The biggest economic risk - Deepstash

deepstash

Beta

Get an account to save ideas & make your own & organize them how you wish.

deepstash

Beta

Risk Is What You Don't See

The biggest economic risk

The biggest economic risk is what no one’s talking about. If no one is talking about it, no one will be prepared, and the damage will be amplified when it arrives.

In recent years, people cited the trade wars and election as risks. It is the same risks, repeated over and over. People may be worried, but no one is surprised. A business may be concerned, but many have prepared. Compare that to what, in hindsight, have actually been the biggest risks.

106 SAVES


This is a professional note extracted from an online article.

Read more efficiently

Save what inspires you

Remember anything

IDEA EXTRACTED FROM:

Risk Is What You Don't See

Risk Is What You Don't See

https://www.collaborativefund.com/blog/risk-is-what-you-dont-see/

collaborativefund.com

4

Key Ideas

Risk and preparation

Risk is more than something bad happening. How risky something is, depends on whether you're prepared for it. A small thing out of the blue can be deadly.

We should also remember this when thinking about the economy and our investments.

The biggest economic risk

The biggest economic risk is what no one’s talking about. If no one is talking about it, no one will be prepared, and the damage will be amplified when it arrives.

In recent years, people cited the trade wars and election as risks. It is the same risks, repeated over and over. People may be worried, but no one is surprised. A business may be concerned, but many have prepared. Compare that to what, in hindsight, have actually been the biggest risks.

When risks turn into disasters

What turn events into disasters is that few discussed them even moments before they occurred. They were surprises. People affected did not prepare, either mentally or with actions. They could only react, often surrounded by panic.

Two things happen with surprises:

  • You become vulnerable.
  • Surprises shake the beliefs that leave you paranoid and pessimistic.

A better direction

  • Expect that risk will arrive when you don't expect it. Don't rely exclusively on forecasts – almost all of which are either nonsense or about things that are well known.
  • Give yourself a wide berth. If you think recessions will reduce your wealth by 20%, design your allocation to withstand a decline of 40% or more taking into account that the powerful downturn will be the one you didn't expect.

SIMILAR ARTICLES & IDEAS:

"Rich Dad, Poor Dad" is Fiction

John T. Reed, a real estate investor, looked into the accuracy of Kiyosaki's best-selling book and found it inaccurate:

  • The Rich Dad is most likely an invention. ...
"Rich Dad, Poor Dad" contains dangerous advice

According to John T. Reed the famous book is filled with bad advice:

Dangerous advice

  • "If you're gonna go broke, go broke big"
  • Convinces people that college is for suckers

Law-breaking advice

  • Advocates committing a felony: have rich friends for trading stock based on non-public inside information, he says "That's what friends are for."
  • Recommends tax fraud by deducting vacations and health club dues
  • Brags about using a partner weasel clause in which his cat is his partner
Kiyosaki is making money from a personality cult

Many critics pointed out that Kiyosaki is selling a cult, not financial advice.

He is accused of tapping into the fantasies of the masses & being short on specifics, both attributes of religious cults.

Polymaths
Polymaths

Polymaths, geniuses with diverse skillsets and varied interests, are the source of some of history's greatest contributions.

Giants like Aristotle, Galileo, and Leonardo da Vinci were...

The Approach Of A Polymath

A polymath sees the world with a unique perspective, making connections that are not apparent to others.

Early polymaths had the advantage of a wide-open field, and went deep in their disciplines, yielding branches and sub-branches of specializations. Deep down, these different branches lead to the same trunk and roots.


Polymaths Vs Specialists

Polymaths differ from specialists, as they are on to a highway that is getting wider, and specialists are parked in a spot that is getting deeper.

Polymaths have the advantage of learning new fields of study, and forming new connections, while specialists start having a narrow vision by going deep, learning less. The learning ability of the polymath is the required skill-set of the future.

one more idea

Paper Money

The instruments of trade and finance, like paper money, are groundbreaking inventions, put to use by collective acceptance using authority and seals of trust.

Money's Worth

The financial crisis of 2008 showed that the system can buckle anytime and money may not always be worth the same.

As we get hyper-connected, the state-backed authority of currency, and what Money is really worth, is being rethought. Society has historically tried to invent new forms of currency, most recent being Bitcoin, a cryptocurrency.

The Idea of Libra Currency

The idea of Facebook's Libra, an attempt to create a new currency made from the architecture that powers Bitcoin, is that the value of new money is not derived from state authority, but a combination of mathematics, global connectivity, and trust that resides in people using Facebook.

5 more ideas

Bruce Lee as a philosopher

He studied poetry and philosophy in school. He focused his studies on Asian and Western philosophy, incorporating elements of Jiddu, Buddhism, Taoism, and Krishnamurti. 

This helped h...

Bruce Lee's impressive life
  • He wasn't a master of any standard form of martial arts. He was closest in mastering Wing Chun.
  • He invented his own style of martial arts. He based his style on the teaching of Man and what he learned of Wing Chun. He called his style Jeet Kune Do "the style of no style"
  • He starred in 20 films in Hong Kong before the age of 18.
  • He popularized the "1 Inch Punch" as seen in Kill Bill Vol. 2
  • He was a prolific poet and philosopher. He studied poetry and philosophy in school and was even published several times.
  • He was so fast, his moves were often too fast for a camera to catch.
  • He only made 5 feature films in the US, his last released posthumously.
Hidden Gems From Ancient Philosophers
  1. The people you interact with the most influence your behavior. Consciously consider whom you allow into your life.
  2. Things can go wrong, anticipate worst-case scenarios to...
The Pareto Principle (the 80/20 Rule)
The Pareto Principle (the 80/20 Rule)

It is an idea discovered by an Italian economist. It says that power and wealth is distributed like a reversed hockey stick where a small percentage of the population (20%) owns majority of...

80/20 Rule All Around

The Pareto Principle could also be observed in almost every industry:

  • In software, 80% of the errors and crashes in a system would be eliminated by fixing the top 20% of the most reported bugs.
  • In sports, 20% of athletes participate in 80% of the big games
  • In business, 20% of the products bring in 80% of the revenue.
80/20 Rule: Threat or an Opportunity?

It is hard to accept the truth that there are inequalities everywhere. But depending on how you see it, the rule could help us filter out unnecessary data, better channel our resources, and make better decision in work and life.

4 more ideas

Making A Crisis Out Of Everything
Making A Crisis Out Of Everything

Our diminishing resilience and decreasing psychological threshold of handling pain and struggle is, in turn, making everything look like a crisis.

We are making a catastrophe out of eve...

Psychological Resilience

Psychological resilience is not about fake positivity and takes its power from our negative feelings. It makes our anger, sadness, failure and self-loathing into something useful and productive.

When we become sufficiently resilient, we are unstoppable and limitless.

Care For Someone Else

Our focus on the self has made us fearful and overwhelmed, especially in times of crisis. Part of our anxiety is the constant focus on oneself. Even if we do focus on others, it is only to judge them about how they feel about us, and what they think about us.

If instead of our inner selfishness, we find a greater cause to endure the crisis or risk, some deeper purpose or mission that eclipses our ego, then the crisis is taken care of.

4 more ideas

Because we idealize love, we overestimate it

We see it as a cure for all of life’s problems. And when we believe that all we need is love, we’re more likely to ignore fundamental values such as respect and commitment towards the people w...

Idealizing love=unrealistic expectations

....about what love actually is and what it can do for us. These unrealistic expectations then sabotage the very relationships we hold dear in the first place.  - Mark Manson

Love doesn't equal compatibility

Falling in love with someone doesn’t necessarily mean they’re a good partner for you. Love is an emotional process; compatibility is a logical process. And the two don’t bleed into one another very well. 

one more idea

Opportunity Cost

It is the estimated value of the best alternative or the best option that one misses out as a consequence of picking one particular option.

Example: Spending a limited resource, lik...

Opportunity Cost in Non-financial Situations

Opportunity cost in non-financial situations is more difficult to quantify. The loss or gain with choosing an option while foregoing another can be subjective and not readily comparable.

Example: While deciding on which job offer to take, we may consider job satisfaction, brand name, commute time, long-term growth, and the salary offered. While finalizing, we have to forego the other best offer. While deciding on a career, we have to consider options like prestige, impact and the work sector.

Calculating Opportunity Cost

The way to calculate the opportunity cost is to subtract the value of the option from the value of the alternative that is foregone.

Opportunity Cost = Return on the best foregone alternative - Return on the chosen option.

3 more ideas

The Peter Principle

Also known as The Peter principle of Incompetence, it claims that people who do their job well are promoted to positions of greater responsibility, and so on, until they reach a position in whic...

Dilbert Principle

The Dilbert Principle refers to the idea that incompetent employees are being promoted to prevent them from causing harm, since higher level positions don't need to be involved in the production of the company, while people that perform well are retained to production jobs, to keep the company going forward.

The Dilbert Principle is just a variation of the Peter Principle and critics think that this principle is only valuable for amusement. 

Dilbert

Is a famous comic strip created by  Scott Adams that shows a humorous look in office life, but also manifests lessons on behavioral economics.

In a series of cartoons published throughout the 1990s, he coined the term the Dilbert Principle. The concept was so successful that in 1996 the book “The Dilbert Principle” was created, which became very successful and it ended up selling over a million copies.