You are cordially invited to a game that lets you earn money very easily. The game works like this:
You pay $1000 to be recruited as a passenger to a plane.
There are 8 passengers, managed by 4 crew members, who have 2 co-pilots above them, co-ordinated by a captain at the top.
Everytime the “plane” is filled with 8 passengers, the captain retires and is paid out $8000.
When the captain retires, the plane is split into two planes and everyone else is promoted one step higher (co-pilots each become a captain, crew become co-pilots, passengers become co-pilots).
When each plane fills with 8 new patients, the captain of each plane gets paid out $8000 and retires.
This seems like a very easy way to earn money. Where else could you invest money and guarantee a 700% return, only needing to recruit 7 new people into the game?
The problem with the airplane game is that it is a classic example of a pyramid scheme. At first glance, it seems that the payout of $8000 is guaranteed because it seems that the promotions will keep coming.
But if you look at the mathematics, 8 people need to participate before the first player wins. 16 people have to participate for the second player to win. 80 people have to participate for the tenth person to win. If you are the one-thousandth person to join the game, you need a total number of 8000 people to be playing the game before you are paid out. At the end of the game, 87.5% of people playing will have lost money because they will never be paid out.
When is the best time to invest? Is it when you have sufficient income and savings that you feel that you have a surplus to invest with?
The correct answer is much simpler: yesterday, with the second best time being today. Because of the magic of compound interest, investing early is the best strategy possible.
Thanks to a simple mathematic rule, compound interest rewards early, small investments more than late, large investments.
The way compound interest works is that after a given time interval (e.g. year), interest (as a percentage of the original investment) is paid out. The next year, interest is paid out again but as a percentage of the new amount. As an example: 1000 x 1.08 = 1080 (end of year 1) 1080 x 1.08 = 1166.40 (end of year 2) 1166.40 x 1.08 = 1259.71 (end of year 3) …until end of year 10
If we use mathematical shortcuts and convert this into a formula, we can express it as:
(A = future value, P = present value, r = interest rate as decimal, n = number of periods/years)
For example, if we invest $1000 (PV) at an interest rate of 5% (r=0.05) for 10 years, then:
$1000 x 1.08^10 = $2158.92,
meaning we have earned $1158.92 over 10 years. Taking it further, in 30 years our investment would have grown to $10062.66 – ten times our original investment.
Because the formula uses exponents (or powers) for the time, your investments grow exponentially with time. This means that the earlier you invest, the greater your returns become disproportionately. This is why within 10 years, we have more than doubled our initial investment despite a reasonable interest rate and not doing anything else.
A rule of thumb for calculating how long it will take your investment to double is to divide 72 by the interest rate in % (e.g. 7). This is the number of years it will take for your investment to double (e.g. 72/7 = 10.3 years).
On top of this, if we invest small amounts every year, then we can benefit even more from the exponential growth of our investment. For example, just by adding in $100 every year, we end up with an additional $564.55 of investment earnings at the end of 10 years – a 50% increase in returns.
Unfortunately, mathematics works both ways and compound interest also applies to certain loans, such as credit cards. This means that your debt will grow exponentially unless you aggressively pay it back, making it seem impossible to pay off your credit card debt sometimes.
(This graph shows that investing early and consistently is the best strategy to maximise your eventual earnings. Compare the grey and purple line and you will see that despite investing a third of what Lyla invests total, Quincy ends up with a higher portfolio by retirement.)
There is a simple rule that every student of Economics 101 knows:
The higher the price of an item, the lower the quantity demanded becomes.
This is because a rational person would feel that the item is not worth it above a given price point.
However, there are many goods that do not follow this law. Veblen goods describe a group of goods where paradoxically, higher prices result in greater demand. Examples of Veblen goods include luxury cars, designer jewellery and trending fashion items such as Air Jordans.
The simple explanation is that these goods are not demanded because of their functionality and usefulness, but because they are status symbols. Possession of a Veblen good suggests that you are financially successful and wealthy enough to disobey the law of demand and get away with it.
For the purchasers of Veblen goods, the fact that they are so expensive and exclusive make them appealing.
People have been giving gifts to each other since the dawn of time. It is a way we show that we care about someone by giving them something that we think they might like. There are many kinds of gifts, from sharing a snack, a flower from the side of the road, hard cash, a book, an expensive piece of jewellery or a heartfelt letter.
Even though we give and receive so many gifts – such as for birthdays, holidays and anniversaries – choosing the right gift is a difficult job. To give a good gift, you need to know the person’s needs and interests, have decent tastes and be original to some degree. Otherwise, you make the mistake of giving them something that they already have, will never use or find absolutely boring.
So what makes for a good gift? Some people may take the consumerist approach of giving an expensive gift, because it shows the other person how much they are worth to them. To practical people, the best gift may be something that the person needs at that moment, such as a new pencil case or furniture. Some may even say that they would rather give cash so the person can buy what they want instead of you having to guess it.
The problem with the above approaches is that they miss the point of gift-giving. The best gift is a gift that we got for someone because we sincerely wanted to – because we felt that this gift might bring a smile to the person receiving it. Gifts do not hold absolute value; they are not something you should treat like transactions, nor must they fulfil a certain purpose. They hold relative value, in that the value of the gift lies in how the person receiving it feels when they open it up.
For example, cash is useful, but it says nothing about how well you know someone. An expensive necklace is pretty, but anyone with enough money can buy it. If the person is financially stable, they can buy things that they need themselves. A small gift that makes the person feel special and loved is far more valuable than any jewellery.
Here are some alternative types of gifts if you cannot think of a decent gift.
The first are experiences. Money cannot buy happiness, but they can buy experiences that leave everlasting memories, such as a fancy dinner or skydiving.
The second are things that they would be hesitant or not consider buying for themselves, even if they would enjoy them. This may be an experience like above, such as a degustation, or an investment in to their hobby such as a better instrument or accessory.
Lastly, consider giving the gift of time. These are gifts that may not have much financial value, but they hold sentimental value and that require the investment of your own time. Examples include: a scrapbook of your special memories with that person, dedication of practising a performance for the person, or a mix of songs you think the person would enjoy. Because in our busy lives, the scarcest, most valuable resource is our time. By spending our precious free time to create something that celebrates our connection with the recipient of the gift, we can truly show how much we care about that person. It also ticks the box of being original and useful, because each connection is unique and they can be looked back on for nostalgia.
A gift is only as good as how the person feels when they receive it. Instead of showing how much you care through materialism, try showing how well you know them as a person and how much you value the connection that you share. A thoughtless gift is no better than not giving a gift at all.
They say money cannot buy happiness. But everyone eventually comes to the realisation that in the world we live in, this is a lie. Who hasn’t felt the thrill of retail therapy – feeling joy from purchasing something they have always desired, from expensive clothes to delicious dessert? It is difficult to persuade a starving person that “money cannot buy happiness” when even a small donation could mean that person being happy from a full stomach.
Of course, this is a literal explanation of the saying. The lesson from the saying is more that money is not the only thing that can buy happiness. Some of the greatest joys a human being can experience – such as connection, love and humour – are virtually free.
That being so, having money gives you the luxury of being able to enjoy even the free things more, because there is one resource that money can buy and that is time. If you are spending less time having to earn a living, then you have more free time to enjoy hobbies and social activities that will bring you happiness. Ergo, money does not equal happiness, but it sure helps your happiness to have enough money.
As mentioned above, money can bring direct happiness as well from purchasing things. However, most of the “happiness” we receive from buying things is from dopamine, meaning it is short-lived and not sustainable.
A better use of your money is purchasing experiences. If you spend your money to go travelling or do an activity like skydiving, the happiness you feel will be linked to the memory and you will be able to reminisce about it in the future. And if you cannot afford an expensive adventure, you can still buy a cup of coffee and catch up with a friend.
Have you ever stopped and pondered what a millionactually is? Sure, you might easily pass it off as the number 1,000,000, or a thousand thousands, but have you really tried to get your head around how big a number that is? For example, you may be able to visualise a hundred people, a thousand people or even tens of thousands of people in your head, but it is very hard to visualise an image of a million people.
Now consider this. When was a million seconds ago? You know a second is very short and a million is a very large number. But it is difficult to put the two together. Make a guess. Last year? Two months ago? Surprisingly, the answer is only a week and a half ago (11.6 days).
Then what about a billion seconds? A billion is a thousand million so you might think it is easy to just add some zeroes, but a billion seconds is 31.7 years ago. Just by changing one syllable, or adding three zeroes, we went from a scale of weeks to years. If we go one step further to a trillion seconds, you leap back in time 31,700 years. You can probably remember what happened a million seconds ago, you might not have even been born a billion seconds ago and our ancestors were still hunter-gatherers roaming Europe a trillion seconds ago. That is how mind-blowing the scale of large numbers can be.
Now let’s look at some other things to really understand how big a million and a billion can be. A million dollars (USD) could buy you a luxury house, a manufacturing line, a 41-acre island in Belize or over 200 years’ worth of coffee (if you drank two cups a day). A million dollars in $1 bills would weigh 1000kg and stack to 30 stories high. A billion dollars – even if you were to convert it into $100 bills – would weigh 10 tonnes, almost as heavy as the truck that would carry it.
The pitter-patter of raindrops on your face feels nice, but a million drops of water weighs 50kg and would break your neck. A billion red helium balloons would have enough lift to carry 14,000 tonnes – enough to lift a hundred small, two-storey houses up into the air. A million grains of rice will feed a person for almost two months, while a billion ants would weigh twice a standard car (3 tonnes total).
(You should definitely check out Hank Green’s take on “a million seconds”, because everything is better if Hank Green is ranting about it! http://www.youtube.com/watch?v=cJ7A0yTDiqQ)
They say that prostitution is the world’s oldest profession. The job sure lives up to its reputation – the first recorded incidence of paying money for sex is in 2400BC, where prostitution is recorded among a list of professions in ancient Sumer. Of course, there is no proof of it being literally the “oldest” profession, because the money (or any currency) to pay for sex must have come from somewhere else. Evidence of prostitution can be found in almost every other ancient civilisations, including the ancient Babylonians, Greeks, Romans, Egyptians, Jews, Aztecs, Korean, Chinese and Japanese. It is also heavily referenced in the Bible, suggesting that it was a widely spread profession.
As unnatural as the act of paying for sex may seem, prostitution has been recorded in animals as well. In 1998, a marine biologist named Fiona Hunter was studying the mating behaviour of Adélie penguins. She observed that the penguins would couple up and begin building a nest for their future offspring. The females would go out alone to look for pebbles at the beach. But then, she noticed that some female penguins would not head to the beach to collect the pebbles. Instead, they approached another male penguin (usually one that was single) and engage in courtship rituals to lure them into having sex. The female would then grab some pebbles and run off, while the male just let her go. Hunter concluded that this behaviour was indeed a material exchange for sexual pleasures.
Similar behaviour of offering food or grooming for sex has been observed in different primate species such as chimpanzees and crab-eating macaques. The most interesting study on this topic was that of training capuchin monkeys to use a currency. As soon as they learned that the silver discs could be used to purchase food, monkeys were seen “gifting” these silver discs to each other in exchange for sex. This kind of behaviour does not seem too unnatural if you consider that sex is a biological need (or at least a strong want), and sexual pleasure is, psychologically speaking, one of the strongest rewards.
Prostitution is generally deemed immoral and looked down upon, especially given the exploitation of women for their bodies and cheapening the act of making love. However, it should also be noted that throughout history, there are several cases of women using it as an opportunity to achieve something great. For example, Rahab was a harlot from Jericho in 1400BC. Back then, intelligent, independent women could not have much freedom as a married woman was treated as a slave to her husband. As a harlot, Rahab could live her own life and make her own decisions. When the city of Jericho was laid under siege by King Joshua, he sent in two spies to scout the area. Rahab hid these two men from the guards of the king of Jericho and showed them the secret passages of the city, ultimately allowing for Joshua to conquer the city with easy.
There is also the case of Theodora of Constantinople, who rose from being a harlot to an empress by seducing the Emperor Justinian, who made her a valued co-ruler of the empire. She then proceeded to use her power to crack down on the exploitation of women and protecting women’s rights.
Money is a human invention that acts as a medium of exchange and a store of value. It lets us easily carry around our assets in the form of paper, or nowadays, on a card. But because of its characteristics, money allows for some very intricate, complicated con schemes. One famous example is the Ponzi scheme – a type of investment scam.
In 1920, Charles Ponzi had a great idea. Back then, people would send an international reply coupon along with international mail so the receiver could send a reply using the coupon. Ponzi noted that since the value of these coupons were constant across nations, buying it cheap in one country then selling them in the United States would lead to profit. To kickstart his business idea, he began gathering investors, to whom he promised large returns that the investors could not refuse. However, when Ponzi began trading the coupons, he quickly found that it was not effective and he did not make the profit he expected. But instead of telling the investors that his plan failed and that they would not get the returns he promised, he decided to try something different.
Having not heard of Ponzi’s failure, new excited investors asked Ponzi to invest their savings too. Ponzi used the invested funds to pay off the original investors by redistributing the money. Happy that they got their promised returns, the original investors told their friends and family about the incredible opportunity. This brought more new investors to Ponzi, whose money he used to pay off the previous investors. Because Ponzi took a commission from each investment, he quickly raked in a massive amount of money – just by redistributing money around and not actually investing a single cent.
But Ponzi schemes do not last. Eventually, the amount of new investments were not enough to pay off the previous investors and people began investigating, only to discover that Ponzi was scamming them all along.
The Ponzi scheme relies on three things: enticing investors with the promise of high returns, intricate redistribution of money to feed the previous group of investors and the good reputation built through word of mouth. Because the scheme relies on paying old investors with money taken from new investors, a larger number of new investors is needed compared to the old investors. This leads to the formation of a pyramid. When the number of new investors is not enough, for example during a recession, the pyramid’s base becomes weak and the whole scheme collapses, with everyone losing money except for the schemer and the few original investors.
(Click Read More for diagram explaining a Ponzi scheme)
If today was the last day of your life, what would you regret? You might know for certain that it will not be something like money or fame, but if you cannot think of a specific answer, it might be worth taking a look at the enlightenment other people reached at the moment of their death. Human beings show the greatest insight about life at the door of death. The following are the most common regrets collected by a palliative care nurse called Bronnie Ware.
I wish I’d had the courage to live a life true to myself, not the life others expected of me: The most common regret is ending your life without achieving the countless number of dreams and goals you had. If there is a dream you can achieve today, do not leave it to tomorrow. That way you can achieve even more dreams in the future.
I wish I’d had the courage to express my feelings: Many people suppress their emotions to get along with other people. But if you push down your feelings and repress them, they will ultimately take a toll on your mind and body. If someone is making you angry, be angry at them (but not all the time obviously). If someone captivates your heart, tell them that you love them. If you have a problem, speak up.
I wish I had stayed in touch with my friends: The busier life gets, the less you keep in contact with your friends. But having a friend to hold your hand and give you words of reassurance at your final moment is a much more successful life than earning a fortune.
I wish that I had let myself be happier: Too many people are misled into thinking that happiness is not a choice. Whatever the situation, happiness depends on your perception of the world. If you are unhappy, that is a sign that you should change something in your life. There is no one on the face of the Earth that does not deserve happiness. Whatever others may say, live everyday as blissfully as you can.
Remember. A successful life is one full of happiness and without regrets.
A professor was lecturing about communism. The students insisted that communism worked since no one would be poor and no one would be rich – a great equalizer. To show the students whether communism worked or not, the professor designed a social experiment. The professor announced to the class that all grades will be averaged and everyone will receive the same grade.
After the first test, the grades were averaged and everyone got a B. The students who had studied hard were upset while the students who had studied very little were happy.
But when the second test came, the students who had studied little studied even less and the ones who had studied hard before decided that since they could not make an A (even if they got 100%, the bottom half of the class would pull the average down), they also studied less. The second test average was a D.
No one was happy. By the third test, the class average had fallen to an F. Now no one was rich, but everyone was equally “poor”.
Communism ultimately fails because it removes one of the major driving forces of economies – incentive. Money is a key (but not the only) incentive that motivates people to work harder as they are rewarded with a better quality of life. But when private wealth is abolished and wealthy is “equally” (note that it is not “equitably”) split among the population, there is no longer motivation to try harder. Because no one wants to work for the benefit of strangers (due to psychological phenomena such as responsibility splitting and the monkeysphere), the economy does not grow and everyone becomes poor.
Communism essentially relies on the goodwill of the people while disregarding all realistic factors of economic growth. It is an extreme ideal that has failed in every instance in history. The only times communism works is in a small society setting such as a small village or tribe where there are less than 150 people (within the monkeysphere, thus people actually care about all of the others). The idea behind it is admirable – that all human beings have equal rights to a certain quality of life. However, it disregards the most important factor of economics; that resources are scarce and we cannot fulfil the infinite needs of everyone. Monetary incentives at least allow us to seek out these resources ourselves, with market economies rewarding such behaviour with money.
Thus, we should not focus on “equality”, which means that everyone should receive the “same”, but “equity”, which means that everyone should receive a “fair share” according to how much they have worked and contributed to the society.
