Guest post by Dr. Gary North (RIP)
Reality Check (February 15, 2005)
Success can come in many ways apart from money. In my view, the inescapable trade-off in life between time and money should favor time. The more successful you are financially, the more expensive your time becomes, unless you are super rich and live off of a trust fund. This trade-off governs the allocation of most goods. You pay in time or you pay in money. It’s the difference between standing in line to get into a big game vs. not having to stand in lines because you bought expensive season tickets.
One mark of a successful person is that he can afford to do what he wants to do most in life, and then he does it. In other words, he purchases time. He may purchase it directly with money. Or he may purchase indirectly with forfeited earnings. He sells money and buys time.
A money-driven person may like making money more than anything else. He may be a miser. He does not make the trade-off between money and time. But he has the problem of succession. His heirs may use the money foolishly.
I have a friend who is a good writer. He used to write corporate biographies for a fee. He wrote a biography of a multi-millionaire entrepreneur in the oil business. I knew this entrepreneur enough to say hello to him. He was mentally sharp until the day he died, well into his eighties. Years after his death, the author called the man’s son to see if he could buy copies of the book. His own supply had run out, and there was still demand for it. The son told him that he had tossed out all copies soon after his father’s death. The author told me, “He had no interest in his father’s work. He had waited around for decades to get the inheritance.” Or, as Solomon said 3,500 years ago,
Yea, I hated all my labour which I had taken under the sun: because I should leave it unto the man that shall be after me. And who knoweth whether he shall be a wise man or a fool? yet shall he have rule over all my labour wherein I have laboured, and wherein I have shewed myself wise under the sun. This is also vanity (Ecclesiastes 2:18-19).
Years ago, my parents attended church with the daughter of a man who had started a highly successful regional bread company. It later was bought by a national company for a fortune. At the end of her father’s life, she told them, he had suffered a stroke. He sat in his bed, mute, waiting to die, with a Bible in his lap and a pencil in his hand. He kept circling the last three words in a verse, First Corinthians 3:12: “Now if any man build upon this foundation gold, silver, precious stones, wood, hay, stubble….” A success? Not in his own eyes at the end of his life. Money bought him no time after the stroke. In his case, his daughter did a lot of good with the money. But this did him no good.
I define a rich man as follows: someone who could lose his job tomorrow and not suffer any decline in his lifestyle, yet never having to touch his savings.
Such a person stays on his job for one of two reasons: (1) he likes it; (2) he is afraid of the future. The successful person is in category one.
If you don’t like your job, but it pays very well, you are not successful. You are not attaining your goal of peace of mind. You are buying money with time.
People look at money and say, “If I had his money, I’d do things my way.” Maybe they would. Maybe not. The point is, they look at money correctly: it’s a way of doing things our way. Of course, maybe the person is a drunk. He stays sober during the week only to keep his job. For him, doing things his way would be a disaster.
I’ll assume that you’re not a drunk. So, let’s think about how you can do things your way. How? You van invest more wisely. You can earn enough money to finance a new way of life with the income generated by your capital. Or you can persuade an employer to pay you to do things your way. Or you can persuade a lot of people to pay you a little to do things your way. That is, you can (1) invest more wisely and hit the jackpot; (2) you can get a better job; or (3) you can diversify the number of your employers.
All three strategies involve change. Most people resist change. All three involve risk. Most people are risk-aversive. So, most people never get rich.
I think fear is the #1 barrier to wealth — not ignorance and not lack of opportunity. Fear. This fear is in part financial, but it is mostly social. Men don’t want to fail in full public view. They are more worried about making a mistake in public than they are about losing the money.
This may not be true of someone up to his eyeballs in debt. For him, the burden of debt is like an anchor. His employers know this.
Over 40 years ago, I saw a black & white TV drama starring Cliff Robertson and his future wife, Dina Merrill. Miss Merrill was rich — really, truly rich. Through her mother, she was an heir of the Post cereal fortune. Had Post gone bankrupt, she would have had to get by on her share of her father’s money. Her father was E. F. Hutton. So, she was doing what she liked to do. She still is.
The show was memorable. It was about an up-and-coming junior executive in a New York firm. The company required its prospective senior executives to live in an expensive area of Connecticut. He was deep in debt. He was struggling. He was warned by a senior executive that the company used its mortgage strategy to separate the super- stars from the also-rans. Finally, he had to sell the house. The company transferred him to Denver. The show closed with the man and his wife on the airplane. He was drinking. His wife told him he was entitled to a drink.
In retrospect, this transfer was liberation. He was able to get out of New York City and move to Denver. But back in the early 1960s, this looked like a step down.
Employers love to see their up-and-comers in debt. This way, they can put the golden manacles on them. They pay these people well — enough to keep them from starting out on their own. But a man in debt is unlikely to start a new venture. Debt lowers the employers’ cost of retaining them.
If you want riches, avoid consumer debt. Avoid a mortgage on a home whose monthly bills keep you from accumulating capital. Additional mortgages are fine, just so long as they are (1) on loans secured 100% by the property; (2) can be repaid by the rental income generated by the property.
WHAT WILL YOU DO WITH THE MONEY?
Recently, I say down and made a list of the things that I want to accomplish by age 80, beyond which I can’t make accurate forecasts. It’s a long list: books to write, day cares to start, high school curriculum materials to write. I may not make it. But at least I can assess what it will cost me in the time-money trade-off. I can allocate both time and money in order to buy special time, meaning productive time.
I find that my clock is ticking more loudly than ever. Money is a concern to me mainly as a means of creating a passive income stream generated by the day care facility’s real estate and various information items that I plan to market, especially my guide to low-cost colleges. The curriculum may sell, but I can’t count on that now: too many chickens to be hatched.
I recommend this “how much time remaining” exercise to everyone. It will help you to focus on what constitutes success in your life. Then you can budget for it. This budgeting procedure involves careful attention to time.
If you have no detailed goals by which you can assess your progress, your time-money budget will be unlikely to meet your lifetime requirements. These goals should be quantifiable (though not 100%) and chronological.
Thus, if you select any set of goals and any budget, you will increase your likelihood of success. Think of your chronology as one headlight and objective success indicators as the other. Don’t let either one go out.
If you have specific goals for your money, you will find it easier to retain your money. Also, if you have a hierarchical series of goals that additional money will finance, you will find it easier to pay the price to generate even more money.
You will find that you must self-fund most of your success. That’s what I found, early. I have never taken a salary for the books I have written. I rarely take royalties. My books are not a means to an end. They are the end. I do not write to live. I live to write. This is true of most writers. That’s because so few books make any money. The classic example in American literature is Herman Melville, author of “Moby Dick” — one of the great literary duds of its time. He then had to take a job in the New York customs house to support his family and his writing habit.
There is nothing wrong with self-funding. You retain control. You buy whatever it is that you believe constitutes the capstone of a life well spent. It’s going to be spent anyway. So, spend it well. Spend it productively.
So, I encourage you to pursue success. But you had better give more thought to defining it, and getting your family to agree with this assessment, than you give to how you will make the money. The more compelling your vision of success, the more you will be able to pay the price in time and money that success usually requires.
William James, the Harvard philosopher and psychologist a century ago, when a person could be both, referred to “the bitch goddess, success.” I disagree with him. Success is not to be worshiped. But it should motivate us. We need a lot of motivation to keep from squandering our personal gifts.
The clock is ticking, with our cooperation or without it.
This article has been first published here: https://www.garynorth.com/members/1298.cfm