A pile of shredded U.S. dollars in Washington, D.C. (Photographer: Andrew Harrer/Bloomberg)

Nine Rich Men And The Transience Of Wealth

BloombergQuintOpinion

Picture this. You are friends with the head of a large steel company (just imagine for once) who takes you along to attend a meeting of a few of the greatest leaders and businessmen of your time.

One of them is the president of a large power generation company. The second heads a big gas company. The third runs the largest match company in the country, and the fourth is the president of a large bank. The fifth holds a very senior position in a stock exchange, and two others are amongst the richest stock market speculators around. The eighth one is a very senior politician. In all, these nine people, including your friend, are amongst the richest people you could ever know personally in life.

Without doubt, you think, these men had solved the secret of making money, and a lot of it.

Anyway, go twenty-five years forward. You are living in another country for the past twenty years and have had no idea about what happened to these friends of your friend. In fact, you have been out of touch with your friend too.

One day, you get the news from an acquaintance that this friend of yours has died. What shocks you more is that he died broke.

Gradually, you also get to know that of the other eight men you had met in that room twenty-five years ago, three died broke, one went insane, two committed suicide, and two were just released from prison after serving cases of fraud.

You wonder what could have befallen these men who were once the epitome of wealth with everything going fine for them. Theirs was a picture-perfect life, wasn’t it?

Anyways, get out of the scene and cut back to now. Let me reveal that the only thing imaginary about the story you just read above is, well, you.

There was indeed such a meeting that happened at the Edgewater Beach hotel in Chicago in 1923. And here are the nine people—rich businessmen, financiers, and leaders—who attended the same.

  1. Charles M Schwab, President of Bethlehem Steel,
  2. Samuel Insull, President of Edison General Electric,
  3. Howard Hopson, President of Associated Gas and Electric System,
  4. Richard Whitney, President of the New York Stock Exchange,
  5. Albert Fall, Member of President Harding’s cabinet,
  6. Jesse Livermore, one of the greatest Wall Street speculators,
  7. Arthur Cutten, a great wheat speculator,
  8. Ivar Kreuger, Financier and Head of International Match Corporation,
  9. Leon Fraser, President of First National Bank of New York and Bank of International Settlements.
American steel industrialist Charles M Schwab. (Photograph: U.S. Library of Congress)
American steel industrialist Charles M Schwab. (Photograph: U.S. Library of Congress)

A tremendously impressive group, right? Anyways, this is how these gentlemen ended by 1948.

  1. Charles Schwab, died broke after living for five years on borrowed money,
  2. Samuel Insull, died broke,
  3. Howard Hopson, went insane,
  4. Richard Whitney, went to prison for fraud,
  5. Albert Fall, went to prison for fraud,
  6. Jesse Livermore, committed suicide,
  7. Arthur Cutten, died broke,
  8. Ivar Kreuger, died broke,
  9. Leon Fraser, committed suicide.

Events, Time, And Survival

Just consider their meeting date again. It was in 1923. We now know that America went through a horrible economic depression starting 1929. Industries were ravaged, hundreds of banks failed, and thousands of individuals lost everything. In short, we can blame the macro environment for a part of what happened to these rich men.

But don’t forget for a fact that almost all of them were investigated for being a swindler or for a failed Ponzi scheme.

They may have started out rightfully, but like drug addicts, the temptations of earning more money irrespective of the means seemingly got to them. And that may have caused their downfall.

I wrote about one of these gentlemen, Jesse Livermore, in my previous BloombergQuint article, and why there are no shortcuts to the top, and why one must worry more about surviving the money game than trying to beat all others at it.

Apart from the importance of surviving, there is another lesson we can draw out from the lives of these men and many others like them who failed to keep what they earned.

This lesson concerns more to people who aren’t wealthy as of now—‘wealthy’ is when your cash flow from assets exceeds your living expenses—but would want to get there some day.

A man takes an Indian ten rupee banknote and one rupee coins out of a wallet in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
A man takes an Indian ten rupee banknote and one rupee coins out of a wallet in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Also read: What 19th Century Art Dealers Teach Us About Investing

How Much Is Enough?

I came across this lesson while reading with my 14-year old daughter this book that had inspired me a few years ago, when I was just starting out in my career.

The book is Robert Kiyosaki’s** Rich Dad Poor Dad, and the lesson he writes about is this, after sharing the story about the nine rich men:

Today we live in times of greater and faster change than these men did. I suspect there will be many booms and busts in the next 25 years that will parallel the ups and downs these men faced. I am concerned that too many people are focused too much on money and not their greatest wealth, which is their education. If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer through the changes. If they think money will solve problems, I am afraid those people will have a rough ride.
Robert Kiyosaki

“Intelligence solves problems and produces money,” Kiyosaki writes. “Money without financial intelligence is money soon gone.

Most of us would realise this critical lesson late in our lives.

It’s not how much money we make that matters, but how much money we keep.

We think we just need to make a little bit more money. When we have x, and we think it should be enough to live a happy life, we see others having 2x and think that is what would make us happier. And then we raise the bar to 3x, 4x, and 10x.

A manager weighs banknotes on a scale. (Photographer: Manaure Quintero/Bloomberg)
A manager weighs banknotes on a scale. (Photographer: Manaure Quintero/Bloomberg)

It goes without saying that this is a path to bankruptcy, morally if not financially.

The more you stay on this treadmill, the more it breaks you down. And thus, it pays to get off while you still can.

Making Money Versus Keeping It

Then, consider this. What good is making a lot of money if you aren’t keeping any of it? Sure, you can live it up in the present day, but once you’re done working, whether it’s because you want to or because you’re forced to, you’re going to be broke. I’m assuming you won’t defraud others in the process of going broke yourself, like those nine men.

And as Kiyosaki writes in his book, we live in times of greater and faster change now than ever, and there will be many booms and busts in the next 2-3 decades. These are externalities over which you have no control, like you don’t control how much you will earn and, in today’s rapidly changing world, till when.

However, what you control is how much you will keep of what you earn. And that will decide how happy and content a financial live you live and end with.

You see, being stuck in the rat race is not intelligent. Especially as a wise woman once said that the problem with the rat race is that even if you win, you’re still a rat.

So, get yourself financially educated, learn to keep most of what you make, and prepare to come out of the race sooner than later.

You don’t want to end up like any of those nine rich men, do you?

** Kiyosaki’s own company, Rich Global LLC, filed for bankruptcy in 2012. But let’s just concentrate on the lesson from his book here.

Vishal Khandelwal is the founder of SafalNiveshak.com, an initiative to help people learn the art of value investing and behavioural finance to be able to make better investment decisions.

The views expressed here are those of the author and do not necessarily represent the views of Bloomberg Quint or its editorial team.