August 05, 2007

These People Are Completely Insane

THE NEW YORK TIMES has a bizarre story out today about millionaires in Silicon Valley. Apparently, plenty of folks in Silly Valley have managed to amass millions of dollars. Yet instead of doing the smart thing -- retiring to Fargo or some place where they can live like kings -- they're still living in Silicon Valley. Even worse, they're apparently doing so for the sole purpose of trying to keep up with the Joneses down the street, who are even richer.

As such, here's a sampling of key quotes and suggested remedies for this problem:

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GARY KREMEN, founder of match.com: "You're nobody here at $10 million."
SOLUTION: Move to some place -- like, say, Fresno -- where you're somebody at $10 million.

DAVID KOBLAS, computer programmer with net worth in high seven figures: “I’d be rich in Kansas City. People would seek me out for boards. But here I’m a dime a dozen.”
SOLUTION: Move to Kansas City.

TONY BARBAGALLO: The Times says, "Over the years, he has tried to live off his salary, but not always successfully." His wife says: "Poor Tony, he’ll never be able to retire.”
SOLUTION: Leave. Retire.

UMBERTO MILLETTI -- once worth $50m, now worth $5m, has giant house: "We could move. But if you do that, then you’re admitting defeat. No one wants to go backwards.”
SOLUTION: Swallow pride. Move. Reap real-estate appreciation. Dump seven-figure mortgage.

Mr MILLETTI, again: “Here, the top 1 percent chases the top one-tenth of 1 percent, and the top one-tenth of 1 percent chases the top one-one-hundredth of 1 percent. You try not to get caught up in it, but it's hard not to."
SOLUTION: Quit rat race. Move.

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I think I speak for most right-thinking folks when I say these gentlemen are completely insane.

This is not to say that I don't appreciate their drive or their work ethic -- I very much do. After all, it is just and right that men toil for their daily bread. That is what men do. But my God! why would people with such money subject themselves to a life of slavery to their debts and consumption? It's one thing if they're willingly in the hunt and it's the drive to succeed and build that's pushing them -- but to keep up the payments on a white elephant of a house? That's madness!

It seems to me these folks have lost sight of a key thing. The primary reasons to gain wealth are to a) provide for one's family, b) achieve peace of mind and c) achieve true independence. We can deduce, through the millions these men have earned, that Item A isn't much of a concern, as they could easily provide for their families if they just decamped to some place less expensive, where they would be the envy of their friends and neighbors. Yet instead of doing that, and realizing Items B and C in the process, they've completely thrown out those things. In exchange, they work 70 and 80 hours a week at jobs they don't seem to enjoy all that much -- and at an age when they shouldn't be working 70 to 80 hours per week. Those are hours for young men, not folks in their 50s.

I mean, there's something fundamentally wrong when I look at my own situation and see it as far preferable to those these men are facing. Like all financially-minded people, I have my Magic Number and I fully admit it may change as time goes on -- but right now, I'm on target to reach it at age 55. Everything else will be gravy for when I do plan to retire from full-time work, around age 62 or so. The best part is that I'm on target without making any huge sacrifices -- I have a job that I enjoy, a job that pays me very well for my field and moderately well compared to other professions, a job that gives me an actual weekend.

And I'm dealing with numbers two orders of magnitude less than these folks. These folks have golden handcuffs and golden or silver parachutes. I've got bronze handcuffs and a bronze parachute*. They're stressed and panicking and wondering how they'll pay their kids' private school tuition, and I'm walking around like Alex Masterley. (Well, actually, a lot more like Greg Masterley, except for the twice-yearly adjustments of my bronze parachute's value. But you get the idea).

IT'S NOT SUPPOSED TO BE THIS WAY. The only reason it is this way is because I live below my means and they're living at or above them. From the story, it sounds that if these folks got made redundant it would be an absolute financial disaster. A while back I also made contingency plans in the event of the unthinkable -- and they involve me taking a nice, long vacation. It sounds like these folks could use a nice, long vacation -- during which they could downsize accordingly -- and then get back into the swing of things, confident of their future success.

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* Lest anyone get the wrong idea, I'm serious when I say bronze. It is a nice sum of money for me but certainly nothing that would knock any businessman's socks off -- or most professionals, for that matter. In fact, it would cause most senior businessmen to snicker and snort while trying to contain their laughter. ("Ooooooooh, you're excited about THAT?") But when you keep your expenses under control you find the money goes a hell of a lot farther than it would otherwise.

Posted by Benjamin Kepple at August 5, 2007 09:18 AM | TrackBack
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