The NYU professor who’s been rich three times—and lost it twice—reveals why his friend making $14 million is “working poor” while his father earning $52,000 is wealthy. Plus: the brutal math behind private school vs. $5.3 million.
The Millionaire Who’s Actually Poor
There’s a guy who runs the M&A group at a bulge bracket investment bank. In a bad year, he makes $3 million. In a great year, $14 million.
He’s stressed out of his mind about money.
Between his ex-wife, alimony, child support, his Hamptons house, and the “master of the universe lifestyle” he thinks he needs to signal to his friends, he doesn’t save much. Despite pulling in millions annually, financial anxiety dominates his life and his marriage.
Scott Galloway calls him “working poor.”
Meanwhile, Galloway’s father collects quarters from a dozen washing machines in trailer parks, receives a Royal Navy pension and Social Security. Total annual income? About $52,000. He spends $48,000.
Galloway’s verdict: His father is rich.
The Real Definition of Wealth
Forget your salary. Forget your net worth for a moment. Here’s the only definition that matters:
Rich = Passive income greater than your burn rate.
If you can live well without working—if you have the choice to work or not—you’re rich. If you need your next paycheck to maintain your lifestyle, you’re not.
The investment banker making $14 million? Not rich. He’s trapped on a treadmill, terrified to step off.
Galloway’s father collecting quarters? Rich. His passive income exceeds his expenses. He works because he enjoys it, not because he has to.
That difference—choice versus obligation—is everything.
The Three Buckets That Define Your Life
Barry Rosenstein, founder of Jana Partners, taught Galloway that life divides into three buckets:
1. Things you have to do
Your biggest investor is in town. You got invited on Joe Rogan and there’s a date window. You have to show up.
2. Things you want to do
Your friends are meeting up in New York. There’s a creativity festival in Cannes you’re excited about.
3. Things you should do
Your coworker’s kid is getting married. It’s South by Southwest and you got invited to a networking party with podcasters. You should go, right?
The great liberation of economic security, Rosenstein told him: You can delete the “should” bucket entirely.
“I no longer do things I should,” Galloway says flatly. It causes some tension with his partner, but he’s firm on this. If it’s not a have-to or a want-to, it doesn’t happen.
That freedom—the ability to say no without consequence—is what wealth buys.
The Equation: How to Actually Get Rich
Getting wealthy isn’t magic. It’s an equation. Here’s how Galloway breaks it down:
1. Focus (Not Side Hustles)
Find something you’re naturally good at. Get in the top 10% or top 1% of your industry. Then focus relentlessly on it.
Galloway hates side hustles. They’re fine for exploration if you hate your main job. But if your side hustles drag on too long, it means you need to change your main hustle, not add more distractions.
The data suggests: The incremental 10-20% effort reinvested into your main career will provide greater returns than the distraction of side hustles.
Focus beats diversification when it comes to building your career. (Though the opposite is true for your portfolio—more on that later.)
2. Stoicism (Control What You Can)
In 2008, Galloway’s company went bankrupt after Wells Fargo pulled their credit line during the financial crisis.
He couldn’t control that. He also can’t control that most of his wealth since 2008 came from markets ripping upward.
But he can control his spending. He can control his savings rate. He can control not buying a BMW when a Hyundai will do.
3. Time (The Variable Nobody Respects)
Humans are terrible at understanding time. For most of our existence, we didn’t live past 35, so our brains can’t calibrate long timelines.
But if you’re 25 today, you’re probably going to live another 80 years. And it’s going to go a hell of a lot faster than you think.
Galloway’s magic box thought experiment:
If I gave you a box at age 25 and said, “Put $1,000 in here, and in 30 years, you’ll have $12,000-$24,000,” what effort would you make to find that $1,000?
The power of compound interest over time is extraordinary. But only if you give it time.
4. Diversification (Your Financial Kevlar)
This is where Galloway learned his most painful lessons.
He’s been rich three times. Lost it twice. And both times, the reason was the same: lack of diversification.
He assumed that if he threw 110% of himself into anything—time and capital—he could move mountains. He went all-in on individual investments.
The brutal wake-up call:
In 2008, Galloway owned $10 million in stock of Red Envelope, an e-commerce company doing well at the time. His bank said he could borrow $3 million against it.
What did he do? Bought more Red Envelope stock.
When the company went bankrupt, he went from being worth $10 million to owing $3 million. The emotional and mental tax was devastating.
The 3% Rule That Saves You
Now, Galloway never puts more than 3% of his net worth in any single investment.
Last week, a healthcare company he invested in—baller CEO, tier-one VCs, huge-name investors—went to zero. He had elbowed his way in to get that investment.
His reaction? He was bummed out for about an hour.
Why? Because he only lost 3% of his net worth. Diversification is Kevlar. It’s protection against getting shot in the chest.
When his net worth was $10 million and he lost it all in 2008, he almost never got back up. Now, even when investments go to zero, he gets knocked down, gets a bruise, and stands back up.
Nothing is critical. Nothing is fatal.
The $5.3 Million Private School Decision
Galloway did the math on elite private schools in New York, and it’s devastating.
Schools like First Presbyterian or Grace Church charge $62,000 per year in tuition. If you have three kids and send them from age 4 to 18, you’re talking hundreds of thousands of dollars. For many families, it’s a genuine financial strain.
Why do parents do it? “I want to give my kids everything.”
What does that mean? “I want them to get into a great college, have better opportunities, get a good job, and achieve economic security so they can do what they want without stress.”
Galloway’s counterproposal:
Send your kid to the public school closest to your home. Reinvest the commute time into studying, sleep, and play.
Take that $62,000 per year from age 4 to 18 and invest it in low-cost ETFs at an average 8% return.
By the time your kid is 35, you’ll have $5.3 million to give them.
Even if you screwed up. Even if they didn’t get into the best college. Even if they ended up with a mediocre career and trouble buying their first home.
Here’s what will ease your pain: $5.3 million.
That will solve a lot of economic anxiety.
Galloway would love to see a banner: “Grace Church or $5.3 Million?”
People just don’t realize how fast time moves and how powerful compounding is.
The BMW That Cost $3.1 Million
When Galloway got his first bonus at Morgan Stanley—$28,000—he bought a $35,000 BMW. He hung swimming goggles from the rearview mirror despite not swimming, thinking it would impress women.
If he’d bought a $12,000 Hyundai instead and invested the remaining $20,000 in the market, that money would be worth approximately $3.1 million today.
A bad car decision at 25 literally cost him millions in his 50s.
Market Dynamics Trump Individual Performance
Here’s the uncomfortable truth Galloway learned the hard way:
Market dynamics will always trump individual performance.
Most of his success—and his failure—isn’t his fault. He can’t control when markets rip up or crash down.
But he can control diversification. He can control his savings rate. He can control not putting all his eggs in one basket just because he’s confident.
Confidence killed his wealth twice. Humility and diversification saved it the third time.
Loss Aversion Theory: Why Diversification Matters Psychologically
The Nobel Prize-winning economist Daniel Kahneman wrote about loss aversion: The pain of losing money is far greater than the joy of gaining the same amount.
The thrill of picking Nvidia two years ago (which most of us didn’t) and watching it 10x?
That joy is a fraction of the pain you’ll feel watching Nvidia drop 90%.
For your financial well-being—and especially your mental health—embrace diversification.
Galloway’s philosophy now: “Give me your best shot. I can take anything.”
A bullet to the chest when an investment goes to zero? It knocks him off his feet. But he has Kevlar. He gets up with a bruise and moves on.
Before 2008? Getting shot in the chest almost killed him. He barely got back up.
Wealth Is a Full Person Project
There’s a myth that really wealthy people crawled over others to get there. That billionaires light cigars with $100 bills and crush competitors without mercy.
Galloway calls bullshit.
The majority of self-made wealthy people are actually good, high-character individuals.
Why? Because if you want to be really wealthy, you need to collect allies along the way.
People need to want to put you in rooms of opportunity even when you’re not there. They need to give you the benefit of the doubt when you screw up. They need to want to include you in deals, work with you, and present opportunities to you.
The only way that happens: Show generosity and character from an early age.
Greatness and wealth live in the agency of others. You can’t do it alone.
The Formula for Getting Rich
Let’s wrap it all together. Here’s Galloway’s equation for wealth:
1. Focus – Find what you’re good at. Become great through obsessive focus.
2. Stoicism – Control what you can control (spending, saving). Accept what you can’t (markets, timing).
3. Time – Respect compound interest. Start early. Be patient. It’s going to go faster than you think.
4. Diversification – Never put more than 3% in any single investment. Diversification is Kevlar.
5. Character – Build relationships. Collect allies. Show generosity. Wealth requires other people.
And then the punchline:
“I know how to get you rich. That’s the good news. The bad news is: slowly.”
The Working Poor vs. The Truly Rich
The investment banker making $14 million? Working poor. Trapped. Stressed. No freedom.
The father making $52,000 collecting quarters? Rich. Passive income exceeds burn rate. Total freedom.
The goal isn’t to make millions. The goal is to reach a point where passive income is greater than your expenses.
That’s when you exhale. That’s when you delete the “should” bucket. That’s when work becomes a choice, not an obligation.
And that freedom? That’s wealth.
The Brutal Lessons:
- $3 million debt taught diversification
- $3.1 million BMW taught compound interest
- $5.3 million private school math taught time value
- Three times rich taught that character matters
Scott Galloway is a Professor of Marketing at NYU Stern School of Business, founder of multiple companies, and host of the Prof G Pod. He’s been called “the most influential voice in business education today.”
