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Speaker 1: Boke No Trillions.

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Speaker 2: I'm Joel Weber and I'm Eric Balchernas.

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Speaker 3: Eric, I'm really excited we have Nick Madjulie back on

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Speaker 3: the podcast today.

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Speaker 1: I checked. He was on three years ago for his first.

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Speaker 3: Book called Just Keep Buying, and he's just out with

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Speaker 3: the second book, The Wealth Ladder, and I want to

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Speaker 3: know more about the Wealth Ladder, how about you?

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Speaker 2: Yeah, No, this is a Nick is an advisor, and

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Speaker 2: advisors are the biggest consumer of ETFs, so you always

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Speaker 2: want to hear from them.

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Speaker 4: They are the users of ETFs, but.

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Speaker 2: They're not they're using ETFs, but that's just one tiny

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Speaker 2: part of what they do, and their people use them

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Speaker 2: as behavioral coaches, life coaches, tax plan It's really a

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Speaker 2: whole deal.

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Speaker 4: And Nick is what I would consider like a cool advisor.

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Speaker 2: Oh a little younger, you know, the average advisory age

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Speaker 2: is like sixty sixty five.

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Speaker 1: No jug no judging.

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Speaker 2: Nick is part of Ritholtz and there have really really

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Speaker 2: changed the way that advisors are even viewed because they're

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Speaker 2: really they do conferences, they're in the media, they write books.

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Speaker 2: They're just like just tons of content coming out of it.

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Speaker 2: And his last book was called Just Keep buying, which

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Speaker 2: is when he was on our podcast like three years

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Speaker 2: ago and that was a huge hit, and I told

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Speaker 2: him this, I thought that phrase just keep buying, really

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Speaker 2: captured the moment. It's funny because he put it out

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Speaker 2: right before twenty twenty two when the market went down

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Speaker 2: a lot, but people in at least etf users they

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Speaker 2: bought through it, and they also bought through the beginning

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Speaker 2: of this year. So people have taken that motto to

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Speaker 2: heart or he captured what they do with a perfect phrase,

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Speaker 2: and so it's cool to see him back with a

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Speaker 2: new book.

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Speaker 1: Okay, this time Nick Majulie.

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Speaker 3: He's the chief operating officer and a data scientist at

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Speaker 3: written Bolk Wealth, this time on trillions the Wealth Letter.

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Speaker 5: Nick, welcome back, Thanks for having me on guys.

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Speaker 1: Okay.

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Speaker 3: The book is The Wealth Ladder, Proven strategies for every

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Speaker 3: step of your financial life. What is the Wealth Ladder?

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Speaker 6: The Wealth latter is a new framework for viewing your

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Speaker 6: finances and the main idea here is I break wealth

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Speaker 6: into six distinct levels. We can get into those in

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Speaker 6: a moment, but based on which level you're at, based

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Speaker 6: on your net worth, it can help influence your spending decisions,

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Speaker 6: your income decisions, your investment decisions, et cetera. And I

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Speaker 6: think the main analogy I use, like in the intro,

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Speaker 6: is like a fitness instructor would give different advice to

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Speaker 6: someone who's like obese versus someone who's like a well

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Speaker 6: trained athlete versus.

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Speaker 5: Yeah, yeah, exactly.

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Speaker 6: So I think that same analogy can apply to your

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Speaker 6: financial advice. Right, So if you're like just starting out,

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Speaker 6: you're going to give someone very different advice than if

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Speaker 6: someone's you know, trying to get to let's say ten

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Speaker 6: million plus or one hundred million plus, et cetera.

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Speaker 1: Does it have to be a ladder? Can it be

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Speaker 1: an escalator?

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Speaker 6: It could, in theory be whatever analogy you want. I

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Speaker 6: think the term the wealth ladder has been used a lot,

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Speaker 6: but there's no official like, oh, this is the person

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Speaker 6: that coined it or anything. It's just been kind of

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Speaker 6: used as like there's like these stages to wealth, and

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Speaker 6: so I just wanted to actually finally put you know

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Speaker 6: my name on this phrase and actually define it.

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Speaker 3: And wealth escalator just wouldn't sell it in the same

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Speaker 3: way that the latter might. Yeah, So one of the

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Speaker 3: things you say is we've been looking at wealth the

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Speaker 3: wrong way. Why and how do you want us to

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Speaker 3: look at it?

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Speaker 6: I think people they understand this intrinsically, Like the difference

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Speaker 6: between zero having no money in ten thousand dollars is

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Speaker 6: pretty large for people, Like if you go from zero

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Speaker 6: to ten thousand, that can like reduce a lot of stress,

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Speaker 6: et cetera. But then even someone going from like one

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Speaker 6: million to two million may not change their life all

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Speaker 6: that much, I mean relatively right. And so of course,

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Speaker 6: like ones a million dollar change the other ones a

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Speaker 6: ten thousand dollars change, Like, it's not linear in terms

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Speaker 6: of the happiness, enjoyment changing your life, et cetera. And

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Speaker 6: so there's this kind of diminishing marginal utility of money.

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Speaker 6: You know, as you have more of it, it's becomes

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Speaker 6: less and less valuable. Right, you need a bigger boost

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Speaker 6: or a bigger hit, so to speak, to see the

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Speaker 6: same jump and happiness or well being, live satisfaction, et cetera.

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Speaker 6: And I think people realize that. And so by defining

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Speaker 6: the wealth ladder and the way I did, I think

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Speaker 6: it's a better way of looking at money and thinking

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Speaker 6: about spending income investments, et cetera.

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Speaker 2: Yeah, I like the way you did this and you

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Speaker 2: had you posted something on Twitter and I'll just read

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Speaker 2: off of what it is. And it was a little controversial.

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Speaker 2: Some people debated this. When you talk about wealth and

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Speaker 2: like classes, I think people can be touchy.

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Speaker 4: But here's what you say.

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Speaker 2: Under ten thousand, wealth is paycheck to paycheck.

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Speaker 4: Level one ten.

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Speaker 2: Thousand to one hundred thousand is grocery freedom, which is

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Speaker 2: where you can buy groceries without worrying about it. And

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Speaker 2: then level three is restaurant freedom. That's one hundred thousand

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Speaker 2: to one million.

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Speaker 1: And by the way, if you mentioning, this is net worth, right, yeah.

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Speaker 2: This is net worth and household net worth, yeah, not income.

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Speaker 2: And then level four is travel freedom one million to

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Speaker 2: ten ten million.

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Speaker 4: You can travel when and where you want.

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Speaker 2: Level five is house freedom ten million to one hundred million.

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Speaker 2: You can afford your dream home with little impact on

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Speaker 2: your overall finances. And then finally level six, which is

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Speaker 2: where I am, but Joel wishes he was one hundred

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Speaker 2: million plus. You can use money to have a profound

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Speaker 2: impact on the lives of others, you know, businesses engaged

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Speaker 2: in philanthropy, et cetera. So I think it was the

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Speaker 2: middle upper middle class where you got a little weird

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Speaker 2: like if you know, middle class being up to a million,

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Speaker 2: I think was part of it. But can you talk

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Speaker 2: about the feedback you got from that and what was

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Speaker 2: like the points that were most contentious.

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Speaker 3: I think I noticed that got two point three million

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Speaker 3: eyeballs that post.

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Speaker 6: So yeah, so that post said, like, okay, level one,

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Speaker 6: which is less than ten thousand, I said, that's lower

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Speaker 6: class ten thousand to one hundred thousands. Level two that's

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Speaker 6: working class. Level three, I would say that's middle class.

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Speaker 6: That's one hundred thousand to a million dollars. By the way,

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Speaker 6: that's about forty percent of households. So there's twenty percent

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Speaker 6: Level one, this is US household US households, twenty percent

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Speaker 6: L one, twenty percent Level two, forty percent in level three.

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Speaker 6: So that's now eighty percent of the entire US has

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Speaker 6: less than a million. About eighteen percent are in level

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Speaker 6: four that's one to ten million, and then the top

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Speaker 6: two percent is level five and six, which is ten

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Speaker 6: million plus. And when I said, you know, one to

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Speaker 6: ten million was upper middle class, of course, some people

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Speaker 6: are like, well, if you have you know, six million

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Speaker 6: dollars in Alabama, you're definitely upper class. I'm like, yes, okay,

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Speaker 6: you can, you know, use these examples. But like if

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Speaker 6: you have six million dollars in New York, I wouldn't

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Speaker 6: say you're necessarily upper class, right, so I think you're

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Speaker 6: upper middle class.

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Speaker 5: You're obviously doing well for yourself.

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Speaker 6: But you know, with the price of an apartment even

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Speaker 6: like it's pretty expensive.

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Speaker 5: Right.

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Speaker 6: So anyways, I said this, it's very controversial. I tried

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Speaker 6: it to make it as useful as possible and like

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Speaker 6: agnostic to location, and I think the idea here is,

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Speaker 6: you know, what I'm especially what I'm seeing is like

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Speaker 6: the upper middle classes. I define it with the one

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Speaker 6: to ten million range. There's a lot of people in

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Speaker 6: that range, eighteen percent of the US, and it's it's

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Speaker 6: tripled since nineteen eighty nine on an inflation adjusted basis

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Speaker 6: used to be about seven percent. So yeah, eighteen is

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Speaker 6: not exactly triple, it's like two and a half times larger.

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Speaker 6: But that's kind of the big change that's happened in

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Speaker 6: our society. I'm starting to see it in other ways,

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Speaker 6: like the AMX lounge is overrun at the airport. You

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Speaker 6: go to a nice resort and like you have to

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Speaker 6: go out at seven am to get your pool chair, right,

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Speaker 6: because people race to get them.

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Speaker 5: So it's like.

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Speaker 6: There's some sort of scarcity thing going on where the

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Speaker 6: upper middle class is like being overcrowded. And I think

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Speaker 6: a lot of people aren't talking about that, and that's

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Speaker 6: kind of one of the issues I wanted to bring

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Speaker 6: up with this book as well.

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Speaker 2: So we talk about these levels, right, what percent or

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Speaker 2: how would you describe people getting up to these levels

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Speaker 2: because this stock market went up a lot versus income? Right, Like,

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Speaker 2: if I look at somebody who has a million in

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Speaker 2: net worth, is that typically a lot? Like how much

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Speaker 2: of that is just because the market went up? So

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Speaker 2: we talk about these like scarcity where you have a

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Speaker 2: lot of people fighting for chairs and the MX lounge.

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Speaker 2: How much of that is on the back of the

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Speaker 2: US stock market because I don't are people really making

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Speaker 2: that much more money?

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Speaker 4: Or is a lot of this the wealth effect because

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Speaker 4: of stocks?

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Speaker 5: It's a mix.

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Speaker 6: And so that data I'm quoting that all the data

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Speaker 6: I use for these percentages was twenty twenty two to

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Speaker 6: twenty twenty three. It's it's the survey of consumer finances,

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Speaker 6: which is across those two years, and at the time,

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Speaker 6: if someone's in level four, so one to ten million,

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Speaker 6: roughly thirty percent of that wealth on average is in

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Speaker 6: their primary residence, and in terms of the retirement account,

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Speaker 6: it's about twenty five percent. So over half of that

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Speaker 6: wealth of someone in level four is typically going to

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Speaker 6: be included in their house and their retirement account. So

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Speaker 6: the other half would be other things vehicles, obviously cash,

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Speaker 6: other stocks they have if they own a business, anything

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Speaker 6: like that. So roughly half of that wealth if you're

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Speaker 6: in level four should be in kind of these less

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Speaker 6: liquid assets, right retirement home equity. So how much of

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Speaker 6: that is being due to the stock market going up?

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Speaker 6: A decent portion of it is obviously over half of it.

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Speaker 6: But you know, I don't have the new The new

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Speaker 6: estate is going to come out next year, and we'll

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Speaker 6: look at it then and see like, oh, has that

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Speaker 6: gone up, has it gone down, et cetera. But I

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Speaker 6: do think there is quite a bit of paper wealth

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Speaker 6: here where like, hey, well my house is worth this,

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Speaker 6: but you can't really access it outside of like a

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Speaker 6: heelock or something. So I think the main thing to

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Speaker 6: think about here is just like, well, either way, there's

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Speaker 6: still a lot more people in this kind of bucket

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Speaker 6: level four, as I call it, and because of that,

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Speaker 6: like they are spending more, they're traveling more. I think

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Speaker 6: that's what's changing a lot in the United States, and

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Speaker 6: it's impacting you know, consumer goods in that sector.

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Speaker 5: In particular.

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Speaker 3: How walled off are each of these levels, Like how

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Speaker 3: often are we seeing people go from level three to

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Speaker 3: level four, level four to level five, or you know,

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Speaker 3: vice versa.

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Speaker 1: I supposed to.

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Speaker 6: Yeah, so it depends on the timeframe. So I covered

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Speaker 6: this in chapter ten in the book, and this was

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Speaker 6: actually kind of one of the reasons why I wrote

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Speaker 6: the books. I basically wanted this like mobility matrix, which

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Speaker 6: would be like, hey, if you start in level three,

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Speaker 6: like after ten years, what's the probability you're going to

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Speaker 6: be in level four?

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Speaker 3: Because my assumption is that this wall is getting higher, right,

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Speaker 3: it's getting harder and harder to advance out of levels.

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Speaker 1: There's an entrenchment on ust.

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Speaker 6: So I haven't looked in that at in particular, like

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Speaker 6: looking at the switching rate, let's say from nineteen eighty

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Speaker 6: nine to nineteen ninety nine versus ninety nine to two

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Speaker 6: thousand and nine. Obviously that's a weird period because of

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Speaker 6: the GFC, But you get my point, and either way

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Speaker 6: that in general, most people are in the same wealth

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Speaker 6: level after a decade, right, So, and that's that's at

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Speaker 6: least true, like across every wealth level. So if you

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Speaker 6: start in level two a decade later, you're very likely

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Speaker 6: to be in level two. If you start in level three,

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Speaker 6: you're seventy two percent of households will still be in

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Speaker 6: level three after a decade. If you're in level four,

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Speaker 6: seventy two percent will still be in level four after

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Speaker 6: a decade. Three percent make it to level five, et cetera.

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Speaker 6: And all this data is in the book, right, and

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Speaker 6: so we can talk about it just in general, like

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Speaker 6: just across all wealth levels, agnostic with the levels, about

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Speaker 6: twenty one percent of households will go up one level

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Speaker 6: within a decade, about three percent will go up two levels,

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Speaker 6: so one in four are going to be up a

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Speaker 6: wealth level.

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Speaker 5: Right.

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Speaker 6: So once again, these some of these levels are pretty broad,

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Speaker 6: like level four is one to ten million, so you

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Speaker 6: can stay in that wealth level. Doesn't mean you didn't

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Speaker 6: build wealth, right, So it's another thing to think about here.

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Speaker 6: It's just I'm trying to say, like what are these

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Speaker 6: big step changes those are the ones that are kind

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Speaker 6: of important have probably a bigger impact on our lives.

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Speaker 6: And the same thing, how many people fall down the ladder,

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Speaker 6: It's about twelve thirteen percent over the course of a decade,

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Speaker 6: even though the course of two decades it's about the same.

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Speaker 6: So that doesn't really change much, right, So whether they're

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Speaker 6: talking ten years or twenty years, the number of people

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Speaker 6: that fall down the ladder is about you know, let's

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Speaker 6: say one to ten in some fashion. And the number

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Speaker 6: of people that go up the ladder, as I said,

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Speaker 6: is about twenty four percent over a ten year period.

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Speaker 6: Over a twenty year period, it's about thirty seven percent,

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Speaker 6: so it's.

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Speaker 5: A bit higher.

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Speaker 6: So there is still a lot of positive mobility. I

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Speaker 6: don't know about the time factor though, which is what

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Speaker 6: you brought up.

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Speaker 3: It's a good point.

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Speaker 4: You have clients in all these ladders, I take it.

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Speaker 6: Yeah, we we have clients across the wealth ladder, right,

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Speaker 6: we have those. I mean technically we don't have a minimum,

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Speaker 6: So we have people with some probably not many, with

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Speaker 6: less than ten thousand. Some would just maybe just less

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Speaker 6: than ten thousand with us, but they may have obviously

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Speaker 6: assets elsewhere, they own a home, et cetera. But for

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Speaker 6: the most part, yeah, we have people across that. We

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Speaker 6: have people technically in one hundred million plus. We don't

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Speaker 6: have too many of them, but we have a handful

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Speaker 6: of one hundred million dollars plus clients. And then we

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Speaker 6: have obviously our our bread and butter is level four

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Speaker 6: and level five, which is you know, one to ten

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Speaker 6: and then ten plus.

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Speaker 2: Because you do talk about like like this is just money, right,

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Speaker 2: and there's also just like happiness and general you know,

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Speaker 2: content with yourself and and you talk in here about

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Speaker 2: some of the you know, there can be some things that.

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Speaker 4: Go wrong when you get a lot of money.

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Speaker 2: Relationships, family dynamics, your kids, stress levels.

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Speaker 4: Is that something you've noticed.

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Speaker 2: Like is already correlation to other things like the more

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Speaker 2: money you have, the more paranoid you get, or the

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Speaker 2: more you hate taxes in in a weird way, or

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Speaker 2: I don't know. I'm just thinking about this because sometimes

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Speaker 2: I sometimes think of that famous chart that USA Today

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Speaker 2: used to put out with like countries ranked by happiness,

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Speaker 2: and like I think Nigeria was like number one and

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Speaker 2: the US is like twentieth, And I wonder if there's

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Speaker 2: an any kind of other correlations with general disposition or

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Speaker 2: happiness or anything like that with these brackets.

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Speaker 6: So there is data on happiness and income and then

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Speaker 6: also data on happiness and wealth. And so most of

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Speaker 6: your audience has probably heard of the conom and deed

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Speaker 6: and study, which is like, oh, once you earn over

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Speaker 6: seventy five K year, your happiness doesn't increase. Long story short,

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Speaker 6: that data wasn't exactly correct. It's the measure was. It

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Speaker 6: wasn't measuring happiness. It was measuring unhappiness, which is kind

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Speaker 6: of a weird thing. So it was saying that after

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Speaker 6: seventy five K year, you can't prevent unhappiness, which is

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Speaker 6: a weird as a double negative, right, so it's kind

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Speaker 6: of hard to think about. But long story short, a

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Speaker 6: guy named Matthew Killingsworth sat down with Condom and they

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Speaker 6: look through the data and everything. While Cocondom is still alive.

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Speaker 6: They look through it and they agreed that the measure

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Speaker 6: was wrong. And so the new takeaways. No, happiness keeps

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Speaker 6: increasing all the way up with your income, but only

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Speaker 6: if you're already happy. So if you're unhappy, more money

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Speaker 6: is not going to make you happy, right, especially if

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Speaker 6: you have a lot of money. So if you're unhappy.

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Speaker 6: I mean, let me just summarize the findings. If you're poor,

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Speaker 6: more money is likely to make you happier. If you're happy,

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Speaker 6: more money is likely to make you happier. But if

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Speaker 6: you're not poor and you're not happy, more money's not

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Speaker 6: going to do a thing, right, That's kind of the

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Speaker 6: main takeaway. So they found like, hey, if you're unhappy

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Speaker 6: and you're in level three or level four, money's probably

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Speaker 6: not the issue. It's something else going on. And I

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Speaker 6: think that's the big takeaway from the research. It's not

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Speaker 6: out there people still believe, oh the seventy five thousand

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Speaker 6: thing that's so old that needs to be like killed

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Speaker 6: already and just gotten rid of, because there's new data

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Speaker 6: out there that shows like across income and wealth is

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Speaker 6: probably even stronger than income. The more you have, the

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Speaker 6: generally the happier you are, assuming you're already happy.

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Speaker 1: That is it, flatline though, Like oh it kep's going

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Speaker 1: to just keeps going.

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Speaker 6: Out, but you have to be happy. It only goes

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Speaker 6: up if you're happy. So the people who are like

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Speaker 6: not even thinking about like, oh I'm not happy right now,

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Speaker 6: Oh do I need more money? Like that's it it's

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Speaker 6: a very it's very ironic, like the people that aren't happy.

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Speaker 6: If you're looking for money is the solution, that's not

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Speaker 6: the solution. But if you're just if you're loving life,

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Speaker 6: everything's great. If I just gave you an extra million bucks,

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Speaker 6: you'd be even everything'd be even happier for you. So

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Speaker 6: like that's kind of a weird irony here.

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Speaker 2: In other words, if you're not happy and you have

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Speaker 2: this big void inside and you're trying to fill it

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Speaker 2: with money, it just won't.

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Speaker 4: You can never fill it.

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Speaker 5: Yeah, exactly, not with money.

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Speaker 6: It's something else maybybe accomplishment or something else might be

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Speaker 6: able to fill that. But yeah, if it's not, of course,

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Speaker 6: and then excluding people who are like very poor, like

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Speaker 6: if you're if you're in like abject poverty, Like, yes,

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Speaker 6: money is going to make you happier.

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Speaker 5: There's no debate there. It's clear in the data.

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Speaker 3: It feels like Rosebud fits in here somewhere. Yeah, so

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Speaker 3: this is a podcast about ETFs. Let's bring it back

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Speaker 3: to ETFs. How do ETFs figure into the wealth ladder?

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Speaker 6: I mean, the big takeaway from the wealth Flatter, at

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Speaker 6: least on the investment side, is those in levels one

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Speaker 6: to three, less than twenty five percent of their assets

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Speaker 6: on average are an income producing assets things like stocks, bonds,

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Speaker 6: et cetera. That ETFs would you know, you'd hold three ETFs.

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Speaker 6: Those in levels four to six have over half of

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Speaker 6: their assets and income producing assets. So like that is

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Speaker 6: the big difference between those lower on the wealth flatter

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Speaker 6: and those higher on the wealth flatters. Those lower on

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Speaker 6: the wealth flatter don't own that many assets that produce income.

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Speaker 6: Those higher on the wealth flatterer have the majority of

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Speaker 6: their assets are actually assets that produce income of some sort.

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Speaker 6: So that's you know, you could be retirement account with

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Speaker 6: an ETF, individual stocks or you know stock ETFs things

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Speaker 6: like that, or owning an individual business. So in terms

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Speaker 6: of like what are the things to think about, and

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Speaker 6: I kind of show this in chapter three. It shows

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Speaker 6: like how much percentage by each wealth level, like what

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Speaker 6: percentage is in retirement accounts, what percentage is in businesses,

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Speaker 6: is in stocks, real estate, et cetera. And looking through that,

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Speaker 6: it's very clear that you know, level four, which is

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Speaker 6: like the most the largest wealth level after you know,

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Speaker 6: in the upper end they primarily have a lot of

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Speaker 6: their money in stocks, retirement accounts, other types of income

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Speaker 6: producing assets of that sort.

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Speaker 2: When it comes to ETFs, I've always thought, you know,

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Speaker 2: and I wrote when I wrote the Bogel book, especially

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Speaker 2: low cost Vanguardian type ETFs, that they are kind of

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Speaker 2: a gift for advisors in any people because you don't

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Speaker 2: have to worry about them, Like, once you lock into those,

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Speaker 2: they're so low cost, you can literally just get.

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Speaker 4: Married to them.

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Speaker 2: You don't have to fuss with your investments that much

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Speaker 2: because you know you're in the good stuff.

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Speaker 4: Do you find that is true with.

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Speaker 2: Those people, that their ability to keep buying, as you

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Speaker 2: would put it, is easier because the products they're in

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Speaker 2: are lovable and reliable versus thirty years ago when you're

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Speaker 2: chasing active managers and active mutual funds, and it's harder

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Speaker 2: to be well behaved if you feel like you're not

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Speaker 2: in the right fund in a downturn, Whereas if you

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Speaker 2: have Voo or something and it's a market down ton

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Speaker 2: you're like, well, what the hell's am I going to do?

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Speaker 2: I'll just hold it and we all know that's the

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Speaker 2: better move.

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Speaker 4: We win in the end with that attitude, have.

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Speaker 2: You because I always thought, you know, I interviewed Michael

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Speaker 2: Lewis for the book, The Bogle Book, and he said

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Speaker 2: ETFs have like helped me become a better writer. I

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Speaker 2: can just focus on that. I don't have to check

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Speaker 2: this stuff at all. So that's something I just as curious.

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Speaker 2: From your role as an advisor, they seem like a

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Speaker 2: godsend because you just buy these like really easy going ETFs,

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Speaker 2: maybe customize the portfolio a little bit, and then we'll

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Speaker 2: focus on other stuff.

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Speaker 6: I mean, I completely agree with that. I think it's

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Speaker 6: allowed passive investors to just free ride off all the

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Speaker 6: work that all the active investors are doing to set prices.

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Speaker 6: And now, of course, how good is price discovery that's

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Speaker 6: obviously debatable, especially as the passive share gets bigger and bigger.

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Speaker 6: I think just in general, yeah, it's one of those

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Speaker 6: things where like I don't have to worry about it.

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Speaker 6: You know, you put and this is only going to

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Speaker 6: work for people who get it. Not everyone's gonna get this.

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Speaker 6: They're not going to believe that. And if they don't

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Speaker 6: believe that, when there's a downturn, maybe they will abandon

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Speaker 6: their VTI or their VOO. Most people don't because they

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Speaker 6: get it. They're like, I just got to keep buying

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Speaker 6: over time and just do this and the market generally

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Speaker 6: goes up. And that has been shown to be true

437
00:18:48,480 --> 00:18:49,920
Speaker 6: over a very long period. We can go back to

438
00:18:50,000 --> 00:18:51,920
Speaker 6: nineteen twenty six. You see that in the US market.

439
00:18:51,920 --> 00:18:55,000
Speaker 6: Of course, there are exceptions. There's Japan, there's Greece, there's Russia. Right,

440
00:18:55,040 --> 00:18:56,800
Speaker 6: we can talk. I know all the exceptions very well.

441
00:18:56,800 --> 00:18:59,800
Speaker 6: There's very dark periods for equities where this can happen.

442
00:18:59,840 --> 00:19:03,280
Speaker 6: But if you're diversified across a broad range of assets,

443
00:19:03,320 --> 00:19:06,159
Speaker 6: it's very unlikely that you're going to lose money on

444
00:19:06,160 --> 00:19:08,480
Speaker 6: an inflation adjusted basis over a long period.

445
00:19:08,240 --> 00:19:10,640
Speaker 5: Of time, especially if you're buying over time.

446
00:19:10,680 --> 00:19:12,480
Speaker 6: I agree, if you put all your money in at once,

447
00:19:12,720 --> 00:19:14,480
Speaker 6: there's a little bit more risk, right, because you're not

448
00:19:14,520 --> 00:19:17,600
Speaker 6: diversifying across time with your payments or I'm sorry, with

449
00:19:17,640 --> 00:19:20,720
Speaker 6: your contributions. But that's just something else to consider when

450
00:19:20,720 --> 00:19:21,879
Speaker 6: you're thinking about this stuff.

451
00:19:21,960 --> 00:19:32,879
Speaker 3: Right, I'm going to assume that most of our listeners

452
00:19:33,080 --> 00:19:36,600
Speaker 3: are in level four, maybe level three, let's say the

453
00:19:36,800 --> 00:19:37,640
Speaker 3: wash of.

454
00:19:37,440 --> 00:19:39,239
Speaker 1: The majority as you as you call it.

455
00:19:40,320 --> 00:19:44,359
Speaker 3: What are the actionable takeaways that you want them to

456
00:19:44,400 --> 00:19:45,320
Speaker 3: hear from this book?

457
00:19:45,840 --> 00:19:47,879
Speaker 6: So level three is a little different than level four.

458
00:19:48,320 --> 00:19:51,280
Speaker 6: Level three obviously it's keep investing and usually a lot

459
00:19:51,280 --> 00:19:53,080
Speaker 6: of these people wrote that book already, Yeah, I know,

460
00:19:53,200 --> 00:19:55,040
Speaker 6: just keep buying. Yeah, well that is the lesson of

461
00:19:55,119 --> 00:19:56,639
Speaker 6: level three, So there's not much. I mean, if you've

462
00:19:56,680 --> 00:19:58,800
Speaker 6: already read just keep buying, you and you're in level three,

463
00:19:58,840 --> 00:20:01,159
Speaker 6: that's kind of the main takeaway that if you're in.

464
00:20:01,240 --> 00:20:03,399
Speaker 6: I mean, the other thing you consider is like people

465
00:20:03,400 --> 00:20:05,320
Speaker 6: starting side hustles, thinking about your career, how do you

466
00:20:05,400 --> 00:20:07,360
Speaker 6: raise your income? That's something I focus on a lot

467
00:20:07,359 --> 00:20:09,960
Speaker 6: in level three. In level four, it's actually a different lesson,

468
00:20:10,000 --> 00:20:12,200
Speaker 6: and the lesson in level four is like what got

469
00:20:12,240 --> 00:20:14,919
Speaker 6: you here won't get you there. So the thing to

470
00:20:14,920 --> 00:20:17,200
Speaker 6: get into level three and level four they're very similar,

471
00:20:17,359 --> 00:20:19,680
Speaker 6: just usually takes more time, and that's you know, get

472
00:20:19,720 --> 00:20:22,560
Speaker 6: a good job, save money, invest in ETFs, et cetera.

473
00:20:22,720 --> 00:20:26,200
Speaker 6: You know, diversification in coome producing assets, you'll get there.

474
00:20:26,480 --> 00:20:28,600
Speaker 6: To get to level five, which is ten million plus,

475
00:20:28,600 --> 00:20:30,800
Speaker 6: that's a completely different ball game, and I think that

476
00:20:30,880 --> 00:20:35,720
Speaker 6: requires in general, outside of celebrities, athletes, entertainers, some sort

477
00:20:35,760 --> 00:20:38,280
Speaker 6: of entrepreneurship, right, unless you're making you know, tens of

478
00:20:38,280 --> 00:20:40,120
Speaker 6: millions of dollars a year. You're not going to get

479
00:20:40,119 --> 00:20:42,240
Speaker 6: into level five unless you have a business that brings

480
00:20:42,280 --> 00:20:44,280
Speaker 6: in a lot of income and you either you know,

481
00:20:44,440 --> 00:20:46,520
Speaker 6: save that income for a long time or you sell

482
00:20:46,520 --> 00:20:48,639
Speaker 6: the business for a lot one day. So I think

483
00:20:48,720 --> 00:20:51,000
Speaker 6: the big decision point for those in level four is

484
00:20:51,080 --> 00:20:53,359
Speaker 6: like do I need to keep doing this?

485
00:20:53,480 --> 00:20:54,920
Speaker 5: Do I take my foot off the gas?

486
00:20:54,920 --> 00:20:58,160
Speaker 6: There's ideas of coast fire or fire financial independence. There's

487
00:20:58,160 --> 00:20:59,960
Speaker 6: a lot of these things come up in level four

488
00:21:00,440 --> 00:21:02,879
Speaker 6: because you start to think, like how much am I

489
00:21:02,920 --> 00:21:04,600
Speaker 6: even impacting my finances anymore?

490
00:21:04,640 --> 00:21:04,760
Speaker 4: Right?

491
00:21:04,800 --> 00:21:07,000
Speaker 6: So let me just a simple example. If you're saving

492
00:21:07,000 --> 00:21:08,959
Speaker 6: one hundred K a year and you have a million dollars,

493
00:21:09,000 --> 00:21:11,520
Speaker 6: that's ten percent you're impacting your wealth every year. By

494
00:21:11,560 --> 00:21:14,280
Speaker 6: the time you have five million dollars, it's only moving

495
00:21:14,320 --> 00:21:16,400
Speaker 6: your wealth by two percent. So over time, like your

496
00:21:16,480 --> 00:21:19,520
Speaker 6: labor is going to get less impactful on an annual

497
00:21:19,560 --> 00:21:21,800
Speaker 6: basis in terms of impacting your wealth. So the question

498
00:21:21,880 --> 00:21:23,639
Speaker 6: is like, do I need to keep working? Should I

499
00:21:23,640 --> 00:21:25,399
Speaker 6: take a step back and I do something I enjoy

500
00:21:25,440 --> 00:21:28,680
Speaker 6: more that pays less A treadmill? Yeah, I think it's

501
00:21:28,800 --> 00:21:30,000
Speaker 6: I think it's one of those things where you have

502
00:21:30,040 --> 00:21:32,720
Speaker 6: to think about, like what do I do at this point?

503
00:21:32,720 --> 00:21:35,720
Speaker 6: And that's like the big decision idea in level four

504
00:21:35,840 --> 00:21:37,480
Speaker 6: is like do I take a step back? Do I

505
00:21:37,520 --> 00:21:41,200
Speaker 6: need to change my my path completely? If I want

506
00:21:41,240 --> 00:21:42,760
Speaker 6: to get to level five. I'm not saying you need

507
00:21:42,800 --> 00:21:45,000
Speaker 6: to get to level five. I don't think that's necessary whatsoever.

508
00:21:45,080 --> 00:21:47,919
Speaker 6: But for some people that want that, okay, maybe you

509
00:21:47,920 --> 00:21:49,320
Speaker 6: need to take a different route.

510
00:21:49,080 --> 00:21:49,520
Speaker 1: To get there.

511
00:21:49,960 --> 00:21:55,880
Speaker 3: So, as Eric mentioned, he's he's level six, I'm level five.

512
00:21:56,080 --> 00:21:58,320
Speaker 3: What's he doing that I'm not doing?

513
00:21:58,480 --> 00:22:01,480
Speaker 6: He probably just either he had a business that he

514
00:22:01,520 --> 00:22:04,080
Speaker 6: worked on for longer than you, or he sold his

515
00:22:04,160 --> 00:22:06,800
Speaker 6: first business and then learned all those bad lessons from

516
00:22:06,840 --> 00:22:09,879
Speaker 6: selling that one, and then, you know, start a second business.

517
00:22:09,880 --> 00:22:12,160
Speaker 6: That's typically what happens. It's not their first business, their

518
00:22:12,200 --> 00:22:12,720
Speaker 6: second business.

519
00:22:12,760 --> 00:22:14,840
Speaker 1: They got to be something else. Because I don't I

520
00:22:14,880 --> 00:22:16,720
Speaker 1: don't think that's him or ETFs.

521
00:22:16,720 --> 00:22:18,640
Speaker 5: Does he have a lot? Is he an ETF is shuer?

522
00:22:18,720 --> 00:22:23,240
Speaker 3: Maybe No, I think that would be a conflict of interest.

523
00:22:24,440 --> 00:22:28,200
Speaker 3: I'll have to talk to him offline about that. He's

524
00:22:28,240 --> 00:22:29,760
Speaker 3: become suspiciously quiet.

525
00:22:31,280 --> 00:22:33,760
Speaker 2: Yeah, I know, I don't have an answer for this.

526
00:22:34,960 --> 00:22:41,600
Speaker 2: I don't want to reveal my secrets for unlike private

527
00:22:41,640 --> 00:22:45,000
Speaker 2: equity companies, I'm not looking to democratize this great thing

528
00:22:45,040 --> 00:22:49,320
Speaker 2: I have. Okay, all right, but by the way, this

529
00:22:49,520 --> 00:22:53,800
Speaker 2: idea of like, okay, people try to get a good job,

530
00:22:53,800 --> 00:22:55,320
Speaker 2: they try to get a good salary. Then like then

531
00:22:55,359 --> 00:22:59,119
Speaker 2: they invest, and then they tend to the investing really

532
00:22:59,200 --> 00:23:01,119
Speaker 2: powers half their funds.

533
00:23:01,200 --> 00:23:04,160
Speaker 4: Later on, there's this I think the bill.

534
00:23:03,960 --> 00:23:07,840
Speaker 2: Passed, right, so there's a in twenty twenty six, they're

535
00:23:07,920 --> 00:23:12,080
Speaker 2: going to have a opportunity where kids will get one

536
00:23:12,119 --> 00:23:15,919
Speaker 2: thousand dollars put into an account. This is a Trump account,

537
00:23:15,960 --> 00:23:17,720
Speaker 2: and I think it's gonna the.

538
00:23:17,680 --> 00:23:18,800
Speaker 1: What the Trump account?

539
00:23:20,600 --> 00:23:22,600
Speaker 4: Yeah, I mean, I don't know what they're calling.

540
00:23:22,680 --> 00:23:23,680
Speaker 5: Is that what is called the child?

541
00:23:23,840 --> 00:23:26,240
Speaker 6: I mean, yeah, they're putting a thousand dollars per child born.

542
00:23:26,280 --> 00:23:28,080
Speaker 6: I think in twenty two. I don't know if it's

543
00:23:28,119 --> 00:23:29,440
Speaker 6: this year or in twenty twenty six.

544
00:23:29,480 --> 00:23:32,120
Speaker 2: Yeah, next year, it's just twenty twenty six, and then

545
00:23:32,240 --> 00:23:34,879
Speaker 2: parents can obviously do it's like a four to one

546
00:23:34,960 --> 00:23:37,200
Speaker 2: k for your kid in a way, and they can

547
00:23:37,320 --> 00:23:40,720
Speaker 2: put money into it. This was an idea put forth

548
00:23:40,760 --> 00:23:42,520
Speaker 2: by Tyrone Ross, who you know.

549
00:23:43,680 --> 00:23:45,600
Speaker 4: He thought this was the solution.

550
00:23:45,359 --> 00:23:48,960
Speaker 2: To killing the wealth gap in America. He had one

551
00:23:48,960 --> 00:23:51,359
Speaker 2: other stipulation which I liked, which is that you can't

552
00:23:51,400 --> 00:23:55,000
Speaker 2: get the money out as the kid until you're eighteen,

553
00:23:55,600 --> 00:23:58,520
Speaker 2: and you have to pass a financial literacy test. Because

554
00:23:58,520 --> 00:24:00,879
Speaker 2: so many people don't know what the hell's going on

555
00:24:00,920 --> 00:24:03,520
Speaker 2: with investing. The only thing they might have gotten is

556
00:24:03,560 --> 00:24:05,840
Speaker 2: like a stock picking competition in like middle school.

557
00:24:06,680 --> 00:24:07,399
Speaker 4: And I don't know.

558
00:24:07,480 --> 00:24:11,120
Speaker 2: This seems like a good idea. Is there any downside?

559
00:24:11,119 --> 00:24:13,880
Speaker 2: Do you think this will help with the ladder climbing?

560
00:24:15,160 --> 00:24:17,480
Speaker 6: I guess the question. I mean, I think it's it's

561
00:24:17,480 --> 00:24:19,399
Speaker 6: better than not doing it, right. I think a lot

562
00:24:19,440 --> 00:24:21,679
Speaker 6: of a lot of the issues we see. As long

563
00:24:21,760 --> 00:24:24,440
Speaker 6: as the account can't be raided, you can't take money

564
00:24:24,440 --> 00:24:26,280
Speaker 6: out of it like you have to. It's almost like

565
00:24:26,280 --> 00:24:28,480
Speaker 6: a it's like a private equity lock in, right, that's

566
00:24:28,480 --> 00:24:30,360
Speaker 6: actually the it's a pheasic canvas.

567
00:24:30,440 --> 00:24:30,600
Speaker 5: Yeah.

568
00:24:30,680 --> 00:24:30,800
Speaker 1: Right.

569
00:24:30,800 --> 00:24:32,880
Speaker 6: If you can't take the money out, that's eighteen years

570
00:24:32,920 --> 00:24:36,000
Speaker 6: of compounding. Right, even even if we go very conservative

571
00:24:36,000 --> 00:24:38,439
Speaker 6: and say four percent per year inflation adjusted, that's like

572
00:24:38,640 --> 00:24:41,159
Speaker 6: still very good, right, Like it will build wealth. Now,

573
00:24:41,200 --> 00:24:42,760
Speaker 6: the question is, as soon as these people turn eighteen,

574
00:24:42,800 --> 00:24:44,400
Speaker 6: what do they do with the money. And even if

575
00:24:44,400 --> 00:24:46,359
Speaker 6: you pass a test, you can study for a test.

576
00:24:46,359 --> 00:24:48,320
Speaker 6: That doesn't mean, like, just because I know the right

577
00:24:48,359 --> 00:24:50,800
Speaker 6: answer doesn't mean I'm gonna do the right thing right.

578
00:24:50,880 --> 00:24:53,320
Speaker 6: So there is the possibility of someone, you know, they

579
00:24:53,400 --> 00:24:55,560
Speaker 6: finally get there, they have you know, how much is

580
00:24:55,600 --> 00:24:57,960
Speaker 6: in this account. Let's say it's I don't know, fifty

581
00:24:58,000 --> 00:25:00,320
Speaker 6: grand maybe I don't know, and they could it all

582
00:25:00,400 --> 00:25:02,679
Speaker 6: right away. I mean, so it's a question of you know,

583
00:25:02,920 --> 00:25:05,240
Speaker 6: people at eighteen are not necessarily the best decision makers.

584
00:25:05,240 --> 00:25:06,800
Speaker 6: I think we all know that I wasn't the best

585
00:25:06,800 --> 00:25:08,080
Speaker 6: decision maker when I was eighteen.

586
00:25:08,359 --> 00:25:10,600
Speaker 2: But isn't isn't part of the idea that a lot

587
00:25:10,680 --> 00:25:13,000
Speaker 2: of parents would be able to use this money for

588
00:25:13,119 --> 00:25:17,560
Speaker 2: college versus having to borrow it, which can be brutal

589
00:25:17,960 --> 00:25:18,520
Speaker 2: later on.

590
00:25:18,600 --> 00:25:20,440
Speaker 6: I mean, that's another option as well. But I guess

591
00:25:20,560 --> 00:25:22,400
Speaker 6: is it the question now? Is is it the child's

592
00:25:22,400 --> 00:25:24,800
Speaker 6: money or the parents money to use for college?

593
00:25:24,880 --> 00:25:24,960
Speaker 1: Like?

594
00:25:25,000 --> 00:25:28,000
Speaker 6: How how is this? Who's the account under? And when

595
00:25:28,040 --> 00:25:31,119
Speaker 6: does the custody transfer or whatever? Like all these types

596
00:25:31,160 --> 00:25:34,160
Speaker 6: of questions matter in terms of how it actually plays out.

597
00:25:34,200 --> 00:25:35,600
Speaker 6: So I think it's a good idea. I actually liked

598
00:25:35,600 --> 00:25:38,080
Speaker 6: the idea of a sovereign wealth fund at the same time,

599
00:25:38,119 --> 00:25:39,040
Speaker 6: like it's better than nothing.

600
00:25:39,080 --> 00:25:40,919
Speaker 5: I think just getting people.

601
00:25:40,640 --> 00:25:42,920
Speaker 6: In levels one, two, and three to own more income

602
00:25:42,920 --> 00:25:45,720
Speaker 6: producing assets is a good thing period, Like full stop.

603
00:25:45,880 --> 00:25:48,480
Speaker 6: I think that will help with the wealth inequality. It's

604
00:25:48,480 --> 00:25:51,000
Speaker 6: not going to solve it completely, because there's just existing

605
00:25:51,040 --> 00:25:54,760
Speaker 6: inequality that's just being exacerbated over time. And if people

606
00:25:54,800 --> 00:25:56,520
Speaker 6: aren't you know, don't have enough income to buy and

607
00:25:56,560 --> 00:25:59,000
Speaker 6: come producing assets, then that's not going to help either. Right,

608
00:25:59,040 --> 00:26:00,920
Speaker 6: A lot of people can't afford or to even put

609
00:26:00,920 --> 00:26:01,880
Speaker 6: money into an ETF.

610
00:26:02,040 --> 00:26:07,280
Speaker 3: Unfortunately, Nick, I'm curious, what do you know now having

611
00:26:07,320 --> 00:26:09,000
Speaker 3: done the book that you didn't know before you did

612
00:26:09,040 --> 00:26:09,320
Speaker 3: the book?

613
00:26:09,400 --> 00:26:10,320
Speaker 1: What'd you learn?

614
00:26:11,400 --> 00:26:12,160
Speaker 5: There's a few things.

615
00:26:12,200 --> 00:26:14,640
Speaker 6: I think The stuff I talk about on level four

616
00:26:14,960 --> 00:26:18,600
Speaker 6: with like the difference between getting out of that level

617
00:26:18,680 --> 00:26:21,399
Speaker 6: versus getting into that level was even more striking than

618
00:26:21,440 --> 00:26:23,879
Speaker 6: I thought it would be. And I use this. I

619
00:26:23,960 --> 00:26:26,200
Speaker 6: used some math to show this, Like once again, a

620
00:26:26,240 --> 00:26:28,400
Speaker 6: million dollar portfolio, you're saving one hundred k a year.

621
00:26:28,880 --> 00:26:30,840
Speaker 6: Let's say you're it's growing by five percent a year

622
00:26:30,840 --> 00:26:33,280
Speaker 6: after inflation, how long does it take to get to

623
00:26:33,320 --> 00:26:36,359
Speaker 6: ten million? The answer is twenty eight years. So like,

624
00:26:36,400 --> 00:26:38,320
Speaker 6: even like you're saving one hundred k year, that's a

625
00:26:38,359 --> 00:26:41,040
Speaker 6: lot of money. You're doing well, you're grinding, it still

626
00:26:41,040 --> 00:26:42,840
Speaker 6: takes you thirty years. And that's after you already hit

627
00:26:42,880 --> 00:26:44,879
Speaker 6: a million, right, which could take someone a few decades

628
00:26:44,920 --> 00:26:46,359
Speaker 6: to get there, right, So you think about that and

629
00:26:46,359 --> 00:26:49,080
Speaker 6: you're like, wow, like doing all these things, the nine

630
00:26:49,080 --> 00:26:51,600
Speaker 6: to five going through that, like it is a rough

631
00:26:51,640 --> 00:26:53,720
Speaker 6: grind to get to ten million from here, and so

632
00:26:53,920 --> 00:26:56,000
Speaker 6: a lot of people rationally so will say, you know what,

633
00:26:56,000 --> 00:26:57,679
Speaker 6: I'm not gonna do that. I don't care about doing

634
00:26:57,760 --> 00:26:59,640
Speaker 6: that and take their foot off the break our foot

635
00:26:59,640 --> 00:27:02,320
Speaker 6: off the game, so to speak. And that was one

636
00:27:02,320 --> 00:27:04,000
Speaker 6: of the big things I learned. And then also just

637
00:27:04,000 --> 00:27:06,800
Speaker 6: seeing how much business interest is at the higher end

638
00:27:06,840 --> 00:27:08,960
Speaker 6: of the wealth flatter. I knew that was true, but

639
00:27:08,960 --> 00:27:11,960
Speaker 6: when I saw it in the data, it's like overwhelmingly,

640
00:27:12,160 --> 00:27:13,680
Speaker 6: you know, the higher you go up the wealth flatter,

641
00:27:13,760 --> 00:27:15,840
Speaker 6: the more people just have their own businesses, right. And

642
00:27:15,880 --> 00:27:18,119
Speaker 6: it's just, of course there's some survivorship bias there. I

643
00:27:18,240 --> 00:27:20,480
Speaker 6: understand all that, but if you just look at people

644
00:27:20,480 --> 00:27:22,280
Speaker 6: in level six, all of them, it's like the vast

645
00:27:22,280 --> 00:27:24,760
Speaker 6: majority of their wealth is in their businesses one way

646
00:27:24,840 --> 00:27:25,200
Speaker 6: or another.

647
00:27:26,400 --> 00:27:29,760
Speaker 3: Last question for you, you're a little fine print at

648
00:27:29,800 --> 00:27:32,160
Speaker 3: the beginning to my father for teaching me the game

649
00:27:32,480 --> 00:27:33,600
Speaker 3: don't move until you see it?

650
00:27:34,920 --> 00:27:38,160
Speaker 6: What's that about Bobby Fisher that it's an old movie.

651
00:27:38,160 --> 00:27:39,720
Speaker 6: He taught me chess when I was, like, you know,

652
00:27:40,080 --> 00:27:41,560
Speaker 6: very young thing. I was four or five when he

653
00:27:41,560 --> 00:27:43,600
Speaker 6: started teaching me, and I started playing as friends, and

654
00:27:44,320 --> 00:27:47,359
Speaker 6: it really made me realize that, you know, like chess

655
00:27:47,359 --> 00:27:50,560
Speaker 6: as an analogy for like life is actually probably more

656
00:27:50,560 --> 00:27:53,360
Speaker 6: true than almost any game out there, because you're looking

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00:27:53,400 --> 00:27:55,000
Speaker 6: at the board. For any thee that's played chess, you

658
00:27:55,000 --> 00:27:56,560
Speaker 6: look at the board a certain point in time and oh,

659
00:27:56,640 --> 00:27:58,080
Speaker 6: I want to make this move. Oh I can't make

660
00:27:58,119 --> 00:28:00,680
Speaker 6: this move because they could do that a few moves later.

661
00:28:00,720 --> 00:28:03,320
Speaker 6: The board's changed. Now that move that didn't make sense

662
00:28:03,400 --> 00:28:05,440
Speaker 6: can now make sense. And I think the same thing

663
00:28:05,560 --> 00:28:07,680
Speaker 6: was true when I was writing The Well Ladder. Oh

664
00:28:07,720 --> 00:28:09,600
Speaker 6: I could do this now, but maybe that's not the

665
00:28:09,680 --> 00:28:12,359
Speaker 6: right move. Like starting a business when you're twenty two,

666
00:28:12,520 --> 00:28:14,920
Speaker 6: some people have succeeded it, most would fail. I think

667
00:28:14,960 --> 00:28:17,280
Speaker 6: most of the successful business owners are actually in their

668
00:28:17,280 --> 00:28:20,600
Speaker 6: forties because they've actually had industry experience, they have more connections,

669
00:28:20,640 --> 00:28:23,480
Speaker 6: and they have money to start the business. So the

670
00:28:23,600 --> 00:28:25,840
Speaker 6: move doesn't make sense at twenty two makes a lot

671
00:28:25,880 --> 00:28:27,680
Speaker 6: more sense at forty two, right, And so I think

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00:28:27,760 --> 00:28:31,000
Speaker 6: thinking through that is when you realize, like wow, life

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00:28:31,040 --> 00:28:33,359
Speaker 6: is more like a chess game than and first glance.

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Speaker 1: Nick Majulia, thanks for joining us on Trillions.

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Speaker 5: Thanks Pridman, guys appreciate it.

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Speaker 3: Thanks for listening to Trillions until next time. You can

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00:28:51,400 --> 00:28:52,760
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Speaker 3: Hit us up on social I'm at Joe Weber Show,

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00:28:56,560 --> 00:28:57,880
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Speaker 1: executive producer. Sage Bauman is the head of Bloomberg Podcast