Joshua Kennon

I was speaking to a relative of mine when this person (who shall remain nameless) expressed horror that after living near New York for so long, I would buy a house near my parents in the Midwest.  “I thought you were going places!” they basically decried in exasperation.

It was then that I realized how truly stupid most people are when it comes to making money.  They have no idea how capital allocation works.  I started to get irritated and then I realized: If they knew how wrong they were, they would be rich themselves.  In a way, it was  a form of The Dunning-Kruger Effect.

I was quiet for a moment and decided to try and lay out my reasons, hoping they “get it” so they stop using their location as an excuse for not having what they want in life.

Here is what I told them:

• I basically retired when I was 22 years old.  I never had to work for anyone else because my investments had been the focus of my life since I was a kid.  How would my location change the total profit earned by my investments?  Don’t I still own the same total shares of U.S. Bancorp?  Of Berkshire Hathaway?  Of General Electric?  Aren’t my operating companies still generating sales from the United States, Germany, Italy, Japan, and Great Britain?  Don’t my writings still generate the same royalties month after month?  The fact is, I could be sitting in the middle of the boondocks rocking on a wooden rocking chair and money is still going to pour into headquarters, waiting for me to do something with it.

• If I woke up tomorrow and wanted to have an apartment on Park Avenue, I would call a broker and it would be done.  It’s not that difficult.  Earnings would get paid out of the company as a dividend and I’ll have a pied a tier.  Likewise, if I wanted to work from the South of France, that could be arranged rather quickly, too.  Nothing is stopping me except for the fact that I am the type of person who would prefer to stay home reading by the fireplace and studying spreadsheets.  I like the Midwest.  Sure, I miss the culture of the East Coast, but that is why one of these days I’ll just secretly buy an apartment in a major city or a country estate in some place like Rancho Santa Fe, California and no one except my immediate family will know about it.

The only fool who would believe I would have some advantage in New York or Los Angeles is the type of person who sells their labor for a paycheck.  They have no idea how money, capital, investment, and compounding work.  And, honestly, it made me sad for them.  They are a good person.

Secret Millionaires are Everywhere

I mean, I know of at least half a dozen people in my old hometown with net worth ranges comfortably in the tens of millions of dollars.  You would never guess it if you ran into them.  One of them, as a matter of fact, had millions of dollars parked in a high-profile hedge fund despite living in an older house that is nothing special and driving an older model car. (more…)