There are so many experiences to have in life, you would think that people with a lot of wealth would have many of them.
But, as this article points out, it's easy to trap yourself with the things you like. Like fishing? You buy a huge boat. Like flying? You spend millions on a cool plane. Like scenery? You buy several houses.
Pretty soon, all your time and energy goes into the things you own. Or, as people say, the things own you instead of you owning the things. John puts it very well: you can only live in one place at a time.
Once my startups begin to mature, I plan on renting just about everything. That way I can try many different things without the pain of ownership. If I find myself doing something over and over again -- and it would have to be dozens of times -- I might consider buying something permanently. Maybe.
Concentrate on experiences, not possessions (or money)
EDIT: I heard somebody refer to what happened as a "luxury consumption trap." Just wanted to add that nothing about this has anything to do with the amount of money involved. This is more about your relationship to the things you own, however much they might cost. You can tie yourself up with five dollar items as easily as you can five million-dollar items. (It's true, however, that people seem especially blind about this when this happens with larger-ticket items.)
I can't agree enough. I used to buy toys all the time (you know, exotic workstations on different architectures, fancy PDAs and so on, you probably know the drill) and realised after a while that I had a whole load of few year old tech that I never really used. These days I cut back. The only thing I really spend money on is travel, accommodation and food. Possessions only tend to stick around for short periods of time. Experiences stay with you forever. I don't think I've ever met anyone who on their deathbed was likely to say, "I wish I had more stuff"
Re: the edit (since that was me), I do think the luxury-consumption trap is qualitatively different, and one that applies to both experiences and stuff. Some of it does overlap with the general being-owned-by-things problem, which can be a problem at various levels of spending. But there's a different kind of paralysis that can come from "now I'm rich, I can do rich people stuff!". For some people that's great, but for other people it leads to them doing what they think $100m-net-worth people should be doing, whether that's yacht purchases or globe-hopping or $200/plate restaurants, even if they personally would be happier coding, starting businesses, or eating burgers.
At least, it doesn't seem too uncommon for people in tech who had successful exits to live a high-spending retire-in-luxury lifestyle for 2-3 years, then "burn out" on that in one way or another.
Perhaps this is related to having some sense of value just in the amount of money involved?
Many folks won't think twice of spending a hundred hours or more each year managing a property they rarely use because of the value of the property. Whereas if they spent that same amount of time worrying over something inexpensive? It would either be considered a hobby -- done exclusively for the experience -- or a sign of some sort of OCD.
I have been very fortunate in my life to have gone many times between having lots of extra cash and having to scrimp and save. I found it took several such cycles for me to finally "get it" For a long time, when I was flush I would buy things. A top-of-the line computer each year. A vehicle that I paid to have refurbished to my specifications. A large piece of land for an office. And so on. One day I woke up, looked around, and thought just what is the purpose of all of this? Owning things gave me a sense of security, and perhaps a sense of social collateral, but the trade-off just wasn't worth it. If you want security, it's better just to have cash in the bank. If you want to socially signal with your possessions, I'd advise making enough to first pay somebody else to manage all of it before you load up. Or better yet, just do long-term leasing and have maintenance and such be completely hands-off from your end. Assuming you have the money, the buying is the easy part.
We all live on some spectrum of consumer vs. producer. Some entrepreneurs (classic producers) never stop being primarily producers. Those are the people who remain frugal and are indifferent about their fortunes. Others fall toward the consumer end of the spectrum, and sometimes lose their way.
I think it's universally true that producing is always better than consuming, but perhaps someone will refute that point convincingly.
I totally agree with you. To me the producer is already doing what they enjoy doing, the financial gains are a side effect, and will pretty much just be used as funding to buy what's needed for them to keep producing. Would be like someone who enjoys running a business, the money is a part of it, but not the only goal, it blurs the line between hobby and work. The consumer spends their time consuming, the side effect of that is waste, once the consumption is over, the thrill is gone, the usefulness, if there was any, runs dry, it's tossed aside, as something new needs to be consumed.
There are things I want, that are not needed for my survival, but they are things I actually enjoy having, they serve some constructive purpose. I don't understand buying stuff just to buy stuff, just to have a new car, or just to have the latest version, it doesn't make sense. I think that is where some people that come into lots of money go wrong, spending it becomes their hobby, with out a job you got a lot of free time to keep yourself entertained. Producers would seem to inherently have the ability to deal with that free time in a much more fiscally responsible manor.
Society rewards production better than consumption.
Yet, when you think about it, when no one consumes, the value of production becomes zero, too.
Perhaps my initial sentence should be changed to:
Consumers reward producers.
They're like a pair of chopsticks.
For individuals:
One could argue that when possible, consuming is always better than producing. You're swapping pieces of paper for real goods and services!
We're sort of fortunate that programming counts as "production" while playing computer games count as "consumption", and we're more interested in the former than the latter. I see it as just how the world works; "Fate" if you will. (I'm not religious, though).
EDIT: I save as much as possible and program lots, while my brother spends almost every dollar of his paycheck. So I'm biased.
We are very consumer based, at some level even the producers are just consumers, that use what they consume to create something else for someone else to consume usually. I would say that is just part of our way of living, in a society of people. The only way for us to have no consumers, is if we are all self sustaining, hunter gatherers really.
Perhaps at one point our species was consumerless, but the fact is, we work way better in a group, which means there will be consumers. I like turning steel into usable objects, I don't like mining it, there for I must be a consumer at some level. If I was forced to produce everything I needed to build something complex, like say a PCB board and components, it would take a life time to get everything necessary to produce something not all that spectacular.
I think the "bad" part of consumerism, is more a psychological state, like using drugs to escape a problem. Consuming on its own, isn't necessarily bad and you're right, very necessary. Perhaps its all psychologically based, I feel better building something, more than I do just waiting around for the next movie, or video game to distract me from my life. But really, whats the difference if what I produced just ends up sitting in the corner collecting dust, why I'm building something else?
In that sense, being a Producer, requires a Consumer, someone else to find what you have made useful. Otherwise all I've been is a consumer. Producing at worst, is a consumer, at best, helping make society a better place. Consumer at best is a Producer, at worst, just collecting, and creating a market, for junk to be eventually thrown away.
You make a great point in general, but especially about gaming. It's not hard to imagine a world where "gamification" eventually leads to productive outlets that appear to be "games". In fact, we already have this in crude forms all over the place, e.g., bonuses and promotions in the corporate and military context. That's where the lines get very blurry.
I really like your point about production being useless without consumers, but I suspect that there will never be a shortage of consumers.
I splurge too much on food. Everything else is either saved or invested.
I am a 20 years old who have it better than most. While everyone is accumulating debt, I am learning tons on the job while sailing by with a modest start in saving and really lucky investment.
According to Wikipedia: "Beginning in February 2010, John started a new venture in the field of bacterial quorum sensing. His new company QuorumEx is headquartered in Belize and is working towards producing commercial all natural antibiotics based on anti-quorum sensing technology."
I just love how the man, even at 66, still swings for the fences. He doesn't dick around with small projects and SaaS. He seems to have a track record of going after game changing technologies.
There's nothing sad about this story. He's still worth $10m. He will never want for food, shelter, a new Porsche, etc.
Sure, a lot of money was wasted on extravagant things, and he's found that the market value of a private playground in a desolate stretch of desert is not very high. But, that doesn't make the story sad. He's not a stupid man; he can't have imagined that these things would sell for what he spent on them.
Perhaps we have a different perception. To me, destruction of his personal wealth (going from $100M to $4M) is sad. Sure, he made bad investment choices, and I'm in no way implying that he'll starve or go homeless, but I still find it sad. On the plus side, the man seems to have rediscovered his true self in the process.
No actual wealth was destroyed. The real wealth may have gone from one rich man's pockets to another's. Or, in this case, a lot of it "trickled down" into the pockets of all the people who built his expensive playground and toys. Money is a representation of value; some of the "wealth" in this story was merely the result of a real estate bubble...it wasn't actually representative of longterm value, and he made poor bets on those properties. Some of it was transferred from one person to another, for the enjoyment of the spender, and resulted in goods that have much lower value to the market in general than to the original purchaser. That's pretty common of luxury goods. A new million dollar yacht will sell for dramatically less a few years later. It's not sad, it's just normal depreciation on luxury goods, and should be expected by anyone purchasing luxury goods. The extreme specificity and quirkiness of his luxury goods spending makes it even more likely to experience extreme depreciation.
Not true. If his bank simply deleted his accounts, then no real wealth was destroyed. Unfortunately, he used his money to encourage the production of useless things. Real resources were consumed. As you point out, some of the value was saved through the producers' profits (and whatever real value the consumer received). However, if the sum of the final value of the product/experience and the value of the profits was less than what was initially paid, then real wealth was destroyed.
In that case, pretty much all luxury goods are destroying some wealth, every time they're purchased. Which, I suppose I wouldn't argue with. But, I'm not sure that I buy that it's "sad" when luxury goods are produced or purchased.
On the plus side, the man seems to have rediscovered his true self in the process
Don't you think that's worth $96M?
Sometimes people engineer these things unconsciously. There's a story in Jack Schwager's second Market Wizards book about a losing investor who, under hypnosis, says that he is trying to lose his money so his wife will leave him. To an outsider, that seems like an awfully complicated way to go about it. But who knows? We are fraught with contradiction.
True, though he actually seems to personally feel relieved by the loss. It sounds like he got stuck in a luxury-consumption trap, where he was spending all his time trying to live a multimillionaire's life (because he could), instead of things like starting companies. Now that most of it's gone he's back to new intellectual endeavors.
The print version of the article linked to here jumps into the middle of the story. You have to go through a page at a time to get the whole thing.
Frankly, the Fast Company article makes a lot more sense. This, "I lost all my assets, but I'm a happier guy, and now I'm off to Belize with a few pennies in my pocket," stuff is pretty convenient for a guy with five pending lawsuits including a wrongful death that could cost him, well, all his assets.
Wow, fascinating. That article paints McAfee and this story in an entirely different light, doesn't it? Thanks.
edit: I should add, I wonder which is more accurate? About 10 years ago my uncle's family was involved in a lawsuit which ended up going to the supreme court. 20/20 and 60 Minutes (I think it was those two) did shows on the story, and it was very interesting to see each show spin the story a different way. So, the media can definitely pick a side which they think will sell well, and selectively quote and share details. I wonder if that's happening here.
Interesting paragraph from the FastCompany article:
"As all this information [about the wrongful death lawsuit] unfolds for me, many things that had seemed odd begin to make sense: McAfee's publicity campaign to promote the idea that he'd lost 96% of his wealth; the fact that he told me he has sold all of his U.S. assets; his having given away all the companies he set up in Belize; and his quorum-sensing research, a topic that gave his relocation to Belize a noble spin, even though in practice he seemed to devote little attention to it."
So is the ABC News story one of the results of that publicity campaign?
As much as I would have loved to get awed by him going for game changing technologies, it appears that reason behind him relocating to Belize is to escape lawsuits in the US, and his focus is hardly on research.
See the link in the wikipedia article: http://www.fastcompany.com/node/1615167/print
Can't blame the guy, the only reason he got sued is because he has money.
Another thing that is possibly part of this is that people feel the need to lay blame for everything, they can't just accept that someone died and that's that.
It's tough to lose a loved one but no amount of money will bring them back and blaming the guy that bankrolled the operation seems a little weird to me. The pilot was responsible, he should have known the limits of his license. But the pilot is dead and probably was penniless anyway so the blame gets shifted to the nearest entity with money.
In the end, the people that will win are the lawyers, everybody else just loses, even if they get some money they've still lost, for all the time that they could spend to heal they kept the wound wide open.
I think you miss the point. He was never in it for the money. The toys, houses, and cars were a distraction. Read his quotes in the article. The sad part is that he wasted so many years showing off when he could have been fulfilling his passions.
and given his talents and interests those passions could have helped us all by creating new and awesome products. Paradoxically, if he spent more time following his passion instead of consuming he'd probably have a lot more money too.
Not sad at all - he is better for it. He did what rich people are expected to do - buy shit, and found out that it isn't as satisfying as people are lead to believe.
There is speculation that he sold off all his assets and moved them all to Belize etc to protect himself from lawsuits, including a wrongful death lawsuit.
Paper-rich assets inflated by the bubble are being repriced for everyone, not just one guy. An airplane is still an airplane, the fact that its unrealized paper value is less does not change its intrinsic qualities. The tragedy is when you have debt, etc and are forced to sell in a down market.
This is a life-long training and you do not need to be a millionaire to do it. Look around your apartment, house, bedroom or closet. I guarantee you 75% of what is there you haven't used more than twice in the past month. In my case I just bag stuff I do not find myself using and take a trip to Goodwill. Ah, sometimes it feels so good to have less things.
McAfee is cited as saying, “We are the ultimate consumer society. If you succeed within that culture, then you’re simply more bonded to it.”
Any item in your possession or service that you command that exceeds your functional needs of it is, for you, a luxury. It's not just about the rich. Can you truly claim that you need that 60" television to watch your favorite sporting match?
Have you seen Independence Day? I found the movie highly ironic. Talking to my father about the movie sometime after watching it, I remember remarking that what separated us from the aliens bent on annihilating us to consume our planet for its natural resources was one thing: time.
The current crisis is going to destroy that nostrum, and reduce real estate to what it is: a depreciating liability/consumable that produces no wealth and that has high transaction costs. Leverage has been the name of the game for 30 years, and the mortgage has been the only way that the little guys could play that in a major way.
There was a thread a while back talking about how to rationally buy a house, and bunch of people mentioned what a great hedge real estate is against inflation. But no one talked about deflation.
Just in the sense that housing, and in particular new housing, had shifted to the rapid-turnover, quickly depreciating model of a consumable: shoddy workmanship, rapid depreciation and rapid discarding of used goods.
At a purely technical level, despite the best efforts of the housing industry, we do not appear to have yet build a significant number of houses that are totally worthless after three years, so I admit some hyperbole in that characterization.
> In McAfee's case, his Rodeo paradise -- on which he's spent millions -- drew only a few modest bids. The home, which included the airstrip and hangar, sold for $525,000 to a couple from the Washington, D.C., suburbs. "It's a little less than what I paid for the landscaping," he said. "Somebody got a great deal."
For more insight into McAfee's mind (and a bit of a "before" picture), take a look at Outside magazine's article from February 2008, "Flying John McAfee".
In McAfee's case, his Rodeo paradise -- on which he's spent millions -- drew only a few modest bids. The home, which included the airstrip and hangar, sold for $525,000 to a couple from the Washington, D.C., suburbs.
"It's a little less than what I paid for the landscaping," he said. "Somebody got a great deal."
But, as this article points out, it's easy to trap yourself with the things you like. Like fishing? You buy a huge boat. Like flying? You spend millions on a cool plane. Like scenery? You buy several houses.
Pretty soon, all your time and energy goes into the things you own. Or, as people say, the things own you instead of you owning the things. John puts it very well: you can only live in one place at a time.
Once my startups begin to mature, I plan on renting just about everything. That way I can try many different things without the pain of ownership. If I find myself doing something over and over again -- and it would have to be dozens of times -- I might consider buying something permanently. Maybe.
Concentrate on experiences, not possessions (or money)
EDIT: I heard somebody refer to what happened as a "luxury consumption trap." Just wanted to add that nothing about this has anything to do with the amount of money involved. This is more about your relationship to the things you own, however much they might cost. You can tie yourself up with five dollar items as easily as you can five million-dollar items. (It's true, however, that people seem especially blind about this when this happens with larger-ticket items.)