[00:02:25] Kyle Grieve: We know that investors hold stocks and indexes for very short periods of time. The lessons from The Wealthy Gardener aim to help you see the obstacles and difficulties that must be overcome to achieve life changing wealth. You’ll learn timeless principles for thinking about prosperity, wealth, purpose, sacrifice, and many other facets of life.

[00:02:45] Kyle Grieve: Today, takeaways from this book and how we can use them to impact our own lives positively. Since this book covers so many topics, I split them into ones that I think are the most important. They include time management, sacrifice, avoiding the income equals expenses trap. reframing of problems, the dangers of procrastination, patience, the seasons of wealth, purpose, goals, compounding, risk, financial freedom, and debt.

[00:03:13] Kyle Grieve: Just a quick note, throughout this episode, I will refer to both John Soforic, the author of The Wealthy Gardener, and The Wealthy Gardener separately. Many insights come from The Wealthy Gardener’s point of view, but John Soforic himself also inserts many great insights and realizations from his own experiences that are highly valuable.

[00:03:31] Kyle Grieve: So to start off with, John Soforic is a big fan of time management. He talks about it extensively in the book through the eyes of the wealthy gardener and his own life experiences. A great quote from the book was, quote, we are always too busy to add to our schedules, but we either change what we’re doing or we keep what we’ve got, unquote.

[00:03:50] Kyle Grieve: If we want to eventually earn financial independence, we must understand that there are only 24 hours in each day. We can’t simply snap our fingers and make our days longer. So we must change what we do with the hours that we have. As I’ve taken my own journey towards financial independence, the time I spend each day on specific habits has changed.

[00:04:12] Kyle Grieve: When I was in my 20’s, my spare time was wasted by watching TV and playing video games. But as I started reading more, I realized that watching TV was time wasted. Jim Rome said quote a television cost you about 40,000 a year not to own it, but to watch it what else could you do with that time? How about working earning or learning time wasted is money lost and wealth abandoned unquote That is precisely how those who want to build wealth should see time.

[00:04:41] Kyle Grieve: I’ll say it one more time. Time wasted is money lost and wealth abandoned. Many listeners of this show will be familiar with one of Charlie Munger’s most potent quotes. Quote, in my whole life, I have known no wise people over a broad subject matter area who didn’t read all the time. None. Zero. You’d be amazed at how much Warren reads and at how much I read.

[00:05:05] Kyle Grieve: My children laugh at me, they think I’m a book with a couple of legs sticking out. While there is some wisdom to be drawn from great works of art and film, it pales compared to what we can learn from reading an excellent book. As Munger says here, the wise read all the time. So spend as much time as you can reading, not just to read, but to really deepen your understanding of whatever you’re most curious about.

[00:05:28] Kyle Grieve: If you aren’t reading about things that you find curious, you will find it challenging to take away essential insights. I like the mental model of reading to solve a problem. This way, your reading is more intentional and you’ll actively think about how you can implement what you read to make improvements to your own life.

[00:05:45] Kyle Grieve: Another crucial area is ensuring that whatever we spend our time on moves us towards our goal. Soforic writes, quote, an impact hour is 60 minutes of doing the right things that lead to a critical outcome. An impact hour is the opposite of a hollow hour, moving us towards our goals. It is an hour of effort that adds the great volume of work that is required for achievement, unquote.

[00:06:09] Kyle Grieve: This makes me think a lot about investing and using the time that we have every week to invest as wisely as possible. Everybody should spend these hours very judiciously. When I first started investing, I would go off on all kinds of tangents, reading about investments that I wouldn’t touch with a 10 foot pole today.

[00:06:27] Kyle Grieve: When Warren Buffett discusses his too hard pile, I think he’s talking about a few different things, and I’m going to weave this in here. So first, it’s simply too hard, and now he’s categorized whatever he was reading or learning about in that way. And secondly, and I’m speculating here, he knows that if it’s in the too hard pile, and he has no desire to learn more about that subject, he can easily spend as little time on it as possible in the future.

[00:06:51] Kyle Grieve: So this alone has multiple positive effects. One, he can spend more time learning about what he already knows and expanding his circle of competence. Two, he improves the efficiency of the time that he spends on his learning. And three, he can spend more time researching topics that he’s curious about and knows that he enjoys learning about.

[00:07:09] Kyle Grieve: So another high impact area that the best investors spend time in is in thinking. Morgan Housel writes in the Psychology of Money, quote, Rockefeller’s job wasn’t to drill wells, load trains, or move barrels. It was to think and make good decisions. Rockefeller’s product, his deliverable, wasn’t what he did with his hands or even his words.

[00:07:30] Kyle Grieve: It was what he figured out inside of his head. So that’s where he spent most of his time and energy. Despite sitting quietly most of the day in what might have looked like free time or leisure hours to most people, he was constantly working in his mind, thinking problems through, unquote. You’ll see this theme in many of the most successful people.

[00:07:48] Kyle Grieve: They are profound thinkers, and their value lies in the fact that they regularly use their brains to solve the biggest problems that their customers have. Ordinary people can spend their days thinking about their own issues. While these issues may not be as big as the problems that a Rockefeller, Jobs, or Musk has encountered, we still need to make sure that we are thinking about the problems that we need to solve in order to continue to reach our own goals.

[00:08:11] Kyle Grieve: Soforic writes, quote, I saw that only a few actions earned tangible rewards, and so I rearranged my schedule for the best activities, unquote. Each person needs to arrange a highly customized range of activities. For most people with a day job, much of their daily life is centered around their job and getting that done.

[00:08:30] Kyle Grieve: But Soforic emphasizes in his book that what we do with the hours outside of work can really catapult us towards the goal of financial independence. If we maximize our use of our spare time, we can get a lot of things done. Soforic writes about his personal experience with how he changed what he called his impact activities.

[00:08:49] Kyle Grieve: What happened during this time? I changed my activities as follows. I eliminated alcohol and entertainment. Spent time in solitude and meditation. Maintained an upbeat attitude. Exercised daily. Adhered to a perfect dietary regimen. Wrote specific money goals. Drew images of my goals. Made a vision board of my clippings.

[00:09:10] Kyle Grieve: Vividly imagined patients calling me. He was a chiropractor. Used affirmations nonstop. Listened to personal development audiobooks while driving. Planned my days, expanded my business hours, spent time with my family, and revitalized my mind and body during non-work hours. Only you will know what you need to spend your time on, but many of Sephora’s points above seem like a good use of time.

[00:09:37] Kyle Grieve: Eliminating waste of time in his case, alcohol entertainment for anyone else. This could be different exercising and taking care of himself physically eating healthy, which also counts as caring for yourself, goal setting, utilizing positive visuals, using positive affirmations, investing time in personal development, spending time with family and spending time on recovery.

[00:09:58] Kyle Grieve: These all sound like things that most people could do immediately to help them lead a more meaningful and prosperous life. To wrap up this part on time management, I’ll leave you with a great quote from Michael de Montaigne that Soforic shows in his book. The value of life lies not in the length of days, but in the use, we make of them.

[00:10:16] Kyle Grieve: A man may live long but get very little. So no matter what you decide to spend your time on, realize that the best results will occur when your time is optimized towards reaching your goals. Time spent doing other things that aren’t helping you reach your goals is time wasted. It’s also important to realize that having some spare time to spend doing nothing might be a part of your physical and mental wellbeing.

[00:10:39] Kyle Grieve: So if you require that, then don’t be afraid to allocate some time if you think it will be beneficial. If there is one aspect of reaching financial independence that the wealthy gardener will teach you, it’s the importance of sacrifice. Soforic says, quote, we pay the price for an extraordinary life, or we pay the regrets of an average life.

[00:10:57] Kyle Grieve: An extraordinary life requires a sacrifice of our leisure hours, but an ordinary life requires a sacrifice of our cherished dreams. It depends on what is most wanted in the garden. Unquote. I think this transitions very well from the points on time management as well. If we want to live an extraordinary life, we must pay a sacrifice.

[00:11:18] Kyle Grieve: In this case, our leisure hours. If we want to live an ordinary life, we must also pay a sacrifice, which is our cherished dreams. No matter what your choice is, there is always going to be a sacrifice. Reading this really made me think about how much Buffett sacrificed to get to where he is today. He sacrificed many relationships with his family to get to where he is.

[00:11:38] Kyle Grieve: I don’t think anybody can just pick and choose to sacrifice everything to obtain a ridiculous amount of wealth like Buffett has. But when I look at Buffett’s relationships with his family, it’s apparent that he’s given up a lot to earn the success that he has today. When I ask myself if I would give up the same thing, the answer is a clear no.

[00:11:56] Kyle Grieve: I would take a fraction of his success if it meant being a better father and husband. A critical aspect of becoming financially independent that the wealthy seem to understand well, but the poor do not, is how important it is to live beneath your means. After reading plenty of books on financial independence, I can say that understanding this has been one of the most potent ways I improved my own understanding of building wealth.

[00:12:19] Kyle Grieve: The millionaire next door taught me that wealthy people can come from low incomes, just like people with little to no wealth can have high incomes. No matter what your income is, it’s important to never fall into what Soforic intelligently calls wage slavery. In The Wealthy Gardener, the wealthy gardener is talking to his protege, Jimmy.

[00:12:36] Kyle Grieve: Jimmy says, what if people have a ceiling on income? And what if their monthly income barely covers their fixed living expenses? The wealthy gardener responds, then they are chained to a life of financial insecurity. They are prisoners of wage slavery. They live to meet living expenses and to pay taxes. I spent a lot of time thinking about this, and it’s such a powerful concept.

[00:13:02] Kyle Grieve: They live to meet living expenses and to pay taxes. This does not sound like a productive use of my time, so I personally have decided to simply not take part. Here is the exciting part, most people assume that the only way to generate wealth is to earn a higher income and while I do agree with the premise that making a higher income can result in accumulating wealth more quickly and with less pain.

[00:13:22] Kyle Grieve: We also need to look at some very simple real life examples. One of my favorite examples is to look at professional athletes. Sure, there are some professional athletes out there that are billionaires today. Great examples are Michael Jordan, Tiger Woods, Cristiano Ronaldo, LeBron James, and David Beckham.

[00:13:37] Kyle Grieve: But we must never forget base rates. The National Bureau of Economic Research concluded that 15.7 percent of NFL players have filed for bankruptcy 12 years after retiring. A Sports Illustrated article reports that 78 percent of NFL players and 60 percent of NBA players face serious financial hardships after retirement.

[00:13:57] Kyle Grieve: There is a laundry list of poor investments that athletes have made resulting in bankruptcy. Now, I’m not here to pick on athletes, I’m just trying to point out that as a cohort, they are highly talented at playing sports, not necessarily talented in accumulating wealth and the two are not mutually exclusive.

[00:14:14] Kyle Grieve: The overarching point is that you can make a lot of money, but even if you have a seven figure income, if you have a seven figure lifestyle, then you aren’t saving anything to buy your financial freedom in the future. This is why people with low paying jobs can retire early and live a life of financial freedom, while people with very high paying jobs are forced to work until they are well into their 60s.

[00:14:34] Kyle Grieve: There are two schools of thought I’ve come across when looking at the wealth building equation. If we think of wealth as equal to income minus expenses, then we can build it in two ways. Number one, we increase our income, and number two, we decrease our expenses. If we look at our day to day life, assets and liabilities are bought with our income.

[00:14:53] Kyle Grieve: Financial independence is an asset that must also be bought and compounded over many years. If we make 100,000 a year and have 100,000 in expenses, we have zero wealth at the end of the year. So, we can either increase our income or decrease our expenses. Let’s say the next year we make 120,000 but keep our expenses at 100,000.

[00:15:12] Kyle Grieve: Now we have 20,000 that we can use to invest into our future or if making more money is out of the question, we can decrease our expenses. In that case, we are still making 100,000 but are able to remove some expenses that aren’t maybe adding value to our life. If we can get those expenses down to 80,000, we still have 20,000 to invest into our future.

[00:15:32] Kyle Grieve: The Wealthy Gardener believes that we should spend our time not only living below our means but also increasing our income. I learned that income equal to expenses is precarious, and the pursuit of excess money is wise and necessary. John Soforic came up with what he called a savings day. Here’s how it worked.

[00:15:52] Kyle Grieve: After a lot of soul searching and deliberation, we chose to sell my practice for 80,000 and change everything. We left Chicago and moved to my hometown near Pittsburgh. This area was more rural, less metropolitan, and far less expensive. We saw less cement and more trees, and the equation for profitability was much better.

[00:16:14] Kyle Grieve: In this new location, I eventually opened a new clinic. I still worked six days a week, but Saturday was my savings day. Every dollar earned on this weekend day was financial excess. Money for saving that has been missing in my Chicago life, unquote. Now this strikes me as a very interesting concept, having one extra day of work that is used exclusively to buy your future freedom.

[00:16:36] Kyle Grieve: Other ideas for this might be using a portion of your bonus, incentives, etc. to invest in the future. The big takeaway here was that anybody is susceptible to becoming a wage slave. You can be making below average income or above average income and still become wealthy if you live below your means. If you can never live below your means, you will end up a wage slave and be relegated to working to pay the tax man and expenses for the majority of your days.

[00:17:02] Kyle Grieve: If we decide that we do not want to work just to get by, we need to learn to live below our means and reframe the inevitable problems that will arise on our journey. John Soforic discusses some affirmations that he cites daily as himself. I do not expect or desire a problem free existence. I seek strength and wisdom, not ease and comfort, unquote.

[00:17:25] Kyle Grieve: This reminds me a lot of a stoic tool where we reframe problems as opportunities to build strength and wisdom by solving life’s inevitable problems. If you want to learn more about this subject, I’d highly recommend listening to TIP, episode 617, where I interviewed Vitaliy Katsenelson about this subject.

[00:17:41] Kyle Grieve: We should not think about life as being problem free. The road to building wealth will be full of problems. After all, Charlie Munger famously said, and I’m only using the PG version here, Quote, the first hundred thousand is a pain, but you got to do it, unquote. When he referred to getting this money together, he didn’t necessarily mention all the problems that would be involved with accomplishing that feat, but it’s important to point out that once you reach that number, things do become a lot easier.

[00:18:09] Kyle Grieve: We can argue over what this number would be today, maybe it would look more like a million dollars if we adjusted for inflation, but either way, we have to accept that savings will be difficult and it will test us at times. But our ability to pass this test and keep moving towards our goal when others are buying fancy trinkets will be vital to generating wealth.

[00:18:27] Kyle Grieve: The Wealthy Gardener has many different views on problems that we’ll face over our lives. Quote, regardless of our capabilities, there’s no escaping from our problems. The only question is, do we have a vision of winning the day? Do we have the mindset to stay the course and endure problems? Do we show up with the warrior’s mentality to battle and maintain our direction? Unquote.

[00:18:50] Kyle Grieve: This concept of maintaining direction is just so important and really stood out to me. If we save for a few months, that’s a great start but the best part about compounding is that we can expedite it even faster by adding more to our pile of money. Over time, and that’s in any aspect of life, not just money, but also in wisdom, a problem I’ve observed and had myself was the problem of basically spending all the money that you have coming in and then deciding, Oh, if I have a little bit of money left over, I’m going to save that.

[00:19:19] Kyle Grieve: But this just didn’t work at all for me. It permitted me to spend all the money I had and maybe even go into debt. This meant I could spend, but not save. I got a great chance to speak with J.L. Collins, who told me that he didn’t consider the problem of saving money as deprivation, as someone once referred to it.

[00:19:36] Kyle Grieve: He felt that every dollar he saved was simply purchasing his freedom at a future date. I think this is a great way to reframe the problem of saving for people who find the idea of saving as depriving yourself of your current satisfaction. Soforic writes, quote, A good garden will always have weeds that keep us working.

[00:19:54] Kyle Grieve: Happiness is not found in a life without problems, but in a life of overcoming problems. We need only to maintain an upbeat attitude to face challenges and do our work of sowing to reap a harvest. A life without challenge is a life without a worthy contribution. This can be a more challenging concept to accept.

[00:20:14] Kyle Grieve: Of course, we want to live a life where problems do not arise. But if we pursue strength and wisdom, problems will be one of the best ways that we can advance ourselves. Charlie Munger was a master problem solver. In his 1996 piece called Practical Thoughts About Practical Thought, he said, quote, in a long career, I have assimilated various ultra simple general notions that I find helpful in solving problems.

[00:20:38] Kyle Grieve: Five of these helpful notions, I will now describe. So these five notions were, one, decide big no brainer questions first. Two, numerical fluency. Three, invert always invert. Four, think in a multidisciplinary manner and five, never discount Lollapalooza effects. Now, it’s important to remember that these notions weren’t necessarily in direct relation to building wealth at the individual level.

[00:21:01] Kyle Grieve: As he used this framework to discuss how Coca Cola was built from a two million dollar business into a two billion dollar business. But I think the first three notions do work very well for wealth building if we think hard about them. If we think about the no brainer question first for building wealth, it’s how we generate the funds needed at some point in the future to allow us to live the lifestyle we want free of obligations.

[00:21:22] Kyle Grieve: Let’s say we need three million dollars. Next, we need to use numerical fluency to work backwards to determine how we achieve that number. Since I’m talking on a podcast, it doesn’t lend very well to doing complicated math, but if we assume we can compound at 8%, we double our money every 9 years. Lastly, we can use the principle of inversion to figure out how we go backwards from that 3 million dollar number.

[00:21:45] Kyle Grieve: 1.5 million, 750 thousand dollars, 375 thousand, 187,000 and that’s halves. So about 36 years. So if we have 187, 000 today, we can expect to have about 3 million in 36 years provided that we compound at 8%. We can make this faster if we add each month as well. It increase the amount we’ll have at the very end if we continue to contribute to our savings each month as well.

[00:22:12] Kyle Grieve: But I’m not going to go into the details of that as it’ll get super complicated without having a visual. And there we go. We’ve basically solved the mathematical problem of obtaining a specific number somewhere in the future. Of course, additional problems will arise. How do we build the initial capital needed to invest?

[00:22:28] Kyle Grieve: How do we ensure that our lifestyle doesn’t get more expensive as we move up the income bracket? How do we try to avoid keeping up with the Joneses? And most importantly, how do we achieve all this while living a life of purpose? The wealthy gardener, as usual, has an answer for this. Quote, the work is fighting the daily forces of entropy, chaos, and disorder.

[00:22:49] Kyle Grieve: But master gardeners know that gardening is about the satisfaction of labor. It’s about staying engaged in a pursuit that pleases the soul despite its many problems. Unquote. To save money, we must accept that we may have to do things that we don’t always enjoy. In the wealthy gardener’s reality, this is gardening.

[00:23:06] Kyle Grieve: You put a lot of thought into the art of gardening and understand that it can be sweaty, uncomfortable, and back breaking work but in order to become a master of your craft, you must find satisfaction in the labor. In a perfect world, we’d all be like Warren Buffet, who tap dances to work every day. In reality, as we age and gain responsibilities, it’s not possible to always work on what we are most passionate about.

[00:23:30] Kyle Grieve: For the younger members of our audience, Buffett’s advice here is priceless. Quote, find your passion. I was very lucky to find it when I was seven or eight years old. You’re lucky in life when you find it, and you can’t guarantee you’ll find it in your first job out. But I always tell college students that come out to Omaha, take the job you would take if you were independently wealthy.

[00:23:50] Kyle Grieve: You’re going to do well at it, unquote. I think the final part of this passage is most powerful. I think he would tell people to take the job that they are most passionate about over the job that pays the most or gives them the most potential to increase their earnings down the road. I think the biggest problem with this advice is understanding what job you would want to do in your early 20s if you were independently wealthy.

[00:24:11] Kyle Grieve: I can only talk from personal experience here, but I had no idea what I would have wanted to do if I was independently wealthy in my early 20s. But for those people who have a wide array of experiences and know specifically what they are most passionate about, this advice is great. Another great Buffett quote on career advancement is, quote, People ask me where they should go to work, and I always tell them to go work for whom they admire the most.

[00:24:33] Kyle Grieve: It’s crazy to take a little in between jobs just because they look good on your resume. Do what you love and work for whom you admire the most, and you’ve given yourself the best chance in life that you can. This advice is very powerful for maybe people who are working in a job that they’re not super passionate about.

[00:24:50] Kyle Grieve: Even if you are doing a job that isn’t your dream job right now, you can still learn a lot from your superiors if they are people that you admire. Additionally, you can learn a lot from working for them, and hopefully you can leverage that wisdom into future opportunities. John Soforic writes that, quote, A purpose is a goal or aim, especially one that transcends selfish ends.

[00:25:11] Kyle Grieve: A purpose for wealth, beyond hoarding it, is vital to sustain the ongoing persistence needed to acquire it. The Wealthy Gardener also believes that our lives need purpose, and if we have that purpose, we can have that dogged persistence that helps us acquire wealth. Whether you work for yourself or on an employer, you need to understand that rewards will be earned by the value you give.

[00:25:34] Kyle Grieve: Rewards are simply not given away. Earl Nightingale said, quote, one thing I do know for sure is that your rewards in life will be in exact proportion to your human services. If you want more rewards, you’d better throw more logs on the fire in the form of more service. Soforic adds, quote, we need to offer more services or we may need better strategies, more training, or even a new career altogether to produce more heat from the same fire.

[00:26:00] Kyle Grieve: Unquote. It’s essential that we try not to put off our purpose for too long. Otherwise, we can live our entire lives with minimal purpose. John Soforic talks about a friend he had named Greg. Now, Greg shared his dream of returning to Florida one day with John. He’d lived there before, but now he had a bunch of responsibilities.

[00:26:19] Kyle Grieve: A family, mortgage, three cars, a job. He could no longer pursue his dream of getting back to Florida because he didn’t want to uproot his family and his life. Now, John had maintained this friendship for over 20 years with Greg. Whenever he pushed Greg to move back to Florida, Greg would always put it off, saying, someday.

[00:26:39] Kyle Grieve: Once his children had all graduated and had little else holding him back from living his dream, John, unfortunately, just stopped asking about it. John writes, quote, In the end, Greg was unable to pull the trigger, and he just kept going to work each day, while the dream slowly faded and died. The days passed and turned into years.

[00:26:57] Kyle Grieve: Few of us can accept the pain of saying no to our dreams. So we cleverly deceive ourselves with the thought of going for it someday. Someday is an excuse to avoid the immediate discomfort and anxiety of change. Someday, leads to passive inaction, so the regrets of abandoning our dreams are not immediate.

[00:27:18] Kyle Grieve: Now I think this is just a great wake up call to avoid complacency. As the great Andy Grove once said, success breeds complacency breeds failure, only the paranoid survive. Once we have established a purpose, we will encounter yet more problems. This problem is one of trying to obtain one of the hardest intangibles a person in the financial world can possess.

[00:27:39] Kyle Grieve: This is patience. Along John Soforic’s journey to financial independence, he wrote, quote, to accumulate wealth, I adopted the conviction with an attitude of patience. I’ll pay any price for as long as it takes so that my daily efforts have time to compound into meaningful and life changing crusades. For all listeners who wish to accumulate wealth, the lesson here is simple.

[00:28:02] Kyle Grieve: You must decide what price you will pay to achieve financial freedom. For those of you thinking that you can succeed in any endeavor without paying a price, I’ll challenge you to seriously rethink that. In the psychology of money, Morgan Housel has an excellent example of the price we pay to succeed in the stock market.

[00:28:20] Kyle Grieve: Now here’s the important part. Like the car, you have a few options. You can pay this price, accepting volatility and upheaval or you can find in an asset with less uncertainty and a lower payoff, the equivalent of a used car or, you can attempt the equivalent of a grand theft auto, try to get the return while avoiding the volatility that comes along with it.

[00:28:43] Kyle Grieve: When we look at some of the best investors of all time, they paid a price for the success that they had. In Robert Hagstrom’s great book, The Warren Buffett Way, he explores the super investors of Hagstrom. These five super investors were John Maynard Keynes, Warren Buffett, Charlie Munger, Bill Ruane, and Lou Simpson.

[00:29:02] Kyle Grieve: All five of these investors ran concentrated, long term funds and were very successful. However, this success came at a cost. Other than Buffett, all these investors underperformed the index about a third of the time. Other than Buffett, they each had multiple years of underperforming the index. Lou Simpson only had one consecutive year, but the rest had two or more.

[00:29:22] Kyle Grieve: Lastly, besides Buffett, they all had a worse relative performance than the index in various years, ranging between negative 15 percent and negative 37%. If you decide to clone the tenets of Warren Buffett and decide to invest in a concentrated way, you will have to make sacrifices for your portfolio’s long term success.

[00:29:40] Kyle Grieve: But even if you choose to go the diversified way of holding index funds, there is still a price to pay. As Housel mentions above, to succeed at index investing, you have to pay the price of withstanding volatility. If you can do this, you’ll make 10 percent returns that the S&P 500 offers. If you decide not to pay the price, you will not earn the rewards.

[00:30:01] Kyle Grieve: It’s just that simple. And this is what most investors do. In Morningstar’s Mind the Gap 2023 report, they reported that over the last decade, the index has returned 7.6%. However, investors had only compounded their capital at 6% per year. So what explained this underperformance? It’s quite simple.

[00:30:20] Kyle Grieve: Actually, investors chose impatience and overactivity, which resulted in leaked returns versus the index. Now, in the summary part of The Wealthy Gardener, the 8th lesson is Patience. The Wealthy Gardener writes, quote, after my money once vanished in risky investments with the promise of high returns, I never again lost money due to impatience.

[00:30:41] Kyle Grieve: As my patience matured, I gained a reverence for five year intervals, unquote. So you can see here that even The Wealthy Gardener, who was by no means a master investor, used these longer periods to evaluate potential investments. Instead of trying to make a buck as quickly as possible, but running the risk of financial ruin, he simply looked at which investments would yield the best results in a five year time period.

[00:31:05] Kyle Grieve: The Wealthy Gardener sums up the savings and investing portion of wealth building very well, saying, quote, saving money must be urgent, and that investments must be given patience without interference or meddling, unquote. I remember listening intently to William Green’s Richer, Wiser, Happier episode number 35, whereas guest Chris Davis discussed the concept of 30,000 days.

[00:31:27] William Green: And before I forget, since we were talking about it right before we, we got on, talk to me about this idea of our 30,000 days, because it’s such a beautiful idea. And two hours from now, I’m likely to have forgotten that we talked about it. So discuss the significance of this before we get started on anything else.

[00:31:44] Chris Davis: Well, I’m going to start, I’m going to go back to my days as an accountant, because this is actually when it, when I first sort of started thinking about it, I’m not much of a birthday celebrator. And, but one of the things I’m particularly struck by is. The ones that are hallmarks tend to be tied to, 10, 20, 30, 40, 50, 60, so on.

[00:32:03] Chris Davis: Not a lot of life changes around those sort of random decades. And when I was working back at State Street as an accountant, I had the worst job, which is I had to at one part of my job was to calculate the NAV of money market and bond funds. And that meant accruing the interest by the day. And so You know, I’m Lotus 1, 2, 3 had just come out and so I was using that to write a little program to make it easier to calculate bond interest and count all the days and so on.

[00:32:36] Chris Davis: And when I was testing it, I put in my own birthday and ended up, I was at the time, something like 9, 500 days old, and that was sort of the genesis of this idea where I started thinking, we live about 30,000 days or generally have 30,000. Really productive days and our life divides much more naturally on the 10,000 day increments.

[00:33:01] Chris Davis: So after 10,000 days, you’re about 27 or so 28, somewhere in there. And you often think that first 10,000 days is about going wide, experimenting, trying new things, new places, new professions, new people, new towns. It’s a time of exploration and 21 years old, doesn’t capture it or 20. And by the time 30 comes around, usually you’re already into what I would call that second phase of life.

[00:33:29] Chris Davis: So right around 10,000 days by then, usually on average, people have decided what they want to do, where they want to do it, who they want to do it with. And instead of going wide as they have for the first 10,000 days, it’s about going deep. The, just the depth of relationships that comes through marriage, through family, through your vocation, your profession, your colleagues, you sort of had 10,000 days to execute, 10,000 days to accomplish.

[00:34:00] Chris Davis: And build what in many ways will be the sort of monuments of your life, your family, your kids, your profession. And then right around 55, 56, 57, somewhere in this fifties range. But what happens, your kids are grown and beginning to leave what you’ve achieved professionally is fairly settled.

[00:34:20] Chris Davis: And in a funny way, it lifts an enormous weight off many people. I think it’s 1 of the reasons people actually end up growing happier as they get to their 50s, 60s, 70s. Because you’re in a time when you can, in a sense, go wide again, you have more perspective, you have less of that urgent depth of the day to day.

[00:34:39] Chris Davis: So anyway I know when we started talking, we were talking about this idea of both sort of completing the, maybe our 2nd, 10,000 days and now looking at how we think about this next 10,000, this chapter that sort of gets us from here till, around in our 80s.

[00:34:58] William Green: And how does this affect the way that you’re actually living?

[00:35:00] William Green: Like, what is this awareness of these three phases do to your view of how to behave and what to focus on and what you’re actually optimizing for at this point?

[00:35:13] Chris Davis: Well, this is sort of ties in with how I think about investing is so much about of it is about anticipation and preparation. So I think a lot of people go through unhappiness in their 30s, in part, because they’re sort of thinking, where did my youth go?

[00:35:28] Chris Davis: I used to be able to do all these different things. And now I’m tied down. And if instead you have this mindset, you really look forward to that. The privilege of being able to go so deep to concentrate. And I think how it’s affected me thinking about this next 10,000 days is a little bit about this idea of inverting it and thinking about what would stand in the way.

[00:35:53] Chris Davis: Of this 10,000 days being a very enriching time of life. And of course, health is one of them. So it becomes, as you think about going into this next third, it becomes a time where you think a lot about taking care of yourself, you think about investing in relationships, when you’re raising a family, when you’re in the office every day, when you know, a lot of your life and your social life are structured for you, as you get to the next 10,000 days, people can lose touch.

[00:36:22] Chris Davis: So I think it’s also been a time when I really invested in maintaining invigorating, revisiting relationships, deeply getting to know my children’s partners and spouses, making sure that their aspects of friendships as people, I, we may get to this, but I, the idea of retiring has no appeal to me.

[00:36:45] Chris Davis: I mean, I love. What I do, it always seems startling to me that we get paid so well for studying something so interesting. And it should be a profession where we get better over time, provided we’re not creating behavioral and psychological roadblocks. And if that is the case, I would like to continue as long as I could.

[00:37:05] Chris Davis: But of course, I also recognize that’s not the same for many of my closest and oldest friends. And so as they contemplate retirement and moving and going to different places, old patterns can dissipate. So I think it’s a time to really invest in being prepared for this sort of exciting chapter that’s in front of us.

[00:37:24] Chris Davis: And it may not end very well, but 10,000 days is, it’s a long time. And so I think it certainly has, uh, impacted how I think about preparing for that transition.

[00:37:37] Kyle Grieve: Let me loop this fundamental lesson from The Wealthy Gardener, which is how he separates his three seasons of wealth building that align well with what Chris Davis discussed.

[00:37:47] Kyle Grieve: In a part of The Wealthy Gardener, he’s talking with his neighbor’s son, Jared, about planting an acorn that has grown into a tree. The tree is a total loser, said The Wealthy Gardener. Northern 200 years old, on average. But so far, this pathetic tree has only managed to grow tall, survive the winters, and develop extremely deep roots.

[00:38:08] Kyle Grieve: Jared understood. It hadn’t produced much yet. And isn’t it interesting, asked the wealthy gardener. The tree hasn’t produced much yet, but it’s right on schedule. You must be aware of the seasons of your life. When it comes to wealth, there are seasons and cycles just as there are seasons for the growth of a great tree.

[00:38:25] Kyle Grieve: You’re being too hard on yourself at your stage of life. You’re just entering the summer season of prosperity. What’s the summer season? It’s the middle phase of your financial life cycle, said the wealthy gardener. At 32, you are leaving the survival season and entering the accumulation season. I never said that your life was pathetic, but I did intend to wake you up.

[00:38:46] Kyle Grieve: You need to focus on your direction and use your potential. You may now be entering the summer season, but unlike a tree that grows on its own, your wealth tree is happy to not grow at all. I found this part about the three seasons of wealth building to be a really good mental model of how we go through life.

[00:39:04] Kyle Grieve: Soforic talks about the three seasons as Spring, Summer, and Fall. The first season is Spring, where we learn to survive. During this season, our minds are malleable and most of what we have learned about money are ideas passed down from our immediate family. But near the later part of this season, we start to become more educated and gaining life experience in the workforce.

[00:39:25] Kyle Grieve: We learn to be adults and all the responsibilities that come along with that, such as paying rent and taxes, using bank and credit cards, creating budgets, etc. John adds quote, we find spending to be thrilling at times, but we learn that it is decreased financial stability. During the spring of our financial life cycle, the future is bright with an expansive time horizon.

[00:39:47] Kyle Grieve: In the spring, optimism is highest. Next comes the summer season. Here, we begin accumulating more money. We’ve lost some of the youthful optimism and idealism we once had. Instead of spending our money as fast as it comes in, we begin to see that our futures need to be addressed somehow. We probably have more purchasing power and higher income since we’ve now been in the workforce for a few years.

[00:40:12] Kyle Grieve: We start needing money not just to take care of ourselves, but also our family. This aligns with being middle aged, or Chris Davis middle 10,000 days. Lastly is the fall. Here, we reap what we have sown during the summer. If we take care of our finances, we can see that financial independence may be an imminent option.

[00:40:32] Kyle Grieve: Our lifestyle in the fall period will reflect what we have done in the summer period. Were we able to make sacrifices and accumulate the funds needed to fuel our desired lifestyle? Or were we more focused on satisfying our immediate urges? This will show up in the lifestyles that we get to live in the fall season.

[00:40:50] Kyle Grieve: In the worst case scenario, we may have to continue working during the fall season to continue finding the lifestyle that we have become accustomed to. As we go through each season, one important part of life is setting ambitious goals for ourselves. Reflecting on goals, the wealthy gardener said, quote, I expanded the borders of the garden, said the wealthy gardener, by expanding the boundaries of my mind.

[00:41:12] Kyle Grieve: Few goals are impossible for someone who will devote time to lifelong learning and continual self-mastery. Now this resonates incredibly well with me. I myself am on a long term journey of trying to learn more. I have no idea if self-mastery can ever be achieved. The more I read, learned, and experienced things, the less intelligent I felt.

[00:41:33] Kyle Grieve: It’s like the opposite of the Dunning Kruger effect. The part of this quote that really resonated with me was about expanding the boundaries of the mind. Now, I’m not trying to get all spiritual with you, don’t worry. But I do think that there is something to be said about attempting to push ourselves past our limitations.

[00:41:50] Kyle Grieve: If we use goals that make us feel slightly uncomfortable, you’ll know you’re pushing yourself and expanding the horizons of your mind. When you mix that with the ability to sleep a little wiser each night, like Charlie Munger used to say, you open yourself up to accomplishing some astronomical things.

[00:42:06] Kyle Grieve: The quote above refers to the wealthy gardener talking about how he grew a small garden into the massive one that he developed over time with a ton of hard work. In terms of finances, there are all sorts of goals that we can set for ourselves. A target sum of money at some point in the future. Two, a monthly savings goal.

[00:42:24] Kyle Grieve: Our financial goals should be aligned with our investing goals. If we want to reach a target of X dollars in 20 years, then our investing actions should move us towards that goal. If you are making investments that are more likely to go to zero than increase in value, then you’re investing and financial goals are not aligned.

[00:42:42] Kyle Grieve: Investing goals might be something like making a target rate of return. For instance, you might have the goal of doubling your money every five years, meaning you’re looking for a 15 percent rate of return. But no matter what goal we have, our actions and decision making should focus on producing that return.

[00:42:57] Kyle Grieve: This is a problem that I think many investors have. They continually make decisions that self-sabotage their goals. For instance, they may say they are long term investors, then repeatedly try to time the market or, being impatient with the stocks they hold in their portfolio because the price won’t move and making silly decisions as a result.

[00:43:15] Kyle Grieve: In the book, An Investing Thinking Toolbox, Daniel Zhang wrote, quote, If the goal is to sell the portfolio in 20 years and not a single day earlier, does it really matter if it increased in price like a straight line, swung up and down like an upward sloping sinus curve? Went way over the target in the short run and dropped to your end goal in the end, or the other way around.

[00:43:36] Kyle Grieve: If the end result is the same, unquote. When it comes to work goals, there are simply too many variables. You’ll know your own unique situation and hopefully you have some answers on how you can continue finding purpose in whatever you do and growing your income at the same time. One part of goal setting that I think is vitally important is the concept of lifestyle creep.

[00:43:56] Kyle Grieve: This is where the goalpost we set for ourselves continues moving. In the psychology of money, Morgan Housel said, quote, The hardest financial skill is getting the goalpost to stop moving. If we continue to move that goalpost, we are setting ourselves up for failure because chances are we’ll never be satisfied with what we have.

[00:44:14] Kyle Grieve: The beautiful part about goal setting is that once we understand the effects of compounding, we realize that our goals can be amplified on an exponential scale rather than linearly. Quote, an oak tree grows two feet in a year, said the wealthy gardener, and the change is barely perceptible. Quote, but after five years, the oak will have advanced its cause by ten feet.

[00:44:36] Kyle Grieve: People want to be mighty oaks without a stretch of time, and that’s not the way nature works. Every worthwhile reward or mastery of a skill grows over many years, unquote. The point here on how changes over short periods are barely perceptible is a strong point to consider when looking at your wealth. I think many listeners in the audience will have a pretty good grasp of compounding, but for those who don’t, here’s just a quick lesson.

[00:45:01] Kyle Grieve: If you save 500k today and don’t invest it, then 35 years from now, you will still have 500k in your bank account. But if we can compound your money, that number in 35 years changes drastically. If we compounded at 10%, our money will double every seven years. That means our money doubles five times over that 35 year timeline.

[00:45:22] Kyle Grieve: Our 500,000 goes to 1 million, then to 2 million, then to 4 million, then 8 million, and finally doubles once more to 16 million. Would you rather have 500k or 16 million? The answer is obvious, but you’ll only be offered the opportunity to reach that number if you understand the powers of compounding.

[00:45:42] Kyle Grieve: Another vital point about compounding is that it works best over long time periods. We only have so much time on this earth. In the above example, I said it was 35 years later, but let’s say we don’t have another 35 years, let’s say we only have 21 years. In that case, then our wealth is only going to double 3 times and we are left with 4 million.

[00:46:01] Kyle Grieve: This is why saving and compounding from an early age is so powerful, but it’s also more challenging as the wealthy gardener discussed in the three seasons. The spring season is when we don’t have a lot of money and spend a lot more time thinking about the present over the future. But you can get some truly magical results for the lucky few who do understand compounding from an early age.

[00:46:21] Kyle Grieve: An easy example is Warren Buffett, who has been compounding money in the stock market since the age of 11. But he learned a lot about compounding even before this age. Robert Hagstrom in Inside the Ultimate Money Mind wrote, quote, from an early age, Warren was taught the benefits of compound interest.

[00:46:38] Kyle Grieve: More important, he experienced the benefits of a compounding machine firsthand when he took the earnings from his various jobs and plowed them back into his little business enterprise. Of course, it would be great to be so lucky, but very few of us have the mental makeup of Warren Buffett, so starting that early isn’t a possibility unless you have a time machine.

[00:46:56] Kyle Grieve: For the rest of us without a time machine, the best thing you can do is start today. So a key concept to understand while we compound our money is the concept of risk. Why is risk so significant? Because if we accept too much risk, we also expose ourselves to the potential problem of unnecessarily interrupting compounding.

[00:47:19] Kyle Grieve: And, as we know from the explanation above, we do not want to interrupt compounding. To put it more eloquently, Charlie Munger said, quote, The first rule of compounding, never interrupt it unnecessarily, unquote. So where does risk play into this equation? Let’s look at risk through the lens of our savings and our investing.

[00:47:37] Kyle Grieve: We always have to face risk. The first risk we must consider is the risk of lifestyle creep. I’ve already discussed this, so I won’t go deep into it. But if we are in a career where we can increase our salary, the risk here in terms of building wealth is that we are unable to avoid increases in our expenses at the same rate that our income rises.

[00:47:56] Kyle Grieve: So let’s say someone has a savings rate of 0%. They get a raise at work of 20,000, then decide to spend 20,000 on the down payment for a new boat. They haven’t gotten any wealthier. Their savings rate is still 0 percent and they aren’t contributing to the compounding machine. So we can look at Marcus Aurelius to help here.

[00:48:13] Kyle Grieve: Quote, Treat what you don’t have as non-existent. Look at what you have, the things you value most, and think of how much you’d crave them if you didn’t have them. But be careful. Don’t feel such satisfaction that you start to overvalue them, that it would upset you to lose them. Now, I think the primary lesson from Aurelius is that at some point in our lives, we must be content with what we have.

[00:48:36] Kyle Grieve: If we are content with what we already have, then any additional incremental increases in income could theoretically be added to our savings, rather than buying additional material objects. In that sense, we are still living a very fulfilling life with what we already have. But we can now increase our ability to save and decrease our risk of allowing lifestyle creep to eat away at potential savings.

[00:48:58] Kyle Grieve: Now, let’s move on to broadly discussing risk on the investment side of things. Soforic writes, quote, Peter Bernstein expressed a sentiment that should be written down and hung on every investor’s wall. Maximizing return is a strategy that makes sense only in very specific circumstances. In general, survival is the only road to riches.

[00:49:19] Kyle Grieve: Let me say that again. Survival is the only road to riches. Unquote. Now I love the focus here on survival. Without the ability to survive in the markets for decades, you will never accumulate enough wealth to become financially independent. So every move that you make with your investments, whether they are private businesses, stocks, index funds, mutual funds, bonds, alternative assets, et cetera, should always account for risk.

[00:49:45] Kyle Grieve: And when I’m referring to risk, I’m referring to the risk Buffett discusses, not what is taught in portfolio management theory. Robert Hegstrom in the Warren Buffett way writes, quote, Warren Buffett has a different definition of risk. For him, risk is a possibility of harm or injury, and that, he says, is a factor related to the intrinsic value of a business, not the ongoing short term price behavior of the market.

[00:50:10] Kyle Grieve: So this is just an important distinction we must all make while investing. Over the short term, we may get scared by the drops in prices of our stocks or index funds. But the fact is, the price will often drop or go up, and intrinsic value hasn’t changed that much in the short term. But we must accept this as part of the benefits of investing in public equities.

[00:50:29] Kyle Grieve: Soforic summarizes how we can find safety in our investing strategy, quote, once you’ve deployed a simple strategy, the risk of investing becomes more about bad behavior. Risk is the result of impulsiveness under the threat of fear or temptation of greed. Safety requires not selling when the stock market tanks and not getting greedy when others outperform your steady returns, unquote.

[00:50:54] Kyle Grieve: So once we execute our simple strategy of saving, investing, and waiting, a time will come when we are financially independent. Now this term can mean different things to different people. When I spoke with JL Collins about financial independence, He said that financial independence does not mean you have to quit working.

[00:51:10] Kyle Grieve: It means you have the option to do so if you want. This is what I find so fascinating about financial independence. There’s no dictionary definition that you have to follow. It can really mean whatever you want it to. The wealthy gardener has his own thoughts on financial independence. What’s even better than social security is self-sufficiency.

[00:51:30] Kyle Grieve: You can’t be secure when you’re dependent on others or even the government. I gave my early life to gain the freedom I’ve enjoyed in my later years, unquote. Now I think he’s kind of echoing JL Collins sentiments here. Financial independence is self-sufficiency. Once you are self-sufficient, you never have to depend on another person or entity to be secure.

[00:51:51] Kyle Grieve: If you are listening to this and have decided that you want to become financially independent, all you need to know is how much wealth you need to accumulate to be self-sufficient. The wealthy gardener simplifies it here. When your investments pay more than you can earn at your day job, then you will drink a freedom that few will ever taste.

[00:52:08] Kyle Grieve: This last section I want to discuss from the book is on debt. I save this part for last because debt is probably the biggest parasite on wealth creation. If you wish to become self-sufficient, part of that is to avoid being indebted to anybody else. And debt is a direct obstacle to that goal. Soforic writes, quote, there is no worse enemy for our profitability than debt.

[00:52:30] Kyle Grieve: And without profits, there is nothing to save and no hope for wealth. Debt robs the future to pay for the wants of today, unquote. Now that final sentence is really the key. Circling back to what I discussed on sacrifice, indiscriminate debt sacrifices our future for the wants of today. Remember, we must always sacrifice something on our journey towards financial independence.

[00:52:56] Kyle Grieve: Reaching financial independence requires the judicious use of debt. Getting into more usable advice, it means doing things like paying down your credit card immediately before any interest is incurred. If you have debt, you’re best off paying that off first and then saving second. Debt also utilizes compounding, but in the opposite direction, let’s say you have 20,000 of credit card debt at 20 percent interest.

[00:53:18] Kyle Grieve: This means you owe 4,000 each year before you even pay your principal back. Many people have a principal that is so high that they are forced to pay interest on their debt for many years into the future or even forever. Negative compounding is most dangerous when your principal continues going up unabated.

[00:53:36] Kyle Grieve: Once this happens, you have a leak in your ability to accumulate wealth. If you can’t afford to pay the 4,000 in interest, your principal is now 24,000 and the interest on that is now 4,800. So these interest payments and your principal can continue to go up as you spend more money. It can get to a point for some people where they will never have enough money to pay anything more than the interest payments on their debt.

[00:53:59] Kyle Grieve: When this happens, you will never reach financial independence. I’ll let the wealthy gardener sum up his thoughts on debt. If you ever want financial freedom, break free of debt. It is the slave master in a free society, the obligator of drudgery. Debt robs the future of time and money. It chains the worker to wages.

[00:54:20] Kyle Grieve: And that wraps up today’s episode. Thank you for joining me and I look forward to catching you on the next episode. Take care.

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