I don’t know when we started misquoting him, but in our office we are constantly reminding each other that “rational investors are not concerned with the timing or form of wealth.”
For example, a rational investor would be indifferent to $50 won on a lottery ticket, $50 in a Christmas card, $50 from the Home Depot returns desk, or $50 from a paycheck. I don’t know about you, but for whatever reason, I spend the Christmas and Home Depot dollars very differently.
I thought about Professor Statman as I read this article in the Wall Street Journal about Lam Sai-wing, a Hong Kong entrepreneur who built his fortune around a golden toilet.
Mr. Lam owned a jewelry manufacturing company and was contemplating how to turn it into a successful retail venture. His idea to make a golden toilet (when gold was $200/ounce) eventually snowballed into a golden palace that, at its height, attracted 100 tourist groups per day and did $100 million in sales annually.
He is melting down golden chandeliers, armchairs and armored knights and selling gold by the ton to fuel growth plans that include hundreds of new retail outlets in mainland China. But even with the selloff, one thing is certain: the toilet stays.
“I don’t care if gold hits $10,000 an ounce,” Mr. Lam says. “I’m not melting it down.”
Interesting. He’ll sell everything else at a gain somewhere under 200% but won’t sell the toilet, even if it goes up 4,900% or roughly 10x the historic peak! Talk about flushing money down the toilet.