In my previous letter, I wrote that ownership was important – but why is this the case?

In the world we live in, money flows from those who do not have ownership to those that do.

It’s why you buy from a seller on eBay and not the other way around. This is the same with the likes of Amazon. And it’s the same with all your favourite restaurants, video game stores, airlines, and more.

Money is similar to energy (the main difference being that theoretically, energy cannot be created or destroyed, while money of course, can be printed and destroyed).

But ultimately, money simply changes hands (as illustrated below).

Consumer -> Producer

It really is as simple as that.

So when you buy a car, the money you pay for the car leaves your hand and goes to the seller. When you go shopping for clothes at your local retail store, the money goes from your bank account to the retail store’s bank account.

So for us to build wealth, we have little choice but to own things – like property, businesses, and other assets. We could keep all our earnings from our 9-5 in our bank account but it’s much harder to build wealth that way because forces like consumerism and social media influences fight to move money from our hands into the hands of large conglomerates.

A few well-known ways I’ve seen to build wealth is to do one of the following:

• Start a business
• Invest into index funds such as the S&P 500, All-World, or World Value funds
• Get a lot of promotions, or hop jobs

There are always tons of other options such as assymetrical bets (which includes crypto, winning the lottery, gambling), but because they’re risky by nature, you may be just as likely to fail as you are to succeed with them.

Ownership is incredible because you transition from a consumer to a producer. You go from paying others to others paying you. When someone buys a burger from McDonalds, Pizza Hut, or KFC, they are paying money to those restaurants, who will then pay their profits to their shareholders.

You can become a shareholder of the world’s biggest companies by investing in an index fund. Once you’ve invested, that’s it – you’ve become a producer. I’ll write more about index funds in a later letter.