2 years ago
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To think like a Rothschild
No wait! this is not one of those articles that give you ( false ) advice, how to get rich quickly. I declare that I do not promise that reading this will make you even one cent richer. Okay so after this somewhat extraordinary opening ( I was really afraid that I might scare you off ), I do like to share with you, what I believe is the real difference between the mindset of the richest people on earth, to that of others. Economy is a big thing now days, but it was not always like that. Until the third quarter of the 18th century, economy was not even a science. Then in 1776, Adam Smith published his book about the wealth of nations and explained how simple arrangements between individuals can bring to the emergence of global order. While the immediate benefit of money as a way to make trading goods and services more convenient was always obvious to everyone, before Smith, there was no way for us to understand the more general effect of money. Wealth was considered as almost synonymous with power. Something that is gained trough brutal struggles. Nobody thought that wealth can be created merely by improving the local arrangements, made between individuals or relatively small groups. Less than a decade after Smith published his book, Mayer Amschel Rothschild arranged for the British crown, to pay in death bonds for the hiring of Hessian mercenaries during the Anglo-French war. It was the first time that a loan arrangement was made between two national entities. Of course it was still all about power struggles, but the principle that new opportunities can be created by a novel monetary agreement was demonstrated. Rothschild's state bonds, innovated global finance and made the descendants of a humble Jewish merchant from Frankfurt into the wealthiest family on earth. At that time, the phenomenon of people who started with almost nothing and made their way to fortune by the merit of their innovative spirit was almost unheard of. The Rothschilds are very discreet and secretive, but I think that it is not necessary to go into the gossip and details of their personal lives in order to understand the principals of how they made and retained their wealth. While there are many people who can be considered as wealthy but still look at money in the same way as normal people do, the very few who understand the real meaning of wealth look at it in a very different way. For them, "making money" is not an aim, or even a welcomed outcome of their endeavours. They understand money as a measurement. A measurement of degrees of freedom. The power of those worthless pieces of paper or metal coins or plastic credit cards is that we can use them to buy anything. That is what makes monetary arrangements so powerful. But there is a catch hidden in these arrangements that most of us fail to understand, and this is why we are so sloppy with our financial conduct. We look at trade actions as the exchange of a known amount of money for a known quantity of goods or services, but what we fail to see is that while this exchange takes place, there is another one happening in parallel - an exchange of a certain amount of degrees of freedom. We let this exchange go unnoticed and do not understand that it is far more important than the trivial money for goods or services trade. But for the Rothschilds, and the other few who understand wealth, it is the other way around. They hardly ever care about immediate benefit or loss, and always ask themselves what is to be gained or lost in terms of degrees of freedom, of future prospects. In 1940, after he was one of the soldiers of the Free France Army who were evacuated to England trough Dunkirk, Guy De Rothschild returned to Paris and saved his family's fortune. With the help of loyal employees and assistances, he was able to assure that most of the family's assets, the bank of Rothschild and their other business, will return to their hands after the war. He was able to do so by persuading the people that the family's confiscated property was handed to, to give him a priority on repurchasing it. He was taking advantage on his ability to see the future value of such a deal, rather than its immediate value. In the reality of after the world war, no one wanted to buy the Rothschild's property except for the Rothschilds themselves. So what can we normal people learn from the Rothschilds? I told you that reading this article will not make you rich overnight, but maybe it can make you stop and think from now on, before you reach for your credit card: "What am I going to gain or loose from this purchase in the long run?", and add that to your considerations. And who knows? Maybe if this change in mindset will make you rethink how you price your own added value, it might help you become a billionaire some day..
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