My uncle was an engineer at Apple back in the 1980’s, days when the company was still in its infant, early stages.
I’ve heard him tell stories that involve demonstrating new Macintosh features directly to Steve Jobs, who stood on expectantly, peering over my uncle’s shoulder. Anecdotes as juicy as you might imagine, in which Jobs’ now-famous intensity and attention to detail were already fully apparent. Back then, though, no one could quite predict the full scope of the visionary’s future impact — the prosperity that companies like Apple would soon seed all over Northern California.
Before Apple, my uncle had gone to UC Berkeley, where he met my aunt, and based on seemingly ancient, archival family photos — picture a gut-length beard for him, flowing blouses for her — they were strongly of the hippie persuasion, specifically of the 1970s Bay Area varietal. They quickly settled south of San Francisco, the tract soon to be christened Silicon Valley, when most of what surrounded Stanford was still farmland. Soon my uncle, equipped with a degree in the still burgeoning field of computer science, landed the Apple job. They bought a house.
It doesn’t take any kind of real estate geek to know that a property investment in that part of the country has done pretty well over the last 30-40 years. They still live there. It’s not a large house; one story, room for a garden. Without delving into any details that would breach my relatives’ privacy, their lifestyle is modest, smart, untethered to any obvious symbols of the status of their bank accounts.
Meanwhile, their zip code alone would be enough to qualify them as wealthy in many people’s estimation, based on asset value. But the realized value of that house, in practice for my relatives, has always been exclusively as a home, a comfortable but simple one on a quiet street — a place to live, a home where my cousins could grow up, serene walls to decorate with family photos. I suppose its monetary value could be liquid if they wanted it to be; they’ve never wanted that.
But somebody else very possibly would. Or, rather, somebody else might look at that house as an amount in a ledger and translate that number into something completely different, something that person — probably the average person — values more.
We can agree that the same asset gives two different people wealth. But when you look at what any one person does with a sum of money or a valuable asset, their decisions might be altogether different than what anybody else would do. And that begs the question: When we’re talking about wealth, what do we actually mean?
Don’t worry: this article isn’t just an extended version of the platitude, “Beauty is in the eye of the beholder — but with money.” While that is true — wealth and value are endlessly subjective — there’s also a real, actionable lesson for investors who can isolate wealth from its common interpretations, break it down, and understand its most elementary parts. If you can understand what wealth really is, you can identify why you want it, and then you can chart a course for acquiring it.
First of all, there’s a serious gap between what many of us know wealth to be in theory — a means to a goal — and how we’re trained to think about it — an endless accumulation of money, frequently realized in opulent and luxurious terms. There’s probably a human — even biological — drive behind the desire to amass: the sense that more money is equivalent to winning more. Or maybe there’s some evolutionary component, wherein seeing more commas in a bank account lights up the same survival-oriented lobe of our brains that soothed our ancestors when their cave-based food supplies were overflowing.
That said, many people do understand that wealth is a self-defined quantity — a flexible goal that each person should ideally identify and shape for themselves. What a lot of people get wrong, however, is they don’t take that goal-setting to the next level.
If you look at the majority of personal finance websites, you’ll notice the same aspirational options championed again and again, as if pulled from an identical, all-you-can-eat menu: home ownership, early retirement, travel, becoming debt-free, etc. Don’t get me wrong — each of these is a worthy and wise goal (for most people, at least), with enough specificity to help new investors focus their money management past simple accumulation. But none of these actually defines what we mean when we talk about wealth, at its elemental level. Is it possible to square someone who wants a SoHo condo with someone who just wants to invest enough to generate interest that can support, say, a lifelong passion for rock climbing? Do they have anything in common?
If you break down why people value wealth, I suggest you’ll find that everyone’s personal definition falls on a spectrum that balances three qualities:
Let’s test that. At first blush, are even the most stereotypical and loud symbols of wealth properly represented along these lines? The Wolf of Wall Street on his yacht. Scrooge McDuck swimming laps across his personal Fort Knox. A Burberry ad featuring a sunken-cheeked model in a $40,000 suit at the back booth of a Le Marais bistro. Even these flashy images fit our model: each is framed as an example of enviable, elite access; they all exercise a surplus of freedom; and they all imply pockets deep enough to guarantee security against even this extravagant expense.
These qualities outline wealth for average investors too, though, of course, in more realistic terms. Consider any specific personal finance goal you may have and weigh how its achievement would place you along those three metrics. Even if your goal is nothing more than to find a way to guarantee you can continue living in exactly the same manner you already do, achievement of that guarantee would be the realization of your own manifestation of wealth — represented as a freedom to live how you want, securely, with access to the rights you value.
Then again, maybe not. Maybe these three qualities mean nothing to you — but that doesn’t change the core sentiment here. How do you define something as personal as wealth? Well, don’t just think of wealth in terms of money, and don’t think of it in terms of what you’ll do with that money. Think about it in terms of how doing those things will shape your life.
This definition can also help you direct investment decisions, too. The investing industry has thrived on telling people to make as much money as possible. Up and to the right! Always higher, always more right-ish! That’s a hard proposition to turn down — wealth-related goals are rarely hurt by having too much in your bank account. But raw accumulation doesn’t automatically translate to the kind of wealth you might want, and your investments should reflect that reality. In fact, blind, maximized accumulation can damage pursuit of your more genuine wealth goals, if it damages your ability to make sober judgments, evaluate risk — or just distracts you from what matter to you in the first place. But that’s a particularly personal question, probably more suited for conversation on a barstool with a friend than a blog post with a stranger.
But take a look: Does your portfolio give you the freedom to form your own definition of wealth; the security for the portfolio to withstand turbulence on its way to accomplishing that goal; and access to strategies you might not be able to find anywhere else? One version of that kind of investing is Fundrise’s platform.
Maybe wealth for you means being able to pay tribute to a certain icon by purchasing a lifetime supply of the finest black turtlenecks. Whatever your vision of wealth looks like, smart investing can help you get there.