Thomas Stanley, one of the co-authors of The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, passed away earlier this year.
He was also the author of The Millionaire Mind and several other books, including Stop Acting Rich: … And Start Acting Like a Real Millionaire.
I like these books. And I want to believe what they offer. On a deep, intuitive level, I think they’re on the money with respect to some important points.
But I’ve got some major reservations. The fundamental is that the “findings” are derived from flawed sampling methodology.
An astute commentator on Reddit puts it well:
Nassim Nicholas Taleb has also been very critical of this work, referring to Stanley’s work as an example of survivorship bias. If you only analyse the characteristics of successful people, you’re not able to compare them with people who are unsuccessful.
For example: you might say that successful entrepreneurs are people who have a high tolerance for risk and don’t let their detractors get in their way. That might be the case, and if you look at a sample of 10 successful entrepreneurs you might be convinced of this, right?
But if you think of it, these characteristics can also be a recipe for disaster. It would give you a better view of the world to look at a random sample of people who have these characteristics, and see if they are actually determinants of success, or characteristics shared by a number of people, successful or otherwise.
So it goes with the premises in Stanley’s work. If you work backwards, it might be possible that the special characteristics of the “millionaires next door” he talks so much about are not so unique to millionaires, and are not highly correlated to becoming millionaires. There might be other important factors at work. You need to look at a broader sample than just those who have succeeded.
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So. You have to take these findings with a grain of salt.
But I like the books, and I think there’s a lot of truth to what they espouse.
Before pointing out a very important insight: