💰 Getting Rich VS Staying Rich 💰

Today's Newsletter:

• Quote From Morgan Housel

• What’s The Big Difference

• A Money Question

Quote

“There are a million ways to get rich. But there is only one way to stay rich: Humility often to the point of paranoia.” - Morgan Housel

Morgan Housel authored the brilliant book Psychology of Money (a must read). Getting rich takes certain characteristics that do not apply to keeping that wealth. In fact, the opposite often applies.

What’s the Big Difference

I have always been fascinated by “the way the world works”. In particular, the ways people make and spend money. I remember as a kid seeing a big house or a fancy car and thinking I wonder what they do? Fast forward several decades and now what fascinates me is how many of those same people think about wealth. In particular, the ability to shift from building it to keeping it.

What it takes to achieve wealth is the opposite of what it takes to sustain wealth. The best example of this is the Forbes Billionaire List. Each year Forbes publishes a list of all of the billionaires with a short write-up on what they did to earn their wealth. The one common theme among everyone on the list? Concentration. They went all in one thing, doubled down on it, and continued to do that until their wealth was in the .0000001% of society.

Would you do that?

Consider the job or business you have today and imagine in 2023 you make 5X more money than you have ever made. At the end of the year, you have two options:

Option 1: You take everything you just earned in your record year and you double down. If it works you will have another 5X year and if it doesn’t you will be back to square one.

Option 2: You take everything you just earned in your record year and you diversify. You know it will work but you will lose the massive upside another great year would provide.

To have a chance to be on the Forbes Billionaire List you have to choose Option 1, often for a decade plus. Doing that requires you to ignore the odds and make a bet that is inherently tilted against you. One bad year and it is all over.

The quickest way to build wealth is to concentrate. The quickest way to sustain wealth is to diversify.

So, if your goal is to be on the Forbes Billionaire List, stop reading. You have your marching order, go all in every year on the same thing for a decade plus. If your goal is to build sustainable wealth without defying all odds, keep reading.

Here is the cycle most fall into when they get rich at any one thing. The more successful you are at something the more sure you are that you are doing it right. This confidence leads to you continuing to do the same thing. This leads to overconfidence that you can never be wrong. This leads to making massive bets while failing to consider your risks. Repeat this cycle until losing everything.

History is littered with examples of this but one of my favorites is the battle between Netflix and Blockbuster. In 2000, Netflix was a tiny company struggling to make it as a mail-order DVD business. While Blockbuster was a behemoth that had become an integral part of the American family’s weekend. Netflix had a deep paranoia that maybe they weren’t on the right track while Blockbuster never considered another route. Fast forward 25 years and Netflix changed course, revamped its business model, and has seen its value rise from $50 Million to $146 Billion. Blockbuster on the hand never changed and has fallen from a Billion dollar company to a relic of the past.

Staying rich requires a level of humility that borders on paranoia. “Am I sure?” “What am I missing?” “What do I not have figured out?”

So how should we apply this lesson in our lives? The good news is it doesn’t require you to be up all hours of the night contemplating your demise. Instead, it requires knowing that no one can predict the future. There is not a person out there that can accurately predict what the next decade will look like. What bets will be successful and which ones will fall flat? The bet you can make is that the next several decades will be filled with future innovations. Taking advantage of that is quite simple:

Be humble, be diversified, and always keep a healthy level of paranoia.

A Money Question?

“What is enough?”

This question in relation to your money is one that everyone needs to answer. Answer this and nearly everything around your money decisions becomes clearer.

Work with Jacob

I help families navigating sudden wealth pay less in taxes, coordinate their financial life, and invest for the long run.

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Until Next Time, My Friends

JL Strategic Wealth, LLC is a Registered Investment Advisor, located in the State of Missouri. JL Strategic Wealth provides investment advisory and related services for clients nationally. JL Strategic Wealth will maintain all applicable registration and licenses as required by the various states in which JL Strategic Wealth conducts business, as applicable. JL Strategic Wealth renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or pursuant to an applicable state exemption or exclusion. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice.