One of the things I've learned as an software entrepreneur was read a lot of self-help-business books. You know what which ones I'm talking about, the ones that help you change your mindset and the mindset then provides the catalyst for your business to flourish. I found them somewhat helpful in the moment.
One of the key concepts that I've learned was about the four quadrants of wealth.
The quadrant is simple and you case see below.
The thing to remember is that essentially they say that Employees make no money, Small Business or Self-employed consultant you make some money and get by. Big Business you get rich if you own portions of it and as an investor (like Warren Buffett or Charlie Munger) you will have attained true financial freedom.
As an amateur investor, this has helped me better grasp where I am in the Financial Freedom journey. I've started small businesses, I've work for large businesses and with my net income from my paychecks I've funnelled it back into becoming an investor.
Many other proponents of this cashflow quadrant would use this to say that to motivate you to become a small business owner or entrepreneur. I don't think that's always the case and being an entrepreneur isn't for everyone.
In fact, I would argue that most of us are both part of the 'E' (for employee) and 'I' (for investor). If you work for a company and get a regular paycheck and you and your employer contributes to your 401(k) and other retirement savings plans -- then you are both an employee and investor.
Product Management is one of those roles that is emerging that breaks this wheel (at least a little bit) and gives a chances for employees themselves to have an upside to being part owner in a small business, in a big business (potentially) and being a minority investor in a potentially big business.
Product Management is the exemption to this rule.
The cashflow quadrants not only identifies which quadrant you are in, in a simple way, but it doesn't do well when we take into account roles like executives who are highly paid.
It also doesn't take into account new roles such as Digital Product Managers who are key roles that are fundamental to new digital products and startups. Product Managers are often part of a founding team, or a well-funded startup ready for growth.
Typically the time that the CEO relinquishes his full time duties on being the chief product owner is to hire someone to take on that role in a thriving and rapidly growing organization. The best startups and organizations typically will offer equity on top of other compensation to make you have "skin-in-the-game".
The people who invested the cashflow quadrant says that there is only one path to get to Financial Freedom as an investor. That path is as follows:
The steps cannot be leap-frogged over, they cannot be missed. That's the case for 99% of people. Think about those who are trapped in being a "job" and all those entrepreneurs who want to own a business or start something to build it into a big business. Most of the time there is no way to leapfrog, unless you have a way in, a backdoor.
While we don't have the data compiled for all product managers (something we aspire to do), from the Product Managers we know, they have all achieved this ability to leapfrog from being an employee to being a business owner and/or investor.
That's because Product Managers are a vital role in this new digital business world. We in a world where one person's idea, one person's blog post, one person's content be it music, film or book can achieve scale like no other time in human history.
Because digital product managers are at the fulcrum of this incredible way of connecting with users/consumers/readers to their product, this concentrates the failures and successes on a core team of team of which Product Managers are the leaders.
Product Manager are the catalyst that makes the product achieve its goals and directly influences the business growth as well.
Which is why most startups, new and growing ones typically offer Product Managers equity/stock options in the company. This is how Product Managers achieve Financial independence. This is what makes Product Management, as a profession, a compelling opportunity to Employees who want to leapfrog into Business Owners and Investors by skipping over being a small business, consultant or self-employment.
It's one of the only opportunities that allow this to happen.
As a product manager in a good organization, you are likely offered equity, warrants, stock options that are restricted or not.
That means the total compensation includes your paycheck and also are part owner in the business itself.
In fact, many VCs and other famous investors, entrepreneurs that we know were part of founding companies that allows them a stake in the company. It was a fast track for them to accelerate their move from being and Employee to a business owner or investor.
This is the best place to be and the best space to be in this quadrant diagram.
If you're a Founder, you typically as the 'I'nvestors so that you can hire people to build a 'S'mall business into a 'B'ig Business. Typically Founders have as much downside as they do upside. As an 'E'mployee who want to move into 'S'elf-employed category, typically this takes a lot of specialization in a specific field and requires years of experience within that vertical. From there, there will be an opportunity to move into bigger business and then from there being an Investor.
Product Management provides a steady income while being a small business owner that can quickly become a big business, especially at a startup. Then you shift to be an investor if that big business gives you an IPO or liquidity event.
How you a story to tell about your product management journey? What was your success story that moved you from employee to Product Management and then to a shareholder in a big business? It'll be great to hear from you and share with our product manager community.