Today’s wisdom comes from a Joshua Kennon quote about building wealth. Joshua Kennon is a value investing portfolio manager with a history of writing about investing and personal finance. This Joshua Kennon quote discusses the importance of education to the successful accumulation of wealth. Bolded emphasis is mine.
Accumulating money is like playing the piano or riding a bike. It can be learned.” – Joshua Kennon
This quote was taken from a blog post on Joshua Kennon’s website. His archive is definitely worth reading. Joshua follows in the footsteps of Charlie Munger by taking a multidisciplinary approach to investing. One aspect of this approach is the study of many subject to improve one’s wisdom. This is the foundation of our purpose in studying mental models. Joshua Kennon has written extensively on mental models and investor behavior over the years, so be sure to check out his writings.
Breakdown of Joshua Kennon Quote
On a very basic level, this Joshua Kennon quote does two things. First, it relates the process of accumulating money to skills such as playing the piano or riding a bike. Second, the quote asserts that accumulating money can be learned. I will address each of these two points independently.
Building Wealth is NOT: a Sin, for only the privileged, or theft
It is not an obvious assertion that building wealth is a skill. Our populace widely disputes the foundation of wealth. Most of which believe that wealth is not related to skill at all. Some argue that the accumulation of wealth is a sin. Others assert that building wealth is only possible for a select privileged few. Yet, others assert that accumulated wealth is the result of theft or deprivation of the poor. As with most observations of the world, these assertions are built upon a fragment of truth. However, they are not the full truth.
The accumulation of wealth is not a sin. Instead, the love of money over all else would be a sin. They are not equivalent.
Building wealth is possible for more than a privileged few. However, it would be true that relatively few are successful in building wealth. This does not necessarily mean that it’s only possible for those who are privileged to build wealth.
It is certainly true that some people manage to accumulate wealth through theft. However, this is most common in corrupt countries where dictators can simply seize wealth by force. Yet, it would be wrong to say that all wealth is the product of applied force or theft. Bill Gates certainly didn’t build his wealth through theft. Instead, he provided immense value to millions of people around the world with his Microsoft products.
Building Wealth is a skill based on a formula of behaviors
Bill Gates makes a great example of why building wealth is a skill. He knew the principals of building wealth and actively applied them.
Why then do some build wealth and others fail to do so?
The answer is fairly simple. Those who fail to build wealth don’t exhibit behaviors that lead to the accumulation of wealth. These behaviors are clearly outlined in The Richest Man in Babylon book* by George S. Clason. I also outlined my take on those behaviors in full in my review of the book. These behaviors can be summed up in a simple formula:
- Save money
- Invest wisely
- Manage risk
- Increase your earnings capability
Money does not discriminate
Anyone who implements these behaviors will build wealth. It doesn’t matter what background you come from. Your religious affiliation, sexual orientation, race, gender, and family’s socioeconomic status have zero impact on the effectiveness of this formula. Don’t let preconceptions of privilege, discrimination, or glass ceilings prevent you from achieving your best possible life.
Money doesn’t discriminate based on such factors. Coca-Cola Company (KO) currently pays a quarterly dividend of $0.37 per share. Everyone who owns a share receives that dividend.¹ Dividends aren’t restricted to only those of a privileged class. All you have to do to receive dividends yourself is pay the purchase price for a share of stock. There is no other requirement. All it would take today is $46.73 plus commissions.
Skills can be learned and Building Wealth is no exception
As riding a bike is a learned skill, so is building wealth. Saving money and balancing a budget is analogous to balancing your weight across the frame of a bike. If you can learn to pedal a bike, you can learn to invest your saved money. Meanwhile, managing risk is just as important as putting on a helmet before riding your bike. When you want to increase your max biking speed, you take off the training wheels or move up from a mountain bike to a road bike. In the same way, increase your earnings capability by steadily improving your knowledge and skills.
Personal Responsibility – the first step
If you begin to recognize that building wealth is a skill, you’ve taken a critical first step in your journey. Only by taking personal responsibility for your personal finance goals can you hope to achieve your wildest financial dreams.
Many people limit their wealth building journey by focusing on factors they can’t control. The only thing that matters is what are you going to do today to increase your wealth. It doesn’t matter what is going on with the economy. Ignore what your neighbor is doing with their money. You can’t control any of those things. The only thing you can control is your personal actions. Focus on improving your own skills and behaviors and everything else will work itself out.
Motivation – Lack of wealth is often a problem of education
The fact that wealth building is a skill is good news. Very good news. If only the privileged were able to build wealth, that would be bad news. However, everyone can learn new skills. Take the time necessary to learn the behaviors needed to build wealth and practice them in your life. Read books like The Richest Man in Babylon to reinforce these behaviors. Most importantly, make a daily habit of improving your financial skills.
The problem for many is often education. Most people never learn that wealth building is simply a skill. Poor and middle-class households don’t commonly teach their children how to build wealth. Note that Joshua Kennon observes that wealthy households do teach their children the skill of building wealth. In many cases, our culture has created a negative stigma for even discussing personal finances. Don’t let this stigma hold you back from improving your finances or prevent you from helping others.
If you take these wealth building behaviors to heart, you should start to see an improvement in your finances over time.
Finally, I hope you’ll then share these behaviors and educate others in your community. Give them a copy of The Richest Man in Babylon* book or share this article. Alternatively, just memorize this Joshua Kennon quote and share it with them. Spreading this knowledge and the skill of building wealth is critical to solving this problem of education for those not otherwise exposed to it.
This post is one of many in my ‘Words of Wisdom’ series. This series focuses on pithy quotes which distill wisdom into a short statement. Consider reviewing my full condensed wisdom page for my useful insights for your investing journey.
¹The listed dividend payment rate of $0.37 per quarter is based upon past dividend payments of Coca-Cola Company as of February 2nd, 2018 and is always subject to change. I am in no way making a statement as to what KO’s future dividend policy might be.
*Disclosure: Some of the links on this page are affiliate links. If you make a purchase through one of these links, I may earn a small commission. This commission comes at no additional cost to you. Please do not spend any money on any linked book unless you feel that it will help you achieve your goals.