The Status Game

RBC First-Year Analyst Gets Probation for Insider Trading

January 17, 2020

"A junior analyst at RBC Capital Markets who racked up tens of thousands of dollars in credit card debt he blamed on pressure to keep up with “the extravagent lifestyle“ of other young investment bankers, avoided prison for insider trading.

Bill Tsai, 23, was sentenced Friday to five years of probation, including 90 days in a halfway house."

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Bill Tsai was a first-year investment banking analyst who felt a pressure not unfamiliar to many of us: the status game. This is the game that pushes the doctrine that your perceived rank in society – who you rub elbows with, where you own a house, how much you earn – is the ultimate goal of life and therefore more – money, connections, accolades, prestige – is always better, regardless of the risks or costs involved. To stay afloat in the game, a pressured Tsai traded on insider information – a serious crime known as securities fraud – to net himself a sudden $100,000 profit and pay off some crushing debt he had accumulated from fronting a New York lifestyle he couldn't afford. This is the danger in playing the status game.

And the status game is everywhere.

Just consider your commute. On the highway, luxury vehicles signify high status. Walking to work, jackets with certain logos signify high status. So do certain briefcases, hairstyles, shoes, and headphones.

At the office, there are certain types of corner offices and desks for individuals of high status.

At the nightclub, there are certain tables – elevated and roped-off from the others – reserved for individuals of high status.

Social media is littered with status signifiers – what Caterina Fake calls “social peacocking.” How many followers do you have? How many countries do you have pictures from? What’s your job title? What are your oh-so-correct political beliefs? Do you have an attractive partner? A beautiful house? A cute baby?

Are you perfect?

Caring too much about your status can make you miserable. You constantly feel inadequate, observing others around you who are taller, more attractive, wealthier, smarter, harder-working, and friendlier, with a more expensive Tesla, a more plush sectional couch, a 401(k) with a higher match, a jacket with more dense goose feathers, a degree from a school with more ivy on the buildings.

You hate to compare yourself to others, but you just can’t help it. It feels like an uncontrollable primal force, emerging from deep within, urging you to compete and be stronger-than, prettier-than, and more confident-than whoever you stand next to at the grocery store or run into at a party.

Dominance hierarchies are over 300 million years old. Back then, lobsters were crawling along the ocean floor, competing for more spacious rock caves and stronger mates. Lions and chimpanzees later evolved, forming hierarchical tribes dominated by the strongest, most aggressive alpha males. “A third of a billion years ago,” psychologist Jordan Peterson notes, “brains and nervous systems were comparatively simple. Nonetheless, they already had the structure and neurochemistry necessary to process information about status and society.” (1) We evolved from these competitive beasts, the selective forces of evolution urging us to continually acquire resources and clamber up an endless social hierarchy, to prove we are eligible to reproduce, and ultimately, qualified to pass forward our genes.

This is the ancient primal force urging you to play and win the countless status games that pervade our society. But there is a fundamental problem with status games: they are zero-sum, meaning that in order to win, someone else must lose. Status is relative; it is a pecking order. Who is number one? Who is number two? If you want to be number one, you must find a way to kick out the person who is currently there. You never quite feel settled or comfortable; at any moment a young, ambitious gunslinger can muscle her way in.

Even if you are currently winning at a status game, you consequently suffer a degree of paranoia. You worry about who might be the next one to take you down from your perch. You worry about whether you still “got it”: the looks, the swagger, the money, the fame, the clout. Out of fear of losing these illusory benefits, you default to an easy answer to keep your ego satiated: I just need a little more, and that will be enough.

In Eastern philosophy, a key idea is that attachments cause us to suffer. Attachments to loved-ones cause us great pain when they die or grow ill. Attachments to money or expensive things cause us great pain when we lose our job or make a bad investment. It’s no different with status: when we are attached to status, to feeling superior to others, to recognition, to power, to fame, we are crushed when it is inevitably erased by fate and the steady march of time.

You can play the status game if you like. But it frequently leads to grandiosity, insecurity, greed, and narcissism – if it lasts at all.

A better game you can play is what Naval Ravikant calls the “wealth game.” The wealth game involves building, saving, and investing your wealth so you can eventually afford to do whatever you want, whenever you want. Forget the paranoid competition and judgmental insecurity of the zero-sum status game, demanding you to take someone down to bring yourself up. The wealth game isn’t about how you rank against others. It’s about creating value for society, saving and re-investing the money you earn from this, and at last gaining what so many of us deeply seek: personal freedom and independence.

Freedom and independence from what?

From the regular paycheck, the 6 AM wake-up calls, the two-hour meetings in windowless conference rooms, the difficult customers and scheming co-workers, the sudden overtime shifts on Saturday nights. Most people, whether they realize it or not, seek wealth not to buy Gucci loafers or private planes, but to break free from these burdens. They want to actually travel for more than two weeks at a time, sleep in, spend the day with their family (without feeling guilty), or refine a personal passion.

By definition, not everyone can win the status game. But everyone can win the wealth game. It’s competitive and challenging, too, but creating wealth is not inherently cutthroat and combative. Playing the wealth game won’t make you paranoid, envious, and over-sensitive to what others have and how you measure up. That’s because creating wealth requires you to trade with others and collaborate. Wealth is not created alone; it’s created when I trade my extra corn for the peanuts you’re allergic to, and we both get more of what we want. It’s created when you invent a creative solution to a common problem faced by society, and people reward you accordingly. Eli Whitney, Thomas Edison, and Bill Gates created wealth not because they took it away from someone else, but because they were rewarded wealth for providing something valuable to society as a whole. Everyone’s situation improves.

Now is the best time in history to successfully play the wealth game. With tools like Coursera or Udemy and access to unlimited content on the Internet, it’s possible to learn almost any valuable skill. We can connect, virtually, with thousands of potential collaborators, mentors, and customers. We can build software to automate and scale our products and services, so we can make money even when we’re sleeping. We can re-invest our earnings with the click of the button into hundreds of different financial assets, growing our wealth over time.

Status games will often come squarely in the way of this promising trajectory toward your personal independence. While attaining wealth will require you to live below your means, so you can save and re-invest your earnings, attaining status will urge you keep up with Jones’s, or in the words of Fight Club, “to buy things you don’t need, to impress people you don’t like.” While attaining wealth will require you to take a necessary risk, an opportunistic gamble, the status game will beg you to stick with the comfortable status quo, your monthly salary intact, where you can’t easily lose your rank.

Most of us must play some form of a status game at some point or another, as it remains a necessary component of many aspects of society. Not everyone can become a doctor or a professional basketball player, and zero-sum status games determine who they will be. The mistake so many of us make is assuming that status games are the only games worth winning, even when our integrity, mental health, and personal independence are at stake.

The wealth game ultimately promises a much more sustainable alternative: the prospect of personal sovereignty and creating a lasting positive impact beyond our rank in society.

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"Honey it's your son I think I borrowed just to much We had taxes we had bills We had a lifestyle to front"

– Passion Pit, "Take a Walk" (2012)

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References

(1) 12 Rules for Life by Jordan Peterson (p. 11)