Avoid mediocrity: Galloway's guide to mastering career and finances

The Algebra of Wealth: A Simple Formula for Success

Author: Scott Galloway

Publisher: Penguin Random House

Pages: 289

Price: Rs 899

  At the age of 42, Scott Galloway—renowned professor, entrepreneur, and author—welcomed his son into the world. But instead of joy, he felt shame. He could easily have built a safety net for his family by then but had instead squandered away the considerable sums he had earned. The problem lay not in a lack of knowledge: He had an MBA degree, had founded startups, and raised millions in funding. He was undone by a lack of discipline. During his 20s and 30s, the author contemptuously dismissed the notion of saving, believing his talents would always allow him to earn more. His son’s birth served as a wake-up call.  

 

Mr Galloway is a professor of Marketing at New York University’s Stern School of Business. He has founded multiple companies, including Prophet, RedEnvelope, and L2 Inc, and hosts popular podcasts such as Pivot and The Prof G Show. His newsletter No Mercy, No Malice boasts over 5,00,000 subscribers. Yet, as his life story reveals, financial mismanagement can undermine the security of even a person of his calibre.

 

In The Algebra of Wealth, Mr Galloway discusses why everyone, from an early age, must strive to achieve economic security. Financial independence, he asserts, alleviates anxieties and grants individuals mastery over their time. With this freedom, they can use their time as they deem fit, instead of peddling it all their lives for a paycheque.

 

Mr Galloway defines economic security as accumulating sufficient assets or investments so that the income from them surpasses one’s “burn rate”, which he describes as the sum of annual expenditure and taxes. To arrive at the corpus required to achieve economic security, he suggests multiplying the burn rate by a factor of 25.

 

Unless you are likely to get a sizable inheritance, says Mr Galloway, the only way you will achieve financial security is by working hard, spending less than you earn, and investing the difference.

 

At the heart of his book is a formula: Wealth = Focus + (Stoicism × Time × Diversification). In other words, wealth equals focus, combined with the product of stoicism, time, and diversification. The book explores each element of this formula in detail.

 

The chapter on Stoicism underlines the need to develop character and live a virtuous life—one replete with industry and discipline. Achieving financial freedom requires sticking to the straight and narrow path for decades. That will happen only when behaviour is rooted in a strong character.

 

The capitalist society we inhabit harnesses all its ingenuity to get us to spend. Social media fuels envy and an obsession with status that can supposedly only be acquired through consumption. It requires a strong character to circumvent the vicious cycle of earning more, spending even more, then wallowing in perpetual economic misery.   

 

The chapter titled “Focus” deals with how to handle one’s career and maximise the income from it. The author advocates being pragmatic in one’s career choice. Contrary to popular advice, Mr Galloway discourages following your passion. He says it leads youngsters into careers like acting, music, and others like them where supply far outstrips demand. Since raw talent is cheap and always flowing in, compensation remains low. The only exception to the advice of not following your passion is if you are so good at something that you feel confident about reaching the very top. Otherwise, non-romantic careers are easier to make a living in. 

 

The author advocates following your talent instead. He defines talent as something you can do that others can’t or won’t do, at least not easily. Only by trying out different things in the 20s and eliminating those they are not suited for can youngsters identify their true talents. 

 

According to the author, once you find your talent, match it to a field where the rewards are attractive. Over time develop mastery in the chosen field and passion will follow.

 

A sad but useful insight he offers is that market dynamics trump individual performance. One must choose a field where the wave—that is, market demand—is so strong that it carries you far.

 

In the chapter titled “Time”, the author elaborates upon the power of compounding and how it can be your silent ally in the quest for financial freedom. It also contains detailed advice on saving and the need to allocate savings across three buckets: Consumption, intermediate expenses (down payment for car, house, etc), and long-term investments.

 

In the final chapter on diversification, the author explores various asset classes and offers detailed advice on investing.

 

This book covers a lot of ground and offers wisdom that could prove invaluable, especially to people in their 20s, who are starting their careers. It could inject greater purpose and direction into their pursuits and help them avoid the pitfalls that result in an existence characterised by lifelong mediocrity and struggle.