In his new biography “Elon Musk,” Walter Isaacson wrote that the world’s richest person seldom passes up a chance to promote his “algorithm” at meetings, and that even Musk himself admits he repeats it “to an annoying degree.”
The so-called algorithm is a five-part philosophy that Musk developed during his aggressive expansion of Tesla’s Nevada and Fremont factories. Musk believes that, as long as they follow the steps in order, anyone can use the algorithm to supercharge their business pursuits. But can average people apply Musk’s philosophy to build wealth in their personal lives?
At least one expert in both business and personal financial planning thinks so. Read on for more.
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Drew Parker graduated with a degree in economics from St. John’s College in Annapolis, Maryland, before working for nearly two decades in the corporate retail world, first as a buyer and a divisional forecaster. He later became a merchandise financial planner in charge of $1 billion worth of company assets and then a merchandise financial manager trusted to oversee $5 billion.
In 2017, he created The Complete Retirement Planner (TCRP), which households in every state now use to develop individualized financial plans for life both before and in retirement. It has earned a place on the U.S. News & World Report Best Retirement Planning Tools list for the last three years.
He’s intimately familiar with the business world that Musk created his algorithm to improve, but he also sees how individuals can adopt it for their wealth-building journeys in their personal lives.
“The five points from Elon Musk’s algorithm can certainly be applied directly to personal finance to help build wealth,” said Parker. Here’s how…
1. Question Every Requirement
According to Isaacson, Musk said, “Each [requirement] should come with the name of the person who made it. You should never accept that a requirement came from a department, such as the ‘legal department’ or the ‘safety department.’ You need to know the name of the real person who made that requirement. Then you should question it, no matter how smart that person is. Requirements from smart people are the most dangerous, because people are less likely to question them. Always do so, even if the requirement came from me. Then make the requirements less dumb.”
Parker agrees, saying that you should build a financial plan based on “clear and specific steps, and the least amount needed, to reach your goals,” whether or not they conform to conventional personal finance wisdom. When crafting your financial plan, always question commonly accepted wealth-building advice — especially when you respect the intellect of the person who offered it.
2. Delete Any Part or Process You Can
“You may have to add them back later,” Isaacson quoted Musk as saying. “In fact, if you do not end up adding back at least 10% of them, then you didn’t delete enough.”
Parker thinks removing unnecessary processes is as important to personal finance as it is to business.
“Strip out any guessing, generic benchmarks, assumptions, or general advice that presents broad generalizations as specific goals,” he said. “It is all just noise that does not apply directly to you. Your financial situation, needs and wants are unique, so use only your individual information to guide you.”
3. Simplify and Optimize
Isaacson wrote that Musk insists this comes after step 2 because “A common mistake is to simplify and optimize a part or process that should not exist.”
Parker, too, thinks simplification is key — and he thinks that clutter can foil a personal financial plan as easily as it can a business plan.
“Use the right tool for the job,” he said. “A pile of financial paperwork that includes years of receipts and tax returns is not needed. A good financial planning tool or financial adviser will ask only for information that is essential to assessing your current and future financial health. Don’t make the process of creating a financial plan more complicated than it needs to be.”
4. Accelerate Cycle Time
“Every process can be speeded up,” Isaacson quoted Musk as saying. “But only do this after you have followed the first three steps. In the Tesla factory, I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted.”
Parker sees a direct line from Musk’s rule of acceleration to his personal finance philosophy.
“If you know that saving a certain amount each month or year will help you to reach your goals in 20 years, do you really need to take the entire 20 years to do that?” he said. “Can saving a little more each month and/or spending a little less help you to reach your goal in 15 years — or less? Get where you want to go in the most efficient way possible. The time and effort saved will give you the gift of having more time to do what is most important to you, to reduce any financial stress, or simply to set higher goals and achieve even more.”
Isaacson wrote that Musk said, “That comes last. The big mistake in Nevada and at Fremont was that I began by trying to automate every step. We should have waited until all the requirements had been questioned, parts and processes deleted, and the bugs shaken out.”
Parker, too, believes that automation is a crucial step that you must implement only after your plan is in place.
“Don’t take unnecessary steps or spend more time than is needed to accomplish tasks,” he said. “Financially, that could mean something as simple as setting up automatic bill payments, having savings deducted directly from your paycheck or reviewing your progress on achieving financial goals once every six months. If you have a solid plan, follow it, and re-evaluate its effectiveness on a regular basis. You don’t need to examine what is happening on a daily, weekly, or even monthly basis. Give your plan time to work and don’t overthink it.”
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This article originally appeared on GOBankingRates.com: Elon Musk Goes By an Established ‘Algorithm’ at Work: Could His Business Commandments Help You Build Wealth?