I know a very frugal billionaire.Â
He told me the only way to become a billionaire was to pinch every penny.
Iâve also met a few flamboyant billionaires, so I know there are a few ways to skin a cat.Â
But it's still worth thinking about.Â
The frugal billionaire I know has told me many times that he has more money than he can ever spend. I believe him.
I hosted him as a keynote speaker at one of my conferences and put him in a five-star hotel. In the morning, I bumped into him on the sidewalk. He was walking over to the food court at the nearby mallââIâm not paying $25 for breakfast,â he scoffed. He walked up the block so he could eat for $7.
In Warren Buffett's documentary on HBO, the 92-year-old revealed that for the past six decades, he has stopped at McDonald's on his five-minute drive to the office every morning.
"I tell my wife, as I shave in the morning, I say, 'Either $2.61, $2.95 or $3.17.' And she puts that amount in the little cup by me here [in the car]," he said on camera. "When Iâm not feeling quite so prosperous, I might go with the $2.61, which is two sausage patties, and then I put them together and pour myself a Coke. $3.17 is a bacon, egg and cheese biscuit, but the marketâs down this morning, so Iâll pass up the $3.17 and go with the $2.95."
When the market is down, Buffett reigns in his order by 23 cents.
He pinches every penny.
My frugal billionaire friend, Warren Buffet, and scores more have built their wealth by being incredibly intentional with every dollar.
Every dollar is considered before it is actioned.Â
Never a dollar wasted.
Another good friend, a local hedge fund manager who may not be a billionaire but is headed in that direction, told me that he thinks about every dollar as if it were a soldier.Â
He would never send a soldier into the field for nothing. He considers the mission, the risk and the reward before making any decisions. Every dollar sent to battle must come home with captives.
I am not entirely aligned with this philosophy of money. I donât think about 23 cents if the market is down.
I may not love money the way these guys do. But I love its utilityâthe stuff I can do with it.Â
The freedoms, experiences and optionality it provides.Â
And I enjoy the sensational too much to pinch every penny. Or maybe I place a higher value on experiences as a return on capital than others.
But if I have no path to becoming a billionaire in the dollar sense - I have thought about something else I can Scrooge McDuck my way towards.
What about a time billionaire?
What if I was as intentional with every minute as my friend is with every dollar?Â
Never a minute wasted.
Now - a minute wasted is a topic of debate. To quote Jerry Seinfeld, âQuality time with your kids can be sitting on the couch eating cereal.â
That may not be your jam, but the point is clear - it doesnât always have to be grand - sometimes the simple stuff is the best. Donât overthink it.Â
But the same as Buffet may feel better after pocketing the $0.23, my best days are when every minute on my calendar is scrutinized.
But here is the real juice.Â
Every morning, I quickly review my priorities, projects, and tasks. I assemble a list of items I must tackle and then sort them by urgency and importance. I include the estimated time to complete each.
Everything gets slotted into the calendar, whether the task will take ten minutes or two hours.
And here is the crucial part.
When the work block arrives - no matter what it is, I have one rule. I donât have to do the task listed on my calendar - but I am not allowed to do anything else.Â
I can sit at my desk and do nothingâor complete the taskâbut nothing else is allowed.Â
It may seem silly - but the option of not doing the thing actually makes me more productive.
Even doing the most tedious of jobs is more interesting than sitting there doing nothing at all.
If it is a writing block - I donât have to write, but I am not allowed to do anything else.Â
If it's an email response block, I donât have to respond to emails, but I am not allowed to do anything else.Â
I hate administrative work.Â
However, I operate two small companies, so I need to do a fair amount of administrative work.
So, I set the work block. I sit at my desk and declare that I donât have to do that admin. But I am not allowed to do anything else. Before I know it, I am halfway through the task.
The mind is tricky. When it comes to the stuff we donât want to do, everything else suddenly seems urgentâsuddenly, I need to check if a particular email has come in or have a quick peek at recent YouTube analytics.
Taking these options off the table until they are allocated a calendar block is one of the most productive things Iâve learned to do.
If my only other option is to sit and do nothing - my output rises dramatically.Â
And here is the core of the lessonâwhether we are meticulous with money or time, the principle remains: intentionality leads to enrichment.
An investor mentor from a few years back used to amaze me with his discipline. He would identify a stock he wanted to own, decide the valuation he was willing to buy at, and then wait.
I remember a certain position; he waited for two years before getting the allocation he wanted at the price he thought was fair.
Another, I watched the share price fall 30% towards his bid, but still need to catch his price target by $0.02.Â
He didnât move. He did nothing.
He would allow himself to do two things - execute the exact trade he wanted or do nothing at all.
Most investors think they should always be putting their money to work. As a result, most investors make too many decisions, not too few.
Most entrepreneurs chase too many ideas.
We are good at identifying the cost of doing nothing.
However, we are less good at identifying the opportunity cost of doing the wrong thing.
Have an epic Sunday,
Jay
Iâm not sure Buffettâs advice to the common man is so genuine. Recall him saying heâs was OK paying a higher tax rate since his current tax rate was lower than his secretaryâs, something to that effect. Of course, we know why his rate is lower. Not to mention, nobody is going to run 100 miles eating McDonalds every day!
This pointless "penny-pinching" behavior among men like Buffet who are worth BILLIONS of dollars is not something to be admired. It is not frugality when practiced to this extreme at at their financial station in life, nor is it noble, nor is it logical. Indeed, it is more like a kind of mental illness similar to an obsessive-compulsive disorder. One might argue beyond that, this hyper-extreme behavior is a disease of the soul... quite literally a love of money itself.
There is no fault in being extremely wealthy. However, if you are worth billions of dollars, your daily income from interest, or your DAILY net worth fluctuation from your portfolio, ... often your HOURLY net worth fluctuation... is measured in the multiple millions of dollars. Taking purposeful thought and decisive action to save 25 cents by skipping the cheese on your sandwich, or to save a few dollars by walking a few blocks to get a cheaper breakfast than what is offered in your hotel, is laughably absurd.
In just the few seconds it takes to engage in the thought process leading to saving this pittance, their net worth has moved by more than most people earn in a few weeks... and mental energy expended to practice this extreme behavior is unwarranted for a billionaire. It is like a billionaire only allowing lights to be on in the room they currently occupy in their mansion and keeping all other areas dark, in order to save a few pennies each day on electricity, (a practice followed by Orlando's Time-Share Resort billionaire David Siegel as shown in the documentary movie "The Queen of Versailles"). It is like the late billionaire Sam Walton (of Wal-Mart) driving a decades-old pick-up truck without the latest safety features to protect himself, in order to save an irrelevant amount of money.
Do not confuse this with a billionaire very reasonably choosing to not drive a Rolls Royce or a Ferrari because he does not like the optics of appearing to be out-of-touch, or does not want to attract unwanted attention for personal safety reasons... that is actually quite wise. But the obsessed-with-every-penny behavior we see in many billionaires is something completely different.
This is absolutely the worship of money. It is not respect for the value of money, and it is not self-discipline, and it is not setting a good example, or any other excuse. It is obsessive worship of money, down to the tiniest level... every penny.