An Illogical Way to View Wealth Creation

You may remember I talked about how our own self-acceptance issues can prevent us from receiving our financial rewards and how to overcome those issues. (click here if you haven’t had a chance to read it). It then leads to this month’s main topic, would self-acceptance alone be sufficient for us to accumulate wealth? The answer is probably NOT.

Before I go further, I would like to distinguish the meanings of the following two words in the context of this article: logical and illogical.

Let me use a few pairs of examples:

Actions:

  • Logical: you punch someone in his face, he punches you back immediately;
  • Illogical: you punch someone in his face, and 3 months later someone else kicks you in your bum.

Words:

  • Logical: you yell at someone, and he yells back at you immediately;
  • Illogical: you tell a lie about someone, a few months later someone else tells a lie about you.

Emotions:

  • Logical: you don’t like someone for some reason when you first meet them, you immediately sense that they don’t like you for some reason either;
  • Illogical: you don’t usually like to see other people making easy money simply by being lucky, you find that the universe doesn’t give you much luck to make easy money either and everything you have ever made has always been hard earned.

Habits:

  • Logical: You are being critical about someone, he is being critical about you at the same time (even if he doesn’t say it to your face);
  • Illogical: You are trying to get away from paying a fair price for the service you receive from a particular service provider today, a few days later one of your customers is trying to not pay you for the service you provide them.

You can see that what I mean by “logical” here can almost be explained by Newtonian physics. An action occurs, then with no time delay, there is a reaction back. While the meaning of “illogical” here follows the rule that “what goes around, comes around”, but it may or may not be obvious and logical due to the time delay effect between the action and its eventual reaction.

To further demonstrate what I mean by “illogical” here, for example, if you have done the wrong thing by someone, then the wrong thing will be done to you in the future. But it’s not necessarily done by the same person to whom you have done the wrong. On the other hand, if you have done the right thing by someone, you’ll be done the right thing back in the future, but not necessarily by the same person to whom you have done the right thing.

Predominantly, wealth creation ideas mainly focus on how to become more financially educated and more intelligent in dealing with investment – such as the most obvious idea of “buy low and sell high”. Pretty logical right? But why can’t we just keep doing that?

With little exception, most of the wealth created I have seen is illogical, i.e. it seems to have a time delay. Let me give you a few more examples of the “time-delay” phenomenon I have noticed after meeting with several thousand property investors.

1) A full-time property investor’s challenge.

It is interesting to note that most property investors who have decided to become full-time investors by quitting their full-time jobs or business have tended to go backwards in their investing after a while, until they eventually go back to some sort of productive full-time work.

Let’s say a typical property investor Joe Bloke has been working as a highly skilled IT professional for 10 years, being paid $80k a year. He believes he is getting paid a lot less than what he feels he is putting into his job and is unhappy about it. As his properties are growing by $100k a year, he decides to quit his job and become a full-time professional investor as he thinks this will make him more money.

After quitting his job, Joe may make another one or two more good investments that make him some money. He then becomes even more convinced that he has made the right decision to quit his job and become a full-time investor just focussing on making himself some money without having to do any more work.

Usually, not long after the initial few successful investments, he will run into a string of non-performing investments or get sucked into the “high return with little effort” type investment strategies such as foreign currency/derivatives trading, etc. In doing so he is likely to lose whatever he has made over the last few investments, and start finding himself unable to keep up with the interest repayments. So he finds himself going back to some sort of full-time work with a lot of resentment about the advisors who have given him “bad” advice or the wealth creation industry as a whole.

What could be happening here for Joe Bloke is that he may have failed to realise the time-delay effect for his wealth creation journey. Here is how it may be explained in an illogical way:

  • When Joe was working as a productive member of the society, he was doing more than the right thing at work by the universe, and the universe was doing more than the right thing by him through his investments;
  • Joe then quit his full-time job and wanted to contribute very little for a lot in return. In doing so he is out of exchange with the universe and his investment suffers as a reflection.
  • Then Joe goes back to full-time work and starts doing the right thing again by his environment, and suddenly the universe is once again doing the right thing by him on his investments.

If you were very intellectual and wanted to prove this within the context of science, you will find that science can only explain 4.5% of the universe at this stage, because the rest of the universe is still unknown and is made up of such things as dark energy and dark matter.

Hence in my opinion, improving our financial intelligence can at best help 4.5% of our financial result; a big part of wealth can only come from our true contribution to the world. For most people I know, our best contribution is not trading shares or properties, our best contribution usually comes from what we are talented or trained for.

If you simply look around, there are plenty of people who have spent years learning about share trading and property investing. They might have been more educated financially and they might have been taking a lot of actions in the area of investment, but their wealth level stays very much the same.

On the other hand, I have found property investors who are very dedicated to their own profession and make a meaningful contribution to the society, tend to have much better luck with their investments and less trouble. This confirms the view of “what goes around, comes around”, what you contribute will be given back to you, it’s just a matter of time.

Most property investors can relate to this experience – when they were putting 100% effort into their work, their investments around that time tended to do better. When they start thinking about how to stop working and start getting a lot of easy money, their investments tend to do poorly very soon after that. Because this appears to be “not logical”, hence most people don’t join the dots.

So in my opinion, it is always safer to do your best and do the right thing by others no matter what, as it may be the surest way to ensure that there is still plenty of good fortune waiting for you out there in the future.

2) The puzzle of lazy but wealthy investors.

I have also observed the phenomenon of some property investors who manage to accumulate a lot of wealth without having to work very hard in the traditional sense. They seem simply “luckier” than others. They seem to bump into the right investment properties at the right time, and happen to be not available to get into other bad investment opportunities. They find good tenants quicker than others, and they don’t seem to stress out about anything either.

The most obvious and common trait I notice about these investors is that they are genuinely generous and giving people. They are often concerned that others may not make enough money dealing with them and want to make sure that others do well financially.

Let me use two examples to show you what I mean.

  • One of our clients was very keen to follow our Freedom Model to purchase properties. He already has a very large property portfolio and still has the capacity to purchase another 10 properties without needing much finance, so you can gauge his level of wealth.When he saw that we were aiming at 7-9% growth rate per year as our investment property criteria, he told me to relax, as he would be happy with 4-5% average growth per year over a 10 year window. He said this because he didn’t want me to stress about it and take unnecessary risk. He also wanted to make sure that we were both enjoying the relationship while we were all doing well together. He also offered to refer a few of his wealthy friends without being asked. What does he do all day for a living? Not much, he is a full-time investor, and he told me that his main interest was to help create good opportunities for his friends to make good money together. You just can’t help liking someone like that, can you? In fact, he was introduced to us by someone who really wanted to see him make more money as that is how he has treated all his friends.
  • One of our land suppliers is one of the largest players in the land development business in Melbourne. After almost one year of referring some of his land to our clients, one day he was in my office and he suddenly realised that we weren’t charging any fees or receiving any commission and were just passing on all his land at its original price to our clients, while covering all the site costs without telling our clients. Without being asked, he immediately offered to share some of our costs because he wanted to make sure that we were doing better financially. I must say that he immediately won me over as a land supplier as he genuinely wanted to see others doing well apart from himself. No wonder he has got to the size he is today. He is another person I don’t see working very hard every day. He seems to always be quite relaxed and not stressed about anything.

So when you compare the two distinct groups of investors who are doing well financially, you see one works very hard and the other doesn’t. So how hard you work may not be the only answer to wealth creation.

So a new way to look at wealth creation may be needed here. Let’s say we simplify our world view by assuming there is only one relationship that exists for everyone, and that is the relationship between YOU and the rest of the universe (let’s call the rest of the universe “NOT YOU” for simplicity sake). How much YOU give to the NOT YOU, will be exactly how much the NOT YOU will give back to YOU. How much YOU take from the NOT YOU, will be exactly how much the NOT YOU will take from YOU. This is because things have nowhere to go outside of YOU and the NOT YOU.

So let’s put this new view to the test to explain our two groups of investors:

  1. For the first group of hardworking contributors, the more value YOU give to the NOT YOU, the more value the NOT YOU will give back to YOU. Hence doing your best and contributing more at work can lead to better financial performance of your investments.
  2. For the second group of generous giving individuals, the more money opportunities YOU give to the NOT YOU, the more money opportunities the NOT YOU will be giving back to YOU. Hence helping others to do well financially or creating financial opportunities for others can lead to a better financial position and more money opportunities for you as well.

Summary

So apart from improving our self-acceptance so that we can allow wealth to be accumulated peacefully, it would be a great combination of always doing our best at work and always making an effort to help others do better financially.

Until next month, happy investing.

Kind regards,

Bill Zheng

P.S. If you feel like making an effort to help your friends and family do better financially, please don’t be shy to start referring them to our Wealth Acceleration Workshop ☺.

Some times people worry about referring their friends and family to financial opportunities because they worry it may not work out for them and may therefore reflect badly on their relationship. This is like medical doctors not treating patients because they know that no one gets out of life alive. The reason why we respect medical professionals is mainly due to the fact that they still unselfishly put in their best efforts to save anyone they come across regardless of the potential outcome.

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