Chapter 15: Slowlane Victory… A Gamble of Hope - The Millionaire Fastlane

CHAPTER 15: SLOWLANE VICTORY… A GAMBLE OF HOPE

I'd rather live in regret of failure than in regret of never trying.
~ MJ DeMarco

Exodus: Life in the Slowlane

Wealth by the Slowlane roadmap is analogous to Exodus, the biblical story of Moses. God leads Moses out of Egyptian bondage into a daunting 40-year journey through the desert, with the promise of a glorious future in the land of “milk and honey.” After a lifetime of toil and struggle, Moses arrives at the doorstep to his destination and-wham!

He dies.

He never sees the promise of the journey because life has no guarantees.

Sadly, Slowlane wealth is akin to this long, perilous journey through the desert. It's a trip that takes decades to finish, starves your life, and makes no promises. Yes, graduate from college, get a good job, entrust your money to the stock market, serve the boss well, and you might be rewarded. In today's harrowing financial climate, I'm surprised people still believe it.

But people do, and in legions. When I see sales figures for Slowlane books, I'm dumbfounded. Millions sold. How sad. Millions being led astray down a path littered with dangerous potholes and detours, a road that takes years to travel for a far-fetched promise of a freer tomorrow. To assume that you will live a long, healthy life is arrogant. To assume that life won't throw you any curves is naive. For the Slowlane to prevail, it assumes life is predictable and forgiving.

It isn't. You lose your job. You get sick. The car needs a new transmission. You get married. You get divorced. You have kids. You have a child with special needs. You have aging parents who need care. The economy dips into recession or depression.

Life is a menagerie littered with crisis points, which make the Slowlane roadmap a risky bet that consumes your most precious asset: time.

Seven Slowlane Dangers

People drive the Slowlane because it's what they've been told to drive. They believe the risks are minimal and it's safe. After all, 90% of all new businesses fail after five years, so the “Fastlane” can't be any safer! If you lob a little logic into the Slowlane narratives you'll find that it's extremely hazardous and a plan based entirely on hope. Assumptions-decades of them-expose the Slowlane's true risks. Choose to travel the road and choose to gamble. Here are the risks:

1) The Danger of Your Health

The Slowlane HOPES you will live long enough to enjoy the fruits of your savings as you hit your late stage years. Remember, you will have millions when you retire at 65! Will you be healthy enough to enjoy it? Alive? If you can't work your job, you can't make money. If you can't work, what happens to this plan? Also, avoid other calamities; hope your job stress doesn't kill you and your family remains healthy.

2) The Danger of the Job

The Slowlane HOPES that you'll be gainfully employed at all times, safely climbing the corporate ladder year after year. You must avoid layoffs, corporate politics, firings, poor industry cycles, job skill degradation, and bad job markets.

3) The Danger of Your Home

Home equity is lauded as a middle-class wealth vehicle. Many gurus have shouted from the rooftops, “Retire on your home equity!” and “Your home is an asset!” Capital BS. The Slowlane HOPES that real estate values always rise, and it's patently false. In 2008, the value of my home equity plummeted $800,000. I disavow my home as an investment and, thankfully, I do not rely on it.

4) The Danger of the Company

Not many companies outlive the centuries. If your retirement faith is put into one company in the form of either 1) your job, 2) your pension, or 3) their stock, you HOPE the company survives. You make a bet. Many retirees discover too late that their retirement pensions are lost to mismanagement by company executives. Others who focus their wealth into one company stock accept great risk that the stock will be worth more in the future. If you assign your retirement unto others, you then accept external risks that you can't control. When the torque of you're financial plan resides with others, you're likely to lose control.

5) The Danger of Your Lifestyle

The Slowlane begs you to settle and become a miser. Want to own an exotic car? Forget it. Want to live on a beach? Wishful thinking. If you cannot control your temptations of lifestyle improvement (a nicer home, a nicer car, a nicer meal out), the Slowlane becomes slower and reverses course. The Slowlane HOPES your “delayed gratification” moves to “no gratification.”

6) The Danger of the Economy

The Slowlane HOPES that your investments will yield a predictable 8% return year after year. You must believe the theory that “buy and hold” works. It doesn't, because economic busts, recessions, and depressions happen. For example, in 2008–2009, the equity markets lost nearly 60%. If you saved for 15 years and amassed $100,000, it would now be worth $40,000. It would take you 14 years at 8% yearly returns just to get back even! That equates to almost 30 YEARS GONE! And this doesn't account for inflation, which makes your $100,000 more like $50,000!

7) The Danger of the Sidewalk

Frustrated Slowlaners often revert to the Sidewalk. Why? Hope over control. When you can't control time, when you can't control your job, when you can't control five days of your life each week, you feel powerless. Emotions of helplessness create an environment ripe for instant gratification and Lifestyle Servitude. A study published in 2008 by the Journal of Consumer Research found that when people feel powerless and out of control, they have a strong desire to buy things that convey a high status. Why do they feel powerless? Simple. In the Slowlane, you relinquish control because time is in control and the gates to the Sidewalk reopen. Hope is not a plan.

Resistance Is Futile

When you perform an autopsy on the Slowlane you see its true colors: It's slow, it eats time, and it's risky. When a Slowlaner realizes the plan isn't working, he goes into overdrive. Overdrive in the Slowlane is like pushing a car's accelerator to the floor, hoping its upper speed limits somehow will mystically extend higher, when in fact, the racetrack itself is the problem-not the accelerator. Yet, a Slowlaner will try to manipulate his weak mathematical universe by trying to make the variables malleable.

• Manipulate intrinsic value by increasing hours worked.
  (I need to make more money!)
• Manipulate intrinsic value by changing jobs or adding jobs.
  (I need to get paid more!)
• Manipulate intrinsic value by going back to school.
  (I need a better career!)
• Manipulate compound interest by seeking better investment yields.
  (I need better investments!)
• Manipulate compound interest by expanding investment time horizon.
  (I need more time!)
• Manipulate compound interest by increasing the investment.
  (I need to save more!)

Each of these six responses is a futile attempt to manipulate the impotence of the Slowlaner's wealth equation. Unfortunately, the limitations of the mathematics cannot be subverted, and doing so results in dangerous cause-effects cycles.

When a Slowlaner wants to make more money, he increases his hours worked, switches to a better paying job, or adds jobs. When a Slowlaner wants to get paid more, he goes back to school, hoping to increase intrinsic value. When a Slowlaner realizes that a 3% investment return isn't building wealth fast enough, bigger risks are assumed for bigger returns. When a Slowlaner watches 40% of his nest egg disappear in an economic recession, he goes back to work arguing that five years is not enough to “get back to even.”

You can't overcome the limitations of mathematics. A car that has a top speed of 10 mph will always have a top speed of 10 mph, no matter HOW HARD YOU PUSH THE ACCELERATOR. If you travel across the country at 10 mph, you're going to need 40 years!

The Slowlane is predisposed to mediocrity because the numbers are always mediocre.

The Slowlane is risky because its variables are uncontrollable and leverage is absent. ULL really means “ULL” never get rich. Yet, lifestyle is the one variable Slowlaners can effectively manipulate. Unfortunately, this quickly turns Slowlane life into a stale exhibition of misery. Yes, settle for less.

Wealth Fail: Wrong Equation. Wrong Variable

At some point, the Slowlaner realizes he can't force the stock market to yield bigger returns. He can't force a 200% pay raise. He can't afford an advanced education to raise intrinsic value. Job-hopping offers little incremental pay upgrades. The Slowlaner is enslaved to his equation and resorts to manipulating the only controllable variable, personal net income, which is increased by reducing expenses.

Personal Net Income = Intrinsic Value – Personal Expenses

Slowlane gurus praise this strategy. The edicts are clear: Pay down your debt. Dump the new car for an old one. Raise your insurance deductibles. Cancel your credit cards and pay cash for everything. Quit buying $10 coffee at Starbucks. Bag your lunch. Shop in bulk. Spend four hours clipping coupons. C'mon buddy, slash those expenses-some day you're going to be rich! Hilarious!

These tiresome strategies are a classic response to being stuck in the Slowlane.

Lifestyle degradation.

When you're married to a bad wealth equation, this is resistance. This is like getting a divorce by sleeping on the couch. This is like never batting in a baseball game and expecting to win. Since wealth is tied to time and can't be controlled, you're left with kitchen scraps … lifestyle degradation in the form of expense reduction. Yup, become a cheapskate.

Wrong. Hoodwinking expenses does not create wealth. You can't win the money game always playing defense-you must go on offense. Exploding income and controlling expenses creates wealth.

For example, when I routinely earned $100,000 per month, I accumulated wealth fast because I maintained control over my expenses. As my income exponentiated, expenses grew linearly and weren't neglected. If my income increased by 100%, expenses only grew by 10%. I didn't accumulate wealth because of expense dickery. Income explosion and expense control created wealth.

So what happens when a Slowlaner commits to the expense variable? Life becomes about what you can't do. You can't take that trip. You can't buy your kids a decent pair of shoes. You can't own a dream car. You can't subscribe to the movie channels. Yes, the good old “sacrifice your today for the promise of tomorrow.”

You settle.

Slowlane Victory: Fame or a Geriatric Ward

Why invest in a plan that consumes 40 years of your life and fails most of the time? I wouldn't. The dreary reality is that Slowlane failure doesn't happen overnight; failure transpires over the years like a termite-infested woodshed, and when its denizens come to judgment, it's too late. Yes, Slowlane victory is as tough as a truck-stop sirloin.

In a 2002 AARP (formerly the American Association of Retired Persons) survey, 69% of the respondents said they would need to work past retirement age. A year earlier, 45% said they would need to work into their 70s and 80s. We can deduce something disturbing from this data: The Slowlane's failure rate is near 70%. Despite the risks, despite the mathematical limitations, despite the typical five day trade for a weekend, despite all of it, you might stand firm and try your luck. While victory isn't impossible, I need mention a few things: Slowlane winners are usually extremely talented, elderly, or overworked.

How to Win the Slowlane: The “Secret Exit”

The Slowlane can be defied if you find its “secret exit,” its “get out of jail free” card that neutralizes the limitations of Uncontrollable Limited Leverage. That secret Slowlane escape?

Fame.

Fame breaks the mathematical limitations of intrinsic value. Those who defy the Slowlane are the most pervasive in our culture because of fame-the pro athletes, rappers, musicians, actors, and entertainers. If you want to bludgeon the Slowlane's weakness you need to get famous. Why? Fame and notoriety carries a high intrinsic value. People pay extraordinary rates for you and your services. (Even if, like a reality-show star, you have no skills.)

When a 20-year old basketball player leaves college and scores a $30 million contract, you've just witnessed Slowlane defiance. When an actress lands a $15 million lead role in a major motion picture, you've just witnessed Slowlane defiance. When an obese freckly-faced Irish guy ascends from waiter to top finalist on American Idol, the limitations of the Slowlane roadmap are shattered because intrinsic value explodes. Suddenly, intrinsic value has leverage because of demand.

Unfortunately, most people who seek wealth do so through Slowlane defiance, not via the Fastlane. Fortune-leading fames are the obvious attack. Why do stadiums breach to capacity for American Idol auditions? Fame explodes intrinsic value! You can defy the Slowlane's limitations by becoming so indispensable that your value to society skyrockets. If millions seek you, you will be paid millions. Pro basketball player LeBron James is paid millions because his skills are in short supply. Famous actors and entertainers are paid millions because millions demand their brand in entertainment form. Extreme talent is paid extremely well.

Overworked into Corporate Management

The other highly sought-after Slowlane “secret exit” is good ol' corporate management. No doubt you've heard the Slowlane missive “climb the corporate ladder.”

When a corporate CEO cashes $20 million in stock options, you've witnessed another Slowlane defiance. Surely you've heard about all those overpaid CEOs of large companies raking in the big dough. Have you ever looked at their age? Exclusive of the founders and owners, most of them are in their 50s and 60s.

Obviously, the roads through corporate management don't happen overnight; from mailroom to CEO can take 40 years. And if it does, you certainly don't get there by taking it easy. Nope, you arrive early and leave late. Sorry, I don't have 40 years of patience, waiting for that golden parachute to land in my backyard.

Successful Slowlaners Get Stuck in the “Middle”

I have no desire to be famous or to be a corporate drone-heck, I don't even own a suit or tie, so how would I climb the corporate ladder? If you're allergic to fame and corporate ascension as a road to riches, what's left? Society enforces the Slowlane as your only option. Unfortunately, that strategy leads straight into the “middles”-middle class or middle age.

Every lottery has a winner. Bad odds have winners! “Oldlaners” (Slowlaners who succeed using a Slowlane strategy) who survive the Slowlane road-map eventually become millionaires, but please, don't pop the cheap champagne quite yet. The distinction between a Slowlane millionaire and a Fastlane millionaire is like the difference between a Buick and a Ferrari. When you recognize the difference, you can critique advice properly and assign it to its correct Fastlane or Slowlane box.

Millionaires Are Rich … or Are They?

I recently read an article about a young woman named Callie from the U.K. who, several years ago, won millions in a lottery, only to lose most of it shortly there after. Of course, “lose” implies that the entire bag of cash flew out of the car while cruising down the boulevard in her brand new convertible.

She didn't “lose” it-she spent it. She was just 16 years old when she won the $3 million, and it took only six years for her to blow it: drugs, partying, exotic cars, breast implants, and a jaw-dropping $730,000 in designer clothes. The problem? Callie thought she was rich and spent like she was rich. Surely she bought into her title: “I'm a millionaire.” While $3 million is a decent chunk of change, she needed $30 million for her lifestyle.

Which brings us to our famous word, “millionaire.”

When you hear that word, what do you think? Like wealth, you probably have visions of an extravagant lifestyle: boats, helicopters, mansions, and expensive jewelry. For decades, the term “millionaire” has been ubiquitously used to describe someone “rich.”

Except these visions of opulence describe a lifestyle of a millionaire elevated by the Fastlane, not the Slowlane. Slowlane millionaires who don't escape by fame or corporate bastardization live differently. They own homes in innocuous middle class neighborhoods. They drive unassuming cars like Hondas or Toyotas, they vacation infrequently, they limit their dining expenses, they cut coupons, and they max out their 401(k)s. They work five days a week at jobs they most likely hate and diligently save 10% of their paychecks. Others own small businesses, franchises, and retail stores. Several national best-selling books have enlightened us: Yes, these are the “millionaires next door.”

Sadly, in today's terms, a “millionaire” (net worth of $1,000,000) is simply upper middle class. A millionaire is not rich. Five million is the old one million. Depressing, I know.

This hidden truth is why many lottery winners go broke after a few years. Winners envision the lavish lifestyle and live it not knowing that several million dollars won't support it! If you win a million bucks (which after taxes is only $600,000), your lifestyle shouldn't change. If you try to live the “millionaire lifestyle” as shown on television, a fool and his money are soon parted.

Playing the lottery is a symptom of the Sidewalk. So why would it shock anyone to discover that a newly crowned lottery winner goes broke just years later? Lottery winners assign “rich” to the word “millionaire,” so their fortune is fast spent on the icons of wealth, and soon thereafter, they're bankrupt.

The word “millionaire” fooled them.

Millionaire is middle class. To live a lifestyle normally reserved for “millionaires,” you will have to amass far more than $1 million. Having $1 million doesn't entitle you to a lifestyle of the rich and famous. You need at least $10 million for that. So when the media spoon-feeds you the word “millionaire,” determine its perspective: Is it Slowlane and middle class? Or Fastlane and rich?

12 Distinctions Between Slowlane and Fastlane Millionaires

• Slowlane millionaires make millions in 30 years or more. Fastlane millionaires make millions in 10 years or less.
• Slowlane millionaires need to live in middle-class homes. Fastlane millionaires can live in luxury estates.
• Slowlane millionaires have MBAs. Fastlane millionaires hire people with MBAs.
• Slowlane millionaires let their assets drift by market forces. Fastlane millionaires control their assets and possess the power to manipulate their value.
• Slowlane millionaires can't afford exotic cars. Fastlane millionaires can afford to drive whatever they want.
• Slowlane millionaires work for their time. Fastlane millionaires have time working for them.
• Slowlane millionaires are employees. Fastlane millionaires hire employees.
• Slowlane millionaires have 401(k)s. Fastlane millionaires offer 401(k)s.
• Slowlane millionaires use mutual funds and the stock market to get rich. Fastlane millionaires use them to stay rich.
• Slowlane millionaires let other people control their income streams. Fastlane millionaires control their income streams.
• Slowlane millionaires are cheap with money. Fastlane millionaires are cheap with time.
• Slowlane millionaires use their house for net worth. Fastlane millionaires use their house for residency.

The Fastlane isn't about becoming the next middle-class millionaire with tiresome mandates about what you cannot do; it's about what you can do.

Chapter Summary: Fastlane Distinctions

• The Slowlane has seven dangers, five of which cannot be controlled.
• The risk of “lifestyle” is the one risk Slowlaners will try to control.
• The Slowlane is predisposed to mediocrity because its mathematical universe is mediocre.
• Slowlaners manipulate the “expense” variable because it is the one thing they can control.
• Exponential income growth and expense management creates wealth-not just by curtailing expenses.
• You can break the Slowlane equation by exploding your intrinsic value via fame or insider corporate management.
• Successful Slowlaners not famous or in corporate management end in the middle . . . middle class and middle age.
• Slowlane millionaires are stuck in the middle class.
• $5 million is the new $1 million.
• A millionaire cannot live a millionaire lifestyle without financial discipline.
• Lottery winners fall into the millionaire trap and go broke because they attempt to live a “millionaire” lifestyle, not understanding that a few million doesn't go very far.