Scott Galloway, NYU marketing professor and author of The Algebra of Wealth, joins Sam and Shaan on the launch day of his book. He shares seventeen blunt lessons about building financial security: follow your talent instead of your passion, engineer your business around an exit from day one, practice stoicism without pretending you’re good at it, and get to a city before you have kids and dogs. The conversation ranges from his activist investing days and losing everything twice to his advice on hard work, the myth of balance, and why the algebra of wealth is simply focus times stoicism times time times diversification.
Speakers: Sam Parr (host), Shaan Puri (host), Scott Galloway (guest, professor NYU Stern, founder L2, author)
Introduction: Follow Your Talent, Not Your Passion [00:00:00]
Sam: Here’s what I want to start with. I love some of the things that you say, and one of the things you said is: don’t follow your passion. People who are already rich tell you to follow your passion. You should follow your talent. Can you unpack that? Can you explain what you mean?
Scott: I wanted to be an athlete — that was my passion — and going to UCLA was a blessing because I figured out pretty quickly that I wasn’t in the 0.1% you need to be in to make your living as an athlete.
There are some pretty basic axioms that should guide your career choices around where you invest your most precious capital, and that is your time, your human capital. The first is: the sexier the business, the lower the return on investment. If you want to be in fashion, the arts, movies, modeling, sports — unless you get really incandescent green lights from a very early age that you’re going to be in the 0.1% — try and make a living somewhere else and then do that on the weekends.
The SAG-AFTRA represents the most talented actors in the world. It’s hard to get a SAG card. You have to actually book something. These are the most talented actors in the world — 182,000 of them — and 87% of them don’t qualify for health insurance because they don’t make more than $23,000 in a given year.
So the key is finding not your passion but your talent, and then committing to developing mastery. If you can develop mastery in anything that has a 90-plus-percent employment rate — which 98% of sectors enjoy — the economic security, the camaraderie, the prestige, the relevance, just the sheer joy of mastery will make you passionate about whatever it is.
I’m passionate about taking care of my kids. I’m passionate about being able to step in and help my aging father. I’d rather be Nadal or Federer, but I’d rather be me than the number three or number four tennis player in the world, because I have financial security. I get to go to Wimbledon on my own terms and not be nervous and not throw up before a match. I’d rather be Nadal, but pretty much anyone else playing tennis — I’d rather be me. And I got there with boring companies.
So the less sexy the business, the higher the return on investment. I would suggest we stop and think: what could I be good at? I think that’s what your twenties are for — workshopping stuff and also getting it wrong. I started in investment banking. I was terrible at it. I didn’t like them, they didn’t like me, and I had to go back to business school and just start workshopping: where could I be great? What industry could I be great in? So find what you’re good at, get great at it, and then be a DJ on the weekends.
Sam: By the way, congratulations — today is the release date of the book, right? The Algebra of Wealth?
Scott: Today is the day. I just want to drop that — we’re number one on Amazon right now. I’m desperate for your affirmation, Sam, that’s all.
Sam: I’ll give it to you. I won’t starve you from that. You’ve got it. I look up to you, I think you’re the man.
Scott: Thank you.
Book Launch Day and Scott’s Personality [00:04:00]
Sam: Let me ask you about being number one on Amazon real quick. You’re a pretty stoic guy — when you come on the pod it’s always surprising how even-keeled you are — but it’s the launch day of your book, you worked on this thing really hard, you’re number one. How does Scott Galloway celebrate?
Scott: I’m pretty flat. I don’t — I congratulate the team. It feels great. It’s very gratifying. I love benchmarks. I’m addicted — everyone’s addicted to something — I’m addicted to strangers’ affirmation, which is kind of pathetic at my age. But it’s very rewarding because so many people worked so hard on this thing. Not just me, but my researchers, my analysts, my PR people, my social people, my publisher, my book agent. Greatness is in the agency of others. So it’s just very gratifying.
Plus my podcast co-host got to number three on the bestseller list, so God damn it if I’m not going to get to number two — I must beat Kara Swisher. Sam, if you could go buy several thousand books, I’d appreciate it. If you like it, write a review. If you hate it, please buy more and send them to an enemy. But yeah, I’m addicted to external affirmation. It’s really pathetic.
Sam: So the book, from my understanding, talks about the people who have money and the people who don’t, and the commonalities between the winners and the losers. I’ve read this for years. There was this awesome Fast Company article about you. I’ve seen you say this in videos: you were shockingly calculating when starting your last company, L2.
You said Deloitte did a study — what’s the difference between the people who sell their companies for five to ten times revenue versus those who sell it for one or two times? And you had these four or five things: they own a niche, they have recurring revenue, tech is at their core, they’re international, they have defensive IP. And then you said how in your forties, when you were starting L2, you were only focused on money. You said, “I worked my ass off, I was there at the office at 2 a.m.” You said you don’t regret it — it was totally worth it.
When you were starting L2, were you that calculating — working backwards from an exit? And the story ends with you selling it for $120 million.
Scott: $160 million. Get your facts straight. And I’m number one on Amazon today, I don’t know if I told you that.
Sam: Right, right.
Building L2: Engineering a Business Around an Exit [00:07:30]
Scott: I didn’t have a lot of money, and for me, work was about getting economic security. I was very focused on money — I’m not saying that’s the right way, it was just my way.
I had done a lot of analysis. The study you’re referring to said: take companies in any industry, look at the lowest 10th percentile and the upper decile of valuations they get taken out at. The study looked at the common features of companies that got sold in the top decile, and it was all the things you talked about. That’s literally how I shaped the business model.
I opened a London office right away. Instead of charging consulting fees, I said, “Pay me a quarter of a million dollars a year and I’ll answer your toughest questions using data.” We focused on luxury and consumer brands. I raised $17 million to create a series of technology and scraping tools so I could collect more data points than anyone in the world — such that when the inevitable guy from the analytics department came in with his arms crossed to play gotcha, they just couldn’t argue with our data. We collected more data than anyone in the world on these issues and tried to distill it down to something actionable.
So I was very focused on exit, and we sold for eight times revenue. My basic pitch to people was: you’re going to work your ass off, and I’m going to try and get you to where your parents were twenty years earlier. If you’re looking for balance, this isn’t that place.
Sam: So that was L2. And now you’ve got Prop G Media. What’s the vibe at Prop G now?
Scott: We’re about fourteen people now. I purposely didn’t take outside capital. I’m not on that hamster wheel again. I’m not trying to jones for an exit. I’m trying to build something interesting that has relevance, that has a little bit more impact on the social issues we think about, and also pay our people really well.
I used to pay people below market and give them equity — throwing nickels around like they were manhole covers — because I wanted to have a profitable company I could sell. Now my priorities have changed. The people who join the company, I tell them: this isn’t the kind of company that gets sold. But what I’ll do is I’ll share — give you equity or participation in my book deals. If you’re a junior analyst, you get one or two percent of any book deal I get. I try to create some economic upside for them.
My natural starting point is that people come to work to develop economic security for themselves and their families, to increase their currency in the marketplace through experience, and also to develop relationships. The workplace is a great place to meet friends, mentors, co-founders.
We saved with COVID — we gave up our office and saved about $800,000 to $900,000 a year. I had this amazing office in SoHo, which is stupid. And I have this rule — or not a rule, but a benefit — if any four of my team are together, they get my credit card. They can go to Broadway or they can go to Tulum. They’ve done those things without asking my permission, as long as there are four of them.
The number one source of retention — I think the key to building a small business is retention. If you find good people, you just don’t want them with you for a year or two and then gone to Google, because the switching costs are enormous. If you find someone good, your job as an entrepreneur or CEO is to create an environment where they want to stick.
I read a study on this, and it said the number one lever for retention — people think it’s compensation, people think it’s culture — it’s whether that person has a friend at work. If they have a friend at work, they look forward to going to work and they’re less likely to leave. What I try to do: everybody interviews everybody when we hire. But these kids — it’s really inspiring — six of them will go on vacation together. They say, “Oh, Scott, you’re speaking in Hamburg, Germany — all six of us are going to come.” They have a great time together. They like each other. It’s a powerful business weapon. I don’t think you can do that when a company scales beyond 50 or 100 people, but for a small business it’s really powerful.
Sam: Is the trick there that you don’t try to be their friend? Because I’ve had that problem before where I wanted to be the friend, and that made the management a little messy. I realized it’s much better for me to not be the friend, not be included in the hangs. The whole company functioned better, even though personally I was like, “Oh man, they’re all going out without me.” But it was far better that way.
Scott: I always had a healthy sense of where the border was — me and my kind of president and the partner at L2, we were both about the same age and had the same view. We have parties all the time. We show up early. As soon as things start getting a little crazy, we leave. We don’t need to see them drunk. They definitely don’t need to see me drunk.
And my attitude — what you’re saying, Shaan, is really interesting — I’m just coming to the realization as a dad that I’m not their friend. I’m their dad. It was really upsetting to me that my kids didn’t, let’s say, adore me the way I naturally assumed they would. I assumed my kids would be really into World War II history and CrossFit because that’s what Dad is into. Guess what — they’re not. And what I realized is: I’m not their friend. I’m there to be their dad.
It’s kind of the same with work. I work with such young people — the average age is probably 34 overall, but the median is like 25. It’s basically a bunch of overeducated, super-ambitious kids. They’re doing dinner and drinks somewhere — I show up for dinner, I leave before dessert, and then they can enjoy each other without thinking they’re being judged by Scott. I go out with them, but I go out for the first couple of hours and then I disappear so they can have their own fun.
Sam: I love the “if four of you are together, you get my card” thing. I’m here to collect little lessons learned from you today, and that’s one immediate one.
The Activist Investor Chapter [00:17:00]
Sam: Obviously you’re kind of killing it right now — the pod, the public profile, the books. Before that you had L2 and the huge financial outcome. One of the things that gets brushed over in your history is what you were doing with activist investing. I know you were on the board of the New York Times and you made a few other pretty substantial investments, working with a hedge fund. What were some of the best deals? What were some of the worst? What were the signals that made you say, “This is interesting, I should pounce on this”?
Scott: There’s a bit of a backstory. I started Red Envelope, went public, was on the board, got into a fight with arguably the most successful venture capitalist in the world — spoiler alert, he won the fight. I was kicked off the board, kicked out of the band I started, which was emotionally and mentally very taxing. And then I got angry.
It was a really weird time in my life. My mom was dying and I moved in with her. During the day I would manage her healthcare. At night — she was living in Vegas — I’d go downtown and get drunk with quote-unquote friends, and then go back and manage my mom’s healthcare and watch Everyone Loves Raymond and Jeopardy with her. It was a strange time. I was also very angry because I’d just been kicked off the board of Red Envelope.
So I took half a million dollars of my own money and filed a proxy to replace the entire board. I learned everything about activist investing and shareholder governance. I tried to kick everyone off the board. I owned 10% of the company. I think I got 12% of the vote. My proxy solicitor said the 2% was probably a mistake — basically, no one voted for my slate. That was a low moment. The world had told me: we don’t want you involved in this corporation.
Then six months later I got a call from a hedge fund that said, “You’re crazy, but we have some stakes in companies and we need someone to go in and rattle the cage.” It struck me that at your lowest moment, you really don’t know where that might lead.
I got backed. I bought 10% of a company called United Retail — a plus-sized clothing brand. I basically showed up and said, “Let me build your website — you don’t have a website.” I tried to replace the board. They said fine. Stock went from $2 to $8 and I thought, “Wow, this is easy.”
Then I did it at Sharper Image — bought a big stake, went in there, the company seemed like a mess. The stock had gone up a little bit. I got out. I did Gateway Computer — went on the board there. That was more difficult. We made a small amount of money, but I never lost money doing it.
Then I went and raised $700 million and became the largest shareholder in the New York Times and went on the board there. Timing is everything, and in this case I went on the board in March of 2008. The stock went from $16 to $3 in about five months. At one point I think I was losing $10 or $12 million of other people’s money every day. We almost lost the business. The company almost went bankrupt. In the world of media, people just stopped advertising — our tap of revenue got turned off. The great financial recession kind of ended my career as an activist.
One, I don’t think I was very good at it. Two, I was getting to a stage where I just didn’t want to be combative anymore. I didn’t want to go to war with CEOs. I was just exhausted by being an antagonist. I thought: I’m never going to go on a board again unless the CEO wants me there.
I learned a lot about human nature, shareholders, governance. I get called a lot by boards when they’re being challenged by an activist, because I was one. I think I have some insight into how these people think. It was a strange time in my life, but it was interesting, it was fun — I just wasn’t very good at it.
Sam: I like that. I like people who have different chapters and sagas. You mentioned your twenties are for figuring out what you’re actually good at — the intersection between what you’re good at and what you like. It sounds like yours went past your twenties, and you just kept experimenting along the way. Is that fair?
Scott: Yeah. Investment banking — no good at it. Business school. Started a brand strategy firm called Prophet, grew it to a couple hundred people, sold it for $33 million. What do I want to do? I know I want to teach.
The implosion — going from what I thought was being wealthy to not being wealthy — teaching wasn’t going to help me maintain the lifestyle I needed with two young kids in New York. So I needed to find other ways to make money. I did the activist investing for a while, did boards, and then saw an opportunity in analytics and benchmarking and started that company — 2009 or 2010 — and that was my big win.
Timing is everything. I got swept up into what is the greatest bull market economy in history. 2008 to present is probably going to go down as the greatest extended bull market run in history. People don’t understand what an anomaly the last sixteen years have been relative to the history of the market. Just as I was coming into my prime income-earning years, the winds filled up my sails. I finally got all the moons lined up, if you will.
But I’ve always said: you’ve got to be humble when things work, because a lot of your success isn’t your fault. At the same time, I wish I’d been more forgiving of myself when things didn’t work. I struggle with anger, and the person I get most angry at is myself. I have trouble getting past things. I was at a book event last night, I said something and it just came out wrong — I’m lying in bed and I can’t get past it. Even though it went really well, I focus on what went wrong.
That would be my advice to people: be humble when you have wins, because a lot of it isn’t you. But also forgive yourself, because again — a lot of it isn’t you.
Stoicism, Twitter, and Mental Health [00:26:00]
Sam: My roommate in college had the poem “If” by Rudyard Kipling on his wall. One of the great lines is: “If you can meet with triumph and disaster and treat those two impostors just the same.” That’s kind of what you’re talking about — maintaining humility in your greatest triumphs and not beating yourself up too much in your greatest failures. You’re a big proponent of stoicism. Make your pitch: why does stoicism matter to someone?
Scott: Just for your own mental and emotional health. Ryan Holiday is kind of my Yoda on stoicism. He distills it this way: life is not about what happens to you — you can’t control that — but you can control how you respond to what happens to you.
I’ve tried to always remember that. I have trouble practicing it. The ultimate stoicism piece of art in modern history is Brokeback Mountain: “If you can’t fix it, you got to stand it.” Focus on the things you can control. You can control your emotions. It’s very difficult to control what happens to you.
Also recognize — and this is more atheism than stoicism — everyone on this podcast, everyone we know, everyone we care about, what they think of us — they’re going to be dead in a hundred years. In the blink of history, nothing you say or do, nothing anyone thinks of you, is going to matter for very long.
When I was embarrassed or I thought I didn’t acquit myself very well — what you realize is: when someone says or does something stupid, you think, “Oh, that was stupid,” and then you go back to thinking about yourself. People aren’t thinking about your wealth, your failures, your successes as much as you are. The key is to be comfortable with yourself, comfortable in your own skin. Really focus on what your spouse thinks of you. Is your spouse happy? Do you have a good relationship with your kids? What Twitter thinks of you really isn’t that important.
Because I had so much trouble actually mooring my emotions to that logical notion — I knew it didn’t matter what people on Twitter thought of me, but I couldn’t emotionally separate myself from it — a role model of mine, Sam Harris, got off Twitter. He’s like, “Why don’t you get off Twitter?” I did. I’ve been off Twitter for nine months and it’s been one of the most meaningful things for my mental health.
I didn’t like to admit this, but I would say five or six weekends where I just got really bummed out — two or three of them started on Twitter. And I thought, why am I on something that’s making me upset on a regular basis?
There’s an addictive nature to it, and that’s what freaks me out. I can modulate it. But can my thirteen-year-old son? I have a rule in my house: our boys aren’t allowed to go into their rooms with their phones alone. Because I think this thing can literally take a teenager — especially a teenage girl — down a rabbit hole, and zero to 60 really fast. Then start serving her content: “Oh, you’re worried about dieting? Here are extreme dieting tips” — despite the fact we know you’re 5’10”, 95 pounds. “Oh, you’re depressed? Here are some videos of people considering suicide. We’re going to normalize it for you.” I don’t think parents are really in touch with how ugly it gets, and how fast.
So I’m trying to be thoughtful about that. And stoicism — controlling what you can and can’t control — trying to be in better touch with my emotions and recognize that when you’re down, it’s more about the chemistry in your head than any legitimate reason to be down.
Sam: Your colleague at NYU, Adam Alter, did great research on people who are very near death, in palliative care. What are their biggest regrets?
Scott: They wished they’d stayed in better touch with friends. They wished they’d lived the life they wanted to lead, not the life society or their parents wanted them to lead. But their biggest regret: they wished they’d been less hard on themselves. They wished they’d forgiven themselves. They wished they’d allowed themselves to be happy.
That’s something I’ve been very focused on — okay, stop beating yourself up. You’re going to be dead soon. Why wouldn’t you squeeze as much juice out of this lemon as conceivable? Afford yourself the opportunity to be happy. Be sad when you need to be. But I think of stoicism as: life isn’t about what happens to you, it’s how you respond. Decide what is in your control. And try to be good to yourself, forgive yourself, and just try to be humble.
You are never more prone to a really big mistake than right after a big win, because you start thinking you’re good at picking stocks, you start thinking it was your skills and not that someone senior to you took an interest and championed you. You start thinking, “I’m great at real estate” — you just got lucky and bought a home at the right time. Try and ignore the market when the market tells you you’re a failure, and ignore the market when it tells you you’re a genius.
I remember saying to my partner at the time: let’s move to a low-cost neighborhood of Charlottesville or Raleigh-Durham. I’m going to teach, try and write, make a decent living, and have a really nice life. My partner said, “That’s giving up.” I’m like, “Well, that’s not giving up.” But I thought this is it — I need to substantially downgrade my expectations.
After my divorce, I thought: I don’t think I’m ever going to have someone I can share my life with again. I’m an unattractive broken man who’s never going to find a partner. I believed that for a short time. And I think it’s important that everybody recognize that you are the answer to a firm’s problem, you can find someone you can love who is going to love you — the key is getting up, putting yourself in a position to succeed, getting out of the house, being friendly, being risk-aggressive, surrounding yourself with people, and exercise and nutrition that makes you feel good about yourself, such that when the winds kick up again your sails are up.
I’ve always had my sails up such that when the winds kicked up again, I was in a position to rumble. I know a lot of people who are very successful, then they hit failure — a personal failure, a death of a parent, a divorce, a company that fails — and they get stuck. They can’t forgive themselves. They can’t forgive others. They can’t forgive the market. And two, three, five, seven years go by and they just haven’t progressed. Their skills start atrophying. Their confidence starts atrophying.
So put a statute of limitations on anything bad that happens to you. A parent dies — within twelve weeks you should still be sad, but you should be able to function. An emotional trauma or breakup — how serious was it? What’s the statute of limitations? Business goes out of business — okay, mourn for a little while. Two months? Three months? But if you aren’t back sending out emails, trying to raise money, going out to meet new people within that timeline, you need to reach out for help and get unstuck. Because time goes really fast and your skills atrophy and it’s a downward spiral.
Churchill said the key to success is the ability to move through failure without losing your sense of enthusiasm. I’ve tried to be pretty good at not losing my sense of enthusiasm.
Language, Communication, and Building a Phrase Bank [00:38:00]
Sam: You’ve got brilliant ideas, you’re a good business person, but what you’re most talented at is communication. I’ve seen you speak live. I listen to the pod. I’ve seen your videos. You do such a good job picking really sharp words and sharp phrases. I’ve noticed that you love the word “accoutrements” — I’ve never heard anyone use it as much as you. And you sign your emails with “Life is Rich.” You’ve got beautiful phrases.
I even had a ChatGPT where I uploaded like 150 of your blog posts and would ask it questions to give me ideas for phrases. Who do you steal from when it comes to language? You seem like a George Carlin guy. And do you have a bank of phrases?
Scott: If you don’t have a kitchen cabinet of people that you learn enough about that you can mimic them, you’re trying to play a team sport solo. You’re on the field alone. I didn’t figure that out until I was older.
When I see something inspiring, I absolutely write it down. I read maybe one book a year — people think I’m well-read, I’m not. But I’ll find a book that’s really meaningful and I’ll try to read it two or three times so I can adopt it into my gray matter. Daniel Kahneman’s Thinking, Fast and Slow — I’ve read that a few times. I know everything about loss aversion theory. I read Peter Drucker’s work. I read Sapiens several times. I want to really embed stuff.
Lately I write down things in my phone that I just think are hilarious — jokes. I wrote something down today as a prank: when my doctor walks in, I’m going to put on gloves. Just to see his reaction. We were talking about Trump today and I saw this great quote: “Consequences rarely show up lubed.” I love that. Whenever I see something I love, I’ll write it down and incorporate it into my rap. Great phrases — “Greatness is in the agency of others.” My VC said that and I’m like, that makes so much sense, I’m going to use that over and over.
I have a lot of inspiration. I surround myself with really intelligent young people. I know that’s ageist but I think young people have a different frame on things that helps me. But if you’re reading something and you don’t take away things you’ll remember, you haven’t really read it.
I’m totally inspired by George Carlin — fantastic on society. I’m inspired by Ricky Dervish. I’m inspired by Michelle Wolf. I’ve read a lot about Muhammad Ali — be courageous, be poetic. And Madeleine Albright, Secretary of State — four foot one. I find her inspiring around public policy and geopolitics. “Our memory is long and our reach is far” — I love that she used to say about America to its enemies. This 4’1” woman, only in America, wielding the most powerful nation in terms of foreign policy abroad. She was an immigrant. I found her inspiring, so I wanted to learn more about her so I could be her on occasion.
Build a kitchen cabinet of people you want to mimic.
Sam: I have a notes app called “Funny Phrases” and I collect these. I’ll give you three — completely out of context. When somebody’s thick, you could say they’re built like a baguette. If you want to talk about something other people are avoiding: “Look, I’m going to address this like an envelope right now.” And for CEOs with a terrible sense of the future: “If this CEO was the shooter at JFK, he would have died of natural causes.”
Scott: I love those. I absolutely love this one: “Your goal isn’t to get the apology — it’s to forgive the perceived debt.” I love that. And “consequences rarely show up lubed” — I love that one.
Sam: These little isms, little phrases — I’m not going to win this game. I’m putting away my swipe file right here. You win.
Excitement, Grief, and What’s Working Now [00:47:00]
Sam: What are you excited about right now? What are some things going on in the world — products, ideas, trends? You talk a lot about what’s wrong with America and culture and society. I want to know the opposite — what are you pumped about?
Scott: That’s not easier for me. I’m, to be blunt, a glass-half-empty kind of guy. I think a lot about loneliness. I think a lot about struggling young men. I think about the threats of AI.
What am I excited about? I work with a really talented group of people that are really inspiring. I love the work we’re doing. I get to travel a lot with my kids. I’ve got kids at a great age and I get to do a ton of fun stuff with them. I’m just really enjoying it — a partner, leaning into my kids. The Hallmark stuff. I just have a really nice life right now, and I’m trying to slow time down so I can really appreciate it.
I had lunch with Ted Sarandos — that’s a name drop, I’m desperate for your affirmation — but his wife wrote a book on grief and she has this great line: “Grief is love’s receipt.” If you really care about something and you lose it, that grief is evidence of what you had.
I didn’t have a lot of grief until the age of 40, and I realized it was because there was no one in my life I really loved or who really loved me — other than my mom. What I would wish for anybody is that they have a lot of grief in their life, because what it means is they’ve had loss, and when you have loss it’s because you had something wonderful. I’m just trying to appreciate how nice things are.
I’m not really excited about the Euro finals in Germany — although I am excited about the European finals in Germany. I’m just enjoying myself. I’m rounding third. I have a really nice life right now. I know everything everywhere ends.
Opportunity Is a Function of Density: Get to a City [00:51:00]
Sam: What do you say for people who are not rounding third? People who are just batting leadoff right now? You talk a lot to young people. One phrase I really liked: “Opportunity is a function of density.” You said get to a place that is crowded with success. What do you mean by that? That seems like really good advice.
Scott: The motivation for the book was that study — you are the average of your five closest friends. There’s this weird study where your peer group, the five people you hang out with — you end up with the same body mass index, similar political values, same job, same neighborhood. You become the same person.
What’s different, though — where there’s greater variance — is that of those five people, even though they make similar incomes, one will end up poor, three will be okay, and one will end up quite wealthy. I tried to understand the behaviors and strategies that separate the person who ends up financially secure from the others.
If you’re ambitious and you want to have influence or economic security — before you collect dogs and kids — you’ve got to get to a city. Two-thirds of economic growth is going to happen in just twenty cities. Get to the biggest city in your nation. Then get to London if you’re in Europe, or New York in the US, or San Francisco if you’re in tech. Because those cities are really competitive, and when you play tennis against players better than you, your game elevates. When you’re in a big city, you’re playing against the best players in the world.
It’s hard to live in Brooklyn. It’s expensive, which means you’ve got to be really good at what you do. You’re surrounded by people who are going to inspire you and elevate your game. At some point you’ll probably have to move out of the city because it’s difficult with kids — but while you’re young, get to a big city. Find really high-character, successful people to hang out with. Find people you want to be like or that you admire professionally and personally. Establish those friendships. Because you rise or fall to the level of your peer group, and in cities you’re just bumping off opportunities.
I’ve moved to London. My reductive analysis of the US versus Europe: the US is still the best place to make money. Europe is the best place to spend it. So if you’re in the money-making part of your life, it’s hard to beat the US.
I didn’t appreciate the American economy until I left it. People start from “yes” here. “How can we work together? How can we build something together? How can we make money together?” In London, it’s sort of an indefinite “maybe.” There’s very little actual organic value creation in London. It’s people servicing other people’s wealth they made elsewhere.
There’s nothing like America that says to a young person: if you work your ass off and you’re really good and you get a little bit lucky, things can happen for you here. All my British friends say they grew up being afraid of tall poppy syndrome — they didn’t want to stick out because their teachers would tell them, “Shut up, get in line.” Whereas in America, if you do something interesting, even if you fail, you’re rewarded as a hero: “That’s awesome, man. You got after it.” And that’s a very unique American thing.
Scott: In America, we embrace failure — that’s not exactly true, but we do tolerate it. Only one out of seven businesses succeed. My strategy has been to start nine businesses and I got two wins. All you need is one. If you aren’t trying really hard, taking risks, failing, and knowing when to pull the plug and move on — you’re not taking advantage of the American embrace of risk and failure.
I’ve never had trouble raising money because of past failures. People didn’t mind, as long as you treated your investors well and you were a decent person who didn’t do anything stupid or unethical. People don’t have a problem funding you again.
If I was born in China, I’d probably be in jail because I’m outspoken and say stupid things. If I was born in Europe, I think I’d be a talented businessperson but I wouldn’t have recognized my success because they don’t tolerate failure the way we do.
Hard Work vs. Balance: The Myth [00:59:00]
Sam: I found what read as contradictory things in your work, or at least in your story. You said in your forties you ground your ass off, all you were focused on was money, it worked out, and you don’t regret it. But then I read how you delegate a ton — you have someone pick out your clothes, you wear mostly the same thing, you have your workout outfit and your work outfit. At Prop G you only meet with your executive producer twice a month, one hour meeting once a week with the editorial team, you haven’t planned vacations in twenty years. Does it do something to you looking back — knowing what you know now, could you have gotten there without the 80-hour weeks?
Scott: Things have changed dramatically. I’m not working nearly as hard now. When you have a small business and you don’t have a lot of money, everyone needs to work hard. You need to set an example. I’m not sure I was ever working 80 hours a week consistently — I definitely had weeks like that — but when I look back on the last ten or fifteen years, I don’t remember much else other than work.
I would vacation two weeks a year. Now I vacation a lot more. But I don’t see any way around it. My students — I’ll ask them how much money they expect to be making by the time they’re 35. About 90% of them expect to be in the top 1%, which is $750,000 a year in America. Then I’ll say, what’s most important to you moving forward? And a lot of the time they say balance. And I’m like: so you expect to be in the top 1% by the time you’re 35 but you also believe you’re going to have balance? I don’t think you can have it all. You just can’t have it all at once.
And by the way, that may not even be the right way to go. You may say, “I want to live a nice balanced life. I’m going to move to a suburb of St. Louis, coach little league, work 40 hours a week, be a good citizen, find a good partner, have a nice life.” Nothing wrong with that. But the majority of young people think they’re going to be in the top 1% and also have balance, and I just think it’s not realistic. The only way to get there is if you have one thing — rich parents. Otherwise, expect to go all in on your career or scale back your expectations around economics and influence.
One of the things people can control is how hard they work. I don’t think you want to work so much that you sacrifice your health or your relationships — there is going to be some trade-off. I didn’t see my kids a lot when they were little. I was divorced. I think work was a contributor. I was always in services companies, never saying no to any opportunity. “Can you be in Seoul tomorrow for a board meeting?” Sure. I mean, I just said yes to everything to move the company forward.
For a long period I worked very, very hard and sacrificed a lot. I did it such that I could have a lot more balance now. But yeah — the myth of balance. Get over it if you expect to be influential or economically secure. You’re not going to have a lot of balance for a long period of time.
Some people are said geniuses — they can work a modest amount of time, make a lot of money, work out, have a great relationship with their parents, be fit, donate time at the ASPCA, and have a food blog. Assume you are not that person. Just have a sober conversation. And have a sober conversation with your partner: how much money do we expect to have? Who’s responsible for making it? What’s your approach to spending? Where are we going to live?
The number one source of divorce is not infidelity or lack of shared values — it usually has something to do with money. And 70% of divorce filings are filed by women, often in cases where the man loses a business, becomes broke, or has a mental breakdown. When a man loses his status as a provider, he’s very inclined to be on the wrong end of a divorce.
I think a lot about young men. I think every man should start with the notion that he’s going to be responsible for the economic well-being of his household. And by the way, sometimes that means getting out of the way and being more supportive of your partner who happens to be better at the money thing than you — and that’s a wonderful thing. But start from a position of: this is my responsibility. Make sure you’re aligned with your partner around this stuff.
The thing we don’t talk about: your kids are going to have higher blood pressure if you’re economically strained. Kids in low-income households have greater systolic resting blood pressure than kids in middle and upper-income homes. You’re much more likely to get divorced, much more likely to have a stroke, much more likely to be the victim or the perpetrator of domestic violence when you don’t have money.
America becomes more like itself every day — it’s a loving, generous place for people with money. It’s a rapacious, violent place for people who don’t have money. All this stuff about “money doesn’t buy you happiness” — oh my God, is that a myth. Middle-income people are happier than poor people. Wealthy people are happier than middle-income people. The bad news is that tops out — you get diminishing returns. You have to be cognizant that when you do get to some level of economic security, the means are for the ends: to have an exhale, release the anxiety, and then use that opportunity to really spend time with your loved ones and cement those relationships.
The problem is you get on the hedonic treadmill and you become so absorbed in professional identity, in money, in making more money, that you never get to the ends. You wake up wealthy — or financially scared, having always thought about economic well-being — and you don’t really have a great relationship with your kids or your partner.
I have someone very close to me — a family member — and I’m taking them to Africa. They’re making excuses. I said, “You realize this is your last chance to go to Africa before you’re dead? You’re fifty years old. When are you going — when you’re 70? But you’ve got to get back to work an extra day.” What are you thinking? We’re going to be dead soon. So many people don’t realize how fast it goes by and never really lean into the relationships or just allow themselves to have a great time.
I’m going to Stagecoach this week. I’m going to a country music festival. I can’t stand country, but I’m going. I’m going to buy a pair of boots. I’m going to have a great time. And it’s like — yeah, why not? Why the hell not? What am I going to do, watch C-SPAN all weekend?
I can’t stand it when people who are blessed with being in this country, who have some level of economic security, who have people in their life they love and who love them, don’t lean into it. You guys are younger than me — it just goes so goddamn fast. It’s just crazy how fast it goes.
Sam: I don’t know how to respond to that, Scott. I feel like I learned something and I feel a little bit bad inside at the same time. I need to go and I need to like burp or something. I need to get a little bit out of my system.
Scott: Do they not have Zoloft in London? I haven’t hit the antidepressants yet, but I just did ketamine therapy. That was a trip. The good news is I hate my life less and less every day, so I’m sort of getting there.
Sam: You’re like if Mitch Hedberg had a podcast and opened an LLC.
The Algebra of Wealth: The Formula [01:16:00]
Sam: Are we going to talk about the book?
Scott: Yeah, tell us about the book.
Sam: Okay, the floor is yours. Make your case as to what I’m going to get out of this book.
Scott: The Algebra of Wealth is the following. Find your talent. Focus. Workshop your twenties in an industry that will pay you. Once you have a certain amount of professional momentum, really try to develop the savings muscle.
Wealth isn’t about how much you make — it’s about how much you spend. Try and get to the point at a fairly early stage where you spend less than you make. That is very difficult. The brightest companies and minds in the world are all here to convince you that an upgrade from economy to economy comfort to economy plus to business class is an investment in yourself. No — it’s consumption. Don’t try to impress other people with your stuff. No one is as concerned with your stuff as you are. You don’t need to order a bottle of vodka at a club for $500. Get a Hyundai, for God’s sake. Travel coach. Save money. Start saving money early.
If you’re young, lean into your advantage — you have a lot of time. Develop that savings muscle. Diversify. The moment you have any real capital, start diversifying. That way, no matter what happens, you have Kevlar. You can have a stock go to zero — a bullet hits you in the chest and it doesn’t kill you because you’re diversified.
Then take advantage of a flaw in the species, and that’s time. Recognize that time will go faster than you think. If you show a little bit of discipline, a little bit of maturity, a little bit of that savings muscle early — the S&P is up 11% a year since 2008. That sounds boring. What that means is every 21 years your investments are up 8x. And that 21 years will go really fast.
So hope you sell a bestselling book, hope your company goes public, hope your album goes double platinum, or some rich uncle dies and leaves you everything. But just in case, make sure you’re financially secure. I can get you there if you follow these principles and show a little bit of discipline, a little bit of maturity.
The good news is I can get you rich. The bad news is the answer is slowly. But we can get you there.
The algebra of wealth equals: Focus, plus Stoicism, times Time, times Diversification. That’s the formula.
Sam: You’re the formula guy. You’ve had the Algebra of Happiness, now the Algebra of Wealth. Is this going to be a whole Algebra of Blank series? Because anytime I see that, I’m into it. If it’s an equation, I’m into it.
Scott: Humans need constructs to remember things. You can read a book and if it doesn’t have constructs or visualizations, it’s easy to forget about it. I really like constructs and equations. I’m about to sign a three-book deal. I’m writing the Algebra of Masculinity, the Algebra of Work, and the Algebra of Mating. Three topics I’m super interested in. I want to do enough research to distill each down to best practices people can hold on to.
Focus and Mastery: The First Variable [01:21:00]
Sam: I want to talk about the first variable in the formula — Focus. We talked about stoicism, I know about time, I know about diversification. Teach me about focus. I’m pretty bad at focus, trying to get better.
Scott: If you have a side hustle, you need to find a different main hustle. You’re better off taking the time spent on a side hustle and investing that incremental effort in your main hustle. A side hustle is fine if you’re investigating a new main hustle. But the way you get wealthy is not a variety of things — it’s being really great at one thing. That’s the focus. The term we used is mastery, or ninja-like capability.
Find something you could become great at. That’s not easy. But also find it in an industry that’s not very sexy. If you’re in the top 10% of tax law, of installing HVAC, of installing soapstone kitchen counters — you’re going to make a really good living. And taking care of your kids is just so much fun. Being able to be there for your parents is really exciting. Young people mistake passion for their hobbies, not recognizing that when you get older — to be able to give money away, to do nice things, to relax with your partner — it’s super enjoyable.
Put yourself in a position, when you’re a little bit older, to do wonderful things with people you care about. The way you get there is by making more than you spend, saving. But the first thing you’ve got to do is find a focus.
We live in a specialist economy. Find something — try and think: could I be great at this? Because if you become great at it, trust me, you’ll become passionate about it. You can’t become great at anything you hate — that’s going to be automatically screened out.
I found consulting. I didn’t know what consulting was when I was in college, even business school. I figured out: wait, people will pay you to rent your brain? Wow. And I was always really good at establishing these proxy father-son relationships with powerful men, and my core deal with them was: “I understand brand better than you. You’re the CMO. I’m going to make you the CEO in three years. In exchange for that, you’re going to pay my company a million dollars a year to answer very deep, hard questions.” I figured that out in my late twenties — which was a blessing.
When I sold the company, I’m like: I don’t want to be in services anymore. It’s a young person’s business. I’m sick of being on planes. So I had to workshop my life again. I figured out: I’m a good teacher. What does it mean to be a good teacher? It means you have to be a good storyteller. But what if I told stories in different mediums — could I make money in books? Could I make money speaking? Could I make money in podcasts? I figured out: yeah, I’m good at this. I could even be great someday. And that mastery has led to a really nice life.
But I’ve always tried to spend reasonably, spend less than I was making — sometimes more than others. I finally learned to diversify the hard way. I lost everything twice — in 2000 and again in 2008 — because I thought I was so awesome that whatever I focused on was naturally going to succeed through my sheer force of character. That’s not true. So I started diversifying and just followed these basic principles and let time take over.
I really started saving a lot of money in my forties. I deployed an army of capital to start fighting for me and my family and my sleep. That army grew in a bull market and came home with just immense spoils — because I deployed this army early and often and kept adding to it.
Sam: Scott, thanks for coming on. Everybody go buy the book — The Algebra of Wealth. He has to be number one on the charts because he needs our affirmation, and let’s give it to him.
Scott: Thanks, guys. Thanks for your success. Thanks, Sam. Thanks, Shaan.