The Spotlight

Frank Lucas was a drug dealer, and a very good one at that. By the 1970’s his heroin empire in New York City was bringing in $1 million per day. Day after day, and year after year. 

Part of the reason he got away with his crimes for so long was that he kept a low profile, living a mostly unremarkable material life, which helped him avoid unwanted attention. He wasn’t on the police’s radar. 

But hubris caught up, as it has a way of doing. 

Other low-level drug dealers lived flashy lives, and eventually Lucas had had enough. He wrote in his memoir: “I could not have people who made less money than me walking around thinking they ruled the world. I screamed it out to all who would listen: ‘Ya’ll think you gone outshine me?’”

At the March 8, 1971, “Fight of the Century” between Muhammad Ali and Joe Frazier at Madison Square Garden, Lucas wore a floor-length $100,000 chinchilla coat with matching hat – clothes worth roughly $1 million in today’s dollars. He sat in the best seat, in front of Frank Sinatra and Vice President Spiro Agnew. 

“For the first time ever, I actually felt like showing off,” he wrote. 

It worked. Strangers lined up to take picture with him and his fancy coat. The press went wild. Everybody that night paid attention to Frank Lucas. 

Including the New York Police Department. 

“I came to the fight an unknown man,” Lucas wrote. “I left the fight a marked man.”

Stunned at how an unknown man could be living like a king, law enforcement began investigating Lucas, and that was that. He was caught, arrested, and sentenced to seventy years in prison. 

Lucas was a criminal. But let me introduce you to a concept that applies to all of us ordinary people. I call it social debt. 

Social debt is what happens when how you spend your money influences what people think of you in unwanted ways. It’s often a hidden form of debt, which makes it especially dangerous. 

Sometimes it’s people being envious of you.

Sometimes it’s you suddenly feeling superior to people whose company you used to enjoy.

It can even be your own higher expectations that come from inflating your lifestyle. 

There are some purchases for which every dollar you spend changes how the rest of the world thinks of you, and what you think of yourself, in ways you might come to regret. 

This story above is an excerpt from Morgan Housel's new book “The Art of Spending Money”

In 2001, I made it a goal to become a full-time private investor. It was my BHAG. “$10k and two 10-baggers = millionaire.” Every day and every night it’s all I thought about. No one else understood this goal. They thought I was being stupid, reckless, lazy or some combination of all three. What people thought of me just added fuel to my fire.

From 2001 to 2007 I went from undergraduate, to graduate school, to consulting – everything I did was to give me additional time and autonomy so I could focus on reaching my goal. During these years I moved to Philadelphia, then to New Jersey, then to the Poconos (Northeastern PA), and then back to Lancaster, PA in 2007. 

When I moved back to Lancaster, I was single. I had no debt. I rented an old red barn that had been renovated into an apartment at the end of the long lane. My neighbors were Amish. Nothing around me but cow pastures. My family and friends didn’t understand what I was doing or pursuing. I liked it that way. There was something energizing about being misunderstood and pursuing something on your own terms. 

In 2008, Mike Tyson punched the financial markets in the form of the GFC. My portfolio was hit too but would recover. I owned three stocks. Two stocks were down 60% peak to trough and one stock went up 280%. By mid-2009 the one stock that was down 60% was making new all-time highs. 

My portfolio eclipsed the $2 million mark. I felt I survived a calamity and earned the badge of full-time private investor.

But something changed in me once I reached my goal.

I don’t know if it was the years of being intensely focused and disciplined.

I don’t know if it was the years of feeling invisible, misunderstood and even disrespected.

I don’t know what it was, but I had that Frank Lucas moment. I wanted the spotlight.

So I woke up one morning and bought a new Porsche 911. I then went to a jeweler and ordered a solid white gold Rolex. I then joined a country club. Then I dropped off a $100,000 check at the Church to try to make myself feel better about the reckless purchases I just made. 

A 20-something driving around in a new Porsche attracts attention in a small town. It wasn’t because many others couldn’t afford one. It’s more so because few would ever want to buy one. 

Lancaster, PA is one of the most robust blue collar rich areas in the country. Lancaster is the type of place where someone might be worth $10 or $20 million but they still drive a Ford F-150. It’s one of the things I now appreciate about this area – there aren’t many “look at me” rich people around here. 

Most assumed I was a drug dealer. For a moment I turned into that guy that most of you can’t stand – a prick with a Porsche. Strangers certainly looked at me differently, but so did family and friends. I didn’t like the attention. 

Ironically, the week I picked up my new car also marked a multi-year top in my portfolio. God looked down on me and rightfully said, “you foolish young man.”

Being a stock picker, I suffer no sunk costs. I sold the Porsche and canceled the country club membership. I kept the Rolex. 

When you start having some success you realize there are two types of people in this world:

People that desperately want you to know they are doing well, and people that desperately don’t want you to know they are doing well.

The older you get the more you respect the latter. 

It’s the same with your portfolio. Most problems occur because you can’t keep your mouth shut when you’re doing well. The market hates hubris so it puts a target on your back to teach you a lesson.

This isn’t a condemnation of buying nice things. Coco Chanel said it best, 

“The best things in life are free. The second-best things are very, very expensive.”

I am not ruling out buying another Porsche after I spend money on a laundry list of things my wife reminds me of every day. But I do think intentions matter. When you buy things to draw attention to yourself, all you attract is the wrong people. 

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