15 Secrets Only Billionaires Know

As of 2023, there are 3,112 billionaires in the world. The billionaire perspective on life is quite different from anything you've ever experienced, and it'll definitely go against many of the things you believe. Here are 15 secrets only billionaires know.

Number one: you don't usually get to $1 billion and still own 100% of your business. Jeff Bezos owns 12.7% of Amazon; Elon Musk owns 13.3% of Tesla; Bernard Arnaud owns 46% of LVMH; Warren Buffett owns 16% of Berkshire Hathaway; Larry Ellison owns 35% of Oracle. You get the idea. Most millionaires are share protective; they guard their shares like hawks without realizing they're actually keeping themselves from accelerating upwards in a shorter period of time. Here's a wakeup call: owning 15% in a multi-billion dollar pie is a lot more financially lucrative than owning 100% of your $3 million business.

Number two: real estate will make you a millionaire; private equity makes you a billionaire. The running joke around the ultra wealthy is that real estate is the dumb millionaire game. You can become a millionaire in real estate, even if you don't have the brain power to do anything else. Ask any millionaire, and they'll tell you almost half (35 to 50%) of their net worth is tied up in real estate. Ask any billionaire, and you'll quickly realize business interests and private equity make up for over 70% of their net worth. The most productive way to increase your net worth is by owning a business, building it up, and then using the funds to buy pieces of other businesses and do it all over again.

Number three: do not use your own money; use someone else's to make yourself rich. You can literally earn your way to $1 million. There are plenty of jobs out there where if you put your head down and put in the years, stack those checks, you'll get to seven figures. Doctors, lawyers, tech engineers—they all earn a ton of money from their salaries. But you cannot get to $1 billion the same way. Your financial life unlocks vertically when you realize you can use other people's money to make yourself rich. Here's how most billionaires do it:

Step one, they go to friends, family, banks, and angel investors with an idea they're willing to go all the way to make happen. They need $100,000 to start the business and give off 20% of the company. This values the company at $500,000. Their 80% share of this new business is worth $400,000, and we barely started.

Step two: they get some revenue, and they build a team ready to scale. Let's say the company at this point is making $1 million in recurring revenue per year.

Step three: they then go to some external investors and sell 20% of the business at a $10 million valuation, meaning they now have $2 million in cash, and the remaining 60% of the company is now worth $6 million. Use that $2 million to go from $1 to $10 million in yearly recurring revenue.

Step five: you guessed it, you go to raise funds again, this time at a $100 million valuation. You sell 20% more of the business to get that $2 million. At this point, the 40% you're left with is worth $40 million.

Step six: you use the $20 million to develop a product for other companies and hire salespeople. This blows up your recurring revenue, and in two short years, your company is ready to go public.

Step seven: you file for an IPO, where the company floats 10% of its shares on the public market at a $10 billion valuation. You and everyone that's invested in your company along the way is now a billionaire. At every stage of this journey, you used other people's money to scale up, to hire people, to develop products, to get new sales. And with every one of those moves, the valuation went up.

Now, before you call on what we just told you, know that this is the simplified model UIP path has used to IPO at a $35 billion valuation, and we were fortunate enough to learn from the founder along the way.

Number four: everything is a buy low, sell high equation. Only the scale differs. Some billionaires trade in commodities, coffee, metals, etc. Others trade in shipping those commodities where the cost of gas, people, and transport is lower than what others are willing to pay you to get it delivered. Others trade in risk. In debt, tech, and media companies trade in attention and eyeballs. Buy them low, sell them high, use the profit to do it larger over and over again.

Once you understand that every business is in the buy low, sell high business, the way you look at yours starts to change. There are two important things to optimize if you want to be rich: one, what your markup is, and two, what your scale is, meaning the number of transactions you're able to do. Amazon, as an e-commerce store, has tiny margins but a lot of transactions. Tesla has incredible margins and a decent number of transactions.

A business grows when one of three situations occur: one, you charge more and maintain the same number of transactions (artists use this model); two, you charge the same but increase the number of customers (when fast-food chains open up new locations); and three, you charge more while increasing the number of transactions (luxury brands used this strategy, which actually made Bernard Arnaud the richest man in the world).

The secret most billionaires know is that once you move into a different bracket of scale, you have incredible negotiating power on how low you can buy. Only billionaires know that the profit is made at the point of purchase, not the point of sale.

Number five: art is a preferred store of value that can easily be moved around. When you're that rich, most of your money is locked up in stocks, other businesses, or hard-to-move assets. You don't want to keep it in cash because at that scale, cash is losing 5 to 10% of its value year-over-year due to inflation. So where do high net worth individuals turn to? Art. Yep, they buy art in bulk, lease it off to museums around the world, or seal it off in shipping containers and use it as a bargaining chip. It's a lot easier to move $500 million in art than $500 million in gold or silver. Most people don't realize that blue-chip art is one of the most profitable investments out there. Fine art is often referred to as the billionaire asset for a good reason.

Number six: stocks won't get you to a billion, and neither will luck. Stocks work well when you've got a large time horizon and a ton of money to start with. Back in the '80s and '90s, there was this trend of financial advice where they said if you simply invested $5 every day in the stock market starting when you were 20 years old and kept doing it until you were 65, you would be a millionaire. And like, yes, okay, we get it, the math checks out. But the market is also evolving, and so are costs. These financial models tell a fancy tale that's all surface, and we think they do more harm than good.

And here's what we mean by that: Warren Buffett paid $31,500 for his house back in 1958. Adjusted for inflation and market value, that same house costs around $877,000 in today's dollars. Sixty years later, that house costs 28.3 times more. It's the same house, nice and old, didn't grow any new bedrooms. Take a moment to process this: the house, just by doing nothing, has almost matched the performance of professional investors. If you keep saving the $5 a day, by the time you get to your million-dollar retirement, a million will barely buy you anything.

It's the same with luck. You might luck your way into becoming a millionaire, but going from that million to a billion is a whole different ball game.

Number seven: every new billionaire turns other millionaires into billionaires. Remember the "use other people's money" example? Well, every newly minted billionaire brings with them those who believe in their vision enough to open up their wallets. In the early days, Peter Thiel was the first outside investor to back Facebook. He invested $500,000 in exchange for 10.2% of the company. When Facebook IPO'd, he sold two-thirds of his shares for $628 million after investing $500,000. Friend of the channel Gary Tan, the current CEO of Y Combinator, was the first investor in Coinbase in 2013. That initial investment of only $300,000 ended up being worth $2.4 billion.

Go anywhere in Silicon Valley, and these types of stories always pop up. Make your money first, and then use it to back promising businesses. One of them might just be the next Airbnb.

Number eight: less than 5% of their worth is liquid. Average people think the rich are hoarding resources when they say billionaires. They picture Scrooge McDuck jumping into a vault filled with gold coins. But in reality, almost all of them are paper billionaires, meaning shares they own in companies are worth in excess of $1 billion on paper. The assets are worth as much. Usually, billionaires keep less than 5% of their worth liquid, and if they do need money, they do not sell their assets. Instead, they go to banks, show them the paper that says they're worth x amount, and then use that as collateral for loans. The bank provides them with a line of credit, and they go off to buy even more income-generating assets.

When Elon bought Twitter, he didn't actually sell his shares in Tesla or SpaceX in order to come up with that money. The bank gave him the funds to buy it.

Here's something most billionaires know: you do not pay tax on debt, so they would rather borrow that money using their assets as collateral.

Number nine: the real money is made in a crisis. Billionaires look at the world differently than most people. Poor people look at life in terms of days; the middle class in terms of months; the upper class in terms of quarters; the rich in terms of years; and the super-rich in terms of decades. People made fun of Warren Buffett's Berkshire Hathaway for underperforming for the past 10 years and critiqued his large cash position losing its value due to inflation. But Warren and Munger were just sitting on cash, waiting. They were okay with losing 1 to 3% per year because when this recession hit, they were able to purchase companies at 50 to 75% discounts. For billionaires, recessions are like the Black Friday event of the decade; everything you really want is on sale. And that's one of their secrets. It's not the day-to-day you focus on; instead, you make two to three plays per decade which are strategic for growth.

Number ten: they all had and still have experts minimizing risk and increasing returns. There's no such thing as a self-made billionaire, at least not in the way that people think about them. In order for you to have the time and mental space to focus on exponential growth, you need to know that almost everything else is taken care of.

You find great accounting firms to mitigate all financial risk; you find great legal firms to mitigate all liabilities. Great managers and CEOs steadily take the company to the next level. Along the way, you have to rely on and trust other people's expertise to get you to the next level. All of these billionaires surround themselves with experts who can point out exactly the inflection points and how to position yourself for them.

These people are called executive coaches, and every big CEO has a couple of them on council. At this level, they cost between a few hundred thousand to a couple of million dollars per year. Their job is to keep the CEO focused and provide clarity of thought, very much like a coach trains and prepares professional athletes for a big game. Just think how incredible it would be to have one of these world-class super coaches available to you. Just how quickly would your life improve, and how quickly would you crush your goals?

Well, now you can, my friend. We pay these coaches on your behalf, and you get to learn from them in the Alux app for a fraction of the cost. This way, you have access to not one but multiple industry experts that are focused on the practical side of growth. We recently did a survey amongst our star users, and over 60% of respondents say they've already crushed their main goal after one year of using the Alux app, with another 30% saying that they're closing in fast. Everyone who uses the app has found it a game changer, and we couldn't be more proud to be the ones behind it. Honestly, the Alux app will probably create more millionaires than any financial book out there. So go to alux.com/slapp right now and just see what it does for you and your life. Scan the QR code on screen for 25% off the yearly subscription or go to alux.com/slapp.

Number eleven: very few billionaires are direct to consumer. Most of the money is in enterprise deals. You probably don't realize this, but Amazon's direct consumer isn't actually profitable. Instead, Amazon's cloud infrastructure business, AWS, is printing cash: 35% year-over-year growth, over $80 billion per year in revenue. Almost the entirety of the internet is now hosted on Amazon's servers. A company is more comfortable paying you $100 per employee that uses your service every month.

Here's something interesting you might not know: Gmail is free for the average consumer, but for us as a business, on a monthly basis, we pay $10 for every business email we have with Google. Since we've got over 20 alux.com emails for this business alone, every year just for something like email, we end up paying Google thousands of dollars in recurring revenue. And we're just a small-sized company. Google is now bringing in $6.3 billion quarterly from its cloud services. That's a $25 billion per year business. As long as you do business, know that it takes the same amount of effort to convince a person to buy as it takes to convince a business. It's still one sale, but the difference in income is substantial. Most of you could actually earn 10 to 50 times more than what you do, but you're deploying effort on the wrong thing.

Number twelve: most billionaires don't start from the bottom. Yep, we're going there. It takes a tremendous amount of work to achieve any form of financial success. These people have earned their way up to the top, but more often than not, the context was a little bit more favorable to them than you might think. Most of them had rich parents, access to high-level education, infrastructure, and a safety net if they failed, so they could risk it all a couple of times. Elon's dad was a multi-millionaire real estate developer who married a model. Jeff Bezos's parents gave him $250,000 to start the company. Bill Gates's mother comes from some serious money. The list goes on.

Going from zero to a $4 million dollar takes years for most people. Not having to worry about where your next meal comes from is also what gives you an edge. What all of them have achieved is incredible, so the takeaway here should be: if you're in a position to have access to education, if you have a device to watch this video on, and access to Twitter or LinkedIn where you can reach out to almost any professional in the world, please know that you're also not starting at the bottom. The bottom are the two billion people who don't have a phone or internet access. But if you're looking for a more controversial point, well, here it is.

Number thirteen: most industry tycoons get wealthy by exploiting slave labor where you can't see it, and the world doesn't really seem to care. The phone or laptop you're watching this on, the electric cars, scooters, drones—all electronic appliances like your fridge, smart TV, etc.—they all use cobalt. Now, here's a recent picture of what's supposed to be an industrial cobalt mine in the Congo. The key word here is industrial because, according to official documents from all the major tech players, not a single human being is supposed to be digging in these cobalt mines. The average adult gets paid less than $2 a day for bringing cobalt up out of the ground. They actually prefer to use children because they're smaller and cheaper for this kind of work. And none of this is new information.

Here's a video of children in a cobalt mine from six years ago. As a developed society, we enjoy the comforts technology brings us because we're sheltered from the reality of what it actually takes to be produced, assembled, and shipped to you. And this is not just the tech industry; the International Labor Organization estimates that approximately 170 million children are used for production, although they are not old enough to work sustainably. In the fashion industry, the children are literally working in the fields, picking cotton, transferring pollen for little to no pay. That's how fast fashion and ultra-fast fashion is able to get you those products so cheaply. But hey, as long as you get it for cheap, right?

Number fourteen: almost all of them are sociopathically obsessed with money and success. Look, here's the truth: you really, really need to want it to be able to get to that kind of wealth, as it will require you to sacrifice almost everything else in your life. You don't have a family life; you don't get to spend time with the kids. You're hyper competitive and traveling all the time. You don't sleep well at night for years, and the amount of stress you're dealing with is nothing others will ever experience. Their brain is wired differently; they look at life differently and see life as building blocks.

Life will grant you one wish, but you have to figure out what it is and be absolutely obsessed with one wish non-stop for decades. Not sure many people are really able to do that.

Number fifteen: decision-making and persuasion are the only two billionaire-tier skills. The job of a senior executive is to make a small amount of high-value decisions that have major upsides. You are rewarded based on what percent of times you're right about your decisions. Warren Buffett is regarded by many as the greatest investor in the world because of his ability to consistently make high-level decisions that generate a lot of money for the investors.

The higher you climb, the higher the stakes with every decision you make. If you're in the earlier days, persuasion, translated as sales and clear communication, is probably the most valuable skill there is. You will need to get people to trust you enough to join you and create a product. You will need to persuade customers to give you money for your product and persuade investors to back your company. Even if you do not know how to build something with the right level of skill, you will be able to convince someone else to build it for you in exchange for a piece of that reward.

As you progress, there's always someone new you need to convince to do something that will benefit you and the company moving forward. If there's one thing you take away from this entire piece, it's this: systematically improve your decision-making process, and you do this by taking your mind to the gym consistently as a result of learning mental models. The second one is learning to speak clearly and convince others to follow you on your mission. We feel the word "selling" doesn't really seem to do it justice for what exactly you need to do.

These two are the only billionaire-tier skills to master, which is why the Alux app focuses on them so much. You know billionaires are a different breed, and we're curious to know: have you ever looked behind the curtain of a billionaire? What did you learn?

Let us know in the comments. And as a thank you for watching this Sunday motivational video until the very end, here's your bonus: this is what the average billionaire investor portfolio looks like, thanks to our friends at Visual Capitalist for this visual.

Now, the most interesting thing you'll notice is just how quickly the retirement fund becomes irrelevant as you climb in net worth, and how that large position is replaced by a trust fund. The wealthiest 10% of Americans own a record 89% of all U.S. stocks. The bottom 90% of Americans barely have any investable assets at all.

So here's what you need to remember: you survive by earning, you get rich by owning. If you don't want to end up like 90% of Americans, start buying things that increase in value over time. If this isn't a wakeup call to start taking this more seriously, Alexir, we don't know what is. It's going to be a really interesting year, and we feel like a lot of things might change for you.

If you're on a mission to escape mediocrity, write the word "Escape" in the comments. That way, we know how many of you are interested in taking this seriously.