Among well-read investors who study the sources of wealth in America today, Dr. Thomas Stanley’s 1996 book “The Millionaire Next Door” was the seminal work dedicated to studying the behaviors of the affluent which were at odds with public perception. Notably, Dr. Stanley pointed out that $2,000+ purses and $10,000 per year country-club memberships, or whatever other type of veblen good activities your imagination associates with conspicuous consumption, only accurately describes roughly a third of millionaires, with the slight majority of millionaires making purchases that we tend to associate with the upper tier of middle-class consumption (e.g. see Stanley’s classic reference to “the Toyota millionaire households”).
If, at any time between 1920 and 1985, you were a member of a wealthy Atlanta household, the odds were strong that your family owned stock in both Coca-Cola and the Trust Corp. of Georgia. Investing in the powerhouse conservatively managed stocks was just something you did, practically on autopilot.
And for about seven decades, the Trust Corp. of Georgia was as beautifully boring as its name suggests. It would make about 5-6% more loans per year, grow profits anywhere between 5-9% per year depending on interest rates and the strength of the economy, and the investors would collect a 2-4% cash dividend. All told, it was a solid way to own a great asset that would compound at 7% to 13% per year. And you would get the benefit of participating in your community’s growth.
In Laguna Beach, California, there are homes that sold for $172,000 in 1956. By 2018, many of them traded in the $2.5 million to $4 million range ($2.84 million as the median). And yet, the worst recession that affected these home values occurred in 1973-1974, when then the 1972 peak of $232,000 crumbled such that the average home price in Laguna Beach became $145,000. If the equity in your Laguna Beach home was a meaningful percentage of your net worth, it was the most noticeable hardship to hit the California real estate market in American history, excluding the Great Depression.
An acquaintance of mine invested in each of the companies mentioned above. He messaged me some of his trading receipts showing scraps of thousands of dollars that are now worth hundreds of thousands of dollars. I asked him how he knew to invest in these companies back in 2011, 2012, and 2013.
He said: “My dad works in privacy law, and these companies scared the shit out of him because they were getting so powerful and no one could stop them.”
The closest Warren Buffett quote that reminds me of this is the “silver bullet” test, when a young Warren Buffett said he would call around industry executives and ask them which competitor they would destroy if they could. It was Buffett’s way of ferreting out the “economic moats” for which he would later became famous.
Historically, life insurance, trust institutions and banks would publish monthly newsletters that would contain stodgy but factually useful advice. The Old Pennsylvania Trust’s 1938 Newsletter about losing weight suggested drinking nothing but water and eating one meal per day no later than 6:30 P.M. Rudimentary, yes, but also capturing the essence that weight loss is heavily reliant on the consumption of fewer calories.
Now, the social age has motivated the marketing departments of places like Northwestern Mutual to launch a “Redefining Retirement Series” in which they profiled a woman who quit her job after two years in the work force, titled “I Quit My Job at Facebook to Travel – And Expand My Professional Network”, with the article’s caption summary stating: “Here, one woman shares how she quit her job to travel the Middle East and Asia – while still using that time to network and grow her professional ties.”