Making Sound Financial Decisions...(Part 1).

One of my favourite TV programs, is Global Public Square (GPS), on CNN, anchored by Fareed Zacharia. The other day, he spent some time, talking about a subject that is very close to my heart:

"Financial Literacy".

There is more to literacy, than "reading" and "writing". Financial literacy, is really about the ability to understand everyday financial issues, and here I am not talking about accounting practice. I am talking about the ability to make sound financial decisions. There are many people, who know how to read and write, very well, and yet are at "sixes and sevens", when confronted with simple financial issues.

Which reminds me.

I knew a businessman, who wanted to leave an inheritance to his two children. They were both highly competitive, with each ever seeking ascendancy on the other. So this is what he did:

To one, he gave a parcel of land, and said to her, "this land is full of minerals, which I believe are worth at least $10m. You cannot sell this land, at anytime. The land yields no income, as it is, unless you get an investor or a loan. And should you seek, an equity investor, it can only be your brother, to whom you go. I estimate you will need not less than $1m, to generate any income from it.
It is my only inheritance for you."
 Making Sound Financial Decisions...(Part 1).

To the other child, a young man, he said "take this $1m, in cash. Based on your lifestyle, it will be gone in a few years, unless you find a way to grow it. Should you decide to invest it, I would insist that you go only to your sister.
It is my only inheritance for you."

Who got the greater inheritance?

Who emerged in ascendancy?

Discuss it, with your friends, and business partners.

If you have to say anything to me, about it, don't use more than one paragraph. The correct answer, in business is not philosophical or ideological. Its just business.


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