Wealth vs. Getting Wealthier

Will Smith writes in his biography that:

The amount of fame almost doesn’t matter. It’s the trajectory that people cling to.

Same with money. I think for a lot of people the process of becoming wealthier feels better than having wealth.

If it’s wealth we were after, most of us would feel great, because most of us are unfathomably wealthier than we were a generation or two ago. Or ten years ago. Or five years ago. Or two years ago!

What feels great is being on an upward path. That’s when dopamine takes over. That’s when you can extrapolate it and assume it goes on forever, and compare yourself to where you were before, and feel like nothing can stop you.

When that path declines – even if it happens when you have a level of wealth you couldn’t fathom a few years ago – the whole sensation shatters.

U.S. household net worth is $80 trillion higher today than it was ten years ago, which is astounding. But it’s about $700 billion lower than it was three months ago, which is honestly nothing. Yet one of those figures creates ten times the headlines, ten times the attention, ten times the emotions, ten times the introspection. It has nothing to do with the level of wealth and everything to do with the trajectory.

The problem is that an occasional downward path is inevitable in investing. Outside of fraud, it’s completely unavoidable. The reason markets can go up a lot in the long run is because they make you pay the cost of admission of going down a lot in the short run.

When people are addicted to the act of becoming wealthier – the numbers going up more than just the numbers being big – and the numbers going down is an integral part of how investing works, of course you’ll find some shattered souls. Some broken egos. Some terrible decisions being made.

Same in business.

Same in careers.

When most people hear this they respond with the classic line, “It’s the journey, not the destination, that matters!”

OK, most of the time that’s good advice. But here I think it’s backwards.

An addiction to the process of making money is a version of never having enough and never being satiated. It’s a game that can’t be won but offers the illusion of a finish line right around the corner.

Maybe that’s OK for some people – if you truly enjoy the game, that’s great. But I think that’s maybe two percent of investors, including professionals.

My sense is a lot of people suffer naively through the game expecting it to end, and they’re frustrated when it never does. Or they think they like the game, but what they actually like is numbers going up, which is maybe half the game.

An indifference to the process – the path of the journey – and a focus on the outcome and goal is probably the best most people can do with money.

Or maybe an acceptance of the process, knowing it’ll be a constant chain of surprise, volatility, setback, and disappointment, but if you can stick around long enough the odds of eventual growth and success are in your favor.

That’s very different from enjoying the process, which can quickly turn into an addiction to needing more.

Money buys happiness in the same way drugs bring pleasure: Incredible if done right, dangerous if used to mask a weakness, and disastrous when no amount is ever enough.