Here in this situation, I actually make money.

And, I think, the number I used in the last video, he sold 500,000 cupcakes.

Let's ignore this for a little bit because now, in this reality, I'm getting a 15 return on my asset.

Imran is essentially at break even. He's making no money.

And then, what's the state of affairs in our city now?

Google is one of our big partners here.

I actually want you to notice something right here, what happened immediately.

He's only running at 25 utilization.

I do lose a couple of these people because they are willing to walk a little bit further for a cupcake.

People want cupcakes so badly, so I could raise prices to 2.

And that worked out pretty well.

High utilization will allow you to raise prices and when you raise price you'll get a better return on your asset, and then the other side effect is, when you have that high return on asset, you'll also have more investment going on to build more capacity.

If I charge 1.60 per cupcake and I only sell 400,000 cupcakes,

So we're all tapped out, we're at 100 capacity utilization.

He's getting this great return on asset.

Imran came here. I think he was he was selling 500,000, right?

And Vikram does the same at 2.

When you have huge returns, as Sal's Cupcakes had in this video or in this worksheet over here

So I just sell out. I just sell out of cupcakes.

But his return on asset has gone down to 20. and, because he's at that utilization, his return on asset has gone down to 20 .

In fact, I'm expecting some type of a return on this investment.

Let's say there's a third party, Vikram and he just has a love for making cupcakes and he says, well, you know, what if I could spend my life making cupcakes and, even if I just get a 7 return, that's a pretty good living.

He wants to see bigger and bigger returns.

But from an investment point of view it makes even more sense.

And let's say Vikram is selling 380,000 cupcakes in a year.

The last two examples I gave contribute to the collective wealth society, some of which you share, and that is your return on the investment.

Call it a math project or engineering project.

So it's 50 utilization and then, my return on asset is my operating income divided by my initial investment, right?

Now we have 3,000 apples being produced, because these were really good investments.

Sure, we invest plenty in innovation.

The economy grows, government accumulates more resources, and the government can invest in infrastructure rather than infrastructure being a cause for economic growth.

He just goes and he sells two million cupcakes a year.

He'd be willing to take a lower return as long as he was allowed to invest in less risky investments.

In a situation where you have growth, you put the new money into this.

And at 3 per cupcake, I'm able to sell you 750,000 cupcakes.

The government has invested in basic education, has invested in basic health.

Seung Jo!

Well their intention was to take these home equity loans and put that money to work, invest it in some way.

But, as you can see, there's a couple of key learning points in this set of videos.

And my cupcakes, I only started selling 250,000 of them and then my return on asset essentially went to zero.

So there's a general theme here.

Because I'm taking this 100,000 and I'm putting it to some use that is creating, hopefully, more value than my original 100,000.

And I make 962,000 a year and I have a huge return on asset, 88 .

He valued what we already had at 5 million dollars.

He invested two hundred dollars in a growing business.