Why some people always make money?

I have come across a few entrepreneurs who always make money in each of their ventures. They are serial entrepreneurs and or multi-tasking entrepreneurs. They may have had failures, but it is less.

It took many years to understand the reason - There are a specific set of knowledge and skills required to make money. If we have that, we make money.

As someone I heard put it nicely, give a Rubik's cube to all the people. Only the person knowing how to solve will solve it. The rest of the people irrespective of any amount of time, will not be able to solve it.

Unfortunately, these skills and knowledge are not thought commercially at one place. Very few places teach that in parts.

Relationship between Time and Money

The relationship between these 2 things is interesting:
The middle class and poor, value money more than time and give their time to earn money.

The business class and the rich, value time more than money and spend money to save time.

For this class, money is time. 

Money is a tool with multiple purposes - to buy something for someone and make someone happy, to attend the best schools and gain the best knowledge to use, to travel around the world for business meetings, conferences and build and keep connections and build the networks. To get the best of the services to solve the problems than spend time to figure it out.

The middle class and the poor, don't know many ways to make money apart from trading their time to earn money with the particular set of skills they have.

For this class, time is money.

As potential to earn is limited, money is scarce and cannot be thought to spend on things, services that could have been outsourced.

For the business class and the rich, know that there are multiple ways to make money, but time is limited. They have seen their money and wealth go up and down many times and understand it much deeper. They sometimes have connections (trust from customers, suppliers, associations, bank credit, mortgaging assets) they can leverage to get back from a bad position.

Know the 4 Dimensions of Investing

Investing and analysing investment options can seem burdensome, tiring, boring, confusing, hair-splitting to know everything about it before committing your money to it. Irrespective of what the brokers, sales guys, agents try to push to you as an excellent opportunity for you and your loved ones, it is important to know that they have an inbuilt interest in selling things to you and you have to do your own due diligence. Doing your own due diligence is often spoke about, but some of you may wonder what does this mean and how do you do it.

There are essentially 4 dimensions to understand any investment:

1. Return/Potential Return

I say return/ potential return and not just return so that you are not overly swayed by the superb past returns of an investment, but realise that not all investments will repeat their super duper track record time and again. There may have been a time and environment where something really made great returns, but this time and environment may well be very different. 

A plot in a far away village may not give you a great return on your investment without nothing new happening. But, once it is known that an international airport will be coming in the area, the investment may have great returns. And once all the development is done, the return on investment may not follow the run you saw during the days when the news of the airport was coming. Similarly with stocks. There are good times and great times for companies depending upon a myriad of factors such as demand for the product/service, cost of making things, saturation of product usage, etc.

2. Risk & Return

Each investment has a certain risk to it. Even Govt. owned companies and their shares/bonds have some risk in it. Nothing is risk free. Sometimes the risk is on the return, while on some others, the risk is on the capital deployed itself. One has be aware of the risks and consider the return on the investment proportionately to the risk involved. Derivatives are more riskier than Stocks which is more riskier than fixed deposits/bonds/gold.

Do remember that sometimes even a less risky investment can cause a major loss compared to a higher risk investment.

3. Liquidity

This involves multiple things and is very important but unfortunately not given much importance by many people. Liquidity refers to how fast can you to convert the investment to cash whenever you need it. Another related aspect to liquidity is whether the investment can be used as a collateral against which you can get a loan. Certain investments cannot be given as collateral and no loan can be obtained against them. E.g. Bonds, Fixed deposits in some NBFC (Non Banking Financial Company)s. Some investments may have a lock in period which will limit the ability to sell the investment. Certain bonds have a lock in period before which you cannot trade it in the market. Sometimes, holding a stock/bond that is not widely traded also brings about liquidity problems while trying to sell it.

4.  Tenor

The length of the investment period. At the end of the day, you will need to match the investment tenures to the life's various goals. No point in investing in a 20 year investment that is locked if you don't have money for your other urgent goals.

All investment avenues would have the above mentioned 4 characteristics. You should know these 4 aspects of your investment and competing investments before you make a decision to invest in one based on your life's goals and risk apetite.

How to tax the Rich

An article by Scott Adams

http://online.wsj.com/article/SB10001424052748703293204576106164123424314.html

The wise men

Once upon a time, some time ago, there were a group of men who were very very rich and owned around 40% of the world's resources. They had land, industries, gold and what not. They were wise and understood how to maintain and grow their wealth throughout time. They very well knew that value is in the thought of the beholder. If the thought of value in something vanishes, the value in the product is zero. To further help themselves, they thought upon an idea to globalise the world to make use and exploit the best of everything. Further, they spread the benefits of globalisation and free market access. At this point of time, they realised that with free markets, value is being interfered by the exchange rates. The group of wise men, decided that they will have to be proactive and move as a group to maintain order and control of the maintenance and growth of their precious valuables in the world. Since they own a substantial part of the world, and markets are never deep enough for them, they could influence the markets with ease. Moreover, they realise the people's psychology and the various govt.'s response to the situations they would create. They start buying into an 'item' initially and start spreading the word how that would be the next 'big' thing in the world. The high risk takers and loyalists start buying it immediately. As the value of the 'item' increases, more people start believing the prophecy and start buying it while all the while the wise men's value increases. After a few years, the wise men believe that they have milked the 'item' to its limit and their value has stopped growing at a fast rate. Further, before someone else calls that the 'item' is overvalued, they start selling the 'item' and buying into another 'item'. And the next prophecy of how this item is undervalued and how it is the next 'big' thing, starts to grow. This cycle keeps repeating over periods of time and the only people who are always in the green are the wise men and the loyalists, while the general public is bled and slaughtered each time when they start buying at the height of the cycle and when the wise men are selling it to the blind public. These "items" could be various currencies, gold, silver, commodities, bonds, houses, land and what not. The frequency with which these wise men are interchanging the 'items' has increased in the recent years. It is not clear whether another set of 'wise men' are on the street trying to call shots on an item which is different from the first set of wise men. This fight between the two sets of wise men having contradictory ideas on some 'items' is probably being seen in the high volatility of the markets. E.g: Crude oil falling by around 6% in a week, INR moving by 1% in a day, gold falling by over 9% in 5 days.

Moral of the story: Besides the all the financial porn being thrown by the media at us and all the talk of finding value, in the end it seems you just have to stick to the side of the 'wise men' if you want to make money/store value. If only, we could easily pinpoint who are these 'wise men' and know their next move.

P.S: This is just one of the hypothesis I have to show that most people have know idea of how the market could be working against you all the time. At times, I feel like one of the little guys who feel like they are born to just get exploited by the 'wise men'.

The wasteful small hundis

I visited a temple yesterday and saw a person struggling to put a Rs.10 note into the pot hundi with only a small slit used to drop coins into it. To try to put the note in it, the person had folded the note into a small square of less than an inch on each side reducing the life of the note by many hand exchanges instantly. Another smarter fellow, just folded the note continuously in the vertical side keeping the height of the note constant. He then kept the note on the slit and pushed it down smoothly into it without the note getting stuck anywhere.

I guess some things are only learnt by observation.

But as I saw the first one, I was left wondering how much the central bank in India struggles and tries to educate the public to not spoil notes (by writing on it, folding it many times, soiling it, staple it, etc). By the rules of the RBI, the notes we now get in the banks are never stapled as it previously used to. The RBI spends crores of Rs. each year replacing old, worn out and soiled notes. It can definitely save a few crores if it bans small hundis and other small collection tin cans with a small slit sometimes used by beggers and sometimes used as donation boxes in shops and during crises.

Another thing that would be useful is for someone to come up with a better donation box design which is one way (money can go in, but wont drop out of the box when turned around or if the box falls). A possible enterpreneural idea? Perhaps...

Get rich soon

I had identified this amazing opportunity a few years ago to get rich quick.

The problem was I am/was not in US or Europe.

Let me get to the point: The easiest way to get (filthy)rich quick is to sue. Sue someone, some company, some institution, something.

Sometimes you have to be in the right situation in the right place to be the victim. But if you already want to get rich quick, you can start searching/looking out for possible victimisations and make yourself a victim and then cry foul and sue.

The processes in the developed countries are pretty efficient and you can make plenty of money in a short period of time.

Just look what one guy has done:

He has sued Bank of America for 1784 billion trillion dollars, that is 1 followed by 21 zeros. The world's GDP in 2008 was merely $60 trillion.

http://economictimes.indiatimes.com/articleshow/5057180.cms

I think I am just not in the right place to get rich soon.

Such is irony

When one feels alone being in a crowd of known people.

When your mind finds peace while riding on a bike at a good speed.

When you have all the money you want, but have no happiness.

When you have been running all your life and still find yourself stuck in a spider web unable to be free.

New age millionaries

http://www.businesspundit.com/15-crazy-ways-people-make-money-in-todays-economy/

I can gift you a Billion dollars, but would you then be happy?

http://www.portfolio.com/slideshows/2008/3/Worlds-Most-Worthless-Money?TID=advert/wired/worthless_money

And note the expiration date.

http://www.news.com.au/story/0,23599,23704105-38195,00.html