by MJ DeMarco
With inflation, the real purchasing power is $500. My spare change bucket on my kitchen table was a better investment. Had I invested $1 million, I’d have lost more than $400,000.
And this is the Slowlaner’s anointed weapon of wealth? Hilarious!
Millions worship the Slowlane roadmap with “buy and hold” as Main Street, a Main Street that is decades long, imperiled by uncontrollable hazards, and rarely leads to wealth.
I recently heard a Slowlane prognosticator proclaim the effectiveness of “Get Rich Slow” by citing this syrupy factoid: If at the end of 1940 you had invested $1,000 in the stocks of the S&P500 you would now have $1,341,513. So let’s examine this fact, assuming it is fact.
✓It’s 1940 and assume you are 21 years old.
✓It’s 1940 and you somehow got your hands on $1,000, which in today’s dollars is about $15,000.
✓You took that $1,000 in 1940s money and did as above.
Congratulations! It is NOW 2011 and you are 91 years old, rich with $1,341,513. Or if you were lucky to get your $1,000 ON BIRTH, you’d now be 71 years old! Yes, folks, it’s time to get excited! “Get Rich Slow” is going to make you rich! Just ignore your 74-year life expectancy and make sure your wheelchair comes equipped with chrome rims.
Seriously, how does anyone get excited over this crap?
The Slowlane’s Traitorous Relationship with Time
Compound interest and a job have the same disease: the sinful and gluttonous consumption of your time while forsaking control. Both variables within the Slowlane wealth equation are anchored by time—time traded in a job and time traded in market investments. Time becomes the linchpin for wealth that congenitally ties to the mathematical handicaps of mortality: 24 hours in a day and a 50-year work-life expectancy.
Yes, “getting rich” is a function of time.
Unless you plan on living forever, this relationship is dubiously foolhardy. Why? Because to trade your time away is to trade your wealth away.
Examine these pathetically common examples. Assume a 5% savings rate on gross salary and an annual investment yield of 8% per year. We’ll exclude taxes and inflation.
Salary @ $25,000/yr, save $1,250/year, invested over 40 yrs @ 8% = $362,895
Salary @ $50,000/yr, save $2,500/year, invested over 40 yrs @ 8% = $725,791
Salary @ $75,000/yr, save $3,750/year, invested over 40 yrs @ 8% = $1,088,686
Salary @ $100,000/yr, save $5,000/year, invested over 40 yrs @ 8% = $1,451,581
Salary @ $150,000/yr, save $7,500/year, invested over 40 yrs @ 8% = $2,177,132
Don’t get enamored with the numbers. Keep in mind this is 40 YEARS from now. If you are 20 years old, you will be 60 years old. If you are 30 years old, you will be 70 years old. If you are 40 years old, you’ll be dead. Sorry, but that’s beyond life expectancy.
So at these ages, does this money and the freedom it buys sound appealing? Also, do you realize that this money will have 50% of today’s buying power? Forty years ago you could buy a car for $5,000 and a loaf of bread for 50 cents. Lest we not forget the other lofty assumptions, gainful employment and a robust economy that behests a safe 8% per year. In 2008 the markets lost 50%. I guess the gurus forgot to mention these anomalies.
Folks, you don’t want millions to accompany your cane, you want it to accompany your youth. Every day, people sacrifice their time for tiny nuggets of wealth, where time is the liability and not the asset. Anything that steals time and doesn’t have the power to free time is a liability.
Within the Slowlane, time is mistreated like an effervescent fountain that runs forever. Unfortunately, the mortality rate is 100% and life’s prognosis is death. Some day you will die, and, hopefully, 60% of your time wasn’t squandered in a cubicle while your children grew up and your spouse cheated with the yoga instructor.
The Slowlane Is a Plan of Hope
The Slowlane dilutes your control. You’re reading this book because you want to control your financial destiny, NOT put it in the hands Wall Street or some corporation.
If you want to get rich, you have to control and leverage the variables in your financial plan—any financial plan without control immediately disintegrates into a plan of hope.
Hope I don’t get laid off!
Hope my stocks rebound!
Hope I get that promotion!
Hope my hours aren’t cut!
Hope my company doesn’t go bankrupt!
Hope, hope, and hope!
Sorry, hope isn’t a plan!
The Slowlane plan rests in a mathematical prison, with time as the warden. To create explosive wealth fast, you must abandon the Slowlane formula and its lecherous relationship to time. Wealth is built with time as an asset, not as a liability!
Yet, the Slowlaner’s reaction to Uncontrollable Limited Leverage is predictable: They embark on an errant fight against the one variable they perceive as controllable—their intrinsic value. The Slowlaner argues, “I must make more money!” And that fight is fought futilely with an expensive education.
Chapter Summary: Fastlane Distinctions
➡Slowlane wealth is improbable due to Uncontrollable Limited Leverage (ULL).
➡The first variable in the Slowlane wealth equation stems from a job that factors to intrinsic value which is your nominal value for each unit of your life traded.
➡Intrinsic value is the value of your time set by the marketplace and is measured in units of time, either hourly or yearly.
➡In the Slowlane, intrinsic value (regardless of its time measurement) is numerically inhibited because there are only 24 hours in the day (for the hourly worker), and the average lifespan is 74 years (for the salaried worker).
➡Like the Slowlaner’s primary income source (a job), the Slowlaner’s wealth acceleration vehicle (compound interest) is also pegged to time.
➡Like a job, compound interest is mathematically futile and cannot be manipulated. You cannot force-feed the market (or the economy) to give you phenomenal returns, year after year.
➡Wealth cannot be accelerated when pegged to mathematics based on time.
➡Time is your primordial fuel and it should not be traded for money.
➡Your time should not be an expendable resource for wealth because wealth itself is composed of time.
➡Your mortality makes time mathematically retarded for wealth creation.
➡If you don’t control the variables inherent in your wealth universe, you don’t control your financial plan.
[13] The Futile Fight: Education
The only thing that interferes with my learning is my education.
~ Albert Einstein
The Fight Against Uncontrollable Limited Leverage: Education
The Slowlaner’s natural reaction to the Uncontrollable Limited Leverage (ULL) genetically innate in their wealth equation is to wage war with intrinsic value by deploying the education weapon.
Since ULL defines the Slowlane, the Slowlaner rationalizes that the only variable worth escalating is their pay rate. I need to make six figures! I need to make more money! So, predictably, they go back to school and get an MBA or some certification. They’ll argue, “MBA grads earn 15% more!” or “The starting salary of a certified PMP is $120,000 year!”
For example, Steve Debois enrolls into an MBA program to sweeten his credentials. The cost of the MBA is $55,000 and 800 hours. Steve justifies this twofold expense (time and money) because he anticipates his intrinsic value to rise. Upon completion, Steve expects to be worth more to his company and worth more in the competitive marketplace. Unfortunately, he still trades his time for money—just at a higher rate, yet still uncontrolled and unleveraged.
Another example is my friend who enrolled in a project management certification class that ate five eight-hour Saturdays from her life and cost $2,700. Her goal? A project management credential that would raise her intrinsic value in the marketplace. As a certified project manager, she exposes herself to new opportunities at higher grades of pay.
But still, a trade of time for money.
Whether consciously or not, the Slowlaner believes that elevating intrinsic value can create wealth. Want to be highly paid right out of college? Go to medical school and become a doctor. As a physician, your intrinsic value is now worth $500 per hour. Become an engineer, a lawyer, or an accountant—all highly paid, professional, salaried positions. Typically, a formal college education is used to serve Slowlane purposes—an explicit attempt to raise intrinsic value. Fight that intrinsic value variable!
Not All Education Is Virtuous
The problem with formal education used to raise intrinsic value is that it’s ungodly expensive in time and money. Not a week goes by when I don’t hear about a freshly minted MBA grad who struggles to pay his student loans while working a job he could have secured out of high school. Debt that traps you to a job is not good debt. A preoccupation to become “highly educated” could be a Trojan horse to your freedom.
Not all education is equal or virtuous. Some education can deter wealth. If an education entombs you under a mountain of debt and shackles you to a job for the rest of your life, is it really a good education? If an MBA increases your salary by 15% but takes 15 years to pay, was it a good investment?
It’s a great myth: To get rich you need an expensive college degree. Hogwash. A degree isn’t a prerequisite to Fastlane wealth. Some of the richest Fastlaners are people who never finished either high school or college. Bill Gates, Steven Spielberg, Richard Branson, Michael Dell, Felix Dennis, David Geffen, and John Paul DeJoria all dropped out of school to pursue Fastlane objectives. How dare they get rich and not be “educated”?
Slowlane Entrapment
Financing expensive college tuition for an education is a dangerous game that can lead to Slowlane entrapment: conformity and education servitude.
A typical collegiate study progresses from general knowledge to very specific skill sets. For example, while studying finance I learned complex mathematical formulas that aided in financial decision-making, things like “lease or buy” and “return on investment.” These concepts are specific trade tools that can hinder your future options. The prescribed path for finance graduates was a job in the financial sector, an insurance company, an accounting firm, or an investment house.
My education had the indirect and unintended consequence of restricting my options to specific disciplines based on an educative skill set. The result? Conformity and limited choice. If there aren’t opportunities in my field, my education becomes marginalized and devalued. If the opportunities available require less education (say, a BS) than I have (MBA), I become overqualified and unemployable. If my skills erode in practicality based on technological evolution, my education becomes deprecated and my value to society plummets accordingly.
The second educational entrapment danger is “education servitude.” While the Sidewalker deals with “Lifestyle Servitude,” the Slowlaner wrestles with “Education Servitude” (freedom eroded by education) that traps the victim to a job. Has your education indentured you to a job? Advanced degrees are not cheap. According to The College Board the average college degree at a public university in 2017, including room and board, now costs over $100,000. Prefer the prestige of a private school? That tab will set you back $200,000+, the cost of a used Ferrari. This kind of debt will bury your dreams, not enliven them. It will permanently bind you to the Slowlane or worse, the Sidewalk.
Consider the statistics. In 2007, the Washington Post reported that, according to Nellie Mae, the big student loan service provider, by the time college students are seniors, 56% of them will have four or more credit cards with an average balance of $2,864. According to a research report by Demos-USA.org, a public policy research and advocacy organization, people in the 18–24 age bracket spend nearly 30% of their monthly income on debt repayment. This is double from 20 years ago. A survey of college borrowers found that the average college senior graduated with nearly $19,000 in student loan debts, and graduate degree pursuers more than $45,000. A 2007 Charles Schwab survey revealed that teenagers believe when they get older they will earn an average salary of $145,000. The reality? Adults with a college degree earned an average of $54,000. Unfortunately, the future isn’t so bright that you have to wear shades. The truth behind reality and expectation is about a $100,000 chasm. This disparity might explain why the debts of our youth have exploded as they bridge reality to expectation. If I can’t make $145,000, I can look like I make $145,000!
The best excuse people have for not having wealth is “I don’t have time.” Well, why don’t you have time? Because you have a job. Why do you have a job? Because you need one. Why do you need one? Because you have bills to pay. Why do you have bills to pay? Because you have debt. Why do you have debt? Oh yes, because you went to school for six years and have six figures in student loans.
If you financed your advanced education with debt, the debt automatically becomes parasitic and traps you into forced job servitude, and that destroys freedom. While you might earn more, work is forced to feed the debt. The debt is parasitic because it fails to free time and instead creates indentured time. Sadly, the parasitic debt is unforgiving and isn’t sympathetic to the source. Whether you owe $45,000 for your awesome BMW or for student loans, debt steals freedom and forces indentured time.
Chapter Summary: Fastlane Distinctions
➡Slowlaners attempt to manipulate intrinsic value by education.
➡Indentured time is time you spend earning a living. It is the opposite of free time.
➡Parasitic debt is debt that creates indentured time and forces work.
[14] - The Hypocrisy of the Gurus
There was a time when a fool and his money were soon parted, but now it happens to everybody.
~ Adlai Stevenson
You’ve Been Duped
Suppose after college you’re getting a bit pudgy around the middle and decide it’s time to put yourself in cover-model shape. You enroll in a community college class called “Mega-Gains: How to Build Yourself the Body of a Spartan.”
On the first day of class, you arrive early, seat yourself, and anxiously await the class instructor. After a few minutes, an obese man walks into the room and waddles to the front of the class. You think, “Wow, he’s fat . . . but he’s here to change that . . . good for him!” As the man profusely sweats while fumbling with a stack of papers, you glance at the student chair near the man and wonder if he can fit on it . . . he’s twice the size of the chair!
Then suddenly you’re hit with the paradox.
This isn’t a student but the instructor!
Are you kidding me?
How can this man effectively teach a class called “Mega-Gains: How to Build Yourself the Body of a Spartan” when he clearly doesn’t have the body of a Spartan?
How can anyone take him seriously?
Bewildered at the hypocrisy, you exit the class and hit-up the college for a tuition refund.
When it comes to gurus and financial advisers this is what you must do: leave class and request a refund because they’re guilty of a Paradox of Practice.
The Paradox of Practice
The Paradox of Practice asks, “Do you practice what you preach? Are you a model, an exemplification of what you teach?”
➡Would you take skin care advice from a butterface?
➡Would you take financial advice from a bankrupt bum?
➡Would you take medical advice from a sanitation worker?
➡Would you take bodybuilding advice from a 90-lb. weakling?
The Paradox of Practice is a heated debate in my forum. Some feel it’s perfectly acceptable to preach a strategy for wealth yet never use it.
Do as I Say, Not as I Do
A Paradox of Practice exists when someone promotes a moneymaking strategy but that strategy is not what made him or her rich. In other words, they’re not practitioners of their own advice.
These people effectively teach one wealth equation (the Slowlane) while they get r
ich leveraging another (the Fastlane).
When I see financial powerhouse “Suze” instructing people to “dollar-cost-average” their mutual fund portfolios, do I listen to her? Hell no. I laugh. When “Cramer” advocates stock in Lehman Brothers because he says it’s a good buy, do I listen? No way.
I feel sorry for anyone who follows the investment advice of these people. I consider these people to be better entertainers than investment advisors. I have no love lost for the poor sap who lost his retirement savings because he listened to some CNBC pundit peddling some hot stock tip or investment advice.What is wrong with people? How do you not take responsibility for your financial plan?
And then there’s your uncle. You know the guy—the well-educated elder in your life who knows everything, including the molecular structure of dark matter in the Horsehead Nebula. His army of factoids is always ready for deployment: stock tips, the latest and greatest investments, money trends. Yet, lest you forget, he lives paycheck to paycheck.
I call these people “Broke Know-It-Alls”—people who dispense financial, moneymaking advice, and yet are dirt poor. These blabber-mouthed imposters are 300-lb walking hypocrisies on how to live a life of health and fitness. Listen to these folks for entertainment, not advice. Good advice comes from the guy who scores touchdowns—not the guy who can’t even get on the field! Yes, the best quarterbacking advice comes from Tom Brady, not MJ DeMarco.
Is a Paradox of Practice in Play?
In the game of money, money is the scorecard. If someone tells you how they “scored,” make sure they disclose their real wealth methods, not the illusion concealing the real culprit.
