The Compounding-Yourself Tier List
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- —
A capital-allocation rule that ranks where a young earner should put marginal money and effort. Top tier is compounding yourself — skill acquisition — because money comes as a result of the person you are, and the person you are is largely a consequence of your skills and habits. Second tier is investing in your own business. Bottom tier is the index fund, which is the correct answer only once you genuinely have no other option and the money is sitting there. The reasoning is return asymmetry: index returns of a few percent make you comfortable at 55, whereas becoming someone who can command a premium changes your earning power now. The skills named are the ones that make you useful to the economy — marketing, sales, copywriting, funnel building. Paired with it is a mindset instruction: program abundance before the money arrives, not after.
Origin
Extracted from Deep Dive with Ali Abdaal
How to run it
- 1
Accept the causal chain
Money comes as a result of the person that you are, and the person that you are is by and large a consequence of the skills and habits you have. Optimise the input, not the output.
- 2
Rank the tiers before allocating
Top returns come from compounding yourself. Second are returns from investing in your own business. Worst case — once you literally have no other options and the money is burning a hole in your account — is the index fund at around 7% to beat inflation.
Watch out Most people default straight to 'I should invest' and never consider the two higher tiers.
- 3
Buy skills that the economy pays for
Focus on cultivating skills that lead to money: marketing, sales, copywriting and similar. The test is being of general use to the economy — if you are useful in some way, people pay you for it, and that is how you create value.
Pro tip Learn the skill by building the asset — the guest learned funnels by building the funnels his business ran on.
- 4
Treat it like levelling up a character
Think of it as a video game: to take down the end-game boss you need to level up, training different trade skills first. Figure out the inputs — that worked, that didn't, done — and treat business as a game whose cheat codes are discoverable.
- 5
Program abundance before the money arrives
Do not wait for the balance to change before changing the mindset. The guest's stated regret is not programming his mind to think in abundance earlier — treating money as something that ebbs and flows while he became the type of person who can create value.
Pro tip Watch for decisions made to avoid losing rather than to win — that is scarcity showing up as strategy.
Watch out Scarcity makes you hold on to things far too long and make defensive decisions.
- 6
Re-evaluate the default advice against your case
The index fund is technically the right answer to the question people usually ask, but often the wrong answer to their situation — especially for people in traditional fields who assume they have no marketable skills outside their profession and therefore that investing is the only route.
In the wild
For the first three or four years of the guest's business, essentially all the brands came inbound rather than from outreach. The reason was a skill, not a sales team: he had become very good at building marketing funnels, learned from operators like Russell Brunson. Those funnels became the foundation of the business and kept bringing people in. He describes the sequence explicitly — he thought about the skills he was cultivating, those skills let him create something of value, and the value then made the money.
→ Inbound-driven client acquisition for years, produced by a skill investment rather than a capital one.
Ali describes people who come to him earning around £50k, saving 10%, and asking whether to put it in index funds or individual stocks. He concedes index funds are the technically correct answer to the question asked, then reframes: at 3–6% you'll be fine at 55. If instead they invested that money in their own education so they became the sort of person who can command a premium and earn as an individual, the ROI is far higher. He notes many doctors believe they have no skills outside medicine, so investing feels like the only option — when starting a business is learnable.
→ The allocation question reframed from which asset to which tier.
Common mistakes
Defaulting to 'I should invest'
Index funds are the right answer only after the higher tiers are exhausted. Reaching for them first — particularly early in a career — locks in single-digit returns while the highest-return asset, your own earning capability, goes unfunded.
Waiting for money to think in abundance
The guest names this as his own mistake: waiting for the balance to arrive before adopting the mindset. Scarcity in the meantime causes you to hold on to things too long and to make decisions driven by not wanting to lose.
Believing you have no transferable skills
People in traditional professions conclude that investing is the only way to make money because they see no skills outside their field. That belief, not their actual capability, is what removes the top two tiers from consideration.
From the transcript
“Money comes as a result of the person that you are.”
“the returns on compounding yourself are way more than any stock”
“there's like a tier a tier list of this almost where it's like most like the the top returns are in compounding yourself”
From the episode
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