Sociology and paleontology each have a theory that normal growth is relatively static and stable, but periodically there are dramatic increases in the systems. This is called punctuated equilibrium. Things go along normally until some factor causes a rapid expansion in the output of the system. This concept is also applicable to the development of wealth. A good example is the impact on nursing salaries which suddenly increased due to the COVID19 pandemic. Nurses experienced in intensive care unit skills were offered dramatic increases in pay, particularly if they were willing to travel.
You have to build your skills and work hard to create value based on those skills. This is necessary because, without this work, the opportunities for sudden advancement in wealth rarely happen. As Oprah Winfrey once said, “Luck is a matter of preparation meeting opportunity.” Working hard every day to fulfill your moral obligation of creating value puts you in a position to see problems that need to be solved in society. The solutions to problems are what creates value. Sometimes solving those problems takes a long time and a lot of effort. Other times a creative or a unique solution can solve the problem relatively quickly, and therefore create a large and rapid value in society. This value can then be extracted for personal financial gain. Think about how quickly Amazon grew after leveraging the newly developing online shopping market.
The housing market from 2018 through mid 2020 saw a combination of both low interest rates and increasing home prices. During this time, I bought a number of “fixer upper properties” to hold as rentals and also general contracted the construction of my own home. I did this because my experience told me that that low interest rates don’t last forever, and being intentionally leveraged in a stable asset such as entry-level residential real estate would yield long term benefits. This basic work then resulted in “punctuated equilibrium” returns as future increases in interest rates allowed me to increase rents, while rising inflation made my low fixed interest rate home loan a smaller percentage of my increasing salary.
