Jul 29, 2021

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My oldest and best friend came to visit last weekend. He is an investment banker, and a successful one at that.

We walked down to the beach from my house and spent a few hours sitting in the sun. Though we have no shortage of things to talk about, inevitably talk turned to work.

From my vantage point, things have been pretty easy for my friend, spending 20 years in banking, and earning progressively more money over time.

But it wasn’t all easy, he explained. He was laid off from Lehman Brothers shortly before the bankruptcy, and close to a year later, he was unable to find work. The only thing available was a fourth-tier private equity job, which he quickly exited once he learned the firm did not have the best reputation.

Then he got hired by a bank, navigated some very ugly internal politics, took an offer from another bank, and navigated more ugly politics. He recently moved on to another job with more responsibility.

But the point, he said, was that it could all end at any moment. And I suppose that is true—it ended for both of us at Lehman Brothers in 2008.

In some alternate universe where the financial crisis didn’t happen and Lehman Brothers survived, we would have gone on to become stupidly rich. But it didn’t work out that way, and we had to scramble and get creative to survive.

And we ended up doing better than surviving. Much better.

It could all end at any moment. Well, of course it could. I could die in a plain vanilla auto collision at the intersection up the road. Stuff like that happens all the time. But most of the time, it doesn’t, and there is no sense worrying about it.

People generally don’t dwell on the idea of perishing in some random accident. But they do buy life insurance just in case, which is a smart thing to do.

But people do spend a lot of time worrying about perishing in some gruesome financial accident: a recession, a depression, loss of job, loss of income, maybe even ending up homeless. All it takes is a series of unfortunate events, and we could end up on the street.

The rational response is to save big piles of money and buy used cars and cheap suits and generic brand soup, even if you’re a millionaire. Because it could all end at any moment.

How to Thrive

Human beings are very good at surviving, from an evolutionary perspective. We all used to be hunter-gatherers, so we found food and shelter and steered clear of predators. We also made sure we had enough stores for the winter or some unforeseen emergency.

We are great at surviving.

We do this in the 21st century too—we build up giant reserves of cash and securities, huge piles of wealth, and never do anything with it. Then we die and leave it to our kids, who become feckless trustafarians living on the Lower East Side.

We are good at surviving, but we are not so good at thriving.

Sure, there are some people who need to spend less money, but there are many more people who need to spend more money. If you’re worth $15 million, you don’t need to buy used cars all the time. I think you’re entitled to the new car smell.

You can also take a sick vacation once in a while. You will come back feeling refreshed and happy.

Implicit in thriving is the idea of optimism—you can spend some of your cash. Sure, there might be an emergency someday, but you will have enough to handle it.

Implicit in surviving is fear—because it could all end at any moment.

I prefer not to live my life in fear. You can take risks, as long as it’s from a position of screw you. If you have no debt, cash in the bank, and life insurance, then there is not much else to worry about.

Of course, some people taking thriving too far. And that is the idea upon which thousands of personal finance bloggers make their careers.

We have an antidote to spending too much—spend less and pay down debt. Everyone has the same message. But we do not have an antidote to spending too little, which can be just as damaging to relationships.

The former problem is easy to solve—all it takes is a little bit of discipline, which is easily taught. The latter problem is more difficult—it takes years of therapy to overcome those financial fears.

Of course, it could all end at any moment. But when you buy insurance on your house, you are not hoping that it burns down so the insurance pays off.

I used to run around with the Financial Armageddon crowd back about 10 years ago, after living through two stock market crashes. Then you start to learn how silly that is. It’s a bit like Pascal’s Wager.

You can’t take it with you. That saying is older than dirt, and people repeat it without understanding what it really means. We are taught to save—for retirement. What else? Don’t we have bigger imaginations than that?

Jared Dillian

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