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When Cars Fly
As I walked into the investment firm in San Mateo, California, for my first official day of work after college, I was certain I would change the world. Instead, the experience working at that firm changed me.
It was a typical overcast morning in the Bay Area, and all the new recruits gathered in the firm’s lobby to take a tour of the premises. “Welcome to your new home!” said the assistant as we prepared to circle the research floor. There were glass windows that enclosed equity traders and research analysts as they processed buy-and-sell orders for clients and the firm’s various portfolio strategies. People were glued to their seats, attention split between four computer screens each that displayed graphs that looked as if they had no correlation or trend. I made it a point to look at all the other members of my cohort. Their faces couldn’t hide their excitement at the amazing opportunity to work at this firm. And I thought to myself, “I don’t know anything about this stuff.”
Yes, I knew nothing about finance and investing. I had played football in college and was on the trajectory to be an NFL draft pick when I tore my ACL. Realizing that I needed a new career path (and fast!), I looked around to see what else I could excel at. With nothing but ambition in my tank, I had interviewed at the investment firm and been hired as an investment associate.
As the week proceeded, I absorbed all that I could about the stock market and financial planning. Basic things like the definition of a stock, how markets work, and the average returns of specific investments were routinely typed in my search engine. But although I was accumulating fundamental knowledge of the industry, I still lacked the tools that would enable me to apply it. I could not pinpoint why investors chose to invest in certain companies over others.
And more importantly, I could not explain how these decisions could help a person build the wealth that I too yearned to build. From my naïve perspective, the stock market was a gamble that involved taking high risks on your principal to receive a reward that may or may not be realized at an undisclosed future date. Part of me was asking myself, “Why take the risk?” But the other, more ambitious part of me refused to let the opportunity to learn pass me by. Besides, I was a first-generation American born in an impoverished neighborhood—I did not have much to lose. And so I rolled the dice.
Every month after my arrival, a new cohort arrived and toured the premises just as I had. About four months in, with only a slightly better understanding of wealth-building, I was joined by a new employee with a knack for investing. Let’s call him John. I observed John closely as he started his computer and organized his desk. His face was as tired as if he had been working for thirty years. He dressed conservatively, even more so than the standard for the financial services industry. He read voraciously and had a laser focus when it came to completing tasks.
When the day came for our first Q&A session with the firm’s chief executive officer and billionaire investor, John proceeded to ask questions that many of us new hires could not even comprehend. The topic of the meeting centered on the correlation between investing and wealth-building, and my head was swimming with fundamental questions about how I, a kid from the inner city, could make my money work for me and build wealth. As the presentation progressed, many of the company’s strategies and ways of analysis were explained. And although most of my cohorts were wide-eyed and clueless, there was one person who wasn’t.
From the accumulation of wealth to the compound interest of dividends to the analysis of a company’s financial position before investing in it, it seemed as if there was nothing that John did not know. He even hurled back tough questions at our billionaire CEO until the leader asked to see him after the meeting. I was thoroughly impressed and felt the need to follow up with John. I machine-gunned a million questions at him about wealth-building, stocks, and analysis. But my simplest question is the one that yielded the most important answer. I asked, “How do you know what to invest in?”
He turned slowly, looked at me dead in the eye, and replied, “I’m investing for the day when cars fly.”
Wealth-Building Is a Marathon
There is an old adage that reminds us, “Life is a marathon and not a sprint.” In a sprint, the runner sets her sights on a destination that is close in distance with a foreseeable end. When the starting gun is shot, the sprinter is eager to reach her top speed as soon as possible so that she can win the race. She exerts all her energy early because of the short-term nature of the competition.
But if, like John, your eyes are set far into the future to the day when cars fly, the race is anything but short-term. It is most certainly a marathon. In a marathon, a number of factors contribute to the success of the runner. The runner must breathe properly and keep her composure. She must assess the distance between her current position and her goal, but also be aware of the other competitors and of other risks, all while being disciplined enough to know when to kick it up a notch and make a pass. The marathon runner’s mindset is one of consistency. It is the mindset that is routinely present in Master Wealth-Builders everywhere.
It is the mental shift from sprint to marathon that allows Master Wealth-Builders to stay committed to their goals. They know the road will be long and arduous, that many parts of the race must simply be endured, and that nothing worthwhile has ever come from comfort zones. They know that while their youth is an advantage, it also means that the journey will be that much longer, and that consistency over time is that much more important. They know how to master their mindsets to keep on going.
The bottom line is that wealth-building is a long-term goal and that young people like yourself have the longest term in which to do it right.
Thinking Counterintuitively
For many of us, our actions—in terms of wealth-building and otherwise—are emotionally driven and not based on rational conclusions. For example, a man plays the lottery and wins a few million dollars. Because his financial circumstances have changed overnight, all of the wealth-building work he had committed to prior to hitting the lotto are now, to him, unnecessary. “I’m rich!” he thinks to himself, which is the intuitive thing to feel. In truth, his winnings are a small deal in the grand scheme of Master Wealth-Building.
Let’s take that scenario and apply some counterintuitive thinking. Instead of splurging on goods, the winner reassesses his current financial circumstances, where he would like to go, and how long it will take him to get there. He deliberates thoughtfully on all his options to make sure that his next course of action is logical, precise, and aligned with his plan. This is a hard thing to do. Ignoring our reactive intuition is extremely difficult. Yet restraining yourself from acting on impulse often yields the best rewards. Take the most recent stock market crash.
On September 29, 2008, the Dow Jones Industrial Average fell 778 points—the largest single-day drop in its history at the time. During the previous period, the stock market had been yielding generous returns year over year. Without much research or professional help, families could throw a dart at any stock or mutual fund and that investment had a high likelihood of appreciating in value. This steady growth and wealth accumulation made Americans greedy and overly confident in their abilities to invest. They strayed from their financial plans (if they had any to begin with) and had astronomical expectations for their portfolios.
Unlike the crash during the Great Depression, which took several years for the market to reach its all-time lows, the financial crisis of 2008 took just eighteen months for the market’s value to drop by over 50 percent. Imagine investing $10,000 and waking up eighteen months later to just a little north of $5,000. Yikes! This was the same sentiment that most Americans had at the time. The thing that most Americans didn’t do was to think counterintuitively about the current situation, which led to hundreds of billions of unrecoverable dollars lost.
Think about it: Your account value is now at approximately $5,000. You’ve suffered the emotional heartache of watching the markets dive over a relatively short time period. At this point, you’ve sworn to yourself that you’ll never try this investing thing ever again. But, as Rothschild, an eighteenth-century banker, is said to have remarked, reaffirming the value of counterintuitive thinking, “The time to buy is when there is blood in the streets.”
With the S&P 500 Index sitting at roughly 676 points, indeed, blood was in the streets. And so you make an unnatural, probably uncomfortable, and definitely counterintuitive decision. Instead of pulling your money out of the market, you invest another $10,000, giving you a grand total of 15 shares in the S&P 500 Index. Nine years later, the S&P 500 stands at 2,351. Those 15 shares that you purchased at the bottom of the financial crisis—and against your own intuition—are now worth more than $25,000!
Wealth is not an accident, nor does it happen with luck. Even if you win the lottery, the likelihood of keeping that newfound wealth is statistically slim to none without your making the mental shift to adopt a mindset of wealth-building. And make no mistake about it: Mastering your mindset is by far the hardest part of building long-term wealth. Wealth starts in your mind, and then it manifests in your life. Wealth is built every day through sacrifice and extremely intentional actions. But without mastering your own thoughts, wealth-building is impossible. Your thoughts are the cogs in the engine that drive you down the path toward wealth.
If you can focus on the bigger picture, way into the future to when cars fly, thinking counterintuitively will eventually become second nature. Luckily, your youth gives you plenty of time to build the required muscle memory and to make the right decisions that will positively impact your near- and long-term financial circumstances.