When I was 14 or 15 years old, my high school principal came up to me one day and said “Ali, whatever you touch turns to gold.”

Whatever did she mean?

I wasn’t rich in high school. I wasn’t making money. Being an A-student hardly qualifies.

What does it mean to make gold, without making money?

This goes to the root of the difference between wealth and money. When people talk about making money, it generally refers to being involved in a favorable trade of some type: selling a house, making a profit on a stock, getting your start-up acquired, getting promoted in a good job. Making money means getting more than what you previously had. Money is a unit of account keeping track of what you get from other people, or what they owe you. Importantly, the converse is true – you can lose money just as easily in an unfavorable trade. In fact, on average, just as many people lose money as make money. Case in point: over the long-term, hedge fund managers as a group actually underperform the stock market.

Generating wealth however means doing things that are valuable to others. You may, or may not, receive equal value in exchange from others. You may receive value now, or sometime in the future. However, making wealth is always a new positive. It is always more than zero. For example, getting a job, any kind of job, will generate more wealth than staying at home. That is because you choose to provide value to others with your time, vs. spending it on leisure. Going back to the stock market example, the long-term growth in stocks comes from businesses generating incremental value (i.e. generating wealth). And in the long-run, this has always outperformed making money, because it is not a zero-sum game. You can generate incremental wealth, and so can everyone else, without anyone losing wealth.

A great and simple framework for thinking about this is how we spend our day. How much time do you spend consuming content (example watching TV or playing video games) vs. producing something of value to others (learning, writing, research, gym etc). It makes sense that the guy who spends his evenings working a second job, or learning a new skill, will eventually be making more money than the guy who spends his evenings watching 5 hours of TV each day. The person who produces something of value to others, whatever it may be, is always generating wealth. Money follows wealth creation, not the other way around.

In reality, all of us are some mix of consumption and production. We all watch some TV or movies, and we all do some kind of work. If you’re thinking about how to move your career forward and grow – consider this: just switching 1 hour a day from consuming to producing will probably have a measurable impact on your income in just a few months.

As Paul Graham says, startups are all about wealth creation. Inventing new things. Creating new ways to provide value to others. Solving tough problems.

After all these years, I think this is what my high school principal meant: by touching things to gold, I was generating value for others by spending most of my time doing valuable things. Startups are one way to do that.

Provide value to others. Do things that are valuable to others. That is the most-reliable, long-term way to generate true wealth.