How many times did you say this to yourself in the past week?

What caused this sentiment? Lemme guess – it is your habit of reading/watching porn. Financial porn is addictive. You will see/hear/read stories of how if you had invested Rs. 10,000 in 2015 it is worth Rs. 10,00,000 now or even more. It is almost impossible to stay away from feeling ‘omg’ this is like the WIPRO story in fast forward and I missed it. So what can be done now?

Well, you can do the following for sure:

  1. Realize that Bitcoin does not add any value to any body and is a medium of exchange.
  2. As a medium of exchange it loses value if the people taking the bitcoin stop taking it. Simple.
  3. It is hurting the financial world – banks, governments, etc. love making money off the common man. They are not in this.
  4. If one government bans it or threatens to ban it, you are doomed.

What do you need to realize:

When you’re confronted with the urge to jump into a new mania you have to ask yourself why did you even come to this place?  If you’re like most people your savings is the what is left over after you spent. So, you have to figure out if you’re touching your savings, your investment money or your ‘FO Boss’ money. Your savings is money you need with some degree of certainty at near point in the future. This is the money that will pay for a house in the future, your child’s education or your retirement. You take this money and put it into investment and the “don’t screw around with this” pile. This gets reallocated into relatively safe assets with a high probability of being there in the future. This includes assets that generate cash flows that are very likely to create a positive return over time. You know, cash, bonds, shares, mutual funds.

Your investment money is money you’re willing to lose, but also money that could have a big asymmetric payoff. This money is spent with the purpose of increasing your future production. So, education, job training, spending on a new widget for your company. That is money that could disappear, but is spent in the process of something that will likely increase your future production.

Your “FO Boss” money is basically your money that is going to help you retire earlier than what the natural process will take you. This can go into the “let’s me try some shit and hope I look like a genius” pile. This is for things that you aren’t really an expert about, but hope to create asymmetric outcomes with. You know, playing cards, roulette, betting on horses, buying unproven assets that may or may not be worthless, etc. In essence, this is money that might go to 0 and you deserve for it to go to 0 if it does. It’s a lot more fun to have this kind of pile and it’s a tremendous luxury to be able to be an idiot with your money. Also, if you have a big pile of “FO boss” money you’re probably not an idiot after all.

If you have a big pile here, then read tomorrow’s post.

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