1. Hard work does not lead to wealth

There is a saying, "wealth comes from hard work," but you may notice that people around you are very diligent, striving to save money and work hard. Why is it that they have not become wealthy yet, and instead, they feel increasingly poor and anxious?

In fact, the underlying logic of most social issues is economic. Hard work is an important condition for becoming wealthy, but it is by no means an absolute condition, and few people can become rich solely through hard work.

Let's take an annual income of a million as an example. Some people might think that an annual income of a million is nothing, but for most office workers, it is definitely the ceiling level.

A college graduate who works diligently and hard every day, and can earn twenty to thirty thousand a month in a first-tier city, is already very excellent. This is a treatment that only a minority in high-paying industries like finance and the internet can have, and other industries find it hard to reach this level. Such excellent workers are still far from an annual income of a million.

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Even the best workers find it difficult to make a lot of money. In other words, the upper limit of working is not high, and diligent work at most can ensure a decent lower limit for your life.

Farmers work hard in the fields all year round, getting up early and going to bed late, repeating the cycle from spring to autumn for a lifetime, but have they become wealthy? No, they have not; construction workers who move bricks every day are very hardworking, but they have not become rich either. A lifetime of hard work can only maintain a subsistence living.

Can you say that these people have not been hardworking in their lives? They are very hardworking! But they have not become wealthy, because becoming wealthy solely through hard work is not possible. This is not only related to the technological content but also has a lot to do with the country's development strategy.

2. How do the wealthy become rich?

Upon careful analysis, a significant portion of the wealthy share a common characteristic: they become rich in a short period of time, rather than accumulating wealth over half a lifetime through work. The richer they are, the more this is the case. It's not the gradual enrichment we normally understand, and many wealthy people earn their wealth by simply owning assets and letting them work for them.For instance, there is a segment of middle-aged individuals in first and second-tier cities who got married and had children early in their lives, necessitating the purchase of a home. From that point on, the house became an asset, and their fortunes became closely tied to the development of the city they resided in.

In 2008, during the financial crisis, central banks of major global economies initiated an era of aggressive money printing and easing, leading to a continuous rise in asset prices. Consequently, the net worth of these individuals also increased significantly. The reason for their growing wealth was not due to hard work but because the assets they held appreciated in value due to the central banks' money printing, resulting in a passive win.

In an environment where central banks are continuously printing money, it is extremely challenging to become wealthy solely through hard work. The speed at which you save money simply cannot keep up with the rate at which asset prices rise, let alone the pace of the central banks' nuclear-powered money printing machines.

The notion that one can become wealthy through hard work alone is nothing more than a ploy by global elites to deceive the lower strata of society, making them believe that their poverty is due to not working hard enough or not being diligent enough.

Is it true that one can only make a fortune by being a passive winner? Actually, that's not the case. You can also seize opportunities and ride the wave of trends.

For example, after China joined the World Trade Organization in 2001, a flood of overseas orders poured into China. That was the golden era for small business owners, with so many orders that they couldn't be completed, leading to the constant expansion of factory sizes and production. The small business owners made so much money that their hands were numb. Those who started businesses during those years were the ones who rode the wave of the trend and became wealthy within a few years.

Starting from 2008, when global central banks began massive easing, the era changed.

In recent years, in addition to office workers who constantly worry about the 35-year-old employment threshold, small business owners across various industries have also become increasingly bewildered, especially those in manufacturing and trade distribution.

Those years also marked a watershed for doing business, transitioning from an era where wealth could be achieved through hard work to an era where wealth could only be achieved through capital and finance.

Why did this shift occur?Let's derive the conditions under which bosses can make money. For bosses to profit, their products must be sellable. This requires a broad market and consumers with the means to purchase the products, which in turn makes the products sellable.

After joining the WTO in 2001, our country's foreign trade exports surged rapidly, with a significant trade surplus every year, and overall, a considerable amount of money was earned. With the economic crisis, central banks around the world flooded the market with stimulus, leading to increases in production capacity and wages. Many people have turned to manufacturing, hoping to get a share of the profits.

Before 2008, the increase in production capacity was driven by the growth in external demand. However, as global wealth disparity has intensified, the current situation is characterized by a decrease in demand while production capacity continues to increase. The pie hasn't grown larger, but the number of people sharing it has, making business increasingly difficult.

Why does increased wealth disparity lead to a decrease in demand?

The essence of the decrease in demand is not a reduction in actual demand, but rather a reduction in effective demand. This requires distinguishing between demand and effective demand.

Demand is my desire to eat steamed buns and steak. Therefore, steamed buns and steak are my demands. However, I can afford steamed buns but not steak, so steamed buns represent my effective demand, while steak does not. Severe wealth disparity leads to many demands being "suppressed," not effective demands.

Is the overcapacity in the mobile phone industry because people can't use two phones at once? No, many people are still using broken, slow smartphones and are reluctant to change them. They don't lack the need for new phones; rather, they lack the funds to purchase them, which suppresses the demand for mobile phones.

Daily consumer goods follow the law of diminishing marginal utility; even the wealthiest individuals cannot use two rolls of toilet paper when going to the bathroom. Ordinary people need money in hand to consume more, and as wealth disparity increases, wealth becomes more concentrated, and the purchasing power of ordinary people deteriorates. After all, the majority of people in this world are ordinary individuals.

Therefore, in recent years, the term "overcapacity" has been heard with increasing frequency. Of course, the causes of overcapacity are not limited to wealth disparity; they are also closely related to factors such as the improvement of productivity. The supply-side reform proposed in 2015 was aimed at addressing the issue of overcapacity, focusing on both reducing production capacity and upgrading industries.

In addition to manufacturing, another driver of economic development is real estate. After the 2008 economic crisis, we implemented an economic policy that many countries, including the United States and Japan, have also adopted, which is quantitative easing, commonly known as printing money. But where did the influx of money and the excess money go? It went into real estate.Since 2008, the rise in China's housing prices has been evident to all. Capital has been detached from the physical economy and manufacturing industries, with real estate acting as a reservoir for this money. Of course, a portion of it has also flowed into the stock market and so on. However, the Chinese stock market has been disappointing, and since the stock market crash in 2015, it has been barely hanging on. The main focus of people's attention has still been on real estate.

Many small business owners who once became wealthy through hard work have found it increasingly difficult to make a living after 2008. They toil day in and day out, only to find that the money they earn in the end does not even match the profits made by their neighbor, who simply bought a house with a loan, almost winning without effort.

In the 21st century, with central banks around the world continuously printing money, it is very difficult to become rich through hard work alone. The prices of assets are constantly rising with the global money printing by central banks. The speed at which you earn money through hard work simply cannot keep up with the pace of money printing by central banks. However, if you stop working, the money in your hands will continue to be diluted.

Perhaps many people would say that if they had the chance to start over, they would definitely buy several houses in advance. In reality, even if given another chance, most people would not be able to do it. Those who had the capital to invest at that time were either those who had previously accumulated funds or those who inherited from their parents. If neither of these applied, then leverage would have to be used, either by borrowing or taking out loans. At that time, this required a lot of courage. After borrowing for the down payment, there would still be monthly payments to be made. Without being able to fully ensure that your income will continue to rise in the future, and without being able to determine that future housing prices will rise to such levels, most people do not have the courage to take such a gamble. Even if given another chance, the immense pressure and uncertainty would deter people from taking the risk.

The Chinese people have always had the spirit of being prepared for the future and have a strong aversion to risk. The highest leverage an ordinary person may come into contact with in their lifetime is perhaps a mortgage. However, the wealthy rely heavily on leverage, using it to move large amounts of capital and earn high returns. Therefore, the gap between those who do not have the funds to participate in the real estate speculation game and those who use capital to speculate and win without effort is becoming increasingly large, and this trend is irreversible.

It is precisely because of the use of leverage that the wealthy are also very sensitive to bank interest rates and interest rate hikes or cuts. Every time the country raises interest rates to reduce leverage, we will witness financial crises.

Both adding and reducing leverage are processes that continue to move forward in the course of history. There is no leverage that is continuously added, nor is there leverage that is continuously reduced. What you need to do is to get on board before the leverage is added and to get off when the leverage is reduced.

4. What should ordinary people do?

Perhaps many people would say that since labor income cannot keep up with capital income, what is the point of working? It might as well just lie flat and not strive anymore, but this is also very dangerous.

Although hard work alone cannot make you rich, the primary significance of work is to increase your income, improve the quality of life, and ensure the minimum standard of family living. For those who have not accumulated wealth, it is necessary to rely on hard work and control their consumption desires to save the principal. With the initial principal, you can seize opportunities when they arise.Although working may not make you rich, there is a significant difference among office workers, and what ordinary people can do is to strive to improve their professional skills and maximize their gains in work. The difference lies in your irreplaceability in the industry.

We observe high-salary individuals around us; they either took the right path and seized opportunities, or they possess skills that others cannot replace. As the saying goes, being proficient in one area is better than being average in many. You might encounter people in life who seem to know nothing, and even have some superstitious beliefs. You might even look down on them, but they can earn a lot of money, even more than what others earn in several years. The key is that they may not understand other things, but they are extremely proficient in their own field. You might know a little bit about everything, but when it comes to their area of expertise, they can outperform you significantly, even leaving their peers far behind.

This is irreplaceability. If you have a strong sense of irreplaceability, not only will your boss not dare to fire you casually, but they may also have to pay you a high salary.

Therefore, it is important to maintain an open mindset in daily life and delve deeply into a specific field to increase your irreplaceability.

Of course, in addition to this, it is also crucial to choose the right direction. For example, civil engineering was booming more than a decade ago, around 2008, and it continued to be hot for several years. With the introduction of the four trillion yuan plan, real estate, bridges and tunnels, railways, highways, and subways were everywhere, and civil engineers were making a fortune. However, once the demand is saturated, the industry will begin to decline because there are already enough housing and infrastructure in China, so civil engineering has been on a downward trend. This is the simplest and most basic logic.

Choosing the right direction is like catching a ride on a fast train; choosing the wrong one means you have to climb a ladder. As the wheel of history rolls over a small segment, it crushes the lives of countless people.