Imaginative Curves of Wealth

Extracted note from the drawing: This is what I think of when I think of wealth creation.  The critical point is a person will always have to stand between (1) accumulating short-term wealth (reflected in the Imaginative Typical Person Wealth Curve) that will phrase out, through time, the chance of investing on some things that personally matter more and (2) engaging into a long and maybe painful process of incubating a grand plan/idea/team/company/product that demands no comfortable short-term wealth level with the risk of failure for the chance of a booming J-Curve Effect and the following Quantum Leap period.

Imaginative Curves of Wealth

Here goes the following thinking:

– The most important thing with the curve is to identify what leads to the boom.  Thus, this does not necessarily trade-off with the short-term wealth accumulation but it generally does.  What leads to the boom differs depends on various factors but most notably is the field/industry the person is operating.  Each field/journey has it way, maybe unique or maybe not so unique, to succeed.  Identify those factors, accumulate, and achieve them theoretically help pushing the person come closer to the explosive point.  Thus, this does not necessarily contradict with accumulating short-term wealth (because it may be one of the factors).  However, if the person operate and accumulate short-term wealth without accumulating key factors mentioned above, the J-curve effect will never come.  Thus my thinking about this issue is: (1) Identify key success points, (2) Accumulating them at the highest priority – and this often comes in contradictory in time with accumulating short-term wealth.

– J-curve effect seems to appear at the end of the Time Axis, this is not necessarily true to all case.  The booming point depends on a lot of independent factors such as industry: Tech start-up brings a great chance to shorten the effective point of booming but this also goes along with the shorter time frame of competition.  Means, one either succeeds early, or the chance will pass.  For finance and other industrial sectors, higher entry barrier and sophisticated learning curve will (1) prevent young ones to boom fast, (2) protect experience accumulated through years for older classes, (3) J-curve effect will typically come later with longer incubating period.

– With either industry (old, young, dynamic, saturated, etc), new ideas, technology, and products have the power to overthrow accumulated experience and change the whole industry structure.  This might rewrite rules of the game and shorten the J-Curve Effect point.

– Incubating period supposes to be painful, very painful.  If one gives up before reaching the point (even how close she is) – she is wiped out of the game.

– Persons who go with the blue curve face time as the largest trade-off.  The person can always stop the blue curve and start the red-curve.  The later the point, the safer the journey but typically less reward.

– J-curve is not the only case.  With diminishing return, a blue curve going person can incubate a shorter time period and break upward her invisible ceiling curve, open a new horizon through innovations and changes.  However, this curve is less likely to have the extraordinary shape of J-curve.  I think this curve will be more like a second layer of blue-curve that lay higher than the original blue-curve and will also face law of diminishing returns.

– A J-curve also faces saturation phrase.  New incubation is needed for the next explosion.

Tri Ton

Businessperson with private equity expertise. Interested in strategy and investment.

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