Seeking Wealth

Hi, I’m David Timis and my mission in life is to prepare people for the future of work.?

In this week’s edition of the newsletter the theme revolves around seeking wealth. Deep down most of us want to be wealthy. We want to have freedom and the flexibility to do with our time whatever we please, which is what financial assets not yet spent can give us. However, it is so ingrained in us that to have money is to spend money that we don’t get to see the restraint it takes to be wealthy. And since we can’t see it, it’s hard to learn about it. Moreover, with the advent of social media it’s easier than ever to identify rich role models, but it’s hard to find wealthy ones we can emulate, because their success is more hidden. The world is filled with people who look modest but are actually wealthy and people who look rich who live at the brink of insolvency. The secret is to be more like the former, not the latter. Below are some insights and thoughts that will help you better understand what wealth is, why it is more important than money or status, and what skills are key to becoming wealthy.?

Timeless Insight

“Seek wealth, not money or status.”? – Naval Ravikant

Everyone wants to be wealthy, but not everyone has a good set of principles to do it by. Naval is a name you should be familiar with by now, if you’ve been reading this newsletter, as he is one of my biggest inspirations, and not just for the angel investing tips he provides, but for the life lessons that are condensed on his Twitter channel in short morsels of truth. That’s where I stumbled upon this quote, which enabled me to see the difference between wealth, money and status, and to rewire my thoughts and perspectives around each of them. Wealth is represented by the assets that earn while we sleep: the robots that are cranking out things (1), the computer program that’s running at night and serving customers (2), money in the bank that is being reinvested into other assets and into other businesses (3). Money is how we transfer wealth. Status is our ranking in the social hierarchy. However, what we should seek is not money or status, but wealth, and the reason we should seek it is because wealth gives us freedom. Freedom so we don’t have to wake up at 7:00 AM every morning to rush to work and sit in traffic. Freedom so we don’t waste our entire life grinding in a soulless job that doesn’t fulfil us. Freedom to do with our time whatever we feel like it. Freedom is the real prize, not having more money or a better status in the social hierarchy.?

Food for Thought

One of the biggest ironies about wealth and money is that those around us who signal their “wealth” are rarely wealthy, and those who are wealthy, well, you just don’t see them. Morgan Housel , the author of the most insightful books about wealth I’ve read in a while, “The Psychology of Money ”, said that “spending money to show people how much money you have is the fastest way to have less money.” For example, if you see someone driving around in a Ferrari or a Porsche, you might intuitively assume the owner of the car is rich. However, that’s not always the case, and there are countless examples of individuals who spent a large percentage of their paycheck on their cars, and some end up living in them.?

We tend to judge someone’s financial success by what we see, their appearance, cars, houses, Instagram photos, because that’s the information we have at our disposal. However, real wealth, the kind of wealth that provides someone with freedom, is what we don’t see (e.g. it’s an individual’s bank accounts, brokerage statements, investment portfolios, etc.). Therefore, wealth is represented by the financial assets that have not yet been converted into the material things you see some people parade around (fancy cars, yachts, jets, etc.). But in today’s consumer capitalist society, maxing out credit cards and Buy Now, Pay Later (BNPL ) financing schemes are becoming the norm, while frugality isn’t what it used to be .?

The only way to build wealth over time is to have a clear gap between your ego and income or, in other words, to not spend the money that you don't have on things you don’t really need. However, nowadays practising self-restraint is for many people easier said than done. To better understand why, it’s useful to identify the key differences between rich and wealthy.?It’s not hard to spot rich people. Someone driving a $100,000 car is very likely to be rich, because even if they purchased the car with debt you need a certain level of income to afford the monthly payment. Same goes for those individuals who live in large houses. However, wealth is hidden. It's the income not spent yet, so you can buy something later.

Exercise and diet offer a useful analogy to better understand the differences between rich and wealthy. Once you exercise, you think, “I did the work and I now deserve to treat myself to a big meal”. Wealth is turning down that “cheat meal” and making sure that you burned more calories than you consumed if your goal in this hypothetical scenario was to lose weight. That’s not easy, because such behaviour requires a lot of discipline and self-control, which is why building wealth and losing weight are both very difficult endeavours. Moreover, what’s also problematic is that even if you aspire to become wealthy it’s difficult to find wealthy role models that you can emulate, because by definition their success is hidden.?

There are of course wealthy people who also spend a lot of money on material possessions. However, in those cases what we see is their richness, not their wealth. We see the cars they chose to buy and perhaps the school they choose to send their kids to. We don’t see the savings, retirement accounts, or investment portfolios. We see the homes they bought, not the homes they could have bought had they saved more or invested their money better. The world is filled with people who look modest but are actually wealthy and people who look rich who live at the brink of insolvency. Appearances are deceiving. Keep this in mind when judging other people’s success and when defining your own measures of success .?

Article of the Week?

Getting Wealthy vs. Staying Wealthy

Caricature of the Week

Source: Condé Nast

Thank you for reading and keep on growing!

David

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