Net worth is a vanity metric

Last weekend I sat in a conference room in Cancun with about eighty people who own things: storage portfolios, hotels, plumbing companies, assisted-living facilities. One of the speakers personally guarantees more debt than most of us will earn in a lifetime.

This was my second such event and my goal was to listen, absorb and learn from those ahead of me on the journey.

Although this sentence was almost a throwaway from Brian Luebben, the host, it really stuck with me:

Net worth is a vanity metric.

The number that tells you what to do Monday morning is the cash that arrived this month.

Before I go deeper, I am not suggesting not to track net worth. One of the speakers uses a perpetually up-to-date personal financial statement to help him obtain loans from banks.

He has to “sell the bank” on extending yet another loan to him and his business. That requires him knowing exactly where his assets and liabilities are, as well as how well covered he is over the next several years.

That’s a professional operation that runs well.

Tracking my personal net worth feels like progress, but in reality it depends on the whims of the market more than on anything I do.

One of the talks centered on tracking, and lag vs lead measures in particular.

A lag measure is something that you track that is the result of actions. For example, if you go to the gym, losing 5 lbs could be a lag measure.

Lead measures are the inputs. In the case of the gym, it could be 5 visits a week, with X reps.

Net worth is a lag measure.

In any given month it moves with the stock market, a property appraisal, the price of Bitcoin, and the rate the Fed set. It can rise $40,000 in a month where I did nothing and fall $40,000 in a month where I did everything right. It's a scoreboard for events, most of which happened to me.

And you can't act on it. Net worth doesn't tell me what to do Monday morning.

Six talks, three days, AI notes and more conversations than I can count.

1. Nobody loses money on a bad asset.

They lose it on a good asset they had to sell on somebody else's schedule.

When a deal looks great, but the unexpected happens, cash is the only thing that decides whether it survives.

Key protections are position size, reserves and well managed loan maturity dates, all cash flow items.

— from Ben’s talk.

2. Capital is the last thing you need.

Get the skills, find the deal, build a team. Then and only then raise capital.

Being in rooms like this makes it real. Capital is abundant and searching for the right deal.

— from Ben’s talk.

3. Compounding happens to the money that moves.

One of the speakers shared that 75% of every dollar gets reinvested. The rest is spent on the vacation. Great deals bring cash back into our pockets. Making sure the largest share goes back into the next deal is what drives the compounding returns.

— from Ben’s talk.

4. Delayed gratification means giving up income, never ownership.

"Income comes back to you. Ownership does not." You protect ownership because ownership is what produces the monthly number later. Give up the paycheck this year and keep the thing that pays.

— from Ben’s talk.

5. Your income is not an asset. What your income builds is.

A $200,000 salary is a lag measure of last year's negotiation. The question is what fraction of it becomes something that pays you without you.

— from Brian’s talk.

6. Clarity, then volume, then consistency.

Pick the direction first and the vehicle second. Then follow-through with massive action over a long enough time period. The results will inevitably follow.

— from Aaron’s talk.

7. Success is 20% strategy and 80% psychology.

Identity explains why lottery winners and retired athletes go broke. Their net worth jumped levels overnight. The person they are the money didn't. Results are downstream of who you believe you are, and a giant number on a screen changes that exactly zero.

— from Joe’s talk.

8. Chasing two rabbits catches neither.

This one is my Achilles’ heel. As a naturally curious person, I see opportunity everywhere. There are many paths to the same destination, some faster some more interesting. Ultimately, pick your own path up the mountain and enjoy your personal experience.

On the day I draw an Amplicon, my net worth does not move.

I draw $40,000 from a line of credit. That's a $40,000 liability. I deploy it into an income asset on a 36-month term. That's a $40,000 asset. Assets minus liabilities: unchanged.

But the cashflow picture changed fundamentally. About $1,253 returns to me on a monthly basis.

That's the CYCLE. Credit, draw the line. Yield, deploy into something that pays monthly. Collect the distribution. Liberate the line by paying it off with those distributions. Expand: each payoff gets me closer to a larger investment capacity.

Net worth misses the momentum. It sees the beginning and the end. Everything in between, which is the entire system, is invisible to it.

Map the weekend onto it:

Rentals build a monthly number too. So do businesses, and so does assisted-living at a scale I'm nowhere near. Whatever vehicle you pick, look at the cash that arrives, especially as you’re getting started.

Open the calculator, set the draw to $40,000 and the term to 36, and watch the monthly line while net worth grows.

Brian asked the room: "does this business have problems that are your flavor of problem?"

I immediately wrote down: spreadsheets. Now there’s more to it, but fundamentally, I enjoy solving cash projections and optimizing my system.

The construction business I bought 3 years ago had crew problems, sales problems and market problems. Not my flavor.

The problems in this system are capital optimization, debt paydown and resilience. Data and financials. I'll solve those all day.

That's a lead measure too. Bring me your spreadsheet problems and the worst outcome is you have a different perspective on how to move forward.

This week, a community member shared he is implementing the plan we built with him. He got to bring his wife on the journey. That’s a massive win for him and the reason behind what we do at Amplifica.

— Miguel

It measures your position at a point in time, and banks underwrite on it. As a measure of progress it's weak, because it's a lag indicator: it moves with markets, appraisals and interest rates, most of which you don't control, and it gives you nothing to act on this week. Monthly cash flow is a lead measure you can adjust.

The number that arrives each month against what your life costs each month. In practice, 3 lines: distributions received this month, capital available to deploy, and months until your current debt is paid off. Check net worth quarterly for underwriting and concentration.

A draw creates a liability and a deployment creates an asset of the same size. Assets minus liabilities is unchanged on day one. Monthly cash flow changes, and net worth can't see it until the loan is fully repaid.

Compounding requires doing the same thing repeatedly so each cycle builds on the last: reinvesting distributions into the same kind of asset, on the same rules, for years. Focus is what makes that repetition possible. Splitting attention across several active strategies divides the reps, and reps are what compound.