"Millionaire Next Door" Misses On Marriage

I’ve finally gotten around to reading “The Millionaire Next Door“, the best-selling look at wealth in America and the characteristics of Real Life Rich People. It has much good advice, but fails to articulate one of its key premises: That prolonged courtship periods are bad for building wealth, and early marriage is good for it.

The book covers lifestyles of the rich — how most millionaires don’t drive expensive automobiles, own expensive suits, how they live in the same house in the same town for long periods of time, and so on. It breaks people out into three categories – Under, Average, and Prodigious accumulators of wealth. To determine which category you are in, the book posits this formula for expected level of wealth: [Age / 10] * [Annual Gross Income]. Is your wealth level (e.g. savings and assets) above that amount? Then you are a PAW. If it’s under, you are a UAW. The book then explores the differences between the categories.

In the book, the authors list 7 characteristics of wealthy people.

1) They live well below their means.

2) They allocate their time, energy, and money efficiently, in ways conducive to building wealth.

3) They believe that financial independence is more important than displaying high social status.

4) Their parents did not provide economic outpatient care.

5) Their adult children are economically self-sufficient.

6) They are proficient in targeting market opportunities.

7) They chose the right occupation.

Just earlier in the book, the authors also noted this little point as a common characteristic of wealthy people.

“He has married once and remained married.”

Although the rest of the book appears to be properly focused on consumption habits, investments, tax-to-wealth ratios, and the like, all this advice is based on the premise that the (presumably) man is no longer courting. A married man, per Becker, is more economically efficient–period–and no longer has to bear courtship costs, which — if a man wants to get married — are mandatory, variable with time spent courting, and should be minimized for overall wealth maximization. A married man — ideally — can spend his time “making his mission, not his woman, the priority.”

Look at marriage as a project: the economic rationale for marriage is such that the net present value of the marriage (economically) is greater than the costs of courtship in time and money. If courtship is extended, then the costs are extended, and the NPV of the marriage needs to be much greater than it would otherwise have been. Marriage NPV is much higher for young men than for older, more established ones, so men reap economic benefits (e.g. wealth) from marrying sooner rather than later — and women get a higher NPV from marriage by marrying proven, potential-maximized men.

The book also notes that millionaires who are goal focused and drop out of school may actually have an advantage over the indebted college-educated people who delay workforce entry for 4-10 years. This parlays into the discussion about how much a degree is worth, which is subject to much debate. Prolonging workforce entry in order to get a degree is an expected investment, the reasoning goes, in terms of skills and networking and sorting.

This, however, is certainly not the case with courtship. Delaying courtship through dating is not an investment in a better relationship. Going on more dates with more people yields heavily diminishing returns if the goal is marriage (although to be sure, a good marriage is better than no marriage, and no marriage is better than a bad marriage).

For women in particular, delaying marriage is bad because looks are a depreciating asset. However, delaying for men is a bad deal too, if the goal is to accumulate wealth. And what is courtship? Courtship is extremely expensive in terms of both time and money. Men must demonstrate either status or status potential to get women. It can be very taxing for a man to develop the personal repertoire to compete against other men for women, because acquiring status is expensive and hard, and is made even more so when 50% of women are non-starts from the get-go. So the expected value of a date or other demonstration in leading to marriage is multiplied by 1/2  for men in the market. Men must spend twice as much as in latter days in dating in order to get married, and take longer doing it too. This has become such a pain in the ass that whole industries (game) and movements (the androsphere) have sprung up around it, and represents an ongoing diversion from wealth-building focus. The fact is that courtship is a resource intensive project competing for time and money during a man’s foundational career years, so getting married early represents a significant financial boon.

To be more complete and accurate, Mssrs. Stanley and Danko’s wealth-building messaging should have included another point, maybe a sub-clause to points 2 & 3:

“To Lay the foundation for sustained wealth building, maximize the value of your marriage by  marrying early and not divorcing.”

The costs of divorce are well-known and include — among other things — tremendous efforts in time and ongoing costs such as alimony, so the effects on wealth-building should be pretty obvious. I won’t address further.