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Continuing the analysis of the Yahoo! Finance article 21 Ways Rich People Think Differenly, a condensed “interview” with Steve Siebold, author of How Rich People Think.

6. Average people see money through the eyes of emotion. Rich people think about money logically.

“An ordinarily smart, well-educated and otherwise successful person can be instantly transformed into a fear-based, scarcity driven thinker whose greatest financial aspiration is to retire comfortably,” he writes.

“The world class sees money for what it is and what it’s not, through the eyes of logic. The great ones know money is a critical tool that presents options and opportunities.”

Ugh. Statements without evidence, effects with no cause, sycophantry, and tautology.

Let’s take the first statement in the headline and the first body paragraph together. While the paragraph uses more words, it’s essentially saying exactly the same thing as the headline statement. Thus, both statements are oversimplifications. Yes, I’m sure it is true that some “average people” are very emotional about money, but there are some who are not and who deal with money logically. I know from personal experience that sometimes I’m emotional about money, but sometimes I’m not.

Also, these statements, even taken together, are incomplete. They don’t include any reason for “average people” being emotional about money. But I think it should be pretty obvious that people are emotional about money when they’re afraid they won’t have enough. It’s called being in “survival mode”, and it’s one of the most stressful things a human being can go through. When you have to choose between electricity and food, or between the car payment and the rent, you’re always afraid! Once again, John Cheese puts it better than I do in his article 5 Things Nobody Tells You About Being Poor, specifically in point #1 (last item on page 2). I won’t quote it, because I don’t know where to start or where to end. Just go read the article.

So now let’s look at the second headline statement and the second body paragraph. And let me make something perfectly clear. Yes, it is often true that rich people can be more logical about money than “average people”. But Mr. Siebold gets the causality backwards. Rich people aren’t rich because they can think about money logically, they can think about money logically because they’re rich. Being able to think about money logically is a luxury, and one that a lot of people don’t have. But take one of those rich people, take away all their money, prevent them from doing the thing that made them the money in the first place—in other words, give them the same circumstances as most poor or working-class people—and I can guarantee you that that rich person will be scared to death when it comes to money.

And finally, the tautology: “The great ones know money is a critical tool that presents options and opportunities.”

At this point, I oughtn’t be surprised that Siebold presents something so bloody obvious as some kind of divine wisdom, but I still find myself gobstopped.

This one was a bit short, and the next few may be kinda short, too, because they deal with very similar points in only slightly different ways. In fact, I may combine a few of them into one article. We’ll see.

Anyway, the next article in this series is about why rich people can work on the things they love, while “average people” have to take jobs they don’t enjoy. And if you can’t guess the gist of what I’ll have to say about that, then you probably haven’t been paying attention very closely.

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Previously in this series: Prelude and Introduction | Part 1 | Part 2 | Part 3 | Part 4 | Part 5

Comments

( 4 comments — Leave a comment )
niall_shapero
Sep. 12th, 2012 10:58 pm (UTC)
"Average people"
If "not having enough money" means "I go hungry" or "I don't get the medical care I need to survive" or "I become homeless", then it is perfectly reasonable to be a bit frightened if one does not have enough money.
ebenbrooks
Sep. 12th, 2012 11:16 pm (UTC)
Re: "Average people"
Yeah, it is! And these are things that well-off people never have to think about. That right there is a luxury in and of itself.
niall_shapero
Sep. 12th, 2012 11:03 pm (UTC)
And the rich...
And if they're really rich, then they don't really CARE if they waste a few hundred thousand dollars - there's more where that came from. The only problem then becomes a matter of pride (and point scores).

If you are independently wealthy, losing several thousand dollars (or tens of thousands, or hundreds of thousands, depending upon one's level of wealth) is about as important to you as losing a rubber of bridge (where there's no money riding on the outcome) to someone like me (or you). We might be "mildly annoyed" at being beaten - but "it's just a game".

If "win or lose", the result is (at worst) a small waste of time, you're not going to care. But if "win or lose" means the difference between being ABLE to eat or not (or survive or not) it becomes an entirely different matter.

Being fearless isn't an indication that one is brave - merely that one is either ignorant, stupid, or the outcome of the situation is not going to change one's situation in life "significantly".
ebenbrooks
Sep. 12th, 2012 11:17 pm (UTC)
Re: And the rich...
Exactly. When you're not in survival mode, you can afford to take more risks. But when one mistake means you lose your house, it's a lot harder to justify any risk taking.
( 4 comments — Leave a comment )

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