What Is Wealth Engineering?
What is Wealth Engineering?
A couple of years ago I realized I was a wealth engineer.
I came to this realization while working on one of our family office’s “wealth engines” — essentially any interest we have that has the potential for capital appreciation, current return or my personal favorite: both.
The problem was explaining what that title meant to my partners and friends.
They barely knew what I meant whenever I excitedly talked about building a new wealth engine, or upgrading some component on an existing engine, and the obligatory (from my perspective) discussion of whatever efficiency or output gains I was geeking out about.
To help organize this idea I launched WealthSystems.ai and started documenting the design and operation of wealth systems.
We totally nailed the “document the design” part of the brief. We started by explaining what a wealth engine is and why you must build one, then we looked at 5 engine architectures in dedicated series:
Wealth Engine #1: Passive Income
Wealth Engine #2: Options
Wealth Engine #3: Direct Lending
Wealth Engine #4: Direct Investing
Wealth Engine #5: E-Commerce
That lead to discussions about how to leverage these engines together in different combinations in an effort to increase yield and smooth out the revenue profile alongside other important operating characteristics….
Fascinating material but I never really got around to explaining what wealth engineering is. Now it’s time to lay down this cornerstone. Need this firmly in place to build any higher.
Wealth engineers build and maintain wealth systems. They work on the problem of wealth making and protecting but from an engineering perspective. Specifically, wealth engineers construct systems composted of networked wealth engines. We build wealth engines, we upgrade existing engines and we optimize their interconnection. Typically we achieve performance improvements via incremental upgrades over time, sometimes with fancy technological breakthroughs… more often with work further upstream at the process and system design levels.
Isn’t This Wealth Management?
When I explain Wealth Engineering to my buddies, or even random folks I meet at events, nearly half say something like this:
“that sounds like money management mixed with business management to me, what’s the difference?”
The table below cuts across the key areas and explains the difference as I see it between Wealth Management and Wealth Engineering.
Wealth engineering is the strategic design, construction, and dynamic optimization of a multi-faceted system of wealth-generating assets (wealth engines), leveraging automation, AI-driven analysis, and intelligent interconnectivity to maximize long-term financial growth and resilience.
It focuses on building a holistic system rather than managing individual assets in isolation. This system is designed for adaptability and continuous improvement, responding to market changes and personal financial goals.
Wealth systems are a structured approach to building wealth.
They provide a framework that automates the mundane, maximizes your resources, and optimizes your decision-making.
Let's break down why wealth systems are so crucial:
They combat willpower depletion: We all have limited willpower. A system reduces the number of decisions you have to make each day about money, saving you mental energy.
They instill consistency: Wealth isn't built in bursts but through steady, relentless action. Systems ensure those actions happen whether you feel motivated or not.
They remove emotion: Markets fluctuate, but a system keeps you on track, preventing panic or irrational exuberance from sabotaging your long-term plans.
They are self-reinforcing: As your systems work and results become tangible, your motivation grows, making it easier to stick to the plan.
And the best part? You don't need a Wall Street pedigree or fancy algorithms to do this. Wealth systems can be remarkably simple, yet their collective impact is far-reaching.
Engines are the individual components of the any wealth system.
Examples include:
Active Income: Businesses, side hustles, high-income skills.
Passive Income: Rental properties, dividend stocks, royalties.
Capital Appreciation: Real estate, stocks, other appreciating assets.
Alternative Investments: Private equity, venture capital, commodities.
You could simplify things even further and bucket everything into either income generating or capital appreciating.
Business ventures, dividend investing and to a lesser extent real estate investing are interesting because they offer both upside & current income.
The other key elements of an effective wealth system are:
Intelligent Orchestration:
Automation
AI-First Design
Strategic Leverage
Dynamic Optimization
Visualizations to Measure What Matters
Intelligent Interconnectivity
This is crucial. The system isn't just a collection of engines; they interact synergistically. For example, income from a business could fuel real estate investments, which in turn generate passive income.
Automation
Automating tasks like reinvesting dividends, rebalancing portfolios, and even managing some aspects of income generation (e.g., automated marketing for a side hustle) is essential for scalability and efficiency.
AI-Driven Design
AI can analyze vast amounts of data to identify opportunities, optimize asset allocation, predict market trends, and even personalize the system based on individual risk tolerance and goals.
Strategic Leverage
Intelligently using debt to acquire appreciating assets or fund business ventures can amplify returns, but it also increases risk. Wealth engineering carefully considers and manages this risk.
Dynamic Optimization
The system is not static because the world is not. It constantly adapts to changing market conditions, personal goals, and new opportunities. This requires continuous monitoring, analysis, and adjustments.
Visualization
A clear, interactive dashboard that unifies knowledge across your wealth system is essential for understanding the interconnectedness of the engines, tracking performance, and identifying areas for improvement.
Imagine someone who builds a software business (active income engine), uses the profits to invest in commercial real estate (passive income and capital appreciation engine), and then uses AI to optimize their stock portfolio (capital appreciation engine).
They automate the reinvestment of dividends and rental income, and use a dashboard to visualize the performance of all three engines, including their interconnectedness.
They strategically use leverage to acquire more real estate. The loop continues.
This is a simplified example, but it illustrates the core principles.
By focusing on the system and its dynamic optimization, wealth engineering goes beyond traditional wealth management and empowers individuals to build more robust and scalable financial futures.
How Does Engineering Come Into Play?
Engineers design and analyze complex systems, understanding how individual components interact to achieve a desired outcome. Wealth engineering mirrors this by viewing your finances as an interconnected system of "wealth engines." Just as an engineer considers the interplay of forces in a bridge, a wealth engineer considers the interplay of income streams, investments, and liabilities. They optimize the entire system for maximum efficiency and resilience, not just individual parts.
Engineering is about designing solutions to problems. Wealth engineering designs a financial system tailored to specific goals. Engineers use mathematical models and simulations to optimize designs; wealth engineers use data analysis and AI to optimize their financial system. This includes optimizing asset allocation, tax strategies, and even the timing of income generation and expenses.
Engineers rely on tools and technology to build and analyze. Wealth engineering embraces technology for automation (e.g., automated investing, bill payments), data analysis (AI-powered insights), and visualization (interactive dashboards). Just as a civil engineer uses CAD software, a wealth engineer uses financial technology to enhance their system's design and performance.
Engineers are acutely aware of risk. They build safety factors into their designs to account for uncertainties. Wealth engineering incorporates risk management by diversifying income streams, stress-testing the system against market downturns, and strategically using leverage. It's about building a robust and resilient financial system that can withstand unexpected events.
Engineering is an iterative process. Designs are tested, refined, and improved. Wealth engineering is also about continuous improvement. It involves monitoring the system's performance, adapting to changing circumstances (market conditions, life events), and seeking ways to optimize further. This mindset of continuous learning and adaptation is crucial for long-term financial success.
Put simply: wealth engineering applies the structured, analytical, and technology-driven approach of traditional engineering to the realm of personal finance. It's about moving beyond ad-hoc financial management to a more deliberate and scientifically informed approach to building wealth.
Let me be clear → this isn't a call for perfection.
Systems are frameworks for consistent forward progress.
Life throws curveballs, markets fluctuate, and your priorities may shift. The beauty of a system-based approach is that they're built to adapt.
Here's how to get started:
Pick ONE Focus: Don't try to overhaul everything at once. Maybe it's automating your savings, setting up a barebones budget, or tackling a nagging high-interest credit card.
Design Your System: Simple is good! Define the steps involved. Do some research, and outline how you envision this system working. What are the basic components, how do they work together?
Leverage the Right Tools: A spreadsheet might be enough in the beginning. As you expand, explore apps, automation platforms, or even consider custom-built tools for very unique needs.
Start Small & Scale Smart: Don't overcomplicate things right from the beginning. Get the basic system working, then gradually add layers, automation, and AI-powered fancy stuff later, as needed.
Review and Refine Regularly: Your life changes, as should your systems. Schedule regular reviews (monthly, quarterly) to analyze results, spot bottlenecks, and make adjustments.
The world of wealth-building can be noisy, filled with get-rich-quick schemes and contradictory advice.
Wealth systems offer an antidote – they give you a framework for clarity, control, and focused action.
I believe in the future we will all recognize we are wealth engineers at work in our own lives! The bigger, stronger and more resilient our wealth systems are, the better we can provide for our family.
Update: Thank you so much for spreading the word on social media, across finance and technology communities, in Discord/Slack and wherever else investors, builders and nerds like us gather.
Thanks to you we are getting lots of inquiries about sponsored posts, product reviews, speaking engagement opportunities and more.
Please fill out this form if you have any inquiries or collaboration ideas.
👋 Thank you for reading Wealth Systems. I started this in November 2023 to share the systems, technology, and mindsets that I encountered on Wall Street.
💡The BIG IDEA is share practical knowledge so we can each build and optimize our own wealth engines and combine them into a wealth system.
To help continue our growth please Like, Comment and Share this.
NOTE: The content provided on this blog is for informational purposes only and does not constitute financial, accounting, or legal advice. The author and the blog owner cannot guarantee the accuracy or completeness of the information presented and are not responsible for any errors or omissions or for the results obtained from the use of such information.
All information on this site is provided 'as is', with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information, and without warranty of any kind, express or implied. The opinions expressed here are those of the author and do not necessarily reflect the views of the site or its associates.
Any investments, trades, speculations, or decisions made on the basis of any information found on this site, expressed or implied herein, are committed at your own risk, financial or otherwise. Readers are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.
The author is not a broker/dealer, not an investment advisor, and has no access to non-public information about publicly traded companies. This is not a place for the giving or receiving of financial advice, advice concerning investment decisions, or tax or legal advice. The author is not regulated by any financial authority.
By using this blog, you agree to hold the author and the blog owner harmless and to completely release them from any and all liabilities due to any and all losses, damages, or injuries as a result of any investment decisions you make based on information provided on this site.
Please consult with a certified financial advisor before making any investment decisions.