Found Money

Today’s gem comes from a tale of Warren Buffett, master investor worth a cool $100 Billion. As the story goes, Warren as riding an elevator with several other executives when he spotted a penny on the ground. No one seemed to have noticed but Warren so as the elevator door opened, he leaned over and picked it up. As he walked away he said, “The beginning of the next billion.”

Even before hearing this story, I’ve been curious about why finding a dollar on the ground will make someone’s day but a penny doesn’t really do it for them. Of course, at face value it is a logical reaction, a 100x difference in value would make anyone excited. But at the same time, they are not mutually exclusive experiences, you don’t choose to pick up a dollar at the expense of not picking up a penny – you can have both. Yet most don’t.

What I think is really at work here is our mind’s inability to differentiate between potential value and colloquial value, something that is especially apparent when thinking in small increments. A dollar has clear value because there is direct marketplace for it. In other words, that dollar has immediate exchangeability, you find something priced at a dollar and buy it. But on its own a penny is virtually worthless. Why bother picking it up if, on its own, there is no tangible item of value to exchange it with? And thus, we leave the penny on the ground.

But then why would Warren Buffett bother? What does he know that we don’t?

For a moment, let’s think about that penny not as 1 cent but rather as an earnings rate – a wage, if you will. Assuming picking a penny off of the ground takes one second, then theoretically you are trading your time at a rate of $36/hour. That’s not too shabby, but it’s also assuming you only stumble upon pennies. Include finding an equal share of pennies, nickels, dimes, and quarters in that calculation and your hourly earning rate jumps to a whopping $369/hour. In reality, you’re not going to make a doctor’s salary from picking up long lost pennies. But your earnings rate might actually be dangerously close, and when most professions are a marketplace to exchange your time for a someone else’s money, I’d argue that earnings rate is pretty darn important. So, taking the time to bend down and pick up that long-lost penny might be the most valuable 1 second of your day. But if you’re still not convinced, let’s re-contextualize that penny in another way.

Instead of viewing that penny as a wage, let’s see it as a dividend. Take for instance Coca Cola, which essentially cuts investors a check simply for owning the stock. Right now, they do so at a rate of about 3.08%. That sounds pretty good! I do nothing, and Coke will send me a check for 3.08% of my investment 4 times a year. Coca Cola stock, is currently trading at $53 per share and a dividend rate of $0.42 per quarter, or less than a half a penny a day. In terms of a dividend, finding a penny on the ground each day is twice as valuable as Coca Cola’s annual dividend plus you don’t have to tie up any capital in the process. This isn’t to say buying a dividend stock isn’t valuable – but again these circumstances are not mutually exclusive, you can have both a dividend stock and find free money!

In a typical year, I’ll end up with over $75 in found money. I’m not going out of my way to find this cash, it’s simply what I come across on my daily commute. Given the literal zero work required that’s a pretty significant haul. Paired with other completely passive income generators, like using Brave Browser to earn Crypto or Microsoft Rewards, you can make a small chunk of cash for just going about your daily life.

I have an inkling that Warren Buffett sees the potential energy of every penny. For me, finding a penny on the ground is not really about making money. It is daily reminder of a crucial ideal in my personal finance strategy: there is free money to be had – you just have to be willing to pick it up.

Speaking of free money — have you opened a Roth IRA yet?