What Is Money For?

What Is Money For?

Shelby Cullom Davis got his start in the stock market in the early 1940’s on the heels of the Great Depression. He bought equities on the cheap at a time when other investors had given up on the stock market and just as the United States emerged as the world’s most dominant and dynamic economy. Davis eventually made it onto the list of the Forbes 400 richest Americans in the 1980’s. To this day, his grandsons manage billions of dollars for the Davis family of mutual funds.

I recently read the book Davis Dynasty: Fifty Years of Successful Investing on Wall Street. Biographies are a fantastic way to peer into history, and it’s particularly interesting to tour the ups and downs of the 20^th century on the shoulders of one of the best stock market investors of that era.

Davis was able to amass an incredible amount of wealth not only because he was an astute allocator of capital, but also, as his wealth took off, he never strayed from his relatively frugal lifestyle and spending habits.

One of the anecdotes from the book that has stuck with me is a scene where Davis teaches one of his grandsons about the power of compound interest. As they’re walking down the street in New York City, his grandson asks if he can borrow $1 to buy a hot dog. Davis refuses and explains that if they were to forgo the hot dog and instead invest the money, that dollar would compound in the market and be worth far more in the future.

I think about that story a lot. I have a lot of admiration for Davis’s frugality and his desire for his children and grandchildren to develop independence and a strong work ethic. He was particularly keen on letting his family know they weren’t going to be able to rely on him for money. His methods may not have been perfect, but his kids and grandkids did carve their own paths in the world and have gone on to be extremely successful in their own ways.

That being said, what’s the point of being a billionaire if you can’t enjoy a small luxury like a hot dog on the streets of New York City with your grandson?

Money is a tricky thing. It’s important to look towards the future and save for life’s milestones like the down payment on a house, putting kids through college, or spending in retirement. That means not spending money that you might have in your pocket today in hopes that you’ll have more purchasing power in the future. Thoughtfulness and long-term planning are required to balance today’s needs and wants with tomorrow’s hopes and dreams.

But it’s also important to differentiate between money as a means to other ends versus the accumulation of wealth as an end in and of itself.

There’s no single recipe for success when it comes to navigating these questions. Everyone’s circumstances and goals are different. People need to decide for themselves what money is for and recognize the tradeoffs between accumulating it and spending it.

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