4 min read

Capitalism requires... capital?

Capitalism requires... capital?

There is an overlap in people that attempt to advance their career aggressively and those that wish to accumulate wealth. Having ran a software firm for 12 years, I've witnessed and overheard countless conversations by very smart, ambitious, and well-paid people about their thoughts on wealth accumulation. Whether it be side hustles, real estate, laundromats, vending machines, credit card churning, digital couponing, or 401k hacks - there is no shortage of ideas or schemes for the ambitious minded person to consider.

It is interesting to watch a lot of smart people discuss a topic; particularly in a collaborative form where a group is navigating like a hive-mind. What is odd, is witnessing that same group struggle with a basic concept that some of the simplest among us have mastered. It is odd seeing that the basic roadblock to every cited scheme is funding. This would be more understandable if everyone in the group made $2.13/hr plus tips, and fought daily just to exist. However, the demographic cited above are brilliant, highly educated people often making well into six figures for years, and yet will struggle to come up with a few thousand dollars for some sort of investment or side hustle. Comments like "its two bad I can't just get a small loan of 1M from my parents" are common.

Cut to a few Summers ago when I was giving a ride to a young farmhand in Roane County, TN named River. River had dropped out of high school his freshman year, was soon to celebrate his 19th birthday, and had a baby on the way. He survived by doing odd jobs at different farms there in Roane County, usually at day laborer wages. When I asked River what he wanted to do for a dream job, he emphatically stated that he wanted a farm of his own, to which I struggled to ensure my silence wasn't too loud.

Ariel view - East Tennessee farm
Photo credit: Nathan Anderson

If you're out of the loop, farming is a good way to take a million dollars and turn it into a bankruptcy and foreclosure. It is necessary and extremely laborious, but if you were born into poverty, and you wanted to change that - farming is the last route you should pick. The thing is, in River's world, farmers were the top of the pecking order. He would look at those half-million dollar tractors and assume there was wealth behind it, not a soul-crushing debt with a criminal interest rate. He would see those large tracts of land and an F350 dually, and see financial success, not a lifetime of debt. And it really isn't in the farmers interests for their labors to find out otherwise - because the minute River ceases wanting to be a farmer, they have lost another cheap, strong back.

What River has in common with our hustlin' geniuses is that they are basing their goals of wealth on what they have personally seen as wealth portrayal; in movies, magazines, songs, even how friends and neighbors manage their finances - and it all boils down to a theme of indulgent and reckless spending. This perception is so base that it is almost not even conscious. So why do they struggle with the same barrier that River faces despite their cozy salaries? Burn rate.

If someone is a Senior Software Engineer, odds are they have spent the majority of their life figuring things out just a tiny bit easier than others. It isn't a rule, but there is a bit of a trend there. And so it is wildly fascinating that this smart people will spend the early days of youth and career increasing their baseline of minimum spend. They'll find someone to marry, have kids, get a fat mortgage on an unnecessarily large home, have a few nice cars (and car notes to boot), get accustomed to a certain about of vacationing, dining out, and toys - and THEN, once absolutely stuck, with no variable wiggle room, decide to start exploring wealth accumulation after 15 years of lost opportunity cost. Do these people know that kids are optional? That there isn't a law requiring you to buy the most expensive home you are qualified to buy with your income? Surely some common sense poked its head up before being bypassed, no? It is poor planning and behavioral patterns like this that make knuckleheads like Dave Ramsey so popular - endless workshops, conferences, and books all summating one common sense principle: don't spend like a poor person unless you want to stay poor. Not every dollar that lands in your account has to be spent.

I am sharing this observation prior to publishing a guide to establishing business credit and gaining access to 100k of borrowing power. It is a warning. The fine print on the bottom of the label. Besides, based on what we know about happiness and the Hedonic treadmill, overspending isn't going to scratch the itch you think it will - not as well as security and a stable foundation will. You can have access to millions of dollars, but until you learn and exhibit a little self-discipline on managing it, your life is always going to be a struggle, or at the very least, one of deficit. Fortunately, the behaviors can be changed once identified, and sometimes it is just that simple.