Getting Around - And Over - The Mountain

The human race is without question the dominant species of our planet. And nothing is more symbolic of this than our position at the top of the food chain. And it's something we should be thankful for. If nothing else, at least no one eats us, right? :)

But when it comes to finance and economics, being at the end of the chain does not mean you're on top. And it's actually a bit disadvantageous. What do I mean?

A food chain is more of an an inclined plane. And it goes something like this:
grass -> eaten by cow -> eaten by humans
Getting Around - And Over - The Mountain. The human race is without question the dominant species of our planet. And nothing is more symbolic of this than our position at the top of the food chain. And it's something we should be thankful for. If nothing else, at least no one eats us, right? :)  But when it comes to finance and economics, being at the end of the chain does not mean you're on top. And it's actually a bit disadvantageous. What do I mean?
Doesn't look like it, but that was actually pretty tasty beef.

But in finance/economics, the dynamic is more of a mountain. And it goes something like this:

raw materials -> processed by manufacturers -> sold by retailers -> paid for and used by consumers.

And the way the product or service moves is through money. The retailer pays the manufacturer for it, then the consumer pays an even higher price to get it.  So if we want to save, we can go around the mountain and get it from the source. But even if we do so, we're still at the foot of the mountain.  So we see, consumers are at the end - but not the top. And the reason is both the manufacturer and retailer made a profit in exchange for their efforts. In contrast, a consumer has no other advantage other than enjoying the product or service he bought.

And the way the product or service moves is through money. The retailer pays the manufacturer for it, then the consumer pays an even higher price to get it.

So if we want to save, we can go around the mountain and get it from the source. But even if we do so, we're still at the foot of the mountain.

So we see, consumers are at the end - but not the top. And the reason is both the manufacturer and retailer made a profit in exchange for their efforts. In contrast, a consumer has no other advantage other than enjoying the product or service he bought.

Sure, he got what he paid for, but it's usually for stuff that won't last: that smart phone will be obsolete in a year - no mater how high-end it is. That laptop will be old in 2 or 3 years max, and probably that tablet too. We, of course, need to buy food constantly.

And that's the essential problem with being a consumer - there's an endless appetite for consumption.

But actually, everyone is a consumer. Even the business owners and manufacturers. The difference is that they didn't stay as just consumers.

But what separates investors and business owners and puts them on top is that they made their profit without as much time and effort as the rest.

In contrast, the manufacturer had to work a lot of hours to create so many product to sell.

If you think about it, you could spend an entire day just to create a really nice chair. But it's possible to sell a hundred chairs in just an hour.

In this regard manufacturers are like employees; needing to invest a lot of time and effort just to stay competitive. Of course, they can get to the top too. But only when they're better than everyone else. The problem is, there's a lot of other people to compete with - a whole lot.

At first this might seem like a static situation. We have to be employed to earn money. It's not like you can just put up a business and get rich.

That might be true, but there's plenty of room at the top of the mountain for everyone. And there are two main ways we can do that.

First, we can climb it. And we do that by starting our own business, or any other income-generating endeavor. It's difficult and risky, but also very rewarding.

Second, we can just raise our position. And we do this by investing. It's easier than climbing, but much slower. There's also risk involved, but the reward is also great.

And the great thing about this is we don't have to choose. You can either start a small business or make a small investment. Let it grow and think about what a good next step is.

But unlike climbing a real mountain, starting the climb is harder than reaching the top. So if you start now, you could get there in no time.


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1 comment:

  1. Fantastic post! I was specially struck with not buying before 2:50pm because I tend to buy at any time, as long as the price reaches my comfort level. Since I only buy 1-3 times the board lot, even if the price goes down after I buy, that only means a loss of a few hundred pesos at most.

    That's why it's so great to start investing with only a small budget set aside per month when you're just beginning. At the very least, even if you commit a major blunder (which happens a lot), you won't feel the need to throttle yourself and just chalk it up to your learning curvr.

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