Hello,
Welcome to another post from Serfdom Road.
There are a select few books, podcasts, or even people, that splash cold water on my current belief system, and awaken me to the real truth of my existence.
A truth, that pulls me from my road to serfdom and on to a new road to freedom.
This YouTube video below is one such source that enabled me to see more clearly the current road I was aimlessly walking down, and how to venture on to a more prosperous one.
The man in this documentary is Anton Kreil, a former trader for Goldman Sachs.
In this article, I will breakdown the key points Kreil makes in this documentary.
Enjoy!
1. Respect, but be indifferent, to money (00:21:00)
Firstly, we must know the function of money, and why it exists. Money exists as a medium of exchange, and enables more efficient transactions than a barter system (for more information please see my article Why Gold?).
We are told, often from an early age that; “Money is the root of all evil”, “Money doesn’t make you happy”, “The more money you have, the more problems you have”, etc.
For Kreil, it is obvious that money has a function - just imagine a world without it.
It is also perfectly acceptable to want more money, to want to do better for yourself, and your loved ones - this is positive greed.
The flip-side is negative greed - to want to become wealthy through the abuse or coercion of other people.
At around 30:50, Kreil demonstrates a brilliant thought experiment on what we think of money.
Kreil argues that money, whether it’s $20, $100, $1,000, or $5,000, is just a commodity with a monetary value.
It is the emotional response of the holder of the money that is the problem - not the pieces of paper with numbers written on them.
Respect money by knowing it’s function in society, but be indifferent towards it by not attaching any emotional value.
This is how you can begin making better financial decisions.
2. Define assets and liabilities (00:42:40)
Most people do not know the difference between an asset and a liability.
To put it simply: an asset puts money into your pocket; a liability takes money from your pocket.
For example, you may have a mortgage on your home - is your home an asset, or a liability?
Well, a mortgage is a liability, as it takes money from you on a defined schedule - therefore your home is not an asset at all (at least until you own 100% of the equity).
Ideally, you want to pay for everything in cash.
Think about car finance, insurance, credit card payments, mobile phone contracts, etc. - these are all liabilities that most people have.
Apart from your salary, do you have anything else that puts money into your pocket instead of taking money from your pocket?
One of the biggest “pandemics” right now, is that everyone is drowning in debt, on top of more debt - we are all funding lavish lifestyles with debt, instead of cash.
Wealthy people do the exact opposite.
With regards, to buying a home, we are all coerced, pushed, or propagandised into owning a home - a home that requires you to take on debt.
What people don’t realise is that you can rent, and renting is not a liability, or just throwing your money away - it can be an asset, because it buys you more freedom.
The freedom to move around, and to not, after 25 years of mortgage payments, end up with a home with less value than what you paid.
Kreil ends with a great insight: if the mortgage is a liability for you, then it is an asset for the bank.
The infrastructure we exist within has been designed to benefit everyone else but you.
We need to start building our own infrastructure.
3. Build, and own, your own infrastructure (00:50:22)
Save. Save. Save.
(I wrote that three times for my own benefit!)
To start building your asset base (or infrastructure), you first need to save, and have no liabilities.
The problem with 99% of people, is that they use their salary to fund their liabilities - that is (mostly) why they are the 99%, and not part of the 1%.
The difficulty here is in accepting your true standard of living; not the one you can have by taking on debt.
The next step is to start a business - today, most businesses can be started with zero capital (blogs, Instagram, Fiverr, etc.).
If not a business, then some way of producing passive income - money that is put into your pocket, even while you sleep e.g. investing.
One important part of anyone’s asset base is their pension - for Kreil, however, pensions have failed.
More and more elderly people are now having to work part-time, or even full-time, to fund their lifestyle until the day they die.
WARNING: CONTROVERSIAL OPINION
Do not sign-up to workplace pension schemes.
Sure, they offer tax breaks and the government tops-up your pot with “free” money (sorry, worthless currency!).
But when you retire, you have to pay taxes on the amount you withdraw.
You also have the risk of not knowing what the tax rules will be when you retire, which could be decades into the future.
You also have to lock that money away over a long time period, with a hefty fee for withdrawing early (wonder why?).
Also, word of warning, in 2008, the Argentinian government nationalised $30 billion in private pensions funds - in effect they took control of private pensions and used them to fund government debt!
Insurance is a fear pitch - most insurance models are built so that they hardly every pay out.
Apart from insurance that is a legal requirement, most insurance schemes are there to scare you into taking on another liability.
Your infrastructure is your insurance - the wealthy do not have insurance because they have the capital to cover any unexpected expenses.
One last point that Kreil makes that really drives home how the infrastructure, that we currently operate within, is highly-geared against us - credit reports.
How insane is it that to prove how good you are at managing debt, you first have to take on debt, and then get scored on how well you paid it back?
Your reward is that you are able take on even more debt!
Save. Invest. Build.
4. Travel (01:01:26)
We’ll leave this one for obvious reasons but feel free to check it out in the video!
5. Risk is subjective (01:07:26)
What is risk?
Risk is the chance that an event will occur, with a given magnitude.
In life, we assess risk as having an upside and a downside.
What is the upside versus the downside of leaving your current job? What is the upside versus the downside of moving to a new country?
Kreil offers a good example: if you are earning $50,000/year, and you decide to just quit your job, what is the likelihood that you will earn less than $50,000/year, and what is the likelihood that you will earn more than $50,000/year?
Well, the downside is anywhere between $0 and $50,000 - the likelihood being that at worst, you will earn only a little less than $50,000.
The upside?… All the money in the world!
So, you have a small chance that you will earn less than $50,000, but a small chance that you could earn all the money in the world!
The problem, though, is that in reality most people use their salary to take on as many liabilities as possible.
So if someone quits a $50,000/year job, with $50,000/year in liability expenses, well… that’s incredibly risky!
Risk is subjective, because it depends on your own personal situation.
Only with freedom, and wealth, can you assess risk objectively.
6. Alternative education (01:18:20)
So, you want to be rich and successful? You want to learn how to build and manage businesses? You want to learn how to manage money?
Well, do you remember that class in your government day care centre (sorry, school) that gave you all those skills?
No? Me neither.
The infrastructure of the traditional education system is not set-up to teach you how to be successful.
It is set-up to imprison you with other chimpanzees for 8 hours-a-day, to be taught by (mostly) below-average humans, and to condition you to become a compliant member of society.
Even if you step outside of the education system for an alternative education, it is usually to worship a footballer, pop star, or some B-list celebrity.
If you want to be wealthy, learn from the wealthy.
People like: Peter Lynch, Robert Kiyosaki, Peter Schiff, Mike Maloney, and many more.
Unfortunately, many resort to their favourite Instagram star, or worse, their local politician, for help on improving their life.
7. Value time (01:24:20)
This next chapter of the video is a real-life version of the “Lady in the Red Dress” scene from the film, The Matrix.
Here, Kreil looks upon all the corporate workers walking into London, with both sadness and disbelief.
Time is your most valuable commodity - it keeps running lower and lower.
Yet, most people swap their time for a monthly salary, and their salary for liabilities - with the net result being 0.00 in their bank account.
Your most important business card, is the one you put into the ATM.
The number that looks back at you is the one that tells you whether or not you are doing things the “right” way.
8. Ditch the smart phone
Anton Kreil, a former Goldman Sachs trader, does not have a smart phone.
I repeat… he does not have a smart phone.
Kreil has a dumb phone, that only sends/receives calls and texts, with room for only 50 contacts.
For Kreil, if you are not more important than the least important person in his phonebook… he ain’t getting your number!
This leads on from valuing your time - too much of our time is wasted on social media, gaming apps, taking selfies, and reading celeb gossip columns.
Ditch the smart phone (or at least reduce your use), and get back some more of that valuable commodity: time.
9. Mainstream media is useless
One needs objectivity, clarity of thought, and independence, in order to become successful.
Mainstream media outlets do not encourage, or in most cases diminish, these important life skills.
Kreil explains that there is no difference between Fox News, the BBC and state-sponsored news in China - they all have an agenda, and the agenda is the agenda.
They all have a purpose, and that purpose is to brainwash the consumers of that news outlet.
First, recognise that all media outlets are designed to keep you hooked, in order to generate as much ad revenue as possible.
Second, just ignore it!
Only consume what can add value to your life, and your pursuit of success.
10. Role models - choose the right one
The problem is celebrity.
Mainstream media glorifies celebrity.
Most celebrities are only famous for being famous.
Celebrities are commodities used by the media to generate higher ratings.
Choose a role model that suits your objectives.
Find role models and mentors that have a track record of achieving your chosen objectives.
Don’t turn on, tune in, and drop out.
Save. Invest. Be free.
I hope you have found this article insightful and helpful!
Please feel free to comment below.
Kind regards,
Le Libérateur
Photo by Markus Spiske on Unsplash
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