Status vs. Wealth: Why The Rich Don't Act Rich
Those who signal their “wealth” are rarely wealthy.
This is because they are playing a different game than wealth accumulation. They are playing status games - which are exhausting and expensive.
Meanwhile, true wealth accumulators avoid status games and buy productive assets instead. Play wealth accumulation games, not status games.
Status Game Are Zero Sum. Someone Has To Lose For You To Win.
Naval Ravikant explores “status vs wealth” in his How To Get Rich podcast series.
Naval defines status as where you rank in the social hierarchy. Are you number 1? Number 2? Number 5? Number 100? This hierarchal game has been around for as long as humans have existed, and even before that in the Neanderthal tribes of old.
Naval says that status is a zero-sum game. Someone has to lose in order for another to win. You must overthrow the current alpha male in a tribe in order to become the alpha male yourself. Naval writes:
“The problem is that to win a status game, you have to put somebody else down. That’s why you should avoid status games in your life because they make you an angry, combative person. You’re always fighting to put other people down, to put yourself and the people you like up.”
If you want to watch status games played out in real-time, just hop onto Twitter.
Twitter is the ultimate Battleground For Status.
Twitter is the ultimate battleground for status games. Trolls - people who start fights on Twitter to provoke and agitate - are doing so for status. The only way for them to pull themselves up a rung is to pull you down a rung. And they can do so on Twitter by attacking you and your content. Their status improves only if yours worsens.
Status games can also involve the accumulation of goods that others don’t have. My Ferrari only improves my status if you don’t have one. If everyone has one, it does nothing to help me climb the hierarchal ladder. (To clarify, I don’t own a Ferrari:).
Status is solely an external ranking. Your status is only in reference to everyone else. And if you are emotionally connected to where you stand in the external hierarchy, you are going to be constantly on edge.
This is why Naval warns of becoming an angry, combative person. If you are playing status games, you are either defending your status from attacks from others or attacking others to try and improve your status. Meanwhile, your emotional life is oscillating wildly between euphoria and anger.
Ignore Status Games And Live By An Inner Scorecard.
Warren Buffett has talked about living by an “inner scorecard.” When you do this, you avoid status games entirely. Buffett says:
“The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way. I say: ‘Lookit. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?’ Now, that’s an interesting question.”
Put another way – would you rather be at the top of the ladder socially even if you’re a fraud, or be at the bottom of the ladder socially, knowing you’re really number one? Most people play status games and are vying for the top of the ladder socially.
The Only Game Worth Playing Is The Wealth Accumulation Game.
Wealth creation is a positive-sum game. The total gains and losses in the “game” are greater than zero - hence the positive sum. In other words, no one wins at someone else’s expense. These are “win-win” scenarios - totally opposite of status games.
Naval defines wealth as “assets that earn while you sleep.” These include the factories, robots, computer code, servers, and stocks that are all pumping away while you’re sleeping. They are not dependent on the hours you work or your hourly wage. They earn without eating up your time.
Wealth creation is the only game worth playing. I learned what wealth was the first time I woke up to find I had made $1000 in unrealized gains overnight. A particular volatile investment had moved enough overnight to earn me the average worker’s one-week wage while I was sleeping. If one wants to get rich, it dawned on me that owning as many of these assets as possible is a good bet.
Naval writes that the reason why you want to accumulate wealth is that it buys you freedom of your time:
“The reason you want wealth is because it buys you your freedom. So, you don’t have to wear a tie like a collar around your neck. So, you don’t have to wake up at 7:00 AM, and rush to work, and sit in commute traffic. So, you don’t have to waste away your entire life grinding all your productive hours away into a soulless job that doesn’t fulfill you.”
The Rich Don’t Act Rich Because They Buy Assets, Not More Stuff.
The rich don’t look rich because they spend their money on assets that buy them their freedom. They are not buying the flashy sports cars, expensive clothes, jewelry, and giant houses purchased by those playing the status game.
They are accumulating wealth, not social status. That’s where you should be spending your money: on assets that free up your time by making money while you sleep.
Start now.
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SOURCES
Naval Ravikant’s “How To Get Rich” - https://nav.al/how-to-get-rich
Warren Buffett quote from The Snowball: Warren Buffett and the Business of Life, by Alice Schroeder.