Getting Rich (7) Upgrade Your Personal Business Model Through Investing

Author: Xiaolai Li, Serial editor: Mr. Y

Introduction

When it comes to investing, the first reaction most people would have is: I don't have any money to invest!

However, this article put forward a subversive view: investing is the best starting point to solve the problem of having no money. Investing would force you to improve your ability to earn money and to upgrade your “personal business model”. *

This upgrade is reflected in the leaps in three transitions:

• Upgrading from "selling your time just once" to "selling your time multiple times".

• Upgrading from "only knowing how to spend money" to "knowing how to make money with money", in other words, investing.

• Upgrading from "only knowing how to invest with money" to "knowing how to invest with both your money and your time".

The "Regular Investing" strategy (also known as Dollar Cost Averaging) is the perfect tool for the average person to practice this upgrade path. It allows you to not only invest the possibly small funds you have now, but more importantly, the large amount of time in your future and the money you will earn in that future time.

In the face of "time", everyone is equal, and everyone has 24 hours a day. Compared with those rich elderly people, ordinary young people have the most precious advantage of all: time.

Therefore, the conclusion is clear: from now on, work hard to upgrade your personal business model to develop your ability to make money. At the same time, continuously invest your future income into high-quality assets with “long-term continuous growth" using the regular investing strategy.

When you do so, both money and time will become your friends.

So, what reason is there not to believe that we will eventually get rich?

Main texts

What Can We Use to Regularly Invest?

by Xiaolai Li, rewritten in English by John Gordon & Xiaolai Li ©2019

It's an undeniable fact that most people don't invest. And they have an answer as to why they don't invest:

I don't have any money to invest!

This is a frustratingly common misunderstanding. In fact, in addition to investing money, we have another resource that we can invest -- time.

It's not just non-investors who forget this. Even the few who do invest don't realize that, in addition to money, their time is also an investible asset. They haven't thought about how important time is, and how strong an influence it has over us.

Warren Buffett is undoubtably the most commonly-researched investor in the world, and you'll find his name in most books on investment, this one included. There's no way around it, as most of what he says is correct, and, perhaps more importantly, he's been so successful that most of what he says on the topic must be correct, and most people can't help but agree with him.

Buffett is not just successful, he's also always very open in sharing his thoughts and ideas. The problem is, he's told us everything that we need to do, so why can't we just go do it? Even though the difference between knowing and doing is the difference between monkeys and humans, there is a yet more important reason:

Warren Buffett has a zero cost of capital!

Berkshire Hathaway's key turning point in its early years came in 1967, when it bought National Indemnity Company and entered the insurance industry. Remember, Berkshire was a textile company that Buffett took control of in a fit of anger, and he regretted getting into the textile industry for many years. It wasn't until 1985 that Berkshire finally exited the textile business, nearly 20 years after Buffett took control in 1964.

But after entering the insurance market in 1967, Berkshire became an investing machine. The reason was simple: Buffett not only had a huge amount to invest, the funds also came at zero cost, and they could be used almost indefinitely. This was a huge relative advantage over all other investors in the world.

Books about Buffett talk about his incredible returns, and they treat his investment principles as the Bible. Even a casual statement at Berkshire's annual meeting can be taken as law. But 99.99% of investors will never have access to massive amounts of free capital to invest over an unlimited term, and that's a big reason why Buffett has been extraordinarily successful.

Regular investors are different. They may not have that much money, but they are investing more than just money. Since they are continuously investing over the long term,

they are also using time to invest.

The reason I have been able to hold bitcoin and other blockchain assets over the long term is not, as many people think, because I have "faith". In fact, faith doesn't require logic, and can't depend on logic, because if it did depend on logic, all faith would be shaken in the end.

The core reason I have been able to hold these assets is that I have the ability to continuously make money over the long term outside of the market, because I have upgraded my personal business model.

The vast majority of people can only sell their time once, but, after upgrading, I can sell my time multiple times. For instance, by writing books or teaching online.

Even though there is a ceiling on this business model, it has allowed me to not be tied down by daily expenses. It also allows me to always have money to use for investment that, despite being limited in amount, has no cost, is constantly flowing in, and can be invested over an unlimited term. Without this, all of my achievements in the investment space would have been impossible. So my regular investment into blockchain assets is not just money, but all of the effective time that I have spent working, and the sustainable income that has come from repeatedly selling this time.

So regular investing is something that people with ambition but limited resources can do, and it is something that only this type of person can do. When Buffett purchased a controlling stake in Berkshire Hathaway, he was already not a poor man. After purchasing National Indemnity Company and entering the insurance industry, almost all of his investments were long-term buy-and-hold investments. Buffett didn't need a strategy of regular investing. Or, to put it more precisely, he didn't need to improve upon his buy-and-hold strategy. The simplest strategy in the world was already enough for him.

As for other fund managers, they are even less able to pursue a regular investing strategy, primarily because 99.99% of fund managers (or everyone except Buffett) have a limited term for their capital. For some it may be ten years, for others it may be three to five years, but no matter how long it is it's still a limit, and that entails great risk. In the investment world it's rare to have a middle ground -- it's either a 1 or a 0.

If capital has a term the risk is 1, if it doesn't the risk is 0, and there is no 0.2 or 0.8. Lots of people don't understand this, so they line up like lemmings to take risks and end up falling off a cliff. The riskiest job in the world is President of South Korea, and right after that is the fund manager who guarantees immediate redemption of capital.

To put it another way, most "professional investors" don't have the ability to do regular investing, because they are not managing their own money, and their funds have a deadline after which they need to be returned. Once it's time to settle the funds, it doesn't matter if it's a bull market or a bear market, it's still time to settle, so how can you be sure of your earnings? Most people have never thought about how a fund's success is not dependent on the manager's acumen and strategy but instead dependent on the time the fund was established.

Funds that are established at the end of Period B and the beginning of Period A are quite likely to succeed, because during that period you can make money investing in almost anything. The problem is that is the time at which investors are the most scared and circumspect, so it's hard to raise money. The easiest time to raise money is at the end of Period A, when everyone has gone crazy in the bull market. But if they raise money at that time, and the money has a term, it's going to be very difficult to succeed.

Selling one bit of your time more than once is an upgrade of your personal business model. It's such an important upgrade that it is hard for anyone to free themselves from the shackles of increasing daily expenses without it. At first you only have to take care of yourself; then you have to take care of your spouse; then you have to take care of your children and even your parents. Most people are defeated by these basic life expenses. An individual must make enough money to cover these expenses, which first increase and then may level out or even decrease later in life, before they can have money left over to practice regular investing. If you don't upgrade your personal business model, it's hard to have any money left over.

As I see it, regular investing requires a trifecta of successful personal business model upgrades:

• from selling your time once to selling the same time multiple times;

• from only using money to consume to using money to make money (starting to invest);

• from just investing money to also investing time.

Even more importantly, a strategy of regular investing systematically reduces risk.

*: Personal business model is a phrase coined by Xiaolai Li to describe the model of individuals making money.

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