Wealthology Read online

  Wealthology

  Creating Lasting Prosperity in an Uncertain World

  By Akinaw Bulcha

  The material in this book is intended to provide you with accurate and trustworthy information. However, the publisher/author is not recommending financial advice specific to individual needs. The purpose of this publication is to provide a way of thinking about economic and financial ideas. No part of this material can be taken to suggest the author is personally liable for the use or application of the material in this publication.

  Copyright © 2010 by Akinaw Bulcha. All rights reserved.

  No part of this publication can be used for commercial purposes without the written consent of the publisher. Any part of the material may be used in blogs, social media outlets, and all news and information media if the purpose of its use is not for re-sale.

  To receive permission to use any part of the material for commercial purposes, please email the publisher: [email protected]. Original cover illustration concept was created by Comstock Images. License to use the image was purchased through Getty Images, Inc. The book cover was formatted by Nong Vang Design (www.nongvang.com).

  Dedicated to anyone who……

  … is smart enough to get that there‘s hidden gold in personal, business, and economic failures.

  …is bold enough to have a dream.

  …believes in themselves.

  …is willing to question their assumptions.

  …wants a solid foundation for making financial decisions.

  …wants total control over their financial life.

  …is looking for an easy, fun and motivational way to understand economics.

  …doesn‘t have time to read lots of books.

  …can see that ―Wealthology‖ can only be learned after false assumptions have proven their worth.

  …who wants to learn something once and move on with their life.

  Contents

  Introduction

  You Must Read This First! 1 Adventures in Squirrelmerica 3 Wealthology 7

  The Secrets of Entrepreneurship The Only Way Money is Made 15 The Rules of the Money Game 27

  The Secrets of Economic Literacy

  Why You Need Economic Literacy 45

  The Few Economists You Can Trust 53

  How to Really Understand Your Financial Universe 63 Making Money With Economic Literacy 81 The One Thing Everyone Needs To Understand 93

  The Secrets of Capital Management

  Riches to Rags 107

  Be Like Grace 111

  Golden Gloves and Golden Records 121

  What"s Your Store of Value? 127

  Two Global Trends You Can"t Ignore 139 Understanding How Government Scams Taxpayers 141 Quigley"s Prophecy: China, Inc. vs. the U.S. 149

  The Secrets of Productivity How to Make Things 161 Making Things: The Secret Ingredient The Story Behind the Money Story 169 Why Making Money Could Be Easy 185

  Concluding Thoughts

  Postscript 189

  Acknowledgments 197

  Read This First!

  It‘s not every day an author forbids readers from doing something with his book, but I‘m doing just that for important reasons. You‘re forbidden from doing any of the following things:

  1. You‘re forbidden from reading the last section of this book before reading the other sections first. 2. More importantly, you‘re forbidden from writing a review of this book that gives away the assignment part in the last section of the book! You can talk about the whole book except for the assignment. That would prevent other readers from getting the benefit of the experience! It‘s one thing to screw up the experience for yourself but quite another to do so for someone else.

  Getting the Most from this Book

  Here are a few instructions that will help you get the most from this book: 1. In the hope of making this book more experiential, you‘re encouraged to underline, write notes, and mark anything that stands out at you. Following this instruction is extremely important in creating more value than you‘d otherwise get if you don‘t interact with the ideas in the book. If you feel strongly about anything, if you agree or disagree with anything, if any statement jumps out at you, please make sure to mark it somehow. You‘ll find out why later—it‘ll be well worth it. And when you find out the reason, remember that you can‘t share just that one part with anyone else until they‘ve read the book themselves.

  2. All readers aren‘t created alike, so there are two ways to read this book. a. For patient readers, just read from the cover to cover. b. For the fast start reader wanting to get into the middle of the

  action, read it in this way:

  i. Start by reading section 2 on economic literacy. ii. Then read section 3 on capital management.

  iii. Then section 4 on productivity.

  iv. Then section 1 on entrepreneurship.

  v. Then, only after you‘ve read the first four sections, read the final section on wealth consciousness.

  The Background The following pages are made up of letters to my nephew Kidus (pronounced ki-deuce) who lives in Ethiopia. It‘s an attempt to teach him what he needs to know about how money (wealth) is made. It‘s my attempt to give him all the tools he needs to create a prosperous life if he comes to live in America. His father, sister, uncle (me) and his aunt (my sister) have all emigrated to the U.S. and there‘s a possibility he may join us soon.

  He lives in Addis Ababa, the capital of Ethiopia. He speaks perfect English, has new paved roads (built by the Chinese), as well as clean water, food, but most importantly, Google and Youtube! Throughout the letters, sometimes I ask Kidus to watch a documentary or read an article online if he wants more background on a given topic. You may want to check them out as well.

  Also, you may read some things you may not agree with in the following pages but keep going until the very last sentence and it will all make sense. Three small paragraphs may be hard to swallow for some (as they would‘ve been for me at one time) but rest assured that it‘s part of the lesson.

  A few reviewers of the book have said that, although they agreed with what they read, some of the stuff wasn‘t easy to stomach. For me, knowing the truth is important even if it‘s not what I want to hear or creates temporary discomfort. Keep in mind that experiencing a little temporary ‗intellectual‘ pain will save you from experiencing financial pain. All our assumptions (i.e., our worldview) have consequences; our economic assumptions have financial consequences. Also remember that you can profit from every ‗comfortable‘ or ‗uncomfortable‘ idea in this book. Don‘t be discouraged about anything you learn; just remember that these ideas can be monetized.

  Lastly, you may find it hard to believe that understanding economics can be so simple. But don‘t think that because it has been made easy, the quality has been diminished in any way. I take my readers very seriously. This book is as useful for someone who has a financial background as it is for the newbie.

  In Your Service, Akinaw Bulcha.

  Adventures In Squirrelmerica

  Dear Kidus, I‘m optimistic you can learn all you need to know about money, investing and wealth creation in a few short letters. My optimism isn‘t based on my teaching ability but on the fact that a little reflection on the current economic crisis can teach us all we need to know.

  To make learning those lessons easier and more memorable, I‘ve come up with a short story that we‘ll revisit from time to time. This story teaches three important things:

  1. The big picture of how wealth is created in an economy.

  2. The big picture of how wealth is destroyed.

  3. The big picture of why the U.S. is in a recession.

  “I found the crown of France in the gutter and picked it up.” ~Napoleon.

  Adventures in Squirrel
merica “What a good country or a good squirrel should be doing is stashing away nuts for the winter. The United States is not only not saving nuts, it"s eating the ones left over from the last winter.” ~Bill Gross.

  Imagine that America was a land of squirrels. The only thing Squirrelmerica bought and sold were nuts of all varieties.

  Our story begins… Since its founding, Squirrelmerica had gone through ups and downs, a civil war, unrest, and a global war on Communism. But it kept chugging along, always creating more prosperity for the next generation. Every generation left more nuts stashed away in the hollows of the forest trees for young Squirrelmericans to enjoy.

  But in the 20th century, a strange virus slowly infected Squirrelmericans, distorting their ability to make good decisions. The virus silently drifted through the dense nut forest without the knowledge of the squirrels. The trees began to mysteriously produce more nuts than ever before all on their own. Enormous harvests magically appeared. This seemed like good news but Squirrelmericans didn‘t realize they were under a curse—a magician, one of their own, had found a way to make it look like there were more nuts on trees than there really were.

  It seemed like good news at first but it was slowly leading them down the road to nutconomic collapse. But it was not their nutconomy alone that would suffer. Their spirits would also suffer.

  As drops of acid slowly corrode even the strongest metals, so the magician‘s spell slowly ate away at the spirit of the once brave, proud squirrels. Slowly, and without their notice, they became squirrels without integrity, pride or a strong work ethic. Having been transformed by the slow degradation of their minds, they became sicklier and cowardly—as C.S. Lewis would put it, ―They became squirrels without chests.‖

  Their priorities changed from saving to spending, from earning to entitlements, from peace to war and from work to idleness.

  Because of the squirrelagician‘s curse, Squirrelmericans carelessly ate way more nuts than they needed. Every squirrel was extremely fat and happy— they‘d just lived through an incredible nut party that had lasted 25 years. When they gorged themselves and couldn‘t eat any more, they threw away perfectly good nuts. In fact, they became so wasteful, they used their edible nuts to build yachts, giant screen TVs, mansions and skyscrapers. They bought giant cars called NUTS-UVs that consumed a great deal of nutsoline to run.

  The Causes of the Nutconomic Recession Throughout the party years, no one realized they weren‘t planting new nut trees. Because the old trees seemed to mysteriously produce nuts all on their own, the squirrels stopped thinking of the future.

  ―The trees are blessed with strange magic, we need not work nor think of tomorrow!‖ they said. So, the party just kept roaring along; no one noticed the coming nutconomic catastrophe. Because they expected the magic to continue to work, Squirrelmericans doubled their rate of consumption and waste.

  After eating all the nuts they had available, they devoured the nuts their parents and grandparents had saved up over the past 200 years (since the founding of Squirrelmerica when the first Squirrelitans arrived on Plymouth Nut).

  After their nut inheritance was gone, they borrowed nuts from Chinese squirrels. For some reason, the Chinese squirrels were willing to eat much less, (and almost suffer hunger) in order to lend Squirrelmericans more nuts to consume.

  After Squirrelmerica ate up all of its saved nuts, all of its nut inheritance and all of its borrowed nuts, a long, deep winter then set in. Then tragedy struck, the squirrelagician‘s potion stopped working. Squirrelmericans finally understood that the squirrelagician was a fraud and that the magic was a curse in disguise. As the weeks turned to months, Squirrelmerica‘s citizens began to shiver in the cold and moan of hunger.

  A great deal of anger was stirring in the forest as the suffering intensified. The unemployment rate was 20%, 40 million squirrels were on nut stamps and millions more turned to peanut kitchens to stay alive. Inhabitants joined protest groups such as nut militias and nut parties to give voice to their anger, to demand change.

  The Proposed Fix Squirreliticians on Nutcapital Hill became alarmed and quickly turned to their secret weapon to alleviate the pain (and to save their furs)—the money printing press. ―No need to fear‖, said their central banker Ben Squirrelnanke, ―we‘ll keep printing nutty money (Squirrel Dollars) to avoid hunger and cold.‖ Its government also continued to borrow money from every other squirrel nation in order to stimulate the nutconomy.

  Now, when trillions of dollars of nutty money entered the nutconomy, do you think more nuts (wealth) were created as a result? Was food more available? Of course not!

  All Squirrelnanke and the Acorn Treasury did by flooding the nutconomy with nutty money was to increase the ratio of dollars to nuts, not nuts to squirrels. No more wealth was created because no more nut trees were planted, nor nut factories built.

  Sadly, when Squirrelmericans finally saw the importance of saving and investment in their nutconomy, they found they couldn‘t do so! The nutconomy had changed. When a lot of extra nuts (savings) were available, they could‘ve invested in better factories and more fruitful nut trees. Doing so would‘ve resulted in a surplus of nuts (wealth). But they decided to party instead when they had the chance to build a brighter future. After all, thanks to their great Squirrelagician, Alan Squirrelspan, they had no idea they were over-consuming their nuts (capital)—they thought they were eating from a real surplus, from a miraculous and bountiful harvest.

  But now, all available nuts must be used for survival (what economists call present consumption); it‘s something Squirrelmericans call ‗living from nutcheck to nutcheck‘.

  But there‘s something much more heartbreaking about what‘s now happening to Squirrelmericans. They‘ve had to incur a massive amount of debt to pay for living expenses.

  Because of money mismanagement, even while they go hungry, they must now pay $300 billion per year in interest to foreign squirrels who lent them money. All the borrowed money didn‘t create any more nuts. They‘re in a bigger hole now than ever before.

  Will Squirrelmerica learn about what ails it or will it disintegrate? Only time will tell…

  As I explain the principles of wealth creation in the following letters, remember this story because it teaches us almost all we need to know about it. Also, please mark anything that stands out at you. You‘ve been given an assignment that only requires you to do that one thing—you‘ll find out why later.

  Your Loving Uncle, Akinaw.

  Wealthology

  Dear Kidus, Not long after the worldwide recession began in 2007, the developing world was back on its feet, growing at an astounding rate. But America hasn‘t seen a real recovery yet. Thirty million Americans are still jobless or underemployed. Many Squirrelmericans want to know what happened, why it‘s happening, why the recovery is taking so long and what will happen in the future.

  The millions who have lost their homes, jobs, and healthcare benefits are trying to make sense of the economic situation. They‘re asking why.

  When we ask why, we‘re looking for causes. If we ask, ―Why are so many people unemployed?‖ we‘re really asking a different question without realizing it: ―What‘s the cause of wealth creation?‖ Jobs, after all, are gained or lost as the total available wealth in the economy expands or contracts.

  Answering that one question would tell the business owner, investor, worker, student, and retiree what they need to know about their nutconomic system. After all, we‘re all after the same thing—to increase the total available wealth in the system.

  The Problem With Reason It‘s easy enough for a nation of squirrels to understand that deforestation contracts the supply of nuts in their nutconomy. They can all agree that in order to increase their wealth (nuts), more nut trees must be cultivated.

  But something happens to the reasoning faculties of humans that complicates an otherwise simple concept. Unlike squirrels (to whom their nutconomy is simple to grasp) we humans have different theories of wealth cr
eation. But should we have various theories of how food gets into our bellies? How can that be? Why has understanding nut creation turned into a paradox, a mystery?

  We must answer that question, not only to increase the wealth in the system through our collective work (such as voting) but also to increase what we‘ve got in our own pockets.

  In attempting to answer the ―wealth paradox‖, we should include one other question many look to answer during times of economic turbulence: How do you make it last? What causes lasting wealth? Many who‘ve lost their jobs, who‘ve folded their businesses, want to avoid experiencing the bitter taste of impermanent prosperity. Many still find it unbelievable that so many giant, solid corporations can go bankrupt seemingly overnight.

  When I worked for Citigroup over 13 years ago, it was a solid, giant financial empire with almost $1 trillion dollars in assets. But just a little over a decade later, it was borrowing hundreds of billions of dollars just to stay afloat. What caused this enormous change in its fortune?

  As an entrepreneur I asked myself these questions, but it wasn‘t until the present financial meltdown began and intensified, that all the pieces finally came together (you‘ll understand why later). I instantly understood everything very clearly.

  (The biggest clue in understanding how recessions are made is to answer this one question: ―What‘s the one thing that connects all nutconomic activity together?‖ If our entire nutconomy implodes all at once, the cause must be common to all our economic activities. Something in our nutconomy has ―collectivized‖ our successes and failures. It‘s up to you to find out what it is as you read on).

  Not only did I finally understand the causes of recessions and wealth creation, but I had also learned the mind habits and principles that must be cultivated in order to build and maintain a financially prosperous life. In the blink of an eye, my prosperity consciousness was changed forever.

  As we explore these principles, we must remember that the path to victory is clearest in times of defeat. The present economic situation will give us as much as we choose to take away from it. Theologians tell us that were it not for sin, we couldn‘t know God‘s mercy. The romantic tells us that were it not for absence, the heart would not grow fond.