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An Interview With The Millionaire Next Door Co-Author - William Danko, Ph.D. Thumbnail

An Interview With The Millionaire Next Door Co-Author - William Danko, Ph.D.

Recently, I had the opportunity to interview William Danko, Ph.D. Bill co-authored The Millionaire Next Door in 1996 along with the late Thomas J. Stanley, Ph.D. In 2017 Bill published his latest book: Richer Than a Millionaire ~ A Pathway To True Prosperity, along with Co-Author Richard J. Van Ness, Ph.D. Bill was incredibly gracious with his time, energy, and wisdom in answering my questions regarding both books. 

As many of my clients know, I consider The Millionaire Next Door to be one of the greatest books on personal finance ever written. The book's central message is that those who are actually rich are not the ones who appear rich with flashy displays of wealth, but rather they are the hard working, frugal and humble ones who you’d never expect to be rich in the first place. The Millionaire Next Door resonated with me to such a degree that I have internalized much of its wisdom and applied its teachings to both my personal and professional lives.   

In Bill’s latest book, Richer Than A Millionaire ~ A Pathway To True Prosperity, he advances many of the original themes and addresses the broader question of what it really means to be rich in our lives, beyond just our wealth. 

The genesis of this interview came after I reread The Millionaire Next Door in 2018, in part because of a blog post I was writing. I became curious about the authors of the book. To my surprise, both of the books' authors had passed through my graduate school Alma mater - The State University of New York at Albany (SUNY Albany). Armed with this knowledge and shared connection I reached out to Professor Danko and a dialog began. 

What is the most surprising discovery you made when researching and co-authoring The Millionaire Next Door?

The media make it appear that the wealthy are profligate with their money. After-all, Hollywood stars and professional athletes are fun to portray with their outsize lifestyles. The reality is that frugality as a way of life is important if mere mortals – which describes most of us – are to become wealthy. This is especially true given that the majority of the affluent are first generation wealthy. Very few are inheritors. In fact, we show that inheritors spend more than earners for housing, cars, clothing, jewelry, and a wide variety of other consumables. The inheritors reason: easy come, easy go! Moreover, since the earners often engage in some unglamorous occupations, such as mobile home park and storage unit owners, they don’t have to “dress the part.” They can drive highly depreciated cars and live in modest neighborhoods. Frugality comes naturally.

But, what about high earners such as physicians and attorneys? Surely, they must be millionaires. Not necessarily. If they have a good income but spend it all and more, they may have a good lifestyle, but are on an economic treadmill. They can never relax, without a change in their lifestyle. The bottom line: frugality pays.

How do you think personal finance has changed since the publication of The Millionaire Next Door in 1996?

Since 1996, technology has massively changed most everything we do today. The way we shop, bank, invest, research, learn, and yes, even play. Along with these changes, many opportunities have been created.  

Consider online shopping, distance learning, video gaming, robotics, telemedicine, and artificial intelligence.  

Of course, new challenges have been introduced with the Covid-19 pandemic. Staggering death count, business shutdowns, sudden unemployment, lower consumer confidence, self-quarantines, social unrest, education disruption at all levels, and so on.

People still need to be frugal, perhaps now more than ever. They need to make viable family budgets that are adhered to. Saving and investing remain a fundamental practice to reach financial independence. This is one aspect that will never change.

We must keep in mind that our economy is resilient. There are many new opportunities for “remote jobs,” there is more family together time, and more outdoor activities are widespread.

There are many reasons for optimism, provided we are willing to adapt.

What is the single most important message you would share from your book: Richer Than A Millionaire ~ A Pathway To True Prosperity?

We agree with Benjamin Franklin’s advice he gave more than 250 years ago. After instructing his readers on The Way To Wealth with comments on frugality, prudence, industriousness, and being charitable, he lamented the problem of human nature: The people heard the advice, approved the doctrine, and immediately practiced the contrary. 

Behavior modification is an essential component for financial independence and true prosperity.

In Richer Than A Millionaire ~ A Pathway To True Prosperity, you argue that being rich doesn’t guarantee happiness.  Outside of traditionally defined “wealth,” what role does personal financial stability play in a person’s happiness?

The median household net worth in the US is about $100,000.  In our survey research, we purposely exclude households below the median, so we can’t comment on their financial stability.  (Unfortunately, a number of households below the median have a negative net worth. Including the lower half of the distribution could potentially confound our study.) By definition, any household above the median is doing better financially than half of all households. However, there is not a linear correlation between happiness (or life satisfaction) with higher net worth.

We measure happiness (life satisfaction) with a widely used reliable and valid scale called Subjective Well-Being, or SWB.

Our survey data show that 73% of those with a net worth between $100,000 and $1,000,000 score high on the SWB scale. They are happy, and well adjusted. Of respondents with a net worth greater than a million dollars, 88% score high on the scale. This demonstrates that one does not have to be a millionaire to have personal happiness. What is a possible explanation for this?  We show that those who are happier have a world view that statistically differs from those who are less satisfied with life. Millionaires and near-millionaires who are happy:           

Practice the Golden Rule

Give more time and money to charity

Are not anxious about the future

It is not surprising that we found the psychological construct for Subjective Well-Being to be highly correlated with the straightforward question: Are you at peace with your soul? In our view, we are all seeking inner peace. Those who have it, but have not yet achieved millionaire status, can be considered to be richer than a millionaire.

What inspires you to research and write about personal financial decisions?

This research path was inspired by the late professor Tom Stanley, when he taught me at the University at Albany, NY. In 1973 he invited me to assist him with his very first study of the affluent market. Shortly thereafter, he left to teach elsewhere, and I earned my Ph.D. at RPI, got married, had three kids, and became a faculty member at the University at Albany.

While Tom and I engaged in a variety of studies over the next 20 years, he called me up in 1993 for a new project: Big Hat, No Cattle! It was to be a survey of who has money, and who just looks like they have money. This project became The Millionaire Next Door, published in 1996.

That was also a pivotal year in my personal life, when I became the primary caregiver to my quadriplegic brother, Tony. I vowed to keep him out of a nursing home. For nearly the next 20 years, I observed first hand that attitude, faith, and outlook are far more important than money. To be clear, though, money pays for a lot of medical expenses to help one age with dignity. But there is far more to consider.

During this period, I had numerous conversations with my colleague, Rich Van Ness, about the legacy we hoped to leave our kids and grandkids, as well as the thousands of students we taught over our academic careers. We felt he had some valuable lessons to impart. This resulted in Richer Than A Millionaire ~ A Pathway To True Prosperity, published in 2017.

Currently Rich and I are developing a book about true prosperity strategies for a post-Covid environment. In the meantime, please visit RicherThanAMillionaire.com

Stay tuned. 


Breakwater Financial, LLC is a registered investment advisor. The content of this blog post is for informational and educational purposes only and is not to be considered investment, legal or tax advice. If you have any questions regarding this Blog Post, please contact us.