The Algebra of Wealth - Scott Galloway

27:06All right, it's tuition time, but instead of Grace Church, I'm putting the$62 ,000 into SPY for those 14 years. Assume you screwed up and assume they're not as successful, that they really would have benefited from the contacts and the networking and the Ivy League school they would have got into. You screwed up by sending them to a public school. You can ease your and their pain with the$5.4 million you can give them at 35. $5.5 million will solve a lot of problems. So does it really make sense? And here's the thing at those schools, and I know this firsthand, there's a lot of people that doesn't care.

27:47If you have the money and it really doesn't matter, fine. Send them to the, on a risk-adjusted basis, the best school, regardless of what it costs. But I think about half or two-thirds of us that send our kids to private school, it's a real tax on us. It creates early anxiety in our lives. Oh, my God, we got to pay this tuition? Jesus Christ. And then once the kid's in school, you can't pull them out of the school. It creates real anxiety in the household. And what I'm suggesting is people just don't understand the power of time and compound interest. Okay. So we have stoicism, then we have time, and then the last component is diversification.

28:25And this is really where I screwed up. I've always made a lot of money. I am remarkably talented. I'm in the top 1%, easily, easily. Now being in the top 1 % of America means you're in the top.001 % of the world. A lot of my success is not my fault. The smartest thing I ever did was being born a white heterosexual male in 60s California. I came of age of free education that was accessible, and my professional life kicked off during the Internet. And I recognize that. I finally recognize that as I've gotten older. But beyond that, right, what are the market dynamics? I came busting out of business school, made a shit ton of money.

29:09And 99, I'm worth 20 or... By the way, I talk in real numbers. I think people, this British and less American notion that you shouldn't talk about money, that's the rich trying to keep you poor. You talk about anything else you want to be good at, why wouldn't you talk about money? Because I know what every employee at my firm makes. So I tell them, no, you don't talk about your salary. Because the asymmetry of information benefits me. Because if Bob figures out Lisa is making 30 % more, you might say, why the fuck is she making 30 % more than me? Talk to your friends about their investments. Talk to them about their houses.

29:46Talk to them about interest rates. Talk to them about how much money they're making and how much money you're making. If you want to be really good at something, you need to talk about it a lot. So I'm very transparent with money. And by the way, I don't want to talk about my wins. I lost$15 million last year shorting the market. I hate it when rich people just talk about their wins all the time. Where was I? Diversification. 99. Well, you're about to start real numbers. What's that? You're about to start real numbers. So 99, I'm worth$20 or$30 million in stock in the companies I've started. I've always I'm looking at jets.

30:20I'm flown down to an airport in the middle of Texas to look at a Bombardier or a Gulfstream, right? That was probably, I was self-aware enough even then to go, this is me sticking my chin out to God, looking at jets at the age of 31. Something's wrong with the universe right now. I remember thinking that, and I was right. And in 2000, the Dodd-Bomb implosion came, and I went from being worth 20 or 30 million to zero, maybe even less than zero. But that was fine. I was single. I didn't have kids. I didn't care. That was like a bad month for me, but then I was fine. But I had several opportunities along the way to sell two or three million in stock, diversify a bit, and put it in strange, boring shit, Japanese bonds, or whatever it might have been.

31:07And I would have had a lot of money to fall back on. But I didn't do it. And then what's worse, I did the exact same thing again. I had a company called Red Envelope, which was an e-commerce company that went public in 2002. And I got into a war with the board and the venture capitalists. So I went and I borrowed $3 million against the$10 million in stock I had to buy more Red Envelope stock so I could kick those motherfuckers off my board. And it felt really good when I did. And then when the company, because of the great financial recession and because of the longshoremen strike, a union went on strike at the port of Long Beach and all of our merchandise got stuck seven miles offshore.

31:47And then there was a software glitch at our distribution center in Ohio and we sent 30 ,000 gifts to the wrong addresses over the holidays, which is really bad for business. And within three weeks, I went from owning 14 million in stock to chapter 11 and the stock was worth zero. and I still owed the$3 million to the people who had lent me the money. And my oldest son had the poor judgment to come marching out of my girlfriend. And I was broke. And I would say one of the lowest moments I've ever had was in the maternity ward at Langone, NYU Langone. And I was so incredibly nauseous. I could barely stay conscious.

32:36and the people taking care of my girlfriend, they had to say to me, just so you know, if you go down, we're not focused on you. We got shit over here. They had to say that to me because they could see how bad I was doing. And they naturally probably thought it was the situation. It was the mechanics of delivery. That wasn't it at all. It was a recognition that the first thought I had when my son was brought into this world that I had failed as a father. That was so humiliating. And I never had that sensation. I think men, and I think this is a very healthy thing, I think men feel an especially strong onus economically around their obligation to economically provide.

33:21By the way, I think that's healthy. I think men should take economic responsibility for their household, which sometimes means getting out of the way and being more supportive of your partner who happens to be better at that money thing than you. But I think it's a good place to start. I do. And by the way, I think most women deep down think it's a good place for you to start too. And I know that sounds sexist and every piece of research backs it up. And I had failed. I had failed myself and I had failed my son. And if I had just taken some, if I had just not doubled down, if I had just borrowed the money against the stock and put it in bonds and then told the bank, sorry, I don't have the stock to pay, I just would have been in such a better place if I just diversified a little.

34:04A little. A little. And I still hadn't learned it. And it caused me such unbelievable mental anguish. And now, and I got lucky again. I got very lucky. I started another company. Unbelievable bull market, 2008 to 2000 to now. We've never seen a market like this. Never seen a market like this. I bought Netflix at 12 bucks a share. It's at 610. Right? Which, by the way, is an intergenerational theft. I'll come back to that. But now I don't have more. I know exactly how much I'm worth. I don't have more than three and a half percent in any one thing. Almost anything can happen, almost. And I own Deutsche Bonds.

34:52I own a piece of an aircraft maintenance facility in El Salvador. I am not going back. I'm running out of time. Diversification is your Kevlar. The one investment I was most excited about that I thought if I had to pick a 10X, it was this company that's doing text-based preventive healthcare. We sign up big companies and the employees pay three bucks, the company pays three bucks for an employee, they can go on AI driven, on your phone, here's my rash, this is the rash, prescription on its way, I just love this company. Tier one VC, lucky to get into the deal. baller CEO, bankrupt last week, zero.

35:33But here's the thing, it was a bad hour for me, but it wasn't a bad day or a bad week, because I have Kevlar, it's called diversification. I can take a bullet to the chest now in any one investment, and it hurts, but I'm fine. I get hit down, and I get back up. Diversification is so incredibly powerful for your own mental well-being and also risk-free adjusted returns. And Daniel Kahneman, who's a role model of mine who died a couple months ago, showed that the happiness you would get from being smart enough to pick NVIDIA two years ago and going all in on NVIDIA, I wasn't that smart, the happiness you're gonna get from outsized returns is a fraction of the misery you're gonna experience from outsized losses from a lack of diversification.

36:22So just for your own mental health, as soon as you can, you want to start diversifying. Now, some of you won't have that option. A lot of you are going to have to be very concentrated to buy your first house. You're going to have to borrow money. You're going to have to go all in on a house. Fine. Some of you entrepreneurs, unfortunately, sometimes have no choice but to be very, very concentrated in an asset. You don't have the choice. What I'm saying is the moment you have the choice, you're doing a financing and you might be able to sell some of your stock in a secondary. You have some additional capital.

36:56You take out a second. Well, let's maybe invest it in a different asset, whatever it might be. As soon as you can, once you have assets, start diversifying because the markets are cyclical. There's nothing like sleeping fairly well in a down market. It feels really good to be like, yeah, my net worth is down 10%, 20%, fine. Being down 120 % of your net worth, and I've been there, it makes for really ugly sleep patterns. Diversification is vastly underrated. Focus times the product of stoicism slash discipline, a recognition of time and how fast it'll go and compound interest, and then diversification.

37:43That's essentially, if you really understand and try and apply those things, I think things will work out. Then the context of the atmosphere around all of it is that wealth is what I call a whole person project. What do I mean by that? There's a myth that wealthy people are bad people. Unfortunately, that notion is cemented by some billionaires in their 30s, mostly in the tech industry, who are just not very good citizens. They're just not they're strikingly non-impressive low-character people and it's cemented this notion that rich people are all like Monty Burns from The Simpsons lighting cigars with hundred dollar bills and getting the power plant living alone and just weird not nice people.

38:29The truth is the majority of wealthy people are high-character people because if you want to be really wealthy you need to you need to create and collect a series of allies along the way. Google just did a study. The hiring manager said, when we have a product management position that we advertise, we get 200 CVs within 24 hours, we pick 20 people to come in. 80 % of the time, the person we pick has an internal champion that's their friend. People with the most friends have the most professional opportunity. You want to be put in a room of opportunities when you're not physically there. Well, I know Lisa's looking for a job, and I just heard this woman's hiring.

39:10I'm gonna go talk to her, and I'm gonna tell her I have someone great for her. Oh, Bob's starting a business. Business sounds stupid, but we love Bob. Let's put some money in. We love Bob, right? We love Bob, right? Generally speaking, wealthy people are really good people. They try to be generous. You need to start making investments in other people and racking and stacking allies. The flip side to that, you know, I've experienced this, is the fastest way to snatch financial victory, financial insecurity from the jaws of financial security is divorce. I lost 60 % of my net worth overnight. 50 % went to my ex and 10 % more because now we're supporting two houses, right?

40:01And I can guarantee you that if you ever get divorced, it'll be exactly the wrong time to sell a house. Whenever you're a forced seller, it's just naturally the world says, oh, it's the worst time in the world to sell these stocks, these assets that you need to split. In addition, nothing, nothing perverts success like professional divorce. Show me a smaller or medium-sized firm that's actually going really well and it starts coming apart at the seams. It's the partners stop appreciating each other and start being mean or not generous with each other. And there's professional divorce. So if you don't bring a certain amount of generosity and forgiveness and character and love to your personal and professional relationships, you're never going to be that wealthy.

40:52Married people, rich people tend to have much higher rates or lower rates of divorce. Really rich people tend to be people that get along, even with their ex-business partners. They're generous. Because if you keep a scorecard, and this was one of my biggest flaws in terms of character growing up, I always had a scorecard. Am I getting enough from this girlfriend I think she's getting from me? Am I getting enough from this friendship, this business relationship, this investment? I'm on a board, am I making money? And what you realize is that you will instinctively inflate your contribution and diminish theirs.

41:27And at some point you're just gonna be upset and angry and it's gonna digress from there And I finally figured out at least for me the approach to life is what kind of son do I want to be? Not how did my dad treat me? Was he around or not? What kind of son do I want to be? What kind of board member do I want? What kind of investor do I want to be? What kind of spouse do I want to be? What kind of business partner do I want to be? What is my goal? And then that's what I put my behavior to. I put the scorecard away And I'm just much happier and I'm a much better partner on a lot of dimensions because you will not calibrate the scorecard correctly.

42:03And it leads to divorce, professional and personal. Wealth is a whole person project. One thing you just said on building wealth is about being high character, about building friends, being someone who someone wants to be friends with in the first place. And a lot of that stuff professionally happens in rooms, right? So 2020 happened. The whole world went remote. That's a big cultural shift for generally how people were running businesses. There were a bunch of remote companies, sure. But predominantly people were office-based. And then since then, you've had to sort of phase back. Like, are we hybrid?

42:43Are we remote? I mean, certainly in my company heights, we've gone through exactly this. Like, fully remote, currently struggling with hybrid. It's a fucking mess. And a lot of people feel this. What's your view on what the right, if you were building a company today, like how would you build it culture-wise? And how do you think that works sort of generationally looking forward? So with AI, all of the things over the next 10 years, how do you build a great company culture? So I have a small company called Prof G Media that does my pods, my books, my TV stuff. It's small. It's about 10 to 12 million a year.

43:16but I'm the only shareholder and the average age is probably 35 because me and my partner are old but the mean or the median is probably 25 or 26. It's a bunch of over-educated, super ambitious, wonderful young people, 12 of the 14 are in their 20s. I think remote work is a disaster for young people. Now, who's it great for? I think there should be a new classification of worker called the care worker. You have young kids, you have aging parents, you're struggling with your own mental health, or maybe you just don't make enough money to live close to the office, which is a lot of people. You should be classified as a remote worker, and I believe the company has an onus to provide the resources and take additional time to try and evaluate you, despite the fact you're not going to be able to maintain the same level of relationships as people.

44:04If you are, before you collect dogs and kids, oh my God, get into the office. There are three people or more who are eligible for every promotion. And the decider will make their decision, their pick, based on who they have the best relationship with. And relationships are a function of proximity. You're 38 % more likely to get a promotion when you're in the office four plus days a week. In addition, and this is especially true of young men, you need the socialization and the guardrails of the workplace. If I didn't have to be in Morgan Stanley, 515 Figueroa by 8 a.m., if I wasn't there by 9 a.m., it was a paid day off.

44:45Things have changed a lot. If I got in at 9.05, it was counted as a paid day off. And I got 20 of those a year, so I was always there by nine, usually by eight. If I didn't have those guardrails, a 22-year-old Scott Galloway would have smoked pot every night. I love pot, oh my god. I don't think I would have showered that off. I wouldn't have. I used to get pulled out of conference rooms by my VP, Betsy Jacobson, and she'd say, come here, let me go into another room. And she'd be like, don't say that. That was stupid. don't say that again. What, she literally used to say, what the fuck were you thinking?

45:27I'd sit there and think, I'd much rather be home getting high. But it was really, I needed that. I needed socialization. By the way, I met a former co-founder of my business. I dated people at work. And it was consensual and wonderful. One out of three relationships begin at work. HR people want to talk about this. If you don't know the difference between expressing interest and asking someone for coffee and harassing somebody, you have much bigger problems. I've had eight marriages at the companies I've started, and I think it's wonderful. Where are young people supposed to meet? Online? That's a disaster.

46:13Online dating? Get into the office. Get into the office. Meet mentors. Meet friends. Meet co-founders. The office is a feature, not a bug. And I realize your lifestyle, it's a strain on your lifestyle. It pays huge dividends because as you get older, remote work is almost necessary. One of the criticisms I've had of the book is, okay, this is advice for people in their 20s and 30s. What about their 50s? So I got on the phone with a bunch of them on my podcast. And they outlined the situation. And I talk about getting to your burn, your passive income needs to be your burn. This couple was 48. They want to retire at 60 and da-da-da.

46:58They're only going to have, we did the math, they're only going to have$78 ,000 and$120 ,000. They live in San Jose. I'm like, why are you in San Jose? They're like, well, our mother-in-law is here. Our in-laws are here. And I said, I'm like, do you need to be near your in-laws? And they all look at each other, and one is looking at the other, right? Their kids have all moved away. And I'm like, where else have you been that you really like? And they're like, well, we just had it. We spend a month a year in Costa Rica. I'm like, why wouldn't you move to Costa Rica? You can cut your burn substantially.

47:30You can be really happy there. It's got great healthcare, great food. So remote work is an enormous unlock for caregivers and for people looking to arb down their spend. But for young people, oh my gosh, you want to get into the office. In terms of a culture, one thing I'm trying to do, I was just on the phone with my team now, we don't have an office. So I started Prop G in like 2019. I'm a narcissist so I got this gigantic space in SoHo because I want my friends who think I'm a baller and it's big and beautiful. And it costs$80 ,000 a month. And yeah, rookie move, right? I keep making them. I keep making them.

48:10And then COVID came along and I had this epidemiologist on my podcast and I called him and I said, how bad is this? And he said, Scott, it's worse than anyone thinks. I remember them saying that. I'm like, I didn't believe any of the thing about the virus. I was like, oh no, I'm not worried about this. He was like, oh no, it's worse than anyone thinks. So I called LVMH, who I was subleasing from, and I said, I want to give it back. And they said, well, you're going to lose a year of deposit. I wrote them a check. I forgo a million dollars, and I got out of the lease. Four years later, it was the smartest thing I've ever done.

48:42Now, the problem is, how do these kids get together, and how do you develop a form of a culture? One, I tell them they can have a co-working space whenever they want. And what's interesting is the youngest people who supposedly love remote work, they immediately get co-working space immediately. I like that. No deposit, no security deposit. It's not that expensive. I think it's 18 or 22 grand a month. It's not a lot of money. And I say to them, OK, anytime any four of you are together, and you can only do this with a small firm. It's not realistic. Anytime any four of you are together, you have my credit card.

49:14I don't care if it's at a Broadway show in Tulum or in three weeks they're going to St. Bart's. They just told me. And they like each other and they get along. And it's selfish of me because the number one source of retention in companies, people think it's compensation. Well, that's actually number three. Number two is if they think they're learning and they're getting some sort of psychic compensation, the number one predictor of retention, does anyone know what it is? If you have a friend at work. So I'm like, it's my job to make them friends. So they all interview each other. We don't hire anyone unless everyone says, yeah, I'd like to hang out with this person.

49:56They like them. And you can only do that in a small company. That doesn't scale well. And they do the most amazing shit together. They have a ton of fun together because it's on me. They make really good money, but they can't afford to go to St. Bart's. In the last three years, they've gone to LA, last three years, last 18 months, LA, St. Bart's, this June, Tulum, Cannes, Oh, we're coming with you to Cannes. There's three of us who want to come. All we need is a fourth, and we'll see you in Cannes.

50:29And I'm sincere about this. They have my card as long as they're together. And I think it's working. I think they genuinely like each other, and they love the firm. Now, granted, my firm's a little bit different. I'm rounding third. I get a crazy amount of money to do talks and books and stuff like that, so I can afford this sort of thing. But we have never lost a person voluntarily. No one has ever voluntarily left the firm. And I think that's kind of the key. I'm getting into it a little bit for HR. But generally what you find, and this is not a hallmark moment, we have a small company, 10 % of your employees add 120 % of the value and the rest are negative 20%.

51:08And you need to identify those 10 % and nail them to the floor. Ignore how old they are. Ignore their background. ignore what they look like, and it's not easy because we all have stereotypes. And if this 23-year-old former diver from Yale who just seems smarter than anyone here and works around the clock, oh hi, I'm gonna give you 10 % of the company. This is my plan. I'm gonna build this company for seven years. I'm gonna sell it for 100 to 200 million. With dilution, that means you're gonna get seven to 10 million. Are you in? Okay. Find those two or three people, or those 10 people, the 10 % who drive the 120 % so they can minimize the negative 20 of everyone else you need to scale.

51:54And by the way, oh, but everyone has a role. Okay, fine. There is a small number of people at firms that drive the majority of the value, and you want to massively overcompensate those people. You want to look them in the eye and go, I'm focused on me, but if me does well, you're going to do well. and this is how I can guarantee that. And you are going to do better than your parents did 20 years younger than them. I'm very Darwinian about it. I have a nice work environment. I want them to learn. My assumption is the majority of people go to work for economic security for them and their families.

52:31And what I tell them is, I'm going to get you to economic security faster than anywhere. And that might not be the right way. It's my way. And I very much focus on those individuals. Retention is job number one. finding good people, ringing the register, but I do think in a small company that has a good product, everything is about retention. Identifying those people early and just knowing they're not going anywhere because they could never do better than what they're doing here. I mean, that is a fucking baller move as well. Like, you know, the card, not everyone can do that, but I think if you put yourself in a position because of wealth, because of following all these techniques, I guess one of the things you're trying to minimize in your age, if you don't mind my mentioning.

53:15Sure, I'm 49. Fuck, I was about to say 59. God, I would have really screwed that up. I'm turning 60 in five months. Because I'm sure one of the things you optimize for is, yeah, sorry about that. But I'm sure one of the things you optimize for is fucking chilling out there. Like not having to deal with like the employee churn, et cetera, et cetera. So therefore, there's like a big tax that you're mentally paying every time you have to sort that out, which money can solve for you, right? And that's a really nice way, nice model and framework to use for money. It's like, is it making your life easier?

53:45That is the, you're tapping into the correct, that's the correct question. Because this is what money gets you. And that is money is a means, it's not the ends. Right? I got to my number. Everyone, you know, you have your number, what you really like to have. What was your number? Well, it was a million dollars when I was your age. Then it became 10, then it became 100. because I had different things in my mind. Well, I'd like to have a nice home. Well, how much do I need for a nice home? Well, only a million bucks. Well, no, that's 10 million. Well, I'd really like two homes. Well, I'd really like a Gulfstream.

54:21You want a nice divorce? I kept going up and up. And that's the problem with money is it's quantified by a number, and you can always imagine more. And what you have to realize, and it takes some discipline, and this is a high-class problem, is to realize it's the ink in your pen, And that is it'll write different chapters. It can make certain chapters burn brighter, but it's not your story All studies show that the key to happiness One let me be clear money can buy happiness the bullshit money can't that's bullshit Money can't buy happiness middle-income people are happier than poor people high-income people are happier than middle-income That's the bad news the good news is it's diminishing returns Once you get to a certain point of wealth once you get above say a million bucks a year Which is a lot of money, but once you get above that going to two or three million very little marginal return.

55:09So you have to figure out, what's my number? And if you're fortunate enough to get there, if you're fortunate enough to get there, what I think the ends is, the whole point of economic security is such that you can have an absence of anxiety, so you can focus on relationships, and then you transfer that money you have into time and attention to your relationships. I can't imagine a bigger failure and I was this way I was more concerned with what other people thought of me than the people who I was living with thought of me I wanted fame I wanted relevance I wanted success and I realized in my 30s but the people really close to me they like me but they don't love me as much as strangers I mean okay I need to recalibrate my life having money is i hit my number i i still think about money a lot but i'm not going to hoard wealth i've decided i'm going to above my number now i'm going to spend it all or give it all away i don't believe in billionaires more power to them i don't think we should take their money away i don't think they're any happier than me i just don't so what money is now is i have an absence of economic stress i still have it kind of deep down but i know i just need to be rational and it disappears because I grew up without no money, so it's still there for me.

56:33But I do amazing things with my wife and kids. I give money to things I love. I help friends out. I'm doing a ton of virtue signaling now. And I don't give money away. I don't give money away because I'm a good person. It makes me feel really fucking masculine. It makes me feel like a baller. I love it. And I don't give money away anonymously. I show up and I cut ribbons. And it makes me feel really good about myself. And I think that's okay. It makes me feel strong like bull. I think that's okay. But once you get to a point of some economic security, the whole point is you can then double down on what every study shows is the key to happiness, and that is deep and meaningful relationships.

57:18I'm catching up. I'm spending a ton of time with my boys. I'm taking the dogs and my son to Estelle Manor, or whatever the fuck it's called, and I'm setting up shooting and all these stupid things, and Padell, and he's doing a cooking class, and I'm doing a cooking class. He's 13. And it's amazing. It's amazing. And I couldn't do these things. Money's an incredible lubricant for a lot of things. But if you don't use it when you have it to cement and really go deep on relationships, what is the point? the biggest tragedy, and I thought about this a lot, is to end up at the NYU Langone President's Circle floor.

58:01If you give Langone, it's probably gone up, but 10 years ago, if you gave a quarter of a million dollars to NYU Langone, you got a secret number. And anything happens to you, you call the secret number, and they're like, oh, you have COVID? We're sending the world's greatest pulmonologist over to your house in five minutes. It's this dirty secret, right? Rich people have much better health care. Most people know that. I don't think they know the extent. And then they have this floor where you go to give birth and die. It feels like a Four Seasons. It literally feels like a Four Seasons. It's beautiful.

58:28It doesn't feel like a hospital. And I thought, this is my biggest fear. I get there and I'm dying and I'm surrounded by strangers, right? All these people that don't know me are super impressed and pretend to like me, but the people who are supposed to love me don't show up. That is failure. That is failure. And it sounds remote, but if you are so obsessed and provide the commitment to make money, it is easy to get on a treadmill where you start ignoring the really important relationships in your life. You start sacrificing and you never bust out of that cycle. And you end up in your 40s and your 50s with a shitty relationship with your spouse.

59:05You're not spending as much time caring for your parents as you would like to, or you don't reciprocate the amount of concern they showed for you. Your friends are sort of professional friends. They're not real friends. I mean, they're friends, but once you're no longer in a position of economic relevance, they don't really love you. That is failure. That is snatching defeat from the jaws of victory. So I purposefully have decided I'm going to spend it all. I don't want my kids to inherit a lot of money. They'll be fine. And all my money goes towards cementing relationships. I'm a yes to everything.

59:42Any friend calls me and says, hey, we're going to stagecoach. What's stagecoach? Well, it's the new Coachella. It's country music. I hate country music. I'm in. And my right is I can always say no. I have the right to always back out. But I'm a yes to anything with friends or people I care about. My kid asks me to do anything. I'm a yes. I have the right to back out. But this qualifies as a good problem. them, but keep in mind, money is just the means. The ends are deep and meaningful relationships. That's a word salad. Most entrepreneurs obviously have a certain type of way they build wealth.

1:00:26You've talked a lot about the strategies that normal, logical people who aren't fucking idiots and go all in on companies would do. But for a lot of us, it's like feast and famine. You either did make a lot of money or you didn't or whatever. So in those circumstances, there can be a number and a moment. I guess I'm wondering, do you actually have a number? I did, yeah. No, but do you have advice in 2024 and just swap dollars for pounds or whatever? How much does someone need to make on an exit to be financially free for the rest of their life? And can you break down your maths? Well, it's just situational.

1:01:01You might decide my goal is to live in the British countryside and have a modest home and live well and be able to take vacations, and I have one kid, and my husband works, so you just do the math. Assume you're going to make between 7 % and call it 9 % a year. The definition of rich is the following. Passive income that's greater than your burn. And I'll give you two examples. I have a close friend who runs the M &A group at a large, iconic investment bank. He makes between$4 and$14 million a year, depending on the market. Between his ex-wife, his alimony, his child support, his three current kids, his master of the universe lifestyle, his 54 % tax rate, his flexjet guard, and all the trappings to signal that he's a baller, and also the feeling that he should be a baller, given how hard he's working and advising the CEOs of the biggest companies in the world, I don't think he saves a lot of money.

1:01:55He's poor. And I can tell you that he, I know this firsthand, he is really stressed about what happens if the music stops. really stressed. That is not rich. My father, who's turning 94 in three months, between his Royal Navy pension, he was a frogman jumping into the North Atlantic with the Royal Navy at the age of 17. Can you imagine that? And he gets a pension for doing that. And Social Security has lived in America for 60 years. And he owns 11 washing and drying machines at trailer parks where he goes every day to collect the quarters. He makes$52 ,000 a year in passive income and he spends$48 ,000 and he's happy.

1:02:40His passive income is greater than his burn. He's rich. My dad is so painfully cheap. He's that guy every Friday, his big treatise, he goes out for Mexican food with his health aid and he orders a frozen margarita and he drinks half of it and he gets the rest to go. He takes home half of a frozen margarita and puts it in the freezer and there's all these like weird gelatinous margaritas from there. Anyways, he's that guy. He's rich. Working is totally optional for him. So your number is just a function of where you think your burn needs to be. And some people don't need a lot of money and some people need a lot of it.

1:03:19But think about realistically, what would my burn need to be at a certain age? What are my sources of income? And assume a certain return on your nest egg based on traditional returns and just do the math. And then if the math isn't there, well, then you need to adjust down what your burn's gonna be. And there's all sorts of ways to do that. A lifestyle arbitrage, moving to a different neighborhood, whatever it might be. Or you might have to work longer, or you might need to get more serious about savings right now. No, saving$800 a month isn't enough. You need to figure out a way to save$1 ,100 a month.

1:03:49You can do the math. The advantage you have in your 40s and 50s is the landing lights are on. You're not going to retire at 65. Assume you're going to make money until you're 70. The landing lights are on. You can start doing the math. What does this cost us? And then the other thing that people don't talk about is it's so important you have alignment with your partner. What's the number one cause of divorce? By the way, 70 % of divorce filings are filed by women. 70 % by women. And what's the number one source or cause for why they file for divorce. I'm guessing it's not friends again. Insufficiency capital.

1:04:27It's money. It's money. It's usually when the male has had a financial breakdown, a bankruptcy, has lost his business or some sort of mental breakdown. And you hear that and you're like, oh wait, I thought all women were just wonderful people and all men were predators. There is still a standard expectation in relationships that once a male is no longer a provider, he becomes much less attractive to his mate. Men are three times as likely to take ED drugs when their wife starts making more money than them. The likelihood of divorce doubles the moment the female in the relationship starts making more money.

1:05:06Isn't it uncomfortable to hear this shit? And here's the thing. Here's the thing. As long as you have alignment, you're fine. My wife worked at Goldman Sachs, and it was a huge source of relief for me because I was starting a business, and we had alignment. She was going to work her ass off because I wasn't making any money. And then when the kids got to a certain age, I was going to take over financially. We had alignment. We have a similar approach to spending. We have alignment. You want to talk about divorce that's just so frustrating. It's when one person has a different expectation around the economic weight class you should be in, a different expectation around who's responsible for putting you and keeping you in that economic weight class, and what can break up a marriage really fast is a different approach to spending.

1:05:51Do you know how many really ugly arguments are around misalignment around spending? So young people, right, what do you need to be successful in a marriage? One, I think, sex and affection. It says you're singular. Young people figure that out. That's very important to them. The second is values. Religion, where are we going to live? What's our approach to kids, child-rearing, all that stuff? Young people don't talk a lot about that. And then the third thing and the number one cause of divorce, a merilagita, and young people never talk about it with the romantic partner because it feels sort of uncomfortable and very unsexy, is money.

1:06:26Where do we expect to live? Where do you expect to live? How much is it going to cost us to live there? Who's responsible for making that money? I mean, these conversations are really hard, but alignment with a partner, and I'm not saying you have to start out, but one of the most wonderful things about, it's great being wealthy, but I actually think the most rewarding thing was getting wealthy and building it with a partner. That was just so nice. It's like raising kids and the kid works out. To build something with a partner is hugely rewarding. Hugely rewarding. Anyways, alignment. And it's not too late.

1:07:03Sit down with your partner. I find especially men don't want to talk about money with their spouses. They go, leave it to me. And by the way, a lot of times I think spouses, men and women, where you really come off the tracks is unwelcome surprises. You need to tell your spouse when you've lost a lot of money in the market. You need to tell, you need to have real transparency. I sit down with my partner once every three months and go through everything. This is where we lost money. This is where we made money. I'm much more risk aggressive. If we were up to her, we'd be bearing cougar hands in the yard.

1:07:40She's much more risky. And the combination works really well. But something we don't talk about with young people in terms of mating is how important it is to get alignment around money. You don't have to be exactly the same, but at least be honest with each other. Final one for me, then we'll do some quick Q &A. So obviously not shy of a hot take. very informed with data and spanning lots of different categories and stuff. You've got a platform. You've got opinions. Is there anything off limits? Is there stuff that you're like, without your SVP taking to another room and saying, what the fuck are you doing?

1:08:19Are there things that you're just like, look, I should not get involved in this. This is not a Prof G thing. Or is your view that anything's on the table if you've got informed opinions? Well, in office hours where people call in, a lot of times people call in who I think are struggling with their mental health or with something medical. And I try to be more responsible and say, I'm just not qualified to comment here. And I'm going to try and get you some resources, but I don't have a degree in clinical psychology. I'm not a psychiatrist. I'm not a medical doctor. I'm trying to be more measured.

1:08:51Here's the problem. There's this Dunning-Kruger effect, where if you're really good at one thing, you immediately assume you're an expert in anything. And it's just not true. I should not be talking to people about health treatment. I should not be trying to diagnose depression. I can recognize depression in other people if I'm going through that. I suffer with depression and anger, and I can say, this is what I'm struggling with, and it sounds like you might be struggling with it. Here are some resources to call. But I try not to prescribe or tell people what to do around health-related issues, because I know I don't have any domain expertise there.

1:09:25I talk about my kids a lot. I don't talk about my partner a lot, because she's threatened me with violence if I say anything about it. She wants that part of our life separate. And your kids haven't threatened that yet? It's funny. My kids are now just figuring out what I do. They're constantly like, my friend's dad says you're great. What do you do again? They just have no idea what I do. No idea. It's nice. I like that. It's nice. Sorry, I do have one last one, actually. Very important. Because you talk a lot about your kids, and you talk about your parents. Yeah. And you mentioned earlier this generational idea of wealth.

1:09:59Right. This sort of like bank robbery. What are you referring to? What is this great robbery that's taken place in generational wealth? Super easy. My generation has fucked yours. The greatest intergenerational theft has occurred over the last 40 years. The average 70-year-old is 72 % wealthier than they were 40 years ago. The average person under the age of 40 is 24 % less wealthy. And we use words like network effects or globalization. It's been a purposeful transfer. What are the two largest tax deductions? I know this is true in the U.S., I know this is true in the U.K. Mortgage interest rate and capital gains.

1:10:36Who owns homes and who owns stocks? People my age. Who rents and makes their money from current income? People your age. Every year in the United States, we transfer$1.4 trillion from young people to old people, the wealthiest generation in the history of the planet, old Americans, called Social Security. Shouldn't old people who've had an unprecedented level of prosperity be responsible for giving young people money? Makes no sense to me. Oh, a virus kills a million people. That'd be bad. But what would be tragic is if I lost money. So we put$6 trillion into the economy. 80 % of it wasn't spent.

1:11:15It wasn't spent on medicine or food. It was put in people's savings accounts. So what do they do? They invest in stocks and bonds, which sent assets skyrocketing. So my assets went boom because I already own a home in stocks. But if you're looking for a house or you're just coming into your prime income earning years and want to buy stocks, how do you get your shot? The reason I got wealthy is because in 2008, we let the economy crash. We bailed out the banks, but we didn't bail out the economy. And I was just coming into my prime income earning years, starting to make real money, even though my life had gone to shit.

1:11:48I was still making a lot of money. And I took all my money and I bought Apple, Amazon, and Netflix for$6,$8, and$12 a share. And now they're at$160,$180, and$600. But we decided we're not going to let assets crash this last time. Disruption and market cycles are key to the... There's this myth that's been fomented that you have bought, and it's a lie and that is strong markets and high asset prices are good for everybody. There are two parts to your life. There's the investing part where you're trying to make more money than you're spending so you can save and invest. How many of you are in the investing part of your life?

1:12:33Then there is I'm spending more than I'm saving because I'm a little bit older. I'm in the harvesting part of my life. How many of you are in the harvesting part? Okay, if you're in the investing part, you want asset prices to crash. Strong markets aren't good for you. You want prices as low as possible. How on earth are you ever going to afford a home in London? How are you, what, you're going to buy Nvidia at 800 bucks a share and hope it goes to 8 ,000? So when we bailed out the baby boomer owner of a restaurant in New York, all we were doing was robbing opportunity from the 26-year-old graduate of a culinary academy that wanted her shot.

1:13:17So the entire market is rigged to take money from a younger generation to an older generation. My tax rate the last 10 years has been 17%. What's your tax rate? The richest 25 Americans paid an average tax rate of 16%. Corporations are paying the lowest tax rate Since 1939 in America, it used to be 3.5 % of GDP corporate taxes. Now it's 1%. But if you're a super earner, you make more than, say, 100 or 150 ,000 pounds, you and your husband or you and your wife, up to a million or a million and a half, but you earn it. It's not from ownership. Your taxes have never been higher. There is a myth that the rich don't pay taxes.

1:14:01Actually, the rich pay almost all the taxes. The nuance, though, is it's the super earners, the workhorses. Dad's a chiropractor. He's got a little chiropractic clinic. He makes two, three hundred thousand pounds a year. He's doing great. Mom is a baller. Partner in a law firm making six, eight hundred thousand pounds a year. They make a million pounds a year. Their tax rate is probably 50 percent. But if you own assets, your tax rate plummets. So it's the super rich and corporations that are not paying their fair share. But the super earners, the people with good jobs who earn a lot of money, are paying enormous tax rates.

1:14:45And this is nothing but a transfer of wealth from the young to the old. Almost every economic policy we have is a transfer of wealth from your generation to mine. COVID was the ultimate generational theft, but all of the biggest tax policies are generated. And it makes sense. Look who's running for president of the United States. Look how old they are. The former Speaker of the House, Nancy Pelosi, when she had her first child, Castro had just declared martial law in Cuba, and two-thirds of households didn't have a color television. But she's supposed to understand the challenges facing a 17-year-old girl who's 5 '9", 95 pounds, getting extreme dieting tips and notifications from Meta.

1:15:26She's supposed to understand that. These elected officials, Mitch McConnell at 82, are supposed to understand the challenges of a 23-year-old male with no economic or romantic prospects who keeps getting notifications on his gaming app from Kevin Hart and Charles Barkley that he should bet on the Chelsea game. They really understand the threats and challenges facing young people. The average age of an American is 38. The average age of our elected representative is 62. do. And seniors keep electing other seniors who keep voting themselves more money. You want to talk about really screwing young Americans?

1:16:03I apologize if all my data is about America. Student debt. It's the only debt in America that's not dischargeable by bankruptcy. Shouldn't it be the most dischargeable debt? If a young person screws up and trusts me and pays$72 ,000 a year to come to NYU and they end up with$150 ,000 in debt, and they're one of the people that's not cut out for college, oh no, you own your debt for the rest of your life. University doesn't have to pay it back. It's backed by the government. Every major fiscal policy across, in my opinion, not Northern Europe, but Western Europe and America is nothing but a thinly veiled con job to get me more money from you.

1:16:40All the protests on campus in the U.S., I was just on Piers Morgan, they got nothing to do with the Middle East. None of these people have any fucking idea what's going on there. They couldn't name anyone in the PLA or any of the leaders of Hamas. They don't even know what countries border Gaza. It's not about the Middle East. It's about America. They're enraged. And any cut to the system turns into an opportunistic infection because they're enraged. They're angry. And I don't blame them. I'd be pissed off. Any opportunity to be really pissed off, I would take if I was a young person in the UK or America right now.

1:17:17There's prosperity everywhere, everywhere. When I was 25, inflation-adjusted basis, average salary, 85 ,000. 20 years ago, it was 65. Now it's 55 for 25-year-olds. But meanwhile, housing has gone up fourfold, and education's gone up twofold. What the actual fuck? But the economy has boomed, and the stock market's touching all-time highs. And I get 210 notifications a day, the majority of which are people vomiting their wealth on me. And what do you know? What do you know? The young generation in Britain and the US is the most anxious, depressed, obese, and addicted in history. I mean, I say that.

1:18:01I literally can't figure out what is this all for, right? Innovation, AI, GDP growth, IPOs. if our kids are obese, depressed, and addicted, what is any of this about? It's like, I can't, I think about this, I'm like, have we lost our fucking minds? Your kids? You know, most of you don't have kids, but I think about, can you imagine, I think about, if I didn't have money, and I was sending my kids into this world of prosperity, or they're going to be so fucking depressed. It's criminal. It's literally criminal. This is the jet lag speaking. I'm emotional. Sorry about that. Let's talk about something brighter.

1:18:52Well, maybe it's brighter, maybe it's not. But what is your advice to entrepreneurs then in the room and listening who might actually be able to make a change? We all believe that we can make change, right? That's the whole fucking point of entrepreneurship in the first place. So what can we do? What can we do to actually create a better world? because all of those things that you have listed there are insidious, but part of stoicism is living in reality, right? And that is something that you are, as a philosophy, that you practice. So how do we live in reality and also create a better world? What is your advice for us to actually make change?

1:19:25Well, it sounds very tried, but vote. Get more politically engaged. Young people don't vote for some reason. I think a lot of the onus comes down to my generation just being less selfish. I think we have to have economic programs to transfer money back to young people. This is, we can, we screwed all this up, we can unscrew it. There's absolutely, there's nothing I'm talking about that can't be fixed. Tax policies that favor the young instead of the old, child tax credit, national service that helps young people meet other people, potential mentors, friends. I think there's a child tax credit, universal childcare, just basics that help young adults out.

1:20:10I think there's a ton of things we can do. Young people, I think young people are pretty socially minded.

1:20:18I think you have an onus to be economically viable. Take the temperature down, get off of social media, it's total empty calories. It'll just make you depressed and angry. I mean, use it for your own companies to get your word out. But I got off of Twitter a year ago, and it's probably the most accretive thing I've ever done for my mental health. But I do think the onus is on my generation to... We're the ones in power. You're more powerful than most people your age because you're young and you have digital platforms. but the real power, the real power is in corporations and people my generation.

1:20:56So I think we have an onus to change things. And I'd like to think people are waking up to it. But young people, just be successful and vote. Take the temperature down. Don't do what I did. Don't feel like you have to get back in someone's face if they say something mean about you on social media. That's just stupid. You know what the best revenge is? I struggle with anger. I get really angry at people I hold grudges. And one of my mentors said something so powerful to me about 15 years ago that changed my life. He said, you really, I mean, I was at a war with my board, and he's like, you really want to serve this guy a cold lunch?

1:21:29I'm like, yeah, I'm dying. He's like, if you really want revenge, he's like, just live an amazing life. Just live an amazing life. He's like, love as many people as you can, have as many people love you, make a shit ton of money, spend it on fun things. and everyone that you hate is just literally going to fail. Don't even think about them. And it's going to drive them crazy when they see what a nice life you're having. And that kind of changed my life. I'm like, what am I doing being angry at people? I've been in business 35 years. I've never sued anyone nor been sued. Someone treats me poorly, I just don't work with them again.

1:22:08But this all started with what can you do? Take the temperature down and social. Never respond to a slight. the world's going to be fine. If it's a little bit out of balance, if someone gets the best of you, and vote. Get very politically active. Scott, it's been amazing. Thank you so much. We're going for a couple of Q &A. Yeah, yeah.

1:22:34Okay, so we do have pizzas and beers upstairs, so I won't keep everyone from them for too long, but we'll take time for three questions. Okay? So first hand up. And there you have it, a masterclass in building wealth from one of the most interesting minds in business today, Scott Galloway. There were so many powerful takeaways from this conversation. Here's what stood out to me. One, the importance of developing a savings muscle and making wealth building automatic. Two, the incredible power of compound interest over time. Three, the necessity of diversifying your investments, skills and relationships.

1:23:14Four, and perhaps most importantly, the idea that true wealth is about so much more than just money. It's about crafting a life of purpose, fulfillment, and generosity. If you enjoyed this conversation as much as I did, please take a moment to share it with someone you think would love it. Also, I highly recommend you check out the full version of the interview on our YouTube channel. Just search The Secret Leaders Podcast and it should pop right up. In the video, you're going to see a bonus Q &A session where Scott answered many questions from our live audience of 80 founders that were split between, you know, some earlier on their journey learning how to save it and a large group of exited founders curious for insights about how to spend and invest their wealth.

1:23:57And as always, a huge thank you for listening and sharing this show. We couldn't do it without you and it genuinely means so much to us.

1:24:11Thank you.