How To Become a Capitalist

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In this video I debunk several misconceptions about capitalism and capital. I explain how capital gets created and how capital accumulation works. I talk also about how to think like a capitalist.

In the film, I refer to this video:
Business and Star Wars - What do they have in common?

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Follow me on twitter: http://twitter.com/BillionairePal
Follow me on steemit: https://steemit.com/@billionairepal
And read the blog where I test the limits of human capabilities: http://nolimits.co

Buy the book "Ready, Set, Go!" that I have co-authored with Brian Tracy:
E-Book: https://www.amazon.com/Ready-Set-Special-Entrepreneurs-Professionals-ebook/dp/B078WZXJDW/
Hardcover: https://www.amazon.com/Ready-Set-Go-Nick-Nanton/dp/0999171402/

Get free chapter of my upcoming book about billionaire thinking: http://TheBillionDollarSecret.com

VIDEO TRANSCRIPTION

Hi! Today from Black Forest. Behind me you can see the mountains on the horizon. This is the Schwarzwaldhochstrasse - The Black Forest High Street.

This is the highest mountains formation in the north part of the Black Forest in Germany.

Today we will talk about capitalism, about the capital and the capital accumulation. See you in the next part.

[Music]

Capital. Capital accumulation and capitalism. What it is all about?

Let's start with the basic notion of the capital.

Most people think capital is money or money is capital. That's all what's capital about.

But in reality capital is not money. Money is just one of the forms of capital. Money is, so to say, frozen capital

or the frozen energy that you can use to produce capital.

Capital is actually all that enables you to manufacture consumption goods in a faster, in a better way. This is capital.

And the capital goods are, so to say, the means of production. There are the consumption goods and the capital goods.

Consumption goods are all the goods that you consume, that you need to live - food, shelter, clothing

And capital goods or the means of production are acutally all the goods that you don't need immedietaly or you don't necessarily need to live.

But you need them in order to produce, to manufacture the consumption goods in a faster, better, more efficient way.

And this is what capitalism is all about. Capitalism is about producing, manufacturing capital goods.

The means of production. In order to be able to manufacture the consumption good in a better way. This is capitalism.

Capital doesn't have to be in a physical form. Capital is for example also your knowledge.

Because your knowledge enables you to do certain things in a faster, in a better way.

If you have a knowledge of agriculture, you can produce more agricultural goods because of your knowledge. Your skills are your capital as well.

Because the skills you have enable you to do things faster, to do things in a better, more productive, more skillful and of course more efficient way.

So, this all generally is know-how. This is capital. Capital can be also your brand. This is also a non physical form of capital.

Because your brand enables you to sell your product more effectively. It gives you leverage in your distribution, in your marketing.

So, these goods are non-material capital goods. Of course, the traditional notion of capital are the physical goods,

The physical means of production like machines, cars, trains, buildings, infrastructure - these are the physical capital goods.

And now I will explain to you a really simple story how capitalism actually works and what capitalism really is.

Let's say we have Alice and Bob. And both of them live on lonely islands. They are alone on the islands. Each of themon their own island.

And the only food available on these islands is the fish and they don't have anything. They have just bare hands.

Of course, there are some trees on the islands and so on, but there is nothing eatable except fish on the islands.

So, they use their bare hands to catch the fish and each of them needs 8 hours of hard work to catch enough fish they need to eat each and every day.

Alice just accepts this fact and each and every day invests 8 hours of her time into catching fish with her bare hands.

And, of course, the rest of the day to eating that fish or to sleeping or preparing food from that fish, etc.

But what does Bob do? Bob decides to save up and to invest 6 hours a day into catching a fish and he is starving for some days, for a wekk, maybe two

Because the fish he catches in 6 hours is not enoough to satisfy his consumption needs. He would need 8 hours of his work to catch this fish with his bare hands

But what he does is he catches the fish for 6 hours and the other 2 hours he invests into constructing a fishing rod.

He invests, let's say, 2 weeks of his life. Every day 2 hours to get a branch fromthe tree, to cut the branch, to get some rope to be able to use that branch

As a fishing rod to catch fish, and of course, hook and he also experiments with the right bait for the fish. At the end, after 2 weeks he owns a fishing rod

That is able to catch the fish twice as efficiently as he would do with his bare hands.

So, in this setting the fishing rod is the captal. He has made / manufactured a capital good that allows him to fish more efficiently.

And now he could spend only 4 hours every day finshing and he would catch as much fish as Alice does in 8 hours

And the rest of the time he would be able to just rest and not do anything.

So, he doubled his efficiency with his capital good. He raised his life comfort. But it's not all. Now he is able to use the other 4 hours without starving.

Now he is able to use the other 4 hours to produce the other capital good.

Let's say a boat. For the boat he needs to cut some trees, maybe manufacture some other tools in order to put the wood together

In order to have some kind of a boat that he can use then to go into the ocean and catch more fish, because is further from the shore

He can catch more fish, much better, much bigger fish. So, it's not only that he raises his production efficiency

But he is also able to produce consumption goods of higher quality. He can catch fish that Alice would never see in her life.

Because she is able only to catch fish on the shore where she can stand and catch fish with her bare hands.

So, now he has fishing rod and a boat. And this is what we call capital accumulation.

Because one capital good allows him to save time in order to manufacture another capital good or also you can use capital goods of higher orders

To manufacture capital goods of lower orders.

Let's say he would produce a hammer that he can use to put together the boat. So, the hammer is not a consumption good.

He doesn't need hammers. He can't also catch a fish with a hammer. But what he can do is to use hammer in order to produce a capital good

That allows him to catch more and better fish. So, now with the boat and fishing rod he is able to catch the same amount of fish as Alice in only 2 hours.

The same amount of fish that Alice catches in 8 hours he is able to catch in 2 hours with his boat and his fishing rod.

And now he can, of course, accumulate that capital more and more because now he has 6 spare hours a day.

So, he can, let's say make some fishing nets. And of course, with a net he can catch more fish than with fishing rod, and so on...

And this is called capital accumulation. So, it's not about getting more and more money. No! It's about raising your production capacity

By using one capital good to manufacture another capital good or to put yourself in a situation to make yourself able of manufacturing

Or to enabling yourself to manufacture another capital good that will increase your production capacity, that will increase your efficiency

In producing consumption goods. And now we can ask ourselves a question "Who is a better capitalist? Alice or Bob?"

And for everybody it's apparent Bob is a better capitalist. Why?

Why? Because he was able to starve in order to produce his capital and then he was using his capital in order to manufacture more

And in order to produce another capital goods. At the end, with the net and boat he may be able to spend 1 hour a day on sustaining his life with catching fish

And the rest he can use for whatever he wants. For, let's say, reading, maybe creating something. Maybe just resting.

So, he has more safety in his life, more stability. He doesn't have to worry about his existence because of building these capital goods.

So, he is a better capitalist evidently. He built some capital while Alice at the same time didn't build any capital

And she still has to work every day for 8 hours in order to catch the fish. She is not able to save up any fish.

Of course, Bob can go for a day fishing and save up for 8 days because he catches in 1 hour as much as Alice in 8 hours.

So, he can go fishing once every 8 days and then take 7 days vacation, so to say.

So, Alice still needs to work 8 hours every day and if she is sick, she has a problem, because maybe she can't fish and then she starvs, and so on...

What is it that decides about who is a better capitalist and who isn't? I made a video about that saying what we learn for business from Star Wars

I will attach it here and also, you will find the link in the comment below.

I was talking there about the marshmallow test, about delayed gratification.

But in economy we talk about time preference. What does it mean time preference?

High time preference is if you have the need to consume everything you get immedietaly.

You prefer to have something now instead of saving up to have more in the future.

When you prefer your self in now instead of preferring your future self.

And low time preferrence is the opposite. So, you prefer your future self, you invest in the future self instead of having the gratification now.

So, the better capitalists, as you saw in the example I gave you in this video are people with low time preference.

Actually, the low time preferrence is one of the descriptions of capitalism, of building, of the capital accumulation

People with low time preference invest in the future. They save up things in order to build a better capabilities and abilities for themselves in the future

So, better capitalists are people with low time preferrence and this is just from the explnation before that.

You will understand why in marshmallow test kids who were able to delay their gratification, they were then later much more successful in their lives

From the kids who weren't able to delay their gratification. This is exactly because in our capitalistic society people who have the low time preferrence

Meaning those who can delay gratification think in these capital accumulation terms. That's why they are much more successful in a capitalist society

They build more capital and that's why they have more success in their lives.

That's it for today. I hope you liked this video. If yes, give me a thumb up. If not, of course, thumb down.

Subscribe below if you haven't. I invite you to comment. What is your perpective? What is your experience? What are your thoughts about this topic?

What do you think about capitalism, about capital, about capital accumulation?

Share this video with your loved ones, with your friends. One day they will thank you for that.

I talk here a lot about economy, about money, about business, about how the best entrepreneurs in our world think and act.

How the self made billionaires think. I talk also about cryptocurrencies, about my investment experience.

So, if you liked this video, you will certainly like my other videos. I invite you to watch them. That's it for today from Black Forest.

I wish you a fantastic day! Let's do something extraordinary today!

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