Sahil Bloom On Wealth, Success, And Pursuing All-Time Highs In Money And Life
Fortunately, we’re in one of those seasons when we get headlines about new market highs pretty regularly as one or the other index surpasses a new, never-before-seen threshold. These benchmark superlatives tend to inspire a moment of celebration—only to be soon followed by hours of anxiety, as investors ponder when their new all-time high will inevitably become a low.
Well, I’ve got some good news: Assets with historically positive rates of return should regularly, if not indefinitely, be hitting new all-time highs. And personally, you should, too—that is, if you’re measuring success correctly. Entrepreneur, investor, and author Sahil Bloom explores this firsthand in his new book, The 5 Types of Wealth. But there’s a twist.
I got a chance to talk to Sahil this week to learn more about the new book and a philosophy that fits right in on the Financial LIFE Planning weekly, so thanks for joining us!
P.S. I know you’re also curious to know what’s going on in the markets with a LOT of action from the land of artificial intelligence this past week. Tony will bring us up to speed in his summary appropriately titled, Creative Destruction.
Tim
Tim Maurer, CFP®, RLP®
Chief Advisory Officer
In this FLiP weekly you'll find:
Financial LIFE Planning:
Sahil Bloom On Wealth, Success, And Pursuing All-Time Highs In Money And Life
Quote O' The Week:
Viktor Frankl
Weekly Market Update:
Creative Destruction
Financial LIFE Planning
Wealth, Success, & Pursuing All-Time Highs In Money & Life
You see, Sahil had done everything to set himself up for success. He was a four-year baseball player at Stanford with prospects for the next level. But he didn’t go pro. Compelled by a friend to pursue a job in high finance, under the presumption that, “…by the time you’re thirty, you’ll be making more money than you know what to do with,” he went that route.
“That sounded pretty damn good to me on the basis of one simple, foundational assumption,” writes Bloom: “Money will lead directly to success and happiness.”
Overachiever that he is, Sahil checked all the boxes, did all the things, had all the things. He was 30 years old, making millions of dollars a year, and had all the visible signs of success, but he was miserable. “I realized I had achieved all of it,” he writes, “and all I could think was Is this it?”
Is this it?
Regardless of the circumstances, I know you’ve had an “Is this it?” moment. Maybe it was a story that was similar to Sahil’s, related to professional or financial success. Maybe it was related to a success you experienced in sports or the arts. Indeed, how many great artists alone have been lost way too early because they couldn’t handle the deification of superstardom?
Or maybe it was something less visible and more personal. Perhaps you married your dream girl or guy, only to learn months or years later that love isn’t just a feeling—it’s work. You got the 2.5 kids, the labradoodle, and the white picket fence around it all, only to ask Is this it?
I have to come clean, too. The first time I got a book deal with a publisher, then when the book got published, then when it got a superlative review in USA Today, then when I got a chance to talk about my work on NBC’s TODAY show... I remember distinctly thinking that each of these successive moments was definitive in my career—that a lifetime of success was a virtual guarantee—only to realize that tomorrow comes just the same. It was a false summit, and there was another, much larger, hill to climb, again and again.
Bloom defines this false summit as “the arrival fallacy…the false assumption that reaching some achievement or goal will create durable feelings of satisfaction and contentment in our lives.”
“But the fallacy of it is that you get to that point, you feel this momentary blip of happiness, and then it immediately resets to something further out on the horizon,” Sahil explained further when we spoke about the book. “It resets to being three million or five million or ten million. The new promotion, the new title, the fancier house, the nicer car—all of those things. And you are making your happiness and your contentment and your fulfillment conditional on some future state that you need to achieve."
Another phrase that has been used to describe these all-too-fleeting mountain-top feelings is hedonic adaptation, more commonly known in the pejorative, the hedonic treadmill—the idea that as soon as we get to the finish line, we envision yet another finish line in the distance. But here’s that aforementioned twist.
Here comes the twist.
As with many behavioral biases that have been miscast as inherently negative, the arrival fallacy and the hedonic treadmill may be features, not bugs, in our human hardwiring. As Dr. Meir Statman is quick to remind us, behavioral finance isn’t all bad behavior. For example, were it not for Sahil reaching his pre-pinnacle moment and finding it lacking, you wouldn’t be reading this post because he wouldn’t have written the book.
He’d be content to rake in his millions putting private equity deals together—not that there’s anything wrong with that—and he wouldn’t have made it his life’s mission to extrapolate the ancient wisdom he learned experientially.
That wisdom, by the way, is that wealth is far more than money—a conclusion that, having spent 28 years in wealth management, I’m inclined to support with a standing ovation.
The Wrong Scoreboard
Money is certainly a part of wealth, but in The 5 Types of Wealth, Sahil extrapolates further to discuss our time, social, mental, and physical wealth, in addition to our financial. He told me that what we really have is a scoreboard problem. “The scoreboard that we use to measure our success, our wealth, our life worth is money. And that is because money is so damn measurable. It is such an easy thing to put a single number around and then to track.”
Thankfully, Bloom doesn’t just diagnose the problem—he provides a master class on how to measure and invest in all five types of wealth, not just financial. This collective wisdom offers a road map for a life perpetually filled with all-time highs.
But I have one more piece of good news for you.
More good news:
Thankfully, the arrival fallacy doesn’t just apply to the great things that happen in our lives, the pinnacle moments. It also applies to the challenges and valleys we endure. It’s altogether possible that you’re going through one of those moments right now, and I’m pleased to report that your hardship is no more definitive than your greatest moment to date.
Nobel laureate and founding father of behavioral economics, Daniel Kahneman, put it this way: "Nothing in life is as important as you think it is while you are thinking about it."
This applies to our highs and our lows, and most of our life is lived in the vast in-between moments.
Yes, like the markets, we will experience volatility in both the upward and downward direction. But when we better understand true wealth, the insatiability of More, and the uncommon comfort of Enough, we position ourselves to enjoy a perpetual series of all-time highs.
This article was originally published in Forbes.com.
Quote O' The Week
Truly one of the most powerful quotes I’ve ever read:
Viktor Frankl
"Happiness cannot be pursued; it must ensue, and it only does so as the unintended side effect of one's personal dedication to a cause greater than oneself."
Weekly Market Update
Markets were mixed this week, with international zigging while domestic zagged:
- 1.00% .SPX (500 U.S. large companies)
- 0.13% IWD (U.S. large value companies)
- 0.97% IWM (U.S. small companies)
- 0.48% IWN (U.S. small value companies)
+ 0.66% EFV (International value companies)
+ 0.30% SCZ (International small companies)
+ 0.47% VGIT (U.S. intermediate-term Treasury bonds
Creative Destruction
Contributed by Tony Welch, CFA®, CFP®, CMT, Chief Investment Officer, SignatureFD
Early last week, many artificial intelligence (AI) related stocks experienced a relatively sharp sell-off owing to announcements from Chinese AI company DeepSeek. What exactly happened to disrupt the U.S. AI names, and what is the investment principle associated with it?
DeepSeek is a large language model (LLM) that claims to have trained its models more efficiently and far less costly than prior and well-known LLMs. It also utilizes some innovative approaches to achieve similar performance to more expensive competitors at potentially far less cost to consumers. There remain questions about how much the total spend was and whether DeepSeek used GPT as a teacher model. Regardless, DeepSeek became more popular than ChatGPT in Apple’s App Store and markets began to pay more attention to it. Potential implications stemming from these breakthroughs are the reason there was a swift market response.
Open questions include whether high-quality LLMs can leverage cheaper chips and to what extent existing projections of future energy expenditures on AI may be overdone. As always, there will almost certainly be winners and losers as AI development becomes more cost and energy-efficient. One investment principle that we may consider is that of creative destruction. I asked ChatGPT to define creative destruction, comparing ChatGPT to DeepSeek as an example. This is the output:
Creative destruction is an economic concept introduced by Joseph Schumpeter, referring to the process by which new innovations disrupt and replace older technologies, business models, or industries. It is a driving force in capitalism, where new ideas and advancements lead to the decline or transformation of existing structures.
Example: DeepSeek vs. ChatGPT
A tangible example of creative destruction in AI could be how DeepSeek’s recent innovations challenge ChatGPT’s dominance in the AI landscape. Suppose DeepSeek introduces a radically more efficient architecture that significantly reduces computational costs while maintaining performance. If users and businesses start shifting toward DeepSeek due to better efficiency, multilingual capabilities, or specialized reasoning improvements, this could erode OpenAI’s market share, forcing it to adapt or risk losing relevance.
A historical parallel would be Google Search replacing Yahoo as the dominant search engine due to superior algorithms. Similarly, if DeepSeek continues to innovate beyond ChatGPT’s capabilities, it could reshape the AI landscape, compelling OpenAI to evolve or be left behind—a clear example of creative destruction in action.”
Last week, we wrote about market multiples and how the U.S. is relatively richly valued. The high valuations persist across all market sectors (i.e. Energy, Financials, Tech). Those lofty valuations imply that U.S. companies will maintain dominance in innovation and cash flow, but that may not be the case. I would suggest that when a business is incredibly profitable, despite high barriers to entry, other companies will attempt to participate, resulting in creative destruction.
This year, we have a major theme for investors regarding portfolio diversification and rebalancing. That doesn’t mean abandoning the big AI beneficiaries, but it does make sense to allocate dollars to less fully valued market segments if the business moats are disrupted for the megacap Tech stocks. AI is an incredibly quickly moving landscape. We expect DeepSeek is not likely to be a significant sea change in the megacap AI story, but it is an example of the potential for creative destruction.
The Message from Our Indicators
Fourth quarter GDP growth and the Personal Income and Outlays reports were two impactful economic releases last week. The GDP report confirmed some positive economic momentum carrying into 2025. Economic output rose 2.3% annualized in Q4, and for the year last year, the economy grew 2.5%. Much of the growth was driven by a surge in consumer spending. In Q4, expenditures popped at a 4.2% annual rate. We’ve discussed how a positive wealth effect, positive real income growth, and higher interest rates on savings contributed to spending last year. In Q4, the anticipation of tariffs may have pulled forward some demand as well. Regardless, we expect economic growth to ease somewhat this year but remain positive in the absence of an unforeseen shock.
The Personal Income and Outlays report is monthly and showed strong growth in both income and expenditures in December. The Fed’s favored PCE price index rose 2.6% on the year, and core prices, which exclude food and energy prices, rose 2.8%. These inflation rates are still higher than the Fed’s target but with potential easing in shelter inflation ahead, the downtrend in the inflation rate could resume in upcoming months. Given solid economic growth and above-target inflation, it makes sense that the Fed elected not to lower interest rates in their January meeting.
Solid economic growth is also evident in Q4 earnings announcements and expectations. S&P 500 companies are expected to report 12% earnings growth and encouragingly, the small-cap S&P 600 Index constituents are expected to report about 15% earnings growth. Positive earnings trends are important for the longevity of the economic expansion as companies rarely conduct large scale layoffs when profits are on the upswing. Additionally, valuations are relatively stretched, but robust earnings growth in the year ahead could alleviate some valuation pressure. We would also note that market corrections tend to be contained when earnings are rising, rather than giving way to bear markets, a condition which is more likely when earnings are contracting.
From a technical perspective, there has been some broadening of the uptrend in January, which is encouraging. Because Dember was negative, we wanted to see a rebound in January to have more confidence that the bull market was intact. We would also note that some leadership trends have shifted, which is a healthy technical condition. The Tech sector has been the worst performer year-to-date but economically sensitive sectors like Financials, Materials, and Industrials have been strong thus far. Small cap domestic stocks and international markets have also been relative leaders. We often say that the most sustainable bull markets are broad-based and global in scope. January’s market action has thus far met that criterion.
All told, we still expect more volatility in the year ahead but for now, the weight of the evidence continues to suggest that the bull market be given the benefit of the doubt.
It’s always helpful for me to remember that the reason we’re able to *expect* a higher rate of return from the equity markets is because we’re willing to endure its inevitable volatility. Hmm…just like life.
Have a great weekend and week to come!
Tim