There Are Two Ways To Be 'Rich'
The Market Ticker - Commentary on The Capital Markets
2017-09-04 09:55 by Karl Denninger
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There Are Two Ways To Be 'Rich'
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The first is to grind at the wheel, take small amounts of money as you acquire them and risk everything, fail early, fail hard, and fail often.

This usually works, but exactly how many times you will fail, and at what cost, is another matter.  Personally, my number was "three"; that is, the third time I wound up with something durable (in terms of a large multiple of what I put in originally.)

But there's a problem with this path -- it takes a hell of lot out of you and if you "crack" before you hit your personal number of failures then you're utterly screwed.

It forces you to be a bastard in some fashion, because the world is not a nice place.  The people in it aren't nice either, and a huge percentage of them not only will cheat, lie and steal, if they're in a larger business than you are they'll do it and the government won't stomp on them even if what they're doing is illegal.

If you try the same thing, on the other hand, you will be bankrupted and will probably go to prison.

This means you need to get real creative.  You can get lucky, of course, but in truth that's a bad strategy.  Oh sure, there are those who do it in every business cycle and "win", but the "out of business" signs massively outnumber the lucky ones.  For everyone who makes a million or ten with a large component of luck there are fifty who wind up with nothing at all.  This leaves the alternative as a strategy to adopt: (1) be a five alarm bastard so that nobody dares **** with you hard and (2) stay on the right side of the law so that if someone tries (especially on the criminal side) they get nowhere with their allegations because everyone who actually cares has already looked at you and figured out that you're almost-certainly not cheating.  The hard part is doing both while watching those larger than you lie, cheat, steal and commit crimes which nobody does a damn thing about.  You damn well better have your head on straight going down this road because if you don't you'll either join them (and get caught) or worse, go postal.

But let's say that for whatever reason this isn't you.  Maybe you're just not cut out that way.  Maybe you know you can't keep the steely-eyed stare when severely provoked and will descend into either some sort of self-destructive cycle (e.g. booze, etc) leading to a blow-up or you just aren't willing to do it. Putting in 100-hour weeks for years is something many people just can't do without emotionally or physically breaking in some way, and one of the worst things to do is to undertake such a path while knowing it's simply not in you.

How do you deal with reality if what you want to do and be leads you somewhere like this, but you just don't have that 100+ hour a week drive in you?

I’m not someone who really likes to sit still for forever and I find most jobs to be boring and repetitive. I may not be amazing at everything I do but I enjoy all the hobbies and traveling that I go take on. Traveling has changed my life and seeing myself as a traveler and finding out whom I am supposed to be in this world has been so eye opening.

There is an alternative: Need little and it's a hell of a lot easier.

In other words structure your life so you don't have debt.  You don't drive expensive cars; you drive cheap-to-operate ones that go a hell of a long way on a little fuel, are older and thus cost almost-nothing to insure.  Don't acquire a lot of "stuff", acquire memories instead -- they take up no space.  Be happy sleeping in a tent instead of a hotel (and God Forbid, if you need a hotel for a night or two it's Motel 6 as you can ****, shower and shave just as well there as you can at the Sheraton!)  Have a reserve and keep it in case things go to hell and carry no balance on any credit card -- ever.  Have a friend or two somewhere and an address you can bail to if things really go to **** on you (it happens), and keep enough in funds available to buy a bus ticket there -- just in case -- along with a bag that will carry all the things you really can't lose.  And finally, pay attention to your health when it comes to the precursors to chronic disease that are under your control -- specifically, how much and what goes down your pie hole.

I see far too many people who need the manicured lawn, the Lexus, BMW or Mercedes (or worse, two or more!) in the driveway, the big house that costs a metric ****-ton to insure, heat and cool, never mind being in hock up to their nuts in order to "have" all of it.  More than 75% of Americans are one missed paycheck away from being on the street; they literally live paycheck-to-paycheck with zero savings and zero real equity -- in anything.  Of that 75% nearly seven in ten are carrying more than half the median income in non-housing debt and half are carrying that on credit cards. Worse, three-quarters of American over 40 along with close to half of those over 20 (and nearly all of the above 75%) can't manage to run one mile or hike three without being winded or worse; the average American is consuming multiple prescription drugs and is headed for Type II diabetes, a heart attack or both with a large percentage 50 or more pounds overweight -- that is, they're fat and it's all a result of choices they make each and every day.

How do you get out of that box?  I'll tell you what people think they can do to get out of it -- play Powerball.  Here's the math on that folks -- it's roughly 1 in 300 million you'll pick the right numbers.  You need to pay $2 for a ticket, however, which means the money odds require $600 million in the jackpot, not 300.  It only gets worse from there since that "Jackpot" amount is a 20 year annuity and the cash value of said jackpot is much less, so now we're up close to a billion before the money odds work for you.  And then we must account for taxes, which of course you don't get rebated on with your ticket purchase but must pay to the tune of 40% immediately if you win.  Of course all of this works only if you're the only one who gets the right numbers; if someone else also picks them you must split the prize.  This means that even when the Powerball has a $600 million jackpot buying a ticket is still a losing bet to the tune of at least 2:1 against you before accounting for the risk of multiple winners.

Why does the Powerball sell any tickets?  The usual claim is that it's a "stupidity tax" but the facts are that plenty of people know damn well that the odds are massively against them but all they have left is luck because they've decided to bury themselves over the space of years in a debt-trapped lifestyle.  So they play anyway, often with money they can't afford to lose.

Don't do it.

Be the one who needs little; optionality is a virtue and leads to nice, calm sleep instead of restless nights, dependence and, for far too many people, insanity.

On this Labor Day consider the option to stop destroying your health, need little, labor less and live more.

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