Student of Life
What’s the most powerful force in the universe?
According to Albert Einstein – Compound interest. He said “compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” The difference is savings that time makes is amazing, no matter what the amount, my advice is always – start saving as early as possible. Even a five year head start can result in a 50% difference in how much the savings can grow to over the years.
in·er·tia
iˈnərSHə
noun
1. a tendency to do nothing or to remain unchanged. “the bureaucratic inertia of government”
synonyms: inactivity, inaction, inertness
2. a property of matter by which it continues in its existing state of rest or uniform motion in a straight line, unless that state is changed by an external force.
The largest impediment to getting things done is not a lack of ideas, opportunities, intelligence, or money. It’s inertia. And it doesn’t get any better as you get older. If your waiting for the day when you’ll have enough money, time, support . . . the list goes on and on, stop. If your waiting for something, you’ve already lost. That day will never come if you wait for it. Go. Do. Now.
Once you realize that you have time to fail, everything becomes possible. Thinking you need a bigger house, faster car, more money, all right now, will rob you of the opportunity to take risks. It will deny you the chance to do what you need to do to succeed, which is to try something so crazy you are sure to fail first.
That’s how you learn to succeed. Setting your eyes and goals on things that require you to fail first, just to get the chance to succeed. Be patient. Fail often.
Failure is a prerequisite to success.
What is risk?
Risk = Uncertainty. If the outcome of an activity is unknown, it is risky. But, that risk isn’t necessarily just associated with a bad outcome. The outcome could be that the project produces a positive return or a negative return. The stock price could go up, stay the same, or go down. It isn’t the fact that it could be a bad outcome that makes something risky. Rather, if the outcome is unknown, there is risk.
But, risk isn’t always a bad thing. If there isn’t risk, there generally isn’t a possible positive outcome. At least not one worth pursuing. So, risk can be good. As long as the risk itself is known and identifiable, a rational decision can be made.
However, I see a lot of people identify risk and then shy away from the choice, investment, project, or activity. This can often lead to the wrong decision. After all, no risk, no return. If we didn’t take any risks in life, we wouldn’t even learn to walk. To move past where you are today, chances are your going to have to take a risk here and there. In my view, if I had one change to make to my past, it would be that I wish I had taken more risks. Not less.
The best approach to considering risk is to attempt to calculate the real risk and then make a good decision. To calculate the real risk you should take the probability of the risk into account. For example, if there is a risk of losing $1,000 this sounds bad, right? But, if there is only a 10% chance that the loss will happen, it really isn’t very risky after all.
When considering risk, it is important to determine the “weighted risk,” if possible. To do this, you simply multiply the maximum downside loss, by the probability of the loss occurring. In the above example, the maximum downside is $1,000. And the chance of the loss occurring is 10%. So, the weighted risk is = $1,000 x 10% = $100. It is’t the $1,000 that should be the decision-making metric. Rather the weighted risk of $100 is the relevant risk. And those two numbers are very different. They can lead to very different decisions. This approach can be applied to everything from what company to invest in, to where to go for dinner. Everything is risky. Embrace it.
What you are probably thinking now is – determining the maximum loss is normally pretty easy. But, how do you quantify the probability of the loss? Not to put too fine a point on it, but – You guess. Sure, you can apply fancy statistical methods. But, you don’t have to. Those methods often include assumptions, which are just guesses too. Nobody knows what the future holds. Everybody is guessing. And if you are familiar with the decision at hand, you are likely in just as good of a position to make an educated guess as anybody else. Why not? Everybody is guessing anyway. Take Risks. Be You.
Nothing happens outside of the box. The action is on the edge.
There are two forces changing our economy, entrepreneurship, and everything else:
1. Technology – it seems that the internet is eating everything. There isn’t an industry that isn’t affected by it. It’s not the internet of things that is coming. It’s the internet of everything. And just when we get used to the internet running our lives, along comes the Blockchain, which could disrupt everything again.
2. Personalization. Through the 90s and 2000s standardization was the trend. Today, technology has enabled personalization. From what we eat, to what we do, to how we live, everything is becoming personalized; tailored to us as individuals. Your customers’ time and attention is becoming fragmented. How do you meet that challenge to succeed?
People trump strategy. Having the right plan isn’t enough. You also have to get everybody involved behind the plan, and have them individually in the right positions.
What is technology? Knowledge, techniques, methods, and processes that help us complete an objective. A pencil is an example of technology. So are smartphones, light bulbs, and clothes. Yes, clothes.
Money is also technology.
What is money? Something that has three functions. Money operates as a medium of exchange so that we all accept it to buy goods and services, a verifiable unit of account so we know what it is worth, and a store of value in that it holds its value reasonably well.
But money also meets the definition of a technology. Technologies change. So will our ideas of money.
The Internet of Information has been revolutionizing our world since the early 90s. The Internet of Value is starting to take hold. Bitcoin is its first major “app.” But just as email did in the Internet of Information, Bitcoin will also have to contend with other technologies.
In fact, at this point it isn’t even clear what the overall platform will be. But Blockchain is looking promising. Entrepreneurs take note. New opportunities abound.
Why haven’t you started the business you want to start? Why aren’t you on the trip you always wanted to take? Why are you not doing what you want to do?
If your answer to these questions is money, or time, your not being honest with yourself. And the lies we tell ourselves are the ones that stand to hurt us the most.
If you are holding back you are simply letting yourself get in the way of your future. Why? It could only be a result of two things. Either you are not actually very interested in doing what you think you want to do, or you are fearful of something. If it is the former, find something you care enough about to make happen, and then do it. If it is the latter, what are you afraid of? What you should be scared of is not living your own life. Your way. What else is there to fear?