You are born with a life into a family setting.
(A completely absent family or orphanage is also a family setting)
This setting influences a lot of your childhood and the chances you have later in life.
Financial/ material resources, security, emotional support just to name a few, are properties that a family offers until you can support yourself on these things.
Today we are going to talk about wealth.
So imagine you are born to a rather rich family in Germany. Your family owns a house and the things in it, two cars, a stock portfolio, a retirement insurance and a dog.
Wealth in this setting is multiple for you since wealth can have multiple facets.
Financial wealth: Assets or objects that have a monetary worth, money itself or a system generating monetary worth make you financialy wealthy.
Physical wealth: You are born with a healthy body, have inherited genes that make your body grow strong and healthy, you don't develop any serious diseases and you have not endured scars or serious injuries. You behave and consume in a way that your body keeps all its functionality for as long as possible. Those characteristics make you physically wealthy.
Social wealth: Your network of friends and family and other members of society that you have relationships with, how integrated you are in a community, how much influence you have, what standing you have in your community. Many close relationships and a deepy rooted integration into society and social circles in your community make you socially wealthy.
Intellectual wealth: Knowledge you gathered, skills that you have attained, a high IQ and how fast you can learn new things, your accumulated experiences and impressions, learnings from classic education or by doing street smarts. All of this makes you intellectually wealthy.
All of them need there own essay.
Lets look at wealth as a property in the financial market for today. Since I am traveling and moving to new countries all the time I have a need for exchanging money often.
Everytime I exchange Euros to another currency I decrease the theoretical wealth of everyone who has Euros just so slightly and increase the theoretical wealth of the other currency area just so slightly. My own wealth stays the same, minus a small fee to the exchange. A day later my wealth is different because the exchange rate could have gone up or down.
But don't be mistaken this isnt the only cause. In reality your wealth is fluctuating anyway everyday all the time like I just described me decreasing the wealth of all euro holders, all the currency you hold fluctuates against all other currencies. So if we assume there isn't any inflation at all and your number in the bank account hasn't changed, your wealth, your sum of financial power in the world, is changing every second.
If we just stay in one currency area the consequences are smaller for you as an individual but as a whole this currency area will feel the shift and so you as an individual eventually as well.
There is unfortunately no object, currency or asset that doesn't fluctuate against other objects currencies or assets. In fact we need to be able to express the value of one thing against another to be able to exchange for it.
The worth of every thing is only relative to other things and may change in a heartbeat depending on supply and demand.
Everything has therefore baked into itself a potential wealth. Your father's skills in his profession allow him potentially to attract wealth by doing his job. A house may increase its value and your wealth due to the fact that there are more people born every year than houses build. An apple will just lose worth due to time and it rotting away, therefore decreasing your wealth as an apple owner.
So we naturally might ask how to retain or increase our wealth in the best way.
Certain assets work better at achieving this goal for instance assets that produce positive value like factories, businesses, slaves (just kidding, but only partly) or yourself.
If you own any of these or parts of them they will increase your wealth by doing what they do. There is always the risk however with any wealth generator that the value it is providing could decrease or no longer be needed. The value of horse carriages businesses went slowly but surely down after the invention of the car. Warren Buffets strategy is investing safely into businesses producing value in areas that will allways be needed (steel, food, oil, ...). They are the safest asset generators since them going down substantially is very slim, but non zero.
So lets look at storage of wealth:
Houses are famously used for this... Hurricane, fire, earthquake, wear and tear, political insecurities, something unfavorable being build close by. It is good but as you might see not perfect.
Gold or rare metals.
Yes..but they are found and mined day in day out so there value is inflated away slowly but surely. This is also the reason why in todays economic system holding substantial amounts of money is a dumb idea. Wealth will flow out of your bank account with you seeing it. I believe if banks were forced to show how much value your money had lost in exchange value to other objects and currencies in a year people would be shocked to see how fucked up this system is.
But gold has been a quite stable store of value over the past thousand years. When you transform the living standard of a rich person during the roman empire it is comparable to the gold equivalent of a currently living rich person.
Holding cash however is not a smart idea. A steady Inflation of the targeted 2% by many economic areas would mean that after 10 years your currency holdings would be woth 18% less or better could purchase on average 18% less of other goods. If you would store 100% of your wealth in such a currency (today every currency used by any government is inflationary and aims at a rate stated above) you would have lost half of your wealth after 35 years. The bank account would still show the same number but there would be more of your currency in the world by then decreasing your share and all other products would require more of your exchange medium (currency) to aquire it. This is how inflation makes you lose wealth slowly over time. And mind this is the best case usually the inflation is above the targeted 2%.
Paintings, ah now we get a little closer. Paintings have the property of being unique you can not duplicate a physical painting, well you could but the original by the original painter is worth more than the copy and an expert would probably be able to tell the difference. Also after a painter is dead not much can happen to his reputation or he can do something to decrease the value of your wealth storage. Sure an undiscovered scandal could surface but usually it makes your paintings be worth more since he or she will just be more famous.
Unfortunately there are not enough famous enough painters and paintings in different and small enough value levels to make this a viable store of value for the average person. With 1000€ you will not be able to buy a sufficiently stable store of value. Usually you need high sums in the millions to find a certain level of stability and wealth storage potential. Comoditizing and then selling shares, parts of the artwork, only partly solves the problem. Sure you have the right to a percentage of the wealth storage, but you still rely on the trustee and whoever runs the share exchange. What if the painting is stolen, or burns down? I think it is quite good of a storage but not perfect and definitely not for the average person.
Shares or other financial instruments fall into the generation for me, since they always have a chance to increase wealth or decrease wealth with differing likelihood. And the goal is never to store wealth indefinitely.
One last thing we could look at are crypto currencies. They have sprung up in the last years and are rather new in the store value world. Here it really depends at what currency we are looking. The vast majority of currencies/ coins has little to none value or use case and will therefore go to zero over time. Most also have an inflationary concept programed into them (Ethereum) or are pegged to another fiat currency we discussed above (USDC) making your holdings in the crypto currency lose wealth over time.
Only one currency really stands out, Bitcoin.
There is a hard limit on the amount of this currency that can exists, 21 million units. Therefore your wealth of Bitcoin expressed in % of 21 million Bitcoin will never change. Technically the rule limiting it to 21 million could be changed. However this is very unlikely since this goes against the idea that many users have of this network as a stable currency area. In theory this network is not deflationary nor inflationary. Due to coins getting lost over time however there is a slight deflation in the currency making your wealth increase over time just so slightly. Well we just said that it will always hold value and even increase over time any wealth put into this asset would therefore keep its value all the time. Isn't this what we are looking for, where is the catch?
This technology is rather new and technical prohibiting widespread adoption one wrong step or number and your wealth could be lost forever. The fluctuations in wealth are rather drastic compared to other assets.
Due to these fluctuations it can be a bad short term medium of storage. Over a span of 4 years however the value expressed in any other currency has always increased historically (and stayed the exact same expressed in Bitcoin). Like any other currency Bitcoin only lives as long as it is valuable to someone. If everyone would stop using it tomorrow you would lose your wealth stored in it. But this is also true of any other asset or currency. Bitcoin (<20 years) has not a long enough track record like gold (>2000 years) where you can be rather certain that it will not rapidly lose value.
Give it more time to earn trust and let it get easier to use and I think it could be the best store of value there is.
Another idea about wealth, which I think is rather interesting is this.:
You are a wealth generation/ attraction machine and a wealth destruction/ consumption machine at the same time.
In order to live you need to give up some of your wealth to feed, shelter and in general take care of yourself. To have enough wealth to do so most people opt to work 8 hours on 5 days of the week. This generates enough surplus to keep yourself alive for the whole week and allows you to do the rest of the time what you want. In the film "In time" there is a great approximation of this idea. You have a timer in your body. When you work time is added to your clock. You pay everything in time, groceries, beer, transportation. Every second a second ticks down from your clock. When it strikes zero you die.
In reality it is similar, however less visible with the concept of wealth.
Wealth generators.
Wouldn't it be nice to gain wealth without having to do anything for it?
Well in our world this is called passive income. It is the easiest if you already have wealth. Because you can lend it away to get more of it. This is called interest, dividend or rent. Easy just have wealth to get wealth.
If you weren't lucky to be born into a wealthy family you gonna have a harder time but you have options as well to gain wealth passively.
It will require you to put in a certain amount of effort first though. You need to create something of value. Something other people need and that can be created once and be valuable more often than once. Share your expertise. Like a video, seminar or book. Sure you might need to update and maintain it, but not 100% every time. The less maintenance it needs the better.
It needs to be like a magnet for wealth. The more value it has to the more people the more wealth it will attract. This is why Bill Gates has such a high net worth. He created something that made the life of so many people easier for so many people with Microsoft.