Lessons - The Wealth Paradox: Why Some Billionaires Are Broke (Scott)

In this lessons episode, I want to speak about the wealth paradox why some billionaires are broke. We're going to talk about the true nature of wealth and why most entrepreneurs have it backwards because real wealth isn't what you earn. It's what you have minus what you want. We're going to cover Morgan Housel's wealth formula, why chasing more never works, and three practical steps to fix your relationship with money. You're going to learn how to grow your assets while managing your desires, a strategy that most founders and entrepreneurs completely miss. Today, I want to talk about the wealth paradox and why some billionaires are broke. And I know that many people listening to this podcast are not billionaires, but the whole point of today's podcast is to help you focus on the right goals, on the right definition of wealth, especially when you're first starting out, so that you don't end up like billionaires who are quote-unquote broke. But let me explain. Most of you are chasing the wrong definition of wealth. Every single day, you wake up, you check your accounts, your revenue, your profit, your subscribers, your followers, and you are constantly monitoring metrics, and you are always anxious about where you stand. I know this because I'm that person too. And you've read about the founders who've raised millions, and they have just by all outside measures and metrics of success made it. And you feel envy. You see your competitors buying vacation homes while you're reinvesting every single dollar into your business. And you're starting to wonder when you'll finally quote-unquote make it. But what if I told you that some of the richest people in the world are actually broke? Now, not financially broke, but broke in the way that actually matters. The whole reason why I put this piece together is because of a quote by Morgan Hausel. The best measure of wealth is what you have minus what you want. And by this measure, some billionaires are broke. And this isn't just some feel-good platitude designed to make you comfortable with mediocrity. It is a fundamental truth about wealth that most entrepreneurs completely miss. And I believe it is one that will transform your relationship with money success and satisfaction if you truly understand it. So today I want to break down why the conventional definition of wealth is fundamentally flawed, how the wealth, these people that I know measure their success, and how you can build genuine wealth even while you're building your business. Because once you understand true wealth, you're never going to look at success the same way again. So most people get the wealth equation wrong. Let's get mathematical for a moment. Most people define wealth with a very simple equation. Wealth is equal to what you have, which means the more money, the more assets, and the more resources that you accumulate, the wealthier that you become. Simple, right? But the issue is that this equation is incomplete. It ignores the denominator of the wealth fraction, what you want. So if we were going to redo this formula, the complete equation would look like this. Wealth equals what you have divided by what you want. And this changes everything. If what you want constantly expands to exceed what you have, you're never going to feel wealthy no matter how much you accumulate. And this is why some people with millions and tens of millions feel broke while other people with a modest amount of money feel abundant. I know founders personally who built eight-figure businesses but live in constant anxiety about the next milestone because they've trapped themselves in this perpetual cycle of wanting to keep some feeling poor despite their objective success. Meanwhile, I know solarpreneurs with six-figure businesses who have designed their lives so intentionally that they experience genuine wealth every single day. They have mastered the denominator of the wealth equation. So at the end of the day, the problem isn't your revenue. It's your relationship with wanting. Now, I'm not saying that wanting things is inherently bad. I'm just saying that most people don't purposefully map out what they want in life and why. And they're playing this game based on someone else's idea of what success looks like. And that's why you're unhappy. Now, let's look at how this plays out in the real world. And I'll give you some examples of people who seem rich on paper. But if you apply this equation, they're actually broke. And I personally believe this is the most meaningful measure of wealth and the best equation that you can apply to your own life. So let's tell a story about Elon Musk who is the billionaire who can't stop working, right? Elon Musk should be by any objective measure one of the wealthiest people alive. And at times, he's been the richest person on the planet. But there were times when he still slept on the couch at the Tesla factory during production crunches. He works 80 to 120 hours a week. He describes his life as excruciating. And he admits to taking ambient just to sleep. Now, this isn't the lifestyle of a wealthy person. It's the lifestyle of someone who's fundamentally broke. Now, why? Because Musk's wants. They vastly exceed even his enormous halves. His ambitions for Tesla for SpaceX and all of his other ventures. They created deficit that no amount of money can fill. Now, I'm not criticizing his choices or his ambition, but the wealth equation we're discussing. He is running a perpetual deficit. Now, contrast this with someone like Derek Sivers, who sold his company CD Baby for 22 million, which is a lot less than a billion. He gave most of it the charity. Now, he lives a life of freedom of learning and creation. Now, these are two opposite ends of the spectrum. I would still say a 22 million dollar exit is great. Most people would love to have that. But the point is, why his own account? He feels extraordinarily wealthy because his wants are modest and intentional. But it's not about how much you have. It's about the gap between what you have and what you want. And I'll tell you, this pattern repeats itself across the entrepreneurial landscape. The founder who sells their company for 10 million, but immediately feels empty because they've lost their identity. The creator who reaches 1 million subscribers, but can enjoy it because they're fixated on competitors with 5 million. The consultant, who runs 500k annually, but works so much, they have no time to enjoy any of their income. And they all look wealthy from the outside, but they live in this constant state of deficit. Now, let's explore how this applies to you directly. And now you can start building true wealth right now, even if your business is still growing. So how do you become wealthy before your quote-unquote rich? Wealth creation typically follows one of two paths. Path one, you increase what you have, while your wants expand even faster. Now, this is the default path. Each achievement unlocks new desires. Each milestone reveals new comparisons. Your enumerator grows, but your denominator grows faster. And that, by the way, this is most people. This is lifestyle creep that a lot of people succumb to. They make more money, and they find ways to spend it, or want more immediately, right? You're never satisfied. Now, path two is you increase what you have, while carefully managing what you want. And this is the path to actual wealth, where your enumerator grows through your hard work, but you maintain control over your denominator. Now, let me be clear, this isn't about limiting your ambition or settling for less. It's about being intentional about what you really want, versus what you've been conditioned to want. And there is a massive difference. You have to be aware of why you are pursuing the goals that you are pursuing. Are they actually your goals? Are they someone else's goals? Are they society's goals? Are they Instagram's goals? Are they your parents' goals? Are they your spouses' goals? You have to do an audit. You have to do a want audit and a self audit. Because most of your wants aren't actually yours. They're implemented by comparisons to other entrepreneurs or just people. Social media highlights, industry expectations, status games with your peer group. So if you take inventory of what you genuinely want, versus what you think you should want, start to ask yourself, if no one would know about this achievement, what I still want it, does this desire align with my deeper values, or does it just align with my ego, and is this something I want, or is something I've been told to want? When I did this exercise, I personally was shocked that about 70% of my wants weren't actually mine. They were external expectations that I'd internalized. Number two, design your enough. So the most powerful financial concept is in compound interest. It's a concept of enough. So define what enough looks like across different dimensions of your life, enough income to support your ideal lifestyle, enough working hours to feel productive without burning out, enough achievement to feel accomplished, enough possessions to be comfortable without excess. This isn't setting a ceiling on your growth. It's establishing a floor for your satisfaction. Now when you know what enough looks like, you can enjoy everything beyond it as a bonus rather than a requirement. The wealthiest people that I know have a very clear definition of enough. Now the broke ones, regardless of their bank accounts, they never do. After you define enough, next you want to practice conscious wealth daily, because true wealth is not a future state. It is available right now through daily practice. That could mean gratitude without complacency, so you appreciate what you have while remaining ambitious. These are not mutually exclusive ideas. Experience over accumulation. So I want you to prioritize experiences that create memories rather than possessions that create clutter. And lastly, time abundance. Guard your calendar as fiercely as your bank account. Time wealth is the purest form of wealth. And the most reliable way to feel wealthy today is to spend a portion of your day in a way that would make others envious of your freedom, not your money. One of my founder friends that I know he's worth about eight figures. He still drives a 10-year-old car but he blocks off every single Wednesday for hiking with no foam. That's wealth. Now I really want to show you how to apply this wealth mindset to your situation as a founder, creator, or just somebody who's super ambitious. I made the argument that true wealth requires addressing both sides of the equation simultaneously, right? Both the what you have and the what you want and the balance between the two. But the issue is most people only focus on the what you have, and they never focus on the what you want. Most people will focus on the numerator, right? The building, the business, the developing multiple streams of income, the accumulating assets, the learning high leverage skills, keep doing those things because they matter tremendously. But I'm telling you they're only half of the equation. The whole lesson here is to manage the what you want part, right? This is the neglected side of the wealth building formula that separates a truly wealthy from the perpetually striving. This means that you have to distinguish between authentic desires and social programming, like I just mentioned. You have to set clear enough thresholds. What is enough? If you don't define it, you're signing up for infinite dissatisfaction. And I know a lot of entrepreneurs, they have written thresholds, very specific thresholds for income, for material possessions, for business metrics, the happiest entrepreneurs, they know their numbers. And also, you have to create space between stimulus and response. So when somebody appears by the larger house or raises out a higher evaluation, can you witness it without automatically adding it to your want list? This space is where wealth lives. And the growth of your desires is truly the silent, wealth-killing that no one speaks about. Every time your mastermind group upgrades their lifestyle, you feel the pull to follow. Every time you hit a revenue milestone, the target immediately moves forward. Every single comparison creates a new want that has this gravitational force. And without conscious management of this process, you're building a wealth-destroying machine alongside your wealth-creating business. So I'm telling you right now, don't be like most entrepreneurs who try to solve their wealth problems exclusively on the numerator side. Just make more money, but it's like trying to fill a bucket with a hole in the bottom. No amount of water will ever be enough. The truly happy, truly fulfilled people, they combine aggressive growth of their assets with deliberate containment of their desires. Now you may ask, well, why is that? Why do we keep chasing money status, whatever that metric is? And really, it's because there's safety in feeling broke. When you're not there yet, you have the perfect excuse for grinding yourself into the dust, saying no to all these life enriching experiences, postponing joy indefinitely, we're all guilty of this. You know, you've said things like, I'll relax after the eggs, that I'll spend time with family after this funding round. I'll focus on health when we hit 10 million ARR. The vulnerability lies in admitting that you might already have enough for happiness, right? The life you're living now is something that your past self could only dream about. And when I speak about this perspective with founders, I see this raw fear, just flash across the rise, not fear of failure, fear of contentment. They are terrified that accepting their current situation as enough will kill their drive in their ambition. But this fear is based on a false dichotomy. Ambition and satisfaction aren't opposite. They are powerful allies. I don't know why people think they're polar opposites. You can be deeply grateful for what you have while enthusiastically building something greater. You can find your enough for today while creating more for tomorrow. This isn't a spiritual bypass or toxic positivity. It's hardcore strategic wealth management, addressing both sides of the equation simultaneously. The founders with the longest, most successful careers aren't the most driven or the most satisfied. They're the ones who've mastered the integration of both states. They celebrate milestones fully before immediately shifting the goalpost. They work with an intensity that would rival any successful entrepreneur without deriving their entire identity from their company. They enjoy financial success without becoming hostage to lifestyle inflation and they compare themselves primarily to their past selves, not the peers or competitors. These ideas are the fundamental operating system of sustainable success. So at the end of the day, the wealthiest person isn't the one with the most zeros in their bank account. It's the one you can say with genuine conviction. I have more than I need and I know exactly what enough looks like. And when you know what enough looks like, you can make radically better business decisions. You don't make terrible deals at desperation. You don't compromise your values for quick wins. You don't burn out your team chasing vanity metrics. You build from abundance rather than scarcity. And the ultimate irony is this mindset tends to create substantially more financial wealth over the long term because it enables sustainable, principled growth rather than destructive accumulation at all costs. Morgan Housel's insight that wealth equals what you have minus what you want isn't just clever. It's the most practical wealth building formula ever created. So ask yourself honestly by this equation are you rich or broke. If you're running a deficit, it's time to work both sides of the equation simultaneously, growing what you have while deliberately managing what you want. Because true wealth isn't having everything. It's wanting what you already have while building something greater.