“Money makes money.”
Growing up, my grandpa reminded me of this often. He learned this lesson late in life and paid the price because of it.
My grandpa was smart. He graduated college at the top of his class in the 1960s and was offered a role as an adjunct professor of chemical engineering. While teaching, he also found lucrative work in South Korea’s emerging auto industry where he was hired as an injection mold engineer at a rising Chaebol (a large, family-owned conglomerate).
In the 1970s, he moved to the US where he found further success - this time as an entrepreneur. My grandpa’s ventures focused on the development of consumer electronics: the early JoyStick, mechanical putting machines for golf enthusiasts, and interactive mini-hoops for basketball fans. The money came easy.
But in the back half of his career, he learned a hard lesson: that winning in business is about more than bringing great ideas to life.
At his core, my grandpa was an engineer, a creative, an inventor. Not a businessman. As an immigrant in his early thirties, he lacked basic accounting, management, and strategy skills. Over time, this caught up to him.
His most costly lesson was that he came to believe money was dispensable. Because of his early success, he was convinced that making money was easy. That he could generate wealth on command. His failure to save and invest during his successful years was proof of this.
The psychiatrist Carl Jung is known for the advice, “Beware of unearned wisdom”. I think a corollary should exist in the business world: “Beware of early success”. Early success can often create reality distortions that are deadly in the long run.
Nowadays, my grandpa sees his mistakes clearly. If he could go back, he would of course have been more prudent. But sometimes lessons have to be learned the hard way.
All of personal finance can be summed up in two lessons: (1) Spend less than you make and (2) Money makes money.
The first is easy to understand (though hard to follow). But the second is not understood by most. Einstein famously said that, “Compound interest is the eighth wonder of the world. He who understands it, earns it and he who doesn’t, pays it.”
In life, some lessons are important to learn early. This is one of them.
Remember: Money makes money.
