How To Own The World

by Andrew Craig

Troy Shu
Troy Shu
Updated at: February 23, 2024
 6 min read
How To Own The World
How To Own The World

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What are the big ideas?

  1. Real wealth comes from making money from what you own, not just from your job.
  2. Knowing about world money trends is important because things are costing more and more.
  3. To have enough money in retirement, you need to save a lot more than most people do now.
  4. Investing your money in different things can make you more money than just working.
  5. Saving a little bit of money regularly can help you build wealth over time.

Summary

The True Definition of Wealth

  • The best definition of a truly wealthy person is that they are able to live on the money they make from their money, rather than the money they make from working.

The Necessity of Understanding Global Economics for Wealth Preservation

  • If you do not have a solid grasp of what is happening in the world at the moment then it is very likely you are becoming poorer, and this process is only set to accelerate.
  • “Things” have been getting more and more expensive in terms of most of the paper currencies on the planet, which means that unless your salary is going up by at least as much or you’re making money from investing, in reality, you are getting poorer every day.
  • Any money you have is gradually being destroyed. If you have any savings in the bank you are losing real wealth every day, and losing more than you think. This is one of the many reasons people are feeling poorer without really understanding why.

Limitations of Government Support in Retirement

  • With very few exceptions (Norway and Australia, for example), wherever you live in the world today you absolutely cannot count on being able to live on handouts from your government for the rest of your life when you stop working.

The Gap Between Retirement Savings and Needs

  • The average British adult has about £30,000 saved by retirement (or less than £10,000 for women and just over £50,000 for men).
  • If you want to have a pension income equivalent to the average British salary of roughly £27,000 per year you will need to have saved up a pension pot of around £675,000 when you retire rather than the £30,000 which is the current UK average as mentioned above.

The Importance and Power of Investing

  • So few people optimise their finances and become wealthy is because they don’t spend time trying their hand at investing.
  • One of the fundamental truths of capitalism is that capital makes a great deal more money than labour—people who own businesses tend to make far more money than people who work for them.
  • It is not an exaggeration to say that virtually every very wealthy person in history has accrued far more money from their investments than from being paid for their work.

Critique of Efficient Market Hypothesis

  • According to the “efficient market hypothesis” (EMH), no one can outperform the stock market by choosing the right investments.
  • However, according to Craig, there is a vast amount of evidence and academic work demonstrating that the theory simply doesn’t hold up.
  • The main reason that the EMH doesn’t work in reality (and why you can hope to make great returns on your money) has to do with human nature and the existence of what is called “asymmetric information”.

Investment Strategy and Diversification

  • Investing in financial markets without knowing what you are doing is like driving on a motorway before you have learned how to drive.
  • Arguably the most important reason why most people fail at investment is that they fail to own a sufficiently wide range of investment products.
  • One of the most successful investing strategies over many years is being properly diversified.

Building Wealth Through Consistent Actions

  • Those who understand money and end up with lots of it tend to be those who understand that little and often is the road to success.
  • Another reason why so many people fail at the money game is that they use far too much debt in their life.
  • You have never been in a better position to make money out of a good idea than you are today.

Understanding Economic Growth and Inflation's Impact on Investments

  • The world economy keeps on growing. You need to own the world in order to make superior returns on your money.
  • There is significant real inflation in the world because of quantitative easing (QE).
  • The Boskin Commission concluded that the consumer price index (CPI) overstated inflation by about 1.1 percentage points per year in 1996 and about 1.3 percentage points prior to 1996.

Government Manipulation of Inflation Data

  • There are three particularly dubious ways in which governments ensure that inflation numbers end up always being lower than the true increase in your cost of living (so you think you are wealthier than you actually are and they get to pay out less in social security, given this is linked to the “official” inflation numbers): Substitution, Geometric weighting, Hedonic adjustment.
  • Another source of the “hidden inflation” that doesn’t make it into the official numbers is sometimes called “ghostflation” or “shrinkflation”.

Protecting Wealth Against Inflation

  • “By a continuing process of inflation, the government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”—John Maynard Keynes
  • The smart investor benefits from inflation by making sure he or she owns the very things that are going up in price.

Essential Financial Principles for Wealth Accumulation

  • Live on less than you earn and invest the rest.
  • If you want to win at the money game, it is absolutely imperative that you create a financial surplus in your life and invest that surplus in a good variety of assets.
  • You are going to be best off saving and then investing a minimum of about 10 percent of your monthly income.

Questions

  1. How can you redefine your perception of wealth to focus on income generated from investments rather than from working?
  2. What steps can you take to increase your understanding of global economics and its impact on your personal finances?
  3. Considering the rising cost of living, how can you adjust your financial strategies to ensure you're not losing wealth?
  4. How prepared are you for retirement considering the limitations of government support and the gap between average savings and retirement needs?
  5. In what ways can you start or improve investing to build wealth, moving beyond relying solely on income from labor?
  6. How can you apply the concept of asymmetric information to make better investment decisions and potentially outperform the market?
  7. What actions can you take to diversify your investments and why is this important for your financial success?
  8. How can you protect and grow your wealth in an environment of real inflation and government manipulation of inflation data?

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