Rich and Anonymous

I think there’s an “ideal” net worth for everyone, when money not only stops bringing pleasure but becomes a social liability. And that number is probably lower than most people think.

Business Insider recently did a story of lottery winners who lost it all (people love the schadenfreude of these tales).

A common denominator of the stories is that lottery winnings have a high degree of, let’s call it, social debt – friends, family, and strangers who feel entitled to ask, beg, and steal in a way that leaves the winners not only broke, but socially exploited.

One of the winners explained:

After winning $3.9 million in October 1985 and $1.4 million four months later, Ms. Adams found that she no longer had the privilege of privacy. “I was known,” she said, “and I couldn’t go anywhere without being recognized.”

A subtle problem with money is that assets are easy to measure but liabilities can be hidden. Measuring lottery winnings is simple: $3.9 million, down to the penny. But how do you measure losing your privacy? Or the nagging doubt that some friends only like you for your money? That’s way harder.

I once spoke to a group of NBA rookies. The topic was how to avoid the tragedy of athletes who make a fortune in their 20s and are bankrupt by age 30.

One player mentioned something I thought was so important. He said most outsiders think athletes go broke because they spent their money on jewelry and cars. Sometimes that’s true, but the most common cause is social debt.

“When you grow up in poverty and then you’re making $10 million when you’re 22, that’s not your money,” he said. “That’s mom’s money, dad’s money, grandma’s money, cousin’s money, friends’ money. You can’t just tell them ‘I got mine, good luck to you all.’”

Buying themselves a mansion wasn’t the problem; it was buying a modest house for their fifth cousin who they’d never met but felt obligated to help that pushed athletes to bankruptcy.

These might seem like rich-people problems. But social debt creeps up everywhere for normal people.

I used to ride the Amtrak train from D.C. to New York. The train has a “quiet car” – a section where everyone is supposed to be quiet so you can sleep or get some work done. People use the quiet car because they want serenity, but it was astounding how often it backfired. When you expect quiet, you become ultra-sensitive to the slightest noise. If someone in the quiet car speaks in more than a whisper, the entire car plunges into a state of deep irritation. I’d bet that sitting in the “peaceful” quiet car actually leaves people with higher blood pressure.

A similar thing often happens when people buy nice stuff.

You didn’t mind when your old car was dirty or dinged – but now that you bought a nicer car you can’t stand it when it gets muddy, and you lose your mind when someone scratches it in the parking lot.

When you bought a new, bigger, house, you thought you’d be happier. But then you realize that the reason you wanted a nicer house was to socially compete with other people who had nice houses. So once you got a nice house, you just started dreaming about even nicer homes. Once you accept that having the nicest home in your social group is your goal, it becomes not only an obsession but a game that cannot be won, since the group you compare yourself to shifts with each salary increase you receive.

My theory is that the more money people have, the more social debt they tend to be burdened with.

The point is not to say you should avoid nice cars and nice homes – I like both. It’s a realization that once money goes from being a tool you can use to make yourself happy to a symbol of what other people measure you by, you are buried in a kind of social debt that’s hard to measure but has a real impact on your happiness.

Thoreau once explained: “The cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run.”

I once did some consulting for a family that’s worth $8 billion. If you Googled their name, nothing came up. No Forbes list, no gala photos, no profiles, no Wikipedia pages … nothing.

That was intentional.

They figured out what so many other people fail to recognize: The way you maximize enjoying your money is by eliminating social debt.

They had total freedom, privacy, and independence. They chose their friends carefully and gave money away anonymously. It may have been their most valuable asset.

It reminded me of what Naval once said: The best position to be in is rich and anonymous.