“DeMarco advocates for taking the ‘fastlane,’ in which one finds an avenue by which he or she is able to earn millions in a lump sum, and thus live through both youth and old age as a rich and free spirit.”

Financial Friday: The Millionaire Fastlane

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Welcome to The Wealthy Healthy, the podcast and blog dedicated to inspiring better mental, physical, and financial health. Today’s Financial Fridays episode will be a summary, deconstruction and some commentary around “The Millionaire Fastlane” by MJ DeMarco.

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If you haven’t yet listened to episode 9 of the podcast where I discuss the 1996 book “The Millionaire Next Door,” and assuming you haven’t read the book already, then I suggest pausing this episode and listening to it before revisiting this. The reason for that being that this episode is essentially the second in something of a three-part series here on the podcast where we’re breaking down two totally different schools of thought on the subject of building wealth, with the third upcoming part being my own personal philosophy that effectively seeks to combine the strong aspects of each.

Whether or not you’re familiar with “The Millionaire Next Door,” it warrants a quick recap. Authors Stanley and Danko spent decades studying the habits of first-generation millionaires. In their search they found that the typical profile of such a person was largely consistent across the board: often immigrants, often entrepreneurs and businessowners, and nearly always frugal in that they save far more than they spend and rarely live in big homes with luxury cars parked in the driveway.

So what does MJ DeMarco, author of “The Millionaire Fastlane” think about the frugal and time-honored approach to wealth-building highlighted in “The Millionaire Next Door”? Well in short, he’d use words like “lame” and “boring.” And with minimal love, he calls it the “slow lane” comparing it to living a life of deferred enjoyment to live like a peasant for 65 years, and when you finally retire and can enjoy your nest egg, you’re too old and pathetic and unhealthy for any of it to matter much anyway. Of course, he is being intentionally a little over-critical here, and I’m just paraphrasing, but amidst it all he does give the method its own merit by also defining an even worse situation, where he feels most Americans find themselves.

This path, far slower than the “slow lane,” is what DeMarco refers to as “the sidewalk,” where people live paycheck to paycheck with no capacity for wealth-building. Even an individual with high income and a lot of material possessions can be a “sidewalker” as he or she is doing nothing to build actual wealth and is instead enslaved to their careers and likely to remain that way until the moment they die. In DeMarco’s eyes, those traveling “the sidewalk” are largely destined to stay there, moving through life at 3 miles an hour, if they don’t make an effort to change.

So perhaps at this point it’s becoming obvious what DeMarco’s stance is given my little description there as well as the title of the book: DeMarco advocates for taking the “fastlane,” in which one finds an avenue by which he or she is able to earn millions in a lump sum, and thus live through both youth and old age as a rich and free spirit. He recalls a childhood experience in which he saw a young man walking toward a Lamborghini Countach, a car that DeMarco idolized on posters in his room. He mustered up the courage to ask the young man what he does for a living, to which the man responded that he is an “inventor.” Before DeMarco could probe any further, the man drove away. This experience led DeMarco to studying people who were rich and living the rich lifestyle but without any fame — he wasn’t interested in those who got rich old, who were rich from inheritances, or who were rich from a platinum album or box office movie hit.

It would be about 10 years, though, before DeMarco would crack the code to wealth and begin driving the “fastlane,” but after many failures he finally succeeds — I’ll talk in a moment about what he did. Nonetheless it’s clear throughout his book that DeMarco revels in his ultimate freedom: he never has to work for a paycheck again and can live out his days on a perennial vacation if he so pleases. Any days he does not spend as a motivational speaker, he gets to enjoy his large Phoenix, Arizona home, driving around in his own Lamborghini, and counting the royalties from his popular book.
It almost sounds too good to be true, but the reality is that it’s not, it’s just difficult. DeMarco actually does a good job breaking down how difficult it is, and even has some reasonably profound commentary on how others view luck and how everything boils down to process and working smarter.

But even with his efforts to highlight all of this, DeMarco still underestimates, perhaps by a lot, the odds of pulling off something similar to what he accomplished. DeMarco is his own case study, so there is a survivorship bias here, but there are certainly a high enough number of similar examples in recent history to bring even more merit to DeMarco’s concepts. I myself live in the Silicon Valley and work in the tech industry, so I’ve had the chance to work in environments where any given conference room may be occupied by people whose combined annual earnings are in the tens of millions. In fact, a cousin of mine was an early commercial hire at a company that went on to become worth billions, and she actually announced her retirement this year. She’ll be departing, in her 40s, from the 9-5 grind — which by the way, in her case, was more like the 5-12, as in 5 am to midnight, 7 days a week for over 20 years. That is not dissimilar from what DeMarco would describe as “the process that created events that others would perceive as luck.”

Now, not everyone’s road will necessarily require that type of commitment or work ethic, and DeMarco’s didn’t, but the point is that the “fastlane” is an attainable reality by a couple of different avenues. Of course, to DeMarco’s point, quite often you don’t get to see the hours and hours of grueling work or the high stress and high risk associated with many of those decisions. But it’s nonetheless an attainable reality, and that’s essentially the premise of “The Millionaire Fastlane.”

You might be thinking this sounds like a “get rich quick” scheme. In a way, yes, the fastlane is a “get rich quick” scheme, in that “quick” means 5-10 years instead of 40, and in that “scheme” isn’t really referring to any single approach, and certainly not any particular product or approach sold by DeMarco himself. In fact, he strongly criticizes late-night infomercials that sell some multi-step process to create wealth quickly and easily, commenting that these commercials prey on those who don’t know better and are looking for something quick and easy, which does not really exist.
So how did DeMarco build his wealth? Well at first, he moved to Phoenix with $900 and lived in a place so small that, in his words, “he slept with Poptart crumbs” because the bed was so close to the kitchen counter. But he nonetheless felt free, powerful, and rich, as he was in control and chasing his own dream and path. Between many odd jobs, he read many books from the local library and he tried his hand at making websites around the uptick of the dot com boom. While working a job as a limo driver, he recognized a market need for travelers who wanted to book a limo in the city to which they were traveling. At the Phoenix library he read books daily about internet programming languages, web design, graphics, and copywriting. At first this venture made him no money, but a company in Kansas saw his website and loved the look, hiring him to design their website. Within a few months he was becoming self-sufficient, paying his bills without his mom and without having to rely on temporary jobs delivering flowers or pizza.

As his own website grew, he made some money, but still not much. Eventually he realized that the volume of email inquiries he was receiving could be sold as leads. He shifted his approach from ad space to lead generation in the late 90’s when lead generation in the internet world was extremely nascent and untapped. With this approach he nearly doubled his earnings month after month, though from a starting point of about $400. With more traffic and more money came more upkeep and more complaints to address and fires to put out. He describes a typical work week as being at least 60 hours long. His friends were out enjoying their youth while he spent Saturday nights in his apartment writing code, but he felt fulfilled. In 2000, he received multiple offers for his website and sold it for $1.2 million.

So what did DeMarco do with the money? He squandered it. He bought an expensive sports car, made poor investment decisions, and forgot about taxes until it came time. He had just enough money left at the end of it to buy back his company from the original buyers who essentially drove it into the ground as the tech bubble burst; he bought the website back for $250,000.

He toiled for a year and a half to take the site to the next level and succeeded in building what he fondly refers to as a “money tree.” He’d planted the seeds and watered the tree and finally, it would bear fruit every minute of every day of every week, nearly regardless of whether or not he spent any time on it. He would profit $100,000 to $200,000 a month working a few hours a week to keep the website going, and no longer felt he had to sell his time for money. In 2007 he sold the company for what he implies to be around $7-8 million, and has been retired ever since living a smartly invested and shamelessly indulgent lifestyle on his nest egg.

Keep in mind what I mentioned earlier in this episode though: despite highlighting how much work went into his achievement, DeMarco still underestimates how difficult this is likely to be to pull off, especially in today’s market compared to the market of 10-20 years ago. In 1997 there weren’t hit shows like “Shark Tank” and “Dragon’s Den” showing entrepreneurs and inventors making it big with their businesses, and even those shows do a pretty good job of hammering in how many moving pieces there are for failure as many of those business owners are coming on the show in the first place after years of losing money and stagnant growth. DeMarco totally overestimates rates of success in entrepreneurship, and underestimates the potential damage of failure because he basically pulled off the dream with the first business he really committed to building. If you put everything into an idea and it tanks, you might not exactly be in a great position to tee up to take a swing at something different a second time. So as much fun as it is to think about and as accurate as DeMarco is in his assertion that one can become a young millionaire without athletic or musical talent, my own personal criticism, and the criticisms of others which you can find anywhere online, is that DeMarco’s concept has much more potential for harm than does an approach like “Millionaire Next Door.”

In any case, that caveat aside, there are quite a number of stories similar to DeMarco’s, and certainly in the Silicon Valley it seems like there’s a new young multi-millionaire made every week. But taking this approach has to be for you. If you are the type of person who finds “The Millionaire Next Door” totally oppressive and boring compared to this “fastlane” approach, you have to assess yourself realistically. Are you in a position to take this type of risk? Keep in mind DeMarco through all of this was single without children. Are you in the right place and time to pull off one of your ideas? Keep in mind DeMarco did all of this during the dot com boom and survived the bubble burst after despite making terrible decisions. Are you capable and willing to forego enjoyment for years to work weekends toward your goal? Are you emotionally able to handle the realities of funding your business on credit card debt? I personally don’t know if any of those things apply to me. I like to take breaks throughout the day. I like to enjoy most of my weekends. I’m not totally risk averse, but the idea of moving somewhere new with no money and taking on debt is a terrifying proposition that I personally would take on take maybe once in one hundred lives. But again, that’s just me.

What DeMarco says has plenty of truth to it, and I can’t act like it isn’t at all appealing. I think most people would agree that it would be fun to live in whatever house you’d like, to drive whatever you like, to travel wherever you want whenever you want without being beholden to a schedule, an employer, or any job at all. That would be fun for most people. And I don’t necessarily mean all of those things would be lavish. I personally would be nervous driving an expensive car knowing it would get door-dinged like any other car and probably would be a target for break-ins and theft. I don’t love the idea of a huge house because I don’t want to clean it or furnish it or design it, and I’m generally bothered by inefficient use of space anyway. Again, that is all just me. There’s nothing wrong with wanting modesty and I don’t necessarily think there’s anything wrong with enjoying “the finer things” so to speak. At the end of the day I can’t deny it would be very comfortable to chase anything that fulfilled me without a financial care in the world, and DeMarco’s opinion is that you’re better off working yourself into the ground to get rich young and live rich forever, compared to the alternative of chipping away at a 401k and cutting back on your Starbucks budget. But listen, if you are the type of person that values this fastlane approach to wealth and freedom above nearly all else, then perhaps the fastlane is for you.

The whole reason I wanted to present this idea is to pair it alongside my discussion of “The Millionaire Next Door.” I wanted to provide any listeners or readers with two basically opposite, somewhat extreme, yet achievable examples of reaching the exact same end goal of financial independence. Those who tuned in to either episode 2 or 9 know my opinion on this: I believe with better health comes better wealth and with better wealth comes even more good health or capacity to maintain good health both mentally and physically. I believe absolutely anybody can benefit from financial independence, whether that means saving $200,000 to live in an RV or saving $10,000,000 to live in a McMansion, whatever life you can build that will bring you happiness, financial independence can help alleviate some potential stressors imposing upon your ultimate happiness.
Next Financial Friday I’ll be sharing something a bit less detailed and technical and a little more personal: I’m going to talk about my own personal combination of “Millionaire Next Door” and “Millionaire Fastlane” concepts which I call “The Next Door Fastlaner.” I personally enjoy the overarching teachings of both of these books, but I’m too risk averse to drop anything and just go for it, but I’m not going to close myself off to opportunities to drop into the fastlane in a way that feels more comfortable and responsible for my own lifestyle. As such, I sought to design a strategy to that incorporates elements of both, and that’s what we’ll explore next Financial Friday.
As always feel free to share your thoughts, your praise, your criticism, it all serves to make the show better!

Affiliate link to purchase The Millionaire Fastlane: The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime.