Hi, today from Amsterdam. Behind me you can see Beurs van Berlage. This is the 20th century building were the Amsterdam Stock Exchange was situated. But in the same place the very first stock exchange in the world had its location.
So, Amsterdam is the homeland of speculation, of speculators. Here we had the first stock exchange in the world. And here also shortly after that, we had the Tulip speculation bubble called Tulip Mania.
It’s the perfect opportunity to talk about speculation, about how it is different from gambling and how it is different from investment, from real investment. I have to excuse myself, I’m now after a full night transatlantic flight, so I may not be in my best shape as far as looks are concerned but I have to tell you something important. So, stay with me till the end of this video, there will be a contest and something to win at the end. What’s the difference between gambling, speculation and investment? Let’s start with gambling. Gambling is every game you play that requires a chance and the odds of winning are against you.
So, lottery, roulette, almost everything you play in the casino, that’s gambling. Also sports bets are actually gambling, as long as it is not manipulated and you’re not an insider. Why? Because the betting offices, they always earn with every bet.
A friend of mine billionaire Tim Draper says, lottery is actually tax for your stupidity. So, if you don’t pay enough taxes, do some gambling; play some lotto, play some roulette, this is the best way to lose money big time on a long term. So, the probability is set against you, the odds are set against you and it’s just a fool’s game. What’s a speculation? Speculation on the other hand is a game in a market where you place bets against other players.
So, if you win money, the other guy loses money. So, speculation you do on markets, on Forex, on stock markets, maybe crypto markets. Right? This is where you speculate or you can be also a real estate speculator. But what you do in speculation, is you try to buy low and to sell high. It’s easy said, but it’s difficult to actually do because you never know if the price right now is a high price or a low price.
Is it gona go up or down? And this is a lot about skill, about the knowledge and of course if you have an insider knowledge, then it’s a winning game. If you are the sucker so to say, the guy who doesn’t know much about the market and who doesn’t know what game is played right now, it’s a losing game. Right? And it depends also, how the market develops.
If the market is growing, the probability, the odds are set in your favor, so you may just buy an index or diversify in that market and you may be successful, it may be a winning game. Like for example, if you believe what I believe, that cryptocurrencies long term will develop, will gain in value, then investing in cryptocurrencies long term when you diversify or if you buy an index, this is a sure game, this is a winning game. Right? On the other hand if there is, let’s say a shrinking market or market that’s in decline, then the odds are against you. So, it is then closer to gambling actually, if you try to speculate in that market.
Right? Then if you have an insider knowledge, if you know certain things about certain currencies that the public doesn’t know about and that will have an impact on the price, then you can use that knowledge of course to buy low and sell high or to place bets in the other direction. And to take advantage of that knowledge. And in that sense, then it is a winning game and it is closer to investing. But real investing is when you actually can influence the market, when you actually can influence the outcome of your investment, then it’s a real investing. A typical example for that is, you buy desolated house or piece of real estate, you renovate it, you raise its value.
And you can calculate: I put so and so much money into that real estate, into that property and it will become that valuable. And you can actually make a win doing that, if you know what you do of course. And this is a calculated investment, you know exactly: I need to pay, to put in so and so much, then I may be able to sell it for that price or I may be able to rent it for that price. This is real investment, where you directly or indirectly influence the outcome of your activity, of your financial activity of the assets you put your money into. And this is what billionaires, what the best players do.
Right? They get a great share, a big share in a company, instead of buying several shares and getting 0.05 % of a company and not having any influence on that company. They buy a substantial chunk of that company, let’s say 60%, so-called controlling share of that company.
And then they can restructure that company, they can improve that company, they can improve its profit, maybe the revenue. They have impact on what this company is about. Or maybe they merge two companies, maybe they divide the companies into different assets that then are more valuable in itself, they’re more directed to certain investors. So, this is how billionaires go about investments, investing in stocks, in shares, in company shares. And you may ask yourself, so how is it about crypto markets?
Is it speculation? Is it investment? Generally, in most cases it’s just pure speculation. And there’re of course different flavors of speculation as I said.
There is a speculation closer to gambling if you invest in ICOs based on white paper only; Companies, they don’t have any product yet, they don’t have any revenue, no profit whatsoever. They have only an idea what they want to do. Right?
They have a list of promises what they would like to implement. And sometimes several points, some points of that promises they don’t have a clue how to implement it, maybe they are even hard problems that aren’t solved yet and they hope they will be able to solved it. And then they get for that white paper, in an ICO, they get millions of dollars, sometimes tens of millions of dollars. So, they have the money already and there is relatively a low motivation to really implement it, instead of just you know, taking time and spending that money. And this is completely different from the previous VC paradigm, where people have to prove themselves over and over again for different financing prompts. So, this type of speculation in cryptocurrency is very close to gambling, because the odds of these projects being successful are extremely low.
They are even lower than with normal startups for the reasons I have talked about. Then there is another way of investing when you just diversify or buy an index of the market. Then if you believe as I do, that this market is going to grow long term that it is going to develop and gain value, then it is winning game. So, it is much closer to investing because you actually don’t have an impact on the market but you use your special knowledge to foresee the future of the market, but it is still speculation. But there is, of course a way of investing, of clever investing into this market when you actually have an impact on what is going on. Look what I am doing with Byteball.
I have invested in Byteball some amount of money. And what I do is I use my channel, my platform to talk about Byteball, about its merits, about its characteristics, maybe to teach people how to use Byteball, what is good about it, what are the weak points and to educate people about that. And I’ll also give away Byteball and I bring new users to Byteball.
It’s not necessarily about that people have to invest in Byteball, I’ve never encourage anybody to invest in anything. No, it’s about using the system, getting to know the system. Because in cryptocurrencies there is so-called Metcalfe’s Law. Metcalfe’s Law talks about the value of every network and cryptocurrency systems are networks. And Metcalfe’s Law states that the value of a network grows with the square of the number of its users.
So, if you doubled the number of the users of a network, its value grows by the factor of four. And I use my channel, I use my YouTube and my blog to encourage people to use that system. And I have acquired or I have won for Byteball many new users and I even give away Byteball for people for free. So, they can use Byteball system even without investing in it.
And by doing that, the value of the assets that I keep in Byteball is actually growing. This isn’t necessarily visible in price right away but in the long term the price follows the value. So, if the usage of a system grows its value grows and here especially with square of the number of its users. So, now how can you make your crypto activities an investment instead of speculation?
You can do the same; Use your social media presence, your social media profiles to talk about the cryptocurrencies you have invested into, to encourage people, your friends to use it. For example, for the people who have gotten Byteball from me in the contests or even who have bought Byteball; give a piece of that, very small amount of that, maybe 100 000 Byteball, maybe 10 000 Byteball, send to your ten friends 10 000 Byteball or maybe 100 000 Byteball each via textcoin, send it to him by email, send it to him by text message. And tell them just to get the money and to try to use it and to use it with you and to play with that. And that way, you increase the number of users and the value of the coins you hold increases as well and long term also the price will increase. So I hope I could explain to you the difference between gambling, between speculation and between investment.
And now you can judge if you invest, if you gamble or if you speculate. So, if you like this video give me a thumb up, subscribe below and don’t forget to hit the bell button in order not to miss my upcoming videos. I talk a lot about investing, about money, about how the best entrepreneurs in the world think and act. I interview self-made billionaires around the world, people who created value of billions of dollars within one lifespan. I invite you to comment on that video, what are your thoughts, what are your experiences, what is your perspective on investing, on speculation, on gambling? Share this video with your loved ones, with your friends.
One day they’ll thank you for that. Among the best comments, among the best shares I will give away one copy of the bestseller I have written with Brian Tracy, who is the best business teacher in the world, the best personal performance trainer. Special edition of that book looks like that. And you will get a personal dedication from me in that book. If like that video you will probably like my other videos.
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I wish you a fantastic day. Let’s do something extraordinary today.