Another money book, I can't help myself. Strong opinions on career planning, wealth building and what it means to have a good life. Some new ideas, some rehashed old ones, but all written very well. I like the author's tone of voice.
What Churchill said about democracy—that it’s the worst system except for all the others we’ve tried—is also true of capitalism.
You’ve likely been told to start saving/investing early. Start cultivating allies and fans early, too. In all aspects of your life, you want to have the home-field advantage. You should (and can) be front of mind when people are asked, “Who would be good for this job, this investment, this board?” And the ultimate objective is to enjoy a life rich in relationships, not to die with the biggest number in the bank.
Modern humans are doubly disadvantaged. We live in a world of excess but are built for an environment of scarcity. And we have built our economy on exploiting this disconnect. You are not going to think your way out of this dilemma.
Historian Yuval Noah Harari, the author of Sapiens, wrote, “One of history’s few iron laws is that luxuries tend to become necessities and to spawn new obligations.”
Journalist Steven Kotler, who’s made a career out of studying exceptional people performing at their best, puts it simply: “Exercise is nonnegotiable for peak performance.”
In the same way that CEOs are held accountable by their boards of directors and shareholders, your spouse is the person who will help you get to where you want to go, as they have the greatest stake in your success. In the most successful relationships I know, both parties have embraced the value of living up to their spouse’s expectations.
The greatest predictor of divorce in America for both men and women isn’t cheating or parenting decisions or career goals—it’s financial disagreement. Money is the second-most-argued-about topic.
It’s especially important to communicate when things are bad. Similar to dealing with a board of directors, bad news is okay. What’s not okay is surprises.
They were some of our most productive and valuable employees. They were managing a lot: clients, teams of junior people, the cognitive work itself, plus their obligations at home. So they had no choice but to be efficient. Their colleagues who missed deadlines didn’t have nearly as much going on, but that turned out to be a liability, as they believed they could take a long lunch, manage their fantasy football team from their desk, and then just stay late to get their work done. It proved the saying “If you want something done, give it to a busy person.”
If someone tells you to follow your passion, it means they’re already rich.
Your mission is to find something you’re good at and apply the thousands of hours of grit and sacrifice necessary to become great at it. As you get there, the feeling of growth and your increasing mastery of your craft, along with the economic rewards, recognition, and camaraderie, will make you passionate about whatever “it” is.
I define talent broadly. A good general definition: What comes easily to you that’s difficult for other people? Incidentally, this is also the root of business strategy: What can you do that others can’t?
It’s useful to think of your twenties as workshopping, your thirties for getting good at your chosen field, and your forties/fifties for harvesting.
The post-2008 Great Recession produced Airbnb, Uber, Slack, WhatsApp, and Block. There are multiple reasons for this. In downturns, good salaried jobs are hard to find, because nobody is quitting. So good people (and cheap assets) are plentiful. The absence of cheap, easy capital means the concept has to work from day one. Founders in downturns imprint a more disciplined DNA on the company’s culture—they have no choice. Clients and consumers are also more open to change than they are during good times, when there’s little motivation to do something besides what you’ve been doing.
I have been in start-ups, tech, hedge funds, and media. The best investments I have made are in real estate.
The conveniences of work-from-home pale in comparison to the opportunities—personal and professional—of being in the same space.
Figure out how you can contribute more than the next person. Baseball statisticians have a metric, “wins above replacement,” that measures how many games a team wins when a star player is in the lineup vs. what the stats say they would have won with a run-of-the-mill player at that position. Find a way to increase your wins above replacement.
In 1983, the median tenure for workers 25 and older was 5.9 years. By 2022, that had declined, but just 17% (over nearly four decades) to 4.9 years.
Asking for advice is one of the most powerful bonding things you can do in the workplace. It’s an expression of trust—that’s why it’s intimidating. But trust builds trust and deepens relationships. Seek counsel, and your mentor will be invested in your success.
Stack rank your recreational activities. (That means list them in priority order, from the most important to you down to the least. No ties.). Considerations:
My NYU colleague Adam Alter found that people consistently underestimate their spending because they fail to account for “exceptional” expenditures—which aren’t really exceptional at all, since one seems to happen more or less every month. Data > Intentions.
Looking back, I went through some distinct phases (though they didn’t feel so distinct at the time). I’ve always been motivated by a combination of anxiety about money, desire for material pleasures, and a need to please and impress the most important people in my life. The balance of those drives has changed radically over time, as has what I think I need to do to achieve them.
Five years of avoiding flashing red lights later, I lost 70% of my net worth when the company declared chapter 11 in 2008. And I never saw it coming. A perfect storm of a longshoremen strike, a mishap at our fulfillment facility, and a credit analyst at Wells Fargo pulling our credit line took the firm down in ten weeks. And here’s the thing: perfect storms are rare, but they always happen.
The seminal work on this topic is a book by Princeton economics professor Burton Malkiel called A Random Walk Down Wall Street.
So why does that matter? Because the federal funds rate is the floor on which all other interest rates rest. Not by government fiat, incidentally, but due to a higher power: the law of supply and demand. Imagine you are a bank president, and you’ve got $1,000 you want to loan out. Your safest possible investment is putting the money in the Fed’s vault or loaning it to a bank the Fed supports. Investing in the Fed is investing in the U.S. government, which has 300 years of history paying its debts, the right to tax the world’s largest economy, and if push comes to shove, a $700 billion per year military budget. Loaning money to Uncle Sam is effectively risk free. If the U.S. is offering you, for example, an interest rate of 3.5%, there’s no rational reason to loan money to anyone else for a lower rate, since they are by definition a riskier debtor. That 3.5% is known as the risk-free rate. When a customer comes in the door seeking a $1,000 loan, you’ll charge them an interest rate higher than the risk-free rate based on how much risk their loan entails. If the Fed raises the federal funds rate to 5%, then nobody else gets a loan for less than that.
Note that over the long term, market indexes perform substantially better than the “average” individual company, because of survivorship bias—as companies falter, they drop out of the index, to be replaced by a more successful company.
In recent years, there has been a trend toward even more aggressive metrics, especially among early-stage companies, usually described as “adjusted EBITDA,” where costs such as marketing and even employee compensation are removed. The dubious justification for these metrics is that the excluded costs are specific to the company’s growth stage and shouldn’t be considered part of its future operating model. Be wary: most of these metrics feel like a car salesman telling me the miles per gallon a car would get driving downhill.
I'm James—an engineer based in New Zealand—and I have a crippling addiction to new ideas. If you're an enabler, send me a book recommendation through one of the channels below.
