In NASCAR, there’s a concept called “running your own race”. Early in a race, there may be other drivers around you throttling the gas or making risky moves in order to try to take the lead. But you know this race is 500 laps, and there is very little value in doing something reckless early in the race. Sounds simple in theory right? Just stick to the plan. Run you own race. But the thing about plans is that they can come apart when the shells start flying around you. The animal spirits come out and you’ll be damned if that guy or gal is going to pass you! You can’t win the race on lap 10, but you can most certainly lose it if you get in a crash and your day ends early. Life is no different. There are distractions and shiny objects everywhere we look. The temptation to try to live out someone else’s (or the internet’s) version of success has never been greater. Not only does paying attention or being jealous of others make us unhappy, it can cause us to run off the road early in life. And it often happens because we’re chasing something that we’re not even sure why we want it.
Just about everyone knows Warren Buffett as the greatest investor in history. Many of you likely know the late, great Charlie Munger as well. Munger was the longtime #2 alongside Buffett who worked in building Berkshire Hathaway into the nearly one trillion dollar behemoth that it is today. I’d venture to guess that none of you know who Rick Guerin is. Guerin was the third partner at Berkshire Hathaway along with Buffett and Munger, and by many accounts was just as smart as them. Buffett said himself, “Rick was just as smart as us, but he was in a hurry.” Because Guerin was in a hurry, he took out massive loans in order to try to build wealth more quickly. My guess was he didn’t need these loans in order to feed his family, go on whatever vacation he wanted, or live in a nice house. He was already filthy rich, but he wasn’t filthy rich enough. Maybe he wanted a private jet. Maybe he wanted a bigger mansion. He probably saw people around him who had both. The reason doesn’t matter, but when the market dipped almost 70% during the 1973-74 downturn, those loans came due and Guerin was forced to sell his shares in Berkshire Hathaway to Buffett for pennies on the dollar. Today, those shares would be worth approximately nine billion dollars. In the meantime, Buffett and Monger stuck to the script, and well….the rest is history. Buffett and Monger ran their own race, Guerin ran someone else’s.
There is always going to be temptation to take the shortcut, and the temptation these days is much greater than it was in the 1970s. The world Guerin faced was much less “in your face” with the seductions of wealth and glamor than what we face today. I can’t recall who I heard this quote from, but someone said “we used to try to keep up with the Joneses, now we try to keep up with the Kardashians.” In the pre social media era, you might be jealous of Mr. Jones down the street who’s house had the pool and the Mercedes Benz parked in the driveway. Today, Mr. Jones is a peasant compared to what we see each of the 900 times we open Instagram each day. Open the app…..there’s the celeb with the house overlooking the ocean hosting parties with Jay-Z and Beyonce in attendance. Scroll a little, there’s the real estate guy with 1,000 rental units showing off his new Rolex. Scroll a little more……JESUS CHRIST, that moron from my high school bought crypto at the right time and shared a screenshot of his crypto wallet?! Your circle of jealousy used to be confined to your block, now it’s extended to the blockchain. It’s never been harder to simply focus on yourself and run your own race.
One of my favorite voices in finance
had a great piece the other day titled “17 Thoughts About Money.” #5 on his list is an absolute banger, “True money contentment comes from accepting that people dumber than you will be richer than you.” The Crypto Guy from your high school that I mentioned above is a great example. Maybe you worked your ass off, got a degree, and have now climbed the corporate ladder to a fairly high paying management position. Meanwhile this guy from your high school who’s never left his mom’s basement took a break between his ritualistic bong rips and hot pockets to throw every last dollar to his name into Dogecoin. Guess what? He got lucky and made a ton of money! He’s dumber than you, hasn’t worked as hard as you, and now he’s richer than you! Bitter pill to swallow? Sure. But does him having more mean that you have less? Of course not. Odds are he got lucky once. He will continue taking dumb risks and next time it won’t work out. Your path of doing the hard work and climbing the ladder will, although it may not feel that way in the moment.
The aforementioned Charlie Munger once said, “The world is not driven by greed, it’s driven by envy.” We all see these shiny objects that someone we know (or just someone on social media) has and we want them. Why do we want them? We’re not really sure. But THAT guy has it and I’m better than him so I deserve it. In psychology, this effect is called “Mimetic Desire.” We want things purely because other people want them. Entire multi billion dollar brands like Rolex, Louie Vuitton, Gucci, etc have been built on this. None of these products have any real utility other than, well…..you wear them. You could also wear something that costs one fiftieth as much. But if you did that, how would everyone know how well you’re doing?
I am in no way immune to any of this. I go on social media. I get envious. I have a weakness for fancy watches that tell the time just as well as the watch that you can get for $30 on Amazon. I’d love to say I don’t care what anyone thinks of me/about me, but that would be a flat out lie. I’ve been working on caring less, but it’s not easy. One simple exercise is to ask yourself “Why do I want this?” the next time you want something. If the answer is “because so and so has it” or “because then everyone will think more highly of me” then it’s probably an indication that you are not running your own race. In my industry (real estate) there is always someone front and center who’s doing better than you. This guy has 2,000 rental units, this gal flips 100 houses a year. The question is, why? Would having 2,000 rental units make me happier than having 1,000? What about 100? Maybe having 2,000 units truly makes you happy and is what you need in order to be financially free. Or maybe those 2,000 units are making your life miserable but you really like telling people about them at dinner parties.
The bottom line is that there is always going to be someone who is doing better than you (at least in a capitalistic sense). Elon Musk is the richest man on earth. He’s doing “better than you”. He also seems genuinely miserable and content with living out his days filing petty lawsuits and making grade school fart jokes on twitter. There is a certain amount of money that you need in order to do everything that you want to do in life. That number is different for everyone, but it surely is not 200 billion (Elon’s approximate net worth) for anyone. If you had 10 million dollars, Elon would be doing twenty thousand times better than you from a wealth standpoint. But is there anything that you want to be able to do with your life that you would be unable to do with 10 mil? Probably not.