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Reflections on Wealth
Being Rich vs Being Wealthy
The world wealth is sometimes superficially associated with extravagance and access to all luxury-oriented indulgences. A curious yet subtle differentiation between the terms 'rich' and 'wealthy' would explain the nuance with which we prefer to approach and interpret the terminologies. Between rich and wealthy, what differentiates the latter from the former is the timeline and sustainability quotient one would attribute to having surplus income generating assets. Hence, a wealthy person in our view is one who has solved the problem of generating positive cash flows needed to sustain a certain desired uncompromised lifestyle without having the need to regularly trade-off time as a barter. However, the same cannot be necessarily said of the rich, as the term denotes having a temporary surplus today but need not be necessarily perceived to be so in the future. Understanding this subtle nuance can change the very perspective with which one approaches money and investments. Simply to conclude, it takes character and perspective culminating in conscious, continuous wisdom to make a rich person become wealthy and stay so sustainably.
The qualities needed to create wealth from an active business and protect it with investing, take a stark difference in approach. The key differences between both those pursuits are here below:
| Wealth Creation | Wealth Management |
|---|---|
| Personal control over performance and results is high | Limited personal control over performance once investment is committed |
| Emphasis is on innovation and experiments | Limited room for experiments and errors. Hence greater role for judgement |
| Scepticism and Cynicism are generally unfavourable | Scepticism and Constructive Cynicism are favourable attributes |
| Sharing of risk is possible with other stakeholders. | Entire risk is borne by the investor |
| Shorter gestation cycles between action and results | Longer gestation cycles between action and results |
| Inaction is generally a negative virtue | Inaction by not reacting to every other situation is a positive virtue |
Sustaining Wealth
The world's 1% population holds nearly half of all wealth created and sadly the bottom 50% of population own only 1% of all the wealth ever created. Such dichotomy in distribution of wealth is quite glaring and at the same time it is curious to see how despite attracting taxes quite steeply and regularly, what keeps the wealthy motivated to continuously grow their wealth. Wealth apart from providing a desirable lifestyle provides several intangible benefits:
- Wealth puts disposable TIME - the ultimate asset in absolute scarcity- at your hands to engage in priority pursuits resulting in personal and greater good.
- Wealth provides social capital, the networks of relationships among people who live and work in a particular micro society, enabling that society to function effectively.
- Wealth engenders broadening of thought and action at a societal level, a key ingredient infact to perpetuate social capital.
- Wealth allows you to nurture and foster innovation and progress accommodating and absorbing inherent risks.
- Finally, wealth provides the pedestal and the platform to inspire and influence others and bring about a desired social change.
Hence, wealth being great power, brings greater responsibility and therefore great respect.