Gurus Are Selling Something; You Should Buy

If you want to get financial advice today, there are two places to turn.

Okay, three places, but the third is your cousin and he got his ideas from one of the other two. The first is in the hallowed halls of academia, where finance professors create mathematical equations on how to invest just the right amount in just the right percent to die happy. The second is to turn on social media and find the gurus teaching you how to get rich now. These two groups are not friends.

The cage match between Team Academics and Team Gurus isn’t going well for nerds. The consensus in university world is that popular finance is “uninformed.” In professor-speak, that is a very mean word. But the gurus are winning the battle for America’s financial mind. They have been for the past 100 years.

In a fascinating research paper, Yale Professor of Finance James Choi¹ quantified the differences between academia and pop-culture investors. He identified where the two completely diverge:

Choi’s paper is a masterclass in understatement. The standard economic theory assumes lab-like conditions: no job loss, abundant willpower, desires that don’t change, the ability to predict the number of kids you will have, and a risk-aversion temperament that never shifts. As best as I can tell, the academic literature has no economic formula for a midlife crisis. The standard model is written for lives that don’t exist.

Gurus, on the other hand, emphasize that jobs go overseas, Super Bowl ads work, wants change, birthday sex leads to baby number three, and “risk taker” sounds cool until the market crashes. Choi labels economists’ failure to include cognitive psychology in their strategies “a potentially important oversight.”

Indeed. Winners of the most prestigious prize in thinking about money rarely do what their papers said they should, anyway. The winner of the 1993 Nobel Prize in Economics² put all his prize money in underperforming municipal bonds. Another laureate put 100 percent in stocks and forgot about them until the absent minded professor discovered huge losses in the dot-com crash. A third put most of his retirement into money market funds, which failed to keep up with inflation. A renowned Wall Street trader once described academics as “resembling a professor of anatomy who was still a virgin . . . you have to learn by doing.”³

But aren’t gurus icky sleazeballs? They’re called gurus, a famous investor said, “because ‘charlatan’ is so hard to spell.⁴” Sometimes that’s true. But double-click on the biggest ones and you see something else. None are Hollywood attractive. Most are abrasive. They share a trait with such ideological opposites as Winston Churchill and Bernie Sanders: in a world filled with fakes, you believe that they believe what they’re saying, in part because their message seems designed to alienate rather than convert. The most successful gurus of the past half century offer deal-with-it contrarianism.

The real gurus have a PhD in people. We the People are stuck running a gauntlet filled with stuff to lust after and people to envy, all while a ticking clock called Time won’t let us go backward in the maze to fix our mistakes. It’s scary in here. The best gurus, and there are good ones, help you identify where you are, where you can go, see traps to avoid, and offer faith that you, too, can Go Ahead. They’re selling you a map that usually works, and most plans are superior to running around with your eyes closed.

Buyer beware, sure. Financial advice itself (what to buy, how to buy it, and when to sell it) is mostly trying to predict the future using a much different past. What the top gurus do is something else. They are teaching behaviors and beliefs: a sense that you can act on the world, so it doesn’t just act on you.

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Are some gurus just sleezy hucksters? Absolutely. The worst was the first: meet Napoleon Hill.

Hill’s Think and Grow Rich⁵ is indisputably one of the top-selling books of all time. Assigned as a boy reporter to interview Andrew Carnegie, the magnate challenged the youth to study the wealthiest men in the world. Giving the lad a letter of introduction to Henry Ford, he sent him on a lifelong journey.

Twenty-five years and 500 famous interviewees later, Hill revealed their secrets: an unshakeable belief in future wealth, repeating success phrases daily, cutting out the word “impossible” from the family dictionary, and harnessing the energy from your sex drive to dominate business. Thus calibrated, the mind established a mystical magnetic pull that brought ambition and destiny together.

Only Hill never actually spoke to any of those people. The book was endorsed by two former presidents and various businessman icons. All were long dead. They lived and died without any idea who Hill was.

The author himself was broke, living with his in-laws, and on the run from the law for securities fraud. He nonetheless made a fortune through believing he would. He was a world-class imposter pulling off an amazingly crafted long con.

Hill’s loudest advocate was Norman Vincent Peale. The Power of Positive Thinking pastor told his Sunday congregants that, if you desired success, Hill was required reading. One young parishioner was listening: Donald J. Trump, whose believe-in-yourself, facts-of-the-matter-be-damned mindset became a part of his financial and political bravado for fifty years. Hill’s batting average as a personal finance guru isn’t great, but his protégés do swing for the fences.

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Gurus got remarkably better after Hill. The person most responsible was 1940s finance editor Sylvia Porter⁶. Porter had a radio show, was on the cover of Time magazine, produced a column in over 400 newspapers, and she helped edit JFK’s final radio speech (on tax cuts) before his assassination. She was the most important financial writer in America for five decades, a reign no future writer has come remotely close to challenging. Porter translated “financial bafflegab” into everyday language because there were no professionals available to do the job for ordinary people.

Before 1969, there was no job title called “financial advisor.” That changed when a former vacuum cleaner salesman, Loren Dunton, convinced mutual-fund salesmen nationwide to gather at O’Hare International Airport for a meeting. They founded the College for Financial Planning and, at a Howard Johnson restaurant, scribbled out a 150-question exam. The HoJo test certified a new breed of professionals with a badge of distinction. They arrived as salesmen. They flew away as Certified Financial Planners⁷ (CFPs). Every town in America could now have its own guru to trust.

Trust was a big deal at that moment. Inflation was back, and nuclear Cold War came with it. One group turned borderline apocalyptic: goldbugs said to buy mountain cabins, bury gold, keep a gun, and wait for the end of times. Books with hints for surviving the world’s demise ranged from the mild to the absurd, but they absolutely dominated the financial bestseller lists of the 1970s. Chief goldbug Harry Browne⁸ received almost half a million votes for president. Survivalist personal finance reached its peak in 1979, the year that launched the apocalyptic movie franchise Mad Max. Both offered strategies for the end of times, just as the times started to get really good.

Something more optimistic got into the water by the 1990s. The four personal finance icons we are most familiar with today arrived: Robert Kiyosaki, Suze Orman, Clark Howard, and Dave Ramsey. By the early 2000s, Howard, Orman, and Ramsey owned the radio waves and cable tv with shows on CNN’s Headline News, CNBC, and Fox Business. Kiyosaki’s book Rich Dad, Poor Dad is possibly the bestselling personal finance book of the past thirty years. If everyday people were looking for what to do with their money, their most likely encounter was with one of these four faces.

The 1990s personal finance Greatest Hits Collection came with a variety of styles. Kiyosaki created a board game called Cashflow⁹. Yes, I’ve made my children play it. You are a rat trying to get out of the race by accumulating assets, minimizing expenses, and accelerating early retirement. Rich Dad, Poor Dad, the book version of the game, said to stop accumulating degrees (like Kiyosaki’s Stanford-educated, job-dependent Poor Dad) and instead acquire assets that made you a Rich Dad boss. Suze Orman¹⁰ burst on the scene in 1997 by tapping the new home shopping channel QVC. She appeared on an episode of The Simpsons, was impersonated on Saturday Night Live, and holds the record for most financial advice titles on annual bestseller lists. Full stop. The modern guru who broke the historical mold, though, was Clark Howard¹¹. Howard is the only American money expert in history genuinely rich before becoming famous. From Ben Franklin forward, most others got their wealth dispensing the advice. Not Howard. While working for IBM, he lived on every other paycheck and invested the rest. Entirely self-taught on personal finance, he founded several entrepreneurial ventures which he sold before retiring to Florida at just thirty-one years old.

A man with a gleeful enjoyment for bargains and travel (and especially for travel bargains), Howard volunteered to give travel advice on local radio stations. Entering the financial guru world through the consumer advocacy door, he continues to be first and foremost an educator. He consistently encourages listeners to subscribe not to his services, but to Consumer Reports magazine.