Those who have money think life is fair. Those who don’t have money think life is unfair.
What if, no matter which side you represent, there are other unfair truths? This question has kept me curious for 5 years. I’ve learned working in banking and as an investor that things aren’t as they seem. There’s more to money. A lot of the principles aren’t obvious.
Let me share a few truths I’ve found that affect you, and once understood, can help you be smarter financially.
Even when you make a bucketload of money, poor choices can ruin you
Mike Tyson made almost $700 million. Today, he’s worth about $3 million.
Lindsay Lohan earned about $28 million. Today, she has about $800,000.
Dennis Rodman made over $27 million. Today, he’s worth about $500,000.
Choices are more powerful than income — Steve Adcock
This is rarely spoken about. When you make a lot of money, life can actually become more unfair. Many of us are not psychologically programmed to manage millions of dollars.
The temptation to use money to inflate our egos, show off, or to use against our enemies is high. The truth I’ve learned is it’s not whether you can make money — it’s whether you can keep the money.
Money can make us lazy. Laziness can cause us to make stupid decisions. Laziness and too much ego are how Mike Tyson lost his fortune.
Inflation depends on whether you use the 80s, 90s, or 2020s calculator
Inflation is unfair. It’s a hidden tax many people pay without realizing it. I’m paying it right now. To sleep at night, I’ve kept some money in a savings account paying 0.3%. Inflation makes my money decrease in value faster than a balloon you pop with a pin.
The trouble with inflation is we’re told it’s 2% on average every year. Right now the official US data for inflation says it’s about 5.3%. Things get ugly when you question financial reality. Especially when you start to dissect how inflation is calculated.
There are many inflation calculators you can use to measure the annual increase in prices. A website called Shadow Stats has an 80s, 90s and 2020s calculator.
The 1980s calculator shows current inflation in the US is 13%. The 1990s calculator says inflation is more like 9%. That’s another tax you pay on top of income tax. The unfair truth is you can’t ignore it.
If you delve further into the Shadow Stats data, you’ll see that unemployment numbers, rent increases and US GDP calculations we’re given are way off too.
There’s a trend. Every year the economic stats get worse, the official data simply excludes more things to make the financial system look healthy. The world being partially shut down since March 2020 will have ramifications at some point. Until now the economic data cleverly papers over the cracks.
Why this matters
40% of Americans have no investable assets, according to research. With no tangible assets the average person is painfully affected by the high inflation numbers that dilute their purchasing power.
Over time this dilution creates wealth inequality. It’s the unfair reason why the wealth gap is widening. It’s also why financial education is now a survival skill, just like having an income to pay for food and shelter is.
At the same time central banks like the US Federal Reserve are creating a record amount of US dollars out of thin air to pay for the ongoing challenges of the global health crisis. All this freshly minted money helps to wipe out the middle class, who don’t have assets like stocks to stay ahead of inflation and money creation.
Financial education helps inequality go from invisible to visible.
A war between two currencies
The US dollar and Bitcoin are at war. The US government and regulators are trying to sort it out. It’s no easy task.
One is a currency backed by a powerful government. The other is a currency created by an anonymous person named Satoshi Nakamoto who hates what happened in 2008 — when banks got bailed out even though they were irresponsible, greedy devils. Crypto expert Balaji Srinivasan explains the difference between the two currencies perfectly.
If we think about it in terms of tradeoffs, USD has short-term stability and long-term depreciation while BTC has short-term volatility and long-term appreciation.
The battle between the two is unfair. USD allows you to transact. Bitcoin helps you store your wealth. End of story.
A new class of landlord has emerged. They want your home.
Airbnb started the trend of businesses buying homes to rent back to everyday people. First they bought hotels. Then they started designing homes. Now they’re building Airbnb branded apartments in Miami, Austin, Orlando, and Nashville. Yippee.
The enormous Lloyds banking group in the UK is tired of low interest rates that crash their profits. Now they’re buying up property from UK citizens with the goal of gobbling up 50,000 homes.
In the future, you better suck up to your bank or they could kick you out of their home. Writer Jarod Brock reported that Blackstone is specifically hunting single-family homes as a way to cash in on the boom. Financial firm Blackrock owns billions of dollars in homes too.
Owning family homes is a business now. It’s unfair but true that when you go to bid on the next home, you’ll likely have to outbid enormous banks and institutions that would prefer you to be their tenant, so they can control the price and maximize profits.
Homeownership used to be sacred. Not anymore.
The forgotten and deeply unfair truth of real estate
Crypto investor Michael Saylor slapped me over the face. He explained in a series of interviews that buying real estate has a huge hidden downside. I’d always been peddled the idea of owning real estate by the men in pinstripe suits, who swore on their mother’s grave it would make me rich.
Land tax of 1%-2% takes away a huge part of the profits from real estate.
Where I live in Australia, the government plans to increase land tax. Even if land tax is low now it can easily be increased. If you own land you’re forced to pay it even if your poor tenant has stopped paying rent because they lost their job. When governments need money to pay for a health crisis to reduce their debt, it’s a goldmine to tax landlords. It’s unfair but it makes sense.
These two investments have stupidly unfair gains
Many people buy real estate or the Vanguard US stock market index fund with the goal to build wealth slowly.
I respect that.
A low-paid school teacher I know has made millions of dollars in the last few years. He no longer works. How? Tech stocks. All he did was heavily invest — using debt — into high-growth US tech stocks like Amazon, Tesla, Shopify.
People like me have invested heavily into cryptocurrencies like bitcoin and ethereum. I’m up more than 10X. It has made me a lot of money. It’s unfair that so much money can be made in such a short amount of time.
It upsets a lot of people. You could say it’s unfair, but we all had the opportunity to invest money into the technology that has and will continue to shape our future.
I’ve never been one to be upset with someone who has had financial success. Instead, I try to learn what they know, and more importantly, where they get their informational advantage from. That’s how I discovered phenomenal investing resources, like Real Vision on Youtube and Twitter.
Sovereigneur on Twitter explains why these two assets create such a huge advantage: “Tech Stocks and Crypto Projects can scale exponentially. And operate with maximum efficiency and low operating expenses.”
Investing money into a side hustle is the best investment
A finance TikToker argues for many people a side hustle is the best way to make money as opposed to stocks. I agree.
Stocks and crypto can be easy money. The unfair advantage of a side hustle is it builds your skills. Five years of investing in a side hustle every day will make you a lot more money than investing in stocks if you stick at it.
A side hustle is an investing machine that compounds exponentially over time. If you do it right you won’t have to work as many hours once you’re far enough into it. Investing in financial assets taught me to be lazy.
Investing time into my side hustle taught me skills I could never have imagined I’d acquire. At the same time, you can give yourself a pay rise by adding an additional revenue stream, instead of waiting for a boss at work to give you a raise (they probably won’t).
The unfair part about side hustles is they look stupid until you’re 5 years in and zoom out. Then the Matrix you’ve previously been living in is revealed.
Money is unfair unless you deliberately level up your financial education. There are so many counterintuitive parts to understand like inflation, real estate as an investment, the unusual gains of crypto and tech stocks, and the power of a side hustle.
Ultimately, when you invest money back into yourself and your skills, life improves. Life goes from unfair to “let’s make it fair.” That’s what most people don’t know about money. Now you do.
This article is for informational purposes only, it should not be considered financial, tax or legal advice. Consult a financial professional before making any major financial decisions.