What kind of financial fiction, what popular personal finance cliches are actually fantasy novel tropes in disguise? The biggest one is, you know, to get rich, you got to cut your spending. It's, oh, you're spending too much. That's the problem. You have too many lattes, too much avocado toast, etc. And there's just so much data that shows the opposite of this that I'm kind of just tired of fighting this battle. You have to be able to take a lot of risk, right? By definition, if you're not a big risk taker, I don't know how you get to $100 million besides marrying in or literal inheritance.
Well, hello everyone. It's Jim O'Shaughnessy with yet another Infinite Loops. Today I am very, very happy because I have on someone I've known quite a long time who actually, Nick, you were for a very brief period of time an intern at O'Shaughnessy Asset Management as you were waiting to go conquer Ritholtz Wealth Management. My guest, who I affectionately call Nikki Numbers, is Nick Maggiulli, the Chief Operating Officer of Ritholtz Wealth Management, author of the best-selling book Just Keep Buying. I do have questions about that. The very, very prominent blog of Dollars and Data, a fellow data junkie like myself. And today we're going to talk about his new forthcoming book, The Wealth Ladder: Proven Strategies for Every Step of Your Financial Life. Nikki, welcome.
Thanks for having me on, Jim. Great to chat.
So, so my first question is, I started it as a joke and I don't think it's a joke. Remember when I said that you were going to have a proprietary indicator that would probably be able to identify market bottoms within, oh, a week or two, and that was the amount of harassing texts or reviews or slamming that you got for the book, Just Keep Buying. Have you been using that?
I haven't used it too much, but it has come up a few times. So the most critical review of the book on Amazon, like, you know, the one that people find the most helpful, that was also a negative review, was written in October 2022, which was the market bottom in '22. But the review even said, like, all I did was listen to this author and all I've done is lost money. So, like, it came out in April. So they really gave it, they gave it, you know, a good solid six months and they abandoned the strategy. So, hey, you know, at least they gave it six months. But yeah, and then since then, since then the market's up. I don't even know how much. I should, I should know that off the top of my head, but yeah, it's, that's my proprietary indicator. And I've seen it pop up a few times, but not, not too often yet. We're still kind of in a bull market for the most part despite the volatility we just had in April. So.
Yeah, the, I, you know, I have an imbued, saturated intuition about that because of all the time in my career I spent in asset management, and it's real. Like, the, the number of people who quit, who fire you angrily, who say you're full of... Yeah, Jim, these systems that you published in What Works on Wall Street used to work, but they don't work anymore. And we graph it, and guess what? They spike near every market bottom. Like, it's why I say, you know, that arbitraging human nature is the last sustainable edge because as much as we know, right, as much data as we have, and this drives guys like you and me crazy, we have mountains of data showing people don't do that, don't do that, don't do that, and yet they do that. How do you think The Wealth Ladder is going to put a little tiny dent in that type of behavior?
I think the, the thing about The Wealth Ladder is I got a lot of different data on how people build wealth over time. And so, you know, unlike most of the data we look at with wealth snapshots that comes from the Survey of Consumer Finances, which is the Federal Reserve, and there's plenty of that in this book as well, but that data set is looking at different households. It's just a snapshot in time. So we can see how aggregate wealth is changing, but I can't actually follow the same households. So I think there's a lot of interesting things you can do when you follow the same households. And for that I used University of Michigan's Panel Study of Income Dynamics, the PSID data. And so I could follow households over time and I could say, oh, well, what actually happens? What's the difference between the households that end up building more wealth and those who don't? What are the different characteristics we can look at, at least the financial characteristics? And so in terms of like the data and what's, what I see in there, and obviously it's about each level of the wealth ladder, and we can get into that a little bit, but it's just very interesting to understand how those factors impact long-term wealth accumulation.
Yeah, it's, the data is very noisy, as I know you know. So that seems like a clever way to get after it on, on The Wealth Ladder. Isn't there an unseen level zero before safety that is kind of the pre-financial level where, for whatever reason, mindset, environment, you know, poverty, trauma, a whole host of things influences whether a person even attempts to go onto the wealth ladder? And if that exists, how would you convince them they got to do that?
Yeah, yeah. So I would, there is no level zero, but level one technically covers any sort of wealth level. So I'll just, for, for the listeners that, that haven't read the book, there are six wealth levels and they're all based on just your net worth or, you know, all of your assets, which everything you own, your home, your cars, your cash, your stocks, etc., minus all of your liabilities, right? Your mortgage, debt, student loans, credit card, etc. So you get your net worth and depending on your net worth, you're in one of the six levels. Level one, the net worth is less than $10,000. So that includes those people that you just spoke about, Jim, who would have, they're at zero, negative, lots of debt, etc. I just consider them all level one, even though there are, there can be differences within level one, right? Someone that has some money, has a positive net worth versus someone deeply in debt, it's very different. Someone in level two, that's $10,000 to $100,000 in net worth. Level three is $100,000 to $1 million in net worth. Level four is $1 million to $10 million in net worth. Level five is $10 million to $100 million in net worth, and then level six is $100 million plus. I just put all those people together, even though there can be quite large differences there. So I think about it in this way because there's these obviously 10x jumps. So once you know one of the levels, you can figure out all the rest. It's very easy, just divide by 10 or multiply by 10 to go up or down the, the ladder. And I, I came up with this because I was like, hey, I realized that like small amounts of money don't really change people's lives as they gain wealth. Like once you have a million bucks, an extra $10,000 is not going to change your life at all. Like you can do one nice thing with it. That's it. But your lifestyle is the same. To really change your lifestyle, you need like a logarithmic, a 10x jump to get there. So that's the kind of thing I've been looking into. And even the happiness data shows that it's like really the log of wealth that seems to move your happiness. It's not like, you know, if you have $5 million, an extra million is not really going to change your happiness, you know, for that long. But if you went from $5 million to $50 million, you could possibly see an actual increase in happiness, etc., right? And there's a lot we can get into there, but the main idea is just in terms of answering your question, those people that are in level one, like I think you can have just going from level one to level two is probably the biggest jump in happiness you're going to get because you have that security, you have that, hey, I don't have to worry as much. But yeah, we can, we can dig into any one of those topics from there.
Yeah, yeah. But on that point and kind of my earlier point about noisy data, right? So Danny Kahneman, the, the godfather of behavioral finance, etc., did the very famous study about income and happiness or net worth and happiness, I think in the early 2000s, right? And he did it by looking at a half a million Gallup phone interviews and basically concluded that the emotional well-being, the happiness factor from increasing income kind of peaks at $105,000 in 2025 dollars. But then there's the Killingsworth study, which you seem to embrace, which was like, no, no, no, happiness climbs log linear, linear, I can't say it, linear with each income doubling. So they still detect happiness increases at much, much higher levels. Like you're a numbers guy, if you had to add to this debate, what empirical study would you cite to say, hey, Danny, you're, you're, you're a great man and great idea, but the Killingsworth guys got it right?
Well, I would actually cite the study that Killingsworth and Kahneman did together because they already done this thing. So they actually did this. They looked through Kahneman's original data and they said, hey, you know, this figure, the $75,000 figure, which now, as you said, $105,000, you know, inflation adjusted, hey, happiness doesn't rise above that. So, but Killingsworth was like, that, my data doesn't show that. What's going on? They looked into the data and basically Kahneman's measure wasn't measuring happiness. It was measuring unhappiness. So it's, there's a very weird, it's kind of a double negative, but basically once your income's above $75,000, that does not prevent unhappiness. So you can still be unhappy above $75,000. That's not the same as saying, oh, your happiness can increase. That's a very different, it's actually the opposite statement, right? So Killingsworth and Kahneman sat down together and said, okay, you know, that's, there's nothing that can prevent unhappiness no matter, there's no income level basically. And so, however, increasing your income does start to prevent unhappiness and then it stops preventing it at some point. And so I think Killingsworth's data is the one I rely on because of all that was found there. And then they've even looked into wealth, not just income, and found similar, if not even larger results on the wealth front. So I think when I'm thinking about happiness and, and income or wealth, either or, the main summary I have is if you're poor, like if you're very poor, I'll just say level one, more income or wealth will probably make you happier. If you're happy, more income or wealth will probably make you happier. But if you aren't poor and you aren't happy, more income and wealth won't do a thing, right? And so that's kind of the main takeaway. I think generally happy people would be happier with more income or wealth, but I don't think that's necessarily true when it comes to unhappy people. And so that's the issue here.
Yeah, and as you might guess, I actually looked at the results of that joint study. And I was fascinated that it broke along Pareto distribution. In other words, they found that 80% of people are in the category where it does in fact make them happier. 20% of the least happy people stay unhappy and nothing you can do. And, and like we're going to get into that much more deeply when we talk more about the levels, but like, is there a way to help that 20% like climb your wealth ladder or are they just going to be unhappy?
Well, climbing the wealth ladder is, I guess, independent of happy. I don't, I actually don't have any studies showing whether happier people are more likely to build wealth than unhappy people. So I don't know the answer to that. But I think it's a different question. I have no idea. If you're unhappy and you're climbing the wealth ladder, that's fine. But that may not necessarily improve your life. I mean, I think people get stuck in their habits and if their habit is like, oh, I just work a lot. Even if I'm stressed and miserable and all this, I don't care because I'm just trying to achieve some arbitrary monetary goal. That's fine. That doesn't necessarily mean that's going to maximize your happiness. That, that is maximizing something that you care about in some way. And so I wonder if that's the mechanism that's causing a lot of this stuff for that 20% of people.
Yeah, that's my suspicion, right? Like the happy man lives in a happy world, the sad man lives in a sad world, the angry man lives in an angry world. And like, that's, that's difficult to change. Let's, let's get back to the levels for a second. So level one, I mean, how do you avoid sounding, sounding kind of moralistic when, when telling somebody that, you know, that's juggling multiple jobs, like a single mom with two jobs, to, you know, your, your goal's got to be to raise your income? How, how is that not just rebranding hustle culture?
It is a little bit. I'm not going to lie. I'm not going to come out here and say, oh, that's not rebranding hustle culture at all. But I think it's when I say raise your income, there's got to be different ways in which you can do that. So if you're someone who's already working multiple jobs, I'm guessing these are not high-paying jobs, obviously, based on how you've phrased the question. I think the thinking is more along the lines of, is there something I can do with any free time I have to increase a skill so I can get a higher-paying job so I can start saving money so I can get out of this? And it's not just that. In the book, I say there's a lot more wealth that people own that's not just financial. And so, are there people you can rely on in your life to help out? Whether that means having someone watch your kids for a while so you can go work on your skills or whatever it is. There's a lot of little things people can do. And I don't think it, you just need to look at the dollars and cents. I think a lot of times it's the network or something like that. And if you don't have a network, if you don't have good friends or family you can rely on for this type of thing, then it makes it even more difficult. So it's a lot of people in this situation are between, you know, a rock and a hard place and there's no great answers. And I wish I could be like, oh, yeah, just do this. But if it was easy, then people would have done it already and, you know, they would already be out of these situations. So these are already incredibly difficult situations to be in. I don't have a personal experience being in that situation. I've read, you know, some things on like social work and, you know, different books related to this. Portfolios of the Poor is a good book which talks about people who are in really desperate situations. And this is around the world. That's not even in the US or people that are living on a few dollars a day and how good they are at budgeting because they literally don't have a lot of money and they have to be good at it. So there's a lot of little things like that that I've tried to understand the situation from. But you're right, it's, it's a very difficult thing. There is a little bit of rebranding of, of hustle culture of some sort because I don't know how else I would get out of it. I'm trying to imagine myself in that situation. And, you know, as the, the punchline for level one is, you know, atypical results require atypical actions. And if you're already in a very, quote, atypical situation, you're going to have to go above and beyond to get out of it. And it's not, it could be no fault of your own, but, you know, you're going to have to do something to get out of that situation.
Yeah. Um, glad you did not answer with platitudes and, uh, you know, the inspirational posters where the cat is hanging on.
No, no, hang in there, Jim. I promise.
Yeah, because like, I think that a lot of that is actually well-meant, right? But I don't think it's effective. And so, yeah, just you got to jumpstart yourself and, you know, that relates to agency, which relates to success, which relates to all of those things, but it also gets us to level two, education, which you rank as between a net worth of $10,000 and $100,000. Um, a couple of questions about that. Like, for example, the MrBeast thousand-day apprenticeship, right? Like, let's be honest, who can afford to do the thousand-day apprenticeship? Rich kids or well-off kids? What about the people who, who aren't in that category? How, how do they do it? And then also, like, delayed gratification is a definite part of people who've been financially very successful. How do you talk to people about, you know, the payment might not come in the educational phase, your payment, I'm making air quotes here for listeners, might not come until level four. How, how do you deal with that?
So in terms of the MrBeast thing, my understanding, I don't obviously know his parents' financials, but he didn't grow up, I would say, wealthy, but he had the support of his parents. He was living rent-free in his house and they were giving him food and everything. So he was probably in a level two to maybe level three situation where he could just rely on his parents. And once again, as we just discussed, relying on your network can be used for all sorts of things. And he was able to use that to build, you know, a YouTube audience, which, you know, gave him momentum to do a lot of other things. And then in terms of your second question, which is kind of more related to, you know, waiting and how long you have to wait before you see the payoff, the marshmallow test, right? Yeah, the marshmallow test. I don't know. I don't have a great answer for this. I know everyone's like, oh, you could just do this or that. I don't know. I don't know how you show someone to delay gratification. I think some of it is a genetic thing, marshmallow test, whether people debate whether that's actually, I can't remember if there's a replication crisis with that one or not. So, so I don't think that's as, you know, serious or as, as real of an effect as people think. At the same time, I think it's just you have to, people have to see it, I think, a little bit in their life. And it doesn't have to be something that, like, they can see right away. It can be in any part of their life. So if it's like, oh, I'm going to go to the gym. Like, wow, you're seeing yourself getting stronger. Now you start to understand it and then you can extend it out further and further. Even myself, as much as I want to say I'm a long-term thinker, I've only really recently started to see kind of the impacts of, like, that investment stuff that I did early on. I just did it because, hey, the data says to just keep buying, so I'm going to do that. And I'm saying that from someone that didn't have a family that taught me that. I don't come from it. I don't, you know, investments are not something I've ever discussed in my life until I started learning about them myself. So I think for me it was like, oh, now I'm starting to see, like, you know, it's where the joke I make is, you know, I've made more money in a day than I made in, like, my first year, like, working, right? Because of, like, just the, just the change in my portfolio during a very volatile update, right? Like, that is the type of stuff that can happen. And I'm starting to see that now where it's like my first year of working after tax, like, I've made more, made at least on paper more in a day than I did when I, my whole first year of working, right? And that's something you'll start to see. And then it'll go beyond that. It'll go beyond, you know, on really volatile days if you're up 10%, you have a very large portfolio, you know, you could see how, like, you could make multiples of what you worked so hard for earlier in your career. And I think that's the, the type of thing where you're going to start to see that delayed gratification payoff at least.
Yeah. The, one of the things that our research identified is that a big majority of investors, even sophisticated investors, are very guilty of hyperbolic discounting, especially when things are not going their way, right? Everybody, it's like one of the things that always bugged me was using regular standard deviation of return as risk because that's crazy. Like, if markets are going up, you want the highest standard deviation of return you can have. People only get freaked out about it by when it's going down. So that you got to use the semi-standard deviation below zero because that's where all the hits the fan. Yeah. Have, have you, like, I'm sure you're familiar with the famous story of Sir John Templeton, who, when, when asked about, you know, protocols and, and things that he built in ahead of panic, right? And, and one of his best answers was, yeah, when I have a group of stocks that I really, really love, I put buy orders in with my broker way below the price they're currently trading at. And his discussant said, well, why? I mean, why would you do that? And he said, because I know that I do not have the emotional makeup to actually call a broker when it's at that price and tell him to buy. So I put these pre-orders in. Do, do you have anything in place to prevent your future self, which is going to violate one of your core rules? You know that, right? Like, it certainly happened with me. Do you have a precommitted automation to protect yourself from you?
I actually don't. I really don't. And so that's a good point about whether I'm going to find out what that error I'm going to, that future error I'm going to make and why I didn't have that automation. I guess it's a funny, the Templeton story is kind of funny because what prevents him from calling in and canceling those orders as the market starts to approach his buy?
They asked him, they asked him that, and he said, because I forget about it.
Okay, that's, he'll forget about the order. That's good. So yeah, you do it and forget about, you know, get blackout drunk, put the orders in, don't remember any of it, and then just, wow, that, because that's the only way I'll be like, didn't I put a buy order in there? And I'm...
You know what's funny is that's the way Alexander the Great and his generals made decisions. They would discuss them while sober and, you know, decide a course of action. After they had decided that night, they would get shitfaced, blackout drunk, and if they, when they woke up the next morning, if they still thought it was a good thing to do, they did it. But if they didn't, they didn't.
It's funny, it's funny to think how our brains prevent us from, you know, doing the right thing at, at different points in time based on what's happening around us. So.
Yeah, and, and I, I believe in that deeply, as you know, right? Like when I was leaving OSAM, somebody asked me what I was most proud of, and it was the fact that I never overrode emotionally one of our models. Through, you know, I, I didn't, I, the last time I did that was what turned me into a quant when I emotionally overrode a really beautiful position in puts prior to the crash of 1987 and sold them all one day before the crash.
Oh wow, that's wild. I think I'd heard, I think I've heard this story before. That's so funny.
And it, it literally changed me into a full quant.
That's great. That's awesome. That has worked out for you, right?
It, it, it has indeed. But like people, you know, Jason Zweig has that great thing about risk. He goes, what most of us in trying to help people with their finances do is we show people a picture of a snake and say, are you scared? And he goes, that's not really testing their risk tolerance. What you ought to do is throw a live snake in their lap and see how they react. I mean, are there any tools that you know about that would help people better calibrate their risk tolerance?
I guess the, if just, how did you feel during 2020? How did you feel during 2022? I know that's not the perfect answer, but the best way to do it is when the live snake's in your lap, and that's when we had the snake was in '20. How did you feel in April? That, I mean, this was an unprecedented policy move by an American president that got the markets very riled up. Did you move to cash? Did you want to add more? Did you, like, what did you do? I'm not saying that that was the right choice what you did, because remember this story hasn't played out yet, but how did you feel and how did you react to it, I think is what's important. The thing I think about, which is like the whole, you know, influence, you know, Cialdini has these six things, and one is commitment and consistency bias. And so for me, I think the biggest thing I could do to kind of make this automation so I don't go against my own advice is like I literally published a book called Just Keep Buying. Like I literally cannot, I cannot put myself... I have, I've tied myself to the mast, and if this ship is going down, if civilization ends up ending, I will be the last person at the stock exchange buying, sending whatever, I don't know, my gold, my canned goods. I'll be handing over cans of beans for shares. I don't know. But something is going to happen, and you're going to hear like, wow, yeah, that guy was just stupid. Like, if that happens, that's going to be me. But I think I have to because that's, you know, it would be, we, I can't in my mind be the guy, oh, I got to move to cash now. That's like the most, that's against everything I know. I believe it's just, yeah, I couldn't do it. So.
Yeah, yeah. That, I actually thought that when I was thinking about what questions I wanted to ask you, I was like, well, I think the, the, the prophylactic that Nick has got here is that book.
And I, I had a different version of it with What Works on Wall Street. While we stay investing, like, what, what do you say to the people who, we always used to joke about this, the, the first midwit question for you is going to be, but what about Japan, Nick? What about Japan? How do you...
And so I talk about that in Just Keep Buying, and I say, like, if you would, let's say you started in 1980, you start buying, just buying, and it's, I think it's $1 a day, that's what I did, just to keep it just an average, the same purchase over time. Yes, there were times when the performance was quite bad in the '90s, 2000s, but you run that through today, and you've basically kept pace with inflation, which, don't get me wrong, that is not great. That is not a great result. You don't want to just kept pace with inflation type of argument. But if you actually look through most of history, you know, even in the US, some of the worst periods in equity markets, if you keep doing it for like a 10-year period, almost all 10-year periods where you're buying over time the same amount, you are keeping pace with inflation, right? Which is, trust me, that is not a great result, but if the worst case outcome is keeping pace with inflation, and I'm not saying that that is the true worst case, but it's like, you know, the, you know, 90% of cases, you know, you're going to at least keep pace with inflation, I think it's a pretty good bet to take, right? You know, compared to if you had, you know, held cash, you would have gotten screwed in basically every period, right? So think about the trade-offs there. And so it makes me very optimistic. And so that's what I would say to somebody, is like, even in one of the worst equity markets ever, you basically kept pace with inflation if you kept doing it for a long enough time. Not, not an amazing argument, but I think it's a decent one. And so that's the one I'm going to put forth.
Yeah. And as you know, we looked at the long-term results. And one of the things that we found that, you know, but a lot of listeners or viewers might not, is that assets that look the least risky in the short term, i.e., US bills, right, are the most risky in the long term. You invest a buck in T-bills back in 1927, it's worth about a buck 80 today, inflation-adjusted. The same dollar in equities is like $500. I haven't looked at recently. Some crazy. It might be 5,000, right? I haven't looked at it in a long time. And, and yet that, that gets us back to hyperbolic discounting. It gets us back to, you know, that, that great idea about the, the short-term emotions driving us to make horrible and often irrevocable long, long-term choices in the heat of the moment, right? I, I think in the first book, my first book, Invest Like the Best, I, I said that really successful investors do not comply with human nature, they defy it. And, and that kind of leads me to, you know, the idea of content, keeping current with like all the, in quote, news about the market, as a quant, ignore it for the most part. But you, you also basically treat, you in your work kind of treat code as an infinitely scaling leverage and content as, you know, very fleeting. What would a half-life chart of your own blog posts look like with the, the decline and decay of content? And more importantly, what pieces, if you did that analysis, what pieces would stubbornly refuse to decay?
This is a great question. I think the content that I think is the least useful or the, has the shortest half-life is going to be almost anything I write on tax policy or taxes, only because they change so often. I write something related to this tax thing, and oh, now it's, I remember writing back before, I think before Trump decreased taxes, I was under the impression that tax rates can only go up from here, and then they went down. Like, that's, every single thing I said was wrong because, you know, looking at the deficit, looking at everything going on, our debt, you're like, there's no way they're going to ever lower taxes, and they got lowered. So every single person I talked to was thinking tax rate, taxes would go up, and that's what they think now as well. Like, taxes have to go up, and so no one could think that tax rates could go lower. So that's an example of probably the least, lowest half-life. The longest is going to be stuff that is just true regardless of, you know, has the most data backing it, and that's stuff like Just Keep Buying, which was a blog post that became a book, etc. But it varies. Every piece of content has various amounts of, you know, how long it, how evergreen it is. I try to make everything as evergreen as possible. But you're right. There's certain times where I just write about an event that happened. Like I wrote about, you know, meme coins and stuff. Like, will memecoins still be around in the future? Yes. But are they going to be as discussed? I don't know. I'm guessing not, but who knows? Maybe I'm wrong on that. I still think crypto will be around, but I think maybe memecoins will be just kind of relegated to like the gambling cycle of like online gambling type thing. So.
Well, we're on kind of investor psychology and behavior. What, what's kind of the quietest KPI that in your role at Ritholtz as COO, kind of a low volume signal is something that most advisers ignore, but that you've found has proven to have a really good forward indicator of client satisfaction or the way that they're going to behave in portfolios? Have you stumbled across anything like that?
So I don't work with clients directly where I like have a sample from talking with them and working with them and those specific types of things. I think the, if I had to guess, and remember Ritholtz, for those that don't know it, it's like we do a lot of content marketing. You know, like Barry Ritholtz has, you know, a podcast, he's blogging every single day. You know, Josh Brown is on CNBC, he's blogging, they have podcasts, right? All these different, we have a lot of media coming out. And I would say the thing that probably, if I had to guess, is most helpful for keeping a client on plan or whatnot is probably how much they consume our content because we are talking about these things, right? And so if you're, if you're someone that's following our content, you're following along, like we're going to have our opinion on all these different issues and they will be out there. And so someone who's listening to us and like, oh yeah, they talked about this before and they said this and look what happened, right? And so I think it's, and it's not that we're right all the time. That's not what I'm saying. It's just that we are thinking about these issues. We are staying tuned in. We're saying, hey, ignore the noise. We talked about this stuff in 2020. We talked about this in 2022 and we made it through all that. And so I think realizing that we are thinking about these issues and so the clients that actually pay attention to us and actually believe in us and listen to us, I'm guessing probably have less of those behavioral issues than those who don't. And only because we follow a lot of the similar principles, even, you know, you and I, Jim, like I, I don't try to override the model, right? I understand the behavioral problems. I understand all that stuff. And so we try and follow those same principles, very quantitatively focused as well. So.
Yeah, one of the things that we found at OSAM and my earlier incantations of the OSAM was that the volume of outgoing calls, it has to like triple, quadruple during market volatility and down markets. And just that simple metric, wow, did that, did that show great predictive on which clients were going to bail and which ones weren't. And one of the things that we noticed, and I kind of, I'm not a rule, I'm not rules, I'm not an authoritarian, even though I am a quant, so I didn't mandate a lot at OSAM, but one thing was everybody is on the phones when the shit is hitting the fan because you, you know, naturally most people don't want, you know, the money you're managing is down 40% and you don't want to call up Bob and say, how you doing, Bob? But that's exactly what you need to do. For example, in another field, what type of doctor gets sued far less than doc, than the majority of doctors? Doctors who the patient likes and communicates with. And so even when that doctor, by their continuous interaction, even when things were bad with the client, they stick with them, they don't sue him, etc., because of that simple thing where just being there when things aren't going really well. So we, we found that that behavior was, was very rewarded. Okay, let's go up to level five, the ownership level. Jump to goodbye middle class, goodbye upper middle class. Let's talk about the upper class.
Yeah, but level three is investing, right? So level three is, that's the middle, by the way. That's 40% of US households, which is $100,000 to $1 million in wealth. Just for the numbers, just real quick, and then we'll go back to level five. Level one, which is less than $10,000, that's about 20% of the US households. Level two, which is $10,000 to $100,000, that's 20%. Level three, which is $100,000 to a million, is about 40%. Level four, which is $1 million to $10 million, that's your upper middle class, that's about, let's say, 18% on average. And then level five and six, that's the top 2% with the vast majority of that in level five. There's only less than 10,000 households in level six, which is over $100 million. So just to put the paint, the numbers there.
Yeah, the, the power law. As I was getting ready for this, I, I was shocked by that. The Henley Wealth Report, basically 9,850 cent-millionaires in the US, liquid net worth. And then you look at all the attention we pay to those people, there's less than 10,000 of them, and we pay most of it to the top five, really, if we're being honest. Right. And, and I want to get into the specifics of level six because the, there might be a lot, not from you, but there might be like a lot of bad advice being given from such a tiny sample who I'm like, this is really interesting to me. And there's a bunch of questions about, you know, how, how you can frame that group. But we, we looked at, I actually did a very quick study. I was, we were talking before we started to record about how we have our own AI, and, and like, so I had it look at meta studies of people in that group, and guess what? They are very different, both psychologically and in behavior, than the vast majority of people. Like things that came back from looking at the meta studies on, and the meta studies are rare because people worth more than $100 million rarely take them. But the, but the, so what came up was like fascinating, delusional self-confidence. The, the calibration shows that in studies they give much wider error estimates. You're familiar with this, right?
If I ask you for a particular estimate on an outcome, if you're a probabilistic thinker, you give really wide error, error estimates. If you're not, which most people aren't, you get very narrow estimates. But what's really interesting from the data that I just had our AI spout, spit out to me, yeah, they, they comply to the wider error estimates, but they still bet on their own estimate. So even though they are giving the correct probabilistic answer, they still are violating it with their own behavior. And then you look at the Big Five profile, which I think are very instructive. Like these people are super high in openness, extraversion, and conscientiousness. They're really low in agreeableness. In other words, conflict and comfort with conflict. And they're really low in neuroticism. If you look at the Big Five various profiles, that's a tiny percentage that have that match on the Big Five. But they're also like, they love risk. Most people hate risk. It goes on and on. They have an internal locus of control, nonconformity. They're very comfortable with conflict. They're persistent. You know, they bounce back. All of these things. I just wonder, and this might apply down in the lower levels, is it right to give advice from a very specific and tiny segment of the population to, to the broader? And I, and I, and I was fascinated when I saw these, and I'm like, wow. And then I, and right before I was getting ready to chat with you, I jumped over to Twitter and I saw my friend Chris Williamson, who I think you know as well.
