More important, I was constantly investing in myself. I was ferociously intense about learning as much as I possibly could, every day. Once a certain level of critical mass in portfolio value was achieved, compound interest took over and proceeded to amaze me with its magic.
Today, even after achieving financial freedom, I continue to work in a job because I want to, not because I need to. I do it because I just love the work I get to do every day, and I feel a sense of joy in doing what I love and loving what I do. Today, I get a deep sense of fulfillment when I look back at the memories of my challenging times and sacrifices in the past, which eventually helped me earn my first million dollars of profits from investing.
Benjamin Franklin laid down the way to wealth for all of us when he said, “The way to wealth is as plain as the way to market. It depends chiefly on two words, industry and frugality; that is, waste neither time nor money, but make the best use of both. Without industry and frugality nothing will do; with them, everything.”
Resist Stepping on the Hedonic Treadmill
I saw that it was the artificial needs of life that made me a slave; the real needs of life were few.
—William James Dawson
Great wealth often inflicts a curse on its owners. It’s called the “hedonic treadmill,” and its function is to continually move the goalpost of your financial dreams, completely extinguishing the joy you thought you would get from having more money, once you attain it. People are constantly running on the hedonic treadmill; as they make more money, their expectations and desires rise in tandem, which results in no permanent gain in happiness.
Economist Richard Easterlin measured the life satisfaction of Americans in 1946 and 1970 and came to the conclusion that material progress was not reflected in increased life satisfaction. This revelation was termed the Easterlin paradox. Once one’s basic needs have been met, incremental financial gain contributes nothing to happiness. This is because, in our minds, wealth is always relative, not absolute.
A research study posed the following question: Which new employee would be happier, the person making $36,000 in a firm where the starting salary is $40,000 or the one making $34,000 where the average is $30,000? Almost 80 percent said $34,000 would make them happier.5
We want what we want until we want some more. A process called “hedonic adaptation” determines that we quickly become accustomed to most things in our lives. As a result, experienced happiness is often fleeting. We may have x and think this should be sufficient to live a happy life, but when we see others who have 2x, we think that would make us happier. And then we raise the bar to 3x, 4x, or 10x. This is a sure path to lifelong misery, even if one eventually becomes monetarily rich. Very often, as Dave Ramsey points out, “We buy things we don’t need with money we don’t have to impress people we don’t know.”6 We want to look good over doing good. Consequently, we make choices based on optics, defensibility, and so on. This typically results from not having a strong sense of self and from seeking external validation. As Benjamin Franklin said, “It is the eyes of others and not our own eyes that ruin us. If all the world were blind except myself I should not care for fine clothes or furniture.” Acquired material objects do not necessarily improve your life. Desiring them is indicative of some social, emotional, or psychological gap that you need to work on. Don’t confuse pleasure with happiness. Pleasure is short-lived, and modern corporations have convinced most people that the only way to be happy is through the pursuit of pleasure. The longer you stay on the hedonic treadmill, the more it will break you down emotionally, so get off of it, quickly.
The book Classics: An Investor’s Anthology features an essay about P. T. Barnum that quotes Barnum on the tendency for individuals to step on the hedonic treadmill:
Thousands of men are kept poor, and tens of thousands are made so after they have acquired quite sufficient to support them well through life, in consequence of laying their plans of living too expensive a platform….
Prosperity is a more severe ordeal than adversity, especially sudden prosperity. “Easy come, easy go” is an old and true proverb. Pride, when permitted full sway, is the great undying cankerworm which gnaws the very vitals of a man’s worldly possessions, let them be small or great, hundreds or millions. Many persons, as they begin to prosper, immediately commence expending for luxuries, until in a short time their expenses swallow up their income, and they become ruined in their ridiculous attempts to keep up appearances, and make a “sensation” [emphasis added].7
Seneca also shared his thoughts on the futile attempts to maximize one’s monetary worth rather than one’s happiness:
Epicurus says: “Contented poverty is an honorable estate.” Indeed, if it be contented, it is not poverty at all. It is not the man who has too little, but the man who craves more, that is poor [emphasis added]. What does it matter how much a man has laid up in his safe, or in his warehouse, how large are his flocks and how fat his dividends, if he covets his neighbor’s property, and reckons, not his past gains, but his hopes of gains to come?
Do you ask what is the proper limit to wealth? It is, first, to have what is necessary, and, second, to have what is enough.8
Morgan Housel recommends a solution to the hedonic treadmill problem: “The solution, particularly after basic needs are met, is actively seeking contentment with what you have. That doesn’t mean you stop saving, stop putting in effort, stop sacrificing. It means you come to terms with the idea that the outcome isn’t a fountain of happiness. So if you’re going to grind, you better damn well enjoy the process.”9
Housel’s words remind me of one of the most profound thoughts I have ever encountered on the subject, from George Lorimer: “It’s good to have money and the things that money can buy, but it’s good, too, to check up once in a while and make sure that you haven’t lost the things that money can’t buy [emphasis added].”
Never measure life by your possessions. Measure it by the hearts you touched, the smiles you created, and the love you shared. Love people and use things, because the opposite never works. Love is caring without an agenda. Love isn’t something we fall into; it’s someone we become.
LIVING LIFE ACCORDING TO THE INNER SCORECARD
To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment.
—Ralph Waldo Emerson
The path to true success is through authenticity.
—Guy Spier
According to Warren Buffett, there are two kinds of people in life: those who care what people think of them, and those who care how good they really are.
Buffett always remains true to himself and never compromises on his values. He has never cared about luxurious possessions, and he still lives in the modest house he bought for $31,500 in 1958. As an investor, Buffett thinks entirely for himself and invests only according to his personal investment philosophy. During 1999, in the midst of the Internet bubble, Buffett was being humiliated by some of the leading financial commentators of the time and Berkshire’s stock price was getting hammered. But Buffett always kept in mind what he had been taught by his father—that the only scorecard that counts is your inner scorecard.
In December 1999, Barron’s put Buffett on its cover with the headline “Warren, What’s Wrong?” The accompanying article said Berkshire had “stumbled” badly. Buffett was facing a kind of negative press like nothing he had ever experienced. Many longtime value investors who followed Buffett’s style had either shut down their firms or given in and bought technology stocks. Buffett did not. What he called his inner scorecard—a toughness about personal decisions that had infused him for as long as anyone could remember—kept him from wavering,