The Real Lessons of Financial History

What Didn’t Work

1) Assuming this time will be just like last time: Late in World War II, an executive at the chain store Montgomery Ward² was handed a chart of prices back to the nineteenth century. Every time there was war, prices rose. In peace, they fell hard. He literally said out loud, “Who am I to argue with history?” He ordered all plans for future stores to stop, refused to even repaint existing buildings, and hoarded bonds to await the coming collapse. And that, children, is why you have never shopped at a Montgomery Ward.

History is a laboratory of time moving in Slow and Fast modes. Slow Time usually looks a lot like the past. Fast Time rarely does. Precisely because the next economy will be different from the current one, people try to overfit the lessons of the last crisis only to confidently make new mistakes. In the late 1990s, fools focused on real estate while the stock market tripled. Then the tech bubble burst, day traders died, and the wealth road was paved flipping houses to sell. Piddly little rent checks were for old men needing hobbies . . . until the ’08 crash, when rental investing became so popular even Warren Buffett wanted to do it. Covid hit, and very smart people were sure a bonanza of foreclosed deals were on their way just like in 2008, but they never came. And on it will go. You need something more profound than “it worked last time.”

2) Believing predictions (especially by experts): I have read thousands of books, articles, and pamphlets of financial advice spanning 300 years. The sheer volume of wrong predictions is difficult to comprehend. Leading experts called depressions that didn’t occur, boom times that crashed, safe real estate that wasn’t, inflation that never took off, political sea changes that came to naught, and any number of “can’t miss” strategies that not only missed but backfired. You could crush a car beneath the writings of the people who got it wrong. To prove this yourself, open your smartphone and download any financial podcast from December 2019 with titles like “Predictions for 2020.” They will discuss many topics. A global pandemic isn’t one of them.

3) Amateur investing: Getting distracted by investing is hazardous to your wealth. One ruined Great Depression investor, with gallows humor, noted that the stock market crash brought at least one silver lining. Professionals were focusing on work again. “Many a doctor who was overlooking his patients³ . . . was over looking at the ticker.” The same idea appears in most decades. The “rage for speculation has brought misfortune to merchants and manufacturers,”⁴ a business writer noted in 1840, as they neglected their day jobs chasing dreams of South American bond bonanzas.

In 2025, the typical investor spent just six minutes on research per stock trade,⁵ usually all six minutes just before the trade. What little research they do is checking price charts and analyst ratings. They almost never consult risk metrics used by professional traders. The rule of concentration always rules: you’ll make the most money being exceptional at one thing rather than mildly aware of many.

4) Putting all your faith in compound interest: It will not always come to save you. From the very first financial advice books to now, the “magic” of compounding returns has mesmerized audiences. Look what happens in ten years. Twenty years! Thirty years!!! While the math is correct, the connection to the real world is not.

The number-one rule of compound interest is . . . never interrupt it. But everyday people do not put money away just to watch it grow. They defer spending today to eat tomorrow. Children come along and want cars. Parents need assisted living. Job loss is not a function in Excel. Lust takes over: for vacation homes, new kitchens, or new spouses. Real people interrupt compounding all the time.

5) Trusting “It’s Guaranteed”: Anything guaranteed isn’t. Over and over again, the idea of guaranteed returns (also known as “can’t miss” and “sure rewards”) appeared in American history. From the Dismal Swamp to canal companies to the Northern Pacific Railway, and in such tragedies as the Freedman’s Bank or the savings and loan crisis, every guarantee has been voided by reality. No one, not even the U.S. government, can promise the future will pay out. The few that do, specifically annuities in the twentieth century, did so by paying less than other investments. If you are given such a promise, explain you’ve been dealing with stomach pains and the laxative is finally kicking in. Get this person away from you.

6) Hoping government will save you: Governments matter, always. But predicting political salvation isn’t something you should bet on. Some of the worst financial advice in history was to trust governments to solve your problems, like skipping home ownership or planning on student loan forgiveness. Use whatever programs politicians implement, but don’t sit around doing nothing in the meantime.

While you wait four years for the people you are sure have all the right answers to a) win, b) really do what they said, and c) do it before the other side wins again, you could have been four years farther down the wealth road. From 1950 to 2024, investing a dollar in stocks returned nearly $3,000. Only investing during Democratic or Republican presidencies,⁶ and not the other, dropped returns to $100 or less. Vote your conscience. Invest in your best interest.

Yes, the government was always involved. Sometimes it throws ropes down to help. Other times it throws roadblocks in your path. The climb still belongs to you.

7) Believing it was easier “back then”: It wasn’t. Early America was no cakewalk. People fled farms for hot, sweaty industrial jobs because farms were mind-blowingly boring—literally. Farming families shot themselves at much higher rates than people in the supposedly horrible urban cities of the early industrial era. Thoreau was wrong. People are happier in modernity.

It wasn’t easier in the 1950s, either. Mom and Dad had to have sex quietly because they shared 900 square feet with four kids. Most women did work, especially immigrants and black women, for low pay. Structural racism was far more structural then than now; many people struggled to get ahead for reasons out of their control. And no, the golden era of workers’ wages did not end in 1972. The average worker today earns more, lives in a bigger home, eats more diverse foods, and watches a wider array of entertainment than her grandfather who worked at the Ford plant. She does this working on average eight fewer hours a week in a safer job.

Perhaps no song released in the last ten years so sums up this wrongheaded nostalgia than the Sam Hunt country hit, “I Bet Breaking Up Was Easy in the 90s.” No, Sam, it sucked then, too.

Life was not better in some bygone era. Your life, your time, your moment is among the best to be alive in human history. Carpe now.

Do What Worked

1) Use Slow Time to get ready, and Fast Time to Go Ahead: Life mostly moves in Slow Time. Even in the internet age, your financial life will occur at the same pace as before. Plan, invest, and think accordingly. When Fast Time comes, and it will, you will neither predict it is coming nor which way it will go. The rules of thumb presented here will hopefully help you navigate these rapid moments without getting wiped out; you may even move ahead.

Eisenhower said that Napoleon said, a genius “is the man who can do the average thing when everybody else is going crazy.” I’m not sure Napoleon really said that, but it is true. When everyone assumes the good times can’t end, or that the bad times never will, those who can save, buy, invest, or leverage what others are too happy or too scared to touch will win more battles than they lose, and they’ll win the biggest battles. Eisenhower, not Napoleon, won the big one.

A recession will come. When? No clue, but you would be surprised how many fortunes were made during hard times. I regularly print book drafts out on my Hewlett-Packard printer, a company founded in the depths of the Great Depression in a detached shed where one of the founders slept for cheap rent. You will face one of these, though hopefully not that bad. Use Slow Time to build a strong position you can pounce from. When, not if, it comes, jumping on the opportunities others flee from may well be how you speed up your journey. It sounds incredibly strange when young people tell me “I wish

I was lucky enough to be around in the 2008 crash like you were.” Since I have not yet mastered Gen Z slang, I rarely know how to respond. I’m still not sure if the Great Financial Crisis counts as skibidi or not skibidi. When their moment comes, I tell them, it will be more than vibes. Get ready for Fast Time.

2) Solve someone else’s problem (not your own): Walk into a colonial store and you would have been asked, “How do you intend to pay?” But today’s stores all ask the same central question of American capitalism: “How can I help you?”⁷ In that one question is the central path forward for you and every other American. Iowa farmers solved the grain problems of Europe. Cattle ranchers in Texas solved the protein problems for New York. Construction workers solved the housing needs of growing families. Their children riveted Chryslers together to solve the transportation needs of suburbanites. You will be rewarded for your efforts in direct proportion to how you solve someone else’s needs. This can be a career choice, a business idea, or moving to a place where there are more people’s problems seeking solutions. Most financial advice focuses only on your money problems, but the answer lies in other’s.

3) Find your guru: The world is complicated. Finding someone who can help you distill complexity into simplicity is a good thing. Sure, remain skeptical. Buy their books, not their seminars. Read their websites, avoid their products. Remember they make a living, too, and the way they pay the bills is through you. But most of what is truly helpful from the gurus is what they offer for free: steps, rules of thumb, and investing principles. Buying into just about any decent plan will get you better returns than flying by the seat of your own pants. I’m a big fan of Kyla Scanlon and Morgan Housel for conceptualizing our place in the economy, Marginal Revolution for tracking the trends that lead to Fast Time, Bill McBride, and Logan Mohtashami for real estate markets, Scott Galloway for career advice, and Dave Ramsey if you struggle with spending habits. The best financial advice on the internet, bar none, is from Clark Howard.

4) Marry wisely: Marriage matters, a lot. Make yours work. Don’t buy the hype that you’re better alone. Also, and this is an unpopular but true lesson from the 1700s and 1800s, beauty is overrated and frugality, family resources, and income potential are underrated. What do Henry Flagler (Standard Oil), Alexander Graham Bell (AT&T), Leland Stanford (Central Pacific Railroad/Stanford U.), and Sam Walton (Wal-Mart) all have in common? They got started by borrowing money from their in-laws. If you don’t marry rich, hardworking and smart also pays out well. Not all the marriageable men and women of the world think prudently about their finances. That’s okay. You only need one.

5) Harness the power of dual incomes: One of history’s most effective financial strategies for everyday people, and one only available to couples, is to have two incomes but live on one. From the factory girls of New England, through immigrant wives running boarding houses, to the twentieth century “working girls” of the office, this strategy stands the test of time. The families that stashed one income into paying for or off a house, putting money into retirements or rentals, or self-funding a new business were often the most likely to get ahead in their own lifetimes. The dual-income couple spending all it makes is, indeed, caught in a “Two-Income Trap.” But the dual-income household that creates a financial fly-wheel can build considerable wealth. Too few families employ this old strategy today, and I wish it would make a comeback.

6) (Side) Hustle smartly: All side hustles are useful for certain times and places. The trick here is to weigh how much more you could make in your lifetime just being great at what you do (concentration). If the answer is “a lot” then side hustle little (limitation). The payouts will come later, but larger for those who can be great at one thing. But not everyone has that type of job. They can get similar effects by leveraging spare time into much more than spare change (diversification).

Trying to save up a down payment or to pay off a car? These are great times to embrace monetizing free time. Your great-great grandmother’s butter probably paid off the farm, so you are not too good to drive for Instacart in this season of life. But, as many immigrant families cherished, there should come a day when the goals are met and you can rest beneath your own vine and fig tree without having to side hustle in someone else’s garden.

7) Rent out your space (for a time): Most American families paid for their farms and townhomes by monetizing them. With more space per person than ever in history, but less homes on the market than needed, boarders and accessible dwelling units (ADUs) make sense. Of course, housemates are messy and often a pain to have around. They were that way for your ancestors, too. Take a page from their book. Have strict rules, kick people out quickly when they break them, and make sure they pay on time. But Airbnb is nothing new; the ideal of being broke in your own space is a luxury item few people in history would have understood or respected.

8) Move more: It’s a big economy, and your mobility matters. You are not as stuck as you think you are. If the Exodusters can walk to Kansas, you can commute to a better gig. Go where the best jobs are paying the most. Most American boomers retiring today are wealthy because their parents or grandparents fled places like Arkansas to build the modern Southern California suburbs. Whether it is trading in expensive San Francisco for affordable Austin or selling out of Florida to retire to the Carolinas, most Americans who geoarbitrage take advantage of the greatest free market zones in the world: the fifty United States.

I cannot emphasize this point enough. We aren’t mobile anymore. In the late 1800s, one in three Americans changed addresses every year.⁸ In the 1960s, it was still one in five. That helps account for all the upward mobility. Today, it is just one in thirteen. Staying put is highly correlated to the dramatic drop (by 50 percent) in people starting small businesses. When students ask me what they should do to become millionaires, my usual answer is move to one of the five fastest-growing metros, start a trade business, and sell it in fifteen years. The easiest place to monetize your human capital is where the money is, and money follows people. If you’re not getting anywhere where you are, Go!

9) Utilize government largesse: Government programs matter, even the bad ones. There is nothing new about this. Land sales, water projects, war with the Sioux, electrification initiatives, and Social Security are just a few ways the federal government paved the way for its citizens. That isn’t always “interfering” in the market. It is just the government being the government. Not every initiative works, and many backfire (especially for the Sioux). But you shouldn’t be shy about supporting those that work, nor timid to criticize those that don’t. Our politics were always messy, but there is nothing peculiar about expecting the government to open up opportunity. After (not before) government programs offer you opportunity, embrace them. The Small Business Administration offers business loans. Use them. States offer move-in incentives. Find them. As long as the government offers Pell Grants, take them.

10) Chase money actively: Even if you hate your job, you should try to do it better than anyone else. And if you still hate your job after that, find something else to do. The chance you will buy a stock or crypto that makes more money than your career earnings has a decimal at the front. The chance you can make more money by adding a part-time job than you can by day-trading is close to 100 percent. Income matters.

If you want to flip houses, that is great for you and for America because it salvages older homes. But you will quickly find that building codes are there for a reason, finishing drywall is dirty work, and there is no “easy” money. Want rentals? You will discover that profit margins run tight, roofs leak, and hoarders are real. That doesn’t make these investments foolish. It makes them active.

If you don’t know where to start, ask those who’ve already succeeded in building something. If such people aren’t available, read The Sweaty Startup by Nick Huber. Striving is not optional. There is sweat equity in every climb that didn’t involve a lotto ticket.

11) Avoid retirement anxiety: You can and will retire. Remember that nearly 50 percent of those living to sixty-five were retiring well before Social Security, and many more did not want to retire for fear of boredom. Even at the peak of the pension era (the late 1970s), six in ten Americans did not have a pension. You may not hang in Sag Harbor, but if you maximize your income and invest eagerly, the chances you will starve are next to nothing. Social Security is far from perfect, but it is basically a poorly performing annuity and most Americans build their retirements on top of that. Some things help more than others: paying off a house beforehand, downsizing, and part-time work are all worthwhile. You will, certainly, have to make sacrifices. But those sacrifices are made to enjoy a twenty-five-year run your forebears never saw. Taking it easy has never been easier.

12) Separate retirement saving from investing: Most of what parades as investment literature are just savings strategies by another name. You should save for retirement, but you will not get rich that way barring a very long lead time. It is better to be safe at seventy than broke, but it is better to be free at fifty than either. If your happiest dreams are a great retirement, that is wonderful. You can pretty much just save your way there. If you want to get rich, with enough money to do what you please as you please, your 401(k) isn’t your supersecret sauce. You’re going to have to do more than that.

13) Do not obsess over early retirement: You can get rich and keep working, so don’t conflate the two. If you are built to achieve an early exit, you probably aren’t built to enjoy it. If you can’t help but catch the FIRE, make sure you seek a meaningful life. The first early retirees, self-sufficient farmers of the 1800s, still worked more hours a week than the typical forty-year-old today. Most early retirees go back to work. I know. I’m one of them.

14) Make your money by concentration. Save through diversification: Your best path to wealth is through extreme focus on one way of making money: owning a company, getting promotions, or “living in a van down by the river.”⁹ Whatever your strategy is, you’ll get the outsized returns by becoming very, very, very good at something. As part of this, your highest return on investment is probably yourself. The younger you are, the more true this is. Invest in your own human capital before you worry about the stock market. If you are deciding between monthly savings and building your skillset, build your skillset first.

After you’ve made your money, diversification protects against losing all that you made. Limitation, concentration, diversification have worked in all eras.

15) Invest in your kids: Remember that your kids’ education is also an investment. Spreading your capital across companies, stocks, real estate, and kids lessens the risk of having a paid-for house still occupied by your useless thirty-three-year-old and increases your chances the kids will help you out if needed.

Remember generational wealth is not as powerful as you hear: Your kids will probably spend it on nicer vacations than you took. History is clear. Invest in their human capital. Build their capacity to succeed. The most important wealth you can pass down boils down to education and job training, cash to help get started in marriage (the house, not the wedding), and as much exposure as you can give to how money works while growing up. Everything after this is nice to have, and everything past that has spoiled many a middle-class kid. Inheritance is overrated.

16) Never co-sign a loan . . . ever!: Nothing. Not for anything. No matter how much DNA you share. This includes your kid’s student loans. If you can pay for their college, pay for it. Otherwise, the debt is theirs. You can always help them out with their payments, but you can’t go back and un-sign the loan docs. This is one of the oldest pieces of financial wisdom in American history. In general, debt-free strategies have lower upsides but far less downside. Signing onto someone else’s loan is all downside. This has ruined lives and broken up families. Don’t do it! Ever!

This advice is one of the few consistent throughlines in American history that survived every era. No matter what money was, no matter what bankruptcy law said, no matter how much family business happened, co-signing loans has undone more American finances than any other mistake. If it can destroy people in the 1700s, 1800s, 1900s, and 2000s it can probably trip you up, too. Yes, your best friend wants that truck. No, you don’t need to help.

You can, as the women of Charleston did, profitably loan money, but you probably won’t. The person most likely to ask you for funds often has access to your heart strings, which hurt when pulled. Lending, both then and now, is a business, and banks are simply better at it today than they were 200 years ago. There are places everyday people can profitably pretend to be banks, like well-established loan flipper businesses or private lenders with long track records of success. If you are tempted to chase yields this way, make sure the lawyer at the closing table represents you, not the borrower. Remember, lending is a dangerous business, not a personal favor. That’s what the interest rate is for: it’s the price you demand for the risk of seeing all your money go away, potentially forever.

17) Play the market, but not to win: The appeal of beating the market excited many.The ridiculous profit margins of the bucket shop owners of the 1890s (and stock apps today) are worth remembering. If you find such pursuits fun, and the money expendable, enjoy your hobby. But don’t call this investing. Remember to adequately factor any return on investment, and you must include time. If you make $45 per hour at work, and you spend two hours each week looking at stocks, then your total invested capital includes nearly $5,000 annually in extra costs from your time. If you are a thoracic surgeon, multiply accordingly.

18) Embrace failure: Many, and probably most Americans who start something new stumble. As devastating as it can feel, we should risk more failure more often. You can only go so broke in America. That wasn’t always true. You won’t be publicly shamed. There are no debtors’ prisons to die in.

Open the hair salon. Move to the booming city. Buy the franchise. Take the online certification course. If it doesn’t work, move on. The chances of failure are overstated. In the 1800s, a widely publicized number said 95 percent of all businesses failed.¹⁰ It appeared in newspapers nationwide and has perpetuated to this day. It was wrong. The real numbers ranged from 30 to 50 percent, not far off today. Most people who try will find some measure of success, but the act of trying is what is in short supply. Remember, financial life has never been less risky than right now.

19) Stay in the market: Play the long game in the market, but stay exposed to what might replace it. It took a century to build today’s faith that Wall Street “always” beat other investments. It hasn’t always, and it won’t always. But faith, once established, is a very hard thing to break. The lesson of history is not, again I say not, that smart people avoid the market, stay in cash, predict constant crashes, or whatever The Big Short version of history you’ve been told on the doomsday fortune teller platform formerly known as Twitter. Something will, one day, become a more popular investment than U.S. stocks. But that something, if it is to last, will have to have some real return from some real business or product. In earlier eras these might have been income-producing farms, government bonds, or lending mortgages. The chances this change happens in your lifetime are relatively small, and the chances you could predict it even smaller. Things which have worked for a long time usually continue to work.

That said, I will register a historical warning. Fast Time eventually comes for most assumptions that “it always worked that way, so it always will.” If what happened before must happen again, then, sure, build your entire wealth strategy around it. But never forget that it doesn’t “have” to happen. The universe does not owe you a certain annualized return. However you go about winning the game, remember to diversify at some point. Own stocks (I do), but few people in history would want to only own stocks.

20) Give annuities a chance: Everyone hates insurance companies, but at least take a moment to be grateful they exist. Your ancestors carried all their risks each day out to their fields and factories. You can sell your risk of accident, injury, illness, fire, or flood to insurance companies. You can also purchase a retirement from them, which is what a century of people did before Social Security.

The reason most gurus hate annuities is that 1) they leave nothing for your heirs and 2) they underperform the market. On some, the fees are also truly godawful. The rise of lifelong singles and childless couples will lessen the first issue. For the second, the meteoric rise of the S&P 500 the last four decades may not repeat over the next four. And you can find annuities without egregious fee structures. Insurance companies can do things everyday people can’t, like buy hedges against market failures and invest in timber land before it gets exciting. Not all annuities are good, some are downright horrific, and not all insurers are created equal. But for a stress reduction against losing your nest egg in a late-life market crash, a modest annuity from a top-rated insurer bought through a fiduciary advisor isn’t quite as bad as is often made out. They were a godsend to earlier generations.

Let me be clear. Annuities will not make you rich. They are for protecting your downside, not increasing your upside.

21) Simplify your budget: You don’t need seventy envelopes or fourteen bank accounts or a monthly subscription to keep track of how much is being set aside for soccer camp. Precise budgeting is a holdover from the Progressive Era’s obsession with measuring everything. Decide how much you should save for things you’ll need to spend money on later in the year, and put that in an online savings account with high interest. Decide how much you’ll invest, and have that put into investments. Everything left should be spent on food and concert tickets. But when you’re broke, stop spending. Keep a stash of ramen noodles for the end of every month.

22) Borrow (carefully): To leap ahead it helps to use a catapult. When you’re flying through the air, though, it can feel terrifying. I wake up every day of my life with an urge to pay off my house, and I could, but I don’t. I get richer by writing the mortgage checks. In fact, I once bought a house with over a million dollars cash, realized I’d screwed up, so went back and put a mortgage on it. If this seems strange, trust me, it seems strange to me, too.

Historically, the most successful strivers leveraged debt-to-equity ratios somewhere between one-to-two and two-to-one. There were outliers who took (and take) more, but you only hear about the ones who say they won, not the many more in front of bankruptcy judges. You can risk too much, but avoiding leverage, especially for opportunities like housing and business expansion, holds back wealth building. Most people who climbed from the bottom to the top took some risks with some leverage to get an outsized payout.

23) Look for oversized (and occasional) paydays: Poor people think in terms of the steadiness of money (weekly checks, monthly deposits). The rich think in terms of rare windfalls (from annual bonuses to selling equity at the IPO). You make more money in real estate when you sell than you do cashing rent checks. Change your mindset. Stop oohing and aahing at the steady stream of small fireworks. You want a money bomb to go off. Invest in things with big one-time payouts.

24) Risk more: You can risk too much. You can also risk too little. Everyday people were taught to steer clear of risk. Too much risk is deadly. But taking no risks, sitting contented in your steady job with the steady check, is not safety. It is fiddling in Slow Time. When the Fast Time comes and the banks are merging, the market’s crashing, or the new technology is finally breaking out, you won’t have time to retool. Take on new roles at work. Solve new and harder problems. Build your human capital. Once you kind of know what you’re doing, look for places you can leverage your way into something larger. When the tide comes in (or out) strong, the smallest boats are most vulnerable.

Blind risk isn’t the goal, as we learned in “Going Broke Is Better Than Ever.” Risk mitigation is important. Historically, the best strategies were building competence in your field, staying within reasonable leverage ratios, and starting small before going all-in. A proof of concept phase is also useful. Do your wedding cakes sell from the kitchen before you lease a shop? Can you manage one rental before you buy twelve? Do people who don’t care about your feelings get excited using your product? Quit rules,¹¹ hard stop points when you accept your losses and move to what is next, are also important and one of the most valuable lessons from successful stock traders (and poker players). Remember the traders who beat the market are good at taking small losses and holding on to big wins. Also, keep enough cash in the bank to survive a crisis.

Past that, risk more. Perhaps Wall Street traders and the heirs to large fortunes risk too much, but the baseline case for everyday people is that we risk too little. Terrified of losing what we have, we risk getting nowhere at all. There has never been a less risky time, or one with bigger, longer payouts for taking them, than right now.

25) Reject pessimism: The returns on despair are low. Big Woe is selling pessimism at scale, but remember—Eeyore ends every episode of Winnie the Pooh surprised at how good things turned out.

Sure, optimism needs its guardrails. But do not confuse cynicism with wisdom. They are not the same.

Believe that you can make it in this country, because if you can’t get ahead here, there probably isn’t a place you will. Doubt every person who says that it is harder today than ever before, that no one gets ahead, or the game is rigged. Give them a copy of this book, and go back to looking forward.

Yes, you can Go Ahead. If you do look backward, though, glance at all those generations who dreamed you would get there . . . and say thanks.