The Witch of Wall Street

Amar Pandit , CFA , CFP

Last week, we explored how reframing our spending narrative can transform our financial behavior and emotional well-being. We understood the importance of aligning our spending with our values and the impact of mindful financial decisions. This week, we continue this exploration through the fascinating and complex life of Hetty Green (known as the Witch of Wall Street), a figure whose relationship with money was marked by extreme frugality and strategic investments. Her story is a stark contrast to the mindful spending approach, highlighting how deep-seated financial fears and beliefs can shape behavior in profound ways. As you learn about Hetty Green’s life, you’ll uncover valuable lessons on the psychological underpinnings of wealth, frugality, and financial identity, providing further insight into how you can shape your own financial narratives for living a HappyRich life.

Born Henrietta Howland Robinson in 1834 to a wealthy New Bedford whaling family, Hetty Green was introduced to money management and investing at a young age. Her grandfather and father involved her in family business discussions and entrusted her with the family ledger, growing her financial acumen.

As she grew, so did her wealth and her reputation for frugality. Hetty’s financial philosophy was shaped not just by her upbringing but also by the times in which she lived—a period marked by economic panic and instability. She inherited a significant fortune at a young age and increased it manifold through shrewd investments, particularly in the bond market during times of distress. She is said to have pioneered what many call today as value investing. This was decades before Warren Buffett’s mentor Benjamin Graham wrote the fundamentals of value investing in his bestseller “The Intelligent Investor.”

The Psychological Underpinnings

Despite her vast wealth, Hetty Green’s lifestyle was shockingly opposite. She wore old, thrown away garments and was said to conduct her Wall Street business at a little desk in a corner of a bank, refusing to rent or own a proper office. Her aversion to spending extended to personal matters (as well as her lifestyle), notoriously so when her son suffered a leg injury. Reports suggest that she wasted precious time seeking free medical care, which eventually led to the amputation of his leg.

Hetty’s behavior showcases a complex psychological relationship with money, often viewed through the lens of pathological frugality. Her habits reflect a potential deep-seated fear of poverty or instability that no amount of money could assuage. It’s possible that the economic collapses she witnessed throughout her life, like the Panic of 1837 and the Civil War, cemented a worldview where financial ruin was always around the corner, no matter the size of one’s fortune.

The Paradox of Wealth and Happiness

Hetty Green’s life also exemplifies the paradox that wealth does not necessarily equate to happiness. Despite her immense fortune, she lived a life of austerity and missed out on many of life’s pleasures. Her story raises an important question for all of us: What is the true purpose of wealth?

Is it to hoard and safeguard against every possible risk, or is it to use as a tool to enhance our lives and the lives of those around us?

Hetty’s example teaches us that while financial security is crucial, it should not come at the expense of overall well-being and happiness. Balance is key and understanding one’s values can guide more fulfilling financial decisions.

Wealth and Identity

For Hetty, money seemed less a means to comfort and more a scorecard of successa way to keep score in a game where the highest number wins, but the game itself offers little joy. Her relationship with money also raises questions about the role of gender. As a woman in the male-dominated world of 19th-century finance, her frugality may have been exaggerated or criticized more harshly than if she were a man. Hetty lived in an era when a woman’s financial independence was an anomaly, and her formidable presence in finance was both a statement and a source of endless fascination and scorn.

Legacy and Lessons

Hetty Green died in 1916, leaving an estate estimated at $100 to $200 million, equivalent to $2 to $4 billion today. She left behind a legacy as complex as her personality—a woman who amassed a fortune through skill and savvy yet lived as if she was on the brink of destitution.

Hetty’s life is a touching story about the multifaceted role of money and how it can shape a person’s life, values, and choices. It’s a stark reminder that wealth and well-being are not synonymous, and that the psychological bonds we have with money can deeply influence how we live, regardless of our financial balance sheet. Her story is an invitation for you to reflect on your own financial fears and beliefs, and to consider how they might shape your behavior in both beneficial and potentially self-limiting ways.

Her life offers numerous lessons for modern-day investors and financial professionals. Her success in growing her wealth through careful, strategic investments during times of economic distress is a reminder of the opportunities that can arise from crises (and the importance of disciplined investing). However, her reluctance to spend even on necessary expenses illustrates the dangers of letting fear dictate financial decisions. For financial professionals, her story underscores the importance of balancing caution with confidence and helping clients find a healthy relationship with money.

In conclusion, Hetty Green’s story is a study of contrasts—an extraordinary tale of financial acumen coupled with extreme frugality. Her story invites us to reflect on our relationship with money, encouraging us to find a balance between saving and spending, fear and confidence. By learning from her story, you should strive to build not just wealth, but also build a life that aligns with your values and brings genuine fulfilment.