The Economics Lesson from an Art Exhibition
Why True Wealth Isn’t About Money
The other day, my future wife came home after attending a talk at the most important national art exhibition. It’s an event where multiple artists and wealthy individuals gather to showcase and trade their paintings. When she got home, she told me something that left a lasting impression on me.
One of the collectors told her that he must be extremely rich. To which he replied: “True wealth is circulating capital.” Later, she came home and said, “I wrote it down because I think you could use it for a newsletter,” and here I am.
When we think about wealth, we often imagine large sums of money accumulated in bank accounts or investments. However, true wealth doesn’t lie in static money but in its ability to circulate and continuously generate value. This concept, inspired by the idea of circulating capital, can transform your perspective on how to build wealth and achieve financial freedom.
Money that doesn’t move loses its value over time. We live in a world where inflation, unexpected expenses, and missed opportunities are just some of the reasons why stagnant money doesn’t create wealth.
On the other hand, when capital flows strategically—whether through investing, entrepreneurship, or generating passive income—it becomes a growth engine.
You already know that I don’t believe analyzing companies is the best way to invest. There are thousands of analysts dedicating far more hours than any of us physically could, and it’s not worth trying to beat them. However, if there’s one type of analysis that I think makes sense, it’s discounted cash flow analysis. This type of analysis can help us understand how healthy a company’s finances are. Similarly, it can demonstrate how healthy our own finances are.
In business terms, circulating capital is the difference between current assets (like cash and inventory) and current liabilities (short-term debts). This indicator reflects a company’s liquidity and operational capacity. In your personal finances, you can think of circulating capital as the constant flow of money entering and leaving your accounts to generate more value.
For example:
Your "current assets" could be your salary, savings, and liquid investments.
Your "current liabilities" would be your recurring expenses like rent, utilities, or loans.
The key lies in ensuring that your assets consist of recurring income streams that grow year after year while requiring less effort over time.
The Best Ways to Achieve This Is: