While the title is all encompassing we’ll go ahead and say that health is the only category where we can’t think of any upside. Becoming disabled or significantly impaired. One item could be “appreciating life more” if you know that you only have a few years to live. Besides that we can’t really think of any benefits from becoming ill/sick. This is also due to our belief that Health is always #1 followed by your personal relationships and money. Essentially we have a bias towards health that makes it impossible for us to recognize why being impaired would ever have a silver lining. That said. We used to believe that getting richer was always a good thing… that isn’t true as well. So we’ll highlight some interesting things to think about.
Bad Side of Getting Rich: If getting rich means you have $100,000 in your account, then there isn’t much downside. We’ve been there before and not much changes (you simply lose the fear of becoming homeless any time soon). When we refer to rich, we’re going to draw a minimum value at around $1,000,000. At this point, things start to change. This is because you will have to be a lot more careful. Even if you’re flying under the radar for the most part, anyone who spends more than a few hours with you at a time (per month) will eventually figure you out. They won’t know how much you’re worth *exactly* but they’ll know that you’re doing well. It could be free time, it could be the amount you fly, it could be your demeanor when money conversations come up (every average dude spends a ton of time talking about money and you won’t relate). Or the most likely culprit… people will realize that you never complain about money.
You’d think there is no downside, but there is a big one: general distrust. This can also be called cynicism, the richer you get the more likely you’ll develop more cynicism as you’ll notice people “angling” for something. It could be as small as “oh sure you can pay for this you’re rich!” (while at lunch) or as large as “Hey I know this isn’t a lot of money for you so let me do the project” (classic). Essentially, unless the person is not directly competing with you (in your field) and the person is also rich (millionaire at minimum), it isn’t easy to trust them. The life you live compared to a person still trying to “make it” is unfathomable.
For fun this is also a good way to tell if someone is actually rich. They don’t complain about having “a lot of friends”. People who have no money are the ones who are most likely to suffer from “a low friend count”. If you’re rich and socially intelligent you’ll limit the number of real contacts to handful. This isn’t due to anti-social behavior. It is due to experience. Essentially, people who don’t have much going on for them will always ask about “how to network better” a polite way of saying they want to scam their way into a good network of rich people without doing any work. These same people will also ask how to become “the life of the party” because people are less likely to hang out with unsuccessful people. Funny how it works. When you make it, you spend more time avoiding people than you do trying to get into a new network. You already have your network since you had value (ta da!).
Bad Side of Spending: One of the other interesting things to be aware of is the downside of spending. Travel is probably the biggest giveaway. Once you’re well off and you’ve traveled to say 30-40 major cities, you don’t feel a “jolt” when you go to a new one. For people on the younger side of the age spectrum, packing your bags and landing in a new city (Moscow, Buenos Aires, Miami, etc.) is exciting. You feel a rush of adrenaline and excitement. We’re here to tell you that this goes away! Eventually, when you have gone to numerous cities, the plane flight and the new city are not exciting anymore. You simply land and you feel like you’ve already been there before. Essentially you’ve become desensitized to new cities unless something extreme is happening.
This same desensitization will overflow into material items as well. If you grew up with no money, buying a new item (car, suit, shoes etc.) gave you a rush. Fast forward a few years after living a more comfortable life and this feeling declines. In fact, buying clothes will become mundane/boring (usually the most common one to go first). You will simply look at your shoes or shirts and say “oh yeah i need to replace this it’s old” and go buy a new one. There will be no emotion and you might even get questioned by the sales people “are you sure you want to buy this so quickly you’ve only been in the store for 5 minutes”. Hilariously, some people will ask you for your ID since your rapid purchase will look like someone who is operating with a stolen credit card. They will be even more confused when you tell them to cut off all the tags and throw away the receipt (no returns).
The final downside of spending? Comfort. The more money you make the more money you’ll spend on comfort. Not sure why this is but it’s a common trend. If you are then forced to stay in a terrible hotel or sit in the middle seat of a plane all the way in the back, you’re going to feel terrible. This is again a “1%er problem” but is a legitimate problem. The more you get used to something the harder it is to go back. This simple sentence is important and explains why we don’t believe in spending more than you make. If you’re saving over 50% of your income, you’re able to live the same life for at least a year without any sort of cash flow.
Good Side of Being Broke: Flipping this around but sticking with money, there is one very big upside to being broke… you don’t know what you didn’t have! Sure you always knew that other people had access to more resources than you did, but you definitely did not know what they were consuming. This means your decisions going forward are *hopefully* more practical. If you’re used to viewing a $100 purchase as a big deal, you’re going to save and invest like crazy until you actually view that purchase as tiny. Odd how that works.
Keeping it simple with examples, take your living situation. If you grew up in a richer home we’ve noticed that these individuals hate living in smaller places out of college. This creates a need to “upgrade” their living situation over and over again (increasing fixed costs). On the contrary, a person who grew up with no money and had to live in a shared bedroom for his life, is going to feel perfectly fine in a one bedroom apartment. In fact, that one bedroom apartment feels a bit big and annoying making him more likely to stay and simply hire a maid for once a month cleaning. When we think of this example it helps explain why the top 1% changes so rapidly every 10-20 years. It’s because the offspring of rich people do not know what a difficult life looks like. This requires them to spend more to try and mirror their prior lifestyle even if they don’t have the money.
The last upside of starting from zero is that each small gain actually gives you a rush. If a person grew up upper middle class, being able to go out to dinner once a week is not special. If you grew up with nothing, being able to go out and spend $50 on dinner every week is an absolute luxury. This “life style high” lasts a long time. Why? Well if $50 can give you a big “life style high” then you only need to earn ~$50/week for a few years in a row to keep this high ($2,600 in annual income spending). Compare this to someone who “expects” to do this. They likely need to spend an extra $500 a week to get the same high ($26,000 in annual income spending).
Good Side of Being Low Status at the Beginning: While this is a different bullet it it still related to being broke. Anyone who started with almost no money, knows that they are treated differently from people with money. This is the same for attractive and unattractive people. Believing that a good looking or rich man will be treated the same as an ugly or broke man but the general public is unbelievably crazy. If you don’t “look” the part or people can get the sense that you “don’t belong” they’ll definitely try to ostracize you and push you away. This teaches you a valuable lesson on human nature and also makes you significantly better at reading people.
The work place is probably the best example. Once a person from a lower status background gets moved up once or twice, he’ll immediately recognize the difference in treatment from people below him. In fact, he can figure out which of those people came from lower or upper classes based on how he’s treated. As a general rule? If the person grew up rich he’ll always believe that he deserves your spot and that he’s underpaid. You see this a lot on Wall Street which is why we used it as an example. If anyone reading this is still on Wall Street, please let us know when the industry wakes up and realizes the best hire is never the guy who grew up rich. The best hire in the guy who grew up with nothing because he had to do a lot more work and stand out to make it in the first place. The only exception is the ultra rich candidate who can somehow immediately bring revenue into the firm (his dad/mom is a client for example, which happen all the time too)
The other major benefit of being low status is that your close friends are more trustworthy. This relates to the prior paragraphs as your friends when you had nothing are the same people you’ll trust when you have everything. Naturally, you’ll lose a ton of people through attrition but it’s always good to know that the people who also make it are unlikely going to stab you in the back any time soon.
Bad Side of “Success”: One of the themes here is “detachment”. While it could be argued that this isn’t bad but a by product it does help us understand why many celebrities and artists die of drug abuse. When you make a big break through (sell a company, make the next big music hit) you get an enormous high. You’re thrilled beyond belief and feel like you’re a king. We imagine this is what your average person feels like when he goes to Thailand or another cheap place where he’s suddenly in the top 1% of the pecking order.
The big negative here is that you’re going to spend a lot of time trying to chase that high. In some cases it won’t actually show up. We’ve seen too many cases of one hit wonders and multiple failed companies (after one successful one). While it hasn’t happened to us (yet and hopefully never) it is very very very easy to see how it happens. When you make your first breakthrough we’ll all but guarantee you go through a stage of hedonism (nothing is ever enough!). If you’re smart/lucky you’ll recognize it and break the pattern. But. There is no doubt that many people fall victim to the spiral if they can’t find anything to replace the high they got from success (money/success is the most powerful drug in the world).
Good Side of Mediocrity: That’s right, there is an actual good side here. The good side is that you’re likely emotionally stable all of the time. While we don’t think this is a life most of our readers are interested in, just take the life of a monk (an extreme). By being able to remain stable at all times, the person is relieved of all worry from his life. He doesn’t have to worry about investments or people angling for his pot of the pie since there are no investment and there is no pie. Instead he’s able to make due with what he has and simply “lives”.
There is a lot of good here that only makes sense once you’ve seen success destroy a few lives. Don’t get us wrong, we strongly prefer immense success with emotional control. But. Living a basic life has many merits. It can create a meditative calm around your life as there are no tasks that need to be done. If you want to see what this is like, try to turn off all of your electronics and leave them for at least 2-3 days. You’ll be surprised at how addicted you are to working and “moving forward”.
Bonus: One last negative for being rich is motivation. If you have $3M in investments, you’re generating $180K without moving at 6% returns. This means a new idea that makes $20-40K but occupies your time, might be a complete waste of your time. This won’t make sense to regular people and will also become apparent when you’re unmotivated for projects most people would die to have.