- You basically get rewarded by society for giving it what it wants.
- Figure out what product or service the society want but does not yet now how to get.
- Become the person who delivers that product/service at skill.
- If you have hobbies around intellectual curiosity you're more likely to develop the skillsets the society does not know how to train other people how to do.
- Know something that other people don't know at the time period when they want it.
- Take specific knowledge that you got and you want to be known as person who can deliver that; you have to have a brand and reputation.
- Leverage is critical: if I put in 8 hours chopping wood that will get me 8 times the output that from one hour of chopping wood. Whereas with leverage I might have bulldozers, chainsaws, lumberjacks working with me, I get a multiplier affect.
- There are three broad classes of leverage;
- Labor: other humans working for you.
- Capital: Everytime you make a decision, you got money as a multipler. That's why fund managers and VCs do so well.
- Products that have no marginal cost of replication: books, media, code.
- Code is the most powerful leverage that is permissionless. All you need is a computer, you don't need anyone's permission.
- To summarize;
- You have to have specific knowledge.
- Take on accountability with a brand.
- Use whichever form of leverage that applies to your situation.
- If you want to make maximum amount of money possible in a deterministic & predictable way;
- Stay on the bleeding edge of trends.
- Study technology, design, art.
- Build specific knowledge.
- You'd wait for the moment until something emerged in the world where they needed that skillset and you're uniquely qualified.
Source: WSJ
Even though I do not personally agree with this one, Mr. Arends does make a valid point that most expert forecasts completely missed the financial collapse of 2008, the largest in the U.S. in 70 years, and the scope of the subsequent stock market recovery.
No truer words could be printed. I believe simplicity is the key to understanding and managing your portfolio well. If you cannot fully understand an investment, you have no business making it.
Even though I wholeheartedly agree with Mr. Arends’ message that you should “never buy fashionable investments,” I believe individual stocks can play a valuable role in a well-diversified portfolio. However, I must preface that statement with the following: “The stock selection should be done with the help of an investment advisor who has done the proper due diligence.”
I could not agree more. Even though equities are volatile, they generally produce the best long-term returns for growth—typically about 4–5% a year above inflation. The hard part of stock ownership is fighting the urge to sell should they plummet.
Diversification is essential when it comes to smoothing out volatility; owning foreign stocks markets is a key part of this strategy.
Even in this low interest rate environment, every stock portfolio needs a rudder to maintain stability. Treasury bonds and some Treasury inflation-protected securities offer this stability, as they are likely to hold their value, or even go up, when stocks crash.
Every time I see someone buying a lottery ticket, I’m tempted to ask them if they have ever won. Everyone knows the odds of winning the lottery are astronomically high, yet many Americans still line up weekly to throw their money away on a long shot.
No one knows you better than you. If you lack the discipline to charge items that are not in your budget, then cut up your credit cards. Use automatic deposits into your 401(k) and savings account. The old adage “out of sight, out of mind” works well here.
It’ll save you money. Insurance is necessary, and a high deductible can help reduce the cost.
Have disability insurance, either through work or directly. Remember, you have to protect the breadwinner (that’s you!). Use term life insurance to cover your dependents should anything unexpected happen.
The miracle of compounding interest requires time and patience. Invest a dollar for 10 years at 4%, and you’ll have $1.50. Invest it for 40 years, and you’ll have nearly $5.
Contribute as much as possible to your company’s 401(k) plan or equivalent (such as a 403(b) or 457), and at least enough to get the company match. If you can, contribute to individual retirement accounts for yourself (and a nonworking spouse) as well.
A third of your adult life could come after you’re 65. Try to pay off your mortgage, and save at least ten times your annual salary by the time you retire. Delay taking Social Security for as long as you can, up to the age of 70, to maximize each monthly check. Don’t carry a balance from month to month unless you are planning to default and file for bankruptcy. Card interest rates are extremely high—partially to account for the borrowers who will default. Make paying off that debt your utmost priority.
There’s fat in every middle-class budget. This is true. Pay attention to where your money is going. There are many areas that can be easily trimmed. Unfortunately, for those foodies on a budget, keep in mind that few habits bust the budget more than eating out regularly.
If you think it sounds too good to be true, it usually is. Think of those 12% CDs offered by an unknown bank in Antigua.
I’m always reminded of the safety briefing flight attendants give you: “Secure your own oxygen mask before putting one on a child.” I thought that was odd at first, but it’s true that without you, your child does not stand a chance. So don’t drain your retirement savings to pay for your child’s college education. Students have many other funding options, such as loans, grants, or a job. But you have far fewer, and less palatable, options if you run out of money in retirement. Likewise, don’t empty your 401(k) or IRA to start a business. You will be taxed and penalized on the withdrawals even if you lose the money. And so long as the money remains in those shelters, it’s protected from creditors.
Teach them early and often. No one else will, and they will have to make their own way.
Work out how much you take home, after tax, for each hour you work. And remember that number—especially when you shop.
Nothing is more rewarding than helping others, so try to find a line item in your budget for charity. It is an investment that will deliver the most valuable of returns.
Noted from a Youtube Video.
1304: Padua, Italy
On the wall of a church in Padua near Venice, the painter Giotto makes a fresco: Jesus and Money Lenders. It restates the notion that a good spiritual life and the pursuit of business and money are sworn enemies. Jesus goes to a temple in Jerusalem, sees merchants and small time bankers crowding the forecourt and gets furious. This sacred place is not fitting arena for the polluting activities of buying and selling.
1450: Venice
Luca Pacioli publishes the first ever book on accounting. Summa de arithmetic. It’s the single most important capitalist invention until the birth of the joint stock company and modern factory. Paicoli’s textbook proposes that dealing well with money doesn’t depend on money anymore. Money isn’t a divine punishment or reward, it’s a kind of science, it can be learnt through patience, reason and hard work.
1555: Geneva
The protistan theologian John Calvin emphasizes his audiences the importance of what have become known as Protestant virtues; hard work, self denial, patience, honesty and duty. These will turn out to be extremely useful qualities for capitalism. Calvin explains that you must never indulge yourself not spend money having a lavish life. You must simply put any surplus income back into your business as an investment. Calvin adds that being good at business far more pleasing in the sight of God than being aristocratic warrior or even a monk. Perhaps more than technology, it’s this new mindset that will accelerate the progress of capitalism.
1670: Delft, Dutch Republic
The newly independent Dutch Republic is the world’s first explicitly capitalist nation where lazy aristocrats are looked down upon and hard working merchants are revered. In the churches, Protestant sermons about thrift and hard work are heard. In the arts outgo glorifications of kings and queens. Johannes Vermeer finishes painting the Lacemaker, a depiction of the intricate careful and homely tasks of manufacturing lace. In his painting The Little Street, the suggestion is that living peacefully and quietly in your own home, running a business is far more glamorous and noble than fighting in a war or going to a monastery.
1776: Strand, London
Scottish Philosopher Adam Smith publishes a new popular book; An Inquiry into the Nature and Causes of Wealth of Nations. Smith demystifies wealth creation by explaining how capitalist economies grow. He reaches several important conclusions; Slavery is inefficient. Violence is less of an incentive than money for a worker and the cost of buying and maintaining slaves far exceeds the cost of wages. The capitalists will make far more money by treating their workers legally and humanely. It’s by specializing that economies grow, says Smith. Smith focuses on pin making industry; while one worker can make up to 10 pins a day, 10 workers well arranged can make not 200 but 48,000 pins a day, thanks to division of labor.a