While I was in Stockholm, I visited the home of the most famous award in the world, which is named after a calm and regal looking man by the name of Alfred Nobel. His life story is extremely colorful, being that he is the namesake of the award that confers the ultimate level of societal prestige. First off, the guy whose name is synonymous with the greatest recognition for peace on this planet made his money from weapons of war. Hence the joke about learning from the explosive life of Alfred Nobel.
That’s right, he was a modern day Tony Stark. The father of the Peace Price made his fortune from inventing dynamite. After decades of working with explosives and selling them to the great powers, Nobel had what you would call an existential crisis. His younger brother died while working to develop Alfred’s product, except some world papers thought it had been him and incorrectly published the elder brother’s obituary. Some of the articles even celebrated that the “merchant of death” was finally dead. Nobel wrote his own version of an obituary when he saw all these clippings:
“Alfred Nobel- pitiful creature, ought to have been suffocated by a humane physician when he made his howling entrance into this life. Greatest virtues: keeping his nails clean and never being a burden to anyone. Greatest weakness: having neither wife and kids nor sunny dispositions nor hearty appetite. Greatest single request: not to be buried alive […] Important events in life: none.”
Talk about being distraught. Nobel desperately wanted a way to turn around how others would measure his life. Having no children, he decided to create a prize for those that had been of the greatest benefit to mankind. He designated five categories: peace, chemistry, physics, literature, and physiology or medicine. When he died the will was read and there was an international incident. He left about $31 million kroner to accomplish the endowment of his prize (around $4 million USD) but this was before the establishment of foundations was a routine thing. What do you think became of all that money and how it was managed?
Lessons For Your Finances
Part 1: Alfred was not very detailed in his will. He left single sentence instructions like “manage the assets conservatively and spend the interest” and “the peace price is to be chosen by a committee selected by the Norwegian Parliament.” Unfortunately, even though he did give some details he left out a ton and it took several years before they even awarded the first prize because of squabbling. So if you have a will, be extremely detailed. Granted you are probably not trying to set up the world’s next great prize but if you have wishes let them be known with lots of specifics. It’s really awkward thinking of your own demise but if you have a family, you need to have a will. If you are married or have a child, you must have a will. If you don’t, you will cause extreme grief, heartache, and frustration if something tragic were to happen to you. Take some time and spend $200 and get a very detailed document saying who will have your power of attorney, is it going to be financial and medical, how you want end of life decisions being decided, etc. Put enough info in there that your loved ones will not be agonizing over what you would have wanted. If you are single and young I understand this feels like it could wait, it probably can, but if you are in any other category of life besides that one get it together and get that right immediately.
Lesson: Get an estate plan. One time a friend of mine had a will from before he got married and had everything going to other relatives. This will was not his intention, and he said that he felt like if something happened they would “do the right thing,” but that’s like playing with dynamite, apologies to Mr. Nobel. On my recommendation, he updated it and now if something happens his wife will not become beholden to a judge that may or may not rule that she gets to keep her husband’s assets.
Part 2: Another crazy part of my Nobel museum trip was seeing the prize money over time. The green part below is the inflation adjusted value of the prize.
Because Nobel said to use conservative investments, the committee only invested in government bonds. The punishment of inflation destroyed the value of the prize, and by the 1920s it was around a quarter of the original figure. They added real estate and it helped but not nearly enough. Finally they loosened the restrictions on stocks and now the fund has recovered and the Foundation is giving out prize money at a higher level than the Prize’s first few years.
Lesson: Have at least 50% of your portfolio in stocks, unless you’re really rich and the money is just for you. Looking at the collapse in value of his portfolio and the recovery over time, if you are planning an extended period of not earning a salary like me or even if you want to achieve solid financial independence, you will have to have a solid amount of your money in the stock market. The reason is that stocks are one of the only places an average investor can get a positive return above inflation over the very long run. If you are trying to generate income, you will have to take risk. As the Nobel Prize investment portfolio shows, if you don’t take enough risk you will not be able to pay expenses indefinitely.
Final Takeaways on the Explosive Life of Alfred Nobel
Because of his long term vision, Nobel’s prize today remains the top award one can get in the world. If you stop by Stockholm the museum is definitely worth a visit. Got me thinking about my own legacy and how I want the world to remember me; it’s certainly not as a great company man that always kept his head down! This sounds kind of weird but one of the reasons I wrote 25 IS THE NEW 65 is because if I got hit by a train tomorrow I will know that I tried to live out a dream and calling of mine: educating others financially. Take risks, live the life you’ve always wanted to because it’s too short not to.