WEALTH VS INCOME Um. Wealth (assets, balance sheet) and Liquidity (cash, income

WEALTH VS INCOME

Um. Wealth (assets, balance sheet) and Liquidity (cash, income statement) are two different things. You can have a lot of liquidity and have no insurance against volatility, and you can have a lot of wealth and have no liquid cash.

The challenge we all face is that while cash can be used in the short term because its value is highly perishable. While assets can be used in the long term, but in the short term it’s value is highly perishable.

This is where business comes in.

Owning Family and Offspring (intergenerational assets)(risk mitigation for self)

Owning Liquidity (short term) (entirely under your control)

Owning Businesses (medium term) ( largely under your control)

Owning Assets (long term) ( only under your reactive control )

Owning ‘The Franchise-Citizenship’ (very long term) (risk mitigation for assets)

All financial orders, whether Personal, Business, Community, and National all work similarly in this regard. The difference is only in our ability to obtain credit.

Now, what I have noticed is that people do not think in terms of accumulating a portfolio of all three. Because instead of generating liquidity for the purpose of accumulating businesses AND assets, they seek to maximize liquidity OR assets. And that is where they get into trouble.

The only way to make asset holding a business is by trading and it’s a fool’s game unless you have vast holdings with which to take advantage of market frictions, take advantage of market ignorance, take advantage of political frictions and ignorance, or to directly manipulate the market.

THE SMARTEST THING TO DO IS “ASSETS BEFORE ASS, LIQUIDITY BEFORE PARTY”