Kurt Vonnegut, the famous American novelist, was at a party thrown by a billionaire hedge fund manager. The party was in Shelter Island, New York, and Kurt was accompanied by a fellow writer Joseph Heller.
Kurt must have been taken in by the opulence and the luxury around him when he turned to Joseph and said that the host might have made more money in a single day than what Joseph did in his entire lifetime. That was possibly true and quite a statement because Joseph Heller wrote Catch 22, one of America’s best selling novels.
Joseph Heller’s response should be embossed and displayed in every household across the world because it aptly summarizes the relation people should have with money. “Yes, but I will have something he will never have… Enough”.
When I read this incident in Morgan Housel’s bestseller, The Psychology of Money, I was blown away. Most of us spend our entire life without asking ourselves when we will have enough. As I immersed myself in the book, I realized that we all face some systematic problems that actively stop us from maximizing our wealth and happiness. In this article, we will explore three major problems related to generating wealth and examine how meditation can help us overcome them.
Problem 1: It’s Never Enough
“To make money, they didn’t have and didn’t need, they risked what they did have and did need. And that’s foolish. It’s just plain foolish. If you risk something important to you for something unimportant, it just does not make any sense”. – Warren Buffet
Rajat Gupta was born in Kolkata and orphaned early in life. That did not stop him from completing his bachelor’s degree from IIT Delhi and an MBA from Harvard University. He joined McKinsey in 1973 as one of the earliest Indian Americans in the firm and rose to the position of Managing Director. After he retired in 2007, Rajat went on to take up roles with the World Economic Forum and partnered on philanthropic work with Bill Gates. Rajat was a millionaire.
Yet, Rajat did not want to be a mere millionaire. He wanted to join the exclusive billionaires club. He was willing to do whatever it took to get there. So in 2008, when Goldman Sachs was at the vortex of the global financial crisis, Gupta, as a board member in Goldman Sachs, learned that Warren Buffet planned to invest five billion dollars in the bank to help it survive. He knew this would send the stocks soaring. Rajat also knew that since this information was not publicly available, Insider Trading laws forbade him from acting on this information. Ignoring the peril, he quickly called a hedge fund manager and bought 1,75000 shares of Goldman Sachs. It’s not that Gupta had not seen other people get caught for insider trading. He did not even need the money. However, his greed had taken over the logical part of his brain. He made a million dollars from that trade. The US Securities and Exchange Commission (SEC) caught up with him and, after an investigation, concluded that Gupta made over 17 Million dollars from such insider trading schemes. Rajat spent two years in jail and lost all the respect and goodwill he had earned in his long career.
Why would you want to risk everything to make more money when you already have ENOUGH?
You can find the answer in a Harvard Business Review article written in 2012. The article summarizes that greed is directly related to the neurochemistry of the brain. A chemical called dopamine fuels greed, and the higher the level of dopamine in our brain, the happier we feel. Hans Breiter, a Harvard researcher, and his colleagues found that the craving for money activates the same brain regions as the craving for cocaine, sex, or any other instant and intense pleasure.
However, there is a catch. Dopamine is best activated by new experiences. It seems to be nature’s way of rewarding you when you learn new things. However, when we try to recreate dopamine by repeating the same experience that gave us the feeling of happiness in the first place, we don’t get the same rush again. That’s why people keep increasing their dose of cocaine or keep trying to make more money. Rajat was not chasing more money. He was trying to recreate the rush he got when he made his first million dollars.
So how can people like Rajat Gupta control their desires? A recent study that included eight experienced meditation teachers found a 64% increase in dopamine production after meditating for one hour, compared to when resting quietly.
Take a moment and think about this. The world is full of wealthy people trying to make more money because they want to recreate the rush they felt while making their first million. The rush eludes them because dopamine gets released only for novel experiences. Meditation seems to be a safe and beautiful practice where you enjoy that happy high after every session without experiencing any side effects.
Imagine if Rajat Gupta meditated an hour every day. Would he have felt the need to risk everything he had, literally within sixteen seconds of knowing of Warren Buffet’s investment in Goldman Sachs? We can never know for sure, but probably not.
Problem 2: Underestimating the Power of Compounding
You can understand the power of compounding best by examining the contrasting examples of Ronald James Read and Richard Fuscone. Ronald was born in rural Vermont and was the first member of his family to graduate from high school. He served his country in World War II and returned to work in Vermont for 25 years as a part-time gas-station attendant. He also worked in JC Penny as a janitor. His life became a case study when it was discovered that when Ronald died, at the age of 92, he had built an estate worth roughly $8 million. A man working in a gas station and a janitor has managed to accumulate a fortune. Analysts studying his investment portfolio realized that Ronald saved diligently and invested only in blue-chip companies. He did not time the market and believed in the power of compounding. Patience and persistence were reasons that Ronald was able to compound his wealth by investing just a few dollars every month.
Richard Fuscone was the polar opposite of Ronald Read. Richard studied at Harvard, worked in Merrill Lynch, and had an MBA degree. He retired at 45 and became a philanthropist. He borrowed money heavily in the mid-2000s to build an 18,000 sqft home that included 11 bathrooms, two elevators, two pools, and a garage for seven cars. The house cost more than $90000 a month to maintain. In the 2008 financial crisis, Richard went bankrupt due to high debt and illiquid assets.
Morgan argues in his book The Psychology of Money that there is no other profession where someone with no degree, formal training, and professional experience beat another individual with all these advantages. Can you think of an ordinary person performing a surgery better than a trained doctor? Would you be able to argue a case in courts better than a trained lawyer? It seems impossible, doesn’t it? Richard with all his education and his training was outdone by Ronald Reed who demonstrated the patience necessary to help the principle of compounding work for him.
Let’s review another example that illustrates the power of compounding. Morgan Housel analyzed Warren Buffet’s wealth and came to a fantastic conclusion. He summarized that at the time of writing the book, Buffet’s net worth was $84.5 billion. Warren accumulated 99.6% of this wealth or $84.2 billion after he turned fifty. Warren was a phenomenal investor, but he was an outstanding investor for seventy-five years. If Warren has started investing in his thirties and retired in his sixties, no one would have heard of him. He started investing when he was ten, and by the time he was thirty, his net worth was a million dollars. Warren’s skill was investing, but the secret of his success is the time he gave his money to compound successfully.
While everyone understands the power of compounding, few have the patience to wait for their money to compound. It seems far more logical and seductive to move money around to assets that guarantee the highest returns instantly than wait for compounding to do its magic.
Patience seems to be the secret sauce to compounding, but that skill is in short supply in our times. Every moment seems to demand urgent action. So how do you develop patience? Can meditation help you with this?
In recent experiments, neuroscientists discovered the critical relationship between Serotonin in the brain and patience. Serotonin is a vital hormone in the brain that stabilizes our mood, feelings of well-being, and happiness. This hormone impacts your entire body. It enables brain cells and other nervous system cells to communicate with each other. Recent studies have shown that meditation increases the level of serotonin in your brain, which in turn can help you develop the patience necessary for leading a better life and, of course, compounding your money.
Problem 3: Understanding the True Power of Money
Angus Cambell, a psychologist at the University of Michigan, wrote, “Having a strong sense of controlling one’s life is a more common dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered.”
Consider this statement carefully. Angus is saying that the feeling of having control over what you want to do, when you want to do it, and with whom, is more important than the job you have and the salary you make, the size of the house you live in, and your job title.
Argus’s statement is collaborated by Morgan Housel who says “Controlling your time is the highest dividend money pays.” Morgan and Argus are telling us that the biggest value of generating wealth is that we get to choose what we want to do with our time. We get to choose when we want to get up in the morning, who we want to spend time with, and who we wish to avoid. That is simply not the case for most of us.
Most of us work for organizations or run businesses that need us to be engaged with them at least sixty hours a week. We sleep for another forty hours in a working week, so on average, we do not control 85% of our time in a working week. We all know how our weekends rush past us as we plan for the upcoming week.
The most significant power money gives us is the ability to have complete ownership of our time and this leads to a strong sense of control and happiness. However, how does one go from being a regular employee to this dream state of where we get to choose the company we keep? It starts by being disciplined and focused so that we can invest for years and compound our money. This will ensure that we can generate passive income from our investments and free us from the anxieties of how to meet day-to-day expenses.
Long-term investments are only possible if you can focus on long-term objectives and ignore short-term distractions. Meditation is your best friend when it comes to developing focus. Neuroscientists have shown that regular meditation strengthens the pre-frontal cortex in the brain. This allows you to resist the distractions of buying the next new gadget and focus on investing and compounding your money.
“Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time.” This quote by Morgan Housel summarizes the attitude we should all have towards money. We need to meditate regularly to develop the necessary behaviors to gather and enjoy wealth. The question remains how do you learn to meditate?
The answer is simple. Black Lotus. Simply download the Black Lotus application on your mobile device and sign up for a free trial. Black Lotus is designed by Om Swami – one of the world’s foremost meditators and spiritual teachers. The application handholds you through the remarkable journey of self-transformation by using the RARE framework.
Reflect – You kick start your day with a guided meditation and breathing exercises designed with individual goals in mind.
Act – You are encouraged to perform random acts of kindness to help you give something back to the world.
Reinforce – You read remarkable short stories aligned with your current goal to help reinforce crucial lessons.
Evaluate – You end the day with a thoughtful reflection that helps you with simple course corrections for transformative results.
Remember that even the most incredible journeys begin with the first step. You don’t need to invest thousands of hours to see the benefits. Just download Black Lotus to meet a happier and more peaceful YOU.