BOOK REVIEW: BEFORE WEALTH, FIRST A MINDSET CHANGE

Book Review: Rich Dad's Guide to Investing

Author:  Robert T. Kiyosaki

 

                                                

 

I have been a fan of Robert Kiyosaki and his “Rich Dad” series since I bought my first book  -- “Retire Rich, Retire Young”, 20-odd years ago.

Up to that point in my life (blame it on my Catholic upbringing) I believed that wealth accumulation was for a select few, which is true, but not for the reasons I thought. I thought some people were genetically predisposed to be rich, that wealth accumulation was based on the genetic lottery and not a learned behaviour.

I thank Kiyosaki for that shift in mindset.

Lately with time hanging loosely on my hands, I decided to go back “revise” Kiyosaki. To my mind “Rich Dad’s Guide to investing” is the one the series which speaks most to shifting mindset as a starting point to eventual wealth.

Kiyosaki begins with the foundation of financial success—education. He argues that most people are trapped in a cycle of earning and spending because they lack the knowledge needed to make money grow. Unlike traditional education, which often prioritizes job readiness, financial education teaches individuals how to manage, grow, and invest their earnings effectively.

He underscores the concept of assets versus liabilities, a cornerstone of his philosophy. Kiyosaki’s rich dad—the inspiration behind his financial lessons—taught him early on that financial literacy involves understanding the difference between what puts money into your pocket (assets) and what takes money out (liabilities). The book stresses that true investors focus on accumulating assets like real estate, stocks, and businesses, which generate ongoing income.

Kiyosaki’s emphasis on financial education isn’t limited to theoretical knowledge. He advises readers to actively seek opportunities to learn—whether through books, mentorship, or hands-on experience. Investing without understanding the market, he warns, is akin to gambling.

“The more you know, the less risk you take.”

This quote hit me the first time I read it, understanding it to mean that more knowledge is key to mitigating against risk.

 

The Power of Long-Term Thinking

 

Unlike many who are swayed by the lure of quick profits, Kiyosaki stresses the importance of building wealth over decades. He highlights that true investors aren’t focused on the next big stock tip or speculative trend but are instead committed to steady growth through well-chosen assets.

Kiyosaki’s perspective on patience is particularly relevant in today’s social media soaked reality, where the temptation to “Keep up with the Jones” is strondger than ever before.

This approach also involves resisting the temptation to sell assets prematurely for short-term gains. Kiyosaki emphasizes the importance of reinvesting returns to compound growth, a strategy that has been key to the success of wealthy individuals.

By prioritizing sustained growth over instant gratification, Kiyosaki offers readers a mindset shift that is crucial for successful investing.

 

The Role of Leverage in Building Wealth

 

Another crucial lesson in the book is the strategic use of leverage. Kiyosaki introduces leverage as a tool that amplifies financial outcomes by utilizing resources beyond one’s own. Expanding its meaning beyond borrowing capital, to leveraging expertise, or using other people’s time and skills to maximize returns.

While leverage has its risks, Kiyosaki argues that educated investors know how to manage these risks effectively. For instance, in real estate, he demonstrates how borrowing money to purchase property can yield substantial returns when managed wisely. Similarly, building a business involves leveraging the skills of a team to achieve results that would be impossible for an individual to accomplish alone.

Kiyosaki warns that without the requisite financial knowledge, over-leveraging can lead to disastrous consequences, such as unmanageable debt or poorly performing investments. He encourages readers to approach leverage with caution, ensuring they have a solid understanding of the associated risks and benefits.

But my key takeaway when I first read the book and again more recently, is that our expenses determine whether we will accumulate wealth or not. More than our income.

There are only two ways to spend your money either to invest it or eat it. If your expenses tend toward one side or the other will determine whether you have a chance of being rich or not. There is really no way around that.

So when we are struggling financially regardless of our income let us look to ow we spend.

As if I could forget "Rich Dad’s Guide to Investing" excels in its ability to simplify complex financial concepts without diluting their significance. The lessons on financial education, long-term thinking, and leverage are not only practical but also timeless, providing a strong foundation for anyone eager to embark on their investment journey.

“Rich Dad’s Guide to Investing” is an empowering guide for those who want to take control of their financial futures. By emphasizing the importance of financial education, the value of long-term thinking, and the strategic use of leverage,Kiyosaki provides readers with a roadmap to achieving financial independence.

I think this book is good reading for even financial experts who have forgotten or never knew, that before any action first the thought. The actions can only be as good as the mindset dictating those actions.

 

LOOKING TO A PRESIDENT YOWERI MUSEVENI SUCCESSION

The succession of President Yoweri Museveni, who has governed Uganda for nearly four decades, is one of the most significant political events looming on the horizon. Museveni’s tenure, marked by a blend of revolutionary zeal, economic pragmatism, and strategic regional diplomacy, has left an indelible mark on the country’s political, economic, and geopolitical landscape. As Uganda anticipates a future without its longtime leader, the questions surrounding his succession involve not only the mechanics of transition but also concerns about the stability, direction, and identity of the country going forward.

This essay explores the political, economic, and geopolitical concerns surrounding Museveni's succession, considering historical examples of African leadership transitions, as well as potential succession models for Uganda. It also highlights how Museveni's personal history and political journey complicate the process of his succession.

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1. Political Concerns

A. Institutional Weakness and Political Polarization

Uganda’s political system, though formally structured by the 1995 Constitution, faces significant challenges when it comes to ensuring a smooth and peaceful succession. While the Constitution specifies that the Vice President should step into the president’s shoes temporarily before elections are held, the system has been weakened by years of political centralization under Museveni. The executive has often dominated Uganda’s political sphere, undermining the independence of institutions like the judiciary, Electoral Commission, and Parliament.

This centralization of power has made it difficult for democratic institutions to function independently and efficiently, raising concerns about their ability to fairly manage the succession process.

Furthermore, Uganda’s political landscape remains deeply polarized. The NRM, which has governed the country under Museveni’s leadership, faces substantial opposition from both within the party and from other political groups. Museveni has long been accused of suppressing opposition, restricting political freedoms, and controlling electoral processes to ensure his continued rule. This suppression of dissent has led to a lack of trust in the country’s democratic processes, creating an environment ripe for instability during a leadership transition. Opposition parties, such as the Forum for Democratic Change (FDC) and the Democratic Party (DP), have long been sidelined, and many of their members see Museveni’s departure as an opportunity to challenge the status quo. However, the lack of political plurality and the dominance of the NRM may mean that the transition is fraught with conflict.

The issue of internal party divisions within the NRM also complicates succession concerns. Speculation about Museveni’s son, Muhoozi Kainerugaba, as a potential successor has created tensions within the party. These tensions are fueled by rival factions and by the general fear that Museveni’s personal leadership style, which has consolidated power around him, may result in an overly personalized transition. The question of whether the NRM can unify behind a single successor is central to the stability of the transition. If the party fractures during this period, it could lead to a protracted power struggle, which would likely involve the military, as it has historically played a key role in Uganda’s politics.

B. The Role of the Military

The Ugandan military, particularly the Uganda People’s Defence Forces (UPDF), has played an instrumental role in Museveni’s rule. Museveni himself rose to power through a military rebellion, and since taking office, he has ensured that the military remains a central pillar of his regime. This strong military presence has helped maintain order and stability but also means that the military could play a central role in the succession process. The UPDF has been integrated into the political fabric of Uganda, with key military figures holding prominent government positions. While this has helped the NRM maintain power, it also raises concerns about the possibility of military involvement in the succession process, particularly if rival factions within the party or military feel excluded.

The military’s involvement could also exacerbate tensions within Uganda, as citizens and opposition groups may fear that the military might intervene to ensure the continuation of Museveni’s rule, even if the transition process is peaceful. The presence of Muhoozi Kainerugaba, Museveni’s son, within the military further complicates matters, as it raises the possibility that the military could push for his succession in the name of stability, regardless of broader democratic considerations.

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2. Economic Concerns

A. Resilience of the Economy and Structural Challenges

Under Museveni’s leadership, Uganda has undergone significant economic transformation, particularly since the early 1990s, when the government embraced a free-market, liberalized economy. The economy has proven to be relatively resilient during times of crisis, and Uganda has experienced consistent growth despite political instability in the region. However, Museveni’s departure raises concerns about whether the next leadership will continue the economic reforms necessary to maintain stability and growth.

Uganda remains largely dependent on external sources of investment, with foreign direct investment (FDI) playing a pivotal role in financing development. Although Uganda has seen impressive growth rates, the economy continues to struggle with a narrow base of domestic capital. The development of a robust indigenous capital base has been hindered by factors such as inadequate access to financing, the small size of Uganda’s middle class, and the limited reach of domestic financial institutions. These limitations make Uganda vulnerable to external economic shocks, and any disruption in the political process could exacerbate this vulnerability.

A major challenge is the country’s relatively underdeveloped middle class. While the middle class has grown in recent years, it remains small and vulnerable. The size of the middle class in Uganda is insufficient to drive sustainable, long-term economic growth. Many Ugandans are still engaged in subsistence agriculture, and urbanization has not been accompanied by widespread industrialization. This leaves Uganda in a precarious position, especially given the country’s large, young population, which faces high levels of unemployment and underemployment. The lack of a significant middle class means that there is a limited consumer base to sustain economic growth during times of political transition.

However, there are emerging signs of progress in terms of local resource mobilization. The National Social Security Fund (NSSF) has become a key player in Uganda’s financial landscape, acting as an important vehicle for mobilizing domestic savings and investing in infrastructure projects. Furthermore, the rise of fintech platforms and unit trusts has increased financial inclusion, allowing ordinary Ugandans to participate in the financial system in ways that were previously not possible. These mechanisms could help reduce Uganda’s reliance on foreign capital, but their sustainability will depend on the political and economic stability that follows Museveni’s succession.

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3. Geopolitical Concerns

A. Museveni’s Strategic Acumen

Museveni’s geopolitical influence has been an important aspect of his legacy. Since coming to power in 1986, he has skillfully navigated the complex regional and international landscape, balancing Uganda’s interests with those of its neighbors and key global powers. His diplomatic approach has helped elevate Uganda’s status in Africa, and his role in regional peacekeeping efforts, including the African Union Mission in Somalia (AMISOM) and peacekeeping in South Sudan, has positioned Uganda as a key player in East African security.

Museveni’s leadership has been marked by pragmatic diplomacy, especially in balancing Uganda’s relationship with Western powers, such as the United States and the European Union, while also courting emerging global players like China and Russia. His ability to extract aid and investment while maintaining Uganda’s sovereignty has been a hallmark of his foreign policy. This diplomatic acumen has helped Uganda maintain relative stability in a region that has seen frequent conflicts.

However, Museveni’s departure could create uncertainty in Uganda’s regional and international relationships. A less experienced successor may struggle to maintain these complex diplomatic and military alliances, especially if they lack Museveni’s political acumen or personal standing. The risk of Uganda’s diplomatic isolation is a significant concern, particularly in light of growing geopolitical tensions in East Africa. Neighboring countries like Rwanda and Kenya, as well as the broader East African Community (EAC), will closely monitor Uganda’s transition to ensure that their interests are not threatened.

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4. Museveni's Personal Historical Context and Its Complications

Museveni's personal history is an essential lens through which to understand his complex leadership and its implications for succession. Born into a poor family among the nomadic Bahima people in southwestern Uganda, Museveni grew up in a rural setting with little in the way of material wealth. His formative years were deeply influenced by the political and social upheavals of colonial Uganda, which, coupled with his exposure to Marxist and anti-imperialist ideas during his youth, played a crucial role in shaping his political ideology. Museveni was swept up by the anti-colonial and anti-imperialist rhetoric of the independence movement, which left a lasting imprint on his worldview.

Museveni’s involvement in the anti-colonial struggle and his subsequent embrace of revolutionary, socialist ideals during the Cold War period played a significant role in his rise to power. Museveni’s early revolutionary activities culminated in the formation of the National Resistance Movement (NRM), which would eventually lead to his victory in 1986 after a five-year guerrilla war. His initial stance was one of ideological purity, rooted in the struggle against dictatorship and imperialism.

However, after the fall of the Berlin Wall and the collapse of the USSR, Museveni shifted towards a more pragmatic stance, embracing the free-market economic model promoted by the West. The collapse of the Soviet Union and the end of the Cold War forced Museveni to adapt to the new unipolar world order, where economic liberalization became a central tenet of governance. This pragmatism, while ensuring Uganda’s integration into the global economy, further complicated the succession debate. Museveni’s transition from revolutionary firebrand to economic pragmatist has shaped his leadership style, leading to a highly personalized regime where decisions often revolve around his own judgment rather than institutional consensus.

Museveni’s personal historical context, marked by his rise from poverty, anti-imperialist revolutionary zeal, and eventual embrace of economic liberalization, complicates the succession process. His personal journey has resulted in a leadership that blends ideological rigor with political flexibility, making it difficult for any potential successor to replicate his ability to navigate both Uganda’s internal political dynamics and its external relationships.

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5. Possible Succession Models

Several African countries have experienced political transitions that provide valuable insights into potential succession models for Uganda. Examining these models, such as those in Tanzania, Kenya, and even a potential reversion to a parliamentary system, helps to frame the possible paths Uganda could take.

A. The Julius Nyerere Model (Tanzania)

Julius Nyerere, the first president of Tanzania, voluntarily stepped down in 1985, ensuring a peaceful transfer of power to his chosen successor, Ali Hassan Mwinyi. This model exemplifies a peaceful leadership transition where the outgoing leader facilitates the succession process. Nyerere’s transition was marked by his continued moral and advisory influence, but he largely refrained from interfering in the new government’s operations. Museveni could adopt a similar approach, supporting a successor and ensuring continuity while avoiding direct involvement in governance. However, Uganda lacks the same level of political maturity and institutional coherence seen in Tanzania, which could make such a transition difficult.

B. The Jomo Kenyatta and Daniel arap Moi Model (Kenya)

Kenya’s experience with succession has been mixed. Jomo Kenyatta’s death in 1978 saw his Vice President, Daniel arap Moi, assume power, albeit with some resistance from Kenyatta’s loyalists. Moi’s rule, though stable, marked a period of autocratic leadership. Museveni could follow a similar model, where a vice president or another figure within the NRM takes over, but this model carries the risk of power struggles and resistance from rival factions.

C. Parliamentary System Reversion

A reversion to a parliamentary system could provide a more democratic route to succession, reducing the concentration of power in a single individual. In this model, the Prime Minister would be chosen from Parliament, leading to a more collective form of governance. This would require significant constitutional reforms, and the challenge would lie in ensuring that the ruling party and other political factions cooperate to make such a system viable.

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6. Conclusion

The succession of President Yoweri Museveni is fraught with political, economic, and geopolitical concerns. Museveni’s long rule has resulted in a highly personalized system of governance, weakening institutions and fostering political polarization. The question of who will succeed him and how the transition will occur looms large, as the NRM

faces internal divisions, and the role of the military remains uncertain. The resilience of Uganda’s economy, while an advantage, also depends on the continuity of policies that may be threatened by a change in leadership. Furthermore, Uganda’s foreign relations, particularly in East Africa, could be destabilized if the country’s diplomatic acumen is lost with Museveni’s departure.

Complicating these concerns is Museveni’s personal historical context. His journey from revolutionary leader to pragmatic economic manager has shaped his leadership style, making his succession more difficult to navigate. Whether Uganda can manage a peaceful transition will depend on whether political and institutional reforms can be implemented before Museveni’s departure, and whether his legacy will allow for a new chapter in Uganda’s history.

WATCH OUT FOR UETCL

Almost 40 years ago this country was in shambles. One did not know where to start to get it back on its feet. Insecurity was rife, inflation had run rampant and government did not have two coins to rub against themselves.

One of the major deficiencies was power availability. Owen Falls dam  -- now Nalubale dam,  was generating only 60 of its 150 MW capacity. Power was intermittent in the best of times but mostly not available altogether.

When we think of the power sector we think of generation and last mile distribution.

But in the last 20 months the transmission component, which gets power from the generators to the distributors – Umeme, in our case, is beginning to come alive, holds a lot of potential and a major piece of the puzzle of Uganda’s revival may finally be in place....

The most dramatic developments during this period was that West Nile is now on the national grid – for the first time since Independence and so is Kabale, which will be switched on before the year end.

But also as dramatic is the linking of Gulu to Agago, which will finally see power evacuated from Achwa power dam, where government has been paying $2.5m (sh9b) monthly for power that is not consumed.

There was also the long overdue connection of 600 MW Karuma dam to the grid which happened in the second half of this year.

All these and many more projects were stalled often due to bureaucratic red tape, that it took a new set of eyes in Joshua Karamagi, who became CEO in March last year, to unlock the backlog.

“This was a team effort but when you focus on delivering, this road blocks become mere distractions and it is easier to bring all the relevant people around the table to sign off and get the project going,” Karamagi said on the sidelines of an end of year media party last week.

While these are critical I am particularly excited at UETCL’s efforts to participate fully in the East Africa Power Pool (EAPP) with its plans to connect our grid to Tanzania through Mutukula, South Sudan via Nimule and the DRC via Arua.

This is particularly important in view of the surplus we now have, we now generate 2000 MW or about two and a half times our peak demand of 800 MW. Meanwhile our neighbours are all suffering deficits, except for Ethiopia.

This is ironic because 20 years ago when then energy minister Saida Bumba was trying to lock down financing for Bujagali dam, she was made to jump through hoops, flying around the region getting our neighbours to take our power if we failed to consume it. The funders of the dam were not convinced Uganda could consume Bujagali’s 250 MW and were skeptical that the region would either. In hindsight there are many ways to view this, none of which are charitable to our donor partners.

It has been estimated that we have the potential along the Nile to generate 4000 MW, UETCL’s efficient operations will be key to exploiting this potential.

 UETCL reported earlier this year that exports to Kenya had returned to pre-Covid levels of $44m (sh170b) last year and are set to exceed that this year. Already we are selling a million dollars’ worth of power to Rwanda monthly.

The potential to supply to power to eastern Congo and southern Sudan is a mouthwatering opportunity we may only just be beginning to set up for.

It is not inconceivable that in coming years that electricity will become a major export earner.

Locally too the ongoing plans for the electrification of Mbale, Kabale and Kapeeka industrial parks, second phase of a project to support industrial parks around the country, will have far reaching implications for job creation, exports and the general economy.

We have learnt through hard experience that availability of power is critical to economic growth and development. 

"The increase in generation capacity on one hand and the improved efficiencies that Umeme brought to the distribution sector, has played a major part in the unbroken string of economic growth even during Covid lockdown...

The power sector is currently on the brink of a major transition, with the exit of power distributor in March next year. With UETCL beginning to live up to its full potential may just help to smoothen the transition.

 

STANDARD CHARTERED, NSSF A SIGN OF THINGS TO COME

Recently National Social Security Fund (NSSF) unveiled its long awaited voluntary saving product, SmartLife. The product linked to their already existing app, will allow people to save voluntarily with the fund, earn compound interest and help plan for medium to long term goals.

Similar to the unit trust funds we have become accustomed to, except that your funds will be locked in for a predetermined duration as way to encourage long term savings. This product is in aid of the Fund meeting its target of covering 50 percent of the country’s working population by 2035 and may very well have far reaching consequences for savings rates in the country and eventually lending rates.

Following hot on the heels of this development, was the announcement last week that Standard Chartered Bank was winding down its retail banking and wealth management operations in Uganda, a process that will be finalised over two years.

It is hard to believe this was a spur of the moment decision, given how the bank has been aggressively reducing its branch network over the last five years, shifting most client interaction online.

It make sense, following behind Barclays Bank, which sold its continental operations to ABSA about three years ago. And in another industry, the sale of petroleum company Shell’s regional assets to Swiss trader Vivo energy about a decade ago.

The reality is that these multinationals, among other things, are finding their margins cut to the bone, as the cost of their high compliance standards, make it difficult to compete with the Johnny-come-latelys, who in many liberalized markets are willing to cut corners and undercut the big players.

This in addition to developments in technology mean, for instance in the case of banks, that branch networks, or even what constitutes a branch, are dated concepts. Carrying the overheads that come with these, while competing with more nimble, virtual competition does not make sense.

The big boys are shedding their bottom of the pyramid operations, to better serve their bigger clients, where the returns per transaction dwarf dealing with the unwashed masses.

These moves are not unique to Uganda or this region, but are part of larger movement that has been unfolding since the beginning of the century.

More than a decade ago NSSF set upon improving compliance among employers liable for NSSF. They did this by beefing up their manpower and opening new branches. But today with greater phone penetration and internet coverage, NSSF does not need as much manpower or a large footprint to do the same job.

When I left university my attempts at opening a Stanchart account fell flat. Because they required a sh300,000 opening balance and a commitment that my bank balance would not fall below sh100,000. My gross salary at the time sh600,000. Those days a bank account was a privilege and not a right.

Fast forward to the present and I can not only open a bank account off my phone or laptop, paying next to nothing, but also I need not open it with a bank. It is safe to say that currently and into the future, most people’s first “bank” account will be with their mobile phone company...

These are part of the accelerating global trend towards digitization, miniaturisation and dematerialization...

Right now all information has been digitized making it easier to transmit and process, quicker than any time before. Which explains why banks are now open 24/7 compared to the old days when they closed for business at 1 pm and did not open on the weekends.

Older people would remember a time when an IBM 256 (the 256 means it had a storage capacity of 256 MB) would cover the better part of a desk. My phone now has a storage capacity of 64 GB and fits easily in my shirt pocket. In effect, I have the storage capacity of 250 IBM 256s at my finger tips. I imagine Stanchart may not have had those many PCs in 1995.

And then, because of the previous two, a lot of what used to be is no longer.

Younger people may find this funny, but there was a time when a calculator, diary, clock, telephone, computer, camera, video  game console etc were all different things, taking up a lot of space. Demateriliastion.

Essentially the big multinationals’ competitive advantage that came with their access to global pools of capital, huge size and global reach are being whittled away thanks to technology. They are retreating to areas where their competence is best suited, the bigger deals where transactions are markedly fewer but the returns are much bigger per deal.

"While the economy may not be at its best right now, these multinationals have operated under worse economic circumstances here and made tons of money, thank you very much. So the state of the economy is not the major driver of these moves...

The pull outs are part of a wider rearrangement of the global economy driven by the aforementioned trends.

In the new world managers will not be able to get by on just size and momentum, but will have to sharpen their strategic focus and execute efficiently.

 Expect this to accelerate in coming years.

 

MONEY MIND GAMES

Book Review: The Psychology of Money by Morgan Housel

                                                                

Morgan Housel’s The Psychology ofMoney is not your typical personal finance book. It doesn’t dwell on spreadsheets, stock market strategies, or budget formulas. Instead, it offers a profound exploration of the human behaviour and psychological biases that underpin our financial decisions. The book’s core premise is that financial success is less about knowledge or intelligence and more about behavior.

A Fresh Perspective on Money

Housel’s work stands out in the crowded field of finance literature because it focuses on the why rather than the how of financial decision-making. He argues that traditional financial advice often overlooks the emotional and psychological aspects of money. This is particularly evident in his observation that people make financial decisions not based on facts or data but on their unique experiences, upbringing, and worldview.

One of the book's central ideas is the notion that "no one is crazy" when it comes to money. Housel asserts that everyone has a rational justification for their financial behaviour, even if those behaviours appear irrational to others.

The Interplay of Luck, Risk, and Perspective

Housel masterfully intertwines stories of real-life figures—Warren Buffett, Richard Feynman, and even Ronald Read, a janitor who amassed millions through patient investing—to illustrate the unpredictable interplay of luck and risk in financial outcomes.

"He challenges the popular tendency to attribute success solely to hard work, emphasizing that luck often plays a significant role in financial triumphs...

This perspective is both humbling and empowering; it reminds readers to approach financial success with gratitude and financial planning with humility.

In one of the most memorable chapters, Housel discusses the danger of misjudging risk. He uses historical examples to show how catastrophic financial decisions often stem from underestimating risks or assuming the past will repeat itself. This theme of uncertainty recurs throughout the book, encouraging readers to embrace a margin of safety in their financial plans.

The Power of Compounding and Patience

Another key takeaway from the book is the extraordinary power of compounding. While the concept is not new, Housel breathes life into it by presenting it as a behavioral phenomenon rather than a mathematical principle. He uses the example of my favourite American Buffett’s success not being rooted in extraordinary investment returns but in his extraordinary time horizon—investing consistently from a young age and allowing compounding to work its magic over decades.

Housel’s emphasis on patience is refreshing in an era dominated by instant gratification and short-term thinking. He explains that the ability to delay gratification and endure volatility is often what separates successful investors from the rest...

The Role of Money in Life

Housel also delves into the broader philosophical implications of money. He encourages readers to define their own financial goals, emphasizing that money should be a tool to support a meaningful life rather than an end in itself. His discussion on the concept of "enough" is particularly powerful. He warns against the dangers of greed and the endless pursuit of more, suggesting that knowing when to stop is an underrated skill in financial planning.

This perspective aligns with his recurring theme that wealth is not about flashy displays of success but about freedom and peace of mind. Housel defines wealth as "the ability to wake up every morning and say, 'I can do whatever I want today.'" This redefinition challenges societal norms and encourages readers to reconsider their own financial priorities.

Practical Takeaways

While The Psychology of Money is not a step-by-step guide, it offers plenty of practical advice. Housel advocates for simple but effective financial habits: living below your means, saving consistently, and avoiding unnecessary financial risks. His recommendation to "save like a pessimist and invest like an optimist" captures the balanced mindset he promotes throughout the book.

Housel also emphasizes the importance of avoiding the pitfalls of comparison. He argues that comparing your financial journey to others’ is not only futile but harmful, as everyone’s circumstances and goals are unique. This insight is particularly relevant in the age of social media, where curated displays of wealth can create unrealistic expectations.

Criticisms and Limitations

Despite its many strengths, the book is not without limitations. Some readers may find Housel’s reliance on anecdotes and stories insufficiently rigorous. While these narratives are engaging and relatable, they sometimes lack the depth or data to fully substantiate his claims.

Additionally, the book’s focus on psychological principles means it may not appeal to readers seeking detailed financial strategies or technical advice.

Whether you’re a seasoned investor, a young professional just starting out, or someone simply seeking a healthier mindset toward money, this book offers invaluable lessons. Housel’s central message is clear: financial success is not just about what you know—it’s about how you behave. And in a world where our behaviors often dictate our outcomes, that is advice worth taking to heart.

GOVT SHOULD APPLY BASIC ECONOMICS TO CAP LENDING RATES

Uganda’s money lenders are appealing to President Yoweri Museveni not to assent to a law that will have government control lending rates.

A few weeks ago parliament passed the Tier 4 Microfinance Institutions and Money lenders Bill, 2024, which among other things, will have the finance minister setting the limits of what money lenders can charge as interest on their loans.

Ever since biblical times the money lender has not been a popular figure. The sin of usury or charging interest for lending money was on the books in medieval times. The church thought all loans should be interest fee, they of course did not factor in the risk to the lender and his right to some compensation for making money available to those who don’t have it...

I suspect too, that the church was being populist, trying to shore up its political muscle at the same time frustrate this new class of capital owners, who were threatening the church’s  power as major landowners.

Interestingly this thinking is what led to the growth of the Jews as controllers of the global financial system.

The kings of Europe and the church, banned them from owning land as punishment for betraying Jesus Christ –antisemitism. The Jews, unshackled by laws against usury, went into finance and the rest, as they say, is history.

Fast forward to the 21^st century money lenders are still getting a bad rap. The arm chair economists complain that lending rates are high and have set aside a special place in hell for money lenders who are unashamed to lend at more than 120 percent a year.

"Government, having forgotten the lessons of the economic reforms of the last 40 years, is jumping behind efforts to arbitrarily cap lending rates. As night follows day, this will only create the very situation they are trying to control, which is high lending rates...

But first some background.

In the late 1980s some central planners in the new NRM government called on government to not only stop landlords from charging rent in dollars, but also put a cap on rent. Government refused at the time, arguing that the “high” rents were caused by a shortage of housing stock. The way to bridge the deficit was to make the sector attractive to investors and by the law of supply and demand, rents will become more affordable.

As a result of this correct application of high school economics, there has been an explosion in the housing sector, which has made not only rents more affordable and stopped most landlords from charging in dollars.

If government had listened to the central planners, the housing market would not have grown as fast as it has and it is not inconceivable that we would now be paying a million shillings for the privilege of living in someone’s garage.

If some landlords are still charging rent in dollars it is often because they borrowed money in dollars to build and are passing on the exchange risk to the tenants. They borrow in dollars because it is “cheaper”.

To lower lending rates government need only enable a greater supply of cash available for lending and voila, lending rates will come down.

Similarly, to lower money lender rates, government just has to look at the demand and supply equation, ask the question how can we increase the supply of credit so even money lending rates can fall?

We have seen this happen in our life time.

The story is told of these money lenders who used to offer credit to market vendors at 10 percent a day. The business model was such that they would lend the vendors money in the morning to buy produce and collect at the end of the day. It made sense for the vendors and for the money lenders.

The money lenders’ dreams of infinite wealth were dashed by the entrance of mobile money lending, which was offering the same money at around 10 percent a month.  Some people would complain that this is still too high, but it was a no brainer for the vendors who can now borrow at 120 percent a year compared to 3,650 percent.

"By legislating to cap lending rates, law abiding moneylenders will take their money elsewhere, lowering supply of credit, pushing the money lenders underground, where prices will be even more unrestrained and collection methods will be more brutal...

A neighbouring country, has seen a reemergence of a black market in forex, the kibanda market, a relic of the pre-liberalised economy days. Their attempts to control foreign exchange flows has created the very situation they were trying to prevent – a shortage of forex.

Increasing the supply of loanable money is what government needs to do. And not by going out and handing money out at street corners, but by creating an environment where capital can see it fit to invest in the sector.

Government might want to start by finding a way to lower its appetite for borrowing from the public.

 

 

UGANDA IS POOR BECAUSE WE ARE WASTEFUL

In September the finance ministry released the first “Report on externally funded projects”, commissioned by the not-so-new secretary to the treasury Ramathan Goobi, to, as the title suggests, assess how we use our loans and grants.

Goobi promises that the report will be released semi-annually and has warned that accounting officers will be liable for the delays to projects they oversee.

First off, one wonders why such a report has taken so long to generate. We have been the beneficiary of donor largesse for the last four decades and we are only getting around to doing this now?

Among other things, a major driver for this report, “There is a problem of poor implementation of the projects,” Goobi says in the Foreword to the report.

“The main concern is around the non-disbursing donor financed projects. The commitment fees are paid upfront yet borrowed funds remained undisbursed for years.”

If you think about it, this is a counterintuitive behaviour. You are a poor man, your friends offer some help in the way of food, but you don’t move to eat it despite the growling in your tummy, allowing it to rot as you watch.

The report, all 370 pages of it, is a litany of criminal project delays, caused by poor planning and avoidable circumstances. As a result the majority of projects – seven out of ten surveyed are behind schedule, leading to expenditure overruns of more than 1000 percent in some instances...

So not only are we not collecting on monies due to us, but when we get the money, we squander it in a way that is mind boggling, and could only be ignored in government where there is an inexhaustible pool of tax payers money to waste.

It is at times like this, in this country that you don’t know whether to laugh or cry.

To illustrate with a few choice projects.

The Karuma  Hydropower project run 60 months or five years behind schedule. The government overspent sh30b due to the delays, a highly understated number, because loan commitment fees and insurance fees were not quantified and when these are made good, should drive the project cost even higher than the planned $1.7b.

The Kampala-Jinja expressway, which was supposed to be a ten year project to begin in 2014 has not begun yet, never mind that a lot of the planned $1.4b project cost is already earmarked. The African Development Bank signed off on $230m loan in March 2021.

And then you have to cry when you learn that €15.6m (sh62b) loan to develop the beef industry has gone begging. The project is way behind schedule --- it was supposed to start in 2018 and end in 2022,  partly because of the lack of a feasibility study, which makes you think these guys must be magicians to get money without a feasibility study. You try it.

But in this project, like many others, delays meant a depreciation of the shilling led to a substantial loss – sh3b, which meant the project had to be adjusted with a reduction in planned targets.

There are numerous other tear jerkers, its 370 page report after all, which goes a long way to explain why we are now back in the high indebted poor countries fold and clearly with little value to show for the debt burden we are shouldering.

The survey only sampled 82 projects, but we all know they are probably hundreds of projects over the last 40 years. Imagine if they had all been brought in on time and on budget, where this country would be?

The haters of liberal economics want government to take back the commanding heights of the economy so that Ugandans can benefit more. It is hard to see how that can be, given the government’s record on projects now...

Are they labouring under the asinine impression that with access to more money we will do better?

It’s a rudimentary tenant of money management, that money does not make you a bad person, it just amplifies who you are.

I would hazard to say that if the liberalized economy is not spreading the benefits of its wealth creation around, we should look to government for answers not the private sector.

The private sector is doing what it is supposed to do which is create wealth,  the failing is on government’s side, because it is not doing what it is supposed to do, which is distribute the benefits of this wealth creation efficiently and effectively.

I also worry for Mr Goobi. This scandalous wastage has been going on for ages – I am not sure he was in school yet by the time it started, the interest groups that have coalesced around this waste – it is not happening by mistake, are powerful, determined and ruthless. They will not let their bread slip away without a fight.

But then I am sure he has learnt that by now.