Earlier, I wrote an article about what is really the goal of entrepreneurship, and why it is the holy grail to financial independence.

The goal is to generate passive income. How do you distinguish that? Active income is the amount you earn based on your skills and time. Passive income is the amount you earn from your investments and assets — income that hopefully will continue even if you are no longer actively working.

I just talked to a successful person, and one of the things that you really want to do is not only to earn from your assets, but to earn from other people’s money ( OPM) or assets. That means if there is someway to leverage what you are doing ( either through loans or other people’s equity) so that you earn from your own, but also those not yours. This is one of the reasons a bank for instance, will be able to get great returns. If they can get deposits and pay 2% interest, and lend it out at 5%, then effectively they have the opportunity to get a spread of 3% and not having to use their money.

Another great example is Dell. The reason that they are successful is to be able to use the supplier’s credit. When you buy a computer from Dell and pay for it, and that is the time they buy it from the supplier and send it to you within 5 days, and they don’t have to pay the supplier until after 25 days, then effectively, they are getting free use (without interest) of the supplier’s capital which effectively can be used to earn more income.

So, the faster way to wealth is how to use leverage, but of course, since you assume the risk, you have to know how to manage it properly as well.