How to Get Wealthy in an Economy Broken for Young People | Scott Galloway

hey Scott it's nice to have you on the podcast today it's good to be here ky I was just saying that meta has decided that I need more Kyla in my life literally pop up in my feed on my reals feed what feels like every other minute so congrats on your your social success oh that's funny yeah I mean hopefully like I said that's not not necessarily a bad thing but the algorithms are um pretty tricky to master as I know you know um but yeah I want to talk about your new book the algebra

of wealth um you know I got a pre-ad and it was incredibly interesting and you talked about all these really big Concepts um but one thing that you really focused on obviously was wealth and you talked about how wealth equated to Economic Security but you also had a definition for wealth that I had never seen before because you walk through that equation and that definition that you put together uh so I the Strate well the def I find the definition of wealth is passive income that's greater than your burn um just on a very basic

level and that means my father is wealthy and I'll come back to the algorithm for how to get there the equation but I find the definition of wealth is my dad is wealthy because between his Royal Navy pension and social security he gets about I think about $48,000 a year and he spends 38 my dad is the world's cheapest man we went to out for Mexican food he's 90 three and he orders the same thing and a margarita and he has a few sips of his Margarita and he asks no joke for the margarita to

go so we take home a half a half drink drink Margarita anyways but he's Rich he's 93 and still saving money and then I have friends who run large divisions of investment banks that make between you know three andeven million a year depending upon the year and between their ex-wife their alimony their home in the Hamptons their Flex Jack card their Master of the Universe lifestyle they spent to all of it and I can tell you firsthand they sit awake at night a lot of night staring at the ceiling really worried so passive income that's

greater than your burn and that's kind of how you sort of figure out your retirement number and and we can go into that later but I have found generally speaking the strategy for trying to get wealthy is is the following and I I'd like to distill it down to an equation that people can hold on to the first is focus and that is finding finding your talent people say follow your passion I think a lot of young people mistake that for their hobby you want to find something that you can be in the top 10%

of everyone in that sector in an industry that has a 90 plus percent employment rate so if you're in the top percent of accounting or maintenance or Plumbing or the legal field or the medical field or what you know any the majority of fields have 90 plus% employment rate you are going to make really good money and so the key is how how do I find something invest the requisite 10,000 hours of grit investment certification breaking through hard things enduring the that's you know endemic to any industry or company and try and become a master

like Mastery Focus Mastery through focus and be careful you know acting 87% of people in sagaa who are the most talented actors in the world 87% of them don't qualify for health insurance because they make less than $23,000 a year you want to open a restaurant a fashion brand uh be a model be in sports I wanted to make my living in sports and then I recognized UCLA didn't have the talent and then the people I talked to who were on the floor working in sports I found make no money and it's a very difficult

industry so you know I think finding that thing workshopping in your 20s and finding something that you're good at your talent and think could I be in the top 10% in an industry that has a 90 plus perc employment rate and then the other stuff is pretty is more basic it's more financial it's one um I call it stoicism but it's really developing a savings muscle and that is recognizing that no one's as impressed with your as you are and that you are you are competing against algorithms and psychologically tested um digital platforms and offers

that are just genius at convincing you that at this moment you should upgrade from economy to economy plus and then if you're in economy plus it's only another 50 bucks to a get economy comfort and why not splurge and only for you know the extra 200 bucks you can upgrade to business class there's just every day you are bombarded with really talented um offers or really compelling offers that will convince you that oh you should order why not add this flowless chocolate cake to your you know your French onion soup that you're ordering from bazur

I mean every day the additional add-ons for checkout in the cart we live in a consumer society and there's just so many amazing ways to spend money so trying to figure out a way wealth is about not how much you make it's about how much you save it's about figuring out a way to spend less than you make um in an environment where it's just incredibly challenging to do that especially in your 20s when you're peacocking and trying to you know have some fun enjoy your youth demonstrate your attractiveness as a potential mate so it

is you know it is incredibly hard I just want to acknowledge that and living you know Finding different types of rewards realizing that very few people look at your stuff and evaluate you based on that and trying to find reward in other things and then and then gamify it if with a partner or someone else to try and save money I talk about when I was in college there would in my fraternity was mostly wealthy kids in the valley but there was five or six of us and everyone knew who we were that we didn't

have any money and we always ow the Fratney money our house bills would pile up and so every summer I had to save $3,300 I wasn't re-enrolling at UCLA and me and these five other guys and the fraternity would gamify it and every every day we'd do a whiteboard and write down how much money we spent and we' gamify trying to spend as little as possible and I spend $77 a week for an entire summer including rent I lived on Top Ramen bananas and milk and it was still kind of fun and you can do

this when you're young because beer and Friends makes for a pretty pretty good time you can have a lot of fun pretty inexpensively when you're young um but develop a savings muscle I'm not suggesting you need to save a ton of money because I think you want to enjoy yourself when you're young and splurge and go to Coachella or Tulum or whatever it is but I do think you want to figure out a way to gamify it and really develop a budgeting and savings muscle the next is diversification I didn't learn this until I was

older I was went all in on one thing usually my own business and even when I had opportunities to take money off the table and diversify didn't do it uh and that was nearly near disastrous for me a couple times uh I was always way over invested in Tech or my own companies and so when the do bomb implosion happened in 2000 I lost everything and then it happened to me again in 2008 after calling my way back better part of a decade so any one stock has like a 50.1% chance of going up in

any given day any five stocks in the S&P if you picked and held on to them for 10 years no one has ever lost money uh so the number one question I get via email outside of advice to young men is should is it too late to buy Nvidia stock that's the email I keep getting right now and the answer is I don't know but I would suggest okay so how do you turn I don't know into a strategy if you buy a lowcost Index Fund 33% on every dollar that goes into that Index Fund

will go into the Magnificent 7 because they now represent 33% of the value of the S&P and these funds are indexed so if they continue to trade at crazy irrational prices and go up and they might they're incredible companies you get to participate but at the same time if their valuations are a little you know a little heady and they come down and the other 493 S&P 500 companies finally get their day in the sun you have the bulk of your capital in that so diversification is essentially your Kevlar from taking a bul it to

the chest and not having a be fatal the companies I have been most confident in the Investments I have been most sure that would do well oftentimes go to zero and then other Investments that I thought were good Investments good management but I really didn't know I've had some Investments go up 25 fold that's not an exaggeration and here's the thing nobody knows and so you don't want to be a hero or you don't need to be a hero and find the needle in the Hast stack just buy the whole Hast stack and when you're

young you're very greedy you can't imagine just making 11% a year but making 11% a year means that in 21 years your investment goes up 8 fold and that goes to the final thing and that is trying to recognize a flaw in our species and that is for 99% of our existence on the planet we haven't lived past the age of 35 so people your age have no ability to calibrate time and that is kight the next 20 years are going to go like a blink for you you just can't even imagine you can't process

it so if you can if you can understand that and recognize that and appreciate it it results in you maybe trying to invest a little bit of more money early and then leave it alone and not trade and not let fees eat up your returns and if you can recognize how fast time will go that's an enormous Advantage for a young person because my closest friend when I was uh just out of college was a guy named Lee Lotus and Lee I remember Lee Sayang to me one day I need to find $2,000 to put

into my IRA Roth or something like that and I said if me investing $2,000 right now means anything when I'm older shoot me because I always thought I'm going to be a baller I'll sell companies I'll make great Investments Lee has never made Lee has probably on average made a fifth to a tenth of what I make every year he is exceptionally wealthy because from a young age he recognized uh me and Scott are going to be hanging out together when we're in our 50s and it's going to go really fast and if I just

make a a consistent number of Investments very early and let time take over you know compound interest is just going to is going to get me over the goal line so Focus find your talent um times diversification times savings muscle through living a little bit more like a stoic and then appreciating how fast time is going to go yeah and I want to touch on a couple of those points and all of them are incredible but um I think there's two ideas that sort of tie into one another the retirement and then Economic Security um

so for the younger generation you know they're facing a housing crisis they're facing um a labor market that does have a lot of opportunities but there's rolling recessions in Tech and finance so we have this current macro environment that has never been better but there's still these pockets of pain and a lot of people feel like they're never going to be able to retire and so considering that current economic environment how can people still make it out on top at the end I'm not here with a message of hope I I I I mean I

I want to be I want this to be a Hallmark commercial but something I'm very concerned about is that I see every economic policy is basically a transfer of wealth from people your age to my age houses cost $290,000 pre pandemic just four years later they're 420 and interest rates have gone from 3% to 7% so we have this really depressing Trend I just got off the phone with the guys who run Nation I'm like a lot of your success is not your fault because people your age a lot of people your age have literally

given up saving for a house and so now they're spending money on going to see Taylor Swift and Bangkok because they're like a house is just out of our reach now they're not they're not mating they're not having kids because they can't afford it uh 60% of people 30 to 34 in 1990 had at least one child now it's 27% it's not because they don't want kids it's because they can't afford them uh look at the two biggest tax deductions mortgage interest and capital gains who owns homes and stocks people my age who rents and

makes their money working all day people your age uh we strip out the child tax credit which makes it more expensive for people to have kids but be sure we had a 9% cost of living adjustment for Social Security recipients so we have essentially the people who make our laws are a cross between The Walking Dead and Golden Girls they're in their 80s literally the Speaker of the House the the minority leader the two people running forent president they had kids in the 60s so do they really relate to people your age and the challenges

you face economically or in terms of technology and some of the issues you face they have no idea and quite frankly they think oh they hear they know everybody knows someone who's at Google and has made a ton of money and just what William Gibson said about the future is true of wealth and prosperity in the United States and that is it's here it's just not evenly distributed so the metaphor of seven companies you know the S&P was up 23% last year oh my God amazing it was seven companies did 60% of it and that's

a metaphor for the larger economy so if you come out from a great school get into a great Information Age economy get options yeah you can make a million dollars by the time you're 30 that wasn't possible when I was getting out of school but at the same time two-thirds of kids who are good kids who play by the rules who work hard don't get into a good school because my me and my colleagues have embraced this rejectionist positioning where we take pride in Turning Away 90% of our applicants which in my view is tan

amount to a homeless shelter taking pride in turning 90% of its the people who shut up last night we won't we purposefully weaponize housing permits and once you own a house you decide that you're concerned about traffic and every year we we have a deficit of one and a half million uh building permits relative to household formation and we have big monopolies who weaponize government to ensure that it's harder for small companies to ever get out of the crib so there's a lack of employment high- paid employment opportunities so what you have is this culture

where some people are killing it and the rest aren't America used to be about the bottom 90% you know who doesn't need college and doesn't need government help the top 10% they don't need it they've got rich parents or they're doing well or so they're so talented who needs help is the bottom 90 and um you know this is something I'm passionate about I got into UCLA when it had a 76% admissions rate this year it'll be 9% it cost me $7,000 in total tuition for all seven years and by the way I graduate UCLA

with a 2.27 GPA and what happened Berkeley let me into graduate school can you imagine Berkeley letting anyone into graduate school now with a 2.27 GPA I mean we've essentially sequestered Economic Opportunity education and housing from young people and what do you know they're the most anxious depressed Young Generation in history so uh the that's the bad news the good news is we can fix it the incumbents wealthy and the top 1% will all pretend that it's network issues and globalization that is just such my taxes are way too goddamn low and your taxes are

way too high and if a a university doesn't grow its freshman seats faster than population growth it is no longer a nonprofit it's a hedge fund sitting you know sitting on top of classes for Rich donors and it should lose its nonprofit status we should break companies up so there's more people bidding for your talent we should make a federal law that any County can be sued if it doesn't if it doesn't issue housing permits that are being applied for faster than population growth we need to massively cram a ton of capital which we have

into the pockets of younger people otherwise they're not going to have kids otherwise they're going to be very depressed because every day they see thousands of images of all the they don't have and all the success they're not reaping because there will be someone who will be a millionaire among your friend group and he or she will take Instagram and then vomit up their inventory of all the they have so that say you feel worse about yourself so we have the worst of all worlds we have total income inequality and then we have social media

platforms that rub it in your face um I I think this is the I think this is the the biggest issue the one piece of data that we have to fix in our society is that for the first time a 30-year-old isn't doing as well as his or her parents were at 30 doing at 30 that's that's never happened in our country's history you're you look like you're 20s headed to 30 your gener you're not going to be doing well as your parents at 30 that's never happened that's never happened and it creates rage and

it creates shame it's been a especially hard on young men because young women are killing it young women are going to college they they mature earlier they have stronger social networks more single women in America have homes now than single men and men are kind of you have never seen a group in America fall further faster than young men and if our kids aren't doing well if Young Americans aren't doing well then what is the point of any of this right so the bad news is we have real we have I think the biggest problem

in the west if our young people aren't doing as well as their parents then what's the point of any of this that's that's the entire point of an economy is that young people do well the good news is we've got the hard part figured out and that is where you think about Prosperity housing homelessness depression Society these issues have been addressed in one or more of any number of markets there aren't very many homeless people in New Zealand the number of young people depressed is really low in Israel because they have national service and they

have programs to take care of this we can figure that out the hard part is figuring out a way to bring together the Alchemy of innovation intellectual property Capital that creates the GDP of Denmark in an earnings call five minutes after the earnings call Nvidia added 20 $40 billion in 5 minutes posted earnings call that's hard so we've got the hard stuff figured out we can figure out how to make the pie much bigger we're just really shitty at slicing it up and figuring out where it needs to go so I'm I am hopeful but

I am really sick of incumbents my age electing people who throw up their arms and pretend these problems are not fixable and if only young men took more accountability and young people oh I have a niece at Google she's really well get a job at Goldman okay thanks thanks Nana thanks popup it's just anyway there's a word salad this is something I'm very passionate about but I think I think the intergenerational theft and absolute cramming of the prosperity into the hands of seniors people under the age of 40 on average are 24% less wealthy than

they were 40 years ago people over the age of 75 or 72% wealthier so that's that's like an economy that's not working that's economy that's been weaponized by rich people so I think we can I think we can address this issue but it is the fundamental glitch in the system it is the flaw it is the immoral corrupt part of our society right now is that we come up with excuses to continue to transfer wealth from Young from The Young to the old and it really does no no it's it's very good uh yeah very

impressive um ranting abilities but I I don't think it was a rant because I think it is really frustrating like as you're right I'm in my 20s I'll be 30 in 4 years so I'm kind of experiencing all of this with my friends right now like their structural affordability problems that I talk about in my content um you know like never being able to own a home and there's also this concept of hoarding wealth with the older Generations right and that's where the taxation idea comes into play but then people will point to the phones

and be like well the social media is killing the kids and it's all social media's fault and you mentioned that anxiety and depression are on the rise and often times it does fixing some of that does come down to building more homes but it does come down to building community and youve called wealth in your book a whole person object right so like more than just yourself um can you talk about the value of building communities so some of this more woo woo stuff that we're dealing with alongside of these policy issues that we're facing

yeah so first off the book is not a Susie Orman book about how you get out of debt and cut up your credit cards this is about okay I'm I'm I'm good I'm I'm I have some reasonable amount of Education I can make money you know I'm emotionally and mentally stable to strong and I have good Pro you know decent prospects but what's the difference between just getting by and establishing real wealth and you've probably seen those studies that if you have five friends like your kids I'm raising two boys their peer group is more

important than me right now and there's all these studies showing that when five people hang out you you are the sum and then the average of your four closest friends you end up the same weight you end up the same supporting the same political candidates you go to the same restaurants you eat the same Foods you end up living in the same area you end up with the same the same approximate income level where things become much more variant is these five individuals in your peer group many of whom a the same amount of money

one will end up economically very secure wealthy three will do just okay and one will end up in real economic trouble and the question well how does that happen when they're all making the same kind of a similar amount of money and that's what the book's about what are the behaviors and strategies for being the person who develops Economic Security despite the fact you did make a lot more money than your peers and that's where the variance really sets in and where you really need to think about thoughtful strategies and a little bit of effort

early in your life to get there and what I found is the difference between being wealthy and super wealthy was the following there's a myth fed by by populist arguments on the left usually that you know Bernie Sanders and Elizabeth Warren Senator war will say a billionaire should not exist that by virtue of the fact you're a billionaire me you crawled over people what I have found is that on average really really wealthy people are better people they're higher character they're more philanthropic they invest more in the relationships they go out of their way to

do to help other people they they live up to their word they work hard they're patriotic they're disciplined because real extreme wealth is is in the agency of others and that is to get really wealthy you have to build an army of allies along the way you have to be the person that is invisibly in a room of opportunities because there's other people that want you to win in that room you you are seen as the person that talks really well of people behind their back and they want to help you and there kind of

Monty Burns and unfortunately a lot of the most famous figures because they dominate The Press because the algorithms like Behavior appear to be these billionaires that aren't very nice people and the reality is the majority of really wealthy people are really good people and so what I call it a whole person project your character is in many ways your weapon for establishing Economic Security because just looking at relationship level the two ways to snatch defeat from the jaws of Victory from an economic security standpoint are one divorce I'm divorced I lost 60% of my wealth

overnight half of it went to my my my ex and I lost another 10% because now we were each supporting two households so each of us lost 60% of our wealth overnight I don't care how wealthy you are when you take a 60% hit overnight it's it's disastrous and then the other thing is a a lot of very talented people get divorces from their business partners they start a firm it's doing well one doesn't appreciate the other one whatever it might be and they get into an argument and a divorce and they tear apart a

successful company because they're not getting along so if you don't bring a certain amount of forgiveness generosity and for lack of a better term love to your personal and professional relationships you're never going to be really wealthy it's the best way to blow up Economic Security is not being a generous forgiving person so wealth is uh going back to your original statement it's a whole person project yeah and I want to talk too about you know when we think about community and like building trust and going outside Beyond yourself and having that good character it

does boil down to trust right and like so my thesis is that trust is the most valuable commodity in the world right now because when you go on social media as you said like the worst people in the world are are being elevated um so how do you think about reestablishing trust you know anxiety and depression makes it hard for people to want to invest in their future to trust in the fact that they do have a future so how would you address those points how to establish trust among other people or to trust that

they have a good future ahead of them um I suppose both yeah they're kind of wunning the same right well look I struggle with this but a basic rle never say anything bad about anybody I mean I know that sounds weird but the moment you say something bad about someone everyone makes a mental note to their what are they saying about me always take the opportunity to talk people up um you know try to be honest try to be measured I was none of those things when I was your age I was always trying to

make bold provocative statements and I think that men especially think that if they sometimes diminish other men that it's a zero some game that they get more and that on the if they compliment somebody or acknowledge someone else's strength or that some how it reduces their worth I think women are better at this I just think women are so much more fluid with compliments of each other uh than men um you know women will come up and say wow you look great tonight like guys don't say that to each other they just don't say that

they they somehow perceive themselves as being weaker so I think being expressing positive emotions trying to really reduce the amount of you talk about others just don't just don't take a chance to talk people up they appreci appreciate it it get word gets back to them when you're talking them up and then they the fastest way what do you want you want to be liked right they did a study on high school kids the kids that are the most popular aren't the best looking aren't the best academically aren't the best athletes they're the kids that

have the confidence to every day demonstrate they like other people they're the kids walking they're the kids that are really nice or walk up to people and say hey can we be friends or you're so good at this or you did great in the game or can you help me with my homework you're so goddamn smart or I love what you're the kids the easiest way to get someone to like you and be your ally is to like them is to show genuine regard and admiration and concern for them and think about it when someone

likes you you kind of immediately like them back now there's some insecurities in young and mating when people like you too much you're not interested in them you know because we have this hierarchy where we want a mate outside our weight class but for the most part the fastest way to get to build character and trust is just to be a a a thoughtful nice person and try and be really promiscuous with your positive emotions force yourself when you think something positive about someone to articulate it I made the mistake of thinking that if I

was impressed or liked somebody or thought well of them that they were telepathic and they would pick up on it even in my closest relationships and what you realize you get older is the the biggest wasted resource in the world is positive thoughts because 98% of them you don't articulate and now I try to if I see a friend doing something interesting on social or whatever I try and just text them I'm like you were great this was great well done or you know or I you know whatever it might be I I saw a

guy in the gym the other day and I went up to him I'm like Jesus Christ I wish I had I'm like you have the guy was you know doing these pull-ups I'm like I wish I could do that you know I just and I could just I can just see was this young kid and he just like just like lit up right anyway um I think talking well of people um trying to really reduce the posting take the temperature down online don't be that person that's always feels a need to respond to every slight

I'm not suggesting you let people walk all over you but recognize you know real again it goes back to the stoics you can't try and learn from any criticism but don't you don't need to get back in their face I used to think everything was a zero I used to be that guy that if someone honked at me I'd speed up and honk back at them and it was like okay I don't know what's going on with this person I don't know if their kid just found they found out their kid has diabetes or they

just got laid off it's like it's okay to absorb some body blows every once in a while so I think generally speaking these are very Basics they it's taught in Sunday school or that you know but you don't practice and um and then I think showing a certain amount of discipline being the person that's got a plan that and your you may not stick your plan got to have a plan you know I coach a lot young men I like you got to be physically strong right you got and you got to have a plan

you might be going back to school to get a you know scuba certification so you can teach scuba it might be getting a class through driver's license it might be learning how to install energy efficient HVAC whatever it might be you have to have a plan and be able to articulate it and also just be the person that shows some discipline like you don't want to be the last person to go home when during the week work week you want to be the person that says no I'm I'm shifting to water when you're drinking I

mean there's a time to go hard I like to I like to drink and I have more of my share Fair of alcohol and drugs but be that guy or that gal in your 20s it's like I love that statement it's all about what you do during the day the people who are most you know who are most impressive at night are the ones that just have going on during the day anyways this is this is a lot but I would say building trust is a function of being measured talking people up living up to

your commitments you know being measured when you say you're going to do something try and do that when you can't being honest and saying I don't know if I can do that being honest with people but never you know try not to be mean unless you're protecting their feelings um and then how do you trust about the future look I I I I do think America I'm worried that we're raising a generation of young people that don't like America because of social media and because of some of the income inequality I think every day and

I think these platforms being manipulated by adversaries and I know that sounds paranoid but it doesn't mean I'm wrong and worry we're raising a generation of Civic nonprofit and Business Leaders that just don't like America despite the fact that on the whole despite our problems we're still probably the least bad place in the world maybe even the best um so I I think we have a lot of work to do um in terms of giving people more hope um and the Mental Health crisis you referenced is just it's just staggering and starts at a young

age my colleague at NYU Jonathan height has this seminal book out right now that is like he's arguably the most influential scholar in the world right now but you know there's a lot of stuff we can do at a younger age around phones and that it's kind of up to parents in schools yeah there's a lot of problems to work on but um I believe too all the problems have Solutions like you've outlined here um it's it's not the answer is not to give up right um so in the book The algebra of wealth you

do give people all these tools so where can people find your book how can they go and purchase it uh there's this book site called Amazon I mean I they can get it anywhere if they type in my name in algebra of wealth they're going to get a chance to pre-order it and if you post a receipt of of uh the book I'll donate 50 bucks to charity water which is this wonderful charity um bringing U potable water to subsaharan Africa started by a guy named Scott Harrison who I've known for 20 years yeah uh

so pre-order it now if you like it please write an Amazon review if you hate it please order another one and send it to an me amazing thank you so much Scott you're very welcome thanks for your time Kyla and congratulations on your success thank you