Everyone’s An Investor

Everyone is an investor.

People think of an investor as a niche group of people who invest in businesses and make a lot of money from them. However, we all are investors because we get to choose where we spend our time and money for the biggest impact. It’s just that the average person isn’t always investing their time in the best ways and they’re unaware of it.

An average person is a bad investor because he or she thinks like a consumer rather than an investor. Anything this person buys has a marginal impact on the his or her life compared to how much they spend and their biggest goals in life.

For example, think of a girl called Sally who doesn’t make a lot of money ($45,000 a year) who has just spent $3000 on shirts.

This impulse purchase can be broken down like this:

Benefit: slight, marginal increase in happiness for a temporary amount of time (a couple days) + possibly status/dating/enjoyment boost

Cost: a sizeable percentage of your money that you could have spent to make much more money in the near future if she was smart with it.

It’s not completely this person’s fault because she is unaware of what’s going on. She has:

  • no clear goals that she’s working towards. However, if you asked her and pushed her to be clearer on her goals, she usually wouldn’t mind working towards financial freedom, more money, and having enough to freely travel the world.
  • not considered or taken the time to plan a way to move towards a better life.
  • is not away of the importance or power of saving and investing your money in ways that make you more money or can move you towards a goal.
  • getting a lot of enjoyment for fashion that could pay off in terms of pleasure, enjoyment, status, or dating

Whether we are aware of all the costs and benefits or not, these results are manifesting when we invest our time or money. Was it worth the investment? Was there an opportunity cost where this money could’ve gone farther elsewhere? That’s something that’s going on to benefit or cost you with or with out your awareness.

Investing in its simplest form is putting money in a place through a calculated decision in the hopes of making a lot more money in the future. That means that you don’t have to put it into buying ownership in a business to do this and that to do well, you must make a great decision that ensures you get a lot more money back.

Here’s an example of someone who is on a higher level than Sally, but still has some things to work on:

Bob is really into self-help. He just graduated college. He knows the importance of putting your money to work to make more money rather than spend it on things like food or accessories that rust, rot, and deteriorate.

He is going into sales. He knows that looking great will increase his chances of closing a deal. He buys a $9,000 suit even though he only has $11,000 in savings.

What has occurred here?

Bob has understood some foundational elements of self-help but has made a very uncalibrated decision. He doesn’t have a lot of money and hasn’t really properly analyzed the cost/benefit of how much he should spend. He knows he should spend on proper stuff but spent way too much.

The average person can’t tell the difference between a $9,000 suit and a $2,000 suit. Plus, the marginal increase in perception rapidly diminishes as you go up in price. Bob has made a miscalculation. He could have bought a $500 suit and been fine.

The extra price he pays for a super-premium price isn’t worth the bang for his buck because he’s young, needs the money for other purposes, and there’s probably better ways to deploy that.

He has failed to properly analyze that opportunity and time cost that using that extra money lost could have provided.

In Bob’s case, the issue now is in properly analyzing and assessing the best place to put his money. This is a tricky thing that a lot of people have to work on. Even I’m not absolutely amazing at it.

Perhaps, a $500 suit would be better suited for his current life stage. It may have been better if he spent $100 to $5000 on the best Sales courses, coaches, and books from the most credible, successful salesman.

The extra training would speed up progress and income. In 1 to 5 years, he would be making a lot more and then could upgrade to a $1,500+ suit.

It’s a process of making sure you acknowledge all the variables at play and then deciding what is the best use of each dollar you have given your specific situation.

  • Remember that there’s a cost to using money. You won’t be able to use the money anymore if you spend it.
  • Take into account all the options to identify the best use of that money for the biggest long-term result you’re after (this could be more money in the future, increased skills that lead to more money, or the fastest progress toward your goal, which can be anything from six-pack abs to being a great parent).
  • If you haven’t found a great use for your money yet, be completely comfortable with saving it in cash until a great opportunity appears. The great investor Charlie Munger has said that he succeeded because he was willing to be patient while others couldn’t help but spend their money on mediocre opportunities.

“It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.” -Charlie Munger

While money you can sit on, your time gets spent everyday whether you like it or not. So, unlike Charlie, we don’t have the luxury of sitting there with our time. You’re not going to reinvent yourself overnight, so start with small changes that may reasonably move you to a better use of your time. I try to dedicate ~30 minutes a night to creating content for the web to build my brand.

We’re always making this decision with our time and money. What is Bob doing in his free time after work? Is he hanging with old friends who are broke and overweight to play Dungeons and Dragons? Is that lifting him up or dragging him down? There’s likely an enjoyment payoff but a career/health cost to how their behavior affects his habits. Then, there’s whether the coaching he bought was a scam or an actually useful guru; he has to invest in the right coach.

Start using this in your life immediately.

Are there things that add a marginal, temporary increase to your happiness or productivity that other people are recommending? Maybe consider not wasting your money on these.

I was listening to Eventual Millionaire, a podcast where the host Jaime Masters interviews millionaires. She kept going on about how she had bought dozens of productivity apps and tools, dozens of essential oils, and was also subscribed to numerous social media management monthly software. This was because she was recommended to get all of these things.

I could not help but think, “No wonder you’re not a millionaire yet. Those tiny costs add up. You’re probably spending a LOT more than you need to and the marginal increase in productivity you’re getting from them definitely isn’t worth it.” I rolled my eyes.

I am fairly familiar with the productivity world and have looked over and tested many of the tools themselves. I’ve thrown out 99% of them. They’re not that useful. People love the hype. People keep looking for a magic pill or secret tool that will save their day.

There is no shortcut. I’ve studied tons of billionaires extensively and I don’t know one who has even a fraction of as many productivity tools as the productivity blogs or experts recommend. Some don’t even have email because they think it’s distracting.

A great illustration of this is America. The USA has spent more money than any other country on weight loss yet it is still the fattest country in the world. People keep looking for quick, painless, magic pills so they don’t have to do the work. And they waste a lot of money doing it.

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By Will Chou

I am the the founder of this site and I am grateful you are here to be part of this awesome community. I help hard-working Asian American Millennials get rich doing work they love.

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