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How Media Makes More Money Publishing About Fake Self-Made Millionaires, Whiz Kids

Whiz Kid Story in New York Magazine — *New York Magazine Article on a “Whiz Kid”*

At the spry young age of 15 and 16, I began trading stocks. I read Jim Cramer’s autobiography and was inspired by his love of markets. Memorizing the two, three, and four-letter tickers for major companies provided a unique joy; frankly, I’m not sure why. I loved watching CNBC and seeing the symbols dance up and down like a permanent Christmas tree of green and red.

Every now and then, a story would catch my eye. It was someone like me; passionate about the markets, but they were making boatloads of cash. They made me jealous, and I wondered how I could emulate their success.

That was until I realized most were fake, underreported, and often, downright lies. These were hardly the role models I should’ve been following. Today, I wanted to point out a few recent stories that highlighted frauds — willingly and with seriously piss-poor reporting.

The already-rich, “self-made” millionaire

Anton Ivanov was a serial entrepreneur and personal finance blogger for years. I had multiple conversations with him after starting Frugaling. To avoid anything slanderous, I’ll just say that I planned on never working with him. Something just didn’t make sense about his riches and efforts in the personal finance world.

Then, shortly before his 27th birthday a slew of stories were written about Ivanov. He even wrote an article for the occasion in one of my favorite personal finance sites, Budgets are Sexy. Yahoo Finance interviewed him to discover how he had succeeded to save, invest, and make wealth in record time.

Being a 27-year-old, self-made millionaire is a unique club that’s generally reserved for entrepreneurs and young tech whiz kids. The Internet has enabled a new generation — Millennials — to see millions and billions in record time with the sale of apps and sites.

Ivanov reported that he did it with old-fashioned hard work and dedication. Remarkable! His advice centered on a few steps: set clear and actionable goals, track net worth, save more income, avoid consumer debt, have an emergency fund, save for large expenses, and invest.

Yahoo Finance reported that Ivanov had successfully entered the workforce at a young age, started hustling at a young age, and then got into the real estate game. The article is filled with blasé quips like,

“He hopes to own at least 10 properties by the time he hits his 40s, but he’s in no rush.”

See, it’s not that his advice was fraudulent and questionable. The heart of the problem was that he wasn’t actually a “self-made” millionaire (as if anyone magically prints money themselves). Here’s what Yahoo Finance then wrote,

“Since the publication of this story on Nov. 4, new details have come to light which have made Anton Ivanov’s claims of becoming a self-made millionaire highly suspect. On Monday, Ivanov admitted to Yahoo Finance that 75-80% of his wealth consists of an inheritance that was left to him by his parents, who died several years ago.”

This kid made $72 million… From his parents

Ivanov isn’t the only fake “success story.” New York Magazine found a “whiz kid” that supposedly made millions trading stocks on his “lunch hour.” It was the ultimate viral article. With a catchy title that spoke to ridiculous riches — $72 million made from trading — and a young man looking to become a hedge fund manager.

Mo Islam was a 17-year-old kid who had already been profiled by Business Insider, as a “20 under 20.” He was going somewhere in life because of his vast wealth creation. Islam supposedly started buying penny stocks — over the counter and paper-based companies that don’t necessarily trade on the major exchanges. These stocks vary greatly and are dangerous for 99.99% of investors to even think about.

The penny stocks didn’t pan out, so Islam swiftly switched to oil and gold. That’s when New York Magazine says he struck bank account success. He quickly amassed about 8-figures of wealth.

If the story is unbelievable and astonishing, it might just be unreal and manufactured. Only a couple days later, every major media outlet was discrediting the kid and New York Magazine’s story. It was all made up, and while the “whiz kid” did have a large bank account, it is because very wealthy parents.

The media is rewarded for good, fake stories

Over and over again, false stories are reported in the media. They used to make me envious for their success. I thought, “Wow! If they can do it, why can’t I?” Well, there was an essential distinction between them and me — lots and lots of money to start. Both Ivanov and Islam started with wealth that was either inherited or given to them. The trading, saving, and investing that came afterwards didn’t essentially make them rich — it just added to their earnings.

These weren’t the mythical “self-made millionaire” and “whiz kids.” No, they were privileged with familial riches. Today I’m writing this story, not to further discredit these two people, but to highlight the severe media mismanagement and horrific reporting that was associated with both stories (and many others I don’t have time to cover).

With each story, the media outlet claimed that the individual told them that he had made boatloads of money. With each story, they reported that claim without properly vetting the source. And with each story, the media outlets made vast advertising dollars in spite of their errs. In fact, they made even more than they would’ve if they honestly vetted and reported the stories!

Ordinarily, these people are singular stories — one-hit wonders. They’re popular for a little while and then the media company moves to the next story. They make money from that one story, but here’s the genius: if they get it wrong, there’s at least two stories to come!

Here’s how you make more money as a news company by reporting fraudulent stories:

Publish a poorly vetted story
Make money from visitors to the “incredible” story
Receive harsh critique and censure from observers of the story, which sends a surge to the original article
Make more money from visitors to the “incredible,” fraudulent story
Publish a story highlighting the “truth” regarding the “self-made millionaire”
Make even more money from visitors to the “incredible truth” about the fraudulent story

All the while, media outlets work diligently to discredit the source, while excusing the journalist’s poor reporting. And meanwhile the mythical narrative of the “self-made millionaire” continues, stubbornly. The narrative doesn’t change, despite the blow to accuracy. Everybody wins when the narrative stays the same, right?

What do you think, can people actually be “self-made” millionaires? What’s the best way to make and build wealth? Is there actually one-size-fits-all advice that works for everyone?

If I Were Rich, Would I Still Be Frugal?

By Frugaling 7 Comments

For my first year of graduate school in Iowa City, I wasn’t able to get back to see family for Thanksgiving. Motivated by the irony and sadness of spending the holiday alone, I watched a sappy movie and ate a cold turkey sandwich. This sorry state was only amplified by my linoleum/concrete floors that were like permafrost ice blocks for my feet, and the dingy, yellowish light of my apartment. All I could think was, “If I were rich, how would this be different?”

Dreams of a vacation I didn’t have

Presumably, I would’ve sat near the front of the airplane — speeding to my destination. The service would’ve been better, too. Maybe I could’ve afforded a first-class ticket. Perhaps this could be a regular weekend getaway. Luggage fees wouldn’t have been usury and awful — just mere pennies to my millions. Although, I probably would not have needed to pay for those fees anyways, as my credit cards and connections would lead to waivers. Either way, I would’ve been wealthy enough to afford whatever outcome. I would never stand in front of a ticket counter, after buying a ticket online, and be surprised that there’s an additional bag fee — breaking my budget and robbing me of my little available savings.

Finally at my destination’s airport, I would’ve rented a car. Not just any car, but a luxury vehicle to speed around the mean streets — something familiar and like my lifestyle. Again, I would have enjoyed the whisk and breeze of skipping lines, priority rentals, and free upgrades. My parents, family, and friends wouldn’t have needed to worry about me; I’d show up on time, no help and reliance necessary. Time would continually be on my side, as waiting would be heavily reduced.

As I walked through the airport, and saw the nice luggage and bags, I could have looked them up on my phone and instantly purchased my own. I wouldn’t need to hesitate to buy something so practical and helpful. Why not get some class with a Louis Vuitton set? Throw in those shoes, too! Traveling in style feels better.

Going home, I would have been excited to see all the friends and family I could. But I’d have to look sharp. Maybe I could stop by my favorite barber for a cleanup? My photos would be filled with the material goods that ooze success. I could show my parents, in person, what they had raised — that I had picked up my bootstraps and become a capitalistic achievement. They could be proud of my wealth and ability.

Thanksgiving without family, but not without heart

Reality is a cold shower. I can’t remember the last time I purchased something and didn’t feel guilty, nervous, and anxious for the added expense. I had looked at plane tickets for this Thanksgiving, but at nearly $500 plus airport shuttle fees, I couldn’t afford it. In a way, it felt like I was forced into frugality, without a choice (unless you consider debt to be an option, which I don’t).

As my friends and the rest of this consummate college town fled their studies and small-town lives for another location, there was a powerfully isolating feeling to my thriftiness and decision to stay. I fully expected it to be another cold turkey sandwich and night alone, but that all changed when a co-worker invited me to dinner. He knew I’d be here, without plans, and suggested I tag along.

What really matters

In that moment of deep gratitude, the Louis Vuitton dreams subsided. Pictures of first-class comfort and VIP lines faded. Suddenly, I felt humbled by his generosity and honored to be included. I was truly thankful — without any need for material goods, money, or proof of my worth.

Wealth is a funny target. If I only wanted to make money, I should’ve chosen a different career. Instead, I was motivated to help others and temporarily delay earning potential. My path to occupational success likely won’t include boatloads of cash.

Undeniably, if I had enough money available, I would’ve flown to Colorado to see my family. And honestly, if I had the money, I would’ve loved the creature comforts of first class. Both of these decisions would get me spending more money and being less frugal.

But at the end of the break, it was clear and simple: I just wanted to enjoy the day with people who are kind and open-hearted. Wealth just didn’t matter. If I were rich, I would’nt have wanted anything more than to share that moment with those I care about.

My High School Gambling Problem

By Frugaling 9 Comments

Poker Table Chips Cards Gambling Problem — *Photo: flickr/imagesofmoney*

As a Millennial and part of the tech generation, I grew up around computers. I can’t remember much of a time before the Internet. Computers were ever-present by the time I reached middle school. When I was in fourth grade, I learned HTML and began writing code by hand – a geek of the highest order.

In elementary school, my parents bought their first computer. I was glued to the magic of the mouse, keyboard, and screen working together in a confluence of beautiful technology. These integrated zeros and ones seemed to dance before me, and it wasn’t long before I started making money from it all.

Today, I have a secret to share with you all: in high school, I had a gambling problem. In 2004, I started playing poker with my friends. It started out pretty casual and fun; lighthearted, even. Large groups of people would coalesce at one person’s house every couple weeks, and a doable $5 buy-in would be advertised. Texts and phone calls would be sent out, and the get-togethers were great.

Poker Cards Chips Texas Hold Em Gambling Problem — *Photo: flickr/deutero*

The buy-ins (the amount to play in tournament-style texas hold ’em poker) grew, too. What was $5 soon became $10, $20, and there were even re-buys (to buy back in for extra if you had lost once) at another $20. The shared prizes were amounting to hundreds and hundreds of dollars. If you won, you could easily walk away with an extra $100-200+ in your pockets. The infusion of funds was electrifying. I was hooked and loving it.

Some people were inspired by the statistical underpinnings. Behind it all, poker between friends was a stats-based game of skill and chance. But if you mastered the art of stats, your chances became stronger. Poker wasn’t pure gambling, as the same winners would be on the leaderboard week-to-week. They were doing something right.

The mathematics never appealed to me; instead, I loved the interpersonal dynamics – the play, candor, and fight between personalities at the table. Give me 8 other opponents, and I believed strongly that I could understand their style, bets, and choices. This was exciting and enticing. Unfortunately, at the end of every tournament, the game would be done for a couple weeks. I’d have to put my earnings and love for poker on hold.

I was looking to fill that gap, and that’s when I found online poker. The world of online poker is complicated to explain in the space and time I have today. Basically, the in-person life I was experiencing every couple weeks could happen every day – at any time. There were hundreds of thousands of players worldwide. Money was flowing – some would say overflowing. A growing mass of amateurs were joining, dropping $100, $200, $1,000 into online accounts. Frankly, they were suckers and I was ready to take advantage of their inexperience.

In 2005-2006, I was playing regularly online through two websites. I entered a couple tournaments and made nearly $2,000 in a couple weeks. When I played “cash games” (no buy-in and not in a tournament style), I was averaging anywhere from $7-10 per hour. Mind you, I was a sophomore/junior in high school, and this kind of money was astronomical to me.

Unfortunately, I had one major problem: I couldn’t stop. The money was so powerful and my earnings were ridiculously lucrative. I lost respect for money, and that’s where things got troublesome.

I was only 16 years old, had made thousands of dollars off of poker, and I was getting bored. Better said, I wanted to raise the stakes and make more money. $2,000 here and there was no longer enough – I wanted the $50,000 prizes and $50 an hour average pay. Amidst this mix of greed and boredom was a toxic combination. I started playing one-on-one (colloquially: “heads-up”) for hundreds of dollars at a time.

The numbers didn’t really mean anything, and it all began to feel pretty surreal. Once, I continually bet $100 against someone – over and over again – until I lost about $400. My heart was racing. I didn’t know whether to laugh or cry. Within seconds, I had lost hundreds, and all without care. I had been gambling for entertainment, and this was never the intention.

Off and on, I struggled to stop or curtail it – a telltale sign of addiction. The rush was calling and I itched to play more – in time and money. As my winnings disappeared, I saw my savings account go back down to near-zero. In addiction parlance, I had hit rock bottom, and began selling off dvds, books, and anything I could get my hands on to keep funding the rush. When I ran out of that, I used credit cards. When I ran out of that, I realized I had lost everything.

I’m about 5-6 years “sober” from poker/gambling problem. I haven’t touched a deck of cards to teach or play texas hold ’em. I blocked and closed all online accounts. Like all dependencies, I know this itch is eager to get back out there and play another hand. Instead, I’m writing this article and saving my precious pennies. Now, my life is changing and it has nothing to do with the cards I’ve been dealt.

8 Proven Purchases For Happiness

By Frugaling 8 Comments

Happiness = Money, right?

Research suggests that happiness and money are poorly correlated. In other words, money doesn’t tend to make people happy. Pretty crazy, right? Everything about our society seems to be predicated around the synergy of these two variables. But most of the time, happiness is correlated to other behaviors (i.e., closeness to friends, enjoyment at work, and balance in life).

In this consumer-driven society, encouraged to buy from our very own presidents and leadership, we are primed and ready to spend and spend – well beyond our budgetary restrictions. Our world tends to eschew philosophical questions about why you need to have something, in favor of taking advantage of the present moment to spend.

Happiness is often a marketing tool, used to increase sales. For instance, a commercial may feature scantily-clad women partying with beers in hand. It doesn’t take a scientist to decipher the claim: drink more beer, get more women – prettier ones, too! But lasting happiness isn’t at the end of a bottle.

You’re Doing It Wrong

In Martin Scorsese’s The Wolf of Wall Street, Jordan Belfort wreaks havoc on financial markets, his family, and to anyone else in his way. He has a ruthless charm, narcissism, and greed. He spends and drives recklessly. Jordan is the living embodiment of a metastasized compulsion to capitalism.

What our antagonist fails to understand is that happiness, purpose, and meaning are not contained within another $100 bill (or, however many millions he makes). Who can blame him, though? When a society values money like we do, and encourages spending without regard for the future, he’s actually playing by our rules.

Moreover, he’s not alone. Many struggle to understand and say “no” to a society that propagates this need to spend and make more money. But what if money did actually make you happy? What if there was a way to make these two things more correlated?

An Action-Plan For Money And Happiness

Newer research suggests that money can make you happy, but up until now we’ve been spending it wrong. All the beer, fast cars, and yachts can’t make us happy. Instead, happiness comes from some specific action-oriented spending.

Take the trip, ditch the tchotchkes
When it comes to happiness, buying material goods rarely suffices. Whatever positive emotions are initially experienced tend to fade rapidly over time. In fact, 57% of people reported greater happiness from experiential purchases versus 34% for those purchasing material goods.
Give a little, give a lot – just give
Researchers found that personal spending – buying for yourself – did not relate to long-term happiness. On the other hand, those who spent money on others acknowledged greater happiness. When you think about all of your expenses for a month, it might help to think about how much of that is going to help others.
The tiny purchases are more important
Unlike Jordan Belfort and his bags of cash, you’ll likely be restricted by current bank account balances. When you purchase expensive, rare items, there’s a finality and adjustment that occurs – a new norm develops. If you buy smaller, more frequent items, you actually can take advantage of novelty and variability – both key health indicators.
Avoid extended warranties and overpriced insurance
Turns out that there’s quite a lot of psychological evidence to suggest that buying extended warranties may be an unnecessary “emotional protection.” Essentially, because we do not want to lose/damage our new purchase, these warranties pull out an emotional response regarding loss. Most of the time, buying or reacting to this makes you spend more than you have to and occludes happiness.
Delay gratification, consumption
Researchers suggest that “anticipation” is a key ingredient to a healthy, happy purchase. By waiting to purchase and letting that eagerness build, we may actually enjoy it more when we finally have it. Likewise, by delaying purchases, consumers may spend less – or not at all.
Clear pros and cons
Looking to buy that dream home someday? Where do you envision it? Maybe you want to buy a dream lakehouse? Researchers found that many people tend to downplay the negatives of an imagined purchase. What about the tax implications, a plumbing issue while you’re away, and/or an exceptionally mosquito-filled summer? Imagined happiness is often easier than the reality of an impending purchase. By trying to realistically imagine your purchase, while creating an objective, logical pro and con list, you may be able to avoid this pitfall.
Don’t dare compare
We’re notoriously awful comparison shoppers/buyers; at least, when we account for happiness. Dunn, Gilbert, and Wilson (2011) found that Harvard University students living in their residential system tended to downplay social ties and try to pick physical features of a building first.

…when these students later settled into their houses as sophomores and juniors, their happiness was predicted by the quality of social features but not by the quality of physical features in the houses.

The point is that even though the social features matter far more, before we choose something, we don’t always process and think about our own social needs. Interpersonal connections with others are necessary for most everyone, and they tend to bring greater happiness.
Think of others’ enjoyment, too
Online review sites and movie rankings bring swaths of people to rate their own experience with a product or experience. By utilizing these websites, you can measure your own enjoyment and future experience to theirs. If lots of people experienced happiness, odds are you will, too!

This action plan for making happiness from money is based off the research by Dunn, Gilbert, & Wilson (2011). They found that people were spending their money inappropriately, thinking they’d be happy, when there were better ways.

How do you spend your money? What do you do to find long-term happiness?