I often write on Quora.com, where I am the most viewed writer on financial matters, with over 686.8 million views in recent years.
In the answers below I focused on the following topics and issues:
- How long will the US Dollar be the world’s reserve currency?
- Are billionaires lucky?
- To what extent will technological stocks outperform the S&P 500?
- What are the pros and cons of having rules, regulations, and laws?
- Is it worth buying a foreclosed home?
- What are some of the highest paying human skills?
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How long will the US Dollar be the world’s reserve currency?
Many people here are probably old enough to remember the Iraq War.
Yet memories are short.
So few people can probably remember one of the most widely believed conspiracy theories at the time.
Many people believed that Iraq wasn’t just invaded for oil, but because Saddam Hussain “dared” to sell oil in Euros, and not USD.
As the Euro gained market share on the USD, this would threaten the USD and its reserve currency status.
Regardless of Iraq, in the 2000s, many people believed that the Euro could overtake the USD.
After the Eurozone crisis, the US Dollar has strengthened its lead as the number one reserve currency.
The point is:
- Don’t believe all media narratives
- Nobody can predict the future. Few saw the Eurozone crisis coming.
The last point does mean that you shouldn’t discount the chances of the USD losing its status more quickly than expected.
Currencies are also not investments and get eroded by inflation.
So, having loads of money in the bank in USD (or any currency) carries more risk than people think.
The British Pound lost a lot, quickly, when it lost its reserve currency status.
Are billionaires lucky?
Here is Mark Cuban admitting as much.
Yet, randomness/chance is a better way of looking at it than luck.
Luck is winning the lottery. It is 100% luck. It is almost impossible for them to replicate it a second time.
Most billionaires have combined many positive skills, attributes and personality traits with vast amounts of luck.
So, if Bill Gates were born today, he would probably become be a multi-millionaire, even if not a billionaire.
The same is true for most self-made billionaires.
So, it isn’t like it is complete luck.
For one thing, if they didn’t take huge chances to start their own business, they could have never had the chance to get lucky in the first place.
Then, unlike buying a lottery ticket, it isn’t enough to sit back, be lazy, and hope for luck to turn you into a billionaire or even a multi-millionaire.
So, it is usually a combination of:
- Natural ability, especially for people like sports and entertainment stars with get that wealthy
- Hard work
- Smart work
- Luck/chance/randomness, including being in the right place, at the right time. Look at the pandemic and how that affected many businesses.
So, it isn’t correct to be envious and think billionaires should pay 95% taxes just because luck played a role in their success.
If it were that easy, everybody would take enormous risks and work incredibly hard.
Few people, in reality, are willing to take the kinds of risks that many of these guys took when they were very young.
Most people are cautious in that regard.
What are the pros and cons of having rules, regulations, and laws?
I read an incredible statistic a few months ago.
It was about the New York Railway:
Apparantly, the cost of adding 1 meter of Railtrack has increased by 50x in the last hundred years.
You read that right.
Or even 500%.
But 5000% (50x) even adjusted for inflation.
This is despite modern technology, which means that fewer workers are needed.
Now, sure, the railway is probably safer than before.
Who knows, it might even look prettier, but I am no expert.
But I am sure that nobody can say it has become 50x better.
The issue is the compounding effects of rules and regulations.
If rules and regulations increase by a small amount over a year, nobody notices.
But a 1%-2% increase in extra regulations a year over a hundred years adds up, especially if there are some years (say in the years where there is a scandal or deaths on the railway) with many new regulations.
The UK tax code is another example. It is The UK tax code is 10 million words and 21,000 pages. long, and always getting bigger. It was 17,000 eight years ago.
I see it in the financial industry all the time. The ordinary consumer and smaller companies pay for regulations. Larger firms get away with it not being a big burden.
That isn’t to mention something else. Answer this question. Do you know anybody who has been protected by financial regulations? Do you even know anybody who knows anybody who has?
99% of people say no, yet some naive people think regulations are there to protect the small guy.
Basic regulations are needed to prevent the worst actor, which is the only positive.
If regulators only focused on those cases, they could also focus more, as they would go narrow and deep, and could focus on preventing Ponzi schemes and the worst cases.
Instead, they have regulated so much that they often don’t know:
- The regulations themselves half the time.
- How to regulate. It isn’t easy to regulate everything!
To what extent will technological stocks outperform the S&P 500?
Long-term, the Nasdaq has outperformed the S&P 500 and Dow Jones.
(Source Four Pillar Freedom)
With that being said, remember:
- The Nasdaq is more volatile than most if not all, advanced markets.
- It took much longer to recover from the 2000 crash than the s@p500
- It is less diversified than the S@P500, so it is riskier.
- Most tech stocks go to zero. So, most tech stocks underperform. A few greatly outperform
- It depends partly on a continuous stream of innovation. So, the internet in the 1990s and 2000s, and maybe AI going forward.
I think technology as a group will outperform in the ultra long-term, as new technology has enormous growth potential.
I explained more in the video below during a chat with CNBC.
Is it worth buying a foreclosed home?
It can be.
Remember, with real estate, you can only beat stock markets long-term by focusing on:
- Yield rather than capital depreciation
- Leverage/debt through a mortgage or sometimes private debt.
So, not capital appreciation.
Sure, some markets can give you capital appreciation, but that is more speculation and can’t be relied upon.
With foreclosed properties, you are more likely to get capital appreciation because you bought it at a discount.
However, a 10%-20% discount isn’t enough to make a massive difference if the rental yield is still relatively low, or you can’t leverage the gains.
Another issue with foreclosed properties is that they either get snapped up very quickly, or you need to know the person in trouble or have a relationship with the bank/a banker.
I have seen some people in specific overseas markets who have bought absolute bargains with foreclosed properties.
But they have known individual bankers who have given them deals that aren’t available in the market.
That isn’t available to most people.
Like all properties deals, you also need to factor in:
- The time and time-adjusted ROI.
- All costs, including buying costs. Property usually has extra costs than market investments.
- How the investment compares to other opportunities.
- The risks and risk-adjusted returns.
What are some of the highest paying human skills?
Consider recent US Presidents.
Many more conventional ones, such as Obama and Clinton, came from a legal background.
Reagan came from acting.
Trump business and show business.
What do all of these professions have in common?
The need to communicate.
Lawyers are trained to make rational arguments to persuade, and to poke holes in the arguments of others.
Trump and Reagan’s target audience might have been entirely different from Obama’s and Clinton’s, and they weren’t career politicians.
Still, they knew how to communicate with their target audience, even if many hated them outside of that audience.
The same is true in business.
Politics and business aren’t so much a pure popularity contest, as needing to persuade the right people, at the right time.
The ability to communicate can:
- Get you a pay rise due to negotiation
- Get your business new sales
- Save you time and much else
The market rewards those who can both communicate and deliver.
The market doesn’t reward those who can hyper-deliver but don’t know how to communicate well.
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Adam is an internationally recognised author on financial matters, with over 694.5 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.