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Below, Joseph Moore shares five key insights from his new book, How to Get Rich in American History: 300 Years of Financial Advice That Worked (& Didn\u2019t)<\/em>.<\/p>\n Moore is a historian who spent more than a decade researching and testing out what Americans were told to do with their money for the past 300 years. His previous work appeared in such outlets as The New York Times<\/em> and Oxford University Press.<\/p>\n History doesn\u2019t give us fixed rules for getting ahead financially. The \u201cright\u201d way keeps changing, so your best bet is to stay flexible, try a mix of strategies, and not get too excited every time someone claims they\u2019ve cracked the code to wealth. We have an opportunity-rich landscape, but how best to mine it changes in every era.<\/p>\n Listen to the audio version of this Book Bite\u2014read by Moore himself\u2014in the Next Big Idea app<\/a>, or buy the book<\/a>.<\/p>\n In 1676, 100 years before the Revolution, colonists burned the capital of Virginia to the ground because they felt that average people couldn\u2019t get ahead anymore. In the 1800s, big speeches were given saying \u201cthe rungs of the ladder to success are sawed off.\u201d Heck, in 1980, there were headlines proclaiming that the Baby Boomers could never afford to retire. How did that turn out?<\/p>\n The same goes for today. Of children born at the bottom, 6 in 10 rise out of poverty, and 4 in 10 become middle class, upper middle class, or rich; 1 in 10 goes all the way to the top. For the privileged born at the top, 64% fall out. Of the top 1%, 90% of their grandkids aren\u2019t particularly wealthy. We may not have perfect mobility in America, but we have a lot more than we think.<\/p>\n Okay, so the Boomer generation was<\/em> weirdly lucky. Fun historical fact: Working one job for 40 years while saving 10% in stocks would have failed<\/em> to fund retirement in almost half of historical scenarios. Boomers tend to think that what worked for them must work for everyone. That isn\u2019t historically true.<\/p>\n As for the Doomers\u2014they may have to get ahead the same way most people did for most of time. In the 1700s, if you went broke you went to jail, and so did your entire family: wife and kids. They forgot to put that in Hamilton<\/em>. <\/p>\n In the 1870s, the average American owned just one and a half shirts. To afford the other half of that shirt, you had to work on average 60 hours per week. Insurance was in its infancy, so you couldn\u2019t protect your house, spouse, or income. As late as the 1970s, when I was born, the median income was 30% lower than today. Nowadays, we work fewer hours for more money with less risk than ever before.<\/p>\n The first step was to take literal steps. In the 1800s, one in three Americans changed addresses every single year! Keep in mind that just getting to America took 30 days, and traveling across the country took the U.S. Army two months. Today, when it has never been easier to go where the opportunity is, only 1 in 10 Americans moves. You could, if you wanted, put everything you own in a U-Haul and be anywhere in the continental U.S. in less than 48 hours.<\/p>\n Americans are becoming increasingly risk-averse at the very moment the financial world is safer and more accessible than ever. Both sides of politics have a warped view of the past: that it was better \u201cback then,\u201d and that someone else is to blame. Anyone telling you it is harder today than ever before doesn\u2019t know history.<\/p>\n In 1835, a runaway slave created money from nothing. Arriving in Michigan broke but determined, William Wells Brown caught a break when a landlord offered him space to start a barbershop\u2014a fabulous idea, save for the fact he owned no scissors, had never cut hair, and everyone in town was short on cash to pay. <\/p>\n Undeterred, the young man borrowed shears and printed money. He went to the local printer and had about $20 printed in small denominations ranging from 6 cents to 50 cents. He handed these out around town, essentially exchanging haircuts for food and lodging. Eventually, other people started trading the tokens too, and before long, Brown\u2019s bucks were treated as money in Monroe, Michigan. <\/p>\n Brown eventually was able to trade his tokens for real cash, and that is how he paid to get to freedom in New York. When he left, his money went to $0.<\/p>\n Money itself has changed dramatically. By 1863, there were around 10,000 unique currencies from more than 1,000 issuers. Coins from the Holy Roman Empire lingered in the U.S. for decades after its collapse, because money from a dead empire was better than money from no empire at all. Grandparents taught grandkids to never save money because, like Brown\u2019s self-made funds, it could become worthless overnight. The trick was to spend as quickly as possible.<\/p>\n There was no golden era when everyone was debt-free, saved money, and invested wisely. What works financially is constantly changing. Much of what we consider timeless advice is quite young. Stocks for the long run? Stocks underperformed or were tied with bonds until World War II, making that \u201ctruth\u201d younger than either of our last two presidents.<\/p>\n Real estate always goes up, right? But it doesn\u2019t. Adjusted for inflation, houses in Atlanta, Dallas, and Pittsburgh cost the same in 1997 as they had in 1897. Home values in St. Louis did not recover their values until 2003. What has happened in real estate in our lifetimes is entirely new. Home prices going up is historically weird.<\/p>\n Most financial advice is like trying to steer the car by looking in the rearview mirror. That may tell you where the road was, but it doesn\u2019t say much about where it is going.<\/p>\n In the 1890s, New York City policeman John Taylor put a small down payment on a brownstone. How could a beat cop afford a brownstone? The answer was his wife, Agnes. The historical record lists her with no occupation, but she was making money. <\/p>\n To pay down their mortgage, Agnes treated the home as an income-producing property. She rented out the rooms in her home to 10 separate boarders at a time, managing their rent payments, laundry service, and meal preparation. She ran a 19th-century Airbnb. That<\/em> is how they afforded their mortgage.<\/p>\n The historical record misses this because the money women made was usually classified as \u201cdomestic industry.\u201d But for all American history, women\u2019s earnings made up the difference between barely surviving and thriving: In total, they added 15% to 25% to families\u2019 total take-home pay. Women churned butter, gathered eggs, wove hats to wake up early and sell at local markets. At some point in their lives, about half of women who owned a home rented out rooms for money.<\/p>\n Women were also investors in every era. Women were the most common lenders of mortgages in the 1700s. They owned 50% of the shares in AT&T. Every women\u2019s magazine had a financial beat writer, because women were active investors. Heck, Abigail Adams\u2019s lifetime annualized returns were 18%, nearly identical to Warren Buffett\u2019s.<\/p>\n Women\u2019s income was so important that when the stay-at-home-wife movement got started it was men<\/em> who were writing angry letters to the newspaper complaining that wives needed to be earning, not learning \u201cat home like scholars.\u201d Two-income families were normal for most of history. The view that women started working in the 1960s is just plain wrong.<\/p>\n And it has warped our dialogue about gender. Women working doesn\u2019t undermine men\u2019s economic roles because it never did in the past<\/em>. Spouses saw themselves as both working to build a future together. Dual incomes powered most people\u2019s pursuit of the American Dream. It still can, today.<\/p>\n \u201cI wish I had a villa in Florida to retire to\u201d is a sentence from a letter in 1830s Baltimore. By the early 1900s, one in three elderly people was retired, Coral Gables was bursting at the seams with old people, and the day the first Social Security check was cashed, nearly half of 65-year-olds were done working. How was that possible?<\/p>\n Rather than relying on a single government-run system, Americans used multiple strategies in their golden years. Paid-for farmland or rental houses were leased. Businesses were sold to junior partners. Annuities offered retirement plans from the insurance industry.<\/p>\n Some companies offered pensions, though not as many as we often think. Pensions typically covered around 15% of workers, and they never covered more than 40% of the workforce. Another strategy we\u2019ve forgotten is state-run old-age insurance. By 1934, there were 30 of these. Alaska offered its own version of Social Security before it was even a state. The final strategy was raising good kids who would help Mom and Dad as they aged.<\/p>\n Social Security didn\u2019t revolutionize retirement; it standardized it. Social Security, private annuities, pension plans, 401(k)s, rental real estate, paid-for homes, and kids who aren\u2019t screwed up are a pretty potent combo. Most of our retirement anxiety is misplaced. If you combine just a few of these strategies, you will be just fine.<\/p>\n The average 401(k) balance, if it had to fund retirement alone, would run out in less than six years. Social Security offers a menial income, barely enough to survive. But when you combine these various strategies, the most typical scenario, using 150 years of market returns, is to die with more money than you started with. <\/p>\n The lesson of history is to combine as many strategies as possible into one wonderful retirement. And never forget, your ancestors rarely lived to see so many free years. Worry less. Enjoy them more.<\/p>\n Reading history distorts time. It makes everything seem fast. Everyone should have seen \u201cit\u201d coming, whatever \u201cit\u201d was: values that crashed (like tulips or Beanie Babies) and things that went boom (like Bitcoin or Nvidia). But reading<\/em> history and living<\/em> history are not the same.<\/p>\n Financial life moves at two speeds: Fast Time and Slow Time. Most of life is lived in Slow Time, but most financial history is written about Fast Time (when all assumptions change at once). The real role of such histories is to give the reader a thrill. It\u2019s a murder movie where we scream at the screen, \u201cLook behind you! It\u2019s the subprime mortgage lender. Run away from the mortgage!\u201d<\/p>\n Mistaking Slow Time for Fast Time changed my town forever and, as a bonus, inspired the Netflix hit series Schitt\u2019s Creek<\/em>. I live in Braselton, Georgia, a tiny town outside of Atlanta, once owned by superstar actress Kim Basinger. Depending on your generation, you know her as a Bond girl, Viki Vale, Eminem\u2019s mom, or that old femdom in Fifty Shades Darker<\/em>. She owned the town as an investment<\/em>.<\/p>\n Her plan was to turn the empty mills into a tourist attraction and build a movie studio .\u00a0.\u00a0. in Georgia, in the \u201990s. But building a dream happens in Slow Time. Taxes mount. Investors get anxious. Soon, you run out of cash. <\/p>\n Basinger declared bankruptcy. Actor Eugene Levy found this story, and the rest was pandemic-era comedy gold starring himself as a failed businessman whose final remaining possession is a backwater town with a funny name.<\/p>\n But who gets the last laugh? Today, the fastest growing movie production studios in the world\u2014bigger than New York and soon to overtake California\u2014are in \u201cY\u2019allywood,\u201d a district just outside Metro Atlanta. The town Basinger bought is home to one of Atlanta\u2019s largest tourist attractions, a winery and resort called Chateau Elan. They sell accessible French luxury on Georgia clay. It\u2019s surrounded by mansions of pro athletes, famous rappers, and C-level reality stars. And it works. It\u2019s profitable. You should visit.<\/p>\n Basinger, bless her heart, just didn\u2019t understand that she couldn\u2019t speed up time. Investing in the future is rarely as profitable as we think because the future rarely arrives tomorrow. It takes its time, and so should we.<\/p>\n Enjoy our full library of Book Bites\u2014read by the authors!\u2014in the Next Big Idea app<\/a><\/em>.<\/p>\n This article originally appeared<\/a> in <\/em>Next Big Idea Club magazine and is reprinted with permission.<\/em><\/p>\nWhat\u2019s the big idea?<\/h2>\n
1. It has never been easier to get ahead than it is today.<\/h2>\n
2. What \u201calways worked\u201d was always changing.<\/h2>\n
3. Dual incomes were always normal.<\/h2>\n
4. Retirement happened long before Social Security.<\/h2>\n
5. The next big thing is usually a bad idea.<\/h2>\n
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