Yahoo Finance How To Build Wealth: Why Mark Cuban Believes ‘Sweat Equity’ Is the Best Equity
Mark Cuban is one of the most outspoken, quotable billionaires on Earth. The “Shark Tank” star and Dallas Mavericks owner is often solicited for investment advice by media outlets and offers his opinions in a trademark, no-nonsense style.
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One of Cuban’s most famous remarks came from a 2017 Inc. 5000 Conference speech: “Sweat equity is the most valuable equity there is. Know your business and industry better than anyone else in the world. Love what you do or don’t do it.”
Here’s a look at what Cuban meant by the comment and how you can apply it to your business pursuits.
What Exactly Is Sweat Equity?
“Sweat equity,” in its simplest form, means working hard. But to Cuban, it’s an unlimited controllable resource you can use to build wealth.
“Businesses don’t fail because of lack of capital. They fail because of brains and effort,” he said. “The one thing in life that you can control is your effort. … If you’re willing to deal with the challenges … via your effort and using your brainpower, anything is possible — and there’s no reason it can’t be you.”
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That’s what Cuban means by “sweat equity.” He’s not only referring to working in place of capital to start a business, he means being willing to struggle through challenges and ups and downs to get where you need to go. While this can apply to a business you’re opening or a side gig you’re working, it can also apply to any challenges in life.
As Cuban told Dave Ramsey, he gives the same motivational “sweat equity” pitch to his Dallas Mavericks basketball players, encouraging them to use what they can control — their effort — to succeed.
Buffett Concurs With Cuban
Warren Buffett, the billionaire CEO of Berkshire Hathaway and one of the most successful investors in the world, supports Cuban’s idea of sweat equity. He thinks it’s the best single investment that any person could make.
Answering an audience question at the 2023 Berkshire Hathaway annual meeting, Buffett said, “The best thing you can do is to be exceptionally good at something. [People] are going to give you some of what they produce in exchange for what you deliver. Whatever abilities you have can’t be taken away from you. They can’t be inflated away from you. The best investment by far is anything that develops yourself, and it’s not taxed at all.”
Buffett’s point is that we all have an asset that is valuable if we’re willing to use it, and it can’t be affected by inflation or a bad economy. If you put in the work to make yourself the best at what you do, whatever it is, you will always be in demand, and therefore as a consequence, money will always flow in your direction. But you’ve got to put in the sweat first to get to that level of expertise.
How Can You Use Sweat Equity to Your Advantage?
As Cuban points out, “sweat equity” is something that every individual has, in an unlimited amount. The question is, are you willing to use it? If so, Cuban and Buffett both believe that you can succeed.
The most obvious use of sweat equity is taking the time and effort to start your own business. From hustling to get all the pieces into place to raising capital, producing a product and making sales, it takes a lot of blood, sweat and tears to successfully run a business.
But sweat equity can apply to plenty of other money-making activities as well. If you want to renovate a house to flip it or simply improve its value, for example, you can save a lot of money doing some or all of the work yourself. Rather than idling sitting by and paying professionals to do the work – which could substantially cut into your profits – pouring in your own sweat equity could put a lot more money into your pocket.
The Bottom Line
When two of the most famous self-made billionaires in the world suggest that working hard and getting exceptionally talented at what you do is a valuable asset, it pays to listen. Both of these talented investors and businessmen learned their own industries inside and out and have leveraged that knowledge to billions of dollars in wealth.
As they both suggest, this type of return is exponentially greater than any you could hope to earn through simply investing in any other type of equity, even the stock market.
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This article originally appeared on GOBankingRates.com: How To Build Wealth: Why Mark Cuban Believes ‘Sweat Equity’ Is the Best Equity
