The money habits and secrets of the ultra-rich, with Paul Sullivan and Ramit Sethi

For those of you who have been following along since 2004 when I started I will teach you to be Rich. You'll know that on the surface, I Will Teach you to be Rich was about personal finance. But if you actually dug beneath the surface, it's really about psychology and behavioral change. I've always been interested in the psychology of change and the psychology of money. Why do people act the way they do? Why do they spend on the things they do? Why do we listen to people who tell us don't spend money on lattes when it doesn't really even do anything for our personal finances? Well, I'm very excited today to introduce someone who has stuck studied the psychology of wealth. He's going to talk to us about it. His name is Paul Sullivan. He's the author of the Thin Green Line, and he's the Wealth Matters columnist at the New York Times.

I'm Paul Sullivan, author of the Thin Green the Money Secrets of the Super Wealthy and the Wealth Matters columnist for the New York Times.

Paul, welcome. Now, you chose to talk about wealth when it comes to. There's a million other books out there, and you've been writing about wealth for a long time. Why wealth? I mean, the argument is or can be made, like most people are not wealthy by definition. And yet you're writing about people who have $10 million for a portfolio defense and they can spend 30 grand a year. You know, why are we talking about this in the first place?

Yeah, we're talking about. Because I make a distinction in the book between being wealthy and being rich. And many people hear that and they think I'm splitting the atom. They say, what's the difference? But, but enriched to be is a number. And if you think of the Thin Green line in my title as the s and P500 over the past 50 years, it starts low, charts high, some dips and doodles along the way. But the people on the underneath of that, they're rich or they're poor at the very bottom. And rich to me is you don't have the choices that you would have if you were wealthy. And you could be at the very top of that chart, you could be somebody running a. A hedge fund. But you're making crazy choices with your money. And at any point you're going to realize that what you're living is a house of cards. Wealthy is being secure. And say wealthy is not the number on your paycheck. It's not the number in your brokerage account. If you Zillow your house, it's not what your house is worth. It's that level of security and comfort that comes from not just being cognizant about what you have, but making the choices and behaving in such a way that you're going to be able to hold on to what you have and hopefully accomplish your goal, whatever your goal may be. And your goal may be very modest. You could be a teacher. My aunt is a retired teacher. She's living a great life, but she lives in a condo. She likes to take care of her grandkids. She volunteers, she takes one trip a year. Or your goal could be much grander than that. But you've got to make sure that the realities in your objectives align.

I always found it a little puzzling that as a society, we're really comfortable studying the best in many fields. Like, we are obsessed about professional athletes. We're obsessed about movie stars. But when it comes to people who have been successful at creating wealth, all of a sudden it's a value judgment. And instead I took the approach, which I think you've done a similar thing of saying, how'd they do it? Doesn't mean that I have to go to the same lengths they did. But I want to know what they did to get there, because I bet you I could learn a few things about my own life. So as you've met these people who are very wealthy, I'd like to dig in a little bit to what you've learned about them. You know, you mentioned the guy from Brooklyn who kind of looks. He's got crumbs on his shirt. That's actually pretty surprising. You know, the common belief, oh, 100 millionaire is going to walk around in a tuxedo all the time.

Right.

What has surprised you as you have met more people in this world?

I'd say their level of focus, good or bad, on whatever it is they want to achieve. They're not necessarily smarter than everyone else, but they're going to put in longer hours than everyone else. And then third is probably their admission, particularly at the very top, that luck is involved, that there was, you know, they worked really hard. But, you know, when I interviewed Pierre Omidjar, who started ebay, he joked with me. He said, you know, yeah, for three years, I worked really hard. I didn't have a vacation. I didn't have a life. But then my company went public, and at that point, when I interviewed him, he was worth about 8 or 9 billion. It's probably more now. He says, you know, I had an outsize reward. I mean, his Parents were academics or quasi academics. They also worked hard, but they picked a different field and it wasn't as lucrative. Which is not to say back to what I said before. His parents may very well be wealthy. They may very well have all the things they want and be able to make those choices. Someone like Omidyar stands out just by the sheer size of his wealth. But those who are smart about it, the Tiger 21 members, the Omidyars of the world, they acknowledge the luck component. But then they say, okay, so what? Life's unfair. Some people get cancer young, and they die. Life is unfair. That happens. How do I learn from this? And I think that's at the core of what a group like Tiger 21 is doing. Because these people aren't worried about paying their mortgage. They're not worried if they need a new car, they'll just go get it. None of these basic concerns are concerns that they have. They're looking at money, and I almost feel like they want to bring it back to its essence, which is a means of exchange. Money is a means of exchange. But to do that, they have to make sure that that money doesn't destroy their kids. It doesn't create some sort of dynastic culture where they have grandkids and great grandkids who are loafing around. If they're going to give to charity, they want to give it in the best possible. I mean, they want to spend money on education in a way that is productive. You know, in some ways, these are champagne problems, but in other ways, it shows that they acknowledge, okay, I have all the money I need, but I still have problems.

So some of the things you're talking about, the emotions, the psychology, are really the drivers of what's going to change people. Now let's actually talk about the psychology, because I'm really curious what you found. We have kind of all read these stories about lottery winners. They make 10 million bucks. Two years later, they're back in the same place. Athletes, classic. I think there's some stat that well over 50% of NFL players are bankrupt within five years. What's going on here?

The athletes, they always get picked on. But in my book, I specifically talk to the chapter on spending. I found a couple of football players who are really thinking through this issue just to play on that joke, that joke of all football players are broke. And this one guy, I found a guy named Paul Puzlinski. He's a linebacker now for the Jacksonville Jaguars. I met him. He's just enormous. He's a Guy who shouldn't wear a suit because it doesn't fit and it's all crowded up around him. And when I first met him, it was during the NFL strike and we were talking, he was talking about a car, and he dreamed about getting BMW. At the time, he was playing for the Bills. He drove a Nissan Armada for free because he signed some autographs. That was enough for him. Now, Paul Pasinski's first contract paid him $4 million. He still thought it was better to drive a free car than to buy the BMW. Well, I talked to him. A year and a half later, he signed this second contract with the Jacksonville Jaguars. Now, the headline number, you know, these NFL contracts have ridiculous headline numbers. A headline number, all in for him playing eight years in the NFL is $47 million. Yeah. But what matters is the guaranteed portion. Guaranteed $20 million. $20 million just for showing up and playing. You assume, you know, 10% of that goes to agents, call it, you know, another 8 million goes to taxes. He's got $10 million post tax, post agent fees sitting in the bank. What does he want to talk about? His car. And he said, remember last time we talked, I was thinking about getting a BMW. I said, yeah, did you, did you get the BMW? And he said, well, you know, I drove it, the big seven series. It was nice, it was comfortable, but in the end, I couldn't pull the trigger. It just seemed too much. What'd you get? And he said, I got the Audi. I got the Audi A7. It's nice, German engineering. Big, you know, big guy, roomy. And we moved on. And I thought, I think about that conversation all the time, because a BMW, top of line BMW, 100 grand, top of the line Audi, 80 grand, 75. 80 grand. Most people think that's absurd. What's the difference? Well, what he did was he made a key Choice. He saved 20 to 25% of the price of that car, 20 to 25% savings right there by thinking it through. And I thought about it a lot. Because a guy like that, who's making choices, who's saying, what do I need versus what do I want? I don't think a guy like that is ever going to run out of money. And he, in the book of spenders, he's in the category of people I call dissipators. They're dissipators, accumulators and making spenders. And a dissipator, it could be a lottery winner, it could be an athlete, but it could very well be somebody who invents a great app and sells it and gets 5 million bucks, 10 million bucks, whatever. 500 million bucks. That's the high water mark chances are of their earnings. And they have to make choices and think about it in a different way than somebody who may have another bite at the apple.