What I Learned from The Wolf of Wall Street

Please. Take our money.

Most people watch movies to pass time or just let off some steam.  When I watch a movie, I make it worth my while.  I like thinking about the characters and their relationships, and what values or morals the movie was trying to get across.  For all the talk of Hollywood being a soulless money making machine, which it essentially is, most movies do have a beneficial lesson or two in them.  You just have to look for them.

I recently watched The Wolf of Wall Street (I know I’m like a year late to the game).  And being a personal finance blogger, this movie REALLY resonated with me.  It takes place in the 80’s and is about a man named Jordan Belfort.  Mr. Belfort (who ironically is currently a motivational speaker) is a Wall Street broker.  Which means he manages investments for people and gets a cut via commissions.  He got an entry level job with a firm and was idealistic to the core.  He just wanted to help people make money, and make a little bit himself in the process.

As the story usually goes, he let the money get to his head.  He eventually founded his own brokerage firm, which was doing some very shady stuff.  They were essentially cheating people out of their money and getting fat on commissions.  The FBI finally caught wind of this and he got some jail time, though not nearly enough in my opinion.  The movie pretty much chronicles his career.  It’s a very entertaining movie, but be warned it’s pretty vulgar so make sure there are no kids in a 50 foot radius.

But this post is not just a movie review.  It also contains some financial lessons I picked up from watching:

1.  There are some bad SOB’s out there trying to take your money.  Mr Belfort and his cronies had one goal and one goal only:  make lots of money.  And they would do it by any means necessary.  This included super high pressure sales tactics, misleading investors and lying to the SEC.  The biggest thing I noticed from their methods is that they wanted to make the investor feel that this one investment decision is the most important one of their life.  That if they don’t agree to investing with them, they will regret it for years.  Because they seemed like a very legit and professional company, many investors complied.

Lesson learned:  Never work with someone who wants you to make a decision right away.  Any major life or investment decision takes time and thinking.  If the salesperson wants you to make a decision on the spot, take your business elsewhere.

2.  There are a lot of gullible people out there.  As the saying goes, there is a sucker born every minute.  I’m not sure who said it, but it was probably Albert Einstein or Ben Franklin.  Mr. Belfort and friends defrauded a LOT of people out of their money with their antics.  I was actually surprised that so many people were willing to invest so much money on a whim.  It shows that as long as you have a good pitch, you can get a lot of people to buy your product.

Lesson learned:  Marketing is key.  If you can effectively (and honestly) market yourself and are diligent about it, you should be able to get what you want (money, clicks, ratings etc.) eventually.

3.  No one knows what the market is going to do.  There’s a scene early in the movie where Jordan is having lunch with his first boss (played hilariously by an old looking Matthew McConaughey).  The boss tells Jordan that no one knows if the market is going to go up or down, that it’s a losers game to time the market.  But as long as you make the investor think that it’s going up, and as long as you make them rich on paper, they will keep investing and the brokers will keep getting rich off of commissions.

Lesson learned:  Don’t try to time the market.  Stick with index funds that have low expense ratios, keeping more money in your pocket and out of the broker’s. 

4.  Technology is awesome.  Since the events of the movie took place in the 80’s, most of the transactions were done over the phone.  This made it easy for the brokers to employ their high pressure tactics and make the investor seem like they had no other choice.  Online trading wasn’t really an option back then so investors were at the mercy of the broker.  It was also harder to get the latest business news so when the broker is telling you something big happened, you had to believe him.

Lesson learned:  Do your research online.  It’s easier than ever to find which funds are the cheapest and what is the right asset allocation for you.  Online transactions are cheaper than phone transactions as well.

5.  There is never enough money.  The main characters of this show totally gave themselves over to money.  It was all they thought about day and night.  This eventually landed them in lives of debauchery fueled by booze and sex, day after day.  No matter how big their houses got, how fancy they traveled or how lavish their parties, they just wanted more and more.  Until the FBI got them.

I sometimes believe I think about money too much,  but then I realize that I want to make money to keep my family secure and help those in greater need than myself.  I wouldn’t say I’m the most noble person out there, but there’s a difference between wanting money for the sake of wanting it and wanting money for higher purposes.

Lesson learned:  Money is not an end, but a means.  It’s up to you to decide what ideal end is.