Money, Money, Money...

Contrarian Advise on Money (& Life)

Money, money, money……it’s so funny, in a rich man’s world.

ABBA released this catchy number in 1976 with a disco feel — a glizy, glittery ode to the pursuit of money.

Dire Straits’ "Money for Nothing" was released in 1985, and quickly became a huge hit. This song was inspired by a conversation lead singer Mark Knopfler overheard in a department store, where two employees were discussing a musician's extravagant lifestyle. The lyrics take a satirical look at the culture of materialism and greed in the music industry. The song also became famous for its innovative use of a "gated" guitar sound, which was created using a special effects pedal. The song's most memorable lines are undoubtedly the chorus. You know it: "Money for nothin' and your chicks for free." It's catchy, it's simple, and it's become a cultural touchstone for the "rock star" lifestyle.

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Will Money Make You Happy?

Lets now turn to money and human happiness. The latest World Happiness Report shows that Finland is again the happiest nation, for the sixth year in a  row. But what’s really interesting is comparing happiness with GDP per capita. The unhappiest countries tend to be very poor. No surprises, poverty makes you miserable.

When GDP per capita reaches $20,000 (the wealth of a disparate group of middle-income countries) the happiness score rises above five out of 10. When GDP capita rises to $40,000, however, further advances in income can’t be relied on to buy extra happiness. Finland ($54,500 per head), is comfortably happier than Luxembourg, the richest with GDP of $135,000 per capita. The following chart was produced by Libby Shepherd of Fathom Consulting.

For policy makers, eradicating poverty should remain a priority. It can’t necessarily buy you love, but it’s likely to buy more happiness. Once that’s done, other things become more important than money.

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Will Money Make YOU Happy?

Surprising answer: It depends.

I recently listened to a podcast by Tim Ferris with Morgan Housel, who is among my favourite writers. Morgan is a partner at Collaborative Fund — he is a financial writer and thinker who's made a name for himself by combining investing, economics, and psychology in a really approachable way. His big idea is that financial success is as much about psychology and behavior as it is about numbers and spreadsheets.

I found the podcast fascinating not least because it had an answer to the happiness question and it was peppered with anecdotes like this:

In 2009 during the peak of the Great Recession when the economy was in pieces, a CEO was driving around Omaha with Warren Buffett. Buffett was driving, he was a passenger, and the CEO said to Warren, and they're driving past closed up shops during the Great Recession, the whole country's in tatters. And the CEO said, “Warren, how are we ever going to pull out of  this? The country's never going to be the same after this.” And Warren said, “Jim, do you know what the bestselling candy bar was in 1962?” And Jim said, “No.” And Warren said, “Snickers.” And Warren said, “Do you know what the bestselling candy bar is today?” And Jim said, “No.” And Warren said, “Snickers.” And that was the end of the conversation. He just stopped right there. And that was his answer to, “Is the country ever going to be the same?” If you look at Warren Buffett's success, he has been betting on things that stay the same forever.

Some people have likened Morgan Housel to a mix between Warren Buffett and Malcolm Gladwell. Like Buffett, he has a knack for taking complex financial ideas and making them understandable and accessible. And like Gladwell, he has a talent for distilling psychology and behavioral economics into stories that resonate with people. Here are other quotes I have saved over the years from his writing:

You might think you want an expensive car, a fancy watch, and a huge house. But I’m telling you, you don’t. What you want is respect and admiration from other people, and you think having expensive stuff will bring it. It almost never does — especially from the people you want to respect and admire you.

The strongest-held beliefs are usually on topics with the most uncertainty. No one is as passionate about geometry as they are about religion.

Woodrow Wilson said government “is accountable to Darwin, not to Newton.” It’s a useful idea. Everything is accountable to one of the two, and you have to know whether something adapts and changes over time or perpetually stays the same.

If you traveled in time to 500 years ago or 500 years from now, you would be astounded at how much technology has changed. The geopolitical order would make no sense to you. The language and dialect may be completely foreign.

But you’d notice people falling for greed and fear just like they do in our current world.

You’d see people persuaded by risk, jealousy, and tribal affiliations in ways that are familiar to you.

You’d see overconfidence and short-sightedness that reminds you of people's behavior today.

You’d find people seeking the secret to a happy life and trying to find certainty when none exists in ways that are entirely relatable.

When transported to an unfamiliar world, you’d spend a few minutes watching people behave and say, “Ah. I’ve seen this before. Same as ever.”

No surprises, Morgan’s new book is Same As Ever: A Guide to What Never Changes.

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Investing is as much about understanding human nature as it is about understanding finance and economics.

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One more (second) thought: While money is important, chasing it blindly can lead to a life of chasing an ever-receding horizon. Meanwhile, the time that you spend chasing that elusive dollar is time that you can never get back. And time, my friend, is the great equalizer. No amount of money can buy you more time, and once it's gone, it's gone for good. Time is the ultimate currency.

Rich people have money, the wealthy have time.