> [!error] For rich people, a large part of their wealth is LITERALLY USELESS to them. # Trading Analogy In Trading, you have an order book. It shows you how much liquidity there is at a certain price. ![[order_book_example.png]] Here, the left side of the green chart shows you how much total money (buy volume) is willing to be spent on this stock at a price of `<$10`. Similarly, on the right side, it tells you how much total money (sell volume) is willing to be sold at a price of `>$16`. If the price never reaches `>$16`, it literally doesn't matter how much was willing to be sold. If it never reaches `<$10`, it literally doesn't matter how much was willing to be spent on buying. *(in practice, in highly efficient markets with bots, this matters - but not to the theoretical analogy)* # Net Worth Net Worth is similar. If you have a net worth of $2M, but throughout your life never go below $1.5M of net worth (i.e your assets never drop that much in value, and you never spend the money) - then it literally does not matter that you had **$1.5M**. ![[net_worth_spend_example.png]] This has a lot to do with my writing in [[website/Philosophy/The Value of Money|The Value of Money]] and [[Return on time]] ![[Return on time#^key-point]] As said in the illustration - the only extent to which the green part matters is: - a) having **a safety net** in case something goes wrong and you need to dip into it - b) as a **psychological aid** - safety aid something to help you feel calm and secure - also allow you to feel greater freedom/incentive to spend on serendipitous things (holiday here for the hell of it, new gadget/hobby/etc just to try it out) - more confidence / feeling of success a) doesn't need to be $1.5M, it should be a much smaller number. b) is wasteful. The brain can easily be hacked to feel safe and secure with less. A large part of the world's (non-Western) population is living proof of that - living with nothing, but no real anxiety. # Are You Over-Investing? One could very well make the case that a lot of the dollars in that green bucket were over-invested. In other words - it would have been more prudent to just spend. Now, this isn't mathematically accurate. It's not 100% of the green bucket that doesn't matter. A lot of the returns that are generated are based on the invested capital - hence the upswings you see in the chart are only there because of the green bucket. So let's simplify: - imagine no market volatility - everything is constant (e.g you've bought bounds) - imagine no downside - e.g there is no inflation (or more realistically - you're pacing perfectly in line with inflation) ![[net_worth_spend_example_simplified.png]] Now, it literally doesn't matter where this green bucket goes. ![[wife_losing_business_flex.png]] # Opportunity Cost What's more interesting besides the raw dollars that could be spent is... where your time could be spent. If you are above the number you need: - i.e have enough money to support yourself - cannot name 3-5 buyable things that you really really desire right now then any time spent on making more money is **literally wasted**: - it brings no value to your life - at the end of your life, your life would literally be the same if it weren't there So what becomes immediately more important is - what else is lacking? Where's the bottleneck? A simple and common example is neglecting optimal health/longevity due to pulling all-nighters and taking drugs in order to work more. # Conclusion This is **much easier said than done**, though. - it’s one thing to say it and logically agree with it - it’s another to internalize it It takes quite a lot to re-wire the brain from a scarcity mindset to an abundance mindset. You're basically biologically wired to be afraid of running out of resources (and for good historical reason) - so it's pretty hard to recognize the massive abundance you live in, were you to be fortunate enough to be in the spot I illustrated.