"The three faces of wealth"

Emmanuel Daniel, founder of The Asian Banker and Wealth and Society, spoke at the 10th anniversary of asset management services provider Xinhu Wealth in September. He discussed how wealth is perceived by society in different periods of time, and the different assets important to people. In the past, gold was very important and was even used as a hedge against inflation, but the trend now is towards digital assets. One can build wealth right at their fingertips through the use of technology. As a signal of how the world has changed, digital assets such as cryptocurrencies and NFTs now play an important role in the economy. He further stressed that the wealth of the community must be built alongside that of the wealthy, this will ensure a sustainable growth for business and society. Daniel said staying healthy, living in a sustainable community, and having family and friends are more important than any other wealth a person can have.

• Digital assets such as cryptocurrencies and NFTs play the role of gold
• Carbon assets trading is on the rise
• Increasing value and liquidity of assets
• Distributing wealth to the community for sustainability
• The real essence of wealth is maximising your potentials, ensuring a sustainable environment and family relationships

Here is the transcript:

Hello everyone. I’m Emmanuel Daniel, chairman of The Asian Banker and Wealth and Society. Happy tenth anniversary to Xinhu Wealth. Thank you very much for inviting me to give this speech. I've entitled my speech as “The three faces of wealth”. I borrowed the idea from an old American movie called “The three faces of Eve”. In 1957, it featured a very famous actress at that time, Joanne Woodward, who had three different personalities.

There are different ways to look at wealth. You can look at it from the perspective of the asset itself, that's one face. You can look at it from the perspective of the role that wealth plays in society, that's another face, and from the perspective of you, the user of wealth. I want to talk to you about wealth from each of these different faces that it has.

Let's start by thinking about wealth as an asset class. If I ask every one of you listening to this speech to write down what your assets are, what would you write？Would you say how much money you have? How many cars do you own, houses you have or properties you own around the world？What would be the first few items on your list of wealth that you own? Can I suggest that the first item that you have in your list is your family and your friends, and the people who are important to you. The people who will stay with you until the day you die, or with you in good times and bad.

That classification alone makes all of us wealthier than we think we are. Some of us are poorer than we think we are. The second most important asset in wealth is your health. All of us notice that without health, there is so much that we cannot enjoy and that we can take for granted in our everyday life. And then come all the other assets that we now think of wealth: money, gold and investment. There is something very interesting that happened to these assets over time.

There was a time when gold was very important. In fact, when I visited the hutongs of Beijing, I met people who tell me stories of hiding gold bars under the sand in hutongs. That was the preservation of the wealth that they owned, and they were very afraid of these gold bars being stolen. But over time, today, cash and bank accounts are important alternatives to gold bars. But gold also performed another function. It was a hedge, an economic hedge against inflation and exchange rate risks. Guess what happened in the last two years?

Digital assets such as cryptocurrencies play the role of gold

Gold has been losing that role that it played in the economy as a hedge against inflation to new forms of digital assets that are beginning to perform like gold, such as digital assets and cryptocurrencies. And you can see in this chart that I put out that cryptocurrencies have been playing the role of gold.

New forms of digital assets are playing an important role in the economy today. The most interesting of these digital assets is this picture that I'm putting out for you to see. This is a digital picture that was put together by an artist in the US called Beeple. It was bought by an investor in Singapore, whose only wealth was digital assets, for $69 million. Up to this point, this is the highest value ever paid for a digital asset that does not even actually exist, except that it is digitally confirmed as being owned by one person or another, an NFT or a non-fungible asset.

This is a new digital class that's creating new forms of asset class that didn't exist before. The person who bought this particular digital painting said he’s going to put it in a digital building, not a physical building, but a building that exists only on the internet. Other people who value this whole idea of a digital existence will come and visit and see this particular art piece. So, that's how much the world that we live in has been changing and it's continuing to change. There are things that we do not understand today that are shaping the world that we live in. Increasingly, because of digital assets and non-fungible tokens (NFTs), anyone can issue an NFT or a digital asset. It all depends on the perception of others and not on the price of a physical asset as hard as gold anymore. When a private banker says that you should have a range of assets, you start with your family, with your health, with your cash, with your gold, and then you need to start thinking about all of these new asset classes that are coming into existence today. I'm sharing this with you not because I’m trying to interest you in digital assets. I'm saying this to you to know how much the world has changed.

Carbon assets trading is on the rise

Another asset class that is becoming popular and perhaps even important today is the trading of carbon assets. Carbon is measured in metric tonnes. There are companies, people, non-government institutions that have activities that are carbon positive or carbon negative. Therefore, if the asset value is positive, they are able to trade carbon against businesses and companies that generate carbon into the atmosphere and environment. China has just started its own emissions trading platform. At the moment, it only involves the 2,000 electric companies in the country. But over time, their ability to be carbon negative is itself becoming an asset that you may want to think about and invest in the future.

What about this boat? If you saw a picture of this in a magazine, you'd probably say, “Hey, that's an asset that I can own”. A luxury boat gives you the idea that someone is wealthy, but that's not necessarily an asset.

Increasing value and liquidity of assets

For all of the new asset classes that are being created, there are two very important considerations. First, it needs to have a value that will not diminish over time. My friends who own boats tell me that there are two happiest days in the life of a boat owner - the day that you buy the boat, and the day that you sell the boat. Because looking after a boat is not easy, it’s not cheap. On the day that you sell the boat, you don't even know whether there's a buyer out there.

The second important consideration or definition of a good asset is that it has to be liquid, meaning that you can sell it when you want to. A boat is an excellent opportunity to enjoy your wealth and the hard work that you've put into building your business, or your family. But, it is not necessarily in itself an asset. It's an expense, but an enjoyable one. Now, let's think about the second face of wealth.

Distributing wealth to the community for sustainability

The second face of wealth is the role of wealth in society. I've studied Chinese culture as deeply as I possibly can. I'm happy to see that the relationship between the wealthy and the rulers of the state was always a deep, interesting and intriguing one that results in good times a very sustainable and stable community. There are two family houses, the Wangjia and the Qiaojia in Shanxi Province, which still exist today. They are huge courtyards that are the size of a town, run by families that started very humble. They built normal businesses like tofu or the production of goods and services and became a very important part of the community. The relationship between the wealthy and the needs of the community and the state is a very important role that wealth plays in society.

Why do I bring this up? Because what happened in the US was that in 1995 we used to think very highly of corporate leaders like Jack Welch and others who made a deal with the unions in the US. They said, “If you're not going to keep wages low, we're going to take our companies abroad where the wages are lower and keep our costs down and our profits high.” That's how companies like GE and others went to India and China and did production there in order to be profitable. What happened over a 20-year period?

The US built an amazing capital markets culture where companies and corporations and their leaders are very well rewarded for keeping their costs down and profits high. But it caused incredible disaster in the local communities where wages were kept low. Inflation kept going up. The cost of living likewise went up, and the local community was not able to cope. Other societies started to take on the roles that used to be done in those local communities.

That is why the wealthy owe an obligation to society. What purpose is there to be wealthy if the society that you belong to isn't equally wealthy? Some of the initiatives are being put together by the Chinese government right now. It is an important process by which you keep the stability of society together so that all of us can enjoy the fruits of being wealthy together.

There is a French university professor who wrote a very important book called “Capital in the Twenty-First Century”. That book is influencing a lot of economists to try to understand how we can balance the importance of a free capital market that rewards hard work, productivity, low cost and profitability against the need of ordinary people to live, to grow, to be educated, to have good healthcare and to raise families that are promising for the next generation. These are some of the thinking that is going into the face of wealth in today's society right now. We need to take into consideration when we think about our own roles with our own families, as well as to the society at large.

The third face of wealth, that's you. What's wealth to you? How do you manage wealth? We used to think of wealth as being captured in large banks and financial institutions with huge pillars, which gives us a sense of safety and security. Wealth today is in your hands. It's in your mobile phone, it's in your device. You are able to manage it in your own hands as what large institutions used to do for only the wealthy before. Wealth has democratised all of us. All of us have access to wealth. We have the opportunity to build wealth on devices and on the technology that we carry. For this reason, the people who are in the wealth industry, the private bankers, the people at Xinhucaifu, who provide these services to you, need to imagine wealth as being part of our lifestyle. Sometimes, when I talk to wealth managers, they give me the sense that the idea of wealth is to get lots of people into a room and then make a presentation to them like what I'm doing right now, and then try to sell them a product. No.

Maximising your potentials, ensuring a sustainable environment and family relationships

The idea of wealth is that all of us feel energised that we are able to do what we want to do with our lives, to go out to learn yoga, take the family out on a holiday, push ourselves to realise our full potential as individuals. That is the real purpose of wealth. Wealth products have to be designed to capture that energy, that freedom, that aspiration and the values that each of us has. There are many things that are important to us as individuals today that were not important in the past. It can be our values for ensuring that we live in an environment that is sustainable, that we live in communities that are sustainable. Things that are important to us personally, to our friends and our family. What's most important and most interesting is that increasingly, there are those of us who don't even live in the real world. There are those of us who are beginning to live in virtual communities and interacting with people around the world, not just in China, in these virtual communities that we design. These are the three faces of wealth, the assets that you have, the society that you belong to, and you as an individual.

I hope that you've appreciated the points that I've raised in this presentation, and then it will give you time to think about the things that are important to you.