Jamaican-Canadian billionaire, Michael Lee-Chin, was in ROB Magazine last week talking about how he grew up, how he got into the investment industry, and how he thinks about wealth creation.

I met Michael once back in 2009 thanks to an introduction by my father. And at that meeting I remember him explaining the five rules of wealth creation. It’s his formula and he’s been practicing it since 1978.

Everybody who creates wealth does five things: They own a few high-quality businesses. They make sure they really understand those businesses. They make sure those few businesses are in strong, long-term-growth industries. They use other people’s money to invest in them. And they vow to hold them as long as they remain great businesses.

That’s consistency. And he’s a pretty consistent guy. The other quote I would like to share from the article is this one here:

Outside wealth is created when there’s a difference between perception and reality, when there are inefficiencies, and when there’s a lack of equity capital flowing into the country, sector or company.

This is something that we have talked about before on the blog. The real value creation happens when you believe in and you’re right about something that most people think is wrong.

As Michael says in the article, you have to be willing to swim upstream, because floating downstream is far too easy and will only get you to the same place as everyone else.

“People get income for doing stuff, and they get income for owning stuff. Increasingly the latter. And the ownership share of income goes to a small slice of households that own almost all the stuff.”

This is a quote from a recent article by Steve Roth over at Evonomics, where he breaks down the share of US household income that is derived from “labor” vs. “capital.” In other words, how much money do households make from working (trading their time for money) and how much do they make from their existing wealth (that is, owning stuff)?

If I were to oversimplify how he calculates this (you can read all of the details, here), it is: (Income - Labor Compensation) / Income. Take all of the household income. Subtract the money made from doing stuff. And then divide it by total income to get the percentage made from “unearned property income.” There are gray areas and others things to consider, but that’s the gist of it.

What he discovers and argues is that basically 50% of household income comes from simply being wealthy and owning stuff. He also reminds us that approximately 60% of US wealth is… “earned the old-fashioned away: it’s inherited.”