Want to predict what someone will do? Look at what they're rewarded for.
Almost all behaviour becomes clear once you see the incentive behind it. A salesperson on commission sells harder; a fund manager paid on assets gathers assets; a founder who owns the company builds value. Follow the reward and you can predict the action — across markets, institutions, and people. It may be the single most useful lens there is.
Behind every confident opinion, look for the paycheck that shaped it.
Incentive → behaviour → outcome
Change the reward and you change what people do.
The rule
Follow the reward
People do what they're rewarded for — reliably, every time.
Watch for
Misalignment
Trouble starts when someone's reward quietly works against you.
Local → Global
Singapore
A property agent's commission
=
Worldwide
Every incentive on Wall Street
A moment in history
In the 2000s, mortgage brokers were paid for every loan they sold — not every loan that got repaid. The 2008 crash followed the incentive exactly.
Money WordAgency problem When someone acting on your behalf (an "agent") has incentives that differ from yours — so they may do what's best for them, not for you. Spotting it explains a lot of bad advice.
“
Show me the incentive and I will show you the outcome.
— Charlie Munger, investor
Part 6 · The big picture & mindset
Booms and busts
Economies and markets don't move in a straight line — they breathe.
Activity rises (a boom), gets overheated, then falls (a bust or recession), then recovers — over and over. It's the business cycle. Booms feel like they'll last forever; so do busts. Neither does. Understanding the cycle keeps you calm when others panic.
The business cycle
Expansion, peak, recession, recovery — then again.
Recession
Shrinking
When the economy contracts for a sustained stretch.
It always turns
Nothing lasts
No boom or bust is permanent — the cycle always comes round.
A moment in history
Black Monday, 1987: the market fell about 22% in a single day — still the worst one-day drop in history, and economists still argue over why.
Money WordRecession A significant, sustained decline in economic activity — falling output, spending and jobs. A normal, if painful, part of the business cycle.
“
The market can stay irrational longer than you can stay solvent.
— widely attributed to John Maynard Keynes
Part 6 · The big picture & mindset
Debt & the long cycle
Borrowed money powers growth — and, every so often, blows it up.
Debt lets people and economies spend tomorrow's money today, speeding growth. But debts must be repaid, so booms built on borrowing eventually reverse. Ray Dalio describes the economy as a machine driven by these debt cycles: a long build-up of borrowing, then a painful deleveraging.
The debt cycle
Borrowing builds for years; the unwind comes fast.
Short cycle
~5–8 years
The ordinary booms and busts you'll live through often.
Long cycle
~50–75 years
A giant debt build-up that ends in a major reset — once a lifetime.
Local → Global
Singapore
A maxed-out credit card
=
Worldwide
A country in a debt crisis
The one number
~US$348tn
Total world debt today — about three times everything the planet produces in a year.
Money WordDeleveraging When people, companies, or countries pay down or shed debt all at once. It's the painful "unwind" half of a debt cycle, and it usually means a slump.
“
Debt is the slavery of the free.
— Publilius Syrus, Roman writer
Part 6 · The big picture & mindset
Risk, leverage & blowing up
The thing that ends most fortunes isn't bad luck — it's too much borrowed money.
Leverage means using borrowed money to bet bigger. It magnifies gains — and losses. Use too much and a small move against you can wipe you out entirely ("blowing up"). The smartest investors obsess less about getting rich quickly and more about never going to zero. But boldness isn't recklessness — great fortunes come from calculated risks, not careless ones.
Leverage cuts both ways
The same 10% move, with and without borrowed money.
Both ways
Magnified
Leverage multiplies your wins — and your losses — alike.
Rule one
Don't hit zero
You can't recover from a wipeout. Survival comes first.
A moment in history
Long-Term Capital Management had two Nobel laureates on its staff. In 1998 it blew up anyway — and nearly dragged the whole financial system down with it.
Money WordLeverage Using borrowed money to increase the size of a bet. It boosts potential returns and potential losses by the same factor — which is what makes it dangerous.
“
Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.
— Warren Buffett, investor
Part 6 · The big picture & mindset
Big money myths
Most of what people "know" about money is wrong — and it costs them.
Myths are expensive. "The government can just print more and we'll all be richer" (no — that's inflation). "Stocks are basically gambling" (not if you own real businesses for the long run). Clear thinking beats received wisdom every time.
Myth vs reality
Swap the folklore for how it actually works.
The myth
The reality
Print more money = everyone richer
= prices rise (inflation)
Stocks are just gambling
= owning real businesses over time
You need money to make money
= ideas & access matter more than ever
Renting is throwing money away
= sometimes smarter than buying
The costliest myth
"It's different"
Believing the old rules no longer apply is how people get hurt.
The fix
Trade-offs
There's no free lunch — always ask what you're giving up.
Money WordOpportunity cost What you give up when you choose one option over another. Every dollar or hour spent one way can't be spent another — the hidden price of every decision.
“
It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.
— widely attributed to Mark Twain
Part 6 · The big picture & mindset
The last word
Everything comes down to a few simple ideas.
Money is trust. Wealth is ownership, not income. Time and compounding are your greatest allies. Risk is about survival — never go to zero. And the more you understand the machine, the less it controls you. That's the whole game.
The toolkit, in five ideas
If you remember nothing else, remember these.
Start now
Time wins
It's the one thing you can't buy back — compounding rewards the early.
Keep learning
Stay curious
The machine keeps changing; understanding it is a lifelong edge.
Money WordCompounding When your gains themselves start earning gains, so growth speeds up over time. Small amounts, given enough years, become large ones. The investor's best friend.
“
An investment in knowledge pays the best interest.