Four years in love. A beautiful anniversary dinner, and I couldn’t eat a bite.
One of my favorite Youtubers ripped my heart out and left it on the floor still pumping blood. There were accusations of wrong-doing. Nobody believed them. There’s just no way an honest guy with a wife and kid could turn into a scammer, surely?
I didn’t want to believe it.
Another popular Youtuber, Ben Armstrong, who owns Bit Boy Crypto, released the evidence. The allegations were true. The founder of the Nugget’s News financial media outlet, Alex, had been exposed.
Alex had been caught asking for payments in crypto in order to have guests appear on his Youtube channel. He got busted saying “can I take the other side of the trade?” Then text messages of him saying a large part of his audience were dumb got released. Then the investment research his company sold was found to be biased towards crypto projects that paid him money to promote them.
The whole saga hurt me because I had referred friends and family to his membership site to get educated on certain aspects of investing.
Alex stood for honesty, compassion, a more democratic financial system, patience with investing, support for the unbanked, wealth equality, elimination of money creation by governments, avoiding hype, taking profits from investing when times are good, and diversifying across multiple assets. These are all powerful messages investors need to hear.
But Alex went rogue.
The most damning claim is that Alex asked other big Youtubers to lend him Bitcoin. When he got desperate he even began asking his own customers to lend him money. This seemed out of character for Alex and began in approximately January 2021. He wasn’t a huge believer in borrowing money (aka leverage) to invest.
Somehow his morals changed.
It turns out he got himself into huge trouble by taking large bets on cryptocurrencies. As the prices of crypto started to go down, he had to find cash quickly to prop up his account. Then he began getting further into debt by borrowing money from supposed loan sharks.
When you don’t pay a loan shark back they can begin circling your home with their jaws open.
Eventually, Alex borrowed five Bitcoin from Ben Armstrong that were worth approximately $250,000 at the time. The agreement was Alex had to pay interest back on the Bitcoin. He never repaid the loan and stopped replying to texts. Alex went from a well-known investor to a gambler.
There’s a cool ending to this story that is still to come. Here are the signs you might be going from an investor to a gambler.
A devil’s thirst for more money
Making money from investing is nice. Earning money while you sleep has become a cliche line. The problem is money can be a drug. When you get it, you want more. The thought of never having to work again can become overwhelmingly tempting.
“Just a year or so more and I’m done with all of this,” you say. Making money is never easy.
The psychology of an investor determines how much money they will make. The book “Richer, Wiser, Happier” proves this point nicely. The author William Green spends a large part of his life interviewing the most successful investors of all time, including the likes of Sir John Templeton and Warren Buffman. By the end of the book the lesson is tattooed on your forehead.
The most successful investors in the world aren’t the smartest. They’re the ones who have the best financial psychology. They can cut out the noise. They can invest when it’s not popular to. They can go multiple years and not invest a dollar. They can be patient. They can handle critics who think their decisions are bad. They can think deeply and sit in a quiet room for days on end. And they can manage their impulses.
No amount of money will make you complete. Investing isn’t a game that has an ending. Investing is a habit you practice for the rest of your life. There is no fast lane, only a slow lane.
A gorgeous newborn baby
Writer Anthony Moore shared this insight in his newsletter. When he became a parent he kept telling himself he needed to be a good provider for his child. This led him to work harder on his business than he needed to and take a few more risks.
There’s nothing wrong with wanting to have a little money to give your child a good life. Just don’t let children force you to become impatient and take unnecessary risks to make stupid amounts of money.
A baby doesn’t want your money. They just want you.
Your level of risk begins to creep
Alex started investing in stocks. Then he first learned about Bitcoin and made good returns from it. Time sped up and within a few short years he took on even more risk by investing in new coins. Remember this:
- The age of a company/cryptocurrency/project/coin determines a portion of the risk. Bitcoin is thirteen years old and is still going strong. XYZ token is less than twelve months old. Bitcoin is like Google. XYZ coin is like a brand new startup that isn’t listed on the stock exchange, and normal investors couldn’t buy until crypto changed all of that.
- What a cryptocurrency is used for is key. There’s a lot of cryptocurrencies that don’t do anything. They’re an okay idea backed by hype on social media. That equals enormous risk. Ethereum, for example, is used every day. It has billions of dollars of transactions going through it.
- A company and a cryptocurrency can have network effects. All this means is, how fast are new users signing up to the idea? If no users are signing up, then it’s an incredibly risky investment.
As investments grow many people forget to adjust their risk. For example, if you invested in Bitcoin and it went up 200% then more of your money is now exposed to it. I’m doing this right now. Crypto has grown too much, so I’m dialing back my investment and starting to look at certain stocks.
Once a year, look at how much of every investment you own. Agree on a percentage for each.
It might look like this: 30% of my money in cash, 5% in gold, 25% in stocks, 25% in real estate, 10% in Bitcoin, 5% in Ethereum. Then sell some of your investments and readjust back to the percentages you’re comfortable with.
You’ve lost everything before
Alex told the story many times on Youtube about the 2008 recession. His family lost a lot of money in the crash.
Losing a lot of money can make you prone to do it all again in the future if you ignore the signs of what caused it.
This has happened to me too. My family lost our home when we were kids. Losing your home has a permanent impact on your psychology, whether you care to admit it or not. The good news is, I hold more money in cash as a result so I can sleep at night.
Financial losses can be a subtle sign of a gambling mindset you’re unaware of.
A focus on one investment
There’s a blinking red neon sign that will tell you if you’re gambling: hurling all your money into one investment.
I met a guy who said “Yeah man, I’ve got all my savings in Dogecoin.” My mouth dropped to the floor. It’s fine to invest in a meme if that floats your boat, but if all your cash is in one investment then you’re flipping mad.
No investment is a guarantee. Read that again.
- Bitcoin could be banned.
- The Ethereum version two upgrade could fall apart.
- Tesla could make a batch of defective cars that ruin its brand.
- Governments could default on their debt which investors own bonds in.
There isn’t a successful investor in history that only invested in one asset. You diversify where you put your money in case an invisible illness forces us into our homes and changes society forever. You diversify in case a war starts and The General of the country’s army doesn’t phone you beforehand to let you know. You diversify in case the dog coin ends up being a giant joke and is worth a total of $0.
Remember this: Multiple assets. Multiple streams of income. Multiple countries. Multiple companies. Multiple investment apps.
When you experience burnout you crave more money to ease the exhaustion. This happened to Alex. Now that I reflect, there’s a clear sign Alex had become a different person.
He stopped posting Youtube videos. When he did publish videos they were infrequent, full of ramblings, and always in a different format. There was a sort of desperation in his voice. A cry for help.
He complained he had burned out. He looked exhausted.
The most telling sign is he always had the flu. Non-stop he was coughing, sneezing, and would lose his voice. The first time it seemed normal. But when it lasted for six months, looking back, trouble had clearly taken over his life. The exhaustion led him to start dissing other Youtubers, which Alex always said he didn’t believe in.
Money buys you energy. But the cost of buying energy back to fix burnout isn’t worth losing everything you’ve worked for and your reputation, for a pump and dump investment that will break your family when they find out.
Your head can’t fit through a normal-sized door
I asked someone who knew Alex how this happened. One line summed it up. “His ego got the best of him.” Ryan Holiday wrote the book called “Ego Is The Enemy.” This is one of the best lessons I’ve ever learned.
Give the average person a little fame, social media attention, or money and they can turn into a monster.
They don’t keep their ego in check. They forgot who they were before all of it. They unconsciously think they are superior to everybody else. Your voice can get too loud. You can think you’re unstoppable. You can think it’s your job to police other people’s behavior while letting your own drift into darkness.
I’ve forced myself for years to check in on my ego. My worst nightmare is to let my ego take over, because I know it will turn me into an asshole. An a**hole with money is still an a**hole. And that sort of person will push every good human out of their life over time.
Rapper Ice Cube says, “Check yourself before you wreck yourself.”
What to do if someone you love turns into a gambler
I promised you an unusual ending. Well, instead of everybody canceling Alex and tossing his life into the dumpster, Ben Armstrong did something incredible.
He forgave Alex, told him the loan didn’t need to be paid back, and genuinely asked him to get help for what has become a gambling addiction. I read through the comments. Not all, but a lot of people, did the same.
Any one of us can become a gambler when we invest money. There is help for this addiction. Empathy heals wounds created by money.
This is the part I’m *not* supposed to tell you. Here goes.
I wrote this story because I noticed some of these signs in myself. Success in investing can go to your head. None of us are geniuses for picking a winning tech company that triples our money. Humility and self-awareness are the antidotes to the gambler’s virus.
Don’t get sucked in. Patience. You have enough.
This article is for informational purposes only, it should not be considered financial, tax or legal advice. Consult a financial professional before making any major financial decisions.