Wealth is Invisible

A recent client meeting gave me the opportunity to discuss the profound difference between income, spending and wealth. In the words of Morgan Housel, "wealth is what you don't see, the nice cars not driven, watches not worn and first class trip not taken. Wealth is invisible." His book, "The Psychology of Money", is highly recommended. Inspired by the discussion, I thought I'd create this very technical graph:

Let's dive in. On the far far top-right, in the extremely fun corner, is Elon Musk. Clearly, the chap has used his brilliant technical mind and oppressive people skills to become so wealthy, that his extravagant lifestyle just doesn't seem to make a difference. By extravagant, I mean his ill-advised tendency to father illegitimate kids and overpay for political stunts like buying Twitter. Big spender, still wealthy beyond words.

Warren Buffett, an impossible role model for us, is almost synonymous for both vast wealth AND frugality. The guy has lived in the same house in Omaha since 1958, and rarely spends more than $10 on lunch. His wealth is only less than Musk's because he has given away so much to charity. Big wealth, big cheapskate. Third down the wealth axis was someone I was entirely unaware of. You too have likely never heard of Diane Hendricks. With a $12B fortune, she topped this year's Forbes List of Self-Made women. She co-founded a construction supply business, ABC Supply, and has built it into a $15B goliath. If her spending habits were bad, we'd all know of her, wouldn't we? What a great story.

Let's save Mr. Reade for last.

Johnny Depp's poor decision-making wasn't confined to his choice of women. Despite a career that earned him nearly $650M, he was nearly bankrupt in 2016. See, he is the poster-child of profligacy. The best example to show that Income isn't Wealth. In his case, a good way to squander wealth was to average $4M per month on staff, jets and wine. Oof. Now to the stories we can all relate to. Consider Carrie Bradshaw, the fictional character (not the actress Sarah Jessica Parker). Even die-hard fans of the show, Sex and the City, roll their eyes at her personal finances. No writer, even a gifted one, would earn enough to splurge that much on designer dresses and shoes, and live in a fairly spacious Manhattan apartment. Her spending was so preposterous that the writers were forced to acknowledge financial struggles in the script. But to be fair to Carrie - if she shopped at The Gap and Aldo, it would have been a different show. That brings us to Ronald Reade - a quiet Vermont mechanic and later part-time janitor. His loudest statement was his last. After a long life of frugal living and prudent investing, he left $8M to his town's library and hospital. What a legend! All he did was to live within his means, save, invest in solid American companies that he understood, and not sell for fifty years. Simple.

Where would you put your face on the graph?