AI Summary #
Key Takeaways:
The host explores the concept of “the laws of getting rich,” highlighting common pitfalls that even wealthy individuals face, including:
- Happiness is not solely tied to wealth: Many people mistakenly believe that having a lot of money will bring happiness, but in reality, it can have limited impact on overall well-being.
- Admiration can be envy: Wealthy individuals often receive admiration from others, which can be a facade for envy and may lead to negative consequences.
- Wealth can stifle social connections: As people become wealthier, they may find themselves surrounded by sycophants who are only interested in their wealth, rather than genuine friends.
- The fear of losing wealth can drive behavior: Many wealthy individuals become obsessed with maintaining and increasing their wealth, often at the expense of other areas of life.
Notable Quotes:
- “By the time we’ve made it, we’ve had it.” - Malcolm Forbes
- “Envy is the tax which all distinctions must pay.”
- “The people who give you the overdraft are your best mates as well, smiling at you and telling you that you are amazing so that you keep doing it.”
Actionable Advice:
- Focus on what brings you happiness: Prioritize activities and relationships that bring joy and fulfillment, rather than relying solely on wealth to do so.
- Be aware of the potential for envy: Recognize when admiration may be masking envy, and make an effort to surround yourself with genuine friends who appreciate you for who you are.
- Don’t become too focused on maintaining wealth: Strike a balance between accumulating wealth and investing in other areas of life that bring happiness and fulfillment.
Conclusion:
Wealth can provide many benefits, but it is not the sole determinant of happiness or success. By recognizing the potential pitfalls of wealth and prioritizing what truly brings joy and fulfillment, individuals can navigate the complex world of wealth with greater ease and find more lasting satisfaction in life.
AI Transcription #
Welcome back.
I found this statistic the other day.
I added it up.
It was not that hard to find, but there are 13 divorces among the 10 richest men in the world.
And repeat that.
Among the 10 richest men in the world, there are a combined 13 divorces.
And seven of the top 10 richest men in the world have been divorced at least once.
Now correlation is not causation, and that sample size is tiny, of course.
But a statistic that is so much worse than the national average on a topic that is so fundamental to happiness.
All among a group of people whose lives are envied by so many other people is interesting, isn’t it?
I’ve always thought it was.
It kind of blew my mind.
Look, there are a million ways to get rich.
Most of which involve exploiting very specific opportunities to say nothing of luck and that sort of thing.
So universal rules about how to get rich are very hard to come by.
But losing money or losing happiness when you have money or becoming a slave to your money or your money interfering with the happiness in your family.
Those stories tend to have common denominators.
Some of those stories are so common that you can call them laws.
This episode is called a few laws of getting rich.
Now measuring wealth is very easy.
You just count it up.
You count their net worth.
Very easy.
Measuring some of the downsides of wealth though is so much harder and more nuanced.
So you can measure your net worth, but how do you measure a life that’s going to lead you to get divorced multiple times?
Much harder to measure.
And those downsides can be so nuanced and hard to measure that many people won’t even believe that they exist.
Like if we say the phrase a downside to wealth, like what, how could that possibly be?
Talk about tiny violin first world problems, rich people problems.
But let me propose that the absurdity of talking about the downside of wealth is part of why wealth doesn’t tend to make people as happy as they thought it would.
Not just for the 10 richest people in the world, but for everybody, for me and you and everybody.
When the benefits of money are so obvious, but the downsides are so subtle, those downsides that you did not anticipate can be more jarring than the benefits that you expected.
And look, I want more money, of course, almost everybody does, maybe for different reasons.
This is not an anti-wealth list in the slightest, but what I want to share today is just a collection of subtle downsides that are easy to ignore and so common that you may as well call them the only true laws of getting rich.
Alright, number one, most of what makes you happy in life has nothing to do with money.
And realizing that once you have money can be a painful admission.
Will Smith wrote in his biography that when he was poor and depressed, he could dream about a future when he had more money and dream about that money making his problems go away.
Once he became rich, that optimism, that hope was gone.
Because then he had all the money that he could ever need and he was still depressed.
His life was still filled with problems.
Rick Rubin once echoed something similar.
He wrote, quote, it’s hard to get really depressed until your dreams come true.
Once your dreams come true and you realize you feel the same way you did before, then you get a feeling of hopelessness.
I think though a lot of extent that happens when people get rich.
Happiness is complicated, but if you simplify it into things like a loving family and health and friendship and eight hours of sleep well-balanced children being a part of something that is bigger than yourself, then you realize how limited money’s role can be in making you happy.
It’s not that it has no role.
It plays a big role in things like independence and autonomy, but it just plays a smaller role than you may have assumed before you got rich.
Think of it this way.
Would you rather make a hundred thousand dollars a year and have a spouse who loves you and children who admire you and good friends and good health and a clear conscience?
Or would you rather make a million dollars a year and have none of those things?
It’s so obvious if that was your choice which one of those you should pick.
And of course, look, you can be poor and miserable or you could be rich and happy, but only the rich are aware of how tenuous that relationship can be.
The relationship between money and happiness.
Gaining money probably will not fix your marriage.
It didn’t make your friends like you more.
It didn’t make you more fulfilled.
So what used to be a comforting optimism about what money could do for you in the future is suddenly replaced by the stark reality of what it cannot do for you.
Sometimes the dream is what feels good and once you’ve hit it, the dream is gone and you actually become depressed.
Malcolm Forbes once summed this up well.
He said, quote, by the time we’ve made it, we’ve had it.
Alright, number two.
What you think is admiration of your success may actually be envy.
I mentioned this quote before, but it’s a great one.
The rapper Drake once said quote, people like you more when you are working towards something, not when you have it.
I think it can be hard to tell when that transition takes place.
And it’s common for a rich person to think that they are being admired by other people when in fact they are actually being envy.
Another rubber green once wrote quote, never be so foolish as to believe that you are stirring up admiration by flaunting the qualities that raise you above others.
By making others aware of their inferior position, you are only stirring up unhappy admiration or envy that will not away at them until they undermine you in ways you cannot foresee.
This is especially true when what made you rich was some form of advertising your success.
In a way that made others want to help and support you.
When you were smaller and poorer and your career was at a lower point, when you were advertising how ambitious you were, people were like, oh, let’s go out that person.
They look so great.
But when that admiration turns to envy and that support do windows and people’s tolerance for your error of shrinks, it starts to backfire.
I mean, look recently, if a no name journalist wrote a book that obliquely defended Sam Bankman Fried, no one would have cared.
Nobody would have cared.
They may have actually congratulated the author on publishing a book.
But since Michael Lewis did it, one of the most famous authors of our time, the pitchforks came out from him.
Throw once said quote, envy is the tax which all distinctions must pay.
Number three, the richer you become, the less likely people around you are to tell you when you’re wrong or crazy or mean or oblivious.
Matt David had this great observation.
He once said quote, you retard socially and emotionally the moment that you become famous because your experience in the world is never the same.
People treat you differently.
They always treat you like an odd person or they want something out of you.
And I think the same might be true and far more common for those who become wealthy.
No one ever treats you the same after you are wealthy.
And the worst part of it is that you may not even know it.
The artist Damien Hurst once wrote quote, they all love you.
The bank loves you, the accountants love you because they’re all taking your money.
Every year you get more and more people as well.
One guy is taking 10% and then another guy is taking 10% and another guy takes 10% more and it’s all a big party.
He said quote, the people who give you the overdraft are your best mates as well, smiling at you and telling you that you are amazing so that you keep doing it.
Sometimes people take advantage of you intentionally, you know, prying some sort of benefit out of you.
But other times they take you seriously when they should it.
A big problem with bubbles, financial bubbles is the reflex of association between wealth and wisdom.
So a bunch of crazy ideas are taken seriously because some temporarily rich person said it.
Warren Buffett once gave a great example of this.
He said quote, I was at my best giving his financial advice when I was 21 years old and people weren’t listening to me.
I could have gotten up there and said the most brilliant things and not very much attention would have been paid to me.
Here’s the important part.
He says quote, and now I can say the dumbest thing in the world and a fair number of people will think there is some great hidden meaning to it.
Number four, sometimes what made you successful was worry and anxiety and you can’t let go of that when you are rich.
I think what many people really want from money is the ability to stop thinking about money.
They want to have enough money so that they can stop thinking about it and focus on other stuff.
It’s this weird relationship.
They become obsessed with making money with the hope that someday they can ignore it all together.
That obsession is fueled by stress and anxiety.
It often shows up as career ambition and aggressive investing and type a motivation.
Then once they become rich, they realize that they cannot let go of that stress.
It’s become ingrained in their identity.
They work 80 hours a week because they want to eventually never have to work at all.
But once they have enough money to retire, they can’t cut back because they don’t know how to do anything else in life but work.
A lot of financial advisors that I’ve talked to say one of their biggest challenges is getting clients to spend money in retirement.
Even a small, like a very appropriate conservative amount of money.
Frugality and savings become such a big part of some people’s identity that they can never switch gears.
I think for some people that’s actually fine because watching money compound gives them more pleasure than they would get by spending it.
Or maybe working gives them more pleasure than they would get by sitting at home.
But those whose ultimate goal is to stop thinking about money are stuck and refusing to recognize that you have met your goal can be as bad as never meeting that goal to begin with.
There is no easy way to manage wealth and kids.
Charlie Munger was once asked by one of his rich friends.
If leaving his kids a bunch of money would ruin their drive and their ambition.
And Charlie said, of course it will.
But you still have to do it.
And the friend asked, why?
And Charlie said, because if you don’t give them the money, they will hate you.
Like a lot of Munger advice, I think that interaction is designed to be memorable.
It’s probably like 80% true.
But by large I think he’s right.
Those are the two options you have for the rich.
They’re ruined your children’s ambition, with inheritance, or risk some form of strife by denying them an easy life that you could have given them.
Warren Buffett once said that he often hears rich people talk about how dangerous a welfare society is.
One that creates a generation of mouchers who are reliant on food stamps and unemployment benefits.
But Buffett said, quote, these same people are leaving their kids a lifetime supply of food stamps and beyond.
Instead of having a welfare officer, they have a trust fund officer.
Instead of having food stamps, they have stocks and bonds that pay dividends.
Through their inheritance, of course.
Now, of course, there are exceptions.
But most of the exceptions, like the rich kids who inherit money and it doesn’t impact their ambition, are because the kids are very special.
Not because the parents necessarily made a smart decision when they were raising them.
If 18-year-old Bill Gates inherited a billion dollars, it would not have stopped his ambition.
Same with Steve Jobs or Elon Musk.
Mark Zuckerberg was offered a billion dollars cash for Facebook when he was like 22 years old and he didn’t blink.
He didn’t even consider it.
But those are the rare birds.
Most people need to be driven by the fear of not making it.
My friend Chris Davis grew up in a very wealthy household.
His grandfather is legendary investor Shelby Davis, who turned $50,000 into almost a billion dollars in the stock market.
And Chris was told when he was young that he would never see a penny of it, because his family didn’t want to rob him of the opportunity of making it on his own.
Chris later joked, he said, quote, they could have robbed me just a little bit.
It’s never easy making decision what to do.
Alright, number six.
Quick wealth is fragile wealth.
I love the idea that the speed in which you made your wealth is the half-life for how quickly you can lose it.
So double your money in a year.
Okay, well don’t be surprised when you can lose half of your money just as quickly.
In startups there’s this term called blitz scaling, which is grow as fast as you can.
You know what comes along with blitz scaling?
Blitz failing.
Two things happen with quick and fragile wealth.
One is that money that comes easily tends to be spent easily.
When money comes quickly, the emotional cost of blowing it on something frivolous is blow.
You are only careful with something when it is dear to you.
Spending quick money that you didn’t invest much time or energy into earning can feel like the equivalent of a one-night stand, just impulsive and prone to regret.
Old money wants attack shelter.
Because it works so hard for that money, no money wants a Lamborghini.
When the money was fast, it’s just like how can we spend this in the most frivolous way that we can?
The other thing is that the quicker the wealth is made, the higher the odds that it came from luck, that will revert on you just as fast.
So if you put those two together, whenever you see a surge of quick wealth, like crypto in 2021 was a good example, you know it’s going to end poorly, as luck converts to risk and as conspicuous consumption converts to inconspicuous debt.
Number seven, reputations have momentum in both directions, because people want to associate with winners and avoid losers.
The more successful you are, the more people want to be associated with you, which is great.
That’s great.
But that is equally powerful in reverse.
Someone who was early in their career can screw up and recover quickly, moving on to the next company or the next job, whatever it would be.
But a successful person, a rich person or a rich company has each flaw blared across the news, saturating the gossip channels of whatever their social network is.
Lehman Brothers 2008 struggles made front page national news, whereas a small community bank could have been on the edge of bankruptcy and hardly anybody would have been aware.
Same for a company like Sears.
Someone is aware how strained Sears is, how much of a damage of a dire condition it is.
So nobody, not customers, not employees, not investors, not vendors, wants to be associated with it.
It’s kind of like the saying goes, the higher the monkey climbs on the pole, the more you can see its ass.
Number eight, expectations could rise faster than income.
So a higher income sends expectations spiraling out of control.
Health is relative, luxury is relative.
Both are just a comparison between what you have and what other people have.
A court that I have seen many times is that some of the wealthiest people are the most prone to expectations spinning out of control, because they become hyper aware of how other rich people live.
In 1907, author William Dawson wrote about how the feeling of wealth is relative to what you are accustomed to.
He wrote, quote, a man of education accustomed to easy means would suffer tortures unspeakable if he were made to live in a single room of a populace and squalid tenement and had to subsist on a wage that was precarious.
He would be tormented with that memory of happier things.
To drive home his point, by the way, Dawson himself was fairly successful and accustomed to the easy means by the standard of his day.
But Dawson who died in 1928, he spent almost his entire adult life without things like electricity and air conditioning.
He never had antibiotics, he never had Advil, he never had a polio vaccine.
All of these things that we take advantage of today, he never had.
In average American today, sent back in time to experience Dawson’s easy life would suffer the same tortures unspeakable that he wrote about.
But he didn’t have modern times to compare himself to.
So life back then felt luxurious to him.
Everything good in life is just the gap between your expectations and reality.
And when your main frame of reference are other rich people trying to impress each other, that gap can close quickly.
Alright, last one.
Number nine.
Nobody is going to remember you in a hundred years.
So you might as well focus on what’s going to make you happy now instead of what money might bring you and how it might make you happy in the future.
There’s a Scottish proverb it says, quote, be happy while you are living for your dead a long time.
That’s it for this week.
We’ll see you again next time.
Thanks again for listening.