Never Enough

As Draper, Gaither, and Anderson came together to form a venture fund on the west coast, Joseph Heller was writing his magnum opus on the east coast.

In 1961, Heller published Catch-22, one of the most famous American novels to date. The book is loosely based on Heller’s personal experience in World War II and it captured the imagination of many families affected by the war. Catch-22’s movie rights were purchased just a year later, and the book royalties combined with the movie rights made Heller a millionaire in his early 40s.

One night he was at a party on Shelter Island with his friend, Kurt Vonnegut. Shelter Island is an island near the east end of Long Island in New York. Kurt Vonnegut was an author who lived in New York.

The party was being hosted by a hedge fund billionaire.

At one point during the occasion, Kurt said, “Joe how does it make you feel to know that our host only yesterday may have made more money than your novel Catch-22 has earned in its entire history?”

Joseph thought for a little then replied: “I’ve got something he can never have… enough.”

Materialism powers entire sectors of the American economy.

At the heart of materialism are deeper diseases - envy, pride, ego - that perpetuate unhealthy relationships with money.

In The Psychology of Money, Morgan Housel explains how our psychology and emotions influence money decisions far more than numbers and rationality. The introduction tells the tale of two men who lived vastly different lives.

Richard Fuscone was a Harvard-educated Merrill Lynch executive who had an extraordinarily successful career in finance before retiring in his 40s to be a full-time philanthropist. He was named to Crain’s 40 under 40.

During the mid-2000s, Fuscone took on a lot of debt so that he could expand his 18,000 square foot home in Greenwich. It had 11 bathrooms, 2 elevators, 2 pools, 7 garages and cost almost $100,000 a month for maintenance. When the financial crisis of 2008 took place, he found his personal balance sheet over-levered and bankruptcy started knocking at his door. Both his Greenwich mansion and Palm Beach residence were foreclosed on. The Greenwich property was valued at $32M but sold for $8M.

Ronald Read was a janitor from rural Vermont. He lived a boring life, he loved peace. Read’s first job was fixing cars at a gas station for 25 years, following by sweeping floors at JCPenny for 17 years. He bought a two bedroom house at the age of 38 and lived there for the rest of his life. His main hobby was chopping firewood.

When he died in 2014, he had a net worth of over $8M.

He left $2M to his step kids and more than $6M to his local hospital and library.

The world was shocked to learn that a blue collar man could build wealth so efficiently. Read didn’t inherit money from a relative, he didn’t win the lottery, he didn’t participate in illegal schemes.

He just consistently saved what he could and invested in blue chip stocks, decade after decade, regardless of market environment. In addition, he always had enough, which prevented him from getting greedy.

Where did consumerism come from?

World War II ended and the American government was worried about a major economic downturn. Now that soldiers were coming home, there was a flood of working age men who would need to find jobs. But the wartime jobs that previously existed weren’t necessary anymore. Not to mention a housing shortage because production capacity had shifted to war materials.

President Truman and the Federal Reserve decided to lower interest rates and promote heavy consumption with the hopes of avoiding a recession.

Consumption consumed consumers.

America became seduced by consumer credit, and people spent money they didn’t have on on things they didn’t need.

Total U.S. Household Debt:

1945 → $29B

1955 → $126B

1965 → $331B

Household debt in the ‘50’s grew at a faster clip than ever before in American history.

All things considered, the economy stayed strong. Income to debt ratio was healthy throughout the time period. Outside of the proliferation of consumer credit, another interesting trend from the 1950s was the equality in consumption across income levels.

For the most part, people were wearing similar clothes, people were listening to the same radios and watching the same channels on TV. The average American drove a Ford while the wealthy Americans drove Cadillacs. House sizes varied, of course, but consumption inequality was lower than it had ever been, due to improved technological efficiency, consumer credit, and rising income.

People in the 99th percentile of income lived a better, yet comparable life to people in the 50th percentile of income.

When did this change?

David Oglivy is the founding father of modern advertising.

Oglivy, Benson, & Mather was one of the most revered advertising agencies in the world, and in 1963, they had gross income of $34M.

David was an Englishman who changed the game by adding an element of elegance to ads.

Oglivy’s background was in consumer research, military intelligence, and the culinary arts. He spent time at the British Intelligence Service during World War II, and used his knowledge of consumer behavior to make recommendations to diplomats.

In Confessions of an Advertising Man, Oglivy admits that his best work was on the first Rolls Royce ad campaign.

“At 60 miles an hour the loudest noise in this new Rolls-Royce comes from the electric clock”

Rolls Royce sales rose 50% in 1958 after the ad was launched.

Headlines

• JP Morgan CEO Dimon demands return to office efficiency. Reuters article

• Robinhood gains ground in crypto trading, adding $6B in market value. Reuters article

• Airbnb CEO says it’s too early for AI trip planning. TechCrunch article

• GameStop is considering investing into bitcoin and other cryptocurrencies. CNBC article