The Greatest Era of Wealth Creation is Here


You don’t have to go far into the financial world to find worries about the world having too much debt and too many problems. The future looks grim, they say.

Maybe you agree.

Well, meet Tiffany Zhong.

She’s an analyst at the US venture capital firm of Binary Capital.

She’s also 18 years old.

Tiffany lives in a gated community where the oldest resident is estimated to be 22.

By grade 7 she was on Facebook and she had an iPhone at 15, though that’s passé now.

Her job is to find the next hot start up so Binary can invest in it. Her biggest asset, according to the Wall Street Journal, is access to the tribe of young hackers and coders she’s grown up with.

To quote the paper, ‘Ms. Zhong explains her investment philosophy. One plank is that startups must have a natural “network effect,” which she explains as: “the platform is so useful that you literally force your friends to download it—like Snapchat.”

The greatest era of wealth creation

Tiffany may very well have her eye on two young Aussies.

The Australian Financial Review reported this week on Josiah Humphrey and Mark McDonald. They’re the founders of app developer and strategy company Appster.

They started the business five years ago. Today Appster has offices in three countries and 20 million in revenue.

Today they’re aged 24 and 23 and have a combined net worth of $58 million.

Has the world ever had this much potential for a wealth creation era? I doubt it.

Look at the future already unfolding before our eyes: driverless cars, incredible connectivity, new fuel sources, 3D printing and cheaper energy.

Plus cash-rich corporations like Apple and Google with prodigious scope to invest in research, development and product creation.

Google — now called Alphabet after a corporate restructure — has $73 billion on its balance sheet.

Apple has $200 billion.

These figures are astonishing. Apple CEO Tim Cook has the money to invest in anything.

What I’ve mentioned above doesn’t even account for the vast wealth that will continue to come out of China or India.

The middle class of China is estimated to have overtaken the US in terms of size. At about 100 million people, it’s still only about a tenth of the Chinese population.

This trend will run for the next century in the same way the US grew over the last 100 years.


There’s no excuses to hold back from building your wealth.

This is not to say the world won’t have problems. The world always has problems. But there’s never been a better time to create a product that people want to buy or to build a business.

It helps too to know where the gains from this prodigious wealth creation will ultimately end up.

Like gravity is to science, this law is to economics…

The fruits of economic development always increase the price of land, which far outstrips the growth in wages.

This is called the Law of Economic Rent. This is an invariable, immutable and permanent law of economics.

For an instructive lesson on that, we can turn to Silicon Valley in California.

There is so much tech money in California that San Francisco is now the most expensive city in the US to buy a home.

The value of the land from the only trailer park in nearby Palo Alto is estimated to be worth $55 million.

The Wall Street Journal reported on 25 October,

Protesters of rising home prices in the San Francisco area blame the technology sector, saying the industry’s high salaries and lavish stock-option awards are fueling the increases.’

They even did a study on Apple employees to prove the point. According to WSJ, the findings were that Apple workers live in pricier homes than other residents in the region.

Home values are rising much faster in neighbourhoods where Apple workers live.

The overflow is now hitting Los Angeles as the tech companies set up company offices. According to FT, home prices in Los Angeles have risen 138% since 2000.

It’s not all good news. According to FT, ‘LA City Council members recently declared a “state of emergency” because of a rising homeless problem.’

That’s why over at Cycles, Trends and Forecasts we always say you have to decide which side you want to be on: renter or rentier.

There are huge gains coming from technology. To take advantage of them click here.


Callum Newman
Associate Editor, Cycles, Trends and Forecasts

Callum Newman

Callum Newman

Callum Newman is the editor of The Daily Reckoning and Associate Editor of Cycles, Trends and Forecasts. He also hosts The Daily Reckoning Podcast. Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect. To have Callum’s thoughts and insights on the current state of the currency, commodities and stock markets delivered straight to your inbox, take out a free subscription to The Daily Reckoning here.

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