Insight | Making Money Is One Skill, Keeping It Is Another
A producer who lost a hundred million dollars, an investor who went broke and others who came into money suddenly describe how fortunes disappear. They agree that protecting money takes different habits from earning it.
Earning money and keeping it are different skills. Earning rewards talent, boldness and luck. Keeping rewards caution, a floor you never touch, a small circle of trusted people, and knowing what you want before the money shows up. Six people who made a great deal of money describe how it leaves.
Music producer Scott Storch once had about $100 million and lost it to cocaine, cars, yachts and the need to impress. He says "I lived a billionaires life as a millionaire." He moved house and bought a bigger yacht to impress one person, and kept wearing flashy jewelry after the money was gone. He has since left Miami for a quieter place and has good people around him. He says he has slipped within the past six months.
Investor Ray Dalio lost through a single confident bet. He had correctly predicted a debt crisis, then bet on a depression in 1982 at the exact bottom of the market. He lost his and his clients' money, let everyone go and borrowed $4,000 from his father. The loss taught him to fear being wrong without losing his boldness. His rule is "you can scratch the car, but you can't total the car." He seeks out smart people who disagree with him, diversifies, and warns against buying what is hot.
Skateboarder Tony Hawk overspent as a teenage professional who thought the money was permanent. By the early 1990s he could barely pay the water bill. A house his father pushed him to buy at 17 saved him. Later, because he was already in a decent place, he refused half a million dollars for his video game royalties, which he calls his best financial decision.
John B. Allen, known as MrBallen, signed a $62 million deal and lost money to other people: contractors who took hundreds of thousands of dollars, and relatives, friends and partners working an angle. He hired a former homicide detective who was not impressed by him.
John Paul DeJoria gives an order: pay off the house, keep six months of expenses in cash, set aside a base you never touch, and only then build. Chamath Palihapitiya says success comes down to controlling your mistakes, and that wealth makes people more of what they already were.
They agree that staying rich is hard, that a floor matters, that luck is part of earning, and that the people around the money decide a great deal. They differ on borrowing against a home, on concentrating in your own business versus diversifying, and on how many mistakes to make. On mistakes they meet at size: small ones are fine, a fatal one is not. Money leaves by your own spending, by other people or by one big bet, and each needs its own defence.
What to do with it: count how long you could live with no income. Secure the home, then cash, then a base you never touch. Treat a big year as your last and set money aside for taxes. Spend less than you earn. Ask whether a purchase is for you or to impress someone. Keep a tight circle. Anyone facing addiction should get professional help, because budgets do not treat it.
