Five more surprising lessons I’ve learned about money and life:
Money and the “Virtuous” Cycle
Jeff Bezos of Amazon popularized the concept of the flywheel.
Put simply, it’s the self-reinforcing cycle that makes Amazon better and better.
- Part 1: Amazon makes their customers happy, leading to more customers
- Part 2: Amazon tracks customer activity, then uses this data to offer more and better products
- Part 3: As more customers use Amazon, more sellers use Amazon to reach these customers. More products leads to an ever better experience for customers
Repeat Parts 1 to 3 to infinity — build the largest e-commerce company in the world. A genius business model. Of course, once you understand the concept, you start seeing flywheels everywhere.
One ugly flywheel I’ve seen is the “teach others to make money” flywheel. It goes like this:
- Part 1: Share how good your life is to attract potential customers. Pics of fast cars, luxury travel, or even screenshots of earnings
- Part 2: Sell a course/book/job on how to “achieve freedom” and get the same lifestyle
- Part 3: As more people buy your product and make you money, repeat Part 1 to attract even more customers
Many variations of this. It used to show up as “millionaire circle” travel pics on Facebook, now it shows up as 30-second “life as a trader” vids on TikTok. But whether it’s crypto, property or MLMs, showing off your lifestyle to attract new customers is a tale as old as time. Selling the dream to others to pay for your own.
As YouTuber Avery Heilbron wrote in a satire video, “The easiest way to make money online is to teach others how to make money online.”
To be clear, I don’t want to paint any industry with unfair generalizations. Nothing against anyone who cleverly markets products, as long as they’re ethical. My problem is people selling unrealistic dreams to benefit themselves at your expense. You probably know who I mean and what I’m talking about.
Be careful what you’re buying isn’t just a way for someone else to get rich.
Why do people get involved in the ugly flywheel? Even at the expense of loved ones? For one, it works. It makes money. And once something makes money, people justify it — no matter how ugly it gets.
Novelist Upton Sinclair once wrote:
“It is difficult to get a man to understand something, when his salary depends on not understanding it.”
Money and Getting Older
The 2021-2022 Liverpool FC team were so good, they nearly won everything they competed for.
Nearly a quadruple. If they had pulled it off, they would have written history — arguably the best English team of all time.
Eventually, they won “just” two out of four. But it was close. Liverpool FC lost the English Premier League by a single point. And the European Champions League final by a single goal.
The 2022-2023 Liverpool team is struggling. I’m writing this in February 2023 — roughly 60% into the season — they’ve already been dumped out of two competitions, face incredible odds in the third, and are 21 points behind the league leaders. What happened?
One of their star strikers left. But at the same time, the consensus view is Liverpool’s midfield has gotten weaker. What’s strange is, they’re the same group of players who nearly won everything just nine months ago.
Change one variable within a complex system and wildly different outcomes can happen.
Another explanation: Father Time. While Liverpool spent hundreds of millions bringing in new attackers, they kept faith in a midfield unit that had served them well for years. It’s never obvious, but age creeps up on you. Doesn’t matter if you and I sprint a 100 meters a half second slower. But in professional sports, it could be the difference between 1st and 8th.
The easiest lesson is that everyone gets older, even legends.
The less obvious one is different stages in life need you to focus on different things. At the end of last season, Liverpool FC focused on rebuilding their attack. In the summer of 2023, they’ll likely spend big on their midfield.
Your priorities in money and life will change over time, and that’s okay. Maybe today you’re worried if your Valentine’s Day date is turned off by the car you drive. But in 10 years’ time, you’ll probably be worrying about your kids’ education more than anything else.
You might not be able to see it today, but it could be the most important thing someday.
Change is the only constant. All part of the circle of life.
Money and Escaping Work
The concept of retirement — work hard till your 60s then ride off into the sunset — feels like it’s been around forever, but it’s actually a new thing.
It doesn’t feel this way because the retired people you know are old. But once upon a time, people worked till they couldn’t.
German Chancellor Otto Van Bismarck is often credited with introducing the first widely-available pension in 1889. Imagine how revolutionary this must have sounded back then: “You don’t have to work till you die. Just till a grand old age, and we’ll take care of the rest.”
In recent decades, people have expanded on this: “What if I could save enough money before I get old?” This led to the Financial Independence Retire Early (FIRE) movement — people retiring in their 30s.
When I first heard about early retirement, it blew my mind. 28-year-old me had never even considered it possible. I just assumed everyone needs to work till they’re old. A bigger factor: I was struggling to feel alive at work.
Perhaps it’s some kind of millennial existential crisis: the feeling of wanting to escape — to dump your job and get away from everything. Know what I mean?
However, the deeper I dived into the math, the more I realized FIRE is likely out of reach for most people — especially if you’re the type who’s gonna splurge on your kids.
So I wrote this on Twitter:
If you hate your job, but it pays six figures, how long would you stay?
Would you change your answer if you got cancer and discovered you only have one year to live?
At his commencement speech at Stanford, Apple co-founder Steve Jobs said:
“For the past 33 years, I have looked in the mirror every morning and asked myself: ‘If today were the last day of my life, would I want to do what I am about to do today?’
And whenever the answer has been ‘No’ for too many days in a row, I know I need to change something.”
Steve’s quote is great because it’s “many days in a row” and “change something.” It’s not “If I’m unhappy today, I’LL QUIT TOMORROW.” It’s realistic. Incremental steps towards a better life.
Retirement math tells me money can give you the means to escape — a job; a life you’re unhappy with.
But what if you never need to escape?
The author of Young Money, Jack Raines put it eloquently:
“The goal isn’t to escape your reality, because you’ll never succeed. The goal is to construct a reality that you don’t need to escape from.”
Money and the Best Way to Spend Money
Mike Tyson holds the record for youngest heavyweight boxing champion of the world. He was only 20 when he knocked out Trevor Berbick in five and a half minutes.
For a non-boxing fan, watch early Tyson fights and you imagine that’s what boxing is. Lightning fast, with powerful punches that quickly end with a knockout. Tyson won his first 19 professional fights by knockout, 12 of them ending within three minutes.
Alas, you might know Mike Tyson for a different type of fast. Despite earning more than 400 million dollars, he declared bankruptcy at 37 years old.
400 million! How? Tyson spent his money like how you’d imagine a testosterone-pumped bro would: on women and partying, luxury cars and mansions, even exotic things like Siberian tigers.
A couple of thoughts: First, it’s easy to blow any amount of money — even hundreds of millions — if you’re not careful.
Secondly, there’s a difference between spending on pleasure and happiness, but our instinctive choice is pleasure.
An easy way to visualize this is ice cream. Having a scoop of ice cream is great. A nice boost of short-term pleasure. But eating a tub of ice cream every night will make you fat.
Meanwhile, a bowl of broccoli isn’t as much bliss as a spoonful of Belgian chocolate. But eating vegetables every day will extend your life.
Finally, where I think many people get lost with spending money is they let others dictate what’s important, instead of deciding what’s important to them.
There’s an old American saying:
“We buy things we don’t need with money we don’t have to impress people we don’t like.”
I can’t say for sure if Mike Tyson blew his fortune trying to impress people, but having once been a 20-something bro myself, I understand the desire to.
Easy to spend money fast; on short-term pleasure; on buying status.
Much harder to figure out what’s important in life. Like strong relationships with family and friends. Meaningful work you’ll be proud of when you’re 60. Faith.
Ironically, things you could even get for free.
Investing in these is the best way I’ve found to spend money.
Money and Making Decisions
The parliamentary constituency where I live is Malaysia’s richest. Technically, it’s called Segambut, but contains several areas claiming the title “Beverly Hills of Malaysia”, like Mont Kiara, Damansara Heights and Bukit Tunku.
Median monthly household income here is RM 15,342 (RM 1 = US$ 0.23), roughly triple the national median of RM 5,209.
One of the popular shopping malls in this area has a special parking rate on weekends. It’s a maximum of RM 7 for 24 hours. Considering the area, not too bad.
Without fail though, every weekend you’ll find a long line of cars illegally parked by the roadside. I can only assume the drivers decided to park there to save money.
You might think it’s cheap cars — people who’re struggling. But it’s a mix. You have the 20-year-old Malaysian cars, but also BMWs, Porsches and Vellfires, easily costing a few hundred grand each.
I find this behavior fascinating. Not even gonna get into civic-mindedness or police enforcement, but purely from a dollars and cents perspective, the rational decision would be to park in a proper spot. Sure, you have to pay, but it’s more convenient and safer than leaving your car exposed. Even if everything is insured, the hassle of making any claims easily outweigh the costs of parking.
“You drive a BMW, but don’t wanna pay a few bucks for parking.” The unkind thought that comes to mind.
Ramit Sethi put it better:
“Most people are wasting their time asking $3 questions; they need to be asking $30,000 questions.”
In other words, obsessing over minor details isn’t gonna make you rich. It’s the big things that count.
In business, we know the 80-20 rule, a.k.a. the Pareto principle. 80% of results from 20% of your efforts.
When it comes to spending, we know that housing, transport and food make up the largest portions of most people’s expenses. If you figure out how to keep your home loan, car, and eating out under control, that’s where the majority of improvements come from. You don’t have to worry over every single cent.
I write this having been a maximizer for most of life. My early articles were about things like maximizing credit card benefits. How to squeeze the optimum amount of points from travel. Stacking cashbacks.
Yes, you could spend all your energy obsessing over minor details. I still find it kinda fun.
But we’d run out of time for the important things in life.
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Part 1: Your Money and Your Life
Pic from Pexels: Ron Lach
Hi Aaron, it seems that is the way now. Even some of these gurus they don’t have experience in making money but they teach people how to make money. It seemed to work and they make money in the process.
Thanks for dropping by. Indeed. Sad thing is that it works. 🙁
Hi Aaron, thank you for writing such a wonderful article.Agree with your article especially about the money and making decison section. Good day to you .
Thanks so much Kalai,
Really appreciate you dropping by and your kind words!