videos around the topics of business, money, or finance in general, be sure to hit the subscribe button.
I’ve also got a Patreon where I post behind-the-scenes stuff, do Q&As, and have a bunch of other exciting plans for it. So, if that interests you and you’d like to support the channel further, do check it out. The link is in the description below.
Now, for me personally, combining what I know about personal finance and entrepreneurship has really helped me the most. And as I mentioned, this YouTube channel was one way in which I knew I could produce some kind of value into the market at scale. If you want to do more extra reading on these subjects, if it interests you, there are two really good books on personal finance: The Millionaire Next Door and Your Money or Your Life. These are really good personal finance books. And of course, if you know me, you know I really love MJ DeMarco’s work, so check them out if you want to also see the entrepreneurship side of stuff.
But with all of that being said, my friends, I hope you have a wonderful rest of the day. I will catch you in the next video, or on my Instagram or Twitter if you have me on there. As usual, hands ahead, salute. Too many days are yet to come. Too many times have come to pass. Too many moments put aside… getting out alive… getting out of letters in the sand.