Chapter I

Chapter I: Understanding Capital and the World

12 min · 12 ideas

We are controlled by money until we learn how to control money.

Before we talk about how to invest, you need to see clearly the world we live in: where money comes from and where it goes, who controls money and who is controlled by it. Once you see this clearly, you'll know why you need to learn to manage money — and only then will you be able to keep going.

1. Understanding the Process of Acquiring Wealth

Reaching financial freedom takes you through three stages.

1. Awakening
The first step toward wealth is a change in the way you think. You need to understand that the power of wealth can give you real freedom. Then set financial goals for yourself, and stop drifting aimlessly through life.

2. Learning
Everyone's financial goals are different. To reach yours, you have to learn both how to manage money and how to invest:

• Managing money is "stemming the outflow": saving, keeping accounts, tax planning — staying on top of where every cent goes.
• Investing is "opening new sources": putting money into assets that can grow over the long term, so compounding works for you.

Learning has to continue for life. But I want to give you a special warning: the learning stage is the most dangerous stage. Many people are impatient and can't hold steady. Before they've built a complete set of investing principles and methods, they rush their money into the financial markets. At best, this pushes financial freedom much further into the future; at worst, it causes irreparable losses from which they never recover.

3. Action
Action takes four kinds of courage and discipline:

• the courage to face temptation and resist impulse spending;
• the patience and discipline to keep saving for years and build your first nest egg;
• the courage to endure a long wait for investment opportunities;
• the courage to buy even when everyone else is afraid.

The self-help author Napoleon Hill wrote in Think and Grow Rich: "Wishing will not bring riches. But desiring riches with a state of mind that becomes an obsession, then planning definite ways and means to acquire riches, and backing those plans with persistence which does not recognize failure, will bring riches."

In the end, everything depends on how strong the desire in your heart is.

2. Most People Are Financially Illiterate

The argument in this section draws on John Lee's This Is How Wealth Is Built (title translated; no English edition), with the data updated to the latest research.

Alan Greenspan, who chaired the US Federal Reserve for more than eighteen years, called repeatedly during his lifetime for financial education to take root in primary and secondary schools, to help young people avoid poor financial decisions that can take years to recover from. (It's widely said that he once remarked that "financial illiteracy is more frightening than illiteracy," but no original source can be found.)

What does it mean to be "financially illiterate"? My answer is simple: however many books you've read and however many words you know, if you don't understand how money comes in, how it goes out and how it can work for you, then when it comes to money, you're still illiterate. The ability to earn money and the ability to keep it are two different things. What worries me most is time. Today, whether you understand a little or not, you can't see the difference. But compounding magnifies that tiny gap, and twenty years later it often adds up to two completely different lives.

This problem isn't limited to a few people:

• Even the US, home of Wall Street, is no exception: the 2026 nationwide survey of financial literacy (the "P-Fin Index," a collaboration between the TIAA Institute and George Washington University) found that American adults answered only 47% of 28 basic personal-finance questions correctly, on average — the lowest in ten years.
• Professional athletes earn astonishing salaries, yet they often run into financial trouble after they retire. Economists who studied about 2,000 American football (NFL) players found that about 16% filed for bankruptcy within 12 years of retiring — and that the likelihood of going bankrupt had almost nothing to do with how much they had earned or how many years they had played. That study stunned me: earning a lot doesn't mean you'll keep it. What decides the outcome is whether you understand money, and how you live.
• And Taiwan? The Taiwan Academy of Banking and Finance's 2022 Taiwan Financial Life Survey found that about three in ten people were completely unfamiliar with finance, and about half lacked financial confidence.

John Lee also notes in This Is How Wealth Is Built that most of the people he met held mistaken ideas about money: they kept almost everything they owned in their homes and bank deposits, and did very little to prepare for retirement.

John Lee's conclusion is that living frugally is the starting point, not the finish line: once you've saved money, you still need to understand how it works, so it can go out and make more money on its own. I agree with him — without that step, no matter how long you save, you won't reach financial freedom.

3. Most People Don't Understand How Capitalism Works

The ideas in this section come mainly from John Lee's This Is How Wealth Is Built.

John Lee believes the dividing line between poor and rich isn't education, and it isn't how hard you work. It's whether you have capital, and whether you know how to use it; once a gap appears, it keeps snowballing on its own. I agree, because you can see it just by comparing what the two kinds of people below do every day.

First, think about what you do at work every day: you trade your time and energy for a paycheck. This is "making money with your time." When your time stops, so does your income.

Now think about what business owners and shareholders do: they put up money to start companies and hire people to do the work. When the company makes money, they collect dividends and enjoy rising share prices. This is "making money through people, and making money with money." Even while they rest, their money keeps moving.

These two roles don't conflict. By day, you're someone who earns a salary; by night, you turn part of that salary into stocks, and you're a shareholder too. I hope you start playing both roles early.

In the end, the capitalist world divides people into two kinds: those who make money work for them, and those who work for money. Which kind you become is your choice.

4. Most People Don't Realize They Are Controlled by Money

There's a widely circulated saying, often attributed to former US Secretary of State Henry Kissinger: "Control oil, and you control every nation; control food, and you control humanity; control money, and you control the whole world." This line can't be traced to any of Kissinger's speeches or writings, but the truth it points to is clear: money is power.

Wealth has always been distributed extremely unevenly around the world.

• The 80/20 rule (the Pareto principle): roughly 20% of the causes account for 80% of the results.
• The United Nations Development Programme's Human Development Report 1992, using 1989 data, found that the richest 20% of the world's population took 82.7% of the world's income, while the poorest 20% had just 1.4%.
• A 2006 study by the United Nations University World Institute for Development Economics Research (based on 2000 data) found that the richest 2% of adults in the world owned more than half of all household wealth, and the richest 10% owned 85%. The researchers estimated the global wealth Gini coefficient at 0.89 and offered an analogy: that degree of inequality is like 10 people sharing 100 dollars, with one of them taking 99 dollars and the other nine sharing the remaining 1 dollar.
• The latest World Inequality Report 2026 (using 2025 data) shows that the richest 10% of the world's population own about 75% of its wealth, the richest 1% own about 37%, and the poorest half own only about 2%.

If you can't control money, you'll be controlled by other people's money — and become someone who works for money.

5. Most People Don't Know They'll Live in Poverty in Old Age

If they rely only on what they earn from work, most people will find that in old age their income can't cover their expenses. Let's run the numbers using Taiwan's public statistics.

Here is a rough calculation for a "median" office worker, using the latest official figures (all in today's money, with no investment returns):

(Average life expectancy in Taiwan has reached 81.27 years, according to the Ministry of the Interior's 2025 abridged life table. Many people will live longer than that, so I plan for 20 years.)

At first glance, spending only NT$30,000 a month seems just about manageable. But notice: that NT$3.52 million exists only if you "never touch a single cent of it in 40 years of work" — and buying a home, raising children, medical and long-term care, and inflation haven't even been counted yet. If you want a slightly more comfortable retirement — say, NT$45,000 a month — you'll face a gap of NT$2–3 million. The individual accounts under Taiwan's Labor Pension system (the "new system") can fill part of it, but most people will still need to invest, so their money works for them.

Mini Glossary
- Disposable income: all income received, minus non-consumption expenses such as interest, social insurance premiums, taxes, fines, donations and gifts — the income left over to cover everyday living expenses (as defined by DGBAS).
- Household savings rate = (disposable income − consumption expenditure) ÷ disposable income × 100%.

With only work income and Labor Insurance benefits, most people can at best just break even in old age, and the first emergency leaves them unable to make ends meet. The shortfall has to be made up by investing.

6. Use Money to Buy Back Your Time and Freedom

There's a popular saying (often attributed to Li Ka-shing, though no source can be found): before 30, you make money with your strength and your brains; after 30, you should make money with money.

We are controlled by money until we learn how to control money.

If you can't control money, you have to sacrifice your time, your body, your energy, your freedom and your life — along with everything else in life that is meaningful and valuable — to work for money. On the surface you're free; in reality, you're controlled by capital.

The power of money isn't that it lets you buy more things. It's that it can buy back your freedom and buy back your life — using money, something with no value in itself, to win back what is truly valuable in life.

Everyone spends money, yet some people grow poorer the more they spend, while others grow richer. The difference lies in where the money goes: do you first spend it on things that eat up your income, or first save it to buy things that bring in income?

Robert Kiyosaki, the author of Rich Dad Poor Dad, says, "You must know the difference between an asset and a liability, and buy assets" — that is rule number one, and the only rule. The book defines assets and liabilities very simply: "An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket."

• One kind of person gets paid and first satisfies immediate wants: buying a car on installments, paying by credit card. The bills pile up higher every month, so they have to work even harder to pay off their debts.
• Another kind of person gets paid and first saves part of it to buy assets. The assets bring in a little income each year, which goes into buying more assets — slowly growing bigger, like a snowball.

So how can ordinary people "make money through people"? The simplest way is to buy the whole market. Buying an index ETF that tracks the broad market makes you a small shareholder in hundreds or thousands of companies, so the most talented people at those companies work for you even while you rest and sleep. That's moving forward by standing on the shoulders of giants. (Chapter V explains in detail why I ended up choosing only broad-market index ETFs.)

7. Be the Master of Your Money

Money is your most loyal servant. It will never betray you. It goes wherever you send it, and it will work for you tirelessly, without end.

Being the master of your money means finding good jobs for your money, so that it works for you day and night, year after year — and demanding that it deliver results.

In the world of capital, how much power you have depends on how large a "money army" you command, and whether you've given every cent in that army a job, so that it's working for you efficiently every moment.

The Korean investor John Lee reminds us in This Is How Wealth Is Built that money doesn't need to sleep: behind the stocks you own is a team of employees who are still at work while you rest. The Korean-American entrepreneur Kim Seung-ho puts it even more strongly in The Secrets of Money (title translated; no English edition): money left idle instead of invested gets eaten away by inflation, little by little. As I read them, both are saying the same thing — don't let your money sit idle.

Become a capitalist, and own your own money-making machine. For most families, that machine doesn't have to be a business of their own. It can be steady saving, used to buy the whole market over the long term.

Key Takeaways

1. Financial freedom comes through three stages: awakening, learning and action. The learning stage is the most dangerous, so don't rush into the market before your understanding is complete.
2. Most people are financially illiterate. Earning a lot doesn't mean keeping it; what decides the outcome is whether you understand money, and how you live.
3. In a capitalist world, capitalists make money through people and with money. Wage earners who invest their pay can become capitalists at the same time.
4. With only work income and Taiwan's Labor Insurance, most people still can't make ends meet in retirement. The gap has to be filled by investing.
5. Save first, buy assets and let your money work for you — that's what it means to be the master of your money.