Wealth Growth Mindset - Part 1

In this first part of two posts, I will cover some insights that I use to attain success as an investor, worker and human. I’ve thought deeply about these subjects and have been using these approaches for quite some time to great effect.

Timing the market

With optimism/superiority bias, humans intrinsically think they are special and can do what others have failed to do. From an investors point of view, this will include trying to time the market. Trying to do so will cause you to loose a lot of money.

Dissecting “timing the market” - it can be broken down into two components.

Identifying when something is cheap and identifying when something is expensive.

I believe its too hard to time when something is expensive

but it is reasonable to time when something is cheap.

Say for example you see a Lamborghini which is in great mechanical condition for sale for $50k. You know immediately it is cheap and a no brainer. Buy it.

Knowing that there are many different markets all in different cycles, peaks and troughs. Diversification is a great thing as it mitigates drawdowns. When one market is in a trough that you are underweight in - consider this the time to sell something , reallocate capital and buy the cheap thing.

See my Q1 Returns Report 26.5% Return @ 7.5 Year CAGR

Being humble, speak through action, ask dumb questions

Knowledge is knowing that you know nothing.

If you truly understand that statement you will realize that pretending to know everything and be fully knowledgeable is false and a fools errand. Therefore acknowledge that you don’t know anything and be a lifelong learner.

Embrace sounding dumb.

This frees you up to ask any and all questions all the time without fear of judgement. Judgement comes from your outcomes not from the questions you ask.

Questions that you ask should never have an answer embedded in them and they should be abstract and open ended. Asking such questions will sound quite dumb and that you are missing knowledge. But that is good - that is what we want.

By not embedding an answer in the question e.g. “Do you prefer left or right” you open up their answer to a broader spectrum of answers. They may answer something other than the left or right you were going to originally constrain them to. Also by placing an answer in the question could well bias the answer itself.

Adhering to Occam’s Razor and First Principles Reasoning both heavily benefit from the above paragraph.

You should only ask a question when you have an answer in mind. If their answer matches your answer - your thoughts are confirmed and you can move on.

Most of your statements should be done through outcomes of an action. Most of your talking should be done through questions.

Living life this way means people will feel that you are present and listen as you aren’t racing to talk over them. You are more likely to attract information and learn as you speak less, listen more without biasing the conversation. You are incentivized to take action as they are the way you make statements, rather than talking about it.

Travel

Travel is one of the keys to unlock global wealth opportunities. TV, YouTube, news don’t do potential opportunities any justice.

Being in a country, seeing, feeling, experiencing opportunities is a huge factor in growing wealth. You get to contrast what you have back at home and what you don’t have where you are visiting. With time spent in a country, familiarity increases. You gain comfort and confidence in putting your money to work in a different context.

Aside of investment opportunities that show themselves to you, your tolerance of other cultures increases. I feel that the humans default state is inward looking, biased towards their own culture and intrinsically critical of other cultures. Experiencing different national holidays, traditions and customs makes one more tolerant. Tolerance and understanding increases the surface area of investable opportunities. Not to mention making you a better human.

Scarcity and Abundance Mindset

Scarcity mindset is easily identified by an outlook of zero sum game (for every winner there must be a loser), coupon clipping, buying the cheapest thing and a heavy focus on resource preservation. Humans default state seems to be a scarcity mindset and one most actively work towards shifting to an abundance mindset.

Your thoughts lead to actions, actions lead to habits, habits lead to behavior and behavior leads to outcomes. By holding a scarcity mindset, your behavior and results manifest being limited, guarded, wary. Instead of what they should be - expansive, welcoming, trusting, partnering and win-win.

I learned the concept of abundance mindset from the Real Estate Show - Get Rich Education. Keith Weinhold is a great educator and I learned a lot about Real Estate from him. I highly recommend listening to his podcast starting back at the first episodes working forward.

Give before you take

I’ve been studying wealth for over two decades and see an overwhelming pattern of wealthy people being philanthropic and giving. Digging down further, you can see a trait that wealthy people have is that they give before they receive. Rather than trying to get something before you give something.

Money really is a biproduct of creating value.

You will have a short lived run of success if you focus on trying to make money rather than focusing on the most important thing. Creating value. Austrian economics has taught us that value is subjective and what is considered valuable lies in the eye of the beholder.

By shifting your mindset into a forever giver, focusing on how you can help people before considering yourself, you will become wealthy.

The Cost of your Time

Time and money can be visualized in the chart below.

When you start life, you have lots of time and no money. When you die you have no time and lots of money. At the mid point, time becomes more valuable than money.

By the time you reach midlife, whatever number you consider that to be, I recommend figuring out a dollar value for your time. The obvious starting point is to take your yearly income and divide by the number of working hours in the year. This will give you a starting point.

If your wealth expands from Capital Allocation from investing, you might also add this to your numbers.

Now you have an hourly rate to make decisions upon.

Queueing at the gas station for 15 minutes to save a few cents. Is that less than 0.25 * your hourly time rate? If so, go to a gas station with no queue, pay the extra cents. Is the cheaper airline ticket worth your time waiting in the airport? Is staining your deck worth the time it will take you?

I consider all these things in decision making now I am at midlife. By baby stepping into time vs money decisions you get used to living more of life earlier. It doesn’t become a black/white thing of when you hit 65 you go from working to a hard stop.

Time saved on these activities can either be re-purposed into you working OR enjoying life. Your choice. You’ve worked hard to have options. Now choose to exercise them or not.