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Why A Humble Secretary Made More Money Than A Wall Street Executive


Morgan Housel, The Motley Fool, Oct. 14, 2013

Grace Groner was born in 1909 in rural Illinois. Orphaned at age 12 and never married, she began her career during the Great Depression. She became a secretary, lived in a small cottage, bought used clothes, and never owned a car.

When Groner died in 2010, those close to her were shocked to learn she was worth at least $7 million. Even more amazing, she made it all on her own.

The country secretary bought $180 worth of stocks in the 1930s, never sold, and let it compound into a fortune. She left it all to charity.

Now meet Richard Fuscone. He attended Dartmouth and earned an MBA from the University of Chicago. Rising through the ranks of high finance, Fuscone became Executive Chairman of the Americas at Merrill Lynch. Crain’s once included Fuscone in a “40 under 40” list of successful businesspeople. He retired in 2000 to “pursue personal, charitable interests.” Former Merrill CEO David Komansky praised Fuscone’s “business savvy, leadership skills, sound judgment and personal integrity.”

But Fuscone filed for bankruptcy in 2010—the same year Groner’s fortune was revealed—fighting to prevent foreclosure of his 18,471-square-foot, 11-bathroom, two-pool, two-elevator, seven-car-garage New York mansion. This was after selling another home in Palm Beach following a separate foreclosure. “My background is in the financial-services industry and I have been personally devastated by the financial crisis,” Fuscone’s bankruptcy filing allegedly stated. “I currently have no income.”

These stories fascinate me. There is no plausible scenario in which a 100-year-old country secretary could beat Tiger Woods at golf, or be better at brain surgery than a brain surgeon. But—fairly often—that same country secretary can out-finance a Wall Street titan. Money is strange like that.

One of the most common calls after the 2008 financial crisis was for America to double down on financial literacy. “We must strive to ensure all Americans have the skills to manage their fiscal resources effectively and avoid deceptive or predatory practices,” President Obama wrote in 2011, calling for a new “financial literacy month.”

But there’s a funny thing about financial literacy: There are quite a few Grace Groners and Richard Fuscones out there. They are extreme examples, but the link between financial education and financial outcomes is surprisingly elusive.

But several studies offer a more convincing answer: Financial education programs don’t improve outcomes because they tend to teach fundamental financial concepts, which aren’t that important, rather than behavioral issues, which are.

Learning the definition of compound interest isn’t going to do you much good unless you understand the devastation you’ll bring to your wealth by panicking when the market drops. Knowing what a Roth IRA is won’t do you much good if overconfidence entices you to take out lots of debt.

These basic behavioral differences are what separate the Grace Groners from the Richard Fuscones. Groner clearly understood patience. She understood frugality. She understood the value of a long-term view and how to not panic—if only subconsciously. Fuscone, it seems, didn’t. (To be fair, it’s unclear exactly where his financial troubles came from.)

The traits most important to mastering your finances aren’t typically taught in finance courses. You’re more likely to see them in a psychology class. They include things like patience, an even temper, being skeptical of salesmen, and avoiding over-optimism. A lot of people miss this because it’s not intuitive. But I think it explains, better than anything else, why so many people are bad with their money. And it extends beyond novices.

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