Wealth creation is pretty simple really.

Love him or hate him, Buffett can breakdown a concept to the simplest terms.

From this years shareholder letter.

https://www.berkshirehathaway.com/letters/2020ltr.pdf

 

Agreed, and it's easier said than done.

Think about a person who has sat on a block of land in the inner city for 50 years. When he sells, there will be like a 1000x ROI. People will look at that and think it's the easiest money anyone ever made. He just did nothing and made a fortune 50 years later. But it's not "nothing" is it?

That's 50 years of enduring hardship and resisting the urge to sell. 50 years of new flashy trends - emu oils, dot com booms, blah blah blahs that you had to resist. 50 years of personal tragedy, injury, divorce, death...many things pushing you to sell. Sending your kid to hospital and having to dig deep to pay for the bills. The 3 jobs you lost and you had to sell everything except that land. 50 years of your friends and family telling you what a f-king idiot you are. 50 years of other areas booming 3x faster and the temptation to move your equity over. 50 years of recessions, depressions, wars.

I hate it when people say "oh he just had to sit on it for 50 years". Like it was that easy. It takes nerves of steel to just "sit" there. Cause "sitting there" sometimes takes everything you got.

 

Lord, grant me the patience and keep a good asset/share, the guts to dispose of the long-term bad/poor performer, and have the wisdom to differentiate the two, Amen.

 

Yeah, know what you mean... Although not 50 years of it yet!

 

That's probably one of the hardest ones honestly. Constantly being told how wrong you are by people who have $0 to their name. Yes you can tell yourself these guys know nothing and are poor as crap, but still...it plays on your mind. It's a mental game, and at times, a very difficult mental game. That's what I mean by saying "just sitting there" is so much harder than it sounds!

 

In my experience and from those I've seen around me, no matter what vehicle or mix of vehicles you decide to use to create wealth, if you don't have (and maintain) a mindset which matches your efforts, your results could be/are often quite diminished.

You'll be susceptible to making emotional decisions when markets fluctuate and when your personal life goes through life's inevitable rollercoaster ride, often you'll find your will to stay the course will be that much more challenging. Many eventually simply give up or settle for a lot less than they'd planned or what could have been achieved had they adopted/maintained a different mindset.

Just my 1.5 cents.

 

You know what, the worst feeling is when you persist, and indeed the share/asset gone down the tube and never re-surfaced, the person sleeping next to you keep nagging: I told you so, look at John of my girlfriend's, he earned gazillions from bitcoins, etc., yet, you are spending your working hours finding a pest control person to deal with termite problems of a WW2 home...

Luckily enough, I have a wife who is very property-oriented

 

Yeah those without perspective focus on the one that didn't work not the other 5 that did. You need to be with people that can see the bigger picture.

 

Simple but not necessarily easy.

Interestingly, you have chosen something that Buffett probably didn’t mean to be included in his description of assets. A vacant block is reliant on only “economic rent” for its increase in value.

Put a building on it and it becomes productive and you can produce cash flow which will help in holding on.

Your example also left out diversification, which will also help you hold on.

The one thing your example does show in spades is the need for delayed gratification, that clearly falls under inner calm and is not easy. But it is also subject to the luck you experience in your life to some degree, sometimes things arise that stop the ability to create wealth. Don’t be one of those people that let their privilege and luck blind them to other people’s circumstances.

 

I get you, but I chose a block of land because it's the very epitome of "nothingness". It's the easiest example to use when talking about how "easy" it looks from an outsider's perspective when talking about the concept of just sitting and waiting for something to pay off. I hope that makes sense.

 

This is definitely a challenge. My wife does at least give lukewarm support to my endeavours, but really struggles with why we don't have more of the visible trappings of wealth.

The other school mums have Range Rovers, why don't we? It doesn't matter that our investments are growing by the equivalent of a new Range Rover every year, we should kill the golden goose and plunder whatever eggs may be inside!

 

Oh, I've had many people tell me that I shouldn't buy in Mt Druitt. Usually the ones who have nothing. Guess what? They've still got nothing.

 

Not so if you switch off the noise.

 

Well said!

 

I'm sure you used to contribute 2 cents... then it reduced to 0.5 cents for quite a while....... is inflation back?

 

Just staple together your land tax bills and show to your friends and they should be fine.

 

Recent boom increased my value

 

Haven't had time to check. The grinning is a full time preoccupation these days.