Dear Friends,
It seems to me, those who use debt to buy sneakers will always be poor, while those who use debt to buy a coffee shop, will probably eventually be rich. Those who put sneakers on a credit card they cannot pay off that month, will always be poor, because of several factors. One is they are using debt wrong, two is they have the wrong mindset about money, and three they don’t understand compound interest. If you are on the wrong side of any of these things, you are destined to be poor, or at best struggle your whole life to keep your head above water… no matter how much money you make. If you are on the right side of all of these things, you will find economic life gets easier and easier… no matter how little you make. The choice is yours, live a difficult and dangerous life, or one of relative leisure?
Debt is a tool, like a chain saw, it can do a great deal of work for you… or it can chop off your arm. You wouldn’t think about handling a chain saw without any training or even seeing someone else do it… would you? That would likely lead to an emergency room visit. Yet we do exactly that, all the time, when a teenager gets a credit card or other debt instrument. Our schools are studious about not teaching anything about money or economics. So the young person starts out with a dangerous tool without the least bit of training on how to use it. I ask you, does that make sense to you? No wonder so many cut off their own proverbial economic arm with it. Debt is a tool that can make you tons of money… or it can cut off your arm, so, since you have to use it… why not learn how?
Starting a business is more than just gaining a source of income, it is a growing and learning experience. Therefore, even if it fails, you are better set up to win in the future. You learn about payroll, accounting, profit loss, cash flow, keep levels, inventory management, logistics of delivering a product, etc… the knowledge from your first business will be worth triple, in life outcome, than a college education today. Not that learning to whore and drink all night is not a valuable life skill, but it bestows less life improvement, than knowing how to do things. The great thing about business is that if it fails there is bankruptcy. It wipes the slate clean, so you can start your next business, the fable banks won’t lend to you if you have a bankruptcy is just that… a fable. That is another thing you learn.
Those who are willing to take a chance and fail, are more likely to take another chance, this is the reason good gamblers often make good businessmen. By the laws of probability, coupled with the learning each failure inculcates, makes success almost guaranteed… eventually. Everyone who is rich, especially the uber rich, are people who took a chance. Elon Musk is a risk taker extraordinaire. No one rolls the dice like he does. But he doesn’t blindly roll them… he uses weighted dice, and you can too. Everything you know before you throw those dice and start a business weighs them in your favor. The more you know then, the more the die are likely to roll your way. If you learn enough, the dice will be so loaded you can’t miss… and that is the goal.
Compound interest works in all factors of life, economically, socially, politically, etc… and in all these areas of life, it has the same effect. Few start out rich, connected and learned. We build our wealth, companions and knowledge throughout our lives. The friends we make as children pay compound interest for us as adults, the knowledge we gain throughout our lives pay us compound interest in opportunities, and the investments in assets we make pay us compound interest economically. Cigarettes, for example, are a poor investment of money, time and health, they do pay compound interest though. Everyone starts out poor, but those who have the right mindset become rich, while those with the wrong ones are trapped forever… unless they change their minds.
Sincerely,
John Pepin
