Inverting the Money Problem

In the controversial movie, The Social Network, which supposedly portrayed Mark Zuckerberg’s Facebook journey, Sean Parker’s character famously quipped –

“A million dollars isn’t cool. You know what’s cool? A billion dollars.”

It’s probably the most favourite problem that majority of the individuals in the world are trying to figure out i.e., how to get rich?

So let’s investigate this problem by using Charlie Munger’s most cherished mental model i.e., inverting the problems to solve them.

One of the ways to invert the question of “How to Get Rich?” is to ask, “Is getting rich worth it?”

Before you decide to skip this article thinking that it’s another one of those “money can’t buy happiness” rant, just stick with me for few more minutes and I promise that you won’t regret it.

In fact, this is a good opportunity to wear our curiosity hats and look at the hardships that tag along with large sums of money. Now given the fact that the author, yours truly, isn’t super rich (money wise at least) and likely never will be, is it justified for him to comment on the problems of the rich?

In my defence, all I have to say is that I never let my lack of first-hand experience with a topic stop me from speculating on it. 🙂

Maybe, like the proverbial fox and his sour grapes, I am deluding myself with a story that I never wanted what I will never be able to get. Or maybe I belong to the camp of those cash-poor intellectual types who want to prove to the world that rich people secretly live a miserable life.

I am not ruling out any of these possibilities where my subconscious is playing a game.

Yet, it’s plausible that I am trying to squint your eyes a bit to help you discover a different perspective – a view from the other side of the fence where the grass seems to be greener and wealthier.

This article is inspired by a very interesting discussion thread on Quora. The participants in this thread include some well known, successful and rich people including folks like Paul Buchheit, the creator of Gmail. So it’s safe to assume that it’s not a pure thought experiment imagined by an armchair philosopher.

Although the Quora thread had a lot of abstract and philosophical arguments, I have distilled out the ones which appealed the most to the rational side of my brain.

Put simply, the question to explore here is this – How does an incremental money above a certain amount can actually subtract from your happiness through the additional hassle it creates?

Not every item that I am going to list here is a problem for every rich person, but some, even many, of these are possibilities. And let me remind you again that these are not my personal beliefs and I don’t necessarily agree with all of them, but they made me smile while thinking about them. Consider them my musings on the topic of unintended consequences of extreme wealth.

On a serious note, if you ever plan to amass wealth and fame, you should at least know what’s in store for you.

The first category of challenge of being rich is related to the social interactions i.e., your equation with people around you.

Your Right to Crib is Revoked

Now that you’re rich (and people know that you’re rich), you are not allowed to complain about anything. Ever.

Since you’ve just achieved the financial nirvana, you’re no longer allowed to have any human needs or frustrations in the public eye.

Yet, you are still a human being. Aren’t you? But most people aren’t going to treat you like one.

This may not really be that big a problem because, when you’re rich, you probably won’t care much as to what people think about you.

But here’s the catch.

When you find yourself struggling with a nasty problem, which obviously can’t be solved by throwing money at (remember you’re rich), and you’re desperately seeking help from your family and friends – your folks won’t believe that you’re helpless.

You’re pretty much on your own.

Unrealistic Expectations

Your relationship with your friends and family will change. It may not necessarily turn sour but it will surely get harder to deal with. Not because of money but because of change in expectations.

Since you’re the superman now and have large resources at your disposal, it’s expected out of you to rescue everyone.

You may be expected, not by all but by some family and friends, to dole out interest-free – give it and forget it – loans. And it doesn’t stop there. You aren’t allowed to get away by giving modest gifts on special occasions.

“C’mon man! You’re a millionaire. Don’t be cheap. Shell out some moolah for an expensive gift.”

Hidden Intentions

Wealth makes you more discoverable unless you put a lot of efforts to lay low. Which means it attracts attention from all sorts of people – genuine and not so genuine.

Genuine people may want to learn from your wisdom, experience and skill but there would be many whose sole interest would be to shake loose some money from your pockets.

Point is that most people now want something out of you, and it can be harder to figure out whether someone is being nice to you because they like you, or they are being nice to you because of your money. This is especially true of strangers who know more about your wealth than about you as a human being.

A typical solution for this problem is to create a screen to ensure that only genuine people get access to you. But this screen will invariably filter out some good people also. Which means you’ll still be interacting with a mix of people, it’s just that the scale of this problem will be bigger because you’re rich.

A side effect of this strategy is that it can often cause wealthy people to cut themselves off from the larger society, out of fear that they will be exploited by selfish motives. As a result, the richness and variety in your social circle may become very limited.

Whoever said, “It’s lonely at the top,” probably was referring to this effect.

The next category of challenge of being super rich is related to your relationship with yourself i.e., the psychological effects of getting rich.

Amplification Effect

Wealth removes constraints, which means becoming wealthy has the potential to mess with you. But it depends on what type of person you are. In general, it makes people more of whatever they already were.

For example, if someone has a serious alcohol or other drug addiction, wealth could be fatal for him. On the other hand, if a person is generous, polite, and resourceful, money will amplify those qualities in his or her behaviour.

David Foster Wallace said, “Happy people are often still happy when they become millionaires. Unhappy people are often still unhappy when they become millionaires.”

Freedom Brings Dilemma

Money can give you the freedom to focus on the things that truly matter to you. But that comes with the assumption that you already know what truly matters to you.

Most people work hard and money keeps them focused on earning more, doing the career-ladder thing and working towards their goals, but when they finally attain that money-goal, it gives birth to weird issues.

The void created by financial freedom could be a difficult one to fill. Which is why many supposedly rich people continue to work hard at earning more money because it keeps them busy.

The most profound effect that becoming financially successful can have on someone is the task of answering the question – “I wonder what am I supposed to do next?”

Ironically, the ability to pursue activities that you find meaningful and bring you happiness does not depend on getting rich. Albeit insufficiency of funds calls for some resourcefulness on your part to continue pursuing your passion.

Many people subscribe to the belief along the lines of Charlie Sheen’s in the movie Wall Street, when he’s asked what he’s going to do when he makes his millions and he says, “I’m going to get a motorcycle and ride across China.” Rolf Potts,  author of Vagabonding, points out that you could clean toilets in the US and save enough money to ride a motorcycle across China. 

Today, you don’t need a million dollars to travel the world.

The Paradox of Desire

Now, this could appear as an entirely unanticipated downside of getting rich.

Being rich is better than not being rich, but it’s not nearly as good as you imagine it is.

All of the things you want to buy one day, are only valuable to you because you cannot afford them yet (or have to work really hard to acquire them). Maybe you have your eyes set on the new Ferrari but once you know you can easily afford it, it just doesn’t mean as much to you anymore.

It’s basic human nature that the things which are just out of reach seem desirable. The moment an object of desire becomes easily available to you, its charm loses grip on you. This is especially true for things which are your wants, not needs.

Realising that your dreams aren’t always what they were cracked up to be can bring in severe disappointment. Following which a boredom could quickly set in.

Diminishing Marginal Utility

Human mind is not good at evaluating things in absolute. It needs a benchmark or something to compare with to assess the value of something. Using this insight let’s see what The Law of Diminishing Marginal Utility says –

For each additional unit of a good the added satisfaction, you receive from consuming the good, decreases.

Yes, the first month you drive the Audi or eat in an expensive restaurant, you really enjoy it. But then you quickly get used to it. And then you are looking towards the next thing, the next level up. The problem is that you have bumped up your expectations, and everything below that level doesn’t entice you anymore.

Calvin and The Law of Diminishing Returns: Source: Bill Watterson
Ben Cosnocha, in his deeply thoughtful article The Goldilocks Theory of Being Rich, writes –

[As super rich] You’ll fly private jets, yes. You’ll eat nice food all the time, you’ll have aides and servants who will save you time. Problem is, we quickly adapt to these material comforts—what psychologists call the “hedonic treadmill.” The private jet doesn’t feel so special the 20th time you’re on it.

A research was done on two sets of people. First group consisted of those who experienced a personal tragedy like losing a loved one or even becoming physically handicapped (losing one or more limbs) which diminished their ability to function normally. The second group of people consisted of those who suddenly became rich.

The research revealed that in both the groups, people returned to their base level of happiness, one year after the fortunate/unfortunate events.

Jason Zweig, in his wonderful book Your Money and Your Brain, summarized all the above points brilliantly. He writes –

Becoming a lottery winner takes only an instant; being one lasts the rest of your life. People who actually win the lottery are often shocked by the aftermath of their lucky draw. There are plenty of thrills from suddenly making a fortune, just as the winners expected. But there are less obvious and less predictable consequences, too. The phone rings off the hook with calls from crooks and desperately friendly acquaintances. Ensconced in your new mansion, you no longer see your old neighbors as often; instead, you are besieged by long-lost relatives who should have stayed lost. Everyone you ever rubbed the wrong way files a lawsuit against you. Quit your job, and you miss your friends and go crazy with boredom; keep it, and your co-workers all seem to hate you or hit you up for money. It becomes hard to tell who your real friends are, so you spend more time alone. At home, you bicker constantly with your spouse over what to do with the money.

Conclusion

I read somewhere, “Money doesn’t necessarily wipe out all your troubles. It just changes the kind of problems that life presents you. The only people who are completely trouble free are buried in the cemetery.”

If one is not happy now, chances are that he won’t be happy even when he is rich. I am sure there are many super rich people who are happy and maintain a healthy inner peace.

I suspect that it’s nice to be super rich but maybe not for the reasons many of us think.

Kevin Kelly, who is known as the most interesting man in the world, in his interview with Tim Ferriss, reminded –

Great wealth, extreme wealth, is definitely overrated. There’s nothing that you can really do with it that you can’t do with a lot of less money. The things that you want to do, the things that will make you content, the things that will satisfy you, the things that will bring you meaning … is usually better than having money.

…if you have a lot of time or a lot of money, it’s always better to have a lot of time to do something. If you have a choice between having a lot of friends or a lot of money, you definitely want to have a lot of friends.

…the technological progress that we’re having is actually diminishing the role of money. And I want to be clear that I’m talking about money beyond the amount that you need to survive. So in a certain sense, most people see money as a means to get these other things, but there are other routes to these other things that are deeper and more constant and more durable and more powerful. Money is a very small, one-dimensional thing, that if you focus on that, it kind of comes and goes. And if you … whatever it is that you’re trying to attain, you go to it more directly through other means, you’ll probably wind up with a more powerful experience or whatever it is that you’re after. And it’ll be deeper, more renewable, than coming at it with money.

Let me repeat, the intention in this post is not to pass judgement but to look at a situation from a different vantage point. And my goal for compiling these thoughts was more with an intention of exploration than preaching.

If you have any interesting dimensions to add to this line of thought, feel free to leave your thought in the Comments section of this post.

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Also Read – Is getting rich worth it?