Leverage OPE To Have More Freedom
How far do you think you could throw a 20 lb. boulder? Probably not very far. What about a 300 lb. boulder? That would be an impossible task on your own. You would need some help.
For example, medieval armies recognized the usefulness of large boulders for breaking down walls and fortifications of opposing armies. Still, they also understood that they could not simply project these boulders by human force alone. They would need help. They would need the aid of a lever – a tool for getting more work done with less physical force. A trebuchet was one such tool that used the power of levers to fling a projectile (e.g., boulder) that would be impossible with manpower alone.
– Source: https://www.iroquoiscsd.org
A trebuchet was an effective siege weapon using a lever arm with a large, heavy counter- weight on one end and a smaller projectile on the other. When the counterweight is raised, it has lots of gravitational potential energy. Then the counterweight is allowed to fall, rotating the lever arm and converting that potential into kinetic energy in the projectile, which is flung through the air.
Medieval armies could fling large boulders great distances through the air at their enemies by leveraging gravity – a much more effective endeavor than soldiers throwing rocks. Not only were trebuchets effective at weakening enemy fortifications, but they also allowed soldiers to keep their distance and reduce casualties from close-quarters combat.
In the world of investing, many are seeking financial freedom through alternative assets. They know that traditional assets like public stocks are too unpredictable and susceptible to market volatility to generate consistent, reliable returns to plan for and achieve financial freedom. They have tried the traditional route, and it doesn’t work.
That 401k or IRA they’re relying on for their retirement will not have enough at the time of retirement, let alone sooner when they’re younger and have the energy and time to enjoy life.
Investors know that private investments offer the promise of higher returns at reduced risk, but do they want to put in the time and effort to learn about a particular asset segment and come up with the capital for acquiring an asset on their own?
Using our example, do they want to figure out how to build a trebuchet on their own, and do they want to come up with all the money for the materials and labor to build it on their own? For many, the goal is freedom, so the prospect of spending years to gain the knowledge to invest in a particular asset segment seems counterproductive.
Then once comfortable with the knowledge, the investor is still required to come up with the capital for acquiring a particular asset, which may be too high a price.
Why reinvent the wheel? Why reinvent the trebuchet? The ultra-wealthy are where they are because instead of figuring out how to build a trebuchet and then paying for it on their own, they partner with experts who have already gone through all this trouble. They partner with experts who already know how to build a trebuchet and then pool their money with other eager investors to overcome the huge capital commitment required if they build one on their own.
By leveraging other people’s experience (OPE), fellow investors can share in the spoils of victory without the headaches of doing it on their own.
Besides overcoming the knowledge, experience, and capital hurdles of investing in a particular asset or segment, leveraging OPE allows investors to team with multiple experts to create multiple streams of diversified income. So, instead of sharing in the spoils of victory from a single trebuchet, an investor can reap the benefits of multiple trebuchets that not only put their money to work but reduce risks by insulating income streams and growth over multiple markets and asset segments.
It’s no secret that many ultra-wealthy have made their fortunes from cash-flowing alternatives like commercial real estate and income-producing private companies. However, many of these ultra-high-net-worth individuals didn’t make money by going out and doing everything independently – the leveraged OPE.
By leveraging OPE, sophisticated investors can screen and partner with various experts in their asset classes and geographic locations to generate multiple streams of income and insulate their returns by spreading out risk across asset segments and geographic locations to maximize returns.
Using OPE, like a trebuchet, allows investors to make their money go much further than trying to do it independently. This is the key to financial freedom.