The author of The Algebra of Wealth is Scott Galloway, who is a professor of marketing at NYU Stern School of Business, who has founded a number of businesses, and who has one of the most widely read blogs on the internet: No Mercy/No Malice. He is a real thought leader. I don’t agree with everything he has to say but I do agree with most of what he has to say. More importantly, I can’t think of anyone who is more thought provoking for me than Scott Galloway. I’d urge you to subscribe to No Mercy/No Malice at https://www.profgalloway.com/, and I’d also recommend his most recent book, The Algebra of Wealth.
This book is about building wealth, but more importantly, it is about how to live your life. The subtitle is A Simple Formula for Financial Security. I’m not sure it is so simple, but the advice is good, and Galloway’s style is easy to understand, albeit a bit blunt at times.
While I recommend this book to you, it would be even better suited to a young college graduate you might know. Really, it would be perfect for someone transitioning from the college bubble to the real world. That is, if you can get that young person to read a book.
After the Introduction, an overview of what’s to come and some history on the author, the next chapter is on Stoicism. The two subsections of the chapter deal with building a strong character and building a strong community. Not what one would expect to find in a book about investing. But there is really good stuff here: training your habits, the role of luck, making good decisions, and much more.
The next chapter deals with focus. Galloway suggests that you shouldn’t follow your passion because passion careers suck. Instead, follow your talent and suggests how to pick a career. There is some really practical stuff here, especially for young people, such as living in a city and going to the office. Both will be good for your career.
The third chapter deals with time, including the power of compounding. But more of the chapter is on using time wisely, the advantage of youth, goal setting, and setting priorities. This chapter starts to get into investing but not heavily yet.
Finally in chapter four, on Diversification, the author covers the basic principles of investing, such as risk and return, and diversification. There is a good explanation of how markets work, the roles of capital and labor, measuring the economy, and the role of government. Next up is a general overview of the various asset classes. This is followed by what Galloway calls Investing’s Final Boss: The Taxman.
There are a number of equations in the book but the main one, the Simple Formula for Financial Security is this:
WEALTH = Focus + (Stoicism x Time x Diversification)
Finally, he wraps up the chapter with advice from a lifetime of investing. It is good advice and don’t think this comes from an academic. Although he does teach at NYU, it is a small part of his current activities. He’s founded companies, is a one-man marketing machine and has become quite wealthy. He even provides the economics and rationale behind his private jet. At an annual cost of $1.2 million, he feels it is worthwhile as it allows him to spend a few more days with his kids.
The Epilogue is called The Whole Shooting Match. It is a two-page explanation of what life is all about, what makes it worthwhile and what really matters. It is moving and profound.
A good read for any of us and a terrific gift for someone graduating from school.
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