The 4 Hour Workweek Mindset

Notes taken while reading THE 4-HOUR WORKWEEK. I do not endorse the content of the books I summarize. I share these notes for pure educational purposes.

The new rich are unique in their thinking and behavior. They consciously pursue a life full of options. The are able to do so because the design their lifestyles—and set their goals—based on certain values and life-philosophies they believe in.

Consuming and accumulating possessions isn’t the main goal of the 4-hour workweek lifestyle. But one should be able to get what he/she desires (At least on paper).

Purposeful pursuit of material wealth using clearly-defined goals, deadlines, and roadmaps.

Be the owner (neither the boss nor the employee).

More quantity (assets, options, etc..), but not at the expense of the quality of your life.

Make sure your work towards frequent cash inflows instead of fantasizing about about a remote big payday in the distant future.

Make the freedom multiplier work for you by carefully controlling your 4Ws: what you do, when, where, and with whom you do it.

Don’t follow a model that doesn’t work. If the recipe sucks, it doesn’t matter how good a cook you are.

The 4-Hour Workweek

Interest and energy are both cyclical and moody. Full retirement is the worst case scenario. Instead, aim for frequent and cyclical mini-retirement plans.

If you enjoyed reading this post, you can support my work by buying me a book (one time donation) or by becoming a patron.

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The Bottom Billion By Paul Collier

By Paul Collier
Oxford University Press, 224 pp., $15, August 2008, 9780195373387

Amazon, Bookshop

Ask any ‘third worlder’—including me—and chances are, he/she will tell you how dirty and poor his/her country is, and how it is likely to remain that way in the foreseeable future. Why are some nations poor? Why these nations stay dirty and undeveloped despite our globalized reality? And why are they likely to stay poor, unless something is done? And, if we want to do something, what should we do about it? This post is about all of these questions—a summary and a review written while reading Paul Collier’s Book: The Bottom Billion.


Paul Collier developed a notion he named the “conflict trap”. His aim is to show how some economic conditions prompt civil war, and how the resulting conflict often becomes a trap—one that is hard to escape.
Four different traps are behind the horrible situation people are living within the bottom billion:

  1. The Conflict Trap
  2. The Natural Resources Trap
  3. The Trap of Being Landlocked
  4. The Trap of Bad Governance in a Small Country

Globalization to the Rescue?

Even during the golden decade—between the end of the cold war and 9/11—these countries still suffered, and captured nothing of what the rest of the world has been going through. In fact, income during this same decade fell by 5%.

That’s why the later countries escape the traps, and begin to take the right track, the harder it is for them to catch up, because the global market is now much more tough for new participants than it was in the 1980s.

The Struggle for the Bottom Billion

The author isn’t trying to offer a one and only explanation for the failures of certain nations to catch up with the Global development train—of beginning to reduce poverty for the first time in history since the 1980s. He acknowledges the diversity of the situation within the bottom billion.

The left could learn that maybe some instruments they’d been avoiding to use—like military interventions—are sometimes effective, or even the only viable option to improve or change the situation.
And, the right can learn that “global growth” doesn’t always bring relief to the Bottom Billion.

The problem matters. And it matters even more to voters and decision makers in the developed world. Because, if they keep ignoring what’s happening within the Bottom Billion, soon enough, the ramifications will land themselves clear in the west—think mass immigration, terrorism, etc..

Paul Collier intended this book to be an enjoyable read through keeping “clear of footnotes and the rest of the usual grim apparatus of professional scholarship,” as he declared from the start.

Nor that this book is a chewing gum for the mind—if you have an attention for details, then all you have to do is to take a look at the book’s ending section and you will find what amuses your tastes and your erudite cravings.

Paul Collier

Paul Collier is a professor at Oxford. He had directed the World Bank’s research department. He’d also taught at Harvard.

Paul Collier’s previous books include Wars, Guns and Votes: Democracy in Dangerous Places, and Greed is Dead: Politics after Individualism.

If you enjoyed reading this post, you can support my work by buying me a book (one time donation) or by becoming a patron.

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Alex Becker’s 10 Pillars of Wealth (Book Summary & Review)

That’s why I had to write this book: to set the record straight about online businesses and generating wealth in general.

Alex Becker

PS: This is a long post for focused and curious minds only. So if you are a caffeine addict, grab a cup of coffee (like these clean bulletproof bean from Mlama, Tanzania), and follow through this post about WEALTH.

Pillar: an upright shaft that supports an overhead structure. (Merriam-Webster’s Online Thesaurus)

Oh Pillars! And the first thing that came to mind is a picture of these beautiful Greek temples. Good old style marble Greek Pillars. But in Alex Becker’s book, there are Pillars too, but pillars of wealth, and they count up to 10. These are your Core Beliefs, your basic yet essential weapons on your way to wealth.

This book is about grounding new beliefs in our heads, while eliminating old poisonous and limiting ones that we usually inherit from our environments. It turns out there is a way to win in life (at least financially) and there is a way that gets us there. Once we figure out the road, once we start making ‘a little bit of money’ we can’t help but want to make even more.

The reason why so many people get rich and others stay poor, is that those who have gotten rich came to a very low or bad point in life AND consequently they decided there is no way they are going to stay that way, they reached rock bottom and they know how things look, feel, and smell down there so they decided to promise themselves that no matter what they will escape serfdom, they said to themselves ‘By god I am gonna be financially independent’.

You have to reject the idea that to become rich you need to e special, a marketing genius, or lucky. The author warns us from the start, that is the number one prerequisite before plunging into the rest of the book.

I like how Alex compares the difficulty of getting rich to that of improving at video games, though I don’t pay video games, I could get his point, which is summarized in 3 parts:

  1. Believe you can get great at something.
  2. Then play the ‘game’ over and over again
  3. Don’t give up until 1 is accomplished

==>Break the limiting beliefs.

About Alex Becker

The most woke empty house billionaire business guy, also known as Alex Becker.

  • He completed his four years term with the Air Force.
  • He started looking for way to generate income online.
  • He stumbled upon SEO.
  • Alex started building websites, ranking them really good on Google, and started to make an income. At one point he got so good at SEO, within few months, that he was offered a job at a marketing agency; he took it.

I began to work on my own business every second I got so I could grow it enough that I could quit my marketing agency job. When I got home from my job, I worked. While my friends were playing video games at night, I worked. While everyone I knew was at the pool drinking on the weekend, I worked.
Then, two months later, I was generating over $20,000 a month from my business, not including my job’s paycheck. At that point, I quit my job and never looked back.

  • With $6,000 in his retirement account, he went all in with his online business.
  • He built an SEO business from scratch called ‘Source Wave’, scaled it, and then sold it.

3 Different Types of Businesses

  • CF:
Cash Flow Businesses

Cash Flow Businesses (CF) are the easiest to start. They require little to no capital.No staff or overhead. You can start a CF business from your bedroom if you want.
These businesses take a lot of time to run and manage, because it is usually a one -man operation; you will be the one providing a service to a client, marketing and promoting your services, and also the one doing the accounting and every other details. And that’s why, scaling this business is often not an option, and a well-defined cap on revenues, income & profits can estimated from the beginning. With all this being said, expect a profit margin up to 90%.

  • High Investment Scalable Businesses (HIS):
High Investment Scalable Businesses

This is the type of business that Venture Capitalists, like Naval Ravikant or Chamath Palihapitiya, are constantly looking for to invest in. These businesses oftentimes ‘explode out of nowhere’ even after years of being stuck or incurring losses.
These businesses are very scalable by their own definition. In a business like this, you need to pay close attention to every little detail: hiring the right people, studying competitors, and doing proper market research, etc…
Lunching a High Investment Scalable business requires some chunk of starting capital however. And that’s why, Alex Becker advises the reader who are still beginners to start with Cash Flow Business and then they can put their into a HIS business, should they want to. This model of businesses is very scalable, and usually can be automated.

  • Long-Term Investment Businesses (LTI):
Long-Term Investment Businesses

This is where you can ‘park’ your money and can expect sometimes as high as 10%-15% ROI per year. Think investing in rental properties or in restaurants. It is relatively safe form of investing (as long as the economy doesn’t collapse) and the businesses you invest your money in are still sell-able.

Decide to Become Wealthy at Any Cost

The longer I live, the more I am certain that the great difference between men—between the feeble and the powerful, the great and the insignificant—is energy, invincible determination—a purpose once fixed, and then—death or victory!

Thomas Fowell Buxton

By god, I am going to get rich! It’s a personal decision, a kind-of an intimate transaction between you and you only, you have your own reasons and motives and no body has the right to ask you about them. Just make them fuel you. Alex Becker, and throughout the book, emphasize the importance of getting to a very low point or extremely bad situation in life where for some people this decision becomes inevitably, and hence becoming wealthy becomes inevitable. (it’s just a matter of time)

Most people never become wealthy. Why? They never decide to get rich. And why? Because, they don’t believe that they can get rich because of X, Y, and Z.

As selfish as it looks on paper, and in life, believing it, seeing it, perceiving the whole thing before it comes to fruition is an indispensable prerequisite to actually getting it.
You may not a be spiritual person, you may not believe in superstitions, and stick only to reason and rationality, even so, you got to have this one belief, a one that has nothing to back it in today’s reality but that you have to have to get to your destination.

Reject Getting Rich Slow

This one from Becker really reminds me of MJ DeMacro’s The Millionaire FastLane. I wouldn’t even be surprised that DeMacro inspired Alex to go on and achieve what he has achieved so far

Don’t be “mildly miserable” like the rest. They are wrong, and that’s why they are the stuck traffic fighter who end up in jobs they hate because it’s ‘secure’.

The slow low risk way to getting wealthy is not risk free at all. In fact, its risks are uncontrollable. You are gambling your future’s outcome on variables outside the scope of your control; things like the economy, the value of the currency you are holding your savings in, the performance of the company you are working for(and whether or not they are going to lay off some employees when the going gets tough).

getting rich slowly requires you to spend 71 percent of your days for the rest of your young life at work.

The big reward at the end of the work tunnel. It’s an illusion! You might day before even get to there.

Get-rich slowly:

  • extreme financial hardships
  • zero control on your financial future
  • spend 71% of your young lifespan on work(5 days out of 7 a week)
  • No chance of getting your dream/fantasy life
  • Constantly living under financial stress (worrying about money all the time)
  • All you your decision are based around money (or the lack of it)

Separate Your Time from Your Income

Everyone have limited time (24 hours a day), so trying to tie your income to your disposable time is a very bad idea and it is literally putting a cap on how much money you will be making from the start. It’s been said over and over again, nobody ever got rich alone. You need other people to help you produce, sell , promote, communicate, and eventually buy from you. This is the reason why many successful business-people are good at dealing with people. And even the ones who are not so good at dealing with people and still went on to be successful, often you will discover that they hired the right employees to take care of that for them.

And so, you are facing two options:
=>Either you spend all your time trying to do everything by yourself, and therefore your income isn’t under your control
=>Or you increase the value of your time and completely separate your time from your income

Instead of spending our time working, we should spend our time creating systems that do the work for us.

  • Clone yourself, either by hiring a super productive team, by building or buying, or subscribing to AI/tech/tools, that will bring your expenses down and profits up. (Examples would be using services like Fiverr Business for outsourcing and hiring across borders, solutions like Tipalti that will take care of your Invoice Management + TAX, VAT, and Global Payments to your clients/suppliers, companies like Ripl for upping your branded content game on social media, or using Yelp for Business to connect to new customers, or Banking easier with Bank Novo, or IncFile for incorporating your LLC or Corporation for as low as $49)
  • Find a process or formula that works, then clone it.
  • It is better to have a business that has a 30% profit margin, but that can be scaled to $10 million a year and then can be sold for tens of millions than to have a one man run business, that will turn into a chaos the minute you get sick and be hospitalized for few weeks.

All you need to be working on right now, is excellent business-planning, automation, and properly cloning yourself through effective hiring, and the next thing you know, is that your time-consuming intense business is turning into a time independent money-making machine.

Take any business idea you have in your mind right now and ask yourself the following questions:

  • Can the process be automated?
  • Is generating $500 worth of sales requires the same amount of energy and steps as generating $10,000 if sales?
  • Can the business be scaled, by hiring more staff and/or developing technologies and solutions?
  • Does the business have the potential of significantly rising in value in the next couple of years, and eventually be sold for tens of millions?

The most successful businesses out there, have their owner(s)’ time separated from their revenues & profits.
=> They’ve created a process that works at soling a particular problem process, a process that customers want. They’ve priced the process competitively. And the rest takes care of itself.

Accept That You Must Be Better Than The Rest

  • As egotistic as it might sound, this is one of the most important pillars that Becker presents to us through this book.

By wanting to become wealthy, you are also saying that you want to accept the challenge to be better at making money than 99 percent of the people on this planet.

  • Follow the Belief,Actions, & Results (BLR) System.
  • Embrace the power of accepting the necessity of greatness

Remember that desiring to be wealthy is by its nature desiring to put oneself into the top 1%. If it was much more common to be wealthy in our society, then the logical conclusion is that it doesn’t take more than being average. Unfortunately, this is not the case in real life. In fact, last time I checked one of those Credit Suisse annual reports about Global Wealth Inequality, it was 0.9% of the world’s population who owned more than half of the assets.

It’s Been 100% Your Fault

Blaming your current situation in life on family, friends, teachers, environment or government is a waste of your time.

You need a complete shift in your attitude towards your reality.

Take back your life from your “whys”.

Controlling your future outcomes is up to you as well

Adopting an Abundance Mindset

How you act reflects the type of mindset you have either towards money, or any other endeavor. The belief in abundance is required here. Anything that has to d with scarcity thinking will hold you back. And so if you want to keep going when the going gets tough in business, you should never have a mental limit to how much money you can make.

  • Mr. Never Take Risks (Super Scarcity Mind-Set): “I am going to spend my life working for someone else making him wealthy, save some of what I earn and hopefully I can retire by the age of 65. Starting a business is too risky for me. Entrepreneurship is not my cup of tea”
  • Mr. Watch But Not Do (Extreme Scarcity Mind-Set): “It is simply not possible and it sucks, so why should I bother?!”
  • Mr. Brute Force (High Abundance Mind-Set): “I know it is risky, and sometimes it will suck, but I am going to try anyway, because If I constantly throw Sh*t against the wall, I know that eventually something will stick”
  • Mr. ‘Ladies’ Man (Educated Abundance Mind-Set):
    =>Takes calibrated social risks.
    =>Acknowledges the fact that he will never be liked by everyone.
    =>100% Confident that he will get what he wants eventually & Self-aware.

In wealth, you only need to ‘get laid’ once.

Alex Becker

It’s hard to have an abundance mind-set & beliefs without actually having abundance.

=>That’s why, you have to trick your mind into believing we have abundance in the here and now, thus altering your core beliefs.

Achieving Abundance as a Newcomer of Wealth

**When you have a limited mind-set, you only focus on ways and trick that will help you save money.

By solely focusing on conservation, you will never be able to expand.

Abundance = Progress

Scarcity = Lack of Progress

Instead of directing your energy towards saving extra dollars here and there, so you can SPEND them later, Smart Entrepreneurs focus on putting their money towards their projects, so that every dollar can bring 5, 6 or even 10 dollars.

==> Adopt this 5th pillar into your life immediately.

Focus on ‘What Is’ Instead of ‘What If’

Discover the number one problem that is depraving you of what you want right now.

Learn everything you can about that problem

Work on the problem until it’s fixed

Move to the next problem and repeat from 1 again until it’s fixed.

Don’t try to learn and speculate about the possible things that can go wrong, just focus on the number one obstacle in front of you.

you must stop thinking about it and stop planning it, and just take action.

Alex Becker

Avoid being locked down in “perfection paralysis” land at at costs. Action is your only way to remedy!

=>Master the only immediate problem you have in the here and now.

Hurry up and make mistakes. The most guaranteeing thing you can do to fail is to never try anything.

Mapping Out Actions That Achieve Goals

The fact is big, giant & successful companies take a lot of time to become profitable. Good things often take times(including learning the piano, or learning a new language), and if you are in doubt about this just ask Warren Buffet (e.g. Amazon didn’t reap a profit in 20 years)

Confusing, right? How can popular companies be worth so much money without being profitable? Because they are moving in the direction of global domination and will be massively profitable because of the amount of leverage they are gaining.

Alex Becker

Creating a plan to reach your target is, in many cases, more important than the target itself. They say that each one minute spent planning can save up to ten minutes in execution. And whether that is right or not, one cannot deny the benefits of planning, even if the planning part would differ so much from the executing part later on, something which will inevitably happen from time to time, it is still helpful and relevant thing to do before jumping into uncharted business territories

Traffic fighters often miss this and think about their goal as a “success event”. They are only capable of noticing the event. They can sketch the map, seeing the trees for the forest is practically unimaginable for them

Questions any aspiring businessperson should ask him/herself:

  • How much money will you be making?
  • What will you be known for?
  • How long will it take you?
  • Would would be your ideal customer?
  • What will your product be?
  • How many customers do you need to reach your monetary goal?
  • Who needs to support you to reach your main goal?

You need to completely ‘re-engineer’ how you define your goals.


Very few of them make their fortunes in a ‘single event’ (it’s not like the lottery)
Even the massive buyouts you hear about them in the news, are the result of hundreds upon hundreds of tiny events leading to the BIG ONE EVENT.
These tiny actions themselves can be further decomposed into daily ‘micro-actions’
The first thing they do is SET GIANT TARGETS
STEP1: Wat is Your Big Goal?
=> This cannot be vague or blurry. It must be clear and quantifiable.
=> You must have a clear end in mind as well as a ‘way’ to get there(e.h. selling real estate, growing avocados, providing a service to stopover travelers, etc..)
Use your imaginary ideal lifestyle and how it looks like in your mind to define exactly how big your goals should be

In this section of the book, Becker introduces a simple exercise: It consists of writing down what you want in specific details. However, he also suggests not including any ‘Grand’ or super Grand desires such as owning mansions, private jets, or sports team, as they will impede and ‘complicate’ the process.

  • Make $500,000 in Sales.

Step2: What Are the five smaller goals you must achieve to reach your bigger goals?
=>List these smaller goals in chronological order

  • Reach a daily output of 200 Cold Calls/day
  • Reach an average daily Sales of 20sales/day
  • Have Access to more contacts to cold call
  • Improve your sales pitch
  • Write 5000 words per day

Sign up for more Affiliate network
==> These will make your bigger target much more manageable. And, it will shift your thinking from “How can I make X amount of dollars?” to “How can produce or make X, and sell Y amount of it in Z years or months?”.
Step3: Break down each the smaller steps into even smaller tasks:
=>Write a Sitemap for Google Crawlers
=>Write at a pace of 1000 words per hour (84 words/5minutes)
=>Apply to more affiliate networks after my first $10,000K check.

Focus Solely on What Gets You Paid

Everything that can be delegated, eliminated or outsourced must be delegated, eliminated or outsourced.

Remember, it’s not always about working 80 to 100 hours a week, driving yourself towards burnout and inevitable health issues. A person who works as little as 10 hours per week but DIRECTS a total of 400 hours per week out of his employees/team will accomplish far more than he will ever do on his own.

The things that you are doing and are contributing little or noting to getting you paid are your income stealers. These are literally stealing from $$$ from your bank account each time you spend time on them and not on your ONE thing; the thing that gets you paid.

They Give Money to People That Get People

One thing you gotta realize is that you will never be able to get rich without other people.

What is money, then? Money is power over other people.

Wealth is power. By trying to get rich, you are in essence trying to gain some form of power over others, so you can buy their labor, time, and products with that power.

You have to become a great influencer on other people’s decisions. You have to persuade and convince them.
==> This is why, if you could learn one thing only, you should be learning how to sell.

  • Don’t just sell products. Instead, provide and sell emotions.
  • Being comfortable with people

Finding Competitive Friends and Suitable Mentors

Birds of a feather, do flock together

Imagine if, right after reading this book, you spent every waking minute working at getting rich like a psycho. Seriously, picture waking up, turning on your computer, working for twenty hours, and stopping only to pee and eat whatever food you own that doesn’t need to be cooked, then passing out from exhaustion and waking up four hours later to do it all over again. Then imagine doing this for months and months without taking breaks or vacations or even weekends off.

Unlike the other ‘mind-set pillars’, this one can and should be applied in real ‘physical’ life.

The best way to trigger the kind of obsessed work ethic is being a part of a community of like-minded people. It will push you to compete in a friendly way.

Look around you right now and try to closely examine your environment. Do they care about money or do they watch Drama on TV? If the answer is the latter, then you are more likely to want to fit in to the group’s ritual, and probably you have little or no motivation at all to do something out of the norm.

Join as many free groups of people you want to be like right now. People already successful at their own businesses, people who have created massive wealth, or currently doing so.
=> Then, keep track of the ‘leaders’ within these groups, and find out where they hang out.
=>Make friends with them, and ask them questions.

The minute you start talking to your circle of friends about opportunities to make money, to kill it, and they respond with disinterest, mockery, and skepticism, then you know you are operating withing a damaging group that is only putting you down.

Start by joining free Facebook groups with people you can relate to what they are doing or had already done what you want to do. Pick up the leaders out of these groups and try to reach them. After successfully reaching them, fear not! ASK THEM QUESTIONS! Also try to build relationships with people above your level, but not that much above your level. Use these groups to keep motivated and continually learn from the best around you.

MENTORS can help you go through the obstacles and hurdles you are going to go through much faster and with less trouble.

a Mentor: Someone who has arrived in your own terms. Someone, who has already accomplished what you are aiming to accomplish.

Look for a mentor who is at a level ‘above you’, but not way too much above your level.
=> Example: If you are not generating any income at the moment, and you shouldn’t be approaching a mentor who is earning $100,000 a month. The line of communication between you won’t be clear and you wouldn’t relate to each other. Instead, you should be focusing on getting a mentor that is generating $3000 to $5000 per month for instance.

AVOID false mentors:

  • There are two types of mentors:
  • Those who make 90% of their income mentoring (think Dan Pena lol)
  • Those who make most of their money from their main business, and mentor on the side

The Final Word

  • Society’s safe route to wealth generation is not that safe
  • Decide you will be rich at any cost
  • Dodge the Slow road to wealth
  • Believe you are better than the competition
  • Take 100% responsibility for all mistakes incurred
  • Delegate, Outsource, Eliminate
  • Clone Yourself, and Operate on Auto-Pilot
  • Break down those giant targets into smaller milestones, and then break down further
  • Focus on the one thing that gets you paid, and resolve to do that only! This is your ONE thing!
  • Hang out with people who have achieved or are achieving what you want, pay for the privilege if necessary! (Like Attending The Rich Dad Summit)
  • Believe that there is out there all the wealth you want to get

If you enjoyed reading this post, you can support my work by buying me a book (one time donation) or by becoming a patron.

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What I’ve learned While Reading The ONE Thing (Book by Garry W. Keller & Jay Papasan)

The biggest challenge we face during our lifetimes, more than any other generation across history, is information overload. And if don’t take control of what’s coming at us, information and input coming from all the possible places (from TV to Netflix to Twitter to Instagram), it will take control of us. It will own us and it will run our lives and make us feel miserable.

This is a book that had been recommended to me by a fellow writer and blogger. The ONE thing focuses on the finding that one and only thing that matters the most in your journey towards your goals, and what you need to do to make reserved or “blocked” time for that thing and protect that block with all you got.

Here are the top X things and principles I learned while reading the book:

Go as Small as Possible:

No matter how big your goal or how success conscious are you, or where you want to be, you will have to start small (and often very small) if you really want to get there.

Many people think that going for a big target also means or implies starting to shoot for the moon fresh from the start. That is false, and can only get you to give up so soon. Reduce it to its childish terms/components and it becomes simple, measurable, and attainable.

Your job is to find ONE thing and one only such that by doing it, everything else becomes easier, unnecessary, or obsolete.

Then, you commit to al least 4 hours each day to doing that One thing.

Until my ONE thing is done—everything else is a distraction!

The ONE thing

The Domino Effect:

The Domino Effect, “Leveraged Action that Will Start a Domino Run”

By starting to do our ONE thing, we begin to line up your dominoes. We line up enough of them over the years, and we enjoy the benefits of The Domino Effect.

At its core, it is a geometric progression. And it very much resembles a very long train: “it starts out too slow to notice, until it’s moving too fast to stop”.

=> Success, by the domino logic, is built sequentially (one THING at a time)

Success Leaves Clues:

The misinformation, myths, and lies keeping us from embracing and accepting the fact we only need ONE THING. These are false claims thrown at us over and over again, start to become familiar and start to sound like they are true.

Beware of the six thrown lies that will be thrown at you time and time again. They will keep you poor, unfocused, and miserable.

Beware of the six thrown lies that will be thrown at you time and time again. They will keep you poor, unfocused, and miserable—here they are the six lies:

  • Everything Matters Equally
  • Multitasking
  • A Disciplined Life
  • Willpower is always on Will-Call
  • A Balanced Life
  • Big Is Bad

Don’t spread yourself too thin!

Someone may be telling you that everything matters equally, and that you never know what could turn out the thing that matters the most and that, that’s why, you should hedge your bets.

Well, if that’s the case and you still don’t know what your ONE thing is, then and as the author tells us, your ONE thing at the moment is to find that ONE thing.

Counter-attack tips from the author:

  • Have Time Blocked each day for your ONE thing
  • Build a Bunker
  • Never leave it (while working) except for the bathroom
  • Protect Your Time Blocks
  • Assign at least 4 hours each day to doing your ONE thing

The Three Commitments:

The Three Commitments

the journey of the successful lifelong learning is never over

  1. Follow the Path of Mastery:
    Try to perceive mastery as a path instead of a destination you’ll arrive at. Remember that ‘mastery’ is a way of thinking and a journey that has no end. It doesn’t matter what you are trying to master, whether it is mastering the guitar, or mastering the stock market, or even mastering mastery the science of learning itself, IT WILL TAKE TIME, IT IS A JOURNEY.
  2. Move from ‘E’ to ‘P’:
    E stands for Entrepreneurial, and P stands for Purposeful. E is doing thing with energy, curiosity, excitement and enthusiasm.

    ‘E’ will lead you to Disappointment => Resignation => Greener Pastures => The Cycle Continues

    P is doing whatever it takes to get to certain level or point.
    And it will lead you to Focus => Models =>Systems => Breakthroughs
    Do not accept plateaus just because it is something you think it is beyond your natural ability. That creates an artificial limit on your future potential & possibilities in life.
  3. Live the Accountability Cycle:
    The contrast here is: Accountable vs Victim
    This is the most important of among the three commitments.
    With this, you’ll absorb the ceilings you’ll encounter and you will keep going.

=> Don’t fight reality or ignore it. Work around it.

The Four Thieves:

The Four Thieves. ‘It’s not a relief, it’s a thief!’

Invitations and interruptions will come at you from everywhere imaginable.

  • Your Inability to day ‘NO’: This is why the author advises to build our own bunker, have blocked time, and protect it by never leaving the bunker or letting anyone or anything interrupt us while doing our ONE thing.
  • Fear of Chaos: Messes are inevitable on your way to success and big results.
  • Poor Health Habits: Your body is the vehicle that carries you through experiencing life. Don’t delude yourself by pretending you can go four days without sleep or one day on one meal and that you can get away with it. Your health is like a credit card: borrow now, pay later with interest. Take care of your health!
  • Environment Doesn’t Support Your Goals: This is the most challenging obstacle to overcome. I know really, because I come from such an environment. It works like a bucket of crabs, with you being the one crab that is about to escape, so everyone else down there starts to pull you back down.

Your environment is simply who you see and what you experience every day.

If you enjoyed reading this post, you can support my work by buying me a book (one time donation) or by becoming a patron.

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How To Heal Your Creative Soul (Julia Cameron’s The Artist’s Way Book Summary)

A redditor recommended Julia Cameron’s The Artist Way to me. I’d never heard of the book before this guy told me about it. And so I went on and grabbed a copy. And while reading, I took some notes and here is my little summary, review, and criticism. ( Buy The Book. )
Note: Each chapter in the book is a week, that’s how the author chose to organize the book.

No matter what your age or your life path, whether making art is your career or your hobby or your dream, it is not too late or too egotistical or too selfish or too silly to work on your creativity.

Julia Cameron’s The Artist’s Way

Spiritual Electricity/The Basic Principles

Julia believes we are creatives in one way or another. She really believes in that, and it shows (within the book). All we have to do, she points out, is “freeing people’s creativity”.

Her idea is to build some sort of “pathways” within our consciousness, and in turn, within these same “pathways” your creativity actually works.

The author refers to these basic principles as “Spiritual Electricity” through which the artist shall recover and discover his creativity.

Some of the principles mentioned:

  • Creativity is the natural order of life.
  • Open yourself to creativity and, you open yourself to the “creator’s creativity” within all of us.
  • You can refuse to be creative, but it is against “our true nature”.

The author introduces the concept of a “creative withdrawal”. And unlike Caffeine withdrawal, here she explains we are withdrawing “to” something instead of withdrawing “from” something like a substance. And the thing we are withdrawing to, in this case, is ourselves!

How do you know if you are creatively blocked? Jealousy is an excellent clue

Julia Cameron’s The Artist’s Way

Well, I can relate to that somehow. And, if you find yourself when (when reading like a maniac like me) that most books in the market are like shit and that you probably could write a something better than 95% of published book out there, then that’s a sign!
And here, Julia Cameron offers us some tips, among them:

  • To stop telling ourselves that it is too late to pursue it
  • To stop using our financial situation as an excuse not to pursue it
  • To stop associating your creative side with your ego (even though it might be true in my opinion, George Orwell thought so in his essay WHY I WRITE)
  • To stop undervaluing dreams and to really believe that they matter
  • To not give a sh*t if you family and friends will think you are crazy (they probably will, in my estimation, but they don’t and will never matter)
  • Creativity is not a luxury (I agree that sometimes, it is an urge and a necessity)
Not a luxury!

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The Basic Tools

Julia Cameron presents two tools here: what she calls “the morning pages” and “the artist date”.

The morning pages:

You need to find your creativity. But, how? Cameron here suggests “the morning pages” method.

Put simply, the morning pages are three pages of longhand writing, strictly stream-of-consciousness:“Oh, god, another morning. I have NOTHING to say. I need to wash the curtains. Did I get my laundry yesterday? Blah, blah, blah …”

Julia Cameron’s The Artist’s Way

The artist date:

This is when you set aside few hours each week to nurture and “date” your inner creative self, “your inner artist”.

The idea here, is that your inner creative needs to be taken care of, and taken out on a regular basis. And for that, the author is seriously telling us to set aside a block of time each week just to do that.

Recovering a Sense of Safety

  • All young artist yearn for acknowledgement, and they often don’t get it neither from family nor from friends, thus they are “shadow artists” (this kinds of reminds me of Saul Bellow when he once said “yes, I didn’t want to be ignored”)
  • Very often in our society, the artistic urge within a child is suppressed
  • Families usually discourage their children to pursue a career in Arts.
  • Usually, the child that has a creative energy within him and surrender to the environment pressure to go for a “real job, ” often later in life, when in his forties or fifties, go back and try to pursue that dream again
  • To make the jump, from obscurity to pursuing their artistic dreams, shadow artists must start taking themselves seriously
  • Your Artist is like a kid: nurture it
  • Take yourself seriously, but don’t take your early work very seriously or compare it unfavorably to the masters’
  • To recover go “gently and slowly”
  • Creative healing is like a “marathon”
  • To be a good artist, you must be willing to be a bad artist at first (and maybe even be bad a log period of time at first)
  • Your core negative beliefs are your worst enemies
  • Your affirmations are like your army,use them often
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Recovering a Sense of Identity

  • Self-definition is quite important in creative healing
  • Go sane! Unstuck yourself!
  • Believing your inner self-attacks will make you remain “victimized”
  • Self-doubt often leads us, blindly, into self-sabotage
  • Creativity thrives when accept ourselves and when we associate positively with our self-definition
  • Toxic company can block our artist growth
  • We are our inner artist’s own parent
  • Your “blocked” friends won’t support your healing/recovery
  • Avoid “Crazymakers” at all costs
  • Our inner skepticism is our worst enemy
  • A creative life involves a great deal of “Attention”

Recovering a Sense of Power

  • Take you anger, use it as fuel, do something with it
  • Don’t ignore the powerful signal of synchronicity
  • Learn to separate the useful criticism from the trash criticism
  • Shadow creative, ignored by their inner circle feel shameful about their own talent, usually doubt it, and run away from it for years
  • Growth happens to you in chunks, take it easy on down/low days, they happen to everyone

Recovering a Sense of Identity

The process of identifying a self inevitably involves loss as well as gain.

Julia Cameron’s The Artist’s Way
  • Face the mess as it shows up in your “morning pages” exercise
  • Clarity is the stage you arrive at when you know your boundaries
  • Just like in twelve steps programs, you need to “let go”
  • Creativity has its base/roots in reality
  • The best judge that you are recovering is you often feel like you are navigating uncharted territories
  • often, you are not conscious of your own growth speed
  • To become permanent and transcend time, a work of art must run away from all known boundaries oh what is possible or acceptable
  • Expect sudden shifts in mood, tastes and attitude
  • Evaluate your past carefully
  • All artists consume a huge amount of content—usually unconsciously
  • Keeping distractions to a minimum and consuming content in a ‘monitored’ way can nurture our own creative well
  • Try to imagine in detail your ideal setup & environment (Geographical, Mood, Schedule, Company, etc..)
  • Reflect back in time (back when you were five years younger for instance)
  • Have a ‘dream area’ (your secret creative space, could be a room, but shouldn’t be decorated as an office)
  • Plan for a sabbatical
  • Get rid of ‘one low-worth’ outfit
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Recovering a Sense of Possibility

  • Prepare your mind to erase any sense of limits on what you are able to achieve
  • Creativity is a ‘spiritual’ problem
  • Shift spiritually, but dot it gradually
  • Free yourself from all dependencies, but not from the dependence of ‘the creator within’
  • Listen to your Artist’s child within
  • ‘Withdrawal’ is a must for you as an artist, otherwise, anxiety and depression becomes inevitable
  • Do not ignore your internal warnings (about toxic marriage, stressful job, deteriorating health, etc..)
  • Often, as a creative, worrying about what will happen to your relationships as a result of doing what you really feel inside that you must do will keep you in the ‘non-action’ zone
  • Don’t be destructive of your true essence as an artist
  • We become really spiritual by getting in touch and accepting the creative within no matter how crazy he/she might seem

Recovering a Sense of Abundance

  • Self-limiting beliefs like ‘money is bad’ or ‘I shall pursue that creative path when I get enough money’ can indefinitely postpone that career/dream
  • Never act out of the belief that what nature or god wants for you is different from what you want for yourself
  • Write about the God/Power you believe in in your mornings journal
  • Stop blaming your misery as a creative on God
  • What we desire to pursue is what w really want to do
  • When we get stuck, we blame it on money (the lack of it)
  • Ask yourself what gives you true joy? everyone is different
  • The life of a creative necessitate a private space (even though it may seem like a luxury for some)
  • Creative recovery as a process may seem silly, but that’s really resistance from within

Recovering a Sense of Connection

  • Progressively hone your listening skill
  • Embrace your ability to create as natural
  • Accept that the universe wants to assist you with what you are doing
  • Perfectionism is simply your own refusal “to let yourself move ahead”
  • Don’t let yourself fall into the trap of perfectionism, because if you do, you’ll never be satisfied
  • Setting your limits too low, perhaps in a sweet spot that your mind perceives as achievable, is a trick and a mistake; it is selling yourself short unconsciously
  • It is easy and natural to get jealous of others when you are outside their ‘camaraderie, ‘ but once you join their club, your jealousy will vanish instantly

We’ve all heard that the unexamined life is not worth living, but consider too that the unlived life is not worth examining.

Julia Cameron’s The Artist’s Way

Recovering a Sense of Strength

  • How your perceive Time is affecting the way you take creative risks
  • Acknowledge your creative losses (rejection, humiliation, failures, bad reviews from critics, etc..) in order for you to heal them
  • ‘True criticism’ won’t destroy you, it will liberate you
  • Academia can poison, and eventually kill, the creative spirit
  • get a circle of people around you who value, respect you and offer constructive, instead of destructive criticism
  • Artists and Intellectuals are the same
  • As an aspiring artist, without the right tools, you may delay your stay in terra incognita , buried there in obscurity
  • Artistic injuries and scars, like athletes, are inevitable
  • You need to focus on what lies ahead of you
  • Every end, is your new beginning
  • Creative endeavors ought not, in a way, and won’t be ‘finished’
  • drop the finished product thinking
  • Don’t join the great masses, the people that let a positive integer called Age stop them from doing, from going, from seeing, from LIVING!
  • Stop daydreaming about how your creative life as an artist ought to be, and start living as an one instead
  • Never think about the odds. Ever!

“I’m too old to really be a writer” is another frequent complaint. This is more ego-saving nonsense. Raymond Chandler didn’t publish until the far side of forty.

Julia Cameron’s The Artist’s Way

Recovering a Sense of Compassion

  • Be prepared to face the emotional hurdle in your creative journey
  • Don’t confuse being Blocked as being Lazy, oftentimes, they are not the same thing
  • Fear is the ultimate block for an artist
  • Declaring yourself as an Artist may represent “an act of rebellion”
  • Being needy to make is as a creative makes it hard to do so
  • Art is a process, try to make it as fun as possible
  • Be free of anger and fear
  • Always remember that your artist is a creative child

Recovering a Sense of Self-Protection

  • Each one of us has several ways to block our own creativity
  • Abusing on the lower human needs (lower down Maslow’s Hierarchy of Needs, think food, and sex) can negatively impact our creativity
  • It is terrifying for an artist to see what is really possible for him/her to achieve
  • It is courageous to admit your own blocking tools
  • Your time is too valuable to waste it on thinking of the next artist who is getting past you and how he doesn’t even deserve it

Fame is a spiritual drug.

Julia Cameron’s The Artist’s Way

Recovering a Sense of Autonomy

  • You must experiment, and see what works for you as an artist, everyone is different
  • Your credibility lies with you and your output
  • You cannot plan your creative career (even if you try)
  • Your self-respect arises from doing your work
  • You don’t need to be rich, but you need to support yourself (don’t be the starving artist)

Recovering a Sense of Faith

  • Meet the prerequisites of creativity: receptivity, faith, and trust
  • Have the courage to admit your inner dream, you are intended to create
  • There is a path for you
  • Creativity begins in darkness; we need to trust it, as ideas start and grow there
  • Mystery is at the heart of creativity

Julia Cameron’s Online Course

If you like the book so much that you want to seriously invest in your creative journey and awakening the giant within, then luckily for you, the author, Julia Cameron is offering a twelve weeks online course: The Artist’s Way Online Course that will perfectly complement your reading of the book.

Follow The Author: Julia Cameron’s Online Presence

Her Instagram, and her Twitter.

If you enjoyed reading this post, you can support my work by buying me a book (one time donation) or by becoming a patron.

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For The Curious: What is Logic Anyway? Part I Validity, Truth Functions, Names, Quantifiers & Descriptions (Graham Priest’s Logic: A Very Short Introduction Book Summary)

What is Logic? Have you ever thought about the question? Have you ever tried to come up with your own definition? If, yes, then you are interested in a discipline that dates back to the 4th century BC, practiced worldwide by man and woman whose professional title is simply: Logicians.

Logic as a subject itself find its deepest roots in Philosophy. In my effort to understand Logic, I came across the book: Logic: A Very Short Introduction by Graham Priest, and so I read it and this post is a summary of my own of the book. It will make understanding the basics of Logic a piece of cake for you. Some basic terminology is introduced along with syntax that requires little to no mathematical background. In fact, I believe, after grasping this book, you will have much easier time pursuing disciplines such as Computer Science, Mathematics and Philosophy.

The Concept of Validity

Validity is a cornerstone concept in the study of Logic. There are two main types of validity:

  • Deductive Validity
  • Inductive Validity

But to understand each, you first have to understand some basic terminology:

  • Premise: The part of the inference that gives reason to something
  • Conclusion: The part of the inference that get its reason and ground from the premise(s).
  • Inference: Snippets of reasoning. They are made of a set of premises and a conclusion

The whole concern of Logic, as Graham Priest puts it, is whether the conclusion follows from the premise(s). And when it does follows from the premise(s), Logicians call the whole inference Valid.

So, the central aim of logic is to understand validity.

Graham Priest – LOGIC: A Very Short Introduction

When is an inference Deductively Valid?

  • An inference is deductively valid, when there isn’t a single case where the premise(s) are true and the conclusion isn’t also true.

And When is an inference Inductively Valid?

  • An inference is inductively valid, when the premise(s) give good reason for the conclusion, but not good enough to draw a final conclusion upon them.

Truth Functions

  • Truth Values:

In any inference, sentences can either be True or False–hence, the concepts of Truth and Falsity. If a sentence is true, then we assign it the truth value T. Else, we assign it the truth value F. As you can guess, T and F stand for True and False, respectively.

Logical Operators:

  • Grammar Form: OR | Syntax Form: A V B, where A, B are sentences.
    When a sentence has the logical operator OR within it, we call it a Disjunction. And, we call sentences at both sides of the ‘OR’ disjuncts.
  • Grammar Form: AND | Syntax Form: A & B, where A,B are sentences.
    When a sentence has the logical operator AND within it, we call it a Conjunction. And, we call sentences at both sides of ‘OR’ conjuncts.
  • Grammar Form: NOT | Syntax Form: ¬S, where S a sentence.
    If S is a sentence, then ¬S is called the Negation of S.

While we are at it, let us define what a sentence is based on traditional grammar:

  • A sentence, at its simplest form, is composed of: Subject + Predicate.

According to Merriam-Webster’s Dictionary:

  • a subject is: that of which a quality, attribute, or relation may be affirmed or in which it may inhere
  • a predicate is: something that is affirmed or denied of the subject in a proposition in logic

Note that you can also chain inferences. For instance: Let W be the sentence ‘Ben Wajdi is a writer’. Let N be the sentence ‘Ben Wajdi was born somewhere in North Africa’. Let Y the sentence ‘Ben Wajdi is a North African-born Writer’. Let F be the sentence ‘Be Wajdi is French’.
Now, if we chain all of the above inferences in the following way:

An example of a chained inference in Logic

Truth Conditions:

Truth Conditions for Negation:

  • S has the truth value T, if ¬S has the truth value F
  • ¬S has the truth value T, if S has the truth value F

Truth Conditions for Disjunction:

  • The disjunction Q v R has the truth value T, if either one of the disjuncts has the truth value T
  • The disjunction Q v R has the truth value F, only if both disjuncts have the truth value F

Truth Conditions for Conjunction:

  • The conjunction Q & R has the truth value T, if each of the conjuncts has the truth value T on its own
  • The conjunction Q & R has the truth value F, if either one of the conjuncts has the truth value F

Truth Tables:

Truth Table for the Negation of S, where S is a sentence
Truth table for the disjunction Q v R, read ‘either Q or R’
Truth table for the conjunction Q & R, read ‘Q and R’

Quantifiers & Names

Modern Logicians call words like ‘nobody’, ‘someone’ or ‘everyone’ Quantifiers and when they appear in a sentence they are distinguished from words like ‘Ben Wajdi’ or ‘David Cohen’ because these are Names. And even if both Quantifiers and Names can both serve as subjects, they tend to work differently.

So How do they differ?

  • a situation comes furnished with a stock of objects
  • the relevant objects can be people, or any other collection of objects depending on the situation
  • all the names we generate about this situation refer to one of the objects in this collection
  • thus if we write W for ‘Wajdi’, w refers to one of these objects
  • and if we write A for ‘author’, then the sentence wA is true in the situation just if the object referred to by w has the property expressed by A.

The Particular Quantifier

  • if we use a quantifier like ‘someone’ and say “someone is an author’ then this is true in the situation that there is an object or other in the relevant domain, (an object x in the collection of objects such as) that happen to be an author
  • we denote ‘some object x is such that’ as ∃x
  • thus, if we want to write ‘∃x x is an author’ we can write it simply as: ∃x xA
  • => Logicians call ∃x a Particular Quantifier

The Universal Quantifier

  • Now, let’s talk about another type of quantifier: ‘everyone’
  • For instance: if we say ‘everyone is depressed’
  • For the sentence to be true, all the objects in the collection of objects must have the property ‘depressed’
  • in other words, ‘Every object, x, is such that x is Depressed’
  • Let’s denote the property ‘depressed’ as D, then we can write the whole inference as: ∀x xD
  • Logician call ∀x a Universal Quantifier

And so, names and quantifiers work differently. The best evidence is that Logicians will write ‘Wajdi is an author’ and ‘Someone is an author’ differently–∃w wA and ∀x xA respectively. And the key takeaway from all of this is that an inference when examined merely through its grammatical form it can mislead us when judging its validity.

Quantifiers play a central role in many important arguments in mathematics and philosophy.

Graham Priest – LOGIC: A Very Short Introduction

Graham Priest then walks us through a popular argument for the existence of God: The Cosmological Argument (very interesting read it in the book, pages 21-22)


We’ve seen already that at its simplest form, a sentence is a subject and a predicate. We’ve also seen that a subject can be a name or can be a quantifier. But, it also can be what logicians call a Definite Description.

A definite description has the form of ‘the thing satisfying such and such a condition’. Example: ‘The man who wrote the first novel in history’.

Th author reminds as that thanks to ‘one of the founders of modern Logic’ English Philosopher and Mathematician Bertrand Russel, we can write the above sentence as:

  • Rewrite ‘the man who wrote the first novel in history’ as ‘the object, x, such that x is a man and x wrote the first novl in history’
  • Now let’s write ix for ‘the object, x, such that’
  • Then, our previous sentence becomes ‘ix(x is a man and x wrote the first novel in history)
  • And, if we write M for ‘is a man’ and N for ‘wrote the first novel in history’ then we can write the whole thing as => ix(xM & xN)
  • The general syntax for a description is: ixcx, where cx is some condition containing occurrences of x.

We know that definite descriptions can take the role of subjects. And we also know that subject + predicate make a sentence. Hence, if we write the predicate ‘was born in Spain’ as U, then the sentence ‘the man who wrote the first novel in history was born in Spain’ bceomes ix(xM & xN)U.

We can write µ as a shorthand for ix(xM & xN), then the whole sentence/inference becomes: µU

Remember, in the last section we talked about the differences between Names and Quantifiers. Rest assured if you have questions going in your mind about the classification of Descriptions because they are considered Names.

==> And so, in the above example, the sentence µU is true only if the object referred to by phrase/description µ has the property expressed by U.

The author here warns us that even though Descriptions are Names, they are a special kind of Name.
Unlike ‘proper names’ like ‘Wajdi’ and ‘Ben’, Descriptions carry information, and often properties, about the object within it. For instance, the Definite Description ‘the man who wrote the first novel in history’ carries within it two properties about the object: he is a man + he wrote the first novel in history.

This is a special case of something more general, namely: the thing satisfying such and such a condition, satisfies that very condition. This is often called the Characterization Principle (a thing has those properties by which it is characterized).

Graham Priest – LOGIC: A Very Short Introduction

==> Here, the author talks about the Ontological Argument for the existence of god. Go on and read it in the book if you’re interested, I didn’t cover it here for the sake of brevity.

Something else you need to know about descriptions: if µP is a sentence, µ description and P a predicate, and if the object referred to within the description µ does not really exist, then µP is false.
But here again, Graham Priest warns us that it is not always the case, and that this is when we start encountering some weird behavior regarding Descriptions. Sometimes, it turns out, the object referred to can be kind of ‘imaginary’ or ‘not real’ and still the property P attached to it can still hold and be true. An example the author present is about ‘Zeus’. After all, ‘Zus’ didn’t really exist, nor did he live on ‘Mount Olympus’, yet still the property of ‘was worshiped by ancient Greeks’ is still true. And so, the author reminds us that there are some cases, where the object does not exist yet still there are truths about it.

If you enjoyed reading this post, you can support my work by buying me a book (one time donation) or by becoming a patron.

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What is Accounting? And Who Uses its Data? (Learn Financial Accounting Series)

This is a series of posts about Accounting. They are simply a rearranged version of my notes and summaries while reading the textbook Financial Accounting: IFRS, 3rd edition by Jerry Weydgandt, Paul Kimmel and Donald Kieso. Taking the auto-education route myself, I know how important notes are to make sure I understand the material within a book ( or several of them). I know too, that sometimes you may need extraordinary level of commitment and motivation to keep going, especially when you get stuck as you will often do throughout your journey towards learning or mastering something.
And so, these posts are for my fellow autodidacts out there, who believe in themselves and who know from within that they don’t need anyone to ‘teach them’; they can learn it themselves. Keep Learning!

You have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization. I’ve heard it came to civilization through Venice which of course was once the great commercial power in the Mediterranean. However, double entry bookkeeping was a hell of an invention.

Charlie Munger

Although Accounting is one popular major across colleges, many businesses spend money to make their employees more ‘financially literate’. That often means, understanding ‘the numbers’. Which in turn, mean getting familiar with Accounting and its lingo.

Accounting Simply Defined

Here is the formal definition pulled out straight from the Financial Accounting Textbook 3rd edition (IFRS Edition):

Accounting basically is the process of identifying, recording and communicating the economic events (usually monetary transactions, more on that later on within the monetary unit assumption ) of an organization (often, a business, but also can be a non-profit or a government agency/subsidiary) to ‘interested users’.

Who Uses Accounting?

  • External users: Debtors, Creditors, Investors/Shareholders, Government Agencies, etc..
  • Internal Users: Managers, Decision Makers, etc..

Accounting Standards

When they prepare financial statements, accountants follow a well defined set of terms and guidelines. And depending on which country or jurisdiction the business is based in, these guidelines can differ.

We call these guidelines Accounting Standards, and they are set by either one of two organizations(also called accounting standard-setting bodies) The IASB(International Accounting Standards Board, its headquarters is in London) or The FASB(Financial Accounting Standards Board).

IFRS is one of these accounting standards. It is set and updated by the IASB and used by businesses in 130 countries. Businesses in the US however use GAAP(generally accepted accounting standards) which is another type of accounting standards set and updated by the FASB.

While in this post, I use IFRS, all the principles are applicable to GAAP as well.

The Measurement Principle

In IFRS, we either use the historical cost principle or the fair value principle when recording assets.
When using the historical cost principle, we must record asset at their original cost. For instance, if the company bought a 10 acre piece of land ten years ago at $2,500 per acre, then according to the historical cost principal, we must record the asset value as $25,000, even though the current market value of the land may have risen over time(to say $3,150 per acre).
On the other hand, if we choose to follow the fair value principle, we must report assets and liabilities at fair value. Fair value means the current market price to sell an asset or settle a debt.
There is a trade-off when choosing between using either the historical cost principle or the fair value principle: a trade-off between relevance and faithful presentation.

Generally, and because IFRS allows the usage of both principle, companies choose to use the fair value principle only when it is perceived as necessary—assets that are often traded on a daily basis or real time or whose prices can be easily determined e.g. investment securities, bonds, etc…

The Monetary Unit Assumption

According to the Monetary Unit Assumption, companies should only record business transactions that can be measured using monetary unit. Hence, business events that cannot be measured in monetary units—and though they can be important to managers and decision makers or to the operation of the business as a whole—such as the attitude of employees (think labor unions and strikes) or the deteriorating health of the CEO should not be included in financial records of a company.

The Economic Entity Assumption

As business owners, we should keep our personal living costs, our personal economic records separate from that of our business. By doing that, we abide by the Economic Entity Principle.
==> The best way to do that? Register a Proprietorship, a Partnership, a Limited Liability Company, or better yet a Corporation!

The Accounting Equation

Assets = Liabilities + Equity

As a business, our assets are everything we have as a resource. That includes the cash in our business accounts, the equipment in our factories, the furniture in our headquarters, the patents we registered as ours, the technology we’ve invented such as source code properties (assets such as patents, and technologies are often called intangible assets).
==> So, our Assets are all our Resources.


Now, Liabilities are our Debtors claims against our assets. So, if we have a total assets value of $150,000 and our debtors’ claims on those assets are $50,000, then we owe those $50,000 to our debtors (creditors/suppliers, etc..) and that is our Liabilities.

Liabilities can include: Notes Payable to a Bank, Accounts Payable to Suppliers, or Salaries Payable to employees, Sales/Real Estate Taxes payable to the government.

Now, subtract the Liabilities from the Assets, and you get the Equity: our Shareholders’ claims on Assets. And by the way, in the case of bankruptcy, debtors are paid first, and the rest, if any remains, goes to the shareholders—often referred to as residual equity.

Residual Equity

Equity itself generally consists of:

  • Share Capital—Ordinary: The Sum of the face value of all issued Shares—a piece of the company sold to public investors (usually for cash)
  • Retained Earnings= Revenues – Expenses – Dividends
    ==> Expenses decrease equity, while Revenues and new Shares sold to outside investors increase equity
    ==> Dividends: these are distributed to shareholders, as a result of a net income and an agreement within the board of directors that this is the best use of the increase in assets (they can choose not to distribute dividends instead and reinvest the net income into the business). Dividends, when they are distributed, decrease equity.

The effects of business transactions on the accounting equation:

Let’s define transactions! Transactions are the business events that are worth recording by accountants. They can be classified into:

  • External Transaction: these involve business transaction between our company and an external entity or enterprise
  • Internal Transaction: these are the economic events that happen within our company

All in all, the company records the transaction only if the event affects the accounting equation.

The 5 Financial Statements

There are 5 financial statements that one must learn to read and interpret:

The Income Statement

The Retained Earnings Statement

The Balance Sheet (AKA The Statement of Financial Position)

The Statement of Cash Flows

The Comprehensive Income Statement

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