Your Wealth Is Mostly Due To Luck: Be Thankful!

Are you confusing your good fortune due to your own skill rather than due to luck? I’m here to argue that your outsized wealth is mostly due to luck. Therefore, stop deluding yourself into thinking you’re so great!

As President Obama said in a July 13, 2012 campaign election speech, “If you’ve got a business, you didn’t build that.“

When I first heard Obama say this sentence, I was taken aback. From 2009-2012, I had been working on Financial Samurai for three years from about 5 am – 7 am and from 10 pm – 12 pm after working 12-hour days in finance. If I wasn’t building Financial Samurai, who was?!

I had also recently left my finance job because I wanted to be free. All I really desired to do was write while traveling around the world, so that’s what I did.

But as I’ve gotten older, I’ve come to understand more of what President Obama was talking about. Just like it takes a village to raise a child, it takes a lot of help along the way to achieve your goals. Besides, Obama was referring to not building the roads and bridges that helped your business prosper along the way.

I firmly believe that it was mostly luck (~70%) that helped me achieve a basic level of financial independence at age 34. Of course, effort is also required to get ahead, but it’s not the main reason. There are plenty of people who work much harder than you or I, yet will not achieve what we have.

The more we can recognize our luck and not take our luck for granted, the more prosperous we’ll become. I encourage you to list as many fortuitous events that have happened in your life. This way, you’ll appreciate more of what you have and fight harder to achieve your goals and freely help others.

Outsized Wealth Is Mostly Due To Luck

When you accumulate a net worth of five million dollars or 10 million dollars at any age, know this level of wealth is mostly due to luck. And when I say mostly luck, I mean greater than 50%. The range can be anywhere between 51% – 99% for how much luck was the reason for your outsized wealth. The exact percentage is your choice.

My first lucky break was being born into a stable, dual-parent household. They worked in the U.S. Foreign Service which enabled me to live in five countries before coming to America at age 14. They also both speak Mandarin.

If you have this type of background, chances are greater you will speak a couple languages, interact with people from dozens of cultures, adopt a zest for travel, be more understanding towards people of different backgrounds, and have a broader world view.

Further, since middle school, my parents have always tried to make me appreciate the value of money. My first experience with money came when my father scolded me for ordering a lemonade at a restaurant.

“Son, why spend $2 on a lemonade when you can order water with a lemon slice for free?” he said.

This moment instilled in me a level of frugality that has stuck ever since.

In high school, his lesson of frugality paid off when I told him I’d only be attending a public in-state university to save on tuition. He encouraged me to apply wherever I thought looked interesting, but I insisted on saving us money.

In the end, his $2 lemonade lesson saved my parents, and ultimately me, over $100,000 in private university tuition in the late 90s. I always told them I’d pay them back once I got a full-time job and I did.

I’m grateful for my parent’s guidance.

A Review Of Some Main Lucky Breaks

1) Luck. After getting suspended in high school for fighting and getting caught shoplifting with friends and doing other illegal things, I thought there was no way any college would take a chance on this juvenile delinquent. But I paid for my transgressions and The College of William & Mary gave me a chance.

I kept the faith that if I did well in college, an employer would ultimately give me a chance as well. Can you imagine spending four years trying to get good grades in college, knowing there was a high probability everything was for not because of the mistakes you made in high school?

2) Luck. I got through 55 interviews over 7 rounds to land my first job in investment banking at a Bulge Bracket firm. Someone like me from a non-target state university had no business getting this job. But I got on a 6 am bus to go to a career fair one Saturday and one thing led to another. Because nobody else got on the bus, I had more opportunities to interview and get a job.

Although my base salary was only $40,000 in Manhattan, my experience working in banking taught me how to invest, network, sell, and build relationships early on. Further, I don’t know if I would have landed a job in the International Equities department if I didn’t have an international upbringing.

I’m grateful for my recruiter, Kim Purkiss for giving me a chance.

3) Luck. Invested in VCSY in 2000, a Chinese internet stock that climbed 50X in six months. Turned $3,000 into $170,000 and sold at $155,000 before it completely collapsed a year later. At the time, I only had about $4,000 to my name, so percentage-wise, this investment was a significant portion of my wealth.

Since 1999, it’s been relatively easy to make money in the stock market. With the central bank on our side, we could have thrown darts in a stock picking contest and made money. I’m grateful for the Fed for boosting our wealth.

4) Luck. In 2001, a headhunter called my VP to see if she wanted to work for a competitor covering West Coast clients. She said no and handed me the phone because I covered West Coast clients out of NYC.

One thing led to another, and I got a new job with a raise and a promotion. Over the next two years, 90% of my old analyst class got let go. I’m grateful to my VP for thinking of me.

This one phone call is something I’m most thankful for. If it wasn’t for my VP and this phone call, I would probably be 50 pounds heavier, suffering from a lot of stress and chronic pain, and still working.

A Combination Of Luck, Guts, And Intent

5) Half Luck / Half Rational Decision-Making. After arriving in San Francisco for my new job, I decided to live like a poor student for a year and a half because I didn’t know anybody and didn’t know where to live. I could have ended up doing “equities in Dallas,” as Michael Lewis wrote in Liar’s Poker. Instead, I came to SF before web 2.0 exploded.

In 2003, at the age of 26, I put down $120,000 and bought a 2/2 condo in Pacific Heights for $580,500. I figured, best to turn funny money (VCSY profits) into a real asset. Today, the condo is a paid off rental worth ~$1,350,000. I’m grateful to the seller who accepted my offer. Due to luck, my tenants have continued to pay rent during the global pandemic.

6) Half Luck / Half Guts. At age 28 in 2005, I bought a single-family home I didn’t need on the north side of San Francisco for $1.5 million. The $300,000 downpayment took ALL the cash I had. I needed a $50,000 bridge loan because it was December, and bonuses weren’t paid until February the next year.

In retrospect, I was overly aggressive with my purchase. Things were good for a couple of years until the financial crisis happened. I was sweating bullets with my $1,150,000 mortgage.

So I rented out a room for several years, held on, and survived. I’m grateful to my grandfather for the bridge loan, the government for helping save the economy, and my company for not firing me during the downturn.

More Luck And An Idea

7) Complete Luck. In 2012 I tried to sell the house I bought in 2005 for $1.7 million. I got no takers. It was embarrassing, so after 30 days, I took it off the market. Actually, my agent had told me a couple people had been willing to offer $1.5M, but I declined. I wanted to sell because I had just left my job. The worst of the financial crisis had just passed. As a result, I wanted to minimize expenses and offload to reduce risk.

I ended up selling the house for a million more five years later after my PITA tenants gave their notice due to luck. I only had one offer too, but it was $240,000 more than I would have taken. The SF real estate market then began to soften in 2018, but the proceeds were reinvested in the stock market, bond market, and in real estate crowdfunding that has fortunately done well. I’m grateful to my realtor for not pushing me to sell.

Today, the house is probably worth $500,000 more (~20%). However, my reinvested proceeds have kept up.

8) Mostly Luck With Some Ingenuity. One October 2011 afternoon while sipping a Mythos beer in Santorini, Greece, I came up with the idea to engineer my layoff. Financial Samurai was growing and all I wanted to do was write online instead of going to an office for 12 hours a day.

One thing led to another and I negotiated a severance in the spring of 2012 worth five years worth of living expenses. At the time, it felt like I had won the lottery! I feel fortunate to have not felt too proud to negotiate. I’m grateful to my manager and the head of HR for agreeing to make the separation work.

9) More Luck Plus Consistency. Since starting Financial Samurai in 2009, the growth trend has been mostly up and to the right. Yes, I’ve had some flat years or down years do to some Google algorithm changes or black swan events like a pandemic. However, for the most part, the journey has been great. A website can only go so far with only one main writer.

After consistently reaching one million pageviews a month by early 2018, I thought I would surely flatline for the foreseeable future. But then Google had a big algorithm update in August 2018 that boosted Financial Samurai’s traffic organically by another ~30% YoY.

I’m not sure what I’ve done to deserve it as I don’t do any SEO beyond the basics nor do I heavily market myself or this site. I’ve got a pretty small social media presence, an intimate newsletter of 50,000 people, and I’m not a part of any mastermind groups. Financial Samurai has also never won any awards either.

All I’ve done is continue to write and connect with others. I’m very grateful to all you readers who have commented and shared my work. I’m also very grateful to Google, even though it can be quite fickle.

Good And Bad Luck

10) Good Luck + Bad Luck. On the one hand, leaving work at the bottom of the bear market was lucky because things didn’t get worst. Having an economic tailwind boost the value of your investments makes it much easier to stay fake retired.

On the other hand, leaving work right before things got really good made me miss out on millions of dollars in forgone compensation.

As Dan so nicely commented in my post, The Best Asset Class Performers From 2001-2020, “My opportunity cost of cashing out of the stock market in 2019 was not as severe as yours dropping out of the labor force in 2012! Salaries and wages have gone up 30% since you decided to quit, and you’re paying for all those health insurance premiums out of pocket. Hope you can get it together for 2022.“

Ouch!

11) Luck + Purposeful Hunting. In 2014, I found my current residence in Golden Gate Heights three years before Redfin named Golden Gate Heights a top 10 hottest neighborhood to buy in 2017. Prices have risen quite handsomely since 2014 and I wish I had bought another house or two in the neighborhood back then. I’m grateful to the listing agent who agreed on my offer with a handshake, and rejected a higher offer.

With the pandemic, demand for single-family homes on the less dense west side of San Francisco has grown. Every month, I’ve been chronicling homes that have sold and I’m astounded by the amount of demand.

I firmly believe that demand for big city living will continue to rebound. As a result, my friends and I are actively buying up properties in San Francisco and NYC to benefit. Let’s see if we are proven lucky 10 years from now!

Not Selling Financial Samurai Was So Lucky

12) Stubborn Luck. In 2018, I was very tempted by multiple offers to sell Financial Samurai for a tidy sum. But I turned them all down after running the numbers and speaking to one person who seriously regretted selling his site for millions. Further, I stubbornly wanted to achieve my goal of publishing 3X a week for 10 years in a row by July 2019.

Valuations for private websites have only continued to increase thanks to an incredible bull market everywhere. I absolutely did not anticipate such a strong return in the S&P 500 in 2019, 2020, and 2021 after a dismal 2018. Thank goodness for the Federal Reserve! Please don’t take away our punch bowl too quickly.

I would have totally regretted selling my baby in 2018 because Financial Samurai is still so fun to run. The irony is that if I was focused mainly on trying to make lots of money online, I probably would have sold and missed out on further gains.

If I sold Financial Samurai, I also wouldn’t have had the opportunity to write a traditionally published book with Portfolio/Penguin. That’s a cool bucket list I can’t wait to see executed in June 2022.

After interest rates plummeted in 2020, the value of cash flow and businesses with strong cash flow went way up. It now takes a lot more capital to generate the same amount of risk-adjusted income.

If you have a cash flowing online business that can’t be shut down due to a pandemic, you’ve benefitted. If there was any time to start an online website, it’s now. Here’s my step-by-step instruction on how to start your own website. Wealth is due to luck, but it can also be boosted due to entrepreneurship.

Being Born In The Right Country

13) Complete Luck. I was born Asian and live in America. Living in America, alone, is like winning the lottery. But living in America plus being born Asian is like a dream.

Because I’m Asian, some people in America just assume I’m intelligent, even though I had a mediocre SAT score and didn’t go to a fancy private university. It’s funny, because when I lived in Asia for 12 years, people just treated me normally because I was part of the majority.

Even private universities like Harvard raise the required standardized test scores for Asians to get in. If Harvard says they don’t discriminate by race, then what could the reason be to try and equalize their incoming class?

Asians are seldom in race discussions for some reason, which enables Asians to just get on with their business. Finally, despite the occasional racism, it may be easier to stand out as a minority.

Genetic Luck

14) More Good Luck. Since 1999, I’ve been able to operate on 5-6 hours of sleep a night plus the frequent 15-minute nap. I don’t need to drink coffee or energy drinks to stay awake either. With more energy naturally comes more production. In fact, I’ve been up since 3:30 am editing this post before the kids get up.

I’m also a super optimist, probably due to having overcome all the troubles I experienced in high school. When someone says something mean or says I can’t do something, I get fired up to work harder. I love rejection! It’s like spinach is to Popeye.

Besides having asthma as a child, I don’t have any disabilities that afflict roughly 15% of the world’s population or one billion people. Of the one billion people, roughly 200 million people experience considerable difficulties in functioning. We must not take our ability to walk, talk, see, hear, speak, and understand for granted. At the same time, we should help our brothers and sisters who do have difficulties.

Finally, I don’t have a strong desire to be loved by strangers. As a result, I’m more easily able to speak my mind and break free from groupthink.

Meeting My Wife Early

15) The Best Type Of Luck. Not only did The College of William & Mary take a chance on me, but while attending, I also found my wife during senior year in Japanese 101 class.

Finding a life partner early on is either the best type of luck or manifest destiny. Life has been so much easier and more fun having someone to share it with.

We’ve been together for over 23 years and I hope we have 40 more. Thank you W&M for accepting me. Marrying your equal is better than marrying rich.

Don’t Take Your Luck For Granted

As you can see from the bullet points, most of the things that helped get me out of my parent’s basement were due to luck. I would be remiss to not mention I also made a terrible investment in a vacation property in 2007. This was a combination of stupidity and bad luck. However, we still own the property today and I’m excited to bring the kiddos up there more often.

I’ve also talked about my perpetual rejections, which is the main reason why I continue to save and invest so much. Eventually, I know my luck and the luck of my loved ones will run out. Therefore, it’s important for me to save ahead of those dark days.

Because I’ve had so much good luck, I’m trying my hardest not to take my luck for granted. The best way I know how to appreciate my luck is to make an ongoing commitment to keep Financial Samurai running for as long as possible. Hopefully, many of you have benefited from the site over the years and have gotten lucky as well.

Many investors are feeling extremely lucky today as well. Seriously. Who would have thought after a meltdown in March 2020, stock would rebound to all-time highs so quickly?

The housing market is also very strong as well. Clearly, the rebound is not due to our amazing insights. It’s due to luck!

Prepare For Bad Luck, But Appreciate Good Luck

Sooner or later, we all will get unlucky. And when we do, we must accept bad luck as a part of life. But we should also remind ourselves during bad times about all the lucky breaks we’ve experienced so far. Then we’ve got to rise up and move on.

I’d love to hear about your lucky breaks and how much you think luck plays a part in your success. If you list them out, I’m sure you’ll feel much more appreciative. Wealth is mostly due to luck. Let’s not take our luck for granted.

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