Archives for February 2017

“You don’t succeed because you have no weaknesses. You succeed because you find your unique strengths and focus on developing habits around them.” Tim Ferriss

Even the most gifted, talented and successful individuals are swimming in flaws.

• JFK, Tiger Woods and Arnold Schwarzenegger were womanizers.
• Edgar Allen Poe and Stephen King, iconic writers, were consumed by drug and alcohol addictions.
• Winona Ryder, Megan Fox & Britney Spears, famous celebrities, were all caught shoplifting in the height of their success.
• Tiger Woods also struggles with a gambling addiction. As does Charles Barkley, Michael Jordan and Ben Affleck.

Yet, despite their many flaws, they excelled in life. How?

What propelled them to greatness and riches was their ability to focus on one or two strengths for many years.

The secret to escaping poverty and accumulating enormous wealth, for self-made millionaires, is finding one or two innate talents and then devoting your life to building habits around those talents:

• JFK devoted his life to honing his political skills.
• Arnold Schwrzenegger devoted focused chunks of his life to four key areas: first on bodybuilding, then on real estate investing, acting and politics.
• Tiger Woods devoted his life to golf beginning at age 2.
• Michael Jordan focused all of his efforts on basketball after he was cut from his high school basketball team.

The path towards success is not eliminating your weaknesses. It is finding one or two innate talents that you possess and then devoting your life to building daily habits around those strengths.

Don’t focus on eliminating or minimizing your flaws. Focus on building your strengths. We were all born with certain innate talents; natural gifts. Find them, develop habits around them and life will rain success down upon you.

Cheap people and frugal people are two very different types. Cheap people focus on price first, when it comes to spending their money. Frugal people focus on quality first when it comes to spending their money. But one common denominator they both share is that they control how much money they spend.

Most people, however, are neither cheap nor frugal. Consequently, they are not cautious about their spending. If you don’t make a lot of money, this character trait can lead to credit card debt and poverty.

But, there is a solution. In my study of frugal self-made millionaires, I found one strategy that they used to limit how much money was available for them to spend. I call it the Invisible Money Strategy. The Invisible Money Strategy involves just three simple steps:

Step #1 Define Your Monthly Nut

This step requires that you track your spending for a few months in order to determine exactly how much money you are spending on your needs and how much money you are spending on your wants. Your needs are the things that you must spend money on in order to survive.

Your needs include housing costs, food, car expenses etc. Your wants include entertainment expenses such as going to restaurants, bars, taking vacations, buying jewelry or buying other stuff you don’t really need.

Your wants also include super-sizing on your needs. You super-size when you buy a house in a upscale neighborhood or when you buy a bigger house just to give others the impression that you are doing well. You super-size when you buy a more expensive car just to impress others. You super-size when you buy a more expensive wedding ring, watch or anything that falls into the latest fad category. Latest fad spending includes clothing, cell phones, computers, etc.

Once you have defined your monthly nut, you know exactly how much money you need to survive.

Step #2 Calculate Your Excess Money

Subtract your monthly nut from your total monthly take home pay. This equals your Excess Money

Step #3 Make Your Money Invisible

Open up a separate savings account. Every time you get paid, immediately move your Excess Money into the savings account. This will force you to spend only what you have in your main checking account. This has three psychological effects. The first, is that the simple act of moving your Excess Money into a savings account makes you feel good about yourself. Feeling good about yourself makes you happy. The second effect is that you will be forced to limit your spending to what is available in your main checking account. This forces discipline, which also makes you feel good about yourself. The third effect is the psychological impact of caving into your wants. Every time you move money from your savings account back to your main checking account, in order to spend money on something you want, you will feel like you are cheating. This makes you feel bad about yourself, which leads to unhappiness.

People naturally gravitate to things that make them feel happy and avoid things that make them feel unhappy. The Invisible Money Strategy plays into that natural human tendency. Over time you will develop the habit of spending money only on your needs in order to prevent the unhappiness that results when you give into your wants.

Give it a try for a at least four months. It takes about four months to forge good money habits.

The life of an entrepreneur isn’t easy. The early stages of every start-up is fraught with obstacles, potholes, dead ends and wrong turns. Successful entrepreneurs do certain things which help them navigate around those obstacles, potholes, dead ends and wrong turns:

1. Self-Education – Successful entrepreneurs read and learn like their life depended on it. They read books, read articles, read blogs, listen to podcasts, listen to audio books and watch video interviews of other successful entrepreneurs.
2. Tap Experts – Successful entrepreneurs find mentors who succeeded. They ask them questions, tapping their knowledge and experience.
3. Take Action – Successful entrepreneurs gain knowledge and experience through the school of hard knocks by taking action. Taking action teaches them what to do and what not to do.
4. Develop Processes That Work – Successful entrepreneurs use the knowledge and experience they gain from the school of hard knocks to develop processes that work, in order to avoid repeating what doesn’t work and to ensure repeating what does work.
5. Find Apostles – Successful entrepreneurs build a team of talent. They search for and eventually find talented individuals who share their dreams and goals.
6. They Don’t Follow the Herd – Successful entrepreneurs are not followers. They are trailblazers. They separate themselves from the herd and never look back. Success brings more and more people into their herd. Successful entrepreneurs understand that the more people they bring into their herd, the more successful they will be.

Last week Vrije Universiteit Amsterdam in the Netherlands published a paper that, for the first time, linked genetics to happiness.

In the study of nearly 300,000 people, the researchers, led by Meike Bartels, found that there was a direct link between genes and happiness.

This is a groundbreaking study. For the first time, researchers were able to determine that happiness is genetic; that your your happiness is predetermined by your genes.

But there’s much more to the story. You see, the research also pointed out that environmental factors can turn happiness or sadness genes on or off. In other words, your environment can turn on or off genes that make you happy or sad. This environmental influence over your genes is known as epigenetics.

Environmental Factors That Make You Happy

• Associate with Happy People – If your inner circle is made up of happy people, like a virus, they will infect you, turning on your happiness genes and suppressing your sadness genes.
• Gratitude – Expressing gratitude every day can turn happiness genes on and sadness genes off.
• Volunteering – Helping others through volunteer work can turn happiness genes on and sadness genes off.
• Dream-Setting – Pursuing something you are passionate about, something that you love, can turn happiness genes on and sadness genes off.
• Goal-Setting – Pursuing meaningful goals, goals that help advance your dreams, can turn happiness genes on and sadness genes off.
• Happy Mentors – Finding a mentor who is happy, upbeat and optimistic, activates your own happiness genes and deactivate your sadness genes.
• Happy Spouses – When you marry a spouse who is happy, upbeat and optimistic, activates your own happiness genes and deactivates your sadness genes.
• Happy Boss – Working for a boss who is happy, upbeat and optimistic, activates your own happiness genes and deactivates your sadness genes.
• Read to Learn – The brain loves to learn. It’s hardwired to learn and rewards you, when you read to learn, with happiness neurotransmitters that turn happiness genes on and sadness genes off.
• Find a Happy Job – Finding a job that you like or love will turn on your happiness genes and suppress your sadness genes.
• Reach – Taking on projects or responsibilities that force you to grow as an individual (meaning to learn new things) excites the brain, which then releases happiness neurotransmitters that turn on happiness genes and turn off sadness genes.
• New Hobbies – The brain likes novelty. When you take up a new hobby or anything new, your brain rewards you by producing happiness neurotransmitters which turn on happiness genes and turn off sadness genes.

Back in early 1991 I was really just getting starting in my career as a corporate tax specialist. I had recently passed a rigorous three day, 22-hour exam and was awarded the prestigious CPA designation. With that CPA in hand I was able to secure a higher paying job as a Tax Manager in a large cement manufacturing company that was on the precipice of going public (issuing stock to the public via one of the stock exchanges) in the U.S.

Along with my new responsibilities as a Tax Manager, I was spending 3 nights a week attending graduate school to get my Masters degree in Taxation. I was also working  15-20 hours a week part time as a tax preparer for a friend’s CPA firm in order to pay for graduate school.

I was burning the candle at both ends but I was happy because my future looked bright. Once my company went public, I stood to make a lot of money in the form of stock bonuses and stock options.

Then the recession hit. My company lost $20 million dollars in 1992 because of that recession. Upper management issued a company-wide memo, informing all employees that salaries would be frozen for at least one year.

I remember sitting at a bar with my boss shortly after the news hit. We had both worked so hard the past two years organizing our tax department, hiring the right staff and putting smart systems and processes in place. We invested our lives in our company, at the expense of family time. We were both very down and we decided to drown our sorrows with some beer. We talked about the situation we found ourselves in. I naively suggested to my boss that things would turn around and everything would eventually work itself out. My normally optimistic boss looked me in the eyes and said that the loss likely meant our company would not go public. Then he looked down at his beer, then back up to me and said,  “it’s the industry that sucks, not us.”

I learned an important lesson from that experience. You can be the best, brightest, hardest working person in your industry, but if that industry is shrinking and not growing, all that hard work and smarts doesn’t matter. Becoming successful requires much more than working hard and working smart. You have to work hard and work smart in the right industry. Hard work and smarts are rewarded in growth industries.

Just look at those smart hard working people at Google, Apple, Uber, Facebook, or Netflix, many of whom are now multi-millionaires. Then compare them to those smart hard working people who worked at Kodak, Blockbuster, Shearson Lehman, or Barnes and Noble. These companies were all in industries that have been disrupted by technology and are either bankrupt, shut down or in steep decline.

Success isn’t easy. You have to forge the traits, habits, thinking, work ethic and good decision-making of self-made millionaires. While all of those success traits are important, good decision-making is probably the most important. It requires that you make choices in life that offer you the best chance for success. One of the biggest decisions you can make in life is in picking the industry you will devote your working life to. Make sure that industry is one that is exploding and not imploding. Plant your flag in the right industry and not just any industry. Life rewards you when you make good decisions and punishes you when you don’t.

“Always hire fanatics. Fanatics get things done.” Ed Koch, former Mayor of New York City

Fanatics accomplish the impossible. They possess the passion, persistence, consistency of action and a single-minded focus that does not entertain distractions. Fanatics go at it every day. Fanatics succeed or they die trying. Fanatics are world changers.

When I think of fanatics, I think of Elon Musk. His obsession with going to Mars gave birth to Space X, the first private company to sent a rocket into orbit around the earth and now a billion dollar company. He was also obsessed with creating the world’s best electric car and formed Tesla Motors, now a billion dollar company. Musk committed $188 million, his entire windfall from the sale of Pay Pal, to funding Space X and Tesla Motors. He went all in. At one point, these two companies took him to within a hair’s breath of bankruptcy. But fanatics never quit and Musk overcame his near bankruptcy and is now estimated to be worth nearly $14 billion.

I also think of Andrew Carnegie, the founder of what became U.S. Steel and the richest man in the world at one time. Carnegie was obsessed with controlling the steel industry. His obsession led him to acquire coals companies, railroad companies, telegraph companies and many other companies in order to control the raw material that went into steel and the distribution channels for selling his steel. After selling his steel company to U.S. Steel, Carnegie shifted his obsession to philanthropy, giving away his $480 million ($310 billion in today’s dollars) to help humanity.

Dabbler’s, unlike fanatics, never wholly commit themselves to anything. They don’t put in the time or effort to learn and grow enough to become expert in anything. Dabbler’s never get very far in life.

Everything big, was once small. 

Small habits lead to lifelong habits. Lifelong relationships start with a hello. While home runs in baseball get most of the glory, the vast majority of runs scored come from singles and walks. 

If you’re an entrepreneur starting a new business, you want to start small. Smart entrepreneurs always start small because they know that new businesses almost always run losses in the early years.  Smaller businesses have lower expenses. Lower expenses results in smaller losses. Smaller losses means using less of your limited working capital.

The really smart entrepreneurs start businesses on the side, while working full-time jobs. The earnings from the full-time job can help fund the side business until it begins to turn a profit.

When you start small, eventually you figure out what to do and what not to do. When you figure out what to do and what not to do, that’s when your business starts to turn a profit. If the business is profitable enough, you can leave your full-time gig and devote yourself full-time to your growing business.

Starting small is the key to success.