"A genius is the man who can do the average thing when everyone else around him is losing his mind."
—Napoleon
"The world is full of obvious things which nobody by any chance ever observes."
—Sherlock Holmes
Ispent my college years working as a valet at a nice hotel in Los Angeles.
One frequent guest was a technology executive. He was a genius, having designed and patented a key component in Wi-Fi routers in his 20s. He had started and sold several companies. He was wildly successful.
He also had a relationship with money I'd describe as a mix of insecurity and childish stupidity.
He carried a stack of hundred dollar bills several inches thick. He showed it to everyone who wanted to see it and many who didn't. He bragged openly and loudly about his wealth, often while drunk and always apropos of nothing.
One day he handed one of my colleagues several thousand dollars of cash and said, "Go to the jewelry store down the street and get me a few $1,000 gold coins."
An hour later, gold coins in hand, the tech executive and his buddies gathered around by a dock overlooking the Pacific Ocean. They then proceeded to throw the coins into the sea, skipping them like rocks, cackling as they argued whose went furthest. Just for fun.
Days later he shattered a lamp in the hotel's restaurant. A manager told him it was a $500 lamp and he'd have to replace it.
"You want five hundred dollars?" the executive asked incredulously, while pulling a brick of cash from his pocket and handing it to the manager. "Here's five thousand dollars. Now get out of my face. And don't ever insult me like that again."
You may wonder how long this behavior could last, and the answer was "not long." I learned years later that he went broke.
The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.
A genius who loses control of their emotions can be a financial disaster. The opposite is also true. Ordinary folks with no financial education can be wealthy if they have a handful of behavioral skills that have nothing to do with formal measures of intelligence.
My favorite Wikipedia entry begins: "Ronald James Read was an American philanthropist, investor, janitor, and gas station attendant."
Ronald Read was born in rural Vermont. He was the first person in his family to graduate high school, made all the more impressive by the fact that he hitchhiked to campus each day.
For those who knew Ronald Read, there wasn't much else worth mentioning. His life was about as low key as they come.
Read fixed cars at a gas station for 25 years and swept floors at JCPenney for 17 years. He bought a two-bedroom house for $12,000 at age 38 and lived there for the rest of his life. He was widowed at age 50 and never remarried. A friend recalled that his main hobby was chopping firewood.
Read died in 2014, age 92. Which is when the humble rural janitor made international headlines.
2,813,503 Americans died in 2014. Fewer than 4,000 of them had a net worth of over $8 million when they passed away. Ronald Read was one of them.
In his will the former janitor left $2 million to his stepkids and more than $6 million to his local hospital and library.
Those who knew Read were baffled. Where did he get all that money?
It turned out there was no secret. There was no lottery win and no inheritance. Read saved what little he could and invested it in blue chip stocks. Then he waited, for decades on end, as tiny savings compounded into more than $8 million.
That's it. From janitor to philanthropist.
A few months before Ronald Read died, another man named Richard was in the news.
Richard Fuscone was everything Ronald Read was not. A Harvard-educated Merrill Lynch executive with an MBA, Fuscone had such a successful career in finance that he retired in his 40s to become a philanthropist. Former Merrill CEO David Komansky praised Fuscone's "business savvy, leadership skills, sound judgment and personal integrity."1 Crain's business magazine once included him in a "40 under 40" list of successful businesspeople.2
But then—like the gold-coin-skipping tech executive—everything fell apart.
In the mid-2000s Fuscone borrowed heavily to expand an 18,000-square foot home in Greenwich, Connecticut that had 11 bathrooms, two elevators, two pools, seven garages, and cost more than $90,000 a month to maintain.
Then the 2008 financial crisis hit.
The crisis hurt virtually everyone's finances. It apparently turned Fuscone's into dust. High debt and illiquid assets left him bankrupt. "I currently have no income," he allegedly told a bankruptcy judge in 2008.
First his Palm Beach house was foreclosed.
In 2014 it was the Greenwich mansion's turn.
Five months before Ronald Read left his fortune to charity, Richard Fuscone's home—where guests recalled the "thrill of dining and dancing atop a see-through covering on the home's indoor swimming pool"—was sold in a foreclosure auction for 75% less than an insurance company figured it was worth.3
Ronald Read was patient; Richard Fuscone was greedy. That's all it took to eclipse the massive education and experience gap between the two.
The lesson here is not to be more like Ronald and less like Richard—though that's not bad advice.
The fascinating thing about these stories is how unique they are to finance.
In what other industry does someone with no college degree, no training, no background, no formal experience, and no connections massively outperform someone with the best education, the best training, and the best connections?
I struggle to think of any.
It is impossible to think of a story about Ronald Read performing a heart transplant better than a Harvard-trained surgeon. Or designing a skyscraper superior to the best-trained architects. There will never be a story of a janitor outperforming the world's top nuclear engineers.
But these stories do happen in investing.
The fact that Ronald Read can coexist with Richard Fuscone has two explanations. One, financial outcomes are driven by luck, independent of intelligence and effort. That's true to some extent, and this book will discuss it in further detail. Or, two (and I think more common), that financial success is not a hard science. It's a soft skill, where how you behave is more important than what you know.
I call this soft skill the psychology of money. The aim of this book is to use short stories to convince you that soft skills are more important than the technical side of money. I'll do this in a way that will help everyone—from Read to Fuscone and everyone in between—make better financial decisions.
These soft skills are, I've come to realize, greatly underappreciated.
Finance is overwhelmingly taught as a math-based field, where you put data into a formula and the formula tells you what to do, and it's assumed that you'll just go do it.
This is true in personal finance, where you're told to have a six-month emergency fund and save 10% of your salary.
It's true in investing, where we know the exact historical correlations between interest rates and valuations.
And it's true in corporate finance, where CFOs can measure the precise cost of capital.
It's not that any of these things are bad or wrong. It's that knowing what to do tells you nothing about what happens in your head when you try to do it.
Two topics impact everyone, whether you are interested in them or not: health and money.
The health care industry is a triumph of modern science, with rising life expectancy across the world. Scientific discoveries have replaced doctors' old ideas about how the human body works, and virtually everyone is healthier because of it.
The money industry—investing, personal finance, business planning—is another story.
Finance has scooped up the smartest minds coming from top universities over the last two decades. Financial Engineering was the most popular major in Princeton's School of Engineering a decade ago. Is there any evidence it has made us better investors?
I have seen none.
Through collective trial and error over the years we learned how to become better farmers, skilled plumbers, and advanced chemists. But has trial and error taught us to become better with our personal finances? Are we less likely to bury ourselves in debt? More likely to save for a rainy day? Prepare for retirement? Have realistic views about what money does, and doesn't do, to our happiness?
I've seen no compelling evidence.
Most of the reason why, I believe, is that we think about and are taught about money in ways that are too much like physics (with rules and laws) and not enough like psychology (with emotions and nuance).
And that, to me, is as fascinating as it is important.
Money is everywhere, it affects all of us, and confuses most of us. Everyone thinks about it a little differently. It offers lessons on things that apply to many areas of life, like risk, confidence, and happiness. Few topics offer a more powerful magnifying glass that helps explain why people behave the way they do than money. It is one of the greatest shows on Earth.
My own appreciation for the psychology of money is shaped by more than a decade of writing on the topic. I began writing about finance in early 2008. It was the dawn of a financial crisis and the worst recession in 80 years.
To write about what was happening, I wanted to figure out what was happening. But the first thing I learned after the financial crisis was that no one could accurately explain what happened, or why it happened, let alone what should be done about it. For every good explanation there was an equally convincing rebuttal.
Engineers can determine the cause of a bridge collapse because there's agreement that if a certain amount of force is applied to a certain area, that area will break. Physics isn't controversial. It's guided by laws. Finance is different. It's guided by people's behaviors. And how I behave might make sense to me but look crazy to you.
The more I studied and wrote about the financial crisis, the more I realized that you could understand it better through the lenses of psychology and history, not finance.
To grasp why people bury themselves in debt you don't need to study interest rates; you need to study the history of greed, insecurity, and optimism. To get why investors sell out at the bottom of a bear market you don't need to study the math of expected future returns; you need to think about the agony of looking at your family and wondering if your investments are imperiling their future.
I love Voltaire's observation that "History never repeats itself; man always does." It applies so well to how we behave with money.
In 2018, I wrote a report outlining 20 of the most important flaws, biases, and causes of bad behavior I've seen affect people when dealing with money. It was called The Psychology of Money, and over one million people have read it. This book is a deeper dive into the topic. Some short passages from the report appear unaltered in this book.
What you're holding is 20 chapters, each describing what I consider to be the most important and often counterintuitive features of the psychology of money. The chapters revolve around a common theme, but exist on their own and can be read independently.
It's not a long book. You're welcome. Most readers don't finish the books they begin because most single topics don't require 300 pages of explanation. I'd rather make 20 short points you finish than one long one you give up on.
On we go.
Let me tell you about a problem. It might make you feel better about what you do with your money, and less judgmental about what other people do with theirs.
People do some crazy things with money. But no one is crazy.
Here's the thing: People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born into different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons.
Everyone has their own unique experience with how the world works. And what you've experienced is more compelling than what you learn second-hand. So all of us—you, me, everyone—go through life anchored to a set of views about how money works that vary wildly from person to person. What seems crazy to you might make sense to me.
The person who grew up in poverty thinks about risk and reward in ways the child of a wealthy banker cannot fathom if he tried.
The person who grew up when inflation was high experienced something the person who grew up with stable prices never had to.
The stock broker who lost everything during the Great Depression experienced something the tech worker basking in the glory of the late 1990s can't imagine.
The Australian who hasn't seen a recession in 30 years has experienced something no American ever has.
On and on. The list of experiences is endless.
You know stuff about money that I don't, and vice versa. You go through life with different beliefs, goals, and forecasts, than I do. That's not because one of us is smarter than the other, or has better information. It's because we've had different lives shaped by different and equally persuasive experiences.
Your personal experiences with money make up maybe 0.00000001% of what's happened in the world, but maybe 80% of how you think the world works. So equally smart people can disagree about how and why recessions happen, how you should invest your money, what you should prioritize, how much risk you should take, and so on.
In his book on 1930s America, Frederick Lewis Allen wrote that the Great Depression "marked millions of Americans—inwardly—for the rest of their lives." But there was a range of experiences. Twenty-five years later, as he was running for president, John F. Kennedy was asked by a reporter what he remembered from the Depression. He remarked:
I have no first-hand knowledge of the Depression. My family had one of the great fortunes of the world and it was worth more than ever then. We had bigger houses, more servants, we traveled more. About the only thing that I saw directly was when my father hired some extra gardeners just to give them a job so they could eat. I really did not learn about the Depression until I read about it at Harvard.
This was a major point in the 1960 election. How, people thought, could someone with no understanding of the biggest economic story of the last generation be put in charge of the economy? It was, in many ways, overcome only by JFK's experience in World War II. That was the other most widespread emotional experience of the previous generation, and something his primary opponent, Hubert Humphrey, didn't have.
The challenge for us is that no amount of studying or open-mindedness can genuinely recreate the power of fear and uncertainty.
I can read about what it was like to lose everything during the Great Depression. But I don't have the emotional scars of those who actually experienced it. And the person who lived through it can't fathom why someone like me could come across as complacent about things like owning stocks. We see the world through a different lens.
Spreadsheets can model the historic frequency of big stock market declines. But they can't model the feeling of coming home, looking at your kids, and wondering if you've made a mistake that will impact their lives. Studying history makes you feel like you understand something. But until you've lived through it and personally felt its consequences, you may not understand it enough to change your behavior.
We all think we know how the world works. But we've all only experienced a tiny sliver of it.
As investor Michael Batnick says, "some lessons have to be experienced before they can be understood." We are all victims, in different ways, to that truth.
In 2006 economists Ulrike Malmendier and Stefan Nagel from the National Bureau of Economic Research dug through 50 years of the Survey of Consumer Finances—a detailed look at what Americans do with their money.4
In theory people should make investment decisions based on their goals and the characteristics of the investment options available to them at the time.
But that's not what people do.
The economists found that people's lifetime investment decisions are heavily anchored to the experiences those investors had in their own generation—especially experiences early in their adult life.
If you grew up when inflation was high, you invested less of your money in bonds later in life compared to those who grew up when inflation was low. If you happened to grow up when the stock market was strong, you invested more of your money in stocks later in life compared to those who grew up when stocks were weak.
The economists wrote: "Our findings suggest that individual investors' willingness to bear risk depends on personal history."
Not intelligence, or education, or sophistication. Just the dumb luck of when and where you were born.
The Financial Times interviewed Bill Gross, the famed bond manager, in 2019. "Gross admits that he would probably not be where he is today if he had been born a decade earlier or later," the piece said. Gross's career coincided almost perfectly with a generational collapse in interest rates that gave bond prices a tailwind. That kind of thing doesn't just affect the opportunities you come across; it affects what you think about those opportunities when they're presented to you. To Gross, bonds were wealth-generating machines. To his father's generation, who grew up with and endured higher inflation, they might be seen as wealth incinerators.
The differences in how people have experienced money are not small, even among those you might think are pretty similar.
Take stocks. If you were born in 1970, the S&P 500 increased almost 10-fold, adjusted for inflation, during your teens and 20s. That's an amazing return. If you were born in 1950, the market went literally nowhere in your teens and 20s adjusted for inflation. Two groups of people, separated by chance of their birth year, go through life with a completely different view on how the stock market works:
Or inflation. If you were born in 1960s America, inflation during your teens and 20s—your young, impressionable years when you're developing a base of knowledge about how the economy works—sent prices up more than threefold. That's a lot. You remember gas lines and getting paychecks that stretched noticeably less far than the ones before them. But if you were born in 1990, inflation has been so low for your whole life that it's probably never crossed your mind.
America's nationwide unemployment in November 2009 was around 10%. But the unemployment rate for African American males age 16 to 19 without a high school diploma was 49%. For Caucasian females over age 45 with a college degree, it was 4%.
Local stock markets in Germany and Japan were wiped out during World War II. Entire regions were bombed out. At the end of the war German farms only produced enough food to provide the country's citizens with 1,000 calories a day. Compare that to the U.S., where the stock market more than doubled from 1941 through the end of 1945, and the economy was the strongest it had been in almost two decades.
No one should expect members of these groups to go through the rest of their lives thinking the same thing about inflation. Or the stock market. Or unemployment. Or money in general.
No one should expect them to respond to financial information the same way. No one should assume they are influenced by the same incentives.
No one should expect them to trust the same sources of advice.
No one should expect them to agree on what matters, what's worth it, what's likely to happen next, and what the best path forward is.
Their view of money was formed in different worlds. And when that's the case, a view about money that one group of people thinks is outrageous can make perfect sense to another.
A few years ago, The New York Times did a story on the working conditions of Foxconn, the massive Taiwanese electronics manufacturer. The conditions are often atrocious. Readers were rightly upset. But a fascinating response to the story came from the nephew of a Chinese worker, who wrote in the comment section:
My aunt worked several years in what Americans call "sweat shops." It was hard work. Long hours, "small" wage, "poor" working conditions. Do you know what my aunt did before she worked in one of these factories? She was a prostitute.
The idea of working in a "sweat shop" compared to that old lifestyle is an improvement, in my opinion. I know that my aunt would rather be "exploited" by an evil capitalist boss for a couple of dollars than have her body be exploited by several men for pennies.
That is why I am upset by many Americans' thinking. We do not have the same opportunities as the West. Our governmental infrastructure is different. The country is different. Yes, factory is hard labor. Could it be better? Yes, but only when you compare such to American jobs.
I don't know what to make of this. Part of me wants to argue, fiercely. Part of me wants to understand. But mostly it's an example of how different experiences can lead to vastly different views within topics that one side intuitively thinks should be black and white.
Every decision people make with money is justified by taking the information they have at the moment and plugging it into their unique mental model of how the world works.
Those people can be misinformed. They can have incomplete information. They can be bad at math. They can be persuaded by rotten marketing. They can have no idea what they're doing. They can misjudge the consequences of their actions. Oh, can they ever.
But every financial decision a person makes, makes sense to them in that moment and checks the boxes they need to check. They tell themselves a story about what they're doing and why they're doing it, and that story has been shaped by their own unique experiences.
Take a simple example: lottery tickets.
Americans spend more on them than movies, video games, music, sporting events, and books combined.
And who buys them? Mostly poor people.
The lowest-income households in the U.S. on average spend $412 a year on lotto tickets, four times the amount of those in the highest income groups. Forty percent of Americans cannot come up with $400 in an emergency. Which is to say: Those buying $400 in lottery tickets are by and large the same people who say they couldn't come up with $400 in an emergency. They are blowing their safety nets on something with a one-in-millions chance of hitting it big.
That seems crazy to me. It probably seems crazy to you, too. But I'm not in the lowest income group. You're likely not, either. So it's hard for many of us to intuitively grasp the subconscious reasoning of low-income lottery ticket buyers.
But strain a little, and you can imagine it going something like this:
We live paycheck-to-paycheck and saving seems out of reach. Our prospects for much higher wages seem out of reach. We can't afford nice vacations, new cars, health insurance, or homes in safe neighborhoods. We can't put our kids through college without crippling debt. Much of the stuff you people who read finance books either have now, or have a good chance of getting, we don't. Buying a lottery ticket is the only time in our lives we can hold a tangible dream of getting the good stuff that you already have and take for granted. We are paying for a dream, and you may not understand that because you are already living a dream. That's why we buy more tickets than you do.
You don't have to agree with this reasoning. Buying lotto tickets when you're broke is still a bad idea. But I can kind of understand why lotto ticket sales persist.
And that idea—"What you're doing seems crazy but I kind of understand why you're doing it."—uncovers the root of many of our financial decisions.
Few people make financial decisions purely with a spreadsheet. They make them at the dinner table, or in a company meeting. Places where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together into a narrative that works for you.
Another important point that helps explain why money decisions are so difficult, and why there is so much misbehavior, is to recognize how new this topic is.
Money has been around a long time. King Alyattes of Lydia, now part of Turkey, is thought to have created the first official currency in 600 BC. But the modern foundation of money decisions—saving and investing—is based around concepts that are practically infants.
Take retirement. At the end of 2018 there was $27 trillion in U.S. retirement accounts, making it the main driver of the common investor's saving and investing decisions.5
But the entire concept of being entitled to retirement is, at most, two generations old.
Before World War II most Americans worked until they died. That was the expectation and the reality. The labor force participation rate of men age 65 and over was above 50% until the 1940s:
Social Security aimed to change this. But its initial benefits were nothing close to a proper pension. When Ida May Fuller cashed the first Social Security check in 1940, it was for $22.54, or $416 adjusted for inflation. It was not until the 1980s that the average Social Security check for retirees exceeded $1,000 a month adjusted for inflation. More than a quarter of Americans over age 65 were classified by the Census Bureau as living in poverty until the late 1960s.
There is a widespread belief along the lines of, "everyone used to have a private pension." But this is wildly exaggerated. The Employee Benefit Research Institute explains: "Only a quarter of those age 65 or older had pension income in 1975." Among that lucky minority, only 15% of household income came from a pension.
The New York Times wrote in 1955 about the growing desire, but continued inability, to retire: "To rephrase an old saying: everyone talks about retirement, but apparently very few do anything about it."6
It was not until the 1980s that the idea that everyone deserves, and should have, a dignified retirement took hold. And the way to get that dignified retirement ever since has been an expectation that everyone will save and invest their own money.
Let me reiterate how new this idea is: The 401(k)—the backbone savings vehicle of American retirement—did not exist until 1978. The Roth IRA was not born until 1998. If it were a person it would be barely old enough to drink.
It should surprise no one that many of us are bad at saving and investing for retirement. We're not crazy. We're all just newbies.
Same goes for college. The share of Americans over age 25 with a bachelor's degree has gone from less than 1 in 20 in 1940 to 1 in 4 by 2015.7 The average college tuition over that time rose more than fourfold adjusted for inflation.8 Something so big and so important hitting society so fast explains why, for example, so many people have made poor decisions with student loans over the last 20 years. There is not decades of accumulated experience to even attempt to learn from. We're winging it.
Same for index funds, which are less than 50 years old. And hedge funds, which didn't take off until the last 25 years. Even widespread use of consumer debt—mortgages, credit cards, and car loans—did not take off until after World War II, when the GI Bill made it easier for millions of Americans to borrow.
Dogs were domesticated 10,000 years ago and still retain some behaviors of their wild ancestors. Yet here we are, with between 20 and 50 years of experience in the modern financial system, hoping to be perfectly acclimated.
For a topic that is so influenced by emotion versus fact, this is a problem. And it helps explain why we don't always do what we're supposed to with money.
We all do crazy stuff with money, because we're all relatively new to this game and what looks crazy to you might make sense to me. But no one is crazy—we all make decisions based on our own unique experiences that seem to make sense to us in a given moment.
Now let me tell you a story about how Bill Gates got rich.
Luck and risk are siblings. They are both the reality that every outcome in life is guided by forces other than individual effort.
NYU professor Scott Galloway has a related idea that is so important to remember when judging success—both your own and others': "Nothing is as good or as bad as it seems."
Bill Gates went to one of the only high schools in the world that had a computer.
The story of how Lakeside School, just outside Seattle, even got a computer is remarkable.
Bill Dougall was a World War II navy pilot turned high school math and science teacher. "He believed that book study wasn't enough without real-world experience. He also realized that we'd need to know something about computers when we got to college," recalled late Microsoft co-founder Paul Allen.
In 1968 Dougall petitioned the Lakeside School Mothers' Club to use the proceeds from its annual rummage sale—about $3,000—to lease a Teletype Model 30 computer hooked up to the General Electric mainframe terminal for computer time-sharing. "The whole idea of time-sharing only got invented in 1965," Gates later said. "Someone was pretty forwardlooking." Most university graduate schools did not have a computer anywhere near as advanced as Bill Gates had access to in eighth grade. And he couldn't get enough of it.
Gates was 13 years old in 1968 when he met classmate Paul Allen. Allen was also obsessed with the school's computer, and the two hit it off.
Lakeside's computer wasn't part of its general curriculum. It was an independent study program. Bill and Paul could toy away with the thing at their leisure, letting their creativity run wild—after school, late into the night, on weekends. They quickly became computing experts.
During one of their late-night sessions, Allen recalled Gates showing him a Fortune magazine and saying, "What do you think it's like to run a Fortune 500 company?" Allen said he had no idea. "Maybe we'll have our own computer company someday," Gates said. Microsoft is now worth more than a trillion dollars.
A little quick math.
In 1968 there were roughly 303 million high-school-age people in the world, according to the UN.
About 18 million of them lived in the United States.
About 270,000 of them lived in Washington state.
A little over 100,000 of them lived in the Seattle area.
And only about 300 of them attended Lakeside School.
Start with 303 million, end with 300.
One in a million high-school-age students attended the high school that had the combination of cash and foresight to buy a computer. Bill Gates happened to be one of them.
Gates is not shy about what this meant. "If there had been no Lakeside, there would have been no Microsoft," he told the school's graduating class in 2005.
Gates is staggeringly smart, even more hardworking, and as a teenager had a vision for computers that even most seasoned computer executives couldn't grasp. He also had a one in a million head start by going to school at Lakeside.
Now let me tell you about Gates' friend Kent Evans. He experienced an equally powerful dose of luck's close sibling, risk.
Bill Gates and Paul Allen became household names thanks to Microsoft's success. But back at Lakeside there was a third member of this gang of high-school computer prodigies.
Kent Evans and Bill Gates became best friends in eighth grade. Evans was, by Gates' own account, the best student in the class.
The two talked "on the phone ridiculous amounts," Gates recalls in the documentary Inside Bill's Brain. "I still know Kent's phone number," he says. "525-7851."
Evans was as skilled with computers as Gates and Allen. Lakeside once struggled to manually put together the school's class schedule—a maze of complexity to get hundreds of students the classes they need at times that don't conflict with other courses. The school tasked Bill and Kent—children, by any measure—to build a computer program to solve the problem. It worked.
And unlike Paul Allen, Kent shared Bill's business mind and endless ambition. "Kent always had the big briefcase, like a lawyer's briefcase," Gates recalls. "We were always scheming about what we'd be doing five or six years in the future. Should we go be CEOs? What kind of impact could you have? Should we go be generals? Should we go be ambassadors?" Whatever it was, Bill and Kent knew they'd do it together.
After reminiscing on his friendship with Kent, Gates trails off.
"We would have kept working together. I'm sure we would have gone to college together." Kent could have been a founding partner of Microsoft with Gates and Allen.
But it would never happen. Kent died in a mountaineering accident before he graduated high school.
Every year there are around three dozen mountaineering deaths in the United States.9 The odds of being killed on a mountain in high school are roughly one in a million.
Bill Gates experienced one in a million luck by ending up at Lakeside. Kent Evans experienced one in a million risk by never getting to finish what he and Gates set out to achieve. The same force, the same magnitude, working in opposite directions.
Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort. They are so similar that you can't believe in one without equally respecting the other. They both happen because the world is too complex to allow 100% of your actions to dictate 100% of your outcomes. They are driven by the same thing: You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.
But both are so hard to measure, and hard to accept, that they too often go overlooked. For every Bill Gates there is a Kent Evans who was just as skilled and driven but ended up on the other side of life roulette.
If you give luck and risk their proper respect, you realize that when judging people's financial success—both your own and others'—it's never as good or as bad as it seems.
Years ago I asked economist Robert Shiller, who won the Nobel Prize in economics, "What do you want to know about investing that we can't know?"
"The exact role of luck in successful outcomes," he answered.
I love that response, because no one actually thinks luck doesn't play a role in financial success. But since it's hard to quantify luck and rude to suggest people's success is owed to it, the default stance is often to implicitly ignore luck as a factor of success.
If I say, "There are a billion investors in the world. By sheer chance, would you expect 10 of them to become billionaires predominantly off luck?" You would reply, "Of course." But then if I ask you to name those investors—to their face—you will likely back down.
When judging others, attributing success to luck makes you look jealous and mean, even if we know it exists. And when judging yourself, attributing success to luck can be too demoralizing to accept.
Economist Bhashkar Mazumder has shown that incomes among brothers are more correlated than height or weight. If you are rich and tall, your brother is more likely to also be rich than he is tall. I think most of us intuitively know this is true—the quality of your education and the doors that open for you are heavily linked to your parents' socioeconomic status. But find me two rich brothers and I'll show you two men who do not think this study's findings apply to them.
Failure—which can be anything from bankruptcy to not meeting a personal goal—is equally abused.
Did failed businesses not try hard enough? Were bad investments not thought through well enough? Are wayward careers due to laziness? Sometimes, yes. Of course.
But how much? It's so hard to know. Everything worth pursuing has less than 100% odds of succeeding, and risk is just what happens when you end up on the unfortunate side of that equation. Just as with luck, the story gets too hard, too messy, too complex if we try to pick apart how much of an outcome was a conscious decision versus a risk.
Say I buy a stock, and five years later it's gone nowhere. It's possible that I made a bad decision by buying it in the first place. It's also possible that I made a good decision that had an 80% chance of making money, and I just happened to end up on the side of the unfortunate 20%. How do I know which is which? Did I make a mistake, or did I just experience the reality of risk?
It's possible to statistically measure whether some decisions were wise. But in the real world, day to day, we simply don't. It's too hard. We prefer simple stories, which are easy but often devilishly misleading.
After spending years around investors and business leaders I've come to realize that someone else's failure is usually attributed to bad decisions, while your own failures are usually chalked up to the dark side of risk. When judging your failures I'm likely to prefer a clean and simple story of cause and effect, because I don't know what's going on inside your head. "You had a bad outcome so it must have been caused by a bad decision" is the story that makes the most sense to me. But when judging myself I can make up a wild narrative justifying my past decisions and attributing bad outcomes to risk.
The cover of Forbes magazine does not celebrate poor investors who made good decisions but happened to experience the unfortunate side of risk. But it almost certainly celebrates rich investors who made OK or even reckless decisions and happened to get lucky. Both flipped the same coin that happened to land on a different side.
The dangerous part of this is that we're all trying to learn about what works and what doesn't with money.
What investing strategies work? Which ones don't?
What business strategies work? Which ones don't?
How do you get rich? How do you avoid being poor?
We tend to seek out these lessons by observing successes and failures and saying, "Do what she did, avoid what he did."
If we had a magic wand we would find out exactly what proportion of these outcomes were caused by actions that are repeatable, versus the role of random risk and luck that swayed those actions one way or the other. But we don't have a magic wand. We have brains that prefer easy answers without much appetite for nuance. So identifying the traits we should emulate or avoid can be agonizingly hard.
Let me tell you another story of someone who, like Bill Gates, was wildly successful, but whose success is hard to pin down as being caused by luck or skill.
Cornelius Vanderbilt had just finished a series of business deals to expand his railroad empire.
One of his business advisors leaned in to tell Vanderbilt that every transaction he agreed to broke the law.
"My God, John," said Vanderbilt, "You don't suppose you can run a railroad in accordance with the statutes of the State of New York, do you?"10
My first thought when reading this was: "That attitude is why he was so successful." Laws didn't accommodate railroads during Vanderbilt's day. So he said "to hell with it" and went ahead anyway.
Vanderbilt was wildly successful. So it's tempting to view his law-flouting—which was notorious and vital to his success—as sage wisdom. That scrappy visionary let nothing get in his way!
But how dangerous is that analysis? No sane person would recommend flagrant crime as an entrepreneurial trait. You can easily imagine Vanderbilt's story turning out much different—an outlaw whose young company collapsed under court order.
So we have a problem here.
You can praise Vanderbilt for flouting the law with as much passion as you criticize Enron for doing the same. Perhaps one got lucky by avoiding the arm of the law while the other found itself on the side of risk.
John D. Rockefeller is similar. His frequent circumventing of the law—a judge once called his company "no better than a common thief"—is often portrayed by historians as cunning business smarts. Maybe it was. But when does the narrative shift from, "You didn't let outdated laws get in the way of innovation," to "You committed a crime?" Or how little would the story have to shift for the narrative to have turned from "Rockefeller was a genius, try to learn from his successes," to "Rockefeller was a criminal, try to learn from his business failures." Very little.
"What do I care about the law?" Vanderbilt once said. "Ain't I got the power?"
He did, and it worked. But it's easy to imagine those being the last words of a story with a very different outcome. The line between bold and reckless can be thin. When we don't give risk and luck their proper billing it's often invisible.
Benjamin Graham is known as one of the greatest investors of all time, the father of value investing and the early mentor of Warren Buffett. But the majority of Benjamin Graham's investing success was due to owning an enormous chunk of GEICO stock which, by his own admission, broke nearly every diversification rule that Graham himself laid out in his famous texts. Where does the thin line between bold and reckless fall here? I don't know. Graham wrote about his GEICO bonanza: "One lucky break, or one supremely shrewd decision—can we tell them apart?" Not easily.
We similarly think Mark Zuckerberg is a genius for turning down Yahoo!'s 2006 $1 billion offer to buy his company. He saw the future and stuck to his guns. But people criticize Yahoo! with as much passion for turning down its own big buyout offer from Microsoft—those fools should have cashed out while they could! What is the lesson for entrepreneurs here? I have no idea, because risk and luck are so hard to pin down.
There are so many examples of this.
Countless fortunes (and failures) owe their outcome to leverage.
The best (and worst) managers drive their employees as hard as they can.
"The customer is always right" and "customers don't know what they want" are both accepted business wisdom.
The line between "inspiringly bold" and "foolishly reckless" can be a millimeter thick and only visible with hindsight.
Risk and luck are doppelgangers.
This is not an easy problem to solve. The difficulty in identifying what is luck, what is skill, and what is risk is one of the biggest problems we face when trying to learn about the best way to manage money.
But two things can point you in a better direction.
Be careful who you praise and admire. Be careful who you look down upon and wish to avoid becoming.
Or, just be careful when assuming that 100% of outcomes can be attributed to effort and decisions. After my son was born, I wrote him a letter that said, in part:
Some people are born into families that encourage education; others are against it. Some are born into flourishing economies encouraging of entrepreneurship; others are born into war and destitution. I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.
Therefore, focus less on specific individuals and case studies and more on broad patterns.
Studying a specific person can be dangerous because we tend to study extreme examples—the billionaires, the CEOs, or the massive failures that dominate the news—and extreme examples are often the least applicable to other situations, given their complexity. The more extreme the outcome, the less likely you can apply its lessons to your own life, because the more likely the outcome was influenced by extreme ends of luck or risk.
You'll get closer to actionable takeaways by looking for broad patterns of success and failure. The more common the pattern, the more applicable it might be to your life. Trying to emulate Warren Buffett's investment success is hard, because his results are so extreme that the role of luck in his lifetime performance is very likely high, and luck isn't something you can reliably emulate. But realizing, as we'll see in chapter 7, that people who have control over their time tend to be happier in life is a broad and common enough observation that you can do something with it.
My favorite historian, Frederick Lewis Allen, spent his career depicting the life of the average, median American—how they lived, how they changed, what they did for work, what they ate for dinner, etc. There are more relevant lessons to take away from this kind of broad observation than there are in studying the extreme characters that tend to dominate the news.
Bill Gates once said, "Success is a lousy teacher. It seduces smart people into thinking they can't lose."
When things are going extremely well, realize it's not as good as you think. You are not invincible, and if you acknowledge that luck brought you success then you have to believe in luck's cousin, risk, which can turn your story around just as quickly.
But the same is true in the other direction.
Failure can be a lousy teacher, because it seduces smart people into thinking their decisions were terrible when sometimes they just reflect the unforgiving realities of risk. The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there won't wipe you out so you can keep playing until the odds fall in your favor.
But more important is that as much as we recognize the role of luck in success, the role of risk means we should forgive ourselves and leave room for understanding when judging failures.
Nothing is as good or as bad as it seems.
finest thinkers, and this book is his best yet."
—STEVEN PRESSFIELD, author of The War of Art
"The comedian Bill Hicks said the world was tainted with fevered egos. In Ego Is the Enemy, Ryan Holiday writes us all a prescription: humility. This book is packed with stories and quotes that will help you get out of your own way. Whether you're starting out or starting over, you'll find something to steal here."
—AUSTIN KLEON, author of Steal Like an Artist
"This is a book I want every athlete, aspiring leader, entrepreneur, thinker, and doer to read. Ryan Holiday is one of the most promising young writers of his generation."
—GEORGE RAVELING, Hall of Fame Basketball coach and Nike's Director of International Basketball
"I see the toxic vanity of ego at play every day and it never ceases to amaze me how often it wrecks promising creative endeavors. Read this book before it wrecks you or the projects and people you love. Consider it as urgently as you do a proper workout regimen and eating right. Ryan's insights are priceless."
—MARC ECKO, founder of Ecko Unltd and Complex
"I don't have many rules in life, but one I never break is: If Ryan Holiday writes a book, I read it as soon as I can get my hands on it."
—BRIAN KOPPELMAN, screenwriter and director of Rounders, Ocean's Thirteen, and Billions
"In his new book Ryan Holiday attacks the greatest obstacle to mastery and true success in life—our insatiable ego. In an inspiring yet practical way, he teaches us how to manage and tame this beast within us so that we can focus on what really matters—producing the best work possible."
—ROBERT GREENE, author of Mastery
"We're often told that to achieve success, we need confidence. With refreshing candor, Ryan Holiday challenges that assumption, highlighting how we can earn confidence by pursuing something bigger than our own success."
—ADAM GRANT, author of Originals and Give and Take
"Once again Ryan Holiday has laid down the gauntlet for readers willing to challenge themselves with the tough questions of our time. Every reader will find truths that are pertinent to each of our lives. Ego can be the enemy if we are unarmed with the cautionary insights of history, scripture, and philosophy. As was said to St. Augustine more than a thousand years ago, 'Pick it up and read'; for to not do so is to allow the enemy to bring despair."
—DR. DREW PINSKY, host of HLN's Dr. Drew On Call and Loveline
"In this day and age where everyone seeks instant gratification, the idea of success is skewed—many believing the road to their goals is a linear path. As a former professional athlete I can tell you that the road is anything but linear. In fact, it is one that consists of twists, turns, and ups and downs—it requires you to put your head down and put in the work. Ryan Holiday hits the nail on the head with this book, reminding us that the real success is in the journey and learning process. I only wish I had had this gem as a reference during my playing days."
—LORI LINDSEY, former U.S. Women's National Team soccer player
"Philosophy has gotten a bad rap, but Ryan Holiday is restoring it to its rightful place in our lives. This book—packed with unforgettable stories, strategies, and lessons—is perfect for anyone who strives to do and accomplish. It's no exaggeration to say that, after finishing it, you'll never open your laptop and sit down to work the same way again."
—JIMMY SONI, Former Managing Editor of The Huffington Post and author of Rome's Last Citizen
"I would like to rip out every page and use them as wallpaper so I could be reminded constantly of the humility and work it takes to truly succeed. In the margins of my copy, I have scrawled the same message over and over—'pre-Gold.' Reading this inspiring book brought me back to the humility and work ethic it took to win the Olympics."
—CHANDRA CRAWFORD, Olympic Gold Medalist
"What a valuable book for those in positions of authority! It has made me a better judge."
—THE HONORABLE FREDERIC BLOCK, U.S. District Judge and author of Disrobed
ALSO BY RYAN HOLIDAY
Growth Hacker Marketing: A Primer on the Future of PR, Marketing, and Advertising
Trust Me, I'm Lying: Confessions of a Media Manipulator
The Obstacle Is the Way: The Timeless Art of Turning Trials into Triumph
PORTFOLIO / PENGUIN
An imprint of Penguin Random House LLC
375 Hudson Street
New York, New York 10014
penguin.com
Copyright © 2016 by Ryan Holiday
Penguin supports copyright. Copyright fuels creativity, encourages diverse voices, promotes free speech, and creates a vibrant culture. Thank you for buying an authorized edition of this book and for complying with copyright laws by not reproducing, scanning, or distributing any part of it in any form without permission. You are supporting writers and allowing Penguin to continue to publish books for every reader.
ISBN 9781591847816 (hardcover)
ISBN 9780698192157 (ebook)
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Do not believe that he who seeks to comfort you lives untroubled among the simple and quiet words that sometimes do you good. His life has much difficulty and sadness and remains far behind yours. Were it otherwise he would never have been able to find those words.
—RAINER MARIA RILKE
CONTENTS
Praise for Ryan Holiday
Also by Ryan Holiday
Title Page
Copyright
Epigraph
The Painful Prologue
INTRODUCTION
PART I. ASPIRE
TALK, TALK, TALK
TO BE OR TO DO?
BECOME A STUDENT
DON'T BE PASSIONATE
FOLLOW THE CANVAS STRATEGY
RESTRAIN YOURSELF
GET OUT OF YOUR OWN HEAD
THE DANGER OF EARLY PRIDE
WORK, WORK, WORK
FOR EVERYTHING THAT COMES NEXT, EGO IS THE ENEMY . . .
PART II. SUCCESS
ALWAYS STAY A STUDENT
DON'T TELL YOURSELF A STORY
WHAT'S IMPORTANT TO YOU?
ENTITLEMENT, CONTROL, AND PARANOIA
MANAGING YOURSELF
BEWARE THE DISEASE OF ME
MEDITATE ON THE IMMENSITY
MAINTAIN YOUR SOBRIETY
FOR WHAT OFTEN COMES NEXT, EGO IS THE ENEMY . . .
PART III. FAILURE
ALIVE TIME OR DEAD TIME?
THE EFFORT IS ENOUGH
FIGHT CLUB MOMENTS
DRAW THE LINE
MAINTAIN YOUR OWN SCORECARD
ALWAYS LOVE
FOR EVERYTHING THAT COMES NEXT, EGO IS THE ENEMY . . .
EPILOGUE
What Should You Read Next?
Selected Bibliography
Acknowledgments
THE PAINFUL PROLOGUE
This is not a book about me. But since this is a book about ego, I'm going to address a question that I'd be a hypocrite not to have thought about.
Who the hell am I to write it?
My story is not particularly important for the lessons that follow, but I want to tell it briefly here at the beginning in order to provide some context. For I have experienced ego at each of its stages in my short life: Aspiration. Success. Failure. And back again and back again.
When I was nineteen years old, sensing some astounding and life-changing opportunities, I dropped out of college. Mentors vied for my attention, groomed me as their protégé. Seen as going places, I was the kid. Success came quickly.
After I became the youngest executive at a Beverly Hills talent management agency, I helped sign and work with a number of huge rock bands. I advised on books that went on to sell millions of copies and invent their own literary genres. Around the time I turned twenty-one, I came on as a strategist for American Apparel, then one of the hottest fashion brands in the world. Soon, I was the director of marketing.
By twenty-five, I had published my first book—which was an immediate and controversial best seller—with my face prominently on the cover. A studio optioned the rights to create a television show about my life. In the next few years, I accumulated many of the trappings of success—influence, a platform, press, resources, money, even a little notoriety. Later, I built a successful company on the back of those assets, where I worked with well-known, well-paying clients and did the kind of work that got me invited to speak at conferences and fancy events.
With success comes the temptation to tell oneself a story, to round off the edges, to cut out your lucky breaks and add a certain mythology to it all. You know, that arcing narrative of Herculean struggle for greatness against all odds: sleeping on the floor, being disowned by my parents, suffering for my ambition. It's a type of storytelling in which eventually your talent becomes your identity and your accomplishments become your worth.
But a story like this is never honest or helpful. In my retelling to you just now, I left a lot out. Conveniently omitted were the stresses and temptations; the stomach-turning drops and the mistakes—all the mistakes—were left on the cutting-room floor in favor of the highlight reel. They are the times I would rather not discuss: A public evisceration by someone I looked up to, which so crushed me at the time that I was later taken to the emergency room. The day I lost my nerve, walked into my boss's office, and told him I couldn't cut it and was going back to school—and meant it. The ephemeral nature of best-sellerdom, and how short it actually was (a week). The book signing that one person showed up at. The company I founded tearing itself to pieces and having to rebuild it. Twice. These are just some of the moments that get nicely edited out.
This fuller picture itself is still only a fraction of a life, but at least it hits more of the important notes—at least the important ones for this book: ambition, achievement, and adversity.
I'm not someone who believes in epiphanies. There is no one moment that changes a person. There are many. During a period of about six months in 2014, it seemed those moments were all happening in succession.
First, American Apparel—where I did much of my best work—teetered on the edge of bankruptcy, hundreds of millions of dollars in debt, a shell of its former self. Its founder, who I had deeply admired since I was a young man, was unceremoniously fired by his own handpicked board of directors, and down to sleeping on a friend's couch. Then the talent agency where I made my bones was in similar shape, sued peremptorily by clients to whom it owed a lot of money. Another mentor of mine seemingly unraveled around the same time, taking our relationship with him.
These were the people I had shaped my life around. The people I looked up to and trained under. Their stability—financially, emotionally, psychologically—was not just something I took for granted, it was central to my existence and self-worth. And yet, there they were, imploding right in front of me, one after another.
The wheels were coming off, or so it felt. To go from wanting to be like someone your whole life to realizing you never want to be like him is a kind of whiplash that you can't prepare for.
Nor was I exempt from this dissolution myself. Just when I could least afford it, problems I had neglected in my own life began to emerge.
Despite my successes, I found myself back in the city I started in, stressed and overworked, having handed much of my hard-earned freedom away because I couldn't say no to money and the thrill of a good crisis. I was wound so tight that the slightest disruption sent me into a sputtering, inconsolable rage. My work, which had always come easy, became labored. My faith in myself and other people collapsed. My quality of life did too.
I remember arriving at my house one day, after weeks on the road, and having an intense panic attack because the Wi-Fi wasn't working—If I don't send these e-mails. If I don't send these e-mails. If I don't send these e-mails. If I don't send these e-mails . . .
You think you're doing what you're supposed to. Society rewards you for it. But then you watch your future wife walk out the door because you aren't the person you used to be.
How does something like this happen? Can you really go from feeling like you're standing on the shoulders of giants one day, and then the next you're prying yourself out of the rubble of multiple implosions, trying to pick up the pieces from the ruins?
One benefit, however, was that it forced me to come to terms with the fact that I was a workaholic. Not in an "Oh, he just works too much" kind of way, or in the "Just relax and play it off" sense, but more, "If he doesn't start going to meetings and get clean, he will die an early death." I realized that the same drive and compulsion that had made me successful so early came with a price—as it had for so many others. It wasn't so much the amount of work but the outsized role it had taken in my sense of self. I was trapped so terribly inside my own head that I was a prisoner to my own thoughts. The result was a sort of treadmill of pain and frustration, and I needed to figure out why—unless I wanted to break in an equally tragic fashion.
For a long time, as a researcher and writer, I have studied history and business. Like anything that involves people, seen over a long enough timeline universal issues begin to emerge. These are the topics I had long been fascinated with. Foremost among them was ego.
I was not unfamiliar with ego and its effects. In fact, I had been researching this book for nearly a year before the events I have just recounted for you. But my painful experiences in this period brought the notions I was studying into focus in ways that I could never have previously understood.
It allowed me to see the ill effects of ego played out not just in myself, or across the pages of history, but in friends and clients and colleagues, some at the highest levels of many industries. Ego has cost the people I admire hundreds of millions of dollars, and like Sisyphus, rolled them back from their goals just as they've achieved them. I have now at least peeked over that precipice myself.
A few months after my own realization, I had the phrase "EGO IS THE ENEMY" tattooed on my right forearm. Where the words came from I don't know, probably from a book I read long, long ago, but they were immediately a source of great solace and direction. On my left arm, of similarly muddled attribution, it says: "THE OBSTACLE IS THE WAY." It's these two phrases that I look at now, every single day, and use them to guide the decisions in my life. I can't help but see them when I swim, when I meditate, when I write, when I get out of the shower in the morning, and both prepare me—admonish me—to choose the right course in essentially any situation I might face.
I wrote this book not because I have attained some wisdom I feel qualified to preach, but because it's the book I wish existed at critical turning points in my own life. When I, like everyone else, was called to answer the most critical questions a person can ask themselves in life: Who do I want to be? And: What path will I take? (Quod vitae sectabor iter.)
And because I've found these questions to be timeless and universal, except for this note, I have tried to rely on philosophy and historical examples in this book instead of my personal life.
While the history books are filled with tales of obsessive, visionary geniuses who remade the world in their image with sheer, almost irrational force, I've found that if you go looking you'll find that history is also made by individuals who fought their egos at every turn, who eschewed the spotlight, and who put their higher goals above their desire for recognition. Engaging with and retelling these stories has been my method of learning and absorbing them.
Like my other books, this one is deeply influenced by Stoic philosophy and indeed all the great classical thinkers. I borrow heavily from them all in my writing just as I have leaned on them my entire life. If there is anything that helps you in this book, it will be because of them and not me.
The orator Demosthenes once said that virtue begins with understanding and is fulfilled by courage. We must begin by seeing ourselves and the world in a new way for the first time. Then we must fight to be different and fight to stay different—that's the hard part. I'm not saying you should repress or crush every ounce of ego in your life—or that doing so is even possible. These are just reminders, moral stories to encourage our better impulses.
In Aristotle's famous Ethics, he uses the analogy of a warped piece of wood to describe human nature. In order to eliminate warping or curvature, a skilled woodworker slowly applies pressure in the opposite direction—essentially, bending it straight. Of course, a couple of thousand years later Kant snorted, "Out of the crooked timber of humanity, nothing can be made straight." We might not ever be straight, but we can strive for straighter.
It's always nice to be made to feel special or empowered or inspired. But that's not the aim of this book. Instead, I have tried to arrange these pages so that you might end in the same place I did when I finished writing it: that is, you will think less of yourself. I hope you will be less invested in the story you tell about your own specialness, and as a result, you will be liberated to accomplish the world-changing work you've set out to achieve.
INTRODUCTION
The first principle is that you must not fool yourself—and you are the easiest person to fool.
—RICHARD FEYNMAN
Maybe you're young and brimming with ambition. Maybe you're young and you're struggling. Maybe you've made that first couple million, signed your first deal, been selected to some elite group, or maybe you're already accomplished enough to last a lifetime. Maybe you're stunned to find out how empty it is at the top. Maybe you're charged with leading others through a crisis. Maybe you just got fired. Maybe you just hit rock bottom.
Wherever you are, whatever you're doing, your worst enemy already lives inside you: your ego.
"Not me," you think. "No one would ever call me an egomaniac." Perhaps you've always thought of yourself as a pretty balanced person. But for people with ambitions, talents, drives, and potential to fulfill, ego comes with the territory. Precisely what makes us so promising as thinkers, doers, creatives, and entrepreneurs, what drives us to the top of those fields, makes us vulnerable to this darker side of the psyche.
Now this is not a book about ego in the Freudian sense. Freud was fond of explaining the ego by way of analogy—our ego was the rider on a horse, with our unconscious drives representing the animal while the ego tried to direct them. Modern psychologists, on the other hand, use the word "egotist" to refer to someone dangerously focused on themselves and with disregard for anyone else. All these definitions are true enough but of little value outside a clinical setting.
The ego we see most commonly goes by a more casual definition: an unhealthy belief in our own importance. Arrogance. Self-centered ambition. That's the definition this book will use. It's that petulant child inside every person, the one that chooses getting his or her way over anything or anyone else. The need to be better than, more than, recognized for, far past any reasonable utility—that's ego. It's the sense of superiority and certainty that exceeds the bounds of confidence and talent.
It's when the notion of ourselves and the world grows so inflated that it begins to distort the reality that surrounds us. When, as the football coach Bill Walsh explained, "self-confidence becomes arrogance, assertiveness becomes obstinacy, and self-assurance becomes reckless abandon." This is the ego, as the writer Cyril Connolly warned, that "sucks us down like the law of gravity."
In this way, ego is the enemy of what you want and of what you have: Of mastering a craft. Of real creative insight. Of working well with others. Of building loyalty and support. Of longevity. Of repeating and retaining your success. It repulses advantages and opportunities. It's a magnet for enemies and errors. It is Scylla and Charybdis.
Most of us aren't "egomaniacs," but ego is there at the root of almost every conceivable problem and obstacle, from why we can't win to why we need to win all the time and at the expense of others. From why we don't have what we want to why having what we want doesn't seem to make us feel any better.
We don't usually see it this way. We think something else is to blame for our problems (most often, other people). We are, as the poet Lucretius put it a few thousand years ago, the proverbial "sick man ignorant of the cause of his malady." Especially for successful people who can't see what ego prevents them from doing because all they can see is what they've already done.
With every ambition and goal we have—big or small—ego is there undermining us on the very journey we've put everything into pursuing.
The pioneering CEO Harold Geneen compared egoism to alcoholism: "The egotist does not stumble about, knocking things off his desk. He does not stammer or drool. No, instead, he becomes more and more arrogant, and some people, not knowing what is underneath such an attitude, mistake his arrogance for a sense of power and self-confidence." You could say they start to mistake that about themselves too, not realizing the disease they've contracted or that they're killing themselves with it.
If ego is the voice that tells us we're better than we really are, we can say ego inhibits true success by preventing a direct and honest connection to the world around us. One of the early members of Alcoholics Anonymous defined ego as "a conscious separation from." From what? Everything.
The ways this separation manifests itself negatively are immense: We can't work with other people if we've put up walls. We can't improve the world if we don't understand it or ourselves. We can't take or receive feedback if we are incapable of or uninterested in hearing from outside sources. We can't recognize opportunities—or create them—if instead of seeing what is in front of us, we live inside our own fantasy. Without an accurate accounting of our own abilities compared to others, what we have is not confidence but delusion. How are we supposed to reach, motivate, or lead other people if we can't relate to their needs—because we've lost touch with our own?
The performance artist Marina Abramović puts it directly: "If you start believing in your greatness, it is the death of your creativity."
Just one thing keeps ego around—comfort. Pursuing great work—whether it is in sports or art or business—is often terrifying. Ego soothes that fear. It's a salve to that insecurity. Replacing the rational and aware parts of our psyche with bluster and self-absorption, ego tells us what we want to hear, when we want to hear it.
But it is a short-term fix with a long-term consequence.
EGO WAS ALWAYS THERE. NOW IT'S EMBOLDENED.
Now more than ever, our culture fans the flames of ego. It's never been easier to talk, to puff ourselves up. We can brag about our goals to millions of our fans and followers—things only rock stars and cult leaders used to have. We can follow and interact with our idols on Twitter, we can read books and sites and watch TED Talks, drink from a fire hose of inspiration and validation like never before (there's an app for that). We can name ourselves CEO of our exists-only-on-paper company. We can announce big news on social media and let the congratulations roll in. We can publish articles about ourselves in outlets that used to be sources of objective journalism.
Some of us do this more than others. But it's only a matter of degree.
Besides the changes in technology, we're told to believe in our uniqueness above all else. We're told to think big, live big, to be memorable and "dare greatly." We think that success requires a bold vision or some sweeping plan—after all, that's what the founders of this company or that championship team supposedly had. (But did they? Did they really?) We see risk-taking swagger and successful people in the media, and eager for our own successes, try to reverse engineer the right attitude, the right pose.
We intuit a causal relationship that isn't there. We assume the symptoms of success are the same as success itself—and in our naiveté, confuse the by-product with the cause.
Sure, ego has worked for some. Many of history's most famous men and women were notoriously egotistical. But so were many of its greatest failures. Far more of them, in fact. But here we are with a culture that urges us to roll the dice. To make the gamble, ignoring the stakes.
WHEREVER YOU ARE, EGO IS TOO.
At any given time in life, people find themselves at one of three stages. We're aspiring to something—trying to make a dent in the universe. We have achieved success—perhaps a little, perhaps a lot. Or we have failed—recently or continually. Most of us are in these stages in a fluid sense—we're aspiring until we succeed, we succeed until we fail or until we aspire to more, and after we fail we can begin to aspire or succeed again.
Ego is the enemy every step along this way. In a sense, ego is the enemy of building, of maintaining, and of recovering. When things come fast and easy, this might be fine. But in times of change, of difficulty . . .
And therefore, the three parts that this book is organized into: Aspire. Success. Failure.
The aim of that structure is simple: to help you suppress ego early before bad habits take hold, to replace the temptations of ego with humility and discipline when we experience success, and to cultivate strength and fortitude so that when fate turns against you, you're not wrecked by failure. In short, it will help us be:
Humble in our aspirationsGracious in our successResilient in our failures
This is not to say that you're not unique and that you don't have something amazing to contribute in your short time on this planet. This is not to say that there is not room to push past creative boundaries, to invent, to feel inspired, or to aim for truly ambitious change and innovation. On the contrary, in order to properly do these things and take these risks we need balance. As the Quaker William Penn observed, "Buildings that lie so exposed to the weather need a good foundation."
SO, WHAT NOW?
This book you hold in your hands is written around one optimistic assumption: Your ego is not some power you're forced to satiate at every turn. It can be managed. It can be directed.
In this book, we'll look at individuals like William Tecumseh Sherman, Katharine Graham, Jackie Robinson, Eleanor Roosevelt, Bill Walsh, Benjamin Franklin, Belisarius, Angela Merkel, and George C. Marshall. Could they have accomplished what they accomplished—saving faltering companies, advancing the art of war, integrating baseball, revolutionizing football offense, standing up to tyranny, bravely bearing misfortune—if ego had left them ungrounded and self-absorbed? It was their sense of reality and awareness—one that the author and strategist Robert Greene once said we must take to like a spider in its web—that was at the core of their great art, great writing, great design, great business, great marketing, and great leadership.
What we find when we study these individuals is that they were grounded, circumspect, and unflinchingly real. Not that any of them were wholly without ego. But they knew how to suppress it, channel it, subsume it when it counted. They were great yet humble.
Wait, but so-and-so had a huge ego and was successful. But what about Steve Jobs? What about Kanye West?
We can seek to rationalize the worst behavior by pointing to outliers. But no one is truly successful because they are delusional, self-absorbed, or disconnected. Even if these traits are correlated or associated with certain well-known individuals, so are a few others: addiction, abuse (of themselves and others), depression, mania. In fact, what we see when we study these people is that they did their best work in the moments when they fought back against these impulses, disorders, and flaws. Only when free of ego and baggage can anyone perform to their utmost.
For this reason, we're also going to look at individuals like Howard Hughes, the Persian king Xerxes, John DeLorean, Alexander the Great, and at the many cautionary tales of others who lost their grip on reality and in the process made it clear what a gamble ego can be. We'll look at the costly lessons they learned and the price they paid in misery and self-destruction. We'll look at how often even the most successful people vacillate between humility and ego and the problems this causes.
When we remove ego, we're left with what is real. What replaces ego is humility, yes—but rock-hard humility and confidence. Whereas ego is artificial, this type of confidence can hold weight. Ego is stolen. Confidence is earned. Ego is self-anointed, its swagger is artifice. One is girding yourself, the other gaslighting. It's the difference between potent and poisonous.
As you'll see in the pages that follow, that self-confidence took an unassuming and underestimated general and turned him into America's foremost warrior and strategist during the Civil War. Ego took a different general from the heights of power and influence after that same war and drove him to destitution and ignominy. One took a quiet, sober German scientist and made her not just a new kind of leader but a force for peace. The other took two different but equally brilliant and bold engineering minds of the twentieth century and built them up in a whirlwind of hype and celebrity before dashing their hopes against the rocks of failure, bankruptcy, scandal, and insanity. One guided one of the worst teams in NFL history to the Super Bowl in three seasons, and then on to be one of most dominant dynasties in the game. Meanwhile, countless other coaches, politicians, entrepreneurs, and writers have overcome similar odds—only to succumb to the more inevitable probability of handing the top spot right back to someone else.
Some learn humility. Some choose ego. Some are prepared for the vicissitudes of fate, both positive and negative. Others are not. Which will you choose? Who will you be?
You've picked up this book because you sense that you'll need to answer this question eventually, consciously or not.
Well, here we are. Let's get to it.