3. How to Maintain Position

It is easy to be a good person, but far more difficult to be a good rich person

by Shuzhimi@RynW1988

Color Coding for This Chapter

Credit: Editor-in-Chief C / Art Director Shuzhimi@Chaney

a. Body text / statements in black

b. Axioms / theorems in red

c. Explanations / supplements in blue italics

d. Inferences / conclusions in orange

e. Facts / data / news in green (due to information locality and author's limitations, not all sources are cited)

f. Speculations / assertions, plus emotions / comments / rumors / anecdotes / metaphors / analogies — popularized and literary expressions — in purple

g. Theoretical innovations in gray with highlight

The vast majority of this chapter constitutes theoretical innovation

3.0 What Is Maintaining Position

3.0.1 Maintaining position means that after reaching W_p, your most important 30 non-kin social relationships/friends (hereafter F30) maintain stable positive expectations of you

a. This of course requires emotional commitment and long-term effort. Generally, there are two primary task lines: financial security and maintaining dignity

b. A person can generally only sustain direct emotional connections with ~150 people (Dunbar's number). F30 represents the 20% accounting for 80% of importance among them.

3.0.2 The method of maintaining position refers to the techniques for achieving both financial security and maintaining dignity — neither is dispensable. This chapter is divided into 3H1 and 3H2

3.0.2.1 Financial security means ensuring that principal is never subject to permanent loss

a. Concretely: in every medium-term period, net worth must not fall below e⁻¹

b. In theory, wealth management methods can recover assets by e× over 7 years, so it suffices to stably keep assets above e⁻¹

3.0.2.2 Maintaining dignity means ensuring that F30 will support you in the next important win-win move

a. As the Chairman said, "Politics means making as many friends as possible and as few enemies as possible"

Historically, the Chairman placed extraordinary importance on comrades who supported him during adversity.

b. At the margin, this means that within some social domain, "becoming someone's new friend" is a self-reinforcing conformist behavior rather than anti-conformist behavior.

- Further, within any social domain, having a base group that operates on a goodwill assumption toward you is the foundation for making new friends

- If no such group happens to exist, making new friends requires switching to a different social domain — colloquially called "restarting one's reputation"

3H1. Financial Security

We will demonstrate that perpetual financial freedom is an endogenous equilibrium state of resource self-sufficiency, hereafter called "endogenous financial security"

The financial state and maintenance work at W_p but before reaching W_H is hereafter called "exogenous financial security"

3.1 Perpetual Financial Freedom / Endogenous Financial Security

3.1.0 Mathematical Model of Endogenous Financial Security

Assume M_i has initial wealth W_i1, where W_i1 ≥ W_H

3.1.0.1 Let M_i's annual total resource consumption (e.g., living expenses, inflation, business risks) be factorized as discount consumption factor R_iD, R_iD ∈ (0, e−1], D for discount; risk-free return rate R_iF, R_iF ∈ (−100%, R_m), F for risk-free

a. Factorizing R_iD is reasonable. The resources consumed to maintain the status quo are not fixed but scale with current wealth W_i1

- R_iD = e−1 means consuming down to e⁻¹ per year; larger R_iD values have no meaningful discussion value

b. Risk-free return R_iF is an independent variable with its own significance. If M_i takes on business risks, R_iD increases correspondingly

- R_iF can certainly be negative; −100% means losing everything within a year

- R_iF does not exceed R_m; no asset's long-term compound return can exceed R_m

3.1.0.2 The subscript i is necessary. For different M_i, R_iD/R_iF values differ entirely, even if their W_i1 is identical.

Each M_i differs enormously in risk appetite, lifestyle habits, ability, and family culture.

3.1.0.3 In year two, W_i2 = W_i1(1+R_iF)/(1+R_iD). Generally, W_i,n+1 = W_i1[(1+R_iF)/(1+R_iD)]ⁿ ...(*)

3.1.0.4 If R_iF < R_iD, W_in converges to 0

a. Colloquially "wealth doesn't survive three generations" — empirically, most W_i1 decline to e⁻¹ W_H within 60 years (three decades)

- This universality is independent of W_i1. This implies that generally, the larger W_i1, the lower R_iF — colloquially "rich families produce prodigal children"

b. In (*), let W_i1 = W_H, n=60, R_iD=4%, R_iF=2%, then W_55 = e⁻¹ W_H, 3×18 = 54 years to fall below W_H;

This is a typical indicator set explaining "why do rationally pragmatic yet non-resilient families lose wealth across three generations?". It can be viewed as the gentlest form of W_H degradation — the Degradation Method

3.1.0.5 Perpetual financial freedom thus requires R_iF ≥ R_iD, and this is achievable

3.1.1 The first principle of endogenous financial security is maintaining R_iF ≥ R_iD

a. Why does R_iF ≥ R_iD not violate entropy increase? Because it has real commercial significance.

b. That is, once W_H is reached, its risk-free growth rate can resist attrition.

3.1.1.1 It is well known that growth comes from innovation/new things/new concepts developing.

3.1.1.2 For any new thing, establishing and achieving widespread acceptance of its value in era T generally requires endorsement from influential M during era T−1

Colloquially "setting up the table," "building the canopy," "the people back the winner"

Value-system reshaping that does NOT require T−1 era M endorsement is called "value revolution." Value revolutions are rare.

a. NFTs being widely recognized as investable required Steph Curry using an NFT ape avatar.

b. BTC being widely recognized as investable required large traditional financial institutions and even national central banks including it in asset allocations.

c. NFTs/BTC then appreciated dramatically during this process. What did Curry or central banks need to do?

d. Nothing at all. Their returns were zero-risk. Their contribution to "setting up the table" was indispensable.

3.1.1.3 M's existence/participation/endorsement itself carries indispensable milestone value in a new thing/concept's development. Conversely, every new class of assets inevitably produces its own representative new M (or several).

Colloquially "seated at the table," "has a say," "the birth of a faction"

a. The essential difference in becoming an M is that other Ms consider you one of their own

b. As long as your money came from legitimate sources, everyone assumes you're capable. As long as you don't sabotage yourself, everyone factors you in as "always being there" when thinking about things

c. Concretely, they'll consult you on matters, reach out when opportunities arise, and if they must harm you they'll give you advance notice.

3.1.2 The threshold for M status in the 2020s is W_H

3.1.2.1 It is generally accepted that reaching W_H represents an extraordinary commercial achievement comparable to world-class achievements in other fields without being overshadowed.

"I want to become an athlete who earns W_H." — LeBron James

3.1.2.2 Money is the image of reason and storyline condensed upon you; it is an endogenous variable of reason and storyline.

3.1.2.3 If you/your family's existence has enduring value, perpetual financial freedom is not an objective but a byproduct.

3.1.3 The logical chain above is "if and only if" — meaning its converse theorems also hold

3.1.3.1 Converse theorem I: Below W_H, accessible investment opportunities are not risk-free cake

a. Colloquially "not seated at the table" — people assume you'll probably lose it all through incompetence.

b. This is the academic definition of old money. Below this threshold, family legacy cannot genuinely exist.

3.1.3.2 "How others treat you is priceless." If you happen to not be at W_H, what truly belongs to you is only memories and experiences from every amusement park visited, and the genuine feelings given and received along the way

3.1.3.3 Converse theorem II: If you or your family's existence lacks enduring value, then W_in > W_H cannot persist long-term

a. W_H is merely a symbolic expression that you remain at the table, while the table itself is perpetually renewed.

b. Mechanical caution/frugality/risk avoidance has limited effect. You cannot preserve through mere protection alone — W_H must carry weight

- If Li Shishi in Water Margin is historically the same person, then Emperor Daojun was Emperor Huizong of Song. That is, within single-digit years after Song Jiang's execution, Huizong was captured by the Jin dynasty.

3.1.4 How to achieve R_iF ≥ R_iD?

3.1.4.0 After reaching W_H, simply "fulfill duties without self-sabotage" suffices

3.1.4.1 "Fulfilling duties without self-sabotage" means being widely perceived as having made maximum effort to preserve one's own value (commercial/social/influence), without slackening, rather than allowing it to casually dissipate

This is a high bar. Some W_H families even codify this requirement in a written document, colloquially "family precepts."

3.1.4.2 Not self-sabotaging guarantees R_iF > 0; otherwise it becomes a massive negative

Not self-sabotaging means progress — it's only a question of speed.

3.1.4.3 Fulfilling duties makes F30 think you're still capable. Across successive win-win moves, R_iF automatically rises above R_iD

a. In practice, R_iD median roughly equals 4%. Doing nothing (R_iF=0), 25 years to consume down to e⁻¹ or confirmed degradation

a. Without self-sabotage, beating R_iD is not difficult — colloquially "you may not be fierce yourself, but you always have that one classmate who's pretty fierce"

Boss Jia and Teacher Y both lost their original businesses. But Teacher Y didn't self-sabotage, so his seat remained — he's still seen as a faction head, still in the game.

3.1.5 How does contemporary financial freedom evolve into perpetual financial freedom?

3.1.5.1 Concretely, how to achieve W_p → W_H?

3.1.5.2 This process cannot be completed by the non-elite

W_H has reached a magnitude where steady-state existence is impossible without carrying weight.

3.1.5.3 How the elite complete this process — see Chapter 4: How to Make Things Happen

3.1.6 W_H in Practice

3.1.6.1 The foregoing merely established numerically that W_H has the opportunity for perpetual existence. In practice, the most common forms of W_H are industrial operations and industrial investment.

You must carry weight, serve original dishes to the world. Buffett isn't just about stock picking. The combined annual revenue of companies he controls/operators reaches the hundreds of billions USD scale.

3.1.6.2 W_H that carries weight thoroughly enjoys earning money, like repeatedly playing a game they excel at.

a. Since they typically excel at only one type of game, investments are extremely concentrated, not diversified at all.

b. Beyond what's allocated to the family office, everything else defaults to industrial operations and industrial investment.

c. This naturally includes aggressive distressed asset acquisition — see Chapter 2 Appendix: Reversal Investing ZD Group

3.1.7 Two Examples of W_H Forms

3.1.7.1 Semiconductor CEO A, net worth at tens of billions USD scale

a. Aside from donations, nearly all his personal capital goes to one thing:

b. Acquiring valuable small companies in semiconductors worldwide that he can buy (e.g., Japan, South Korea, Israel).

c. Because he knows best + he's relatively richest + he puts capital to greatest use, win rate is extremely high and he enjoys it daily.

3.1.7.2 New energy vehicle CEO B, net worth at tens of billions HKD scale

a. Beyond living-expense money left for the family office, the vast majority of his funds went entirely into three or four new industries representing humanity's future.

b. My child's previous idol was Howard Hughes. Since meeting him, my child says he's China's version of Howard Hughes

3.2 Exogenous Financial Security

3.2.0 First Principle of Exogenous Financial Security

3.2.0.1 If you are an elite W_p, the first principle of exogenous financial security is continuing to serve original dishes to the world.

Your original contributions as the driver of sustained wealth growth, not your money's contributions. At the W_p level, money is ordinary.

3.2.0.2 If you are a non-elite W_p, the first principle of exogenous financial security is heavy reliance on accessible club investments.

Hereafter in this chapter, W_p defaults to non-elite W_p.

3.2.0.3 Club investment refers to projects operated by M, with widespread F30 participation, denoted C_l, with participants denoted c_l, CL for Club

3.2.1 How Does W_p Allocate Assets?

A typical Chinese family office's approximate allocation across asset categories (with standard variance):

3.2.1.1 e⁻¹ / 37% floor assets

a. 22% real estate

- Occasionally also allocating to physical assets (oil & gas/gold)

- Chinese people prefer real estate more.

b. 15% cash/cash equivalents/fixed income

- Must always maintain capacity for club investment participation. In fact, due to the existence of club investments, cash is actually the most aggressive asset.

- Due to agency problems with family office managers and the pitfall nature of structured fixed-income products, the only safe fixed-income product is short-term U.S. Treasuries.

3.2.1.2 e⁻¹ / 37% alternative assets (offensive assets)

- 32% alternative assets

- PE/VC funds and attached co-investment allocations

- Becoming a fund investor in multiple PE/VC firms. Beyond collecting financial returns, this can be viewed as joining an intellectually resource-leading club.

- This is one of the best ways to maintain broad contact with global cutting-edge advancement, second only to reading research papers oneself.

- SQ Fund consistently provides BD secondary-share discount allocations to its investors while locking in its own returns.

- Hedge funds/quantitative funds/BTC

- 5% art/annual donation commitments

- Building two resumes: one for art disposition and one for charitable giving.

3.2.1.3 (1 − 2e⁻¹) / 26% standard assets

a. U.S. equities: MAG7/pharma/Nasdaq; A-shares/HK equities: Kweichow Moutai/Tencent

3.2.2 Club Investment

3.2.2.0 Non-elite W_p cannot engage in industrial/industrial investment (or prior industry has failed and transformation is impossible).

3.2.2.1 Maintaining dignity sustains one's social circle and updates market consensus value.

3.2.2.2 One then learns of recent C_l opportunities (though not necessarily proactively invited)

a. Group A privatization and delisting, Group B new-track subsidiary spin-off, Giant C pre-IPO final funding round.

3.2.2.3 C_l is (a priori) zero-risk for M.

3.2.2.4 However, due to differences in trading position and information timeliness, C_l is not 100% positively returning for all c_l participants.

a. Empirically its return distribution approximates 50% at 2x, 20% at 1x, 30% at 0x, yielding ~90% probability of profit after three compound rounds

3.2.3 Participate in C_l once every few years. With luck, exogenous financial security can be maintained

3.2.3.1 Why can't wealth management methods recover R_m after reaching W_p?

a. Wealth management methods involve highly concentrated holdings. At W_p, there is too much hard-won capital to bear such idiosyncratic risk; black swans must be guarded against.

Even Tencent dares not go all-in anymore — diversification starts to make sense.

b. Wealth management methods require ultra-long-term judgment certainty regarding The Portfolio.

No target maintains certainty forever.

c. In practice, W_p struggles to concentrate assets in just 2–5 targets

3.2.3.2 Per 3.2.1.1, you can only deploy a very small proportion of total assets into C_l investments, aiming to lift overall portfolio R_iF.

a. This demands high returns from C_l. Meanwhile, C_l carries risk — three consecutive wrong bets cannot occur.

b. But non-elite W_p must accept this risk; occasional extraordinary returns make it worthwhile

c. C_l and X_l share the same source, but X_l offers better pricing and higher returns because it monetizes one's own influence rather than mere dependent participation

3.2.4 Two Examples of Club Investment

3.2.4.1 Mr. LJC's family investment

a. Mr. LJC served as China's wealthiest individual for a long time. After a series of ordinary family investments, he invested in Zoom during the pandemic. By April 2025, Zoom holdings accounted for as much as 1/3 of Mr. L's total assets.

3.2.4.2 An internet company's capability-chain spin-off IPO

a. After going public, this internet group spun off each operational link of its core business into separate IPOs, all under the original brand.

b. By April 2025, five publicly listed companies sharing the brand had been established, with a sixth imminent. Each would have been profitable if invested in from spin-off through IPO.

c. If you happen to be in the founder's social circle of this internet group, you could effortlessly maintain position through these opportunities.

3.2.5 It should be noted that "club project" is a logical concept whose form need not even be investment

a. Club projects refer to win-win moves generated by F30 participating in designated projects initiated by M

This is a litmus test for M: projects they initiate will definitely proceed (generally within 18 months) regardless of F30 participation levels. Whereas W_p cannot initiate/pursue projects opposed by their entire F30, and day-to-day activities lack predetermined certainty.

b. Any project whose expected return exceeds market rates qualifies as a club project, colloquially "dependent participation"/"licking the pot rim." Non-investment "club projects" (e.g., participating in recruitment or appearing in new productions) are omitted here.

3.2.6 Before W_p, long-term financial security does not exist, hence position maintenance is unnecessary

3.2.6.1 Before W_p / wealth management success, R_iD greatly exceeds R_iF

a. Note that R_iD is a factor. When asset scale is small, fixed living expenses produce an R_iD far exceeding 4%.

b. On the other hand, before reaching W_p, low probability of accessing club investments means R_iF approaches zero.

Note that wage income and investment income are both not risk-free; increasing risk-return inevitably synchronously increases R_iD.

c. The above analysis targets expectation; in reality, variance plays a larger role. One blowout event ends the game.

- Those between W_F and W_p are hereafter called the middle class.

- The middle class cannot withstand one serious illness, unemployment, divorce, investment failure, or other life accident...

- Cannot withstand means permanent loss of principal, falling below e⁻¹.

- Over ultra-long horizons, these negative events inevitably arrive.

- Thus the middle class is not a state variable with stable meaning but a temporary probabilistic manifestation.

3.2.6.2 In summary, the middle class possesses no meaningful concept of financial security.

3.2.6.3 The rational approach is applying wealth management and shore-reaching methods, bearing necessary (concentrated investment) risks, and reaching shore as early as possible

3H2. Maintaining Dignity

3.3 Maintaining dignity means doing everything possible to prevent F30 from forming negative suspicions or unnecessary conjectures

3.3.1 The first principle of maintaining dignity is: never offend those truly beyond offending (collectively termed M alongside the aforementioned M)

3.3.2 Those truly beyond offending are individuals whose unilateral opinion can alter F30's baseline goodwill assumption toward you

3.4 Core Elements of Maintaining Dignity

3.4.1 Core element I of maintaining dignity: Social vigilance

3.4.1.1 M always exists.

a. The wealthier one is, the greater the need for cautious real-time situational judgment of one's social environment.

Colloquially "having situational awareness."

b. Long-term probability of offending M is high.

Relatively speaking, the probability of getting three consecutive club investment bets wrong is quite low.

3.4.1.2 Lenin said, all things are universally interconnected.

a. You don't know what M looks like when they appear.

b. Actions you take to maintain relationship with M_i may offend M_j or even unknown M₊ (M that M needs to maintain for position preservation).

c. You don't know which individuals connected to M (hereafter m) influence M.

d. People's mindsets vary wildly; you don't know how certain moves might trigger thoughts in M/m.

3.4.1.3 The direct corollary: unless necessary, avoid dealing with many M simultaneously

In practice, many W_H interact with only one M per phase. Switching M is colloquially "changing allegiance."

3.4.2 Core element II of maintaining dignity: Treat others generously

3.4.2.1 This is virtue; doing the right thing is reason enough in itself.

3.4.2.2 This is also a direct corollary of 3.4.1: treating people sincerely and generously makes it easier to earn understanding and support from M and m.

3.4.3 Core element III of maintaining dignity: "When in Rome, do as Romans do"

3.4.3.0 "When in Rome, do as Romans do" refers to a social assimilation strategy of proactively integrating into F30's mainstream lifestyle patterns.

3.4.3.1 This is obvious: non-conformity triggers unnecessary suspicions and conjectures.

3.4.3.2 You must maintain emotional bonds with F30 anyway; being similar to them across dimensions saves effort over the long term.

3.4.3.3 This explains why in the 2020s you need to build two resumes: one for art disposition and one for charitable giving.

3.4.4 Core element IV of maintaining dignity: "Marital happiness"

3.4.4.1 This is a direct corollary of 3.4.3. Spouse = most important F30 member, hereafter "F1."

3.4.4.2 F1 ideally shares your interests and stays within mutual expectations. This also falls within F29 expectations, saving effort.

a. Success or failure of most short-to-medium-term goals changes your life by at most x%.

Professional/industry choice is 10x%; city/work/promotion are all x%.

b. Marriage represents a 50% change. In corporate finance terms, you issued 100% new equity and swapped it for F1's 100%.

Your lives had no intersection in the first half. Suddenly your decade of study/natural brilliance/leadership acquired exchangeable value, swapable for F1's decade of study/bright intellect/distinguished lineage — precious beyond measure, cherish it.

3.4.4.3 If this is not the case, revert to "treat others generously" — i.e., exercise high fault tolerance toward your F1.

Buffett says long-term happy marriage needs only one ingredient: low expectations of F1.

3.5 It should be noted that most of the above logical chains are "if and only if" — meaning most converse theorems also hold

3.5.1 Note that maintaining dignity applies regardless of elite status. Both elite and non-elite need it.

3.5.2 Converse theorem I: Offending M causes immediate position-maintenance failure

3.5.2.1 M has their own F30 and higher-tier M₊ above them.

3.5.2.2 If you harm them, the blowback against you constitutes part of their own position-maintenance work. Details omitted.

3.5.3 Converse theorem II: Requirements outside the scope of position-maintenance methods (omitted) are of secondary importance.

3.6 Two Examples of Maintaining Dignity

3.6.1 A real estate family

3.6.1.1 On one hand, their second generation generates frequent unconventional social news. On the other hand, they almost never engage in risky businesses.

a. PS Investment Phase I almost exclusively invested in WD ecosystem pre-IPOs, ultimately returning over 5x.

b. Their only risky venture was founding XMTV and directly challenging Tencent. Incidentally, the founder is an elite individual.

3.6.1.2 They never offend anyone truly untouchable — to a degree exceeding even their father Old Mr. W. Details omitted.

3.6.2 Another real estate family

3.6.2.1 The first generation maintained a longstanding approachable image with extremely stable business models, once holding vast amounts of PRE in Beijing and Shanghai.

3.6.2.2 The first generation navigated all sides smoothly, making large anonymous donations to overseas institutions; the second generation's errors caused instant position-maintenance failure.

3.7 Non-Elite Version: 30 Years of Fantastic Drift

3.7.1 At this point, the non-elite version of "How to Go from W₀ → W_P" is fully written. I have optimized every stage to the best of my ability.

3.7.2 This methodology can lift any W₀ → W_P, median 30 years 200x, IRR 19.3%. R_m is the speed of light in this domain.

Appendix: Real Estate (Chapter 3 Appendix)

3.8 Common Family Office Investment: Real Estate

3.8.1 Premium Real Estate in core areas of international metropolises (hereafter PRE) is a core asset delivering 70% LR_m / 10% long-term returns

3.8.1.1 Humanity's fondness for real estate is among the most stable aspects of human nature.

3.8.1.2 Starting from London, PRE value laws have been validated across international metropolis after metropolis worldwide.

London completed the cycle before Hong Kong, Hong Kong before Beijing. Mathematically, this is called "a solved problem."

3.8.2 The People's Leverage

3.8.2.1 A brief discussion of domestic commercial bank housing loans as of April 2025, hereafter "People's Leverage."

a. Conclusion first: People's Leverage is unadulterated superiority

b. Credit capital law dictates that the richer the borrower, the lower the interest rate and higher lending ratio; the less wealthy face the opposite.

c. People's Leverage reverses this: first-home buyers enjoy interest rate discounts and LTV benefits.

If the commercial bank's money were your own, would you lend it out at April 2025 rates of 2%-4% over 20-year equal-installment terms?

d. The supreme advantage of People's Leverage is that it is counter-cyclical

- Per capital logic, clearly it should be pro-cyclical: worse markets mean tighter credit/lending reluctance to avoid bad debt.

- People's Leverage is counter-cyclical: weak real estate markets trigger easing, with no lending reluctance/bad-debt fear; strong markets see relative tightening.

3.8.2.2 The essential reason: state-owned mega-banks' operational purpose serves the real economy, not pure capital objectives

3.8.2.3 The above makes leveraging into domestic PRE carry far lower default probability than theoretical values.

April 2025: leveraging domestic PRE at 50% via People's Leverage (ignoring default risk) achieves long-term returns reaching LR_m = 15%.

3.8.3 Real Estate Is Pro-Cyclical / High-Fault-Tolerance / Beginner-Friendly

3.8.3.1 Unlike stocks, real estate is a high fault-tolerance investment; purchasing PRE is not mandatory.

High-quality property in decent locations of modernized major cities (hereafter "good houses") can also achieve 10% returns.

3.8.3.2 Standards for good houses

a. The gold standard for a good house: when your child is matchmaking, you'd invite the match home for dinner rather than to a restaurant (budget is flexible)

3.8.3.3 Pricing power for good houses lies with the broad populace. Pro-cyclical operation yields 10% returns.

a. Intuitively, pro-cyclical means: the year ±1 when most of your friends bought property is when you should buy.

b. Beijing example: 3+ bedroom apartments within Second Ring/Tsinghua vicinity/Wanshou Road vicinity, and villas within 40 mins drive of Shunyi Airport — all qualify as good houses

c. Locations further from these anchors score lower but retain sufficiently high fault tolerance.

Appendix: BTC (Chapter 3 Appendix)

3.9 Common Family Office Investment: BTC

3.9.1 BTC's first principle is a consensus: "people need currency that treats all people equally"

3.9.1.1 BTC is the root of an equation. Using the root of an equation as currency holds core value because most Western countries lack a people-centered monetary philosophy.

As of April 2025, the world remains full of terrible governance and monetary disasters. The equation's root treats rich and poor equally.

3.9.1.2 Pity our world, suffering abounds — this consensus is far more stable than Kweichow Moutai's

3.9.1.3 BTC's certainty also derives from the difficulty of new consensus forming around alternative digital currencies with similar mechanisms.

Historically, BTC mining's sunk costs were enormous, making new consensus formation extremely difficult — convincing people to spend fortunes solving new equations.

3.9.2 In summary, BTC is a top-tier investment absorbing global growth forces, with long-term expected returns GR_m

3.9.3 Buffett repeatedly emphasizes he doesn't buy BTC — this can be read as respect for a true rival

3.9.3.1 The gentleman approaches age 100. What he values most is Berkshire's track record — 60 years at 20%.

3.9.3.2 Every time he mentions BTC he stresses it's not worth investing in. Note how rarely he discusses an asset he doesn't buy.

3.9.3.3 He struggles to accept that BTC, relying solely on a people-centered design, achieves Berkshire-like performance over the long term

3.9.4 Buffett's Asset Philosophy and His Rare Error Points

3.9.4.1 Buffett believes that if an asset produces no physical output, its total value should be zero — gold/BTC included.

3.9.4.2 As of April 2025, China as a super-industrial power makes "atoms becoming commodities" essentially zero marginal cost.

Pinduoduo randomly ships 2-yuan umbrellas with free delivery.

3.9.4.3 The subject of investment is human beings — it is humans' buying and selling. Therefore, human consensus / spiritual demands deserve respect

Gold not growing crops doesn't make it worthless — gold is a value-storing collectible satisfying spiritual demand.

3.9.4.4 Buffett primarily lived through America's great industrial / consumer era

a. He believed physical output is humanity's first demand from assets. As of April 2025, basic subsistence is nearly free; human spiritual pursuit / consensus holds value and deserves voting with feet.

3.9.4.5 Each generation has its own core value system

a. Some future generation will abandon most material pursuits for core items inside VR glasses. Then BTC becomes obsolete, and that item becomes the new currency.

b. The movie Ready Player One predicted this — note the film never addresses "how to manufacture physical products."

3.9.4.6 Buffett carries two additional historical entanglements

a. He's from Nebraska. Nebraska has big farms. He holds a simple sentiment: "assets that grow nothing beat farmland."

b. He treats cash as unit 1 — i.e., he's a Fed-supporting patriot who believes no matter how much gets printed, the dollar remains 1.

c. He believes making unit 1 represent something better is his mission and that of fellow patriots

Appendix: Quantitative Strategies (Chapter 3 Appendix)

3.10 Common Family Office Investment: Quantitative Products

3.10.0 Quant finance is a fine industry.

3.10.1 Quant strategies' return source is the statistical regularity of retail investor / weak trader behaviors

3.10.1.1 Clearly this statistical regularity persists long-term because human nature is extremely stable.

3.10.1.2 This certainty enables quant strategy returns to frequently reach or exceed R_m.

3.10.2 Running a quant firm as a business model resembles tax collection — worthy of long-term study as a top-tier industry

3.10.2.1 Other business models struggle to maintain profitability while staying diversified and anonymous

3.10.2.2 Money is the image of reason and storyline condensed on a person.

3.10.2.3 Examine scenarios a and b:

a. 100,000 counterparties each losing 1,000 yuan, unaware of whom they lost it to.

b. 2 counterparties each losing 50 million yuan.

c. As the trading counterparty in scenario a vs. b, profits are identical, yet the former carries vastly lower negative reason and narrative burden

The latter virtually guarantees furious retaliation.

3.10.3 Like many high-intelligence fields, in leading quant firms, "management" and social resources hold near-zero value

3.10.3.0 If you are a fund investor, you must be an employee (long-term won't manage external capital).

3.10.3.1 If you are a shareholder, you must be core staff (almost no need for non-product-related social-resource shareholders).

3.10.3.2 If you are leadership, you must know how to code (no need for detached-from-technology leadership).

3.10.3.3 Like a cooperative, you must contribute to the core to qualify as a member

3.10.4 The above makes quant firm equity highly concentrated around the #1 position and core members

3.10.4.1 Many PE-industry W_H second-generation heirs did not take over PE operations. Those PE second-gens still investing often work in quantitative finance.

3.10.4.2 Top quant firm #1-position equity median sits at 1 − e⁻².

a. Citadel's Griffin exceeds 80%.

b. Huafang's Boss Liang is first-generation founder, so retains an important second shareholder.

c. After reaching W_H, Boss Liang holds 80%+ equity in his second-curve / second-startup DS

Long-term, he will be the world's wealthiest individual.