Full Transcript: The Intersection of Portfolio and Purpose
Wealth, Freedom, and the Goal Beyond the Number
Matt: You are watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use, where better questions lead to better decisions. Bogumil Baranowski, you’re here with me today because I’ve got a whole ton of clips. We ask these questions a lot that are about purpose in your portfolio, and we are way overdue for a recap episode. And because you and I both traffic in this space of working with families and business owners and individuals, we’re candidly in these trenches every single day with money and meaning, portfolio and purpose. That’s why you’re here with me. Are you ready to watch some clips? You got the popcorn, you’re ready to do this.
Bogumil: I’m super excited. I love the topic and for me everything begins with the meaning and purpose when it comes to money, and we’ll talk more about it in a minute, but I’m super excited.
Matt: Hey, you and me both. Let’s go right off the diving board. We’re starting with a big hitter, Aswath Damodaran, the professor, Mr. Valuation. Of course he has thoughts on this. Jack Forehand, roll some clips.
Aswath: Whenever I think about investing, I think about what its end game is. The end game, at least for me with investing, is to preserve and grow your wealth. That to me is key. It’s not to get rich, it’s not to beat the market, it’s to preserve and grow your wealth. Because I think if you get that starting mission wrong, everything else gets thrown off by it, right? If you say, look, I want to get rich in investing, you’re going to put your money in very different places than I would. So for me, all through my investing life, it’s not been about, can I beat the market? No. If I do, it’s great. If I don’t, it’s not the end of the world. It’s about preserving and growing your wealth.
So that’s kind of animated almost every decision I make when I think about how to invest my portfolio, my family’s portfolio, my children’s portfolio. That end game drives everything I do. What about has it evolved — if I could jump in the time machine and get 20-year-old Aswath, does he have the same answer as you today?
Different. Because I didn’t have a family, I was investing for myself. When you’re 20 years old, you can recover from mistakes, right. Take risks you could not take when you’re 40 or 50 or 60. But my philosophy hasn’t changed. I was old at 20. I wasn’t buying the riskiest stock I could to make a 50 because, to me, the odds of winning were not good enough for me to do it. Investing to me has never been gambling, so I don’t think I would’ve invested that differently. But the burden you carry as an investor changes as you age as an investor.
Was there a specific change with having a family? Did you experience an actual shift in the approach at that point? Any of those family milestones? I think we often talk about time horizon as something we just go pick, right? If you asked an investor, what’s your time horizon? The answer is long term, because that’s the answer we’re supposed to get. The truth is life determines your time horizon, right? Which is if you have a family, you have health bonds, you have kids who have to go to college, guess what? Your time horizon just got shorter. Why? Because you need cash in the near term. So one of the things that it’s changed is your liquidity, that’s ebbed and flowed. It’s now, again, back to a point where I don’t have to worry as much, but in peak liquidity needs, I’d invest differently than I invest today.
Matt: What’s the end game, to preserve and the growth of your wealth? I have an initial place where my brain immediately goes, but where’s your head go when you hear Aswath say this?
Bogumil: Well, first of all, when I listen to him, I feel like there’s no one answer. There’s your answer, right? And that’s how he frames it. He says, that’s how I thought about it. But starting with the end goal — coming to investing from any direction you come, and you go in with the assumption you’re gonna become the richest person in the world, you’re gonna outperform the market for the longest period of time, and on and on and on. And then you pause for a second and ask, what’s your honest end goal? And it was different when he was young. It’s different now when he’s older. He has kids and a family and everything else. But I think asking, why am I doing this? So when I have new clients reach out to me and we sit down and we look at an amount of money, I wanna understand where it came from, how it came about, because it helps me understand where we’re going, and then we want to grow it. But if we grow it, what would it change? What does it mean to you? A whole different level of engagement and thinking shows up. So the end goal is where everything really starts. What about you? How do you think about it?
Matt: Do you know Peter Mladina’s work? M-L-A-D-I-N-A? Have we talked about this before?
Bogumil: Maybe. I don’t think so. Refresh my memory.
Matt: We’ve had him on. He really shaped my thinking around this stuff. And he shaped it because he boils it all down — there’s a great old Excess Returns episode, people can dig it out. We’ve had him on. As a financial planner, it’s one of my favorite conversations I’ve ever been a part of. He literally says everything is either for consumption or it’s a gift.
Bogumil: Mm.
Matt: And it is such an end-state, thought-provoking, forced question. Okay, you’re saving this, you’re squirreling this away. Is this going to be consumed by you in your lifetime or are you gifting it for somebody else to consume in theirs? And no matter what fancy analysis, no matter what Monte Carlo, no matter what thing we run, is this consumption or is this a gift? And then let’s talk about what the purpose is and what this means.
Bogumil: I like the sound of that. What really hit me listening to Aswath was that he says he was never gambling. And I think it’s such a profound revelation when you go into investing. And then he takes on the burden of — you talk about the gift, like who is this money for? It’s obviously for him, but it’s also for other people. And when you’re managing multi-generational family fortunes, you realize you’re managing money not just for the people in the room, but the people that are not even around yet. And you’re doing it because of the people that are no longer in the room. So you’re kind of that bridge.
I wanna highlight one thing that really struck me listening to Professor Damodaran, which is what I call the quality of the journey. You can get to the same destination. I wrote a piece about it last summer about a race car and a family car. And I actually had the experience of driving a family car and catching up with a much faster car at the end of the day trip.
Matt: Oh, Camille, the race car driver! I didn’t go ski racer. I was driving —
Bogumil: Very steady, very slow on a boring road, and whoever that was was speeding up, slowing down, speeding up. I don’t think it was possible to have a cup of coffee in that car that was passing me by. But anyways, we ended up at the same gas station at the end of that section of the road, and it made me think of investing just the same way. You could have incredible returns for three years in a row and a massive drawdown, then four good years and a massive drawdown. My clients don’t want to sign up for that, and it’s a conscious choice. There are no guarantees, as you know and everybody knows, but you can build a portfolio in a way that will make the journey more comfortable.
Matt: I hear you on this loud and clear. The drawdown tolerance changes with different phases of life. Yeah, that’s a big part too. Your appetite for risk might be very different when you’re young, even if you’re not swinging for the fences or risking a zero. And you have to actually have the perspective over time on the journey to realize as stuff evolves. Because that savings goal might start off as something that is purely for consumption. You’re investing in something, you’re not tolerating the same level of variance because you’re buying a higher quality business or however you’re approaching it. But over time, if that actually compounds and grows, you might start to have to segregate this: I thought I’d need this for later, for retirement, or whatever. But now I only need this much of it. And now I need a way to start partitioning and understanding what’s consumption, what’s a gift, what role does this play?
I’m gonna bring one other quote into it and then we’re gonna jump into the next clip. I always go to it, it’s a marketing term, but it’s a Seth Godin, and it’s that always asking the question, what’s it do? Who’s it for?
Bogumil: It’s a good one.
Matt: I can’t help but see that in portfolios. If I look at your portfolio and you’re like, I have X, Y, Z stock, I have X, Y, Z fund, I have X, Y, Z private business — okay, what’s it do? Who’s it for? And that is to triangulate around to that whole point, which is a perfect segue. Meb Faber. We got a clip from him. Jack Forehand, let’s roll some clips.
Meb: I want to be on that first rocket spaceship to Mars with Elon. That’s what I want. What’s the ticket gonna be, like a hundred million? I think there’s a couple things, and these obviously can change throughout time. A 20-year-old me is gonna have a different answer to this than a 40-year-old me and 60 and hopefully 80, a hundred, 120-year-old me.
Laying the foundation I think is really important. Because on FinTwit and elsewhere, writing academic papers and books, we tend to argue like the final 5% because a lot of the base case, the foundation, is assumed. And a good example will be, I think over a certain income and net worth, you want to get to that freedom level where you have freedom and capacity to choose your own path. Those old choose your own adventure books, right? And I think that’s important for a lot of people, and that number, whomever you ask, is different.
The challenge of course, and you see this in all your neighbors, all your friends, people that come into money, people that bought Bitcoin at a hundred, on and on — you adjust. There’s the hedonic treadmill of income and wealth, and that I think is a problem for a lot of people. And then you see all the polls: how much money do you need to retire? How much money do you need to be happy? And it’s always like twice as much as everyone currently has.
The good news is I’m a very content human. While I work in the financial world, I’m at the point where I feel a great deal of contentment and peace and freedom. And a lot of the literature shows that you need to get to like that $75K amount of income — the happiness curve really plateaus after that. With inflation maybe that’s gonna be a hundred K, but let’s just round somewhere in there. And then above that it’s sort of gravy. And then it gets into Jay-Z problems, or excuse me, Biggie problems — both of them — but more money causing more headaches.
And so a lot of people who invest and get wealthy, this is one of the key things you have to avoid too. And William Bernstein talks a lot about this. He’s like, once you get to a certain amount of wealth — and this means different levels for different people — you’ve won the game, and he says you don’t have to keep playing. And one of the biggest mistakes people make is they get wealthy or super rich and they still risk it all. And that to me is insane. And so you see example after example after example: wealthy people that have all this leverage and crazy concentration, and then boom. The regime shifts and it’s all gone. Not like part of it — it’s gone. Like all of it’s gone.
And so part of the wealth building — what we call, we wrote this four-part series last year, or excuse me, it’s 2022 now, during the pandemic, 2020 — we wrote a four-part series called the Get Rich Portfolio, the Stay Rich Portfolio, which is interesting, particularly with what’s going on right now with interest rates and bonds. How I Invest, which is what we’re gonna talk about today. And the last was Investing in a Time of Corona, that was specific to some opportunities back in March 2020. But part of those buckets — mentally, getting rich and staying rich are different for a lot of people. And you see this a lot with business owners. They build their career, they do this business, they sell it, and then all of a sudden they have all this money. And the life they had before and the life they had after — the mental approach, the accounting, and even the portfolios are very different. And this gets on to spending too. So anyway, long-winded answer, which is what you get with me.
But basically I think about wealth as freedom. And we talk a lot about — we bemoan the fact they don’t teach personal finance or investing or money in schools, which I think is a tragedy, but I think that narrative is changing. You’re starting to see a lot more states adopting that curriculum. But really reframing this concept of money as freedom and wealth as the ability to do what you want, live where you want, make the life decisions you want, and not be beholden to a structure where you’re forced to turn down opportunities or make life decisions you don’t want to.
Matt: Do you wanna be on a rocket ship to Mars? I know we just admitted you’re a race car driver now, which I’m very impressed with. I’m your co-pilot in this scenario. Do you wanna be on the rocket to Mars? What’d you think of Meb?
Bogumil: I was in a family car in that story, but anyways, when I was a kid, I was really fascinated with space and travel, and I wanted to go to the moon and Mars. I don’t know why, but that idea faded. Maybe I fell more in love with Earth, the planet I was born on. And whether it’s being up in the skies flying small planes, or scuba diving and seeing the oceans, or spending time in nature in the woods, this is such a beautiful planet, and anywhere near us there’s no planet that I know of that’s anything like it. So it’s gonna be hard to leave that planet. Maybe I’ll let other people take that flight with Elon ahead of me. What about you? Are you gonna be on the first one?
Matt: No, no, I don’t have the risk tolerance. I don’t have the stomach for that. And I also think too, there’s a weird concept here, and I’m gonna take it to comic books for a second. Do you know the character Dr. Manhattan from the Watchmen? Big naked, blue guy?
Bogumil: Okay.
Matt: What about him? Anyway, big naked blue guy, that’s all you need to know. It’s this whole idea that he’s basically unstuck from time, if you will. He doesn’t experience time in a linear fashion. And it’s the unsticking from time where all of a sudden he might as well be an alien, or he might as well be a God. He spends a lot of time on Mars. That’s part of why. He goes to Mars as a quiet place to contemplate the inner workings of the cosmos. But it’s this idea that if you’re not part of time —
Bogumil: Mm-hmm.
Matt: You might as well be an alien or a God. The idea that you’re gonna run away — I get the exploring instinct to want to go to Mars. I just don’t have that explorer instinct where I’m like, that seems like a crappy place to die in the depths of space. I think I’d rather take a shot at scuba diving or something. I don’t wanna be on a spaceship for multiple years.
Bogumil: There’s so much more to see and experience on this planet. The more I think about it, we think about growth — even in investing, bigger, better — but we just have one planet. This is it. And everybody that has ever lived has lived on this planet. At least in our civilization, even going back — I don’t know, there’s something that hits you. It’s like this is it. This is the only place where we could live, so far. Maybe that’s gonna change in the future, but it’s such a blessing that we have a planet that has the climate that we like and the abundance of food and just a pleasant, beautiful blue planet to live on. So a lot has changed for me since I was a kid thinking about traveling to space. But maybe that will change again when I’m older. There are many things. I’m just —
Matt: Becoming more of a Wes Gray. Tell me the investment implications of this for you. What do you think of Meb? What he’s actually saying about the money side?
Bogumil: He’s talking about freedom. He’s talking about the hedonic treadmill. He’s talking about enough. He points out something that will come back throughout many other clips that we’re gonna talk about, but the idea that you don’t have to keep playing — and that’s something that really made me stop. Other people that we’ll talk about today will bring it up, so we’ll talk more about it. But I had a very intimate conversation with a listener of Talking Billions last week. It’s somebody that made really good decisions, a lot of ups and downs on the financial front throughout his life. And he’s basically showing me how things are. He’s asking, have I done the right thing? And he’s very comfortable, but he told me something that really made me think. He said, I don’t want to stop working. And I told him, nobody’s making you stop working, although you reached your financial goal. And I think we have to disconnect that idea that we work just for the money. And I’ll come back to it later, it’s not really about the money — a bigger topic that I want to talk about — but I’ll come back to it.
But I told him, you reached the goal, but the goal was not to work until you have the money. He’s working in a profession he really, really loves and enjoys, and he was immersed in it and he’s learning more about it. You can continue to do that. Nobody’s telling you to stop just because you reached the financial goal. Flip it on its head. Don’t continue to work just because you’re pushing the financial goal away. That’s a whole different thing. I hope people can tell the difference.
Matt: I love the way that you put that because — I mean, obviously we’re very high paid salary workers here recording this podcast, so clearly we would never do anything unless we are maximizing profit potential. Your pockets are stuffed with cash right now too, right?
Bogumil: In my current pants, not so much. But there are other pants that are more — your podcast, your pants aren’t going. Yeah.
Matt: So this idea though of — work might be a thing. Talk about this with people retiring all the time. Work might be a thing. That cash flow comes in, it flows the bank accounts, it fills the 401k, it helps plug the coffers, you send the kids to school, whatever. All the wonderful things that work for money does. But it’s okay to actually keep doing the same job or a variation of the same thing and realize that it’s no longer about the money. Not that you have to work for free. We are not communists. But you can realize there’s other value, there’s other stuff that you do that you can treat with the same respect and the authority of a job. And that can be part of your identity and purpose — to go out and fill those things that you actually take as seriously.
And I challenge people to think: map out that schedule. Tell me what you’re gonna do every day of the week if you’re retiring in three years. What’s a week actually look like? And most people get the look of panic in their eyes. And I know I would if I was in that case too, because it’s like, well, how are you going to fill that time so that there’s actual purpose and identity there? And how do we make this a challenge where it’s exciting to fill this time? There’s a wonderful Joseph Conrad quote that I’m gonna butcher off the top of my head. It’s bleak. It’s existential. But it’s basically like, they find this guy swimming in the middle of the ocean, and they’re like, you should not be out here. And they think they’re rescuing this person and they bring him over the side of the ship, and he’s like, you think that I was out here to drown. I just meant to swim until I sank. And those are not the same thing.
Bogumil: Very true, very true. You got me thinking. It’s that flip that we have in our heads: first we work to pay the bills and save a bit of money, and if you found a career that you love, you can stay in it much longer. The other thing, and we’ll come back to it in other conversations, is that I see this clear distinction between what got you here will not get you there, whenever I’m listening to clips like this. Because what you thought was the initial goal is not the ultimate or the second goal. It’s such a clear, visible observation after listening to those eight clips — yes, you are headed somewhere, and once you got there, there’s something else and something more transcendental and bigger. And when you’re thinking about a family fortune, it’s not a number. It’s almost a feeling that you have. And we’ll come back to it in the other conversations.
Matt: This is a perfect segue. We’ve got Ben Hunt up next. Jack, roll the clip.
Ben: A friend of mine, Brian Portnoy, he wrote a book on this, and I think he’s really right. He talks about funded contentment. And I think for me, that is what I’m trying to achieve — that notion of funded contentment. I’m 58 years old. I love what I do. We can talk about what I do and why I do what I do and how that impacts what I think about investing. But I want enough money to live a life well lived. And that’s why I invest like I invest.
What is your idea of a life well lived, would you say? I want to take care of my pack. Right? Which is my family — extend it as much as I can. So that does come first for me. I think that’s true for a lot of people. And two is I want to — I’ve got something to say. And so I want to be able to say it. I don’t want to look back and not have — I want to shoot my shot. I want to say what I want to say. And that, to me, is a life well lived.
Matt: First off, the shout out to Brian Portnoy because the funded contentment idea, the idea of flourishing, there’s so much stuff that comes out of his work on this topic, and that’s part of why we love Brian and what he’s doing. The one that hits me the hardest with what Ben says here is the importance of finding the pack, of finding community. I’m curious — I get the great privilege of talking to Ben a lot — what did you take from this one?
Bogumil: Well, I’m a big fan of Brian Portnoy and his books. He was on Talking Billions, and we had a fun conversation about funded contentment. Sometimes it’s the choice of words that just strikes the perfect balance, right? It’s like “funded contentment” — you do need the money, you do. When I was listening to this clip, I was thinking about this idea that you brought up briefly before, that you would do something if you are not paid to do it. And somebody reframed it for me and said it from the other end of this logic. He says, how much would it take for somebody to pay you so that you no longer do it? It’s a very different thing. You might say the outcome is the same — you stop doing it or you continue to do it — but the question is very different. The first one implies that maybe your work is not worth anything, that’s the risk. The other one is, it’s worth so much to you that people have to pay you for you to stop doing it.
And I’m thinking of founders that sell their businesses. I was just listening to the Founders podcast, the Whole Foods founder — wonderful guy, incredible conversation about capitalism, building businesses, entrepreneurship. But there’s this subtle feeling, if you listen to that episode, that he regrets that he sold the business, he wishes he never sold it. And I meet founders who become my clients too, that have this moment where they feel like, I wish I hadn’t sold it. So this is the moment when somebody paid you so much that you did actually stop.
Matt: Ben brings up in this clip, and I think it’s related — because it’s related to the transaction, but on an internal level. And he calls it finding your pack. And I think this is really important too, because inside of this, part of your identity is not just the job you do. But it’s the people around you — your colleagues, your family, and everything else. And the critical part, and it’s part of where he lands on saying, I wanna be able to say the things that I wanna say.
Bogumil: Mm-hmm.
Matt: Kind of in a freedom-of-speech way, but also in the way of, I wanna be able to freely communicate. You don’t communicate by yourself. The pack and the communication are very, very tightly linked here. And in the Whole Foods story, and I see this with founders a lot, the identity is tied with the job and it’s not tied to the people and the family around you as well.
Bogumil: Right.
Matt: You are immediately on an island. You’re immediately Dr. Manhattan. You have been unstuck from time. You are an alien or a God in this world with no basis anymore. You can’t relate. If you find that pack though, the beautiful thing about a pack is, just like the goal, how you were explaining it earlier — it doesn’t stop. Somebody’s always dying, somebody’s always being born, somebody’s coming in, somebody’s phasing out. And to learn to live inside of that permeability of community is a really, really powerful way to think about money and the purpose of saving and everything we’re doing.
Bogumil: I have this image of a surface. We’re talking about the planets and we are all kind of like planets flying around. Because of the internet, because of podcasting, blogging, writing and being — learning in public — we create this surface that’s available for other people to touch and maybe even stick to. That’s how I see it. When I write an article and people respond to it, I feel like I made a bigger part of me visible, which is a very vulnerable and comfortable thing for me to do, and I’m sure others as well. But because of it, people saw a surface to land on. And I highly encourage people to experiment with that in bigger and larger circles, where you make a bigger surface available — for lack of a better word to explain it. And you’d be surprised how the pack that you describe can grow and grow and connect with you.
Matt: Alright, we’re gonna zoom out from pack for a second. This next clip is Cullen Roche. Jack, let’s roll the clip.
Cullen: Starting from a real financial planning foundation, I think the key question for everybody is understanding — like Ken French said — that risk is uncertainty of consumption. And so as we navigate our financial lives, I think the thing that’s really difficult for people to compartmentalize is the time horizons over which they’re gonna have certain assets. To me, time has become the essential aspect of managing all this. Especially when I had kids — I think kids really screwed up the way that I think about all this stuff. Because when you have kids, you create a lot of short-term burdens for yourself that you didn’t previously have. But you also have to start thinking in this sort of multi-generational perspective. It completely transforms your mentality from thinking solely about yourself and your wife to thinking then about other people and their time horizons. And so now, in a weird way, having kids kind of kicked me in the butt because it motivated me to start thinking about things in not just a hyper-productive short-term time horizon, but also this weird, unpredictable long time horizon — this multi-generational time horizon.
My goals essentially are to create certainty of consumption across various time horizons. We can get into how I actually quantify the liabilities and then match certain assets to them across specific time horizons. But in a general sense, that’s what I’m doing — looking at things in very specific time horizons to try to optimize consumption over all of these time horizons, including time horizons that are incredibly unpredictable. In the long term, my own retirement plan, perhaps my demise — how is my wife gonna navigate my demise? And then how my children are gonna navigate potentially inheriting some money or benefiting from what I can produce in my lifetime, so that they can create greater predictability across their own consumption time horizons.
Matt: We’re getting into another part that’s very near and dear to my heart — the Peter Mladina ideas of this liability-driven investing. Cullen’s actually got a marvelous new book mostly on this topic and how it folds into planning. Where do you come into this one? Risk is uncertainty of consumption. What’s Cullen making you think of here?
Bogumil: Well, the consumption in the future, the time horizon, the unpredictable future, having a buffer — many things that I wrote down listening to it. But there’s a moment when he’s thinking beyond one’s lifetime, which really spoke to me. Given the clients that you and I work with, they think beyond their lifetime. And I meet so many people that just are not there yet. And then there are people that just see it — they work towards something that will exceed their lifetime, a legacy of sorts.
I was thinking, retirement is not a finish line. And the way I look at it, I meet so many people that are thinking about retirement five, ten, fifteen years from now, and they have a number in mind. And there’s something that I wanted to point out that I think gets lost: the day you retire is not the day when you need — speaking of the liability — all the money that you saved. It’s not. You might have another decade or two or three.
Matt: I have to remind people of this all the time. They’re looking at it and it’s like, well, this is worth a million, or ten million, or a hundred thousand dollars. And it’s like, okay, are you gonna spend that tomorrow? Because you’re talking about it like you’re gonna spend it tomorrow, and you’re not.
Bogumil: I wrote a piece on my Substack — “Climbing the Mountain, Rolling the Snowball” — about how so much of the financial storytelling and narrative is about climbing the mountain. And when you actually think about climbing Mount Everest, it’s easy at first, it’s harder later, and you can’t stay too long at the top. You have to go back down because it’s not a friendly place to be. When you’re actually building a family fortune or your own fortune, you are rolling a snowball. It’s very hard at the beginning, very little progress. Then it becomes very big and you wanna stay at that proverbial top — the preferred place — for as long as possible. That’s what my families think about. So we’re using the wrong metaphor.
When people think about retirement, they feel like, I climbed the mountain, I’m finally there, and this is it. What about the next day? What about the next decade? We both know that Buffett created the majority of his wealth past the retirement age. He’s the master compounder. So when people are panicking about the retirement day — you have a few more decades, and if you’re thinking about your kids, you might have half a century or a century to roll this snowball. Think about it.
Matt: Only because it’s super related, Corey Hoffstein is the next clip. Jack Forehand, let’s get it in here, because it builds on this point.
Corey: Yeah, this is the big question, right? And it’s changed over time. When I was younger, it was very much about trying to get to that point where I felt comfortable with the assets I had. I’ve been very fortunate that I think I’ve exceeded the amount of assets I need to meet my future liabilities.
So I should start by saying I’m a really big believer in liability-driven investing. That’s something that’s very popular among pensions. I think individuals, in many ways — all the things that we do — have these future liabilities that we’re trying to meet with our investment assets and our human capital, right? We’re trying to create income, we’re trying to put our money to work for us, and we’re trying to meet the needs of our children, potentially, future retirement, future things we wanna spend money on, whether it’s vacations or homes or whatever.
So for me, I’ve always very much taken a liability-driven approach. I’ve gotten to the point where I feel confident enough — both in the human capital I have, my earnings, as well as the investment capital — that I’ve sort of superseded my future liabilities. I’ve met my liabilities. I think I’m totally fine there for the type of spending I want. And now the big question for me is, okay, what else do I need money for?
And I think what I have concluded is sort of two things. The first is that I don’t want to have to think about money. People say money doesn’t solve your problems. But money can help de-stress you in many ways. If you have a problem, it can free up your time — you can hire someone to help you do yard work or clean the house or all that sort of stuff. So having a little bit of excess money for those needs certainly leads to higher quality of life.
And then as I sort of think about becoming a father soon, a huge priority for me is education with my kids. So I was given a tremendous gift from my parents, which was I was able to go to a private high school, private college, and private graduate school and came out with zero debt. My parents were able to pay for all of that. And I recognize that it is just a tremendous gift that I would like to be able to pass on to my children. So as I say, I think I’m on the path for the retirement I want, the next goal for me really is, how can I meet that dream of being able to give my kids that gift of education?
Matt: So to the point you were just making about the mountain, and this is part of why I wanted to pull Corey in — because the “don’t worry about money” aspect that he introduces on top of this liability-driven investing way of thinking. I think a lot about how what you have in savings is a product of the cash flow statement, what you have in surplus, which is a product of the calendar over time. So over time, you have a surplus. The surplus turns into an asset. The asset turns into this thing. And in our saving years, in the pure accumulation mode, we’re riding up to the top of that mountain. To your point, you’re rolling that snowball and making it bigger and bigger and bigger. And then at the end, because we’re not melting the entire snowball down or the mountain all at once, there’s potentially a gap where we can kind of coast. Where we can stop saving, but the investment is of a big enough size that we can live off of it — and maybe we can live off it forever. Maybe the next three generations can live off of the giant snowball we rolled. But we have to shift our mindset from that abject saving in the same mechanism to decumulation, to spending, to living off of this thing in some responsible way.
That mindset shift is so, so tricky. And what Corey starts to get at the heart of, when I hear him talking about it, is that idea of not just not having to think about it, but how hard it is to let go of that last mode of thinking. What about you?
Bogumil: So many thoughts come to mind. I wrote a piece on my Substack that I called “Escape Velocities of Money.” And just to give a visual for this audience — there’s a moment that you will realize that your investments made more money this year than you earned by showing up for whatever job you have. And this moment is really shocking, eye-opening. Because you kind of created a second self. It’s this idea of making money in your sleep. You’re not even there.
And I think something interesting happens, and then if you’re rolling the snowball and it gets momentum and speed, so many people experience a moment where they can’t keep up with the spending. They realize they will never spend this unless they go really wild and crazy. They won’t spend it in their lifetime. So that snowball is benefiting the next generation.
He talks about this feeling that money de-stresses you. We say money is not everything, but there’s a certain level of financial comfort where you don’t have to worry about changing tickets, booking an extra hotel night, or renting a car or doing things. It does give us a lot of this comfort. And he talks about education being paid by his parents. You and I talked about this idea — we’re thinking about the multi-generational family fortune, but the idea that the next generation doesn’t have to start with zero, which is such an important thing, at least for me personally, to think about. His family paid for his education. Education is something that — I take calls from listeners that had to change countries, move away, and all they had in the previous country was lost. You and I spoke with some individuals like that as well in some of the recordings. The education that you received, sometimes it’s the only asset that you can bring to the other side. Anyways, it’s an incredible gift to receive from your parents, grandparents.
Matt: Yeah, and you can build off of that. You can rebuild off of that education. Knowledge, confidence — it’s all foundational.
Bogumil: Yeah.
Matt: And this is — I’m sure you have these conversations too — the “teach a man to fish” aspect of it all. Because it’s that part where it’s what’s foundational, what’s first principles that you’ve instilled, that goes well beyond the financial assets.
Bogumil: Yes.
Matt: You and I both preach this. In our day job all the time, it’s like, how about your human capital? How about your intellectual property? How about your wisdom capital? How about your spiritual or your social capital — these other things? How does that fit into the actual accumulated savings of your family? Because it’s way more than money if you wanna have any chance of flourishing, funded contentment, all those words.
Bogumil: Can I chime in real quick? I got an email from somebody who is a long-time listener, and I’ll present it in a way that’s very anonymous. But he’s thinking about the moment when his parents will pass away and he will receive the inheritance. And it feels like a date, a moment set in time. And I told him, the gifts that you’re receiving, it’s not just a financial gift that will come at some point — and it will be bittersweet because they will pass away. And a lot of planning is around that date, which I don’t think is the best way to think about it — it’s a whole different conversation. But you’ve been receiving things from them that are not monetary for decades now. The family rituals, the education, the principles, the values, how you built your life. So you’ve been receiving things for a long time, and the financial gift is just one of many. And I love the idea that it’s not one singular thing and it’s not just the money. You’ve been receiving things, and you’re probably more ready for the financial gift because of all the other experiences you’ve collected with your parents or grandparents.
Matt: Absolutely. Difference between picking up a scratchy lotto and winning a bajillion dollars — yeah — and working for something over a lifetime. Daniel Crosby is up next. I mean, come on, The Soul of Money guy. Daniel, what do you got to tell us? Jack Forehand, let’s roll the clip.
Daniel: Yeah, this is super easy — freedom. I mean, full stop. I don’t have fancy tastes. I am a simple man from Alabama. I don’t need expensive things, but I do need to be left alone. So freedom is really always my ultimate goal when investing. The number one thing that my wife and I are setting aside for is to just be able to live life on our own terms — to say yes to the things that are valuable to us, to say no to the things that we don’t value, and to maximize quality time with family. So that freedom, to me, is everything. And it’s one of the things that makes me able to do some of the hard work of saving, setting aside money, taking risk, because I see this all in service of my freedom. And that to me is so much more powerful than a bigger house or a new car or something.
Matt: He’s a simple kind of man from Alabama. And I know Lynyrd Skynyrd was really from Florida, but I’m pretty sure they recorded “Simple Man” at Muscle Shoals in Alabama. So Daniel Crosby, wherever you’re hearing this, just know I’m singing “Simple Man” in my head to you right now in service of freedom. And I’m not talking about a car with an embarrassing, you know, American history flag on the side of it. What do you think about this? The freedom angle — it just really hits me hard with what Daniel’s saying here.
Bogumil: Well, I love the word freedom. Dan has been on the show on Talking Billions a couple of times, and he’s just a wonderful human being. And I learn something new every time we speak. He shares his family story. One of the things he told me that maybe this audience might not know — he grew up with siblings, at least one sibling as far as I remember — and the family experienced a very different financial backdrop when he was a kid versus when his sibling showed up in the world, and how they have very different perceptions of what money means and what’s expected.
And it made me really think about how, in the same household — and I work with families where you have multiple siblings a few years apart, or sometimes more — you feel like it’s the same household, the same parents, the same grandparents, the same family dinners and holidays, and two kids grow up with a very different outlook on money and life and career and all that. Anyways, I wanted to throw it in. Freedom, I think it covers it all. We talked about it with the other guests in the clips. It’s the freedom of choice, the freedom of speech. You can do whatever you want. It’s not about expensive things, as Dan says. He wants to be left alone, but also free to express himself. It’s very unconditional. Maximizing time with family, with people that are important to you, living on your own terms.
Matt: It brings back that Ben Hunt idea again, right? Yeah. The same thing — freedom to say what you want to say, in the right way, in service of your community. Not just to be able to be a blowhard about whatever you wanna say out loud.
Bogumil: There is a certain level of financial comfort that allows you to do that. And I’ll add a caveat that we might not notice it has happened, that we’ve arrived. I think this comes across maybe in the upcoming clip as well — that we already arrived and we don’t know we have arrived. Like, you are actually this free already. And I talk to so many listeners of my podcast and I tell them, you’ve already done very well. Like, you’re already comfortable from what you’re telling me. And sometimes we might have to hear it from somebody.
Connected to that — I meet and talk to so many people that have done so well for themselves financially. And one thing that hits me is that they’ve never asked for outside help, which I have a huge respect for. But at the same time, I look at myself and I ask for outside help on so many fronts in my life. I have a dentist, a lawyer, an accountant and bookkeeper, a compliance consultant. Why not ask for a little bit of help? And I’m meeting people who are like 65, they’ve been investing on their own for 30 years, and they have a very handsome amount of money, and they’ve never asked for somebody to just even sit down and talk to about what they’re experiencing. There are folks out there that would listen and help and provide an incredible experience — even if you choose to do most of it on your own, there are folks that can really, really add a lot more to the experience.
Matt: And so much of it is just to be able to say those very, very simple words of either, hey, you’re okay — or you’re doing great, do you know how great you’re doing? Because holding up that mirror for people and saying — maybe we just met, maybe we’ve been working together for 10 years, maybe 20 years, maybe I’m working with you and I worked with your parents and grandparents, which both of us have had the fortune of being in situations like that — but it’s to be able to look at somebody and say, you know, you’re doing great. You know, this is an incredible outcome. You are in the upper echelon of the history of humanity with what you’re doing here. Can we take a moment to just snapshot this?
Bogumil: Celebrate it. Very special. Celebrate.
Matt: Yeah. Alright. Celebrate good times. Larry Swedroe is up next. Jack Forehand, roll the clip.
Larry: I wrote a book, your complete guide to a successful and secure retirement. And we talk about in that book what your goals should be. One of the things I try to teach highly wealthy people is that once you’ve won the game, you should stop playing. So the strategy to get rich is very different than the strategy to stay rich, which is to preserve wealth, not necessarily to try to accumulate more.
So the first thing you wanna do is establish what your needs are, how much money you’re gonna need in retirement. You also might consider what your desires are — you may desire to take two trips to Europe, or anywhere in the world you wanna go, twice a year, go travel, see the world, buy a new car every three years, have a second home in Colorado if you don’t live there the rest of the year. Those would be desires, but they’re not necessarily needs, right? And so you really should figure out what are the things you really need, what are the things you desire. Are you willing to take the risks to meet those desires as well?
And then you have to think about what economists call your marginal utility of wealth. Which, if you think about that, it looks kind of like an elephant. So when someone’s starting out getting out of college, they have no net worth, maybe even some debt. The next dollar that they can save and invest is worth a lot to them. But let’s say once you reach, let’s pick a number, like $2 million — once you reach two million, if you can turn it into three, great. That will obviously mean more money, and more money is better than less, but it doesn’t likely change your lifestyle all that much or the quality of your life. Because once you have enough money to not worry about putting food on the table and shelter and maybe providing a good education for your kids, the good things in life are either free or relatively cheap.
I get more joy out of playing games with my grandchildren or taking a long walk in a beautiful park around the lake with my wife. I don’t need to spend a lot of money to do those things. So that’s what you wanna figure out. And once you’ve reached that top of the elephant’s back where the marginal utility of wealth is bending sharply to the right — still, more money is better than less, so the curve never turns down. But once it gets to be pretty flat, you should say, I don’t need to take more risks. Some people may want to, they may even have a bequest desire to leave a lot of money either to charity or their kids, and that may cause them to take more risks. But the question is, do you really need to? That’s what you wanna focus on — achieving your life goals with your portfolio so that it enables that to happen. Set your life goals, figure out what are the needs and desires. If you can afford the desires, great, but you shouldn’t take a lot of risk to do that.
Matt: I bet Larry Swedroe is a big Kool and the Gang fan. I could see him throwing down to some “Jungle Boogie” or getting out there on the dance floor. The “stop playing” thing came up again here.
Bogumil: Mm-hmm.
Matt: Well, what are you thinking? What do you think of Larry? This is an interesting perspective. Larry, to have him reflect like this was really special.
Bogumil: I think it goes back to what we talked about, but I wanna take it in a different direction. He says, turning two into three million — it’s a question that I ask, especially new clients or the next generation that sits down with me. We have a number. If we double it, what difference does it make? It’s a really fun thought experiment. What would it change? What would be different? Okay, so both kids will go to better schools. Okay, so you’re gonna go on three trips instead of two trips. What else? Which part out of what you shared really, really excites you? What makes a big difference? And you’re onto something. And we loop back to the purpose and the meaning that we talked about at the beginning. But I think it’s good to pause and realize where am I? And if we do continue, what difference does it make? In many cases, the lifestyle doesn’t really change. You still drive the same car. But there are a couple of things that will change, and I think that they can really inspire you to take the leap and continue on this journey. I like what he said, that the good things in life are cheap or free. It’s a great reminder, and it’s very true, isn’t it?
Matt: It’s so true. Because it comes down to moments with friends, back to this pack idea. If you don’t have stuff that you’ve built around the identity of whatever enabled you to save the money and do the investing in the first place, what else have you got? My brain keeps going back to there’s a Mos Def lyric — it’s something like trying to make a dollar out of what makes sense. And adding it up. If you can add that up, then I’ll be a rich man. But I’m butchering the line — the old Black Star song. Maybe it was Black on Both Sides. But it’s this idea of compounding the knowledge —
Bogumil: Mm-hmm.
Matt: And compounding the knowledge in a parallel track to compounding the money. Because you have to also learn to make sense of the experience that you’re having, and then understand what of that experience to harvest. Not to take us in a million philosophical directions — this is what you and I do, this is the problem. There’s the parable — I feel like it’s a Genghis Khan story. You know, he conquers this village, he comes through, and it’s like he lived there once, way, way back in his life. And he goes and he gets in the boat with the guy who’s fishing and he’s like, I can’t believe I’m here, in this childhood village, sitting with this fisherman, catching fish. And this is the greatest thing. I’ve conquered this city, I’ve conquered this country, I’ve killed these people, I’ve fathered these children. He’s got all the things. And the fisherman looks at him and he’s like, you know, you never had to leave. Like, I’ve been doing this the whole time. Very happy. You didn’t need to go through so much trouble.
Bogumil: It’s very true. There are certain risks — and risk is such a powerful word that means different things to different people — but just to frame it for this conversation: if there’s a chance that you would lose something that’s really meaningful to you, maybe the reward is not worth it. And I think with money it gets very confusing because a lot of people — very smart people, that have been written about in articles and books — have taken the step to risk what they have to get what they don’t need, and been totally wiped out.
And I think at that point, when you get to — continue to play the game or don’t? You get to a point where you have that infinite time horizon, like a lot of families that you and I work with. Certain risks are just not worth taking. And not being in a rush, taking your time, and having a respectable return instead of an excessive, very high return. Investing is such a peculiar pursuit, isn’t it? When you think about it — if you rush it, if you want to cut corners, if you want to go fast, you could actually end up way, way behind relative to what you would’ve accomplished had you just kept on going at a decent pace.
Matt: Especially because you brought up those micro decisions in the pacing. Wes Gray, last clip. Jack Forehand, roll this Wes clip.
Wes: I kind of break it down into big blue arrow ideas and then what I call tactical goals, like things I can actually wrap my head around. So for me, the big blue arrows are just not having to stress about money, right? I grew up broke. I was on the free lunch program, didn’t have anything as a kid. My whole life was just trying to figure out how do I not have to stress out about this? So just not having to stress — peace of mind — is a big thing for me.
The other one is being able to fund our business. We’re all in on Alpha Architect and I like my team. I like what we’ve built. And we’re in a business that has a lot of volatility, so I just wanna have enough capital on the personal side where, to the extent things get rocky or crazy, we don’t have to fire people. We can keep on building and keep on maneuvering. I just think it would be a shame if a financial distress event somehow affected Alpha Architect.
And then kind of the last one is just blocking and tackling — make sure we can retire, pay for the kids’ college, which is obviously getting more and more expensive. Those are kind of like the big blue arrow ideas. And those could change. Who knows?
What I call the tactical goals — these are things that are tangible to me that I can kind of grab onto. The first one is like not having to cheap out on flights with three kids. So instead of taking the three connections to go to California, maybe I take the one connection and the non-red-eye and I pay an extra 50 or a hundred bucks. Not having to worry about that is awesome. So I’m not at a private jet level, but I’m at “let’s not red-eye this thing” — that’s awesome.
The other thing is healthy food and nutrition. I wanna be able to go to Costco and buy whatever I want in bulk, even if it’s more expensive than the less healthy version, because I value trying to take care of my body. And same with the family. And then the third one, kind of related to that, is being able to afford things that motivate or help encourage activity and exercise for my family. I don’t need extra motivation to go work out and stay in shape, but a lot of people do. So if I can get lessons, if I can get special gear, whatever it takes to get people motivated, I wanna be able to spend on that.
And then kind of the last one is just the ability to host cool parties and good community events where no one has to worry about the cost, because I can just float it. I always think that’s fun, right? You get to go to a big get-together and you don’t ever have to sweat about the cost. I just would rather people focus on having fun. So anyways, those are kind of like my big blue arrows and my tactical goals — what I like about having capital, which I do now. I like these things.
Matt: I wanted to pick up with what you were saying and what Wes says in this, which is the little steps along the way. He talks about big directions, small tactics — his big blue arrows, and then the tactical goals. I’ve got ways that I think about this. Where’s your brain go first with Wes though?
Bogumil: So many thoughts about no stress around money, hosting parties that he can pay for, having a buffer — the word “buffer,” I don’t know if he uses the word, but that’s what I’m hearing — the safety, and then having those tactical decisions, being able to pay for the extra flights or whatever. Just this kind of comfort.
But there’s something else underneath it all that he briefly mentions that really stood out to me. And I was trying to frame it and I wrote the word “reincarnation,” which is gonna surprise you, but — oh boy, explain why — now we’re talking.
In one life, when you listen to these folks and many people you end up interacting with if you’re hosting an investment podcast, I feel like they have lived many, many lives in this singular life. And he talks about being broke at some point. I meet people that there were times in their life where they really had almost nothing. They came to a country — this country, any country — with a suitcase, and they tell me like, I really had nothing. And that stays with you. They tell me it’s the feeling of being truly chased by the wolves, and all those very visual images that strike you. Anyways, they might be living in a whole different universe right now. Very comfortable. There’s no danger. That’s why I called it reincarnation — because we have to accept that we’re no longer the five-year-old self that remembers that the parents didn’t have money to put the food on the table. That’s no longer you. And the sooner you accept that, the more you can embrace what’s ahead, and definitely what’s ahead for your kids.
And I think that’s such a powerful image for me, because so many people make the forward-looking decisions based on the fears that got ingrained in them at the age of five.
Matt: Not only is that powerful — have you had Wes on Talking Billions before?
Bogumil: Not yet. I’m looking forward to it.
Matt: Alright, we gotta make that happen. He did — we’ve done a bunch of stuff with him. My favorite thing that I’ve done with Wes is an Intentional Investor episode. And Wes is also important — Wes has given me guidance at a couple of different points. He’s a very kind and generous person. I say that in all the ways because he is. He told a story in our Intentional Investor about being — he grew up around a lot of farm type stuff, migrant farm work, things like that. And he had this cow and he took the cow to the state fair. And he had his blue ribbon cow and he got more money than he ever got in his life. And it wasn’t a giant sum of money — it was more money than he’d ever had. And that was his first exposure to investing — like going to get advice from winning with this cow.
Bogumil: Hmm.
Matt: He showed up on Twitter after the interview. He found himself — found a picture of five or ten-year-old Wes with the cow and the blue ribbon. And all I could think of is what you just said. I was like, how hard is it not to approach everything in life — all the stuff he’s built with Alpha Architect and the fund structures and everything — how hard is it not to snap back into, I’m just a kid showing my cow? And when the money all of a sudden shows up, I’m like, oh my God, what do I do? I have a whole new fear.
Bogumil: Yeah.
Matt: Letting go and understanding how you compound through life is a really tricky thing, and something you can’t do alone. Like you need other people — not this as a “go hire an advisor” pitch. This is probably a “go hire a shrink” pitch. And then maybe get some help. Get the dentist, get the advisor, get the lawyer.
Bogumil: And not the cheapest one, please.
Matt: And not the cheapest one.
Bogumil: I wanna flip it on its head for a second. I get to meet people that grew up around wealth. They might have had wealth for two, three, four, five, six, ten generations. And there are books written about the inheritance experience. They honestly, on a human, genuine, vulnerable level, have not experienced hardship the way many of us might have, and they come from a different place. They can’t even imagine losing it, right? So you have people like Wes, or you and I, that know very well what it’s like not to have and appreciate having. But somebody that grew up around comfort cannot imagine not having. And maybe that’s a blind spot that needs exploring — that things can go wrong. And how do you prepare for it? How do you protect, how do you not just grow, but how do you preserve what you have so you don’t have to experience what some of our guests today talked about — the shortage of consumption, the pressure, the lack of. Anyways, I wanna point it out because it’s the other side of the experience that’s not talked about. It’s assumed that if you grew up around money, you know how. Not necessarily. It’s something that you’re growing into learning just as everybody else. You have a different starting point, so some things might sound more foreign to you than to other people. But I have a lot of empathy and understanding for that experience, as much as I do for the story of a cow or a five-year-old self that has no money to put food on the table. That’s also a human experience.
Matt: Once again, it’s back to this idea of community for me. Everything’s gonna be consumption or a gift. Everybody starts at a different place. And the more people you surround yourself with — not just the more assets you accumulate in your bank account or your brokerage account or whatever else — it’s the people you surround yourself with that determine the experience. And inside of that community, it’s gonna be a diverse group of people. I think we both also have the pretty incredible vantage point of seeing people from all these different points. Of knowing — like working with the third generation kid who’s only grown up flying private. It’s terrifying to think about, what would I have to do if I had to fly on a regular plane? And I remember being a kid and being like, holy crap, I’m about to fly on a plane for the first time. Here’s the problem — totally different experience, but we can empathize with each other. That doesn’t put us at odds. And we get to hear all these stories from these people. We get to relate to them and help think about what do they need to navigate forward. It’s a very strange job we both have, when I step back and think of it this way.
Bogumil: Very much so. Very special. Very special, and very intimate. The conversations that sometimes I have with clients, I might be the only person that they can have that kind of conversation with. Where there’s no judgment, a complete safety and a space where we can talk and observe something instead of judgment or critique — or something that they might have experienced throughout their life from so many individuals that even mean well but just don’t know how to approach it as just a human experience.
And we can’t run away from money whether we have it or we don’t have it, whether we have too little or too much. It’s just a human experience. And I think the more time we spend understanding and accepting that money is here to stay, then we have to find a way to interact with it in the most positive, beneficial way instead of trying to deny its existence or claim that it’s worthless, claim that it’s not helpful. It is helpful. It’s solving a lot of problems day in, day out, small ones and big ones. And to find a way to interact with this phenomenon in the best way possible — I think that’s the ambitious goal.
Matt: No truer words have been spoken. No better place to go out than on that statement in and of itself. Bogumil, this is an absolute ball. People wanna look you up. Where should we send them?
Bogumil: Substack — Bogumilowski. You can look up the podcast, the essays I’m writing, and I’m sharing quite a bit. And I’ll also mention that I have this habit of writing emails to my new Substack readers. So if you sign up, don’t be surprised that you get an honest, real, true personal email from me, because I’m absolutely curious and I’m dying to know your story. And I really appreciate when people share their stories and I love hearing from my readers and listeners.
Matt: Well, make sure you sign up. Maybe you’ll get the golden ticket of the Bogumil custom email. You know you want it. I’m telling you, I get it. You know you want it. This is Excess Returns. That’s Bogumil. I’m Matt Ziglar. Like, subscribe, comment, all the things below, and we are out.