One of the problems with discussing things over the internet is the need for brevity. Who, after all, has the time and inclination to thoroughly explain complicated issues in a forum setting? The problem with brevity is that it unitentionally leads to misunderstanding.
Obviously, where accumulating wealth is concerned, it is better to be relatively frugal vs. relativey extravagant. After all, common sense dictates that the more capital you have, the easier it is to compound capital (in absolute terms, that is – once you have too much capital, it can get progressively difficult to compound that capital in relative terms – ask Warren Buffett about this problem). I agree with that particular point made in The Millionaire Next Door (how can one not?). It is logically incorrect to say, however – as The Millionaire Next Door implies – that, “You’re likely to become a millionaire if you’re really frugal and take some risk on the investing (or business) side.” You may be MORE likely to become a millionaire, but as Taleb correctly points out, the bankruptcy world is littered with smart, frugal people who took some risk. The problem is that the winners’ risks worked out and the losers’ didn’t. Some of that, of course, can be controlled through risk management. But, much of it cannot and can only be attributed to… “luck” or “fate.”
One of the reasons that our particular generation of humans has survived and thrived on this planet is that we are poor estimators of risk. We are overconfident and often take on more risk than we are aware of. This evolutionary trait encourages risk-taking and has advanced mankind in the aggregate although clearly lots of individuals fail. As an investor, it’s important to be aware of the fact that you, me and almost everyone routinely underestimate risk because of lots of internal evolutionary behavioral factors that I’m not going to go into (read up on Behavioral Finance). This will never change, but at least your decision making will improve at the margin by being aware of your inherent biases as a human.
There’s plenty in The Millionaire Next Door that’s good information, but that doesn’t mean you should accept the author’s conclusions (as Taleb points out).
I agree with most of the posters that you have a lot of opportunities to make your own luck or exploit luck when it presents itself. I always liked Ronald Reagan’s quip, “You know I’ve been lucky all my life, but I always found that the harder I worked, the luckier I got.” There’s a lot of wisdom there. Having said all that, I’ve also found that bad luck trumps all: intelligence, hard work, etc. But obviously there are certain things you can do to minimize your odds of getting sunk by bad luck.
Addressing one of the other topics in this thread, if you worry about money all the time, something’s wrong in your life. In my view, the primary value of money is freedom and security – it gives you freedom to do things you want to do and security to sleep at night and not worry about finances so much, both of which hopefully lead to “inner peace” (or “contentment”) which I think is the primary measure of the quality of your life. If you’re rich and not content, what’s the point? If you’re dirt poor but truly want for nothing, then you’re probably content. Everyone’s wired differently and has to find out what makes them tick on these fronts. And I can tell you that a lot of people simply lack the introspection necessary to figure out what is going to make them content. Instead they defer to “society” to answer the question for them… this rarely turns out well as you might have noticed.
