The Path to Riches: Slow Millionaires and Forever Millionaires
A speedy, easy path to riches is one of humankind’s dreams, and one of its oldest, most popular forms is the lottery ticket. It’s cheap, requires little effort, and the payout can be mindboggling. As a civilization, we have over 2,000 years of history with lotteries dating back to the Han Dynasty in China, and the funding of major government projects like the Great Wall of China. But it’s crucial to note that lotteries have built more monuments and funded more big projects though than they have minted millionaires.
What if I told you, though, that there is a slower, harder, but a more likely path to riches? That slow path to riches is followed by surprisingly few of those who want to grow rich (the slow millionaires) but — not so surprisingly — by everyone who chose to stay rich – the forever millionaires.
My dear friend and mentor James (Jay) E. Hughes, Jr. (who spent a wonderful career working with prominent families around the world in his role of a true homme de confiance) recently reminded me how, in family wealth preservation, we at Sicart are in a quickly shrinking minority. As everyone else is chasing fast and easy riches, we might be among the few on our slow path. When lottery jackpots are high, people line up to buy tickets, when stocks reach new highs, investors line up to buy more, but the path to slow riches for slow millionaires and forever millionaires is surprisingly quaint, and far from crowded.
In our role as investment advisors to wealth creators – families and entrepreneurs around the world — we are privileged to hear many tales of success and failure with money. As a matter of fact, I dedicated a third of my new book Money, Life, Family to lessons from the most successful families with enduring fortunes of the last two hundred years. The successes are exciting and worth a celebration. The failures are painful to witness, especially knowing that there are ways to avoid them.
We at Sicart believe that in every wealth creator’s journey, a change in the mindset occurs –sometimes after the first major loss of capital, other times gradually — as the fortune-keeper comfortably embraces his or her new reality. These individuals transition from making money to keeping it. Don’t get me wrong, the power of compounding, the size of the capital, and — most of all – time will typically grow their fortunes further. We like to think in terms of doubling wealth every 5 to 15 years. Edgar Bronfman Sr., the heir to the Seagram’s fortune, famously said: “To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.”
We notice that habits of forever millionaires are the same as habits of slow millionaires. Now, what parallels are there between a slow path to riches for those just starting off with little capital, and time they can’t afford to waste, and those that have a large fortune at stake, and money they can’t afford to lose?
The forever millionaires already have the capital. They let time and compounding work in their favor. Slow millionaires need to be able to earn, and save first to build up their capital. They will probably be most successful in locations where salaries are good, the cost of living is moderate, and taxation is reasonable. (In contrast, we believe that high earners, and big spenders in heavily-taxed locations might have the hardest time on the slow path to riches!)
As slow millionaires successfully start to roll their proverbial snowballs, their path converges with that of forever millionaires. We have found that, once they have capital, whatever the size, they seek investment opportunities that will allow them to grow their fortune. A reasonable taxation of capital will allow them to keep most of their returns and reinvest further.
The beauty of the stock market is that it democratizes access to investment opportunities. You can become an owner of the best businesses that exist, whether you have $100 or $1 billion. You might hold a few shares versus millions of shares, but your capital has the opportunity to benefit from the same power of compounding.
We believe that the biggest lessons slow millionaires can learn from forever millionaires are patience and risk aversion. To the latter, risk aversion comes naturally. There is a point when they realize that what they have made so far is not worth risking on illusory quick gains. We have found that it is patience and risk aversion that helps to ensure forever millionaire status.
To me, the best examples of slow millionaires who turned into forever millionaires are Warren Buffett and Charlie Munger, the two investment legends behind Berkshire Hathaway. Buffett has famously said: “”Never risk what you have and need for what you don’t have and don’t need.” At any time, they could have risked more for higher or faster returns, but instead they harnessed the power of compounding, and let time take care of the rest.
We notice that every slow millionaire has the quiet ambition to become a forever millionaire one day; and no forever millionaire wants to start to all over with nothing. Munger and Buffett have made it very clear on many occasions, the last thing they want is to go back and start from scratch!
Spending the last three years studying the histories of numerous families around the world who have retained their millions over generations, I’ve learned many lessons. The most important is that for new money to become old money, it needs to stand the test of time. It needs to stay the course and endure all the change around it. There is no way to accomplish that without avoiding temptations to follow shortcuts, and the risk of losing it all.
Old money is slow money. New slow millionaires can learn a lot from the forever millionaires. At Sicart, we believe that investment opportunities, patience, and risk aversion are the three indispensable pillars of wealth growth and preservation.
Are you on the slow path to riches already? If not, join us! There is plenty of room! Are you a forever millionaire? Stay the course, it really is no fun at all to start from nothing all over again.
The information provided in this article represents the opinions of Sicart Associates, LLC (“Sicart”) and is expressed as of the date hereof and is subject to change. Sicart assumes no obligation to update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by Sicart at any time without notice.
This article is not intended to be a client‐specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally.