The Return on Investment Can Be Split into Two Parts: The Value of Money—Narrowly Defined Investment—and the Value of Your Talent

What is money worth? Go look at the interest rates on government bonds in various countries. Money is only worth as much as what it can earn through investment within that country. That’s the baseline return on capital.

The extra returns come from people. Whether you’re a Buffett or just a financial consumer—that’s the difference. You’re not making money from the investment itself; you’re monetizing your own talent.

Do you actually have that talent? Talent itself can be leveraged.

Consider Dong Yuhui: before and after he became famous, the person didn’t change, but the leverage did. Fame simply amplified his leverage. But if you put a stutterer who can’t speak well in his place, what good is leverage?

The same logic applies to investment talent. If you have it, giving you principal is like adding zeros after a 1. But if you lack investment talent, that leading digit is 0—adding more zeros afterward is useless.

It’s not any behavior that makes money; it’s the person. The difference lies in the individual.

Take a long-term holding curve like 1000, 1100, 900, 1050, 900, 1200—it’s a game that requires pulling back. You’re always short on cash. Whether you’re buying companies or real estate, can you access cash on demand? No, you can’t.

Now contrast that with a high-frequency approach: 1000, 1001, 1002.001. Every day the market closes, you still hold substantial cash. When you spot another opportunity, you can pounce on bargains anytime you see them. That’s powerful opportunity cost management.

Whether someone trades long-term, swing trades, stays out of positions, or runs high-frequency strategies—they’re all essentially running a business: trading their own algorithms and systems.