This is what $1 million dollars looks like, in $100 bills. According to the classic personal finance equation 25x (x = how much you spend per year), you need one or two (maaaybe three?) stacks of these to reach financial independence.
In comparison, this is what $1 billion looks like.
If you were given one of these stacks once a month ($12 million a year), in 83 years you’d have $1 billion.1 There are over 2,600 billionaires in the world and 7 men who have over $100 billion.
Why? What’s the point of having $1 billion?2 There is no way you can spend a billion dollars. You could lose 90% of your wealth and would still have $100 million. And even with only $100 million, losing 90% of your billion, there is still no way to ever become poor, or middle class, or even lower upper class. A billionaire can never live in want again. Unless, of course, it’s a spiritual want, an inner psychic hole, which no amount of money can fill. It’s the spiritual dis-ease of not knowing enoughness.
After a certain level of wealth, all money becomes bullshit.
Which leads to a true story.
True story, Word of Honor
- by Kurt Vonnegut
Joseph Heller, an important and funny writer
now dead,
and I were at a party given by a billionaire
on Shelter Island.
I said, “Joe, how does it make you feel
to know that our host only yesterday
may have made more money
than your novel ‘Catch-22’
has earned in its entire history?”
And Joe said, “I’ve got something he can never have.”
And I said, “What on earth could that be, Joe?”
And Joe said, “The knowledge that I’ve got enough.”
Not bad! Rest in peace!”
The Great Lie
Ah, the spiritual dis-ease of not-enoughness. Billionaires have it, we all have it. One of my heroes, Lynne Twist, just published a book this week that talks about the cost of the disease, to us, and to the world:
The Great Lie that we are all subject to is the mindset of scarcity: it’s an unconscious, unexamined belief system that we all swim in but can rarely recognize, so pervasive is its grasp on our collective consciousness. We instinctively feel that the world is a place where there is just not enough to go around—that someone somewhere is always going to be left out, that more of anything and everything is better, and that’s just the way it is.
I am not saying that scarcity does not exist. As someone who has worked directly with people in abject poverty, I am well aware that in too many places in the world (including the United States) there is not enough food, or clean water, or health care. I am not talking about people who are truly oppressed and marginalized, lacking the basics, including homes, jobs, and opportunity. I am speaking to a disease of the rest of us, the comfortable and relatively affluent, who fail to recognize that we actually have adequate resources for our lives and yet are driven by the desire for more. It is this scarcity mindset that I am addressing here, and it is what exacerbates hunger and poverty in the world, driving our global economic inequality. - Lynne Twist, Living a Committed Life
When those us who have enough take more, we are taking from people who don’t have enough. There is enough for everyone, if you stop taking more than your share.
What we’re talking about is spiritual poverty.
Speaking of economic inequality: the lottery
A couple of weeks ago, people around me started buzzing about the $2 billion Powerball jackpot. They were going to buy tickets, I should buy tickets, we should buy tickets together.
The lottery pays about about 66 cents on the dollar of what it collects (the government “earns” the other 34 cents). A bunch of Americans voluntarily surrendered $3 billion so one person could have $2 billion. What the hell? The lottery is simply a redistribution scheme of many people giving hard-earned (life-energy) money to one person, who did nothing, with the government taking a cut.
Most of those people are poor. The lottery is B as in biased. The poorest third of Americans buys half the lottery tickets. People earning less than $30,000 a year are 25% more likely to play. People who didn’t attend college think the return on lottery tickets is 40% higher than those with college degrees. In other words, the lottery acts as a regressive tax on the uneducated poor, and is targeted at Black and brown communities.
Why do any of this? Winning the lottery increases satisfaction with one’s personal finances (duh) but studies after studies show that it doesn’t increase satisfaction with health, or relationships with friends and family. So what’s the point of taking $3 billion from a lot of people and giving $2 billion to one person? All we’re doing is increasing misery and creating a culture of greed. You should never buy a lottery ticket and you should always vote to end lotteries. Lotteries are a symptom of something much larger: hopelessness and a sense of vulture opportunitism of the powerful over the despairing.
Booms, busts, and bankruptcy in crypto
For years, my FF2 students kept asking whether they should invest in crypto or NFTs. It’s been hard to tell people crypto is not a good investment strategy when Bitcoin, Ethereum and the literally thousands of other crypto coins are skyrocketing in value. “I’ve done the research, Douglas, and _______ coin is sure to be explode because [reasons].” From what I can tell, this is what happened:
People are afraid of missing out. They hear of Bitcoin millionaires in the news. Or worse, it’s a friend of a friend bought $1,000 of some token and it’s worth $50,000 now. And they think, it’s too late for me to invest in the stock market so I have to make a riskier “investment.” But they’ve “done the research” and are “pretty confident” that this is the next big thing because… [reasons]. I’ve been in many conversations like this. Almost all of them were with men.3
Then they have to convince others. The classic example of this is the Bitcoin bro who will tell you all the reasons Bitcoin is better than the dollar and the future is crypto and NFTs. But funny enough, for them to be right and to become rich, the number of people that have to believe it and buy it too have has to keep growing. In fact, if more and more people don’t believe it, their crypto will become worthless.4
The delusion expands, bringing in more suckers to fuel it. There is a famous, possibly apocryphal, story of Joseph Kennedy (JFK’s dad) selling all his stock ahead of the big stock market crash of 1929 because as he was getting his shoes shined, the shoeshine boy was telling him which stocks to buy. Years later, he said, “If shoe shine boys are giving stock tips, then it’s time to get out of the market.” When Tom Brady and Giselle, Larry David, Matt Damon, or some random friend are giving you crypto advice, then it’s time to get out of the crypto market.5 The time to get into crypto was before the commercials.
The people who came in late get hurt. People who get in early, before everyone was talking about it, are fine.6 But shoeshine boys and everyone else who got in late lose a lot. And like the lottery, it’s the poor. It's the less financially literate, people who watch Super Bowl commercials from Larry David, Tom Brady, Giselle Bündchen, Shaquille O’Neal, Stephen Curry and believe that's how to get rich quickly (those celebrities are now being sued for misleading the public).7 Black investors were more likely than white investors in crypto and lost more money than white investors. It’s “almost” like a Ponzi scheme.
You can replace the above analysis with the word “houses” and you’d have a basic explanation in the the Great Housing Crash of the 2000s.
Of course, there’s no consumer protection or regulation for crypto. That was the selling point: it’s outside government interference! But that means when it turns out to be a fraud, there’s no government agency to bail out investors. Up to last month, the biggest crypto exchange FTX said it was holding $32 billion in crypto assets for customers. It turned out Sam Bankman-Fried, genius founder of FTX, was stealing customer deposits and losing all of it in risky crypto trades. FTX is now bankrupt, and the customer assets are gone.
This 40 second clip from Dumb and Dumber is the funniest and most accurate explanation of FTX, and perhaps crypto generally.
So who’s at fault here? A bunch of people wanted to make money faster than money should be made. Sam Bankman-Fried literally described his business plan as a magic box of IOUs. Should those people blame Sam Bankman-Fried? Or themselves?
If you’re trying to make money faster than money should be made by investing, in an unregulated market, caveat emptor.
No one wants to get rich slowly
Someone once asked Warren Buffett, the world’s most successful investor: “Your investing thesis is so simple. Why doesn’t everyone just copy you?”
Buffett replied, “Because no one wants to get rich slowly.”
One of the most common things I hear in my Financial Freedom class about investing is, “I don’t trust the stock market. Remember 2008? In 2008, the stock market lost half of its value!” Yes, totally true and totally scary. From October 2007 to March 2009, the Dow Jones dropped from 14,100 to 6,500, a 54% decline.
But what is it now? As of December 2022, even after a 20% downturn for the year, the Dow is 34,000. $1,000 invested at the height of the market in October 2007 is now $2,4000. $1,0000 and 5.5 times higher than it was in March 2009.
But leaving it in is how you get rich slowly. There’s a Taoist phrase, “When spring comes, the grass grows by itself.” That’s what we should be doing with our investments: plant the seeds, and then leave them alone. Let them grow without your interference. Charlie Munger, Warren Buffett’s business partner, explained it, “The first rule of compounding: Never interrupt it unnecessarily.” If you sold during the market panic, look what you’ve missed out on: you took a loss and never took advantage of the gains. If you never invest at all, bet it on speculation like the lottery or crypto, look what you miss out on: the consistent, long term compound interest over time.
Selling in a panic, speculating, or not investing at all is what the average person does. The average person does not get rich, quickly or slowly.
Investing:
You’ve got to do it
You have to leave it in.
As my spiritual director says, “not too tight and not too loose.” Just set it and forget it.
All we need is just a little patience
The problem in life is everyone is trying to make the grass grow faster. From lottery players to crypto enthusiasts, everyone wants a short cut to riches.8 Statistically men chase trends. They are overactive investors and hence, lower their returns.
“The stock market is a device for transferring money from the impatient to the patient.” - Warrren Buffett
The stock market isn’t God and investing isn’t spirituality, but both are about a fundamental trust in life. I wrote about faith and long-term investing before but both life and investing is about doing the thing you’re supposed to do. And then not worrying about it. Letting go. I mean, read this:
Above all, trust in the slow work of God.
We are quite naturally impatient in everything to reach the end without delay.
We should like to skip the intermediate stages.
We are impatient of being on the way to something unknown, something new.And yet it is the law of all progress
that it is made by passing through some stages of instability—
and that it may take a very long time. - Teilhard de Chardin
In both your life and your investing, everything is going to be OK. Realize you don’t have to try so hard. I wish I could tell it to the billionaires, to the lottery players, and to everyone in between. You already know everything you’re supposed to do with your personal finances.
Just do the things you’re supposed to do.
If you have enough, don’t take more.
Don’t rush. Be patient.
Albert Einstein once said:
The most important decision we make is whether we believe we live in a friendly or hostile universe.
I can’t help think about all the things we talked about today: billionaires, the lottery, cryptocurrency, taking more than your fair share, are symptoms of not trusting life is working in your favor. That’s why we believe in the three toxic myths: there’s not enough, you have to grab yours before others do, and that’s the way it is. That’s why, in the midst of absolute material abundance, we are so dissatisfied, and so busy. That’s why we’re drawing the earth’s resources down.
Believe in a world of enoughness. Don’t rush. Don’t take more than what you need. We’ll make heaven on earth.
Image and stats sourced here.
The genderized mistakes of investing are super interesting. Men are over confident and overtrade while women are underconfident and uninvest.
The best analogy I have for it is investing in baseball cards. The only reason this Mickey Mantle card is worth $12.6 million is because someone believes someone else will be willing to pay more than $12.6 million for it in the future. It doesn’t have any other value other than that belief. Other people have to buy the delusion, so they have to sell the delusion. Bitcoiners would argue the same thing about the American dollar. Which is true. But find me someone who doesn’t believe in the collective delusion of the American dollar.
Actually this would be great financial advice. At the time of these Super Bowl commercials, Bitcoin was at about $40,000. Now it’s around $16,000.
I bought some Ethereum in 2017.
Why would a celebrity agree to be in a crypto commercial? I mean, they should have enough money already not to endorse something they know nothing about. And why would someone buy crypto just because a celebrity said so? I’ve got questions.
You could probably add Big Ag, but that’s outside my area of expertise.
I really enjoyed this issue, thank you.
This hit so hard:
“Lotteries are a symptom of something much larger: hopelessness and a sense of vulture opportunism of the powerful over the despairing.”
And my reaction to this is that the reason we have the feeling of scarcity is because of fear. Fear creates the feeling of scarcity. And then we have bad actors—defectors in game theory. And so, you have a lack of toilet paper during a pandemic that is a lungs problem…
The trouble is, time and time again, our faith is tested. Our faith in things being ok. Our faith in others. And Defectors embattle the very idea of having faith in one another—of giving in to the cynic’s idea that we can’t believe in one another.
And as long as our institutions do not hold Defectors accountable—for starting insurrections, for stealing from the masses, for crimes against humanity, and for taking more than their share (rewarding and exalting billionaires), we will have the hunger, the lack of faith, the Get Mine.
In response to the Stock Market piece: I don't have 'faith' in the stock market for the same reason you don't have faith in crypto. It, too, is a shell-game ponzi-scheme, architected by the rich to enrich the rich. While I have managed assets in the stock market (using someone smarter than me at this game), my issue with tying up money in that is that it, at its very base level, supports capitalism and all its ills. I wish I could use my investments to better people's lives, not better capitalistic intent. And that that would come back to me.
We complain about the ills of capitalism: the desire machine it creates, the haves and have-nots, GINI, disparity, the rich choosing the winners... The stock market is all of those things. I used to think that microlending would be a better path, but that still fuels capitalism. It tells (judgemental term alert) Developing Countries that they're not good enough as they are--that subsistence and community-based living or nomadic life/traditional life is not good enough. "What you need is seed capital and entrepreneurialism." It's such an economic colonialist perspective. It is the Devil in Sheep's Clothing. Because once you start down that path, it is rapacious, Hungry-Ghostism run amok.
I love your posts. Thank you for making me think… continuously.