Michael and Ben were talking about a new study they’d read at The Atlantic about how no one is happy with the amount of money they have, up and down the scale. The conclusion of the piece is that pretty much everyone says they’d be contented if they only had 2 to 3 times more wealth.
Now, of course, for people who don’t know where their next meal is coming from, this is a ludicrous proposition, but talk to those same people a year after winning a million dollar scratch off and I’d bet they’d still be grateful, and yet strangely unsatisfied like everyone else.
It’s called Baseline Happiness, which I’ve written about before. People adjust to their new reality, up or down, relatively quickly. It’s a survival mechanism that had been necessary for the species since our time on the Savannah.
My job is helping wealthy people remain wealthy and do what they want to do with the money they’ve accumulated today, far into the future. The best one-sentence description I could give you for what my firm’s Certified Financial Planners do each day: We’re in the dream quantification business. Tell me what you want for your future and let’s figure out how to invest accordingly. Let’s put some numbers on those dreams and talk about how much risk will be necessary in order to see them become reality.
It’s a great business, because people are more often surprised than not at how doable their dreams are once we’ve quantified what it will take in investment returns, ongoing contributions and pain tolerance in order to make them happen. We’ve had people tell us that the planning conversations we’ve led them through have been life-changing moments of clarity. I live for feedback like this.
Anyway, back to the study – why do people feel as though they won’t be satisfied until reaching a level of wealth that’s two to three times greater than what they have? I will tell you the three reasons that are almost always in play, based on the twenty years I’ve been at it…
One: Lifestyle creep
As you make more money, new and better experiences are suddenly within reach. You only live once! Sitting closer to the basketball court and flying first class and upgrading to better hotels and nicer restaurants, fancier cars and maybe even a private school with some extra tutoring. You can do these things now. But once this begins, you start to realize that while you have a lot of money, you’re spending it faster. So you’ll need more. Two to three times more would be perfect.
Two: Wealth is always relative
You don’t compare yourself to the average of your peers around you – at least, you don’t for long. You certainly don’t compare yourself to the poorest people you know or the least well off. You compare yourself to those who are doing best. It eats at you. It makes no sense. Especially when you realize that even they’re not any more satisfied than you are. It only looks that way from the outside. I’m 41 years old and live in the suburbs of New York City. I’m at the age at which all of my successful friends are trading in the houses they bought in their late twenties for much, much bigger houses. They’re all moving closer to the water. Because they can. It’s great, they bust their asses to be able to do this, I don’t live in a town where people inherit family fortunes. But again, looking around, there’s always someone buying (or building!) a bigger house.
Three: Career obsolescence
This is the one that people are so petrified about they almost never discuss it in the open. Husbands and wives don’t even bring it up, in the wee small hours of the night when the kids are asleep, once they’ve rolled off of each other and there is a gap left open for complete and total honesty. It doesn’t happen. Jimmy Kimmel fills that space instead. Or Jimmy Fallon. Or Jimmy Corden. Any Jimmy will do. But the anxiety stemming from career obsolescence hangs above all of our heads, at all times of day. Virtually no one feels completely secure in their ability to keep the money coming in. The pace of technological change might not be much different than it’s always been in post-war America, but it’s undeniable that the signs of it have become more ubiquitous. The five biggest companies in the world are all technology companies that assassinate middlemen in every industry vertical. The middle class in my neighborhood is a muddled mix of technologically disrupt-able middlemen and professionals on the run from machines that grow increasingly capable with every software update. Having two to three times our current wealth might not be necessary today, but it sure would be a nice insurance policy against the uncertainty of the future.
I said this last summer in the midst of the incredible run up in the technology stocks, and I still believe it explains a big part of what we’re living through:
We could be in the midst of the first fear-based investment bubble in American history, with the masses buying in not out of avarice, but from a mentality of abject terror. Robots, software and automation, owned by Capital, are notching new victories over Labor at an ever accelerating rate. It’s gone parabolic in recent years – every industry, every region of the country, and all over the world. It’s thrilling to be a part of if you’re an owner of the robots, the software and the automation. If you’re a part of the capital side of that equation.
If you’re on the other side, however – the losing side – it’s a horror movie in slow motion.
The only way out? Invest in your own destruction. In this context, the FANG stocks are not a gimmick or a fad, they’re a f***ing life raft.
Now, let’s say you get that two to three times more, in the relatively short-term. Then what?
Well, there will be more lifestyle creep. There will be more wealthier neighbors. There will be continued fear of the future and your ability to keep up. I don’t think we can eradicate any of these three drivers of our perpetual dissatisfaction.
So we’ll just have to outrun them.
This post originally ran here on December 17th, 2018
Talk to us about your financial plan today. We live for this stuff.
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