What are the essential mindsets needed to be successful?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 370.1 million views in recent years.

In the answers below I focused on the following topics and issues:

  • What are the essential mindsets needed to be successful?
  • What are the financial, and non-financial reasons, Western people go to Asia?
  • Are the Chinese GDP numbers fake?

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Some of the links and videos referred to might only be available on the original answers. 

Source for all answers – Adam Fayed’s Quora page.

What is the essential mindset needed to be successful?

Firstly, it depends on what you mean by success.

There is success in many domains – health, financial, spiritual, and so on.

People who are most successful usually know what they want to achieve and are focused on that thing, and are willing to make sacrifices.

Both Bill Gates and Warren Buffett both agree that focus is the number one component of success, as the word goes beyond merely working hard or being smart.

Let’s give an example – financial success.

Many people want this form of success either for material reasons, to retire early, to give to others, to focus on health and wellness, or many other reasons.

Yet there are only a limited number of ways to make money including:

  • Luck. Inheriting it, marrying into money, winning the lottery, etc.
  • Doing illegal things. Not recommended and as the first option of luck, isn’t therefore available to most people.
  • Working really hard academically to get a career in a specific field. Something so niche and specialized that the pay is better than 99% of other roles.
  • Taking advantage of compounded returns by investing from a young age. We all have met the types – they bought assets decades ago and just held long-term. Many of these people are middle-income and didn’t become wealthy until middle-age.
  • Taking loads of calculated risks as a self-employed person or businessman

You will notice a commonality here. The bottom three options, the only ones available to any reasonable number of people, require sacrifices as well as focus.

Delaying gratification by taking advantage of compounded returns is a sacrifice.

Taking calculated risks is a sacrifice, as you might work harder and get nothing in return.

Working really hard to get into a specialist career is also a sacrifice because you are earning less as a student going into such a field, with no guarantees of future payoffs.

Hard work and making sacrifices doesn’t mean there are any guarantees. In fact, there are no gurarantees.

If there were, everybody would live healthily, safe in the knowledge that they will be able to play tennis at 90, and everybody would hard work and smart to gain benefits later in life.

So, often the needed mindset is to do the difficult things even when there are no guarantees.

Many people are more concerned with avoiding the worst outcome than taking a risk or making a sacrifice.

I remember having a conversion, in my early 20s, with a guy who hated his job.

He didn’t, however, want to go towards a performance-related job even though one of his best friends was earning a lot in a similar role, because “I don’t want to work harder and still be faced with the possibility of earning less than I do today”.

A more sensible approach would have been to try something else for a few months or years.

What is the worst that could have happened? He didn’t make as much money as before or even lost money if he needed to support himself briefly, and then go back to his previous career.

But he was scared even though he didn’t, in reality, have much to lose. It is called loss aversion:

It is why people don’t invest, even if they know they are likely to do better than having money in the bank.

It is also a major reason why people don’t make the necessary sacrifices to make more money, or for that matter get healthier.

I am sure plenty of people have stopped going to the gym and living healthy because they are worried all those sacrifices won’t be worth it if they still die early.

We all know that person who has lived until 90 despite smoking, or that smart, hard-working person, who hasn’t achieved what he/she set out to do, even if they tried over and over again.

So, focus, getting beyond loss aversion and understanding that there are no guarantees, but we can increase our odds of getting whatever success we want, all help.

What is the reason that motivated Westerners to go to Asia?

It depends on the individual, but in general, the same as other areas of the world, including:

  • To make money – to work or open a business. For some, that means a lucrative, but short-term, expat contract. If multinationals struggle to find the right person locally, they sometimes offer good short-term contracts. In this case, many expats will make more than they do in their home country but only for a few years. For business owners, the motivation is to go into new markets.
  • To study/learn new languages
  • To gain new experiences and adventures, which is particularly interesting for younger expats or those who have never lived overseas before.
  • Lifestyle reasons. This is more likely to be prevalent in some of the beach areas or retirement villages, in much the same way that plenty of Europeans want to retire in Southern Europe
  • Lower cost of living. For location-independent people like some business owners, retirees, and digital nomads, some places in South East Asia offer great internet and low costs.
  • Due to family reasons. For example, meeting a spouse from the area

The third reason is perhaps the only thing which is more pronounced in some countries in Asia.

Whilst most people go to Singapore to work, people going to some less developed countries are interested in the experience as well as working.

The more frontier markets all over the world attract a certain type of person – either adventurous or entrepreneurial.

The number of Westerners who live in the region isn’t higher than many other parts of the world, which makes me think the motivations are similar globally.

For me, I first visited the region in 2007, when the growth was much faster than now, before the Financial Crisis of 2008–2009.

That experience was certainly eye-opening and made me think that China and some southeast Asian countries would have some great growth areas ahead.

Since then, things have slowed down, with only a few countries now growing at incredible speeds.

The key thing is understanding your motivation and then picking the country accordingly.

Are the Chinese economy numbers “fake”?

I am about to tell you something which you probably don’t know.

The reason I say this is because I, myself, and most people I know didn’t know this basic fact, despite reading a lot about politics and economics.

The man below is called Michael Pettis

He is a professor of finance, working at Guanghua School of Management at Peking University (Beijing).

He alleges that China’s growth is less than half of what is reported:

So far, so “mainstream”. Many others have made this point. What is fascinating about his analysis is that he isn’t alleging that China is “faking” the numbers.

He is merely stating something he says is a fact – the way China calculates GDP is different from the rest of the world.

GDP isn’t a standardized thing. Even France and the UK calculate GDP in a slightly different way. China just calculates it in a very different way.

You could argue, perhaps legitimately, that every country has a right to calculate GDP in the way it sees fit.

That may be true, but we also, therefore, have to see how these different definitions might affect the overall picture.

As the old saying goes, “lies, damn lies and statistics”!.

To quote him directly “the Chinese economy operates under soft budget constraints. A hard budget constraint means “you’ve got to have the money to spend it,” whereas a soft budget constraint means there’s no limit to one’s spending and losses can in principle be rolled over indefinitely.

Local governments in China operate under soft budget constraints, in contrast to the hard budget constraints of other major Western economies, and because they comprise a significant share of economic activity, China’s GDP numbers are fundamentally different in nature and as such, incomparable.

He illustrates this point by two hypothetical, identical Chinas—with the only difference being one has hard budget constraints and the other has soft budget constraints.

In the first China, a construction firm spends $100 digging a hole, then $100 filling it up. “In a hard budget constraint economy or in a normal accounting, you have an expense of $200 and nothing to show for it,” said Pettis.

In the second China, a construction firm similarly spends $100 digging a hole, then $100 filling it up. “But in [this] China, you don’t expense it,” he explained. “You call it an asset.

You say, I have now built an asset worth $200.” This, Pettis noted, is how GDP accounting works in the China that we all know. What this means is that China’s official GDP figures as currently reported are significantly inflated relative to actual economic conditions, and are also impossible to compare with the GDP figures of other nations.

You can see the full article here:

To give a simple example to his point, let’s say one province in China has a GDP of 600billion and the target is 6% growth (so 630 billion is needed).

Now let’s say there is so real growth of 3%. However, it is fairly easy, with the soft budget constraints for the local government to engage in unproductive (or low-yielding at least) investments to achieve the other 3%, which wouldn’t be counted in a hard constraint economy.

That is one reason there are so many ghost cities and excessive infrastructure projects in China, such as second and third airports in cities that don’t need them.

So, China grew by 5.95% in 2019 versus 2%-3% for the US, using both country’s accepted GDP growth measurements.

However, if you were to standardize the measurements, China and the US would have grown by a similar amount.

What is interesting is that he also appears regularly on the Chinese state, so his findings aren’t seen as embarrassing by the regime, and China itself is now focusing on “high-quality growth” because they recognize the problem.

I have yet to find somebody who has actually refuted his central claim that there is not necessarily any lying or manipulation going on, but the different use of statistics is distorting the total figures.

This should be interesting for investors thinking about investing in Mainland Chinese private companies.

I don’t think it makes any difference to those looking to invest in Chinese stocks because GDP growth and stock market performance often aren’t linked.

So, we can’t say that weaker GDP growth will mean lower valuations for Chinese stocks, especially as they look very cheap compared to some markets.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 583.2 million answers views on Quora.com and a widely sold book on Amazon and a contributor on Forbes.

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