Are you confusing your good fortune due to your own skill rather than due to luck? I’m here to argue that above average wealth is mostly due to luck. Therefore, stop deluding yourself into thinking you’re so great!
As President Obama said in a July 13, 2012 campaign election speech, “If you’ve got a business, you didn’t build that.“
When I first heard Obama say this sentence, I was taken aback. From 2009-2012, I had been working on Financial Samurai for three years from about 5 am – 7 am and from 10 pm – 12 pm after working 12-hour days in finance.
If I wasn’t building Financial Samurai, who was?!
I had also recently left my finance job because I wanted to be free. All I really desired to do was write while traveling around the world, so that’s what I did.
Wisdom Grows With Age
As I’ve gotten older, I’ve come to understand more of what President Obama was talking about. Just like how it takes a village to raise a child, it takes a lot of help along the way to achieve your goals. Obama was referring to not building the roads and bridges that helped your business prosper along the way.
I firmly believe that it was mostly luck (~70%) that helped me achieve a basic level of financial independence at age 34.
Of course, effort is also required to get ahead, but it’s not the main reason. There are plenty of people who work much harder than you or I, yet will not achieve what we have.
The more we can recognize our luck, the more prosperous we’ll become. The main reason why is because we will continue to work as if our luck will eventually run out.
I encourage you to list as many fortuitous events that have happened in your life. This way, you’ll appreciate more of what you have and fight harder to achieve your goals and freely help others.
Outsized Wealth Is Mostly Due To Luck
When you accumulate a net worth of one million dollars, three million dollars, five million dollars or ten million dollars, know this level of wealth is mostly due to luck. It has to be given the median net worth is about $150,000 and the average net worth is about $750,000 today.
And when I say mostly luck, I mean greater than 50%. The range can be anywhere between 51% – 99% for how much luck was the reason for your outsized wealth. The exact percentage is your choice.
But if you have a net worth equal to 5X the median or you have an above average net worth for your age, consider yourself lucky. Beating the average so thoroughly is not easy.
In fact, roughly half of the world’s richest one percent of people live in the U.S according to Branko Milanovic, a World Bank economist. Therefore, just being able to work in America is a huge lucky break.
Back in 2013, all you’d need to do was earn $34,000 a year per person to be considered a top 1% global income earner. Inflation-adjusted, the $34,000 hurdle is roughly $45,000 today. Back in 2013, the global median income was just $1,225 a year, or $1,600 a year in today’s dollars.
A Review Of Some Lucky Breaks
My first lucky break was being born into a stable, dual-parent household. They worked in the U.S. Foreign Service which enabled me to live in five countries before coming to America at age 14. They also both speak Mandarin.
With this type of background, chances are greater you will speak a couple languages, interact with people from more cultures, adopt a zest for travel, be more understanding towards people of different backgrounds, and have a broader world view.
Since middle school, my parents have always tried to make me appreciate the value of money. My first experience with money came when my father scolded me for ordering a lemonade at a restaurant.
“Son, why spend $2 on a lemonade when you can order water with a lemon slice for free?” he said.
This moment instilled in me a level of frugality that has stuck ever since.
In high school, his lesson of frugality paid off when I told him I’d only be attending a public in-state university to save on tuition. He encouraged me to apply wherever I thought looked interesting, but I insisted on saving us money.
In the end, his $2 lemonade lesson saved my parents, and ultimately me, over $100,000 in private university tuition in the late 90s. I always told them I’d pay them back once I got a full-time job and I did.
I’m grateful for my parent’s guidance. But things were not always easy. Here is a review of some lucky breaks that helped me build above-average wealth.
1) 70% Luck. Got Into A Respectable College.
After getting suspended in high school for fighting and getting caught shoplifting with friends and doing other illegal things, I thought there was no way any college would take a chance on this juvenile delinquent. But I paid for my transgressions and The College of William & Mary gave me a chance.
I kept the faith that if I did well in college, an employer would ultimately give me a chance as well. Luckily, I got accepted to college before my major transgression the summer after senior year.
Can you imagine spending four years trying to get good grades in college, knowing there was a high probability everything was for naught because of the mistakes you made in high school? For four years I had to keep the faith.
As a parent now, I totally see why kids having too much free time can lead to trouble. Few kids will become professional athletes, but at least playing sports may help kids stay out of trouble!
2) 80% Luck. Landing A Job In NYC.
I got through 55 interviews over 7 rounds to land my first job in investment banking at a bulge bracket firm. Someone like me from a non-target state university had no business getting this job.
But I got on a 6 am bus to go to a career fair one Saturday and one thing led to another. Because nobody else got on the bus, I had more opportunities to interview and get a job.
Although my base salary was only $40,000 in Manhattan, my experience working in banking taught me how to invest, network, sell, and build relationships early on. Further, I don’t know if I would have landed a job in the International Equities department if I didn’t have an international upbringing.
I’m grateful for my recruiter, Kim Purkiss for giving me a chance. She was a strong black woman who didn’t give up on me even though I kept getting bounced around various desks because nobody wanted me.
3) 90% Luck. Making Money During The Dot Com Boom.
In 2000, I invested in VCSY, a Chinese internet stock that climbed 50X in six months. I sat on the Asian equities desk and thought internet in China would be huge one day.
I invested $3,000 in VCSY out of the $4,000 total I had. Then I told my colleagues about the idea who then told their colleagues at different firms.
Because I sat on the Asian equities desk at Goldman Sachs, other people found the idea to be credible. In truth, I was just taking a punt on this name I knew little about.
The $3,000 turned into a high of $170,000. I sold at $155,000 before it completely collapsed to $0 a year later. I’ve been trying to hunt for new multi-bagger fortunes since, but with no luck.
4) 100% Luck. A Fortuitous Phone Call.
In 2001, a headhunter called my VP to see if she wanted to work for a competitor covering West Coast clients. She said no and handed me the phone because I covered West Coast clients out of NYC.
One thing led to another, and I got a new job with a raise and a promotion. Over the next two years, 90% of my old analyst class got let go. I’m grateful to my VP for thinking of me.
This one phone call is something I’m most thankful for. If it wasn’t for my VP and this phone call, I would have lost my job during the many rounds of layoffs post the Dotcom bust. I knew I wasn’t being offered a 3rd year analyst position at Goldman Sachs.
5) 50% Luck, 50% Habit. Frugal Living.
After arriving in San Francisco for my new job, I decided to live like a poor student for a year and a half because I didn’t know anybody and didn’t know where to live. I could have ended up doing “equities in Dallas,” as Michael Lewis wrote in Liar’s Poker.
In 2003, at the age of 26, I put down $120,000 and bought a 2/2 condo in Pacific Heights for $580,500. I figured, best to turn funny money (VCSY profits) into a real asset. Coming to San Francisco before web 2.0 was a lucky break.
Today, the condo is a paid off rental worth ~$1,280,000. It used to be a strong-performing asset, that was once worth up to ~$1,450,000. But condos prices have underperformed in SF since the pandemic. That said, the condo still generates a steady $50,000 in gross rental income a year.
6) 60% Luck, 40% Guts. Went All-In On Real Estate And Didn’t Get Laid Off.
At age 28 in 2005, I bought a single-family home I didn’t need on the north side of San Francisco for $1.5 million. The $300,000 downpayment took all the cash I had. I needed a $50,000 bridge loan because it was December, and bonuses weren’t paid until February the next year.
In retrospect, I was overly aggressive with my purchase. Things were good for a couple of years until the financial crisis happened. I was sweating bullets with my ~$1,100,000 mortgage. If I got laid off and couldn’t find another job within three months, it would have been game over for my finances.
So I rented out a room for several years, held on, and survived. I’m grateful to my grandfather for the bridge loan, the government for helping save the economy, and my company for not firing me during the downturn.
7) 100% Luck. Tried To Sell Property At The Bottom And Didn’t.
In 2012, I tried to sell the house I bought for $1.5 million in 2005 for $1.7 million. I got no takers. It was embarrassing, so after 29 days, I took it off the market. Actually, my agent had told me a couple of people had been willing to offer $1.5 million, but I declined.
I wanted to sell because I had just left my job. The worst of the financial crisis had just passed. I wanted to minimize expenses and reduce risk. My wife and I didn’t need a four-bedroom house because we didn’t have kids yet.
I ended up selling the house for a million more five years later after my PITA tenants gave their notice due to luck. I only had one offer too, but it was $240,000 more than I would have taken.
The proceeds were reinvested in the stock market, bond market, and in real estate crowdfunding, which have showed positive returns. I’m grateful to my realtor for not pushing me to sell.
Today, the house I sold is probably worth $500,000 more (~25%). However, my reinvested proceeds have more or less kept up. I’m most thankful for the time and stressed saved not having to manage the property with rowdy tenants.
8) 70% Luck, 30% Ingenuity. Negotiating A Severance.
One October 2011 afternoon while sipping a Mythos beer in Santorini, Greece, I came up with the idea to engineer my layoff. Financial Samurai was growing and all I wanted to do was write online instead of be in an office for 12 hours a day.
One thing led to another and I negotiated a severance in the spring of 2012 worth five years worth of living expenses. At the time, it felt like I had won the lottery!
I wasn’t too proud to negotiate. The majority of people I know think their employer would never offer them a severance. So they give two-weeks notice instead and quit. But quitting your job is more selfish than negotiating a severance.
I’m grateful to my manager and the head of HR for agreeing to make the separation work. I turned my severance negotiation experience into a ebook that has helped thousands negotiate millions in severance payments since 2012. The ebook has also generated over $500,000 in net profits so far.
9) 60% Luck, 40% Consistency. Growth of Financial Samurai.
Since starting Financial Samurai in 2009, the growth trend has been positive. I’ve had some flat years or down years do to some Google algorithm changes. However, for the most part, the journey has been good. A website can only go so far with only one main writer.
I’m grateful for the search engine traffic because I never expected it. I’ve got a small social media presence, an intimate free newsletter of 55,000 people, and a podcast and that’s it. I’m not a part of any mastermind groups and I don’t have a YouTube channel.
All I’ve done is continue to write and connect with others. I’m very grateful to all you readers who have commented and shared my work. I’m also grateful to Google, even though it can be quite fickle.
There’s also something lucky and interesting in my space. Most personal finance writers don’t have finance backgrounds. As a result, it’s been relatively easy to differentiate this site by just being me and writing from experience.
10) 50% Good Luck, 50% Bad Luck. Left A Fortune Behind.
On the one hand, leaving work at the bottom of the bear market was lucky because things didn’t get worst. Having an economic tailwind boost the value of your investments makes it much easier to stay retired.
On the other hand, leaving work right before things got really good made me miss out on millions of dollars in forgone compensation.
As Dan commented, The Best Asset Class Performers From 2001-2020, “My opportunity cost of cashing out of the stock market in 2019 was not as severe as yours dropping out of the labor force in 2012! Salaries and wages have gone up 30% since you decided to quit, and you’re paying for all those health insurance premiums out of pocket. Hope you can get it together.“
Ouch!
In retrospect, if I could retire all over again, I would have worked for another three years. If I did, maybe I wouldn’t have felt as much anxiety and stress the first year. Hence, my decision to retire in 2012 was a combination of immaturity, impatience, and bad luck.
11a) 60% Luck, 40% Purposeful Hunting. Found a neighborhood before it got hot.
In 2014, I discovered Golden Gate Heights three years before Redfin named Golden Gate Heights a top 10 hottest neighborhood to buy. I was sick of living in the north end of the city for the past 12 years and wanted a change of pace.
New parks, new restaurants, new scenery, and cheaper prices sounded like a great idea! Since fake retiring in 2012, I had longed to move back to Oahu and find a home with an ocean view. When I realized I could just move three miles west in San Francisco to buy an ocean view home, I was sold!
Since 2014, prices have risen handsomely. I wish I had bought another house or two in the neighborhood back then. I’m grateful to the listing agent who agreed on my offer with a handshake, and rejected a $30,000 higher offer.
11b) 100% luck. Heartland real estate boost due to pandemic.
Since the pandemic began, demand for single-family homes on the less dense west side of San Francisco has grown. Almost every month, I’ve been chronicling homes that have sold and I’m astounded by the amount of demand.
But the pandemic boosted heartland real estate investments the most in 2021. This was complete luck. Without the pandemic, heartland real estate prices would have increased closer to 10% in 2021, not 30%+.
Below are the returns percentages of the Fundrise heartland eREIT. 41.7% in 2021 is incredible. But maybe even more impressive is a 10.4% YTD return for 2022 given a surge in mortgage rates. I expect prices to moderate over the next six months and then strengthen after mortgage rates decline again.
12) 60% Luck, 40% Stubbornness. Not Selling Financial Samurai.
In 2018, I was very tempted by multiple offers to sell Financial Samurai for a tidy sum. But I turned them all down after running the numbers and speaking to one person who seriously regretted selling his site for millions. I stubbornly wanted to achieve my goal of publishing 3X a week for 10 years in a row by July 2019.
Valuations for private websites continued to increase until 2022. I did not anticipate such a strong return in the S&P 500 in 2019, 2020, and 2021 after a dismal 2018.
I would have regretted selling my baby in 2018 because Financial Samurai is still fun to run. It gives me something mentally stimulating to do after I spend time with my kids. Four years later, I’ve already earned back 100% of the potential purchase price. Now, everything feels like gravy with mashed potatoes and key lime pie.
The irony is if I was focused mainly on trying to make lots of money online, I probably would have sold and missed out on further gains. There are a hoard of online marketers I compete with who care more about profits than the joy of writing.
Further, if I had sold Financial Samurai, I also wouldn’t have had the opportunity to write a traditionally published book. Publishing a book is a cool bucket list! As an author, I finally have some status to help my kids.
If you have a cash flowing online business that can’t be shut down due to a pandemic, you’ve benefitted. Here’s my step-by-step instruction on how to start your own website.
13) 100% Luck. Getting To Work In America.
I was born Asian and live in America. Living in America, alone, is like winning the lottery. But living in America plus being born Asian is like a dream.
Because I’m Asian, some people in America just assume I’m intelligent, even though I had a mediocre SAT score and didn’t go to a fancy private university. It’s funny because when I lived in Asia, people just treated me normally because I was part of the majority.
Even private universities like Harvard raise the required standardized test scores for Asians to get in. Although Harvard penalizes Asians for our personalities to throttle admissions, I see it as an honor Harvard needs to do such a thing.
Asians are seldom in race discussions because we don’t fit a certain narrative. Therefore, one benefit may be that Asians are more free to just get on with our businesses. Being given the opportunity to work hard with less societal drag is a privilege.
14) 100% Luck. Don’t need to sleep too long.
Since 1999, I’ve been able to operate on 5-6 hours of sleep a night plus the frequent 30-minute nap after lunch. I don’t need to drink coffee or energy drinks to stay awake either. With more energy naturally comes more productivity. In fact, I’ve been up since 4:30 am editing this post before the kids get up.
I’m also a super optimist, probably due to having overcome all the troubles I experienced in high school. When someone says something cruel or says I can’t do something, I get fired up to work harder. I love rejection! It’s like spinach to Popeye.
Besides having asthma as a child, I don’t have any disabilities that afflict roughly 15% of the world’s population or one billion people. Of the one billion people, roughly 200 million people experience considerable difficulties in functioning.
We must not take our ability to walk, talk, see, hear, speak, and understand for granted. At the same time, we should help our brothers and sisters who do have difficulties. This is the minority we need to fight hardest for.
Finally, I don’t have a strong desire to be loved by strangers. As a result, I’m more easily able to speak my mind and break free from groupthink.
15) 85% Luck. Met My Wife In College.
Not only did The College of William & Mary take a chance on me, I also found my future wife in college during senior year.
Finding a life partner early on is either the best type of luck or manifest destiny. Life has been so much more fun having someone to share it with. Sure, there have been plenty of ups and downs. But at least the trend is positive!
Building wealth with someone is also much easier. You can be each other’s champions before each job interview. You can share living expenses to save more money. As a couple, you can also take more risks, like one person retiring first or starting a business while the other holds down a steady paycheck until things work out.
We’ve been together for over 23 years and I hope we have 50 more. Marrying your equal is better than marrying rich.
Don’t Take Your Luck For Granted
As you can see from the bullet points, most of the things that helped get me out of my parent’s basement were due to luck.
I also made many terrible investment mistakes, such as buying a vacation property in 2007. This was a combination of stupidity, ignorance, and bad luck. Like a baby baboon, I thought my income and investments would keep growing to the moon forever.
15 years later, however, we still own the property. It is paid off and it’s been nice to take the kiddos up there during the summers. Maybe they’ll finally see their first snow this winter! Just don’t remind me how much money I could have saved by just renting instead.
I’ve also talked about my perpetual rejections, which is the main reason why I continue to save and invest today. Bad things like pandemics, bear markets, injuries, sicknesses, and deaths are inevitable. There is a comfort to saving and investing for dark days ahead.
Thankfully, we can get insurance to hedge against the worst. I felt tremendous relief when I finally got a new affordable 20-year term life insurance policy earlier this year at age 44. In 2013, I messed up by only getting a 10-year term, which resets at $723/month in January 2023!
Prepare For Bad Luck, But Appreciate Good Luck
Sooner or later, we all will get unlucky. And when we do, we must accept bad luck as a part of life. The return of the bear market in 2022 is a perfect example of why we need to stay humble and diversified.
During bad times, we should also remind ourselves about all the lucky breaks we’ve experienced so far. Go through the gratitude exercise, like I have done with this post. I’m sure you’ll feel more appreciative if you do.
I’d love to hear about your lucky breaks and how much you think luck plays a part in your success. What are some of the things you’re doing to hedge against bad luck? How are you making the most of your good luck?
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