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Oct 9 55 tweets 11 min read
1/ On Is Money Just A Game?


For most people, it is a huge struggle, but the people who make the most money tend to think of it as a game.

Can we thread the needle and figure out why both people are right?

We will try! Off we go.
2/ A common question among Manhattan finance professionals is "what is your number?"

The number is meant to be "the number at which you have enough money to retire, not go to the office and so on"

It is not a normal question in most parts of the world, but polite enough in NYC.
3/ Also, non-NYC people will find the NYC answer to this question to be obnoxious.

By the time people are in their 30s and doing well in finance, it is unlikely the number is less than $20M

Wait seriously? How can that be?
4/ Well, ok, here is the math.

You want a nice 3 bedroom family apartment in a nice neighborhood to raise your kids? $5M

Private school for 2 kids for 18 years plus college. $1M/kid, total $2M minimum
5/ An entry-level home in the Hamptons? $3M

That leaves $10M, assume inflation eats away 2% / year (back then, not now), you have a safe-ish return of 3% post inflation, $300K pre-tax, $150K post tax, property taxes on your house $50K/year, restaurants, travel, etc
6/ It sounds ridiculous to anyone outside that context but if the question is taken literally - you never work again and you have to run the rest of your life on that money while living the high end NYC professional lifestyle, you probably do need something around $20M upfront
7/ And note that this does not give you the hyper deluxe high end NYC professional life.

It gives you the entry-level high end NYC professional life.

As people got richer, you heard $50M floated, then $100M floated and it goes up from there
8/ A note for the audience, lest they get too excited about job opportunities in NYC.

Most people who said "$20M" for the number never come close to it.

They may have the life above, but by working their butts off every year until retirement, to have current income coming in.
9/ What I want to say is that "The Number" was a bit of a parlor game, a way to relieve the stress of working 80 hours per week, a chat over your 4th martini, a way to daydream that you can enjoy the adult goodies of NYC without the office grind.
10/ I was once asked this question, fairly young, *in a job interview* by a billionaire.

I froze - do I say "$20M" (humble man of the people), $50M (more ambitious), a bigger number (delusional?)

I fudged in the normal range & said "but I would never stop working" (go-getter!)
11/ In any case, this is all nonsense, nobody ever stops working whether they make it or not.

You cannot fill the hole with money, you have to fill it with love.

This is covered here in great depth:

12/ One day, I had a friend from out of town, a normal person with a normal job in a normal city.

I asked them "what is your number?"

They were a bit surprised because normal people don't ask this rude questions like this and blurted out "$1M"
13/ I thought this was all very charming and sweet because it is what normal people will say "I am a millionaire"

Nobody asks stupid questions like this in the real world so nobody checks the math.

So I asked some follow-up questions and we went to dinner
14/ A brief interruption, lest I now seem out of touch.

While I was having this very discussion, I probably had $50K in my bank account.

This was a parlor game, a thought exercise in your 20s and 30s, not an actual thing that people who actually have $100M think about.
15/ In any case, we were at dinner chit-chatting and I said: "anyway, none of this matters, money is just a game anyway"

NOW my friend got pissed off at me.

"What do you mean, money is a game?"
"Do you realize how hard I work?"
"If I lose my job, I am out on the street"
16/ Oh boy, now I have done it, how do I handle this now?

We were having a perfectly nice time at dinner and now I look like the jerk of the year.

Every single thing my friend said IS TRUE.
But what I said WAS ALSO TRUE.
17/ Here is the answer, my answer to this question.

As with all "framework" answers it is partially right and partially wrong.

My goal as always with frameworks is not to convince you if they are "right" (no such thing), but to give you a tool that might be "useful"
18/ For the vast majority of people in the world, money is *not at all a game*

It is highly stressful. Many people are 1/2/10/20 paychecks away from disaster, from things that will ruin their lives.

They have responsibilities, they work hard, they care, and still barely get by
19/ For those of you in those shoes (most people reading this), please know that I agree with this view and I agree that this is how your life is.

What I am here to tell you is that "this is how the game is set up, it is how it is set up to function."
20/ Money is many things but, for today, in the context of a capitalist society, I want to focus on a specific thing.

Money is an information processing and distribution system.

Read that about a zillion times. It is very important.
21/ No society is perfectly capitalist or centrist/communist but to use some stereotypes:

a) a central planning system has a group of people who decide what is needed in what quantity across the economy

b) a capitalist system uses "price signals" to communicate what is needed
22/ Our current capitalist system has many flaws and areas for improvement (maybe some parts of crypto can help) but the idea of using "prices" to communicate information is a great idea.

(econ nerds, we are going to assume away externalities for another day)
23/ What do I mean by "prices"

Imagine that everything about NYC is the same but you owned the only pizza shop in NYC.

The demand for your pizza would greatly outstrip your supply of pizza.

Happy times! You raise prices, start stacking up the profits
24/ But wait, me, aspiring entrepreneur, waiting in line for my $20 slice of pizza start doing some math.

How much do rent, flour, tomato sauce, pizza flippers cost?

Wait, they cost $2 per slice? This guy is making $18 profit PER SLICE?!
25/ Time to drop everything and launch "6529 Original Pizza"

Just like the other pizza shop, but we sell slices for $18/slice (not $20/slice) and are still thrilled to make $16/slice.
26/ Does the story end here? Nope. Your friend Sally is also handy with a brick oven so here comes Sally's pizza at $15/slice.

And this repeats over and over until NYC has thousands of stores fighting to sell you a slice of pizza for $1 to $5/slice
27/ Here is the important part.

On average, the average pizza slice shop and its owner and its employees are *just about getting by*

Money does not seem at all like a game to them, they are working all day near a hot oven, crankign out the slices and they do "meh, ok" $-wise
28/ None of the people working in the shop are at any risk whatsoever of making $20M, even in their wildest dreams.

is it because they are not bright? is it because they are not hard workers? is it because they are less worthy?

no, of course not, none of those things at all
29/ The reason that the average pizza shop and pizza shop employee in NYC do "just OK" is because selling pizza in NYC is just about as close to a perfect competitive market as you will find in a big city like NYC.

Product/pricing is clear and barriers to entry are low
30/ If anyone is making "excess" profits, someone else will come and compete with them, offer the same product for less, and steal their profits.

So the market settles into:

crappy slices: $1
ok slices: $3
deluxe slices: $4-$5
31/ You can make a living slinging slices in NY, but, on average, you won't get very rich.

This is the capitalistic system working *exactly as intended* - the capitalist system is meant to return the excess profits to the consumer, not to the greedy businessman.
32/ So yes it might suck to work all day and only be able to sell your slice of pizza for $3, but on the other hand, for the 99.9999% of people who are not working in a pizza shop, well it is AWESOME to get pretty decent meal for $6 in the most expensive city in America
33/ And to the degree that this is happening in other fields, it is good for the pizza worker too.

Because everyone else is fighting to win market share, improve quality and reduce costs in every other industry too, so pizza worker will also buy better products for less
34/ OK, so what? This classic microeconomics, assuming away all the cases where it does not work as designed (corruption, bad regulation, "externalities" and so on).

Where is the *game* you are talking about?

This just sounds tough, a rat race, the grind.
35/ The game is this.

You will only make good money if you find a way to *avoid perfect competition*

This applies whether or not you are running a business or running your own career.

You have to find a way to have:
a) something people want
b) not easily copied
36/ The game is learning to read the price signals.

Money-as-an-information-processing-system is designed by society to deliberately send messages

"lots of profits" -> send more societal resources here
"lots of losses" -> take away societal resources from here
37/ This is an excellent guide, an excellent system, an excellent game, but to have a chance of succeeding in it, YOU HAVE TO KNOW THE RULES OF THE GAME

You have to read the price signals the way they were intended to be used
38/ If you find that you are dissatisfied with the salaries people are offering you.

If you find that you are not happy with the income your business is earning.

You have to detach from your emotions, detach from "but I need money for X" and put a different lens on
39/ The lens you need to put on is "why is the game sending me this signal?"

The generic answer is of course "the game is not valuing your contribution as much as you would like because either there is no demand for your service or lots of supply for your service"
40/ And the generic next step is "figure out what can I change about myself or my business" or even "maybe I should be in a different field altogether"

And your filter for "are these good ideas?" is "how much supply is there relative to demand?"
41/ At a personal level, this is an easier and more satisfying exercise.

The generic answer is: "add skills"

The more advanced answer is "add skills in different areas until you are a 1/1"
42/ There are lots of, say, bookkeepers in the world and they earn a 'perfect competition' type salary (not bad, not great).

There are very few bookkeepers with crypto expertise and they earn a much much higher salary
43/ I suspect there are close to zero bookkeepers with crypto and NFT expertise, who know off the bat how to account for LooksRare tokens and Nouns PFPs.

A bookkeeper of this type can basically name their rate because they are a 1/1 in an area with demand and money
44/ Note that this is not some type of super-duper challenge.

The person who has learned to prep financial statements has all the cognitive power needed to learn how to look up opensea transactions on etherscan and figure out the debits and credits.

it might take 6 months max
45/ And yet I am sure there are millions of bookkeepers worldwide who are dissatisfied with their current income and probably <25 who can do NFT bookkeeping with no supervision or training at all.

It is wild if you think about, but these type of "market inefficiencies" happen
46/ Now, in time, the market inefficiency will close.

More bookkeepers will learn how to read etherscans and their billing rates will normalize again.

But that will take years, you will make a lot of money until that happens and then you go on to the next thing
47/ One thing I think @ScottAdamsSays is right about is that it is easier in your personal life to build differentiation by adding skills horizontally.

Being the top 1% of something is hard.

But being the top 25% of 5 things is much more manageable and might be just as good
48/ The same rules applies to business but it is much harder. The average bookkeeper does not think like this, you can find the gaps.

The average successful businessperson *does* think like this so most obvious opportunities are already gone
49/ In fact the risk in business is to think like this but in practice be a "mid"

You think you have found a market gap, but most of the time you just have not understood something about the market that the better players know.

I lost a lot of money this way!
50/ I have had many different careers, roles, businesses and products.

It is very hard in business and when I was younger I made a lot of mistakes.

Usually of the type above - I thought I found the market inefficiency but it was a mirage
51/ In the NFT space a lot of people, particularly the artists, are somewhere between 'having a career' and 'running a business'

It is very clear what you have to do to avoid "perfect competition" - you have to develop a distinct voice or style.

Easy to say, hard to do
52/ In any case, almost every rich person I know and literally every uber-rich person I know thinks about it this way.

They are trying to solve a puzzle, they are trying to unlock the part of the market that is not perfectly efficient.

They are, in effect, playing a game
53/ So, tl;dr:

✅ In a capitalist society, you are playing the price signals game whether you like it or not
✅ Most people do not realize it so it is hard, stressful, confusing
✅ Some do, it is still hard, but you know the rules of the game, so you have a chance
54/ Good luck with your personal journey, that is ALWAYS bumpy, always difficult

As the Making It Thread says, money is not the only thing, not even the most important thing.

But at least if you are playing the game, better to know what game is being played
55/ If you got here for the first time through this thread, the game we are playing here is ensuring the metaverse is built on open systems, not within 1 or 2 tech companies

Lots more about that there

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