“Life is long. Success is difficult. Passion is fleeting.” – Michael Masterson

Why “Profiting From Your Passion” May Be a Big Mistake

When I first retired at 39, I bought a half-interest in an art gallery, believing it would be the perfect hobby-like, retirement occupation. I pictured myself sitting amidst beautiful paintings, reading interesting books, and chatting with art lovers about Karel Appel and Jules Pascin.

Instead, I was thrust into a high-pressure selling situation. One in which my partner expected me to press friends and former colleagues into buying art. After six or seven months, I had to admit to myself that this experiment in mixing my love of art with the desire to profit from it had failed. So, I got out. It cost me a considerable sum of money, but it was worth it.

What I learned was that the job of running a business – even a “passion business” – is first and foremost about selling. And selling is always hard work.

It’s also mandatory and therefore ceaseless. If you are not continually finding new customers and reselling old ones, your business will shrink. A shrinking business is, of course, a dying business, and disappointing. But the death of a business you believed to be your life’s calling is downright depressing.

My fantasies about being a gallerist were shattered by the reality of having to constantly sell art. Not just to strangers, but to everyone I knew (one of my partner’s success secrets). All the things I loved about collecting art (as a hobby) were ground into mundanities by the application of them towards profit.

After a brief respite, I abandoned that retirement and went back into the business I had been in previously. But this time I told myself that I would change my idea about being in that business. It would no longer be about creating maximum profits, but about building a profitable business that I could be proud of.

Most of what I did on a day-to-day basis was the same. But I became more selective about the quality of our products and the satisfaction of our customers and less concerned about the bottom line.

The result was a surprisingly happy ending. I was able to enjoy the hours I spent working and – to my surprise – the business grew far beyond what it had been.

I can’t say for sure exactly why this happened. But I think one of the factors was that in my second go-round, I was constantly pushing to make all the Ps that make up a business better – the products, the protocols, the procedures, and the people. And my primary criterion for better wasn’t profit but something more personal. Something like, “If I make this change, will this improve the business in some way that I will like it more? In some way that will make me feel better about it? Prouder of what it is and is becoming?”

I don’t mean to imply this was a come-to-Jesus moment, that I returned to work as an entirely different person. It was much more subtle than that. I was still mostly about “ready, fire, aim.” I was still very much a pusher and a grower. And I still kept my eye on the bottom line. But I was no longer obsessed with growing profit. It was important to me – actually, mandatory. But I didn’t actually care whether we made 20%, 10%, or even 5%. I was secretly more interested in making the business into something that felt good to me.

The psychologist Jordan Peterson said that parents should raise their children to become the sort of adults they themselves would like and admire. This is sort of what I was doing – nudging the business along as it grew to become something I could like and admire.

I suppose you could say that with the gallery I tried and failed to convert my passion into profit, and with the business, I found a way to convert my profits into a passion.

For the Young and Still Hopeful…

A word to my younger readers: I’m not saying it’s impossible to turn your passion into a successful career.

I’m saying that, before you commit, you should think seriously about the fact that in trying to make a career of your passion there are four possible outcomes:

* You succeed and are happy in your success.

* You succeed but discover that success kills your passion.

* You fail and are emotionally defeated by your failure.

* You fail and are fine with your failing and move on to a happy life.

The most common advice you’ll hear from successful people about charting your career is, “Don’t walk towards it. Chase your dreams. Don’t listen to anyone that doubts you or warns you about the risk. Fly without a net.”

This advice is utter foolishness. It will not help you succeed. Nor will it make you happier if you do succeed.

Remember, generally speaking the people giving this advice are celebrities – the one in a thousand that were good enough and lucky enough to make a success of their passion. And they are usually dispensing this advice at award shows – where they are enthralled with their own wonderful selves.

Any parent or person of authority that would give such advice is either stupid or selfish or, more likely, both.

Here’s my advice: If you are young and have a particular passion, go for it. But do so only after you have mentally prepared yourself for the four possibilities listed above.

Start by identifying the psychological rewards your passion brings you now. Be honest and specific. Excitement? Engagement? Admiration? Validation?

Imagine yourself working relentlessly towards your goal, ignoring everything else in your life – friendships, family, marriage, even a bit of your self-respect. Would you be okay with that?

If your answer, “YES!,” imagine yourself 10 or 20 years into the future. You’ve achieved your goal. You have turned your passion into a profitable career. You have the status. You have the money. You have the validation you were looking for. But you’ve lost the excitement and the engagement. The work doesn’t fire you up anymore. Would you be okay with that?

Imagine, too, another scenario. Imagine that, after several of giving your all to making your passion profitable, you come to the realization that the prospects of success are approaching zero. Imagine that you look around and find an opportunity to start a different career – one that would almost certainly be profitable but for which you have no passion. Would you be able to make that change? Maybe with the idea that you could you put aside several hours a week to continue practicing your passion as a hobby? Would you be able to do that? Without second-guessing yourself?

Now imagine that while you are building your current career – a career that you had no passion for when you started – you begin to treat it like you are passionate about it. Imagine what you would do to convert it into something that would give you those feelings of excitement and engagement and admiration and validation that you now are hoping to get from your passion. How would that feel?

Imagine that after enjoying a profitable career that you found a passion for, and continuing to enjoy your current passion as a hobby, you retired from the first and spent your golden years engaged fully in the other.

How does that feel?

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“Life is a series of natural and spontaneous changes. Don’t resist them; that only creates sorrow. Let reality be reality. Let things flow naturally forward in whatever way they like.” – Lao Tzu

Advice to “Shark Tank” Wannabes:

Don’t Fret the Business Plan… Obey the Market 

“Shark Tank,” the enormously popular TV show, is about entrepreneurs vying for money to fund their ideas. They win or lose based on their business plans and how well they present them.

It’s a bogus concept. Anyone that knows anything about how venture capital works, including the celebrity entrepreneurs that act as judges on the show, knows it.

What’s BS about the show is the focus on the business plan itself. Business plans matter, but not nearly as much as most people think. And when it comes to start-up ventures, the initial plans matter even less.

That’s because in the real world nothing is static. The economy is in a continuous state of change. Industries are forever shrinking and/or expanding. Supply and demand changes on a daily basis. And this is to say nothing of the infinitely complex and unpredictable nature of the human beings that comprise the business experience: the managers, the employees, the vendors, and the customers.

Business plans, however, are by nature static. They are based on facts and assumptions that are true for some limited period of time. Bigger plans – those that contain more facts and assumptions – may have the appearance of being more reliable, because they take so much more into consideration. But in fact, they are less stable – precisely because they contain more parts that are likely to move.

I’ve been involved in more business start-ups than I can count. When I think about the best of them, I can’t think of a single one that succeeded by faithfully following its original plan.

On the contrary, the most successful businesses I’ve been involved with at inception – the ones that grew to into thriving, enduring, multimillion-dollar companies – were all started with plans that were sketchy. Literally sketchy – with the core ideas recorded as sketches on scraps of papers.

The simple truth about entrepreneurship is this: It’s much more about the ingenuity, tenaciousness, and flexibility of the founders than about their ability to make perfect plans.

And that is why, in the past 20 years, the average business plan required by venture capitalists has shrunk from 75-100 pages to 15-25. Angel investors today understand that successful start-ups are not those that begin with amazing plans but with amazing people that have the ability to adapt quickly and enthusiastically to changing market conditions.

Do you recognize the name David H. McConnell?

He began his career as a traveling salesman. He sold books. Over several years of trying out a variety of whimsical sales pitches, he discovered that he could increase sales by giving potential customers perfume samples as a bonus.

I know! It doesn’t make sense. But the gimmick worked. It worked so well that he trashed his plan for building a bookselling empire and replaced it with a plan to sell perfumes.

He hired 13 female sales representatives (mostly former customers) and set them to work. A decade later, he had a sales staff of 5000. His business then was called the California Perfume Company.

Later, he changed the name to Avon.

The Takeaway: You don’t need a perfect plan to start a great business. You need a plan that is flexible enough to guide you through all the changes you’ll be making as your business grows.

Recommendation: If this idea feels important to you, get yourself a copy of Ready, Fire, Aim. 

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“The essence of strategy is choosing what not to do.” – Michael Porter

How to Make More Money Than Wall Street Wants You to Make 

The investment “advisory” business in America is a huge, multibillion-dollar industry populated with smart, sophisticated, and ambitious people. It’s a world in itself, supported by computerized systems and algorithms equal to or better than NASA. But it’s at least partly based on one widely accepted and respected lie.

The lie is that you can grow wealthy safely and surely by investing in some sensible combination of stocks and bonds.

It’s not a big, black lie. Because it’s sort of true… can be true… has been true… at certain times, in certain circumstances, for certain people.

The truth is that limiting your wealth-building strategy to stocks and bonds is a mistake. In most cases, a big mistake.

When you limit your investing to stocks and bonds, the best you can hope for over the long term is to make an average return for stocks and bonds. That’s about 5.5% for non-taxable government bonds and 10% for taxable stocks. Most financial advisors recommend, depending on your age and net worth, a split between stocks and bonds of 60/40 to 40/60. That would give you an average return of about 7% to 8%.

The easiest and cheapest way to achieve a long-term return of 7% to 8% would be to buy one no-load stock fund (like the Vanguard 500 Index Fund) and one bond fund (like the Fidelity Total Bond Fund). Index stock funds and total bond funds are designed to track the markets – i.e., give you returns equal to the stock and bond markets. Limiting yourself to one reliable stock fund and one reliable bond fund is the simplest and easiest way to achieve that sort of 7% to 8% long-term result.

And that’s not bad. You can, indeed, become wealthy that way if…

* You start with a sizeable one-time investment of, say, $100,000, or…

* You contribute a sizeable amount of, say, $10,000+ each and every year, and…

* You have 30 or 40 years ahead of you before you retire.

Or you can try to beat the averages by doing your own research and/or getting advice from a broker and creating a portfolio of individual stocks/bonds of your choosing. If you are going to do that, be prepared to work hard and be very disciplined. Most individual investors that take this route end up achieving average returns that are actually much lower than stock and bond market averages. Instead of getting the 50+% returns they are hoping for, they actually earn, on average, less than half the 7% to 8% they could get by investing in index funds.

If you opt for putting all your investment dollars into conservative stock and bond funds, you have to be satisfied with the 7% to 8% returns you will probably achieve. But if you’d like to earn more than that safely, there are ways. I am going to tell you about one of them. One that I know very well… because I developed it myself.

A Different Approach to Building Wealth 

This is not some theoretical strategy I learned from reading books on investing or talking to financial advisors. It’s the result of making and losing money over the course of many years.

Like any strategy, it has don’ts and dos. The don’ts are those investment schemes that looked great when I first tried them, but failed me in practice. The dos are the few that worked for me consistently over time.

One of the reasons this strategy worked for me – and may not for you – is that it was calibrated to my own particular wealth-building mentality. (See Monday’s blog.)

For one thing, I am not much interested in the game of investing. I find it tedious, even boring. I don’t believe it actually is tedious and boring. The best investment analysts are not just smart but also immensely interested in the subject matter of investment. I’m not. So that’s something to keep in mind.

Second, I am deeply and purposefully lazy. I am always looking to get the best result from the least amount of work. I shouldn’t say the best result. I should say a satisfactory result. If I can score a 90 on a test by studying one hour and a 100 by studying 5 hours, I am satisfied with the 90.

Third, I am a fast but not a careful thinker. I like gathering what seem to be the important facts, and then coming to quick conclusions about them. I don’t like reviewing details. And I definitely don’t like reviewing my decisions, if I don’t have to.

And finally, although I am not, by nature, a patient person, I have learned to be patient about building wealth. That means my approach is appropriate for you if you have at least 10 years to let it do its magic.

These characteristics rule out my involvement in a few perfectly good investment strategies. Strategies that some of my more industrious, punctilious, and thoughtful colleagues in the investment advisory industry embrace. That’s fine with me. We have to work with who we are.

In short, you can think of what follows as…

A Quick and Lazy but Safe and Sure Way to Grow Rich 

1. Stocks – I have three stock portfolios. One (which I call The Legacy Portfolio) contains about a dozen big and reliable Warren Buffett-type companies like Nestle and Coca-Cola. A second (Legacy Two) contains half a dozen companies like Amazon, Apple, and Alphabet. And a third (Junior Legacy) is a smaller portfolio of mid-cap stocks. Stocks currently represent about 15% of my net investible wealth. (My net worth minus my residence and possessions I would never sell.)

2. Options – Although my cardinal rule is to not invest in something I don’t understand, I found a way to trade options that I actually do understand. Like real estate and insurance products, many options strategies are essentially leveraged speculations. So, I steer clear of them. But the way I do options – selling puts on high-quality stocks that I want to own – has so far worked well for me. Still, I’ve limited my activity to only about 3% to 4% of my net investible wealth.

3. Direct Investments in Entrepreneurial Businesses – I’ve been an investor in private, start-up companies for more than 30 years. I learned early that when I put money into businesses about which I know nothing, I get back nothing. (As in: I lose all my money.) Today, all the money that I have in private businesses are in companies that sell information via direct marketing. A business I know very well. I have only two rules that I follow for private placement deals: (1) I have to know the business inside and out, and (2) I have to have a controlling interest in it, which means the ability to approve key decisions. My initial investments in private businesses were almost all shockingly small, but they now represent about 32% of my net investible wealth.

4. Pre-IPO Deals – This is where I violate my rule about not investing in things I don’t understand. A friend of mine has made a successful career out of investing in private businesses that are on the verge of going public. He is very good at this sort of thing. He is smart. He is careful. And he does his homework. (He is actually an advisor to one of the celebrity investors on “Shark Tank.”) So when he started his own recommendation service, I joined it. But although I have great faith in his abilities and expertise in making the individual buy and sell decisions, I consider this activity to be a form of gambling and I’ve limited my exposure to less than 1% of my net investible wealth. To be clear, I’m not recommending this as a safe way to build wealth. If you like this game, consider it like you would backing an expert player in a game of poker. It’s not as risky as roulette, but it’s better than playing yourself.

5. Fixed-Income Bonds – At one time, bonds (AAA-rated municipal bonds) represented as much as 40% of my net investible worth. Today, they are less than 4%. My strategy was always to buy them in “ladders” and hold them until maturity. But I haven’t bought them since the rates dropped below 4%. When rates hit 6% again, I’ll probably start buying again.

6. Private Debt – I’ve been lending money privately for about 30 years. About half of these loans are mortgages, secured by the property. The other half are business and personal loans. I made some bad investments doing this early on – some to friends and family members, which was awkward and embarrassing. Nowadays, I make only collateralized loans and I demand interest payments to start immediately. My private debt investments are about 5% of my net investible wealth.

7. Rental Real Estate – Next to direct investments in start-up companies, investments in income-producing real estate have been the largest contributor to the growth of my wealth. I follow a strict rule about how much I will pay for a property that is based on the income the property is currently producing. I expect immediate cash flow of 6% to 8%, plus long-term appreciation of 4%. Whenever possible, I buy properties whose value can be increased by making inexpensive improvements. The formula is simple: Fix them up. Raise the rents. And then leverage my position with bank financing. (Because rental real estate is local and simple, leveraging properties with bank financing is usually a very safe proposition.) Rental real estate represents about 25% of my net investible wealth.

8. Land Banking – Although my preference is to invest in current income rather than future appreciation, I have bought about a dozen parcels of land over the years in the US, Canada, Central America, and Europe. Since my bet here is that these assets will appreciate in the future, I consider them to be speculations, not investments. Land banking represents about 5% of my net investible wealth.

9. Gold and Silver – I bought a bunch of gold coins some years back, when gold was selling for about $400 an ounce. I also bought some silver and platinum coins. These have appreciated more than four times, as you know. But I didn’t buy them to increase my wealth. I bought them as insurance against the remote chance that there will one day be a collapse of the dollar and a subsequent deep, inflationary depression. If that happens, these coins will be very valuable. In the meantime, they make me feel like I have the threat of financial Armageddon covered. Gold and silver coins represent about 4% of my net investible wealth.

10. Crypto Currencies – About a year ago, I bought a small basket of five crypto currencies – bitcoin and Ethereum and three of the other usual suspects. I bought them not because I believe they will replace the dollar, but because I wanted to be able to say I did if they eventually do. Like the money I put into pre-IPO deals, I consider this activity to be a form of gambling. And since I think of gambling as spending, not investing, I limit my total exposure to an amount I wouldn’t mind losing. Thus, my investment in cryptos is less than 1% of my net investible wealth.

11. Collectibles – I’m a big fan of investment-grade collectibles because they are tangible, portable, non-reportable, and provide the pleasure of looking at them while they appreciate. My preferred collectible is investment-grade art. But I also have modest collections of first-edition books, vintage cigarette lighters, watches, and rare coins. Since I have experience and some expertise in the markets I deal in, I consider these to be smart speculations. Altogether, my collectibles represent about 10% of my net investible wealth.

12. Cash – The amount of cash that I have at any time depends on the state of the economy (precarious now), the stock market (overvalued but with room to rise), the bond market (rates are unattractive), and any opportunities in business and real estate that present themselves. Right now, my cash holdings represent about 5% of my net investible wealth.

As I said above, my strategy isn’t the ideal strategy for everyone. I don’t think it’s the best possible example of diversification for people that are younger or older than I am, richer or poorer, or have different emotional and intellectual inclinations. But the overall approach has done well over the years, and its diversity and balance are just right for me.

Most importantly, it reflects my strongest belief about building wealth: To get the best result, you have to go beyond stocks and bonds.

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“People who lie to themselves about investing are the same as overweight people who blame their genes for their obesity.” – Robert Kiyosaki

Lessons From “Losing a Million Dollars”

Growing up in a family of teachers and artists, I came into my adulthood knowing next to nothing about money. Curiously, that didn’t stop me from making a good deal of it. After a two-year stint teaching English Literature at the University of Chad for $50 a week, I began my “real” career in publishing. And during the next 10 years, I brought my income up from $35,000 a year to a whole lot more than that.

Figuring out how to make money happened pretty fast. After consciously deciding to “get rich” in 1983, I was in the top 1% of earners by 1985 or 1986.

But here’s the thing: I wasn’t getting richer. I think I may have even gotten poorer during those first several years. I went from having a net worth of maybe $30,000 to having a net worth of less than zero!

What happened is easy to explain: As my income went up, so too did my spending. Some of it was on depreciating assets – things like luxury cars and furniture and watches and jewelry. Some of it was on luxurious experiences – like first-class travel and expensive restaurants.

But most of it was on what I thought were “investments.”

Those quotes are to highlight a point. My ignorance of investing at that time was profound. Looking back at it now, I’d describe my idea of investing as “putting money into something that might make me richer somehow, some way, and some day.”

During those early years of investing that way, I had one or two memorable triumphs and dozens of disappointments. Which I promptly forgot. That was how I was able to get poorer while my income was soaring.

When you think of investing as something as nebulous as putting money into opportunities that might make you richer one day, you forgo the chance to understand the primary difference between investing and building wealth. So, let’s start with that – the difference between building wealth and investing.

Defining Our Terms 

Building wealth is a good and sensible objective. Investing, on the other hand, is not an objective at all. It’s an activity. Something you do with your money. Just like exercising is something you do with your body.

If you want to build strength, there are many forms of exercise you can do to achieve that goal. Some work very well. Some are less effective. And some can actually weaken you. If your goal is to increase your wealth, you should likewise recognize that there are many activities you can engage in towards that objective. Some work very well. Some are less effective. And some can likely make you poorer.

In What I Learned Losing a Million Dollars, Jim Paul makes some very useful distinctions between 5 money-related activities that are sometimes lumped into the sobriquet of investing. This particular statement caught my eye:

“Most people who think they are investing are speculating. And most people who think they are speculating are gambling.”

That sounded like wisdom to me. I took notes. Here are Paul’s definitions:

1. Investing – parting with capital with the expectation of a return on it over a longish time horizon, with those returns coming from interest/income and capital appreciation.
2. Trading – making a market on (buying and selling) a particular asset over a specified amount of time. The time frame is usually short. The trader tries to make money from the spread between the price he pays to buy the asset and the price he gets for selling it (a long position) or vice versa (a short position).
3. Speculating – buying an asset with the expectation that its price will go up sometime in the future. Speculating is about foresight, about believing you know that something will happen in the future that will affect the price of a certain asset.
4. Gambling – A derivative of speculating, gambling usually involves a game, but it can also involve an asset class. Almost anything. The gambler’s primary motivation is entertainment. He gambles because he likes to gamble. He also likes to make money with his gambling, but that is not his core desire because he will continue to gamble even if he consistently loses money.
5. Betting – Betting is also about risking money on the outcome of a certain event. It also involves chance. But the bettor’s primary motivation is being right, not entertainment.

Paul’s definitions are helpful because they identify not just the strategic and technical differences between these activities but also their different psychological motivations.

That is very important.  Our mental/emotional approach to making money almost always drives our decisions. If we are unaware of our inner objectives and motivations, it’s easy to make bad decisions and then to keep repeating them.

Our investment psychology is complex. It includes our risk tolerance, our capacity for deferred gratification, our mathematical IQ, our willingness to learn, our attention to detail, and also such things as attention span, compulsiveness, and even our ego attachment to our decisions.

When you break it down like that, you can see why it is the principal factor in our ability to build wealth.

This was certainly true for Jim Paul. As he explains in the book, his early approach to making money on Wall Street wavered between gambling and betting. He thought of himself as an investor – even a brilliant investor, when the dice were rolling his way. But after losing a million dollars and nearly ruining his life, he figured out that what he was doing was anything but investing. What I Learned Losing a Million Dollars is a blueprint for how he reinvented his financial life.

Paul’s definitions are perfect for people who, like him, have an affinity for risk taking. The definitions below are my attempt to interpret them for people that have a relatively low tolerance for risk and for anyone that, like me, has little interest in investing but a great interest in building wealth.

Betting and Gambling 

Paul makes an interesting distinction between the gambler and the bettor. The gambler, he says, is looking for entertainment, whereas the bettor is interested in proving himself right. If you are addicted to either gambling or betting, these distinctions are crucial. What is motivating you? Is it the fun of playing? Or is it the ego gratification of being right?

From a wealth-building perspective, however, gambling and betting are synonymous: foolish and habitual activities virtually designed to make you poorer. As a wealth builder, you should do neither of them. Ever.

Trading 

Paul’s definition of trading is straightforward: making a market on (buying and selling) a particular asset over a specified amount of time.

The trader’s goal is to build his wealth one trade at a time by making a profit from the gap between bid and ask. His time frame is usually short, the risks are usually significant, and the trades themselves are sometimes complicated.

To succeed, the trader must be willing to spend a good deal of time on his trading. It’s not something one should do casually or impulsively. I see trading as an occupation like entrepreneurship, where you must work hours every day and keep up to date on your business. But it’s also a complex and sophisticated business, one that requires knowledge, intelligence, and discipline.

I’d like to think that I could be a successful trader. But on a deeper level, I know I don’t have the mentality to do it right. I don’t have the patience. I don’t have the discipline. And I’m not willing to put in the hours to learn what I’d have to know. Trading would definitely be a wealth-depleting activity for me.

My advice to anyone that wants to try his hand at trading: Be humble. Assess your mental and emotional qualifications. Move slowly. Never make a trade that you don’t fully understand. And don’t put money at risk that you are not prepared to lose.

Speculating 

The speculator wants to build wealth by buying assets that he believes are either currently undervalued or will become more valuable. He makes his buy and sell decisions based on expectations of the future.

By that definition, most individual investors are speculators and most of what they do, which they think of as investing, is speculating. When you buy or sell stocks based on stories you hear about the economy, sectors of the economy, individual industries, and even individual companies, you are speculating.

There is nothing inherently wrong with speculating. Like trading, it is a perfectly legitimate way to build wealth. But there are smart ways to speculate and there are dumb ways to speculate. Wealth builders speculate smartly by doing what smart traders do. They learn as much as they can about what they are doing. They move carefully. And they limit their risks through a combination of diversification, position sizing, and stop-loss mechanisms.

Investing 

Paul defines investing as parting with capital with the expectation of getting a return on it over a longish time horizon, with those returns coming from interest/income and capital appreciation.

The long-term time frame is key. It provides a level of safety that you cannot get with any of the other financial activities named above. To be a successful investor, you have to have or develop an aversion to risk and an ability to wait. But those are good qualities to have. They are, to me, the essential characteristics of a wealth-building mindset.

Paul’s definition of investing also mentions income and appreciation (or growth). These are worth parsing.

* Growth Investing – Growth investing is putting your money into an asset or business whose value you expect to increase over the long term. In other words, you hope to profit from some circumstances that will make the business or asset more valuable in the future.

* Income Investing – Income investing is putting your money into an asset or business for the purposes of generating income (or interest) from that activity. Lending money to someone or some business is a form of income investing. So is buying municipal or corporate bonds.

* Growth & Income Investing – This is my favorite type of wealth-building activity: putting money into a business or financial asset that will give me both current income and future appreciation. The best of both worlds.

Rental real estate is a perfect example. If I invest $100,000 or $1 million in a small apartment complex, I am usually looking for an annual return, cash on cash, of about 6% ($6000 or $60,000). Before buying the property, my partners and I do a lot of work to make sure that our net ROI will be 6%.

But I’m also counting on the growth of my equity – i.e., on property appreciation.

The historic ROI for real property is about 4%, which would bring my total ROI on that $1million to about $100,000 or 10%, cash on cash. This is just the beginning. The wonderful thing about the real estate market is that it’s both local and easy to understand.

Because I know my local real estate market, I know the value dynamics of the neighborhood in which I’m investing. In one part of town, I can bet I’d be lucky to get an annual appreciation of 3% or 4%. But in an up-an-coming area, I might expect to get 8% to 10%. And because real estate is relatively easy to understand, I can safely finance a portion of my investment and thus dramatically improve my long-term ROI.

You can get both current income and equity appreciation by investing in dividend-yielding stocks, too. Some of the best companies in the world are of this type.

The point is this: If you are interested in building wealth, you must understand that many of the financial activities that promote themselves as investing are actually forms of gambling and betting. You should also understand that to succeed as a trader, you must treat what you’re doing as a complex and risky business. And, finally, you should understand the differences between speculating and investing and the three types of investing.

Understand the activity. And understand your motivation.

You can tell yourself, for example, that when you buy crypto currencies you are investing. But if you analyze the strategy by using the definitions above, you will see that buying crypto currencies is a form of speculation.

Bitcoins are not businesses. Nor do they produce income. They are currencies whose values rise or fall depending on myriad future possibilities, not current facts. Buying bitcoin right now might be a smart speculation. It might even be a way to make a good deal of money. But because it is based on future possibilities rather than current facts, it is nevertheless a speculation.

Buying a bunch of gold bullion coins because you believe the world is on the verge of a debt-fueled economic crisis is not investing. It’s speculating. It is speculating because the decision is based primarily on the belief that the value of gold will go up in the future because of a variety of factors that are not possible to predict with any certainty. This does not mean that buying gold coins is a bad idea. In fact, it may very well be a good idea. But it is not investing according to the definition established above. It is speculation.

Putting your money in a tech stock that has huge revenues but no earnings may be a brilliant move. But it is not, according to the above definition, investing.

Again, I’m not saying that speculating is wrong. On the contrary, it’s a perfectly good way to build your wealth… if you do it right. But that means accepting the fact that you are making your decision based on future expectations, not current facts.

Alas, What Most People Do 

Most “individual investors” buy and sell stocks and bonds based on information they have been told or read about, hoping that information will make them richer. The same is true for most people that buy gold and other precious metals. Their motivation is to profit from some imagined future event.

Most people that trade options do so because they have read about some systematic way to profit from options, without ever really understanding what they are doing. I myself traded options for a year or two – selling puts – and did about as well as I would have done putting my money in an index fund. At the end of the experiment, I had increased my wealth, so it met the test of being a wealth-building activity. But I don’t think the 10% return I got on my money would be enough to satisfy most people that trade options.

Today, almost everyone I know, young/old and rich/poor, is trading stocks. The new digital platforms have been designed to make trading incredibly simple and easy. What these people know about trading – or even the stocks they are trading – is next to nothing. But they think they know. What they are doing is not any form of wealth building. It is not investing. It’s not speculating. And although they call it trading, they are doing it with limited experience and even less knowledge. They are the equivalent of novice poker players playing with pros.

It might be argued that the above are arbitrary definitions. I cede that point. But I do think they are helpful in forcing us to pay attention to what we are actually doing when we put our money at risk. We need to understand the game we are playing – the costs, the benefits, the risks, and the potential rewards. We must also understand what sort of mentality we are bringing to these games.

We must take the time to ask ourselves: “What, exactly, am I doing?”

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“If you have always believed that everyone should play by the same rules and be judged by the same standards, that would have gotten you labeled a radical 60 years ago, a liberal 30 years ago, and a racist today.” – Thomas Sowell

Race Politics: Will It Doom the Democrats in November? 

He’s a racist.

That’s what many of my friends think about Trump. His 2016 campaign rhetoric about illegal immigrants and his promise to build the wall ignited a conflagration of animosity towards him. Subsequent comments, some purposefully misconstrued by the press, added fuel. It’s still raging.

In their thinking, Trump won the electoral vote (“He didn’t win the election,” they tell me) by appealing to the crudest prejudices of some 35 million deplorable Americans.

They see Trump’s comment that there were “very fine people on both sides” about the protest in Charlottesville as support for white supremacists. They see ICE’s protocol of separating children from their parents at the border (a protocol that had been in place during the Obama administration) as a racist tactic against Hispanics.

After the killing of George Floyd on May 25, support for BLM surged all across the country. For a few days, it looked like it might be a unifying moment, bringing Republicans and Democrats together in a common cause. But when some of the protests turned violent, the gap reasserted itself, with conservatives condemning the rioting and progressives supporting it.

Democratic politicians justified the violence (“Where is it written that protests should be non-violent?” New York Governor Andrew Cuomo asked.) And the largely Democratic media did so, too. (CNN’s Chris Cuomo and Don Lemon likened the rioters to American revolutionaries. “This is how this country was started,” Lemon said.)

Then, as the coalition of BLM and Antifa leaders gained access to the media, the message shifted from outrage over an individual case of police brutality to an organized campaign against policing itself. The slogan was “Black Lives Matter.” And though nobody could agree on what exactly that meant, Democratic tacticians seized on it as a rallying call to unite their core supporters and win over others in the November elections. Before long, everyone on the left side of the aisle was taking a knee and denouncing the US as a systemically racist country.

That played well for a while, bolstering Biden’s ratings in the polls. Early in the summer, his lead over Trump reached a seemingly insurmountable 10 points (51 to 41). If the protests continued but the rioting and looting did not, Democratic support of BLM might have sealed Biden’s victory. But the violence spread and even escalated during the summer, and that began to worry many centrist voters. Still, the Democrats and mainstream media must have felt forced to excuse and even defend the violence, because by then it was clear that it was coming from the left.

NYT writer Nikole Hannah-Jones told CBS that “destroying property which can be replaced is not violence.” And books such as How to Be an Antiracist, White Fragility, and In Defense of Looting shifted the narrative even further: Either you supported BLM and its Socialist/Marxist solutions or you were racist.

In June and July, the violence continued, with the destruction of private property exceeding the $700 million in damages that LA had suffered after the Rodney King riots and reaching nearly $2 billion. “There has been no precedent [in US history] for… such a massive property loss from rioting in more than one state,” Tom Johansmeyer, head of Property Claim Services (PCS), said in a recent interview.

But property damage was only part of it. During August and September, the riots continued with assaults and shootings of civilians on both sides and armed attacks on police. At the same time, crime rates in those same cities were escalating.

* In Minneapolis during the first two weeks of July, there were 43 shootings, about triple the number during the same period in 2019.

* In Atlanta, there were 66 shootings (106 victims) between June and July, an increase of 265% from the previous year, while murders increased by 240% with 17.

* New York City saw 239 shootings (318 victims) in June, a 130% increase, plus a 118% rise in robberies and a 30% rise in murders.

* In Chicago, police reported 31 murders in just 6 days (July 6 to July 12), a 417% increase from the previous year. In that same time frame, there were 93 shootings, 127% more than in 2019. And the city saw 24 deaths and 61 injuries due to gun violence in what was later called the most violent weekend of the year.

* In Philadelphia, there was a 25% increase in murders, with 224 as of July 15. Philadelphia PD also reported a 55% increase in shootings and a 31% increase in shooting victims.

All the way back in May, David Shor, then an analyst for the liberal think tank Civis Analytics, posted a tweet citing research by political scientist Omar Wasow on the riots following MLK’s assassination which showed how Democratic support for the violence had worked against them in the 1968 election.

In June, Biden’s lead over Trump had been 10 points (51 to 41). By mid-July, it had narrowed to 8 (48 to 40), and it narrowed again in August. As the spread narrowed, it began to dawn on the Democrats that Wasow had been correct: Their tacit and sometimes explicit support of the violence was hurting them.

So, heeding the polls, Biden and many of the Democratic governors, senators, and even local politicians began to condemn the violence. But by condemning it, they were forced to acknowledge it. And that only made it more obvious to voters, Democrats and Republicans alike, that the social fabric of the country was being torn apart. This was going to be a critical election.

At this point, Biden’s lead had dropped again, to 6.5. And we found ourselves in a rhetorical battle between Democrats and Republicans with two issues: Trump’s handling of the Corona Crisis and the Democrats’ handling of the violence and crime.

Sensing an opportunity, Trump positioned himself as the law-and-order president and portrayed Biden as soft and Harris as radicalized.

The Democrats fired back by characterizing Trump’s law-and-order initiatives as racist, and continued to charge him with bungling the response to the pandemic.

The corona-bungling narrative was strong when the death counts were soaring, but it weakened every time the counts went down. Trump continued to downplay the danger while predicting a vaccine before the end of the year.

The presidential race is now a contest between fear of the pandemic and fear of escalating violence. The recent spike in COVID-19 cases in states such as Florida and Georgia were good for Biden and company in June and July, and they are (no doubt) hoping for a spike just before the November election to recapture the story’s impact. The Republicans, on the other hand, are (no doubt) hoping the violence will continue.

So what will happen?

The core contingencies on both sides aren’t going to change their votes. The election will be determined by the swing states and the undecided voters. My theory: It all depends on which of the two principal narratives scares them the most.

The Democrats need a dramatic COVID-19 scare in the next six weeks, but I don’t think a spike in cases will do it. People understand the risks better than they did months ago. To boost the pandemic to the top of undecided voters’ fear gauge, the Democrats need a surge in fatalities. And given the current numbers, that doesn’t seem likely.

Perhaps sensing this, the Democrat strategists have just this last weekend begun to talk about healthcare, arguing that Trump’s plan to dismantle the Affordable Care Act will be assured with the appointment of Amy Coney Barrett.

But Trump is already countering that by promising (and even officially declaring) that he will force insurance companies to accept preexisting conditions.

The fear of losing health care coverage was a motivating one in the 2018 mid-term elections, but it seems unlikely that it is going to sway undecided voters now. I also doubt that Trump’s Supreme Court appointment or the story of his tax returns are going to have a significant effect. (I’ll tell you why in a future blog.)

I could be wrong about all of the above. But if I’m right, the Democrats may be left with the one issue that motivated so many of them in the beginning: racism. Is Trump racist? Is America racist? Do Black lives matter? Do all lives matter?

This is not the issue I’d want to run on if I were Biden. The justified outrage over George Floyd’s killing that was so strong at the beginning of the summer has ebbed amid the continuing violence, with damage and death on both sides of the racial divide.

Moderate and undecided voters may be tired of all the turmoil and tired, too, of all the talk of institutional racism, intersectionality, and white privilege.

These are not moderate viewpoints. And I don’t think they are likely to appeal to the majority of undecided voters. American culture, which had been gradually polarizing since the Reagan years, has been all but shattered in these last few months, inflamed by the algorithms of Facebook, Twitter, and other social media.

A particular concern for Democrats today is the Hispanic vote.

From David Leonhardt in The New York Times:

“Ross Douthat, a Times columnist, argues that Trump’s relative strength among Hispanic Americans is a sign that Democrats are misreading the politics of race. Liberals often draw a bright line between whites and people of color (as the acronym BIPOC – for Black, Indigenous and people of color – suggests). But this binary breakdown doesn’t reflect reality, Ross argues.

“For starters, about 53% of Latinos identify as white, Andrea González-Ramírez of Medium notes. Others do not but are conservative – on abortion, taxes, Cuba, or other issues. In some states, Hispanic men appear to be especially open to supporting Trump, Stephanie Valencia of Equis Research, a polling firm, told my colleague Ian Prasad Philbrick.

“A recent Times poll of four battleground states captured some of these dynamics. Most Hispanic voters said Biden had not done enough to condemn rioting, said he supported cutting police funding (which is not true), and said they themselves opposed police funding cuts. For that matter, most Black voters also opposed such funding cuts.

“It’s a reminder that well-educated progressive activists and writers – of all races – are well to the left of most Black, Hispanic, and Asian voters on major issues. These groups in fact, are among the more moderate parts of the Democratic coalition in important respects. If Democrats don’t grapple with this reality they risk losing some of those voters.”

So the question I keep posing to my Democrat friends is: Could you be making the same mistake you made in 2016?

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“There is an inverse relationship between the value of advice given and what people are usually willing to spend for it.” – Michael Masterson

Why It’s a Bad Idea to Ask a Someone You Don’t Know for Advice… and How to Do It Anyway 

Time: Forty years ago

Place: Queens College campus, CUNY

Main Characters: Harriet Zinnes, college professor and accomplished poet, and me

Background: I had taken several classes from her. She was a great teacher. And a really good poet. I adored her, and she seemed to have adopted me as a favorite student.

Action: I’m walking with her, from the class I’d just taken back to her office, basking in the glow of being sort-of friends with a real poet. She is telling me about her new collection, to be published by New Directions Press.

Cut To: Her office

Action: We sit down. She opens a small stack of mail. One piece is a thick manilla envelope. She opens it and withdraws a typewritten manuscript. I can see that it is poetry. She flips through it, then unfolds the cover letter and reads that. She frowns.

“Bad news?” I ask.

“No.” Shaking her head, she puts the manuscript and cover letter back in the envelope and tosses it into a box that is almost full of similar looking packages. “It’s just amazing.”

I lift my eyebrows.

“I mean. What do these people think? I don’t know them. They don’t know me. But they assume that I should be honored to read their poetry in my spare time.”

She looks at me.

“Listen, Mark. I’m happy to read the poetry of my students. That’s my job. But I need every minute of my spare time to work on my own poetry. I get these requests all the time. I’d have to spend hours every week trying to keep up with them. Don’t they realize they are imposing on me?”

That conversation stuck with me. On the one hand, I was thrilled that this person I adulated would condescend to confide in me. On the other hand, her comments seemed mean-spirited.

Years later, I came to understand why Professor Zinnes felt the way she did. It wasn’t that she was uncharitable. Nor did she think her status as a poet put her above amateurs. And I believe she understood as well as I did that such requests were a kind of compliment. I’d bet that after her first collection was published and the first few requests dribbled in, she was happy and excited to respond to them.

But as she gained notoriety and those early few requests became a steady stream, it was impossible to respond to them all. And what was once a great ego boost turned into a source of frustration.

That’s pretty much what happened to me when I was writing Early to Rise (ETR) 20 years ago. At the beginning, I would occasionally get letters from subscribers asking for my views on this or that or my advice for their specific situations. I was so flattered to be asked. I answered every one – some at great length.

As ETR grew, I could answer only some of the letters that came in. To the rest I sent short notes saying that I would get back to them later. When that became impossible, I had my assistant send personalized messages saying that I’d try to answer by way of an upcoming essay in ETR. (Which I was usually able to do.) Eventually, when the circulation reached nearly a million subscribers, my publisher had to take over with a form letter.

But I can still remember the early days of frustration, when each new request put me on edge. Not because I wasn’t still grateful to have earned the trust of a subscriber, but because I was irrationally angry about the fact that the demands on my time had become so great.

These days, my essays are published in syndication, so I am rarely overwhelmed with personal letters. But often, I get one that I’m not really sure how to respond to.

This happened recently when I received an email from someone named – well, let’s call him David Smith.

David writes:

Dear Mr. Ford:

I hope this email finds you well. My partner and I would like to meet you for an hour or two when you are in town next. We have problems with our business (a contsruction company). I know you have the experience we need, so we are asking for your advise.

If you may, let me know your decision about this via email as soon as possible.

Thank you, and it is a pleasure to salute you.

David Smith

* My first thought: Who is David Smith? Did I once meet him? Or does he know me by reputation? In any case, why does he assume I recognize his name? Why doesn’t he tell me who he is?

* My second thought: Alas, here’s someone else that believes that asking a stranger for an hour or two of his time is like asking for a light. How can he think that way?

* Third question: It’s not that hard to spell-check an email. Does he not know how to do it? And if he does, why didn’t he take the time?

* Fourth question: Does he think the preemptory “thank you” is fair compensation for the work he is asking me to do?

* Fifth question: Did some networking guru encourage him to “build his contact list” this way?

What to do?

Should I write and explain to David that when it comes to giving personal advice, I normally charge for it? Should I let him know that my base fee starts at a million dollars? (No. That would be mean.)

I’m always happy to share my opinions when I’ve had a few drinks. Should I suggest that he should root me out at a conference cocktail hour? (But if I did that, I’d have to also warn him that free advice is almost always worth exactly what you pay for it.)

Should I write a short note, explaining that I’m on vacation and don’t have the time? (But that’s not the real reason.)

Or should I write a brief essay that perhaps he’ll read, explaining why it’s a bad idea to ask a stranger for favors?

A Simple Strategy That Has a Fair Chance of Working 

If you have a question about just about anything, start with Google. You’ll get dozens of answers from all sorts of interesting perspectives that you can consider.

If that doesn’t appeal to you – if you want the answer to come from a particular person that you’ve read or read about (e.g., a published writer, business leader, or public figure) – recognize that your motivation is not to get your question answered but to form a connection that will be valuable to you.

If you are able to do that, you should be able to take the next mental step: Recognize that the relationship you are seeking is an unbalanced one. It’s beneficial for you, but it’s a cost for the other person.

Picture this: The person with whom you want to connect has just finished making a speech to 600 people. He/she has left the auditorium and is now standing in the lobby, surrounded by 20 or 30 people, all of whom are asking questions. Is that a good time to ask yours? And if you asked a question, do you think that could possibly be the beginning of the connection you are going for?

You can see the problem. Yes?

But there is a question you could ask that might actually accomplish your mission.

I’ve been in the speaker’s position many times. And I always take the time to answer questions. But of the hundreds of questions I’ve answered, there is only one I can remember that made me think: “Who is this person? I’d like to know more about him/her.”

The question was: “Can I get you a glass of water or a cup of coffee?”

In an upcoming essay, I’ll talk about the next step in forming a relationship with someone you admire.

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“Someone is sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett

How to Invest in Stocks for Lifetime Wealth 

With a net worth of $66 billion, Warren Buffett is the second-richest man in America.

Most people know Buffett as a great investor.

Why? Early in his investing career, he realized that there were certain businesses that had strategic advantages – advantages that allowed them to continue to grow bigger every decade, crushing their competition over time. He figured that if he could buy those businesses when the price was right, the market would guarantee him huge, long-term profits.

And that’s exactly what he did.

Berkshire Hathaway, the company Buffett took control of in 1965 to buy such companies, has produced an average 20.3% annual return on investment (ROI) since then.

But if Buffett’s system is so great, why doesn’t every investor – professional or private – follow it?

I believe I know the answer.

The investment advisory industry – at least the way it is practiced by more than 95% of the professional community – is not geared toward long-term wealth.

I can hear you shouting already: “I don’t care about long-term wealth. I want to start making good money now. In fact, I want to get rich now!”

I hear you. But the fact is that you can’t get rich quickly in the stock market unless you are both extremely foolish and also extremely lucky. What you can do, if you are smart, is generate a reasonable amount of short-term income while you are building up a retirement nest egg that will cover all of your lifestyle expenses after you stop working.

That’s why, today, I want to focus on Buffett’s secret: generating nearly guaranteed long-term wealth.

The Power of Compounding 

Of all of the many investment strategies that exist, why did Albert Einstein call compounding “the eighth wonder of the world”?

It’s because nothing else has the power to create great wealth so surely.

Compounding works like this: You put your money in an investment that pays a return. At the end of the year, you take that return and reinvest it with your original stake. Your dividend (or interest) earns a return, too. This gives you a bigger, compounded return in the next year.

Compounding is slow and boring at first. But as time passes, the dividends get exponentially larger. Eventually, you wake up to discover that you are making huge dividends every year, while your account grows to an enormous size.

A snowball is the best analogy for compounding. As you roll the ball through the snow, the surface area gets bigger. The more surface area on the snowball, the more snow it picks up. The snowball gains mass slowly at first. But pretty soon, it’s so large you can’t move it.

Here’s an example. An 18-year-old girl puts $2000 into an account each year for seven years. Then she stops. She never puts another nickel into the account. Her $14,000 sits there, earning interest at a rate of 10% each year.

How much will the account be worth when she is ready to retire at 65?

The answer is $696,992. She will have become a wealthy woman at retirement simply because she invested a modest amount of money and allowed it to compound over time.

Not only is compounding the best way to build long-term wealth, it is also the easiest. You can take full advantage of compounding without watching the markets every day or setting stop losses or hedging your bets. The only question you must ask is what kind of investment or asset class compounds the best.

The Best-Performing Asset of All Time 

The answer to that question is easy. Compounding works best with stocks.

Jeremy Siegel is a professor of finance at the Wharton School of the University of Pennsylvania. He studied the returns of different types of asset classes like cash, gold, Treasury bills, bonds, and stocks over a 211-year time frame.

The results were astonishing.

From 1802 to 2013:

* $1 kept in cash would be worth 5 cents.

* $1 invested in gold would be worth $3.21.

* $1 invested in Treasury bills would be worth $278.

* $1 invested in bonds would be worth $1505.

* $1 invested in stocks would be worth $930,550.

Those are the actual numbers.

It’s clear that when it comes to building long-term wealth, stocks are the only way to go.

You may be thinking, “But 200 years is a long time. How would stocks do over a shorter period of time? Say, 54 years?”

Siegel answered that question. Between 1950 and 2003, a $3000 investment in the S&P 500 would have given you a return of $1,323,936.

That’s pretty remarkable.

But had you invested that same $3000 into three companies that have enduring, competitive advantages, your total return would have been $5,080,054 in the same timeframe!

Here are the stock-by-stock results. One thousand dollars invested turned into:

* a balance of $2,042,605 in Kraft Foods

* a balance of $1,774,384 in R.J. Reynolds Tobacco

* a balance of $1,263,065 in ExxonMobil

Why did these three stocks outperform a broad stock market index fund by four times?

It’s simple. They all focused on basic human desires and necessities. Things such as food, cigarettes, and fuel. And they all had what Warren Buffett calls enduring competitive advantages.

Siegel’s work confirms what I’ve been saying: To build serious wealth, you need to have – in addition to strategies that bring you shorter-term income and growth – a long-term strategy that takes full advantage of compounding.

The Five Benefits of Investing This Way 

To get the full rewards of a long-term strategy, you need to follow some rules. You need to select only very safe and very protected businesses. And you need to stick with them regardless of yearly results.

If you do, you will benefit enormously from a number of things.

It gives you…

1. The power of compound interest 

If you have ever looked at a compound interest chart, you’ve noticed that the upward curve of wealth accumulation begins slowly over the first 10 years and then increases rapidly after that. By year 30, the numbers are impressive. By year 40, they are simply unbelievable. For investors with meager means, they will be in the millions. For mid-level investors, they will be in the tens of millions. And for affluent investors, they will be at $100 million or more.

2. Simplicity 

When you invest this way, you don’t have to regularly monitor the markets or even worry which way they are going. You can pretty much set up your portfolio and leave it be.

3. Peace of mind 

With this sort of strategy, you don’t worry about stock market fluctuations. Not even big ones like we’ve experienced in the last few years. (Buffett says that if they closed the market for five years, he wouldn’t care.) In fact, you are happy when the market declines – even when the stocks you are holding drop.

Plus…

4. It prevents you from paying unnecessary fees to money managers, brokers, and financial planners. 

Over time, the fees siphoned away by these professionals erode your wealth significantly.

5. It keeps you from being too conservative with your money. 

One of the greatest risks you run is losing money to inflation in overly conservative investments such as cash, CDs, money market funds, and bonds. By investing in the best companies in the world, you’ll grow your money at much higher rates of return. Rates that beat the pants off inflation’s wealth-eroding effects.

It’s What I Do 

Since having my own personal Warren Buffett insight, I’ve made some decisions. Five years ago, I created a portfolio of some of the best businesses in the industry and invested millions of dollars in them.

Even if I never work another day in my life, and even if the stock markets crash, the dividends alone from these stocks will still pay me over $100,000 per year.

If you invest this way, you could have a portfolio that could do the same.

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“Intelligence without ambition is a bird without wings.” – Salvador Dali

10 Ways to Get Rich as an Employee 

Most people know me as an entrepreneur, a person that has started and/or consulted with dozens of successful multimillion-dollar entrepreneurial businesses, and the author of Ready, Fire, Aim, a NYT bestselling book on entrepreneurship.

In fact, I made my first 10 million as an intrapreneur – an employee that became a partner in a business that went from $1 million to $135 million in about seven years. I did that by doing everything I’m about to tell you…

1. Begin well. 

Recognize a simple truth: If your ambition is to go as far as you can go as an employee, you have to accept the fact that you have to distinguish yourself as a superstar. That means you have to be willing to do more, learn more, and care more than your peers. This won’t increase your general happiness in life, but it will give you the opportunity to have more freedom, authority, and autonomy. Plus you will make a whole lot more money. 

2. Set the only goal that makes sense. 

On day one of your new job, set this goal: to become the CEO of the company. It doesn’t even matter if that’s really not your goal. Anything and everything you can get from your current job will come faster and easier if you assign yourself this crazy goal of becoming the CEO.

3. Study the architecture. 

It’s amazing how many people come to work each day with little to no idea of what their business does or how it does it. They enter data or process accounts payable or write computer code without any knowledge of or interest in how the company works. 

Remember: The goal you’ve assigned yourself is to become CEO. That means you must take the time to educate yourself about the structure, the key people, and the basic operations of the business. Read company literature. Interview your boss and other bosses. Talk to your fellow employees. 

4. Take names. 

Walk around. Make eye contact and smile. As you expand your knowledge of the business and its functions, get to know some of the people outside your immediate work environment. Your goal is not to make friends, but to create a network of people that can help you have a bigger and more meaningful impact on the growth of the company.

5. Use your brain. 

You can’t always be the smartest person in the room, but you should seek to be. Pay attention. Ask questions when you don’t understand. Take notes. Study. Be determined to know the business inside and out. This will mean extra work, evenings and weekends. It will be a good investment of your time.

6. Catch the worm. 

Don’t believe anyone that tells you it’s quality, not quantity, that counts. Both are important. That applies to every aspect of your work performance, including the hours you work. To get on the fast track in a new company, you must not only work at least 10 hours a day, at least one of those hours should be in your office before your boss arrives. Being willing to work late shows loyalty and commitment. Arriving early shows initiative and ambition.

7. Make your first fan. 

Your fate during the early days of your employment is dependent on your boss’s opinion of you. So, make it your first priority to figure him out and become the employee he wants you to be. 

8. Be thankful and thoughtful. 

Every time someone helps you, teaches your something, or does you a favor – even a small one – send them a personalized thank-you of some sort. In some cases, an email will suffice. In other cases, a handwritten note would be better. The point is to let people know that you are open to, and grateful for, advice and encouragement.

9. Step up. 

When something bad happens under your watch, don’t make excuses. If it’s your fault, fess up immediately. If it isn’t your fault, don’t play the blame game. Explain what happened, but also take responsibility for it. You want to be known as  someone that can be relied on to solve problems, not just point fingers.

10. Get ready for a promotion. 

What is the job you should do next? The one that will advance you fastest? You should always have your eye on a position with more responsibility and authority. And usually, that means a job that can make the company more bottom-line dollars. 

Think about what that job can be and then start spending your free time hanging out with the people that are currently doing it. Learn everything they know. Help them solve their problems. Become their fervent apprentice. And when a job in their department opens up, they will think of you… and you will be fully prepared to jump on it.

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“Globalism began as a vision of a world with free trade, shared prosperity, and open borders. These are good, even noble, things to aim for.” – Deepak Chopra

Free Trade or Trade Wars?

The Facts Are Clear

Tariffs are meant to protect local business and their employees from “unfair” foreign competition. By imposing a tax on inexpensive imported goods, they remove the price incentives for buying them and increase the consumption of US products.

So if, for example, it costs $10 to make a pair of sneakers in the US and only $5 in China, you can theoretically even the scale by imposing a 100% duty on sneakers made in China. Since both sneakers now cost the same, American sneaker manufacturers (and their employees) are “protected” from “unfair” Chinese competition and keep their jobs.

That’s the basic idea. And if you are concerned only with US sneaker companies, it’s a strategy that makes sense.

But, in fact, the US footwear industry has had tariff protection for 90 years, ever since the Smoot-Hawley Tariff Act of 1930 went into effect. And as Alexander Green pointed out in a recent issue of Liberty Through Wealth, the tariffs that were employed so aggressively during the 1930s made the economic problems of that era much worse.

What happened then is what is happening now. The US-imposed tariffs made formerly cheap consumer products more expensive. This reduced the spending power of US consumers. At the same time, foreign countries responded by putting tariffs on US goods. And that made US goods less attractive overseas. Prices increased on both sides, slowing trade and eating into the GDP. Ultimately, the world economy contracted by 25%.

Green calls this “the economic version of mutual assured destruction.”

The Case for Free Trade 

The original argument against tariffs and other trade barriers was made by Adam Smith in The Wealth of Nations almost 250 years ago. Smith’s theory was that free trade produces the maximum economic benefits by rewarding businesses, industries, and countries that can produce superior products at the least cost.

From the point of view of a single country, there may be practical advantages in trade restriction, particularly if the country is the main buyer or seller of a commodity. In practice, however, the protection of local industries may prove advantageous only to a small minority of the population, and could be disadvantageous to the rest.

Here’s an example that anyone my age can remember.

When, 50 years ago, Japan began selling automobiles to Americans at a fraction of the price of comparable US-made cars, the US auto industry charged Japan with unfair practices, predicting that unless tariffs were imposed, hundreds of thousands of Americans would soon be unemployed and the economy would tank.

That didn’t happen.

Initially, US auto manufacturers lost a huge share of the market. But then, forced to compete with the Japanese, they figured out how to improve the quality and cost of their own cars. And those that survived did very well. Meanwhile, millions of American car buyers enjoyed the equivalent of a big raise in income, and were able to apply the money they were saving on cars to other goods and services.

As a result, the US economy grew and millions of new jobs were created. The net result of not imposing tariffs was a huge economic gain.

This has been the history of tariffs and trade protection for many years. A 2017 study by trade specialist Scott Linciome showed that, with very few exceptions, trade barriers “imposed immense economic costs on American consumers, workers, and companies (more than $600,000 per year for every US job created) while also failing to open foreign markets or resuscitate protected American firms and workers over the longer term. In case after case, the jobs still disappeared, and the companies either went bankrupt or came back to the government for more help.”

What About China? 

Of all the trade relationships that Trump has been negotiating, those with China have been at the top of his list. China is now the second-largest economy in the world and the producer of a multitude of products imported by the US, including drugs and medical goods. Trump and his protectionist allies have argued that this is a danger to the US, and have initiated a trade war that they believe will make America great again.

Are they right?

From the Cato Institute, a conservative think tank:

Several recent studies have found that freer trade with China, for example, has generated, through increased competition and lower prices, hundreds of billions of dollars in US consumer benefits –  benefits that, according to economists Xavier Jaravel and Erick Sager, are the equivalent of giving every American “$260 of extra spending per year for the rest of their lives.”

Consumer gains from imports, in general tilted toward the poor and the middle class, are especially tilted toward them when it comes to goods that are made in China and sold at stores like Walmart. The magnitude of such benefits also debunks the well‐​worn myth that free trade is mainly about cheap T‐​shirts. Indeed, trade’s consumer surplus is a big reason that Americans today work far fewer hours to own far better essentials than at any prior time in US history.

Something that protectionists often forget is that many American exporters rely on cheap foreign imports to produce their own goods. According to the San Francisco Fed, almost half of US imports are parts and materials bought by American manufacturers to make globally competitive finished goods.

“These supply chains,” Scott Linciome says, “not only deliver modern marvels at amazing prices but also allow American companies and workers to focus on our high‐​value comparative advantages, such as professional services and advanced manufacturing, and leave the lower‐​value stuff to other countries and workers who lack such skills.”

They also create millions of American jobs in transportation, logistics, and wholesale and retail trade.

And finally, as economist Russ Roberts recently noted, “When we find ways to get more from less, that means more resources available to expand opportunities elsewhere in the economy. That expansion is unseen.… But it’s hugely important.”

The Bottom Line 

People that favor tariffs and other trade restrictions do so, Henry Hazlitt said in The Foundations of Morality, because they suffer from a sort of analytical myopia: They see clearly what’s right in front of them, but they can’t see the rest of the picture, which is much larger and ultimately more important.

Having free-trade has and always will result in driving some US businesses out of business and putting thousands of people out of work. But these losses will be more than compensated for by the creation of new businesses that will absorb most of the laid-off workers and many more. More importantly, by providing “the greatest good for the greatest number,” free trade has and will give all Americans better products, lower prices, and more cash left over to spend on more products and services, which will grow our economy overall.

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“As far as the laws of mathematics refer to reality, they are not certain, and as far as they are certain, they do not refer to reality.” – Albert Einstein

A Realistic Look at the Lockdown 

If you get your news from the NYT or CNN, you probably believe that the US has the worst record among all advanced countries in dealing with the Corona Crisis. We have the most diagnosed cases and our official death toll is more than 190,000.

Both of these data are, of course, meaningless.

If the objective is to analyze performance in preventing death (and what other criterion would one use to impose an economic lockdown and create a worldwide recession?), you have to compare COVID-19-related deaths to the size of the population. (Actually, you’d need to compare COVID-19-caused deaths, but thanks to the CDC, we don’t know those numbers.)

So now that the pandemic is more than 8 months old, how does the US compare?

As of September 14, the US per-population death rate from COVID-19 stood at 59.5 per 100,000 people.

Here are the numbers for some other countries:

* Spain: 63.8

* UK: 70.4

* Belgium: 87.4

* Netherlands: 71.4

* Brazil: 62.8

* Mexico: 56.1

* Italy: 59.0

And the death rate in Sweden, which was vilified by the NYT and CNN for taking a much less stringent approach and letting its economy go on more or less as normal, is now at 57.5.

“Hold on!” I hear my friends saying. “What about Norway, Denmark, and Finland? They had strict shelter-in-place mandates and their per-population death rate is less than 10.0! Surely that says something!”

Yes, those Nordic countries that imposed strict lockdowns have very impressive population-based numbers compared to Sweden.  (And the US and all the other advanced economies mentioned above.)

France, Germany, and Canada have much better numbers, too. Have they done something differently than Italy, the UK, and Spain? The answer is no. Italy, for one, implemented the strictest shutdown rules in all of Europe.

And how do we explain the great numbers from countries like Thailand, Bangladesh, Niger, Papua New Guinea, Mongolia, and Haiti? They have numbers that are 5 times better than Norway and Denmark. Are we to believe they have done a better job at wearing masks, washing hands, and social distancing than Canada, Germany, and France?

(I’m not going to talk about China, which, if you believe their numbers, have a mortality-per-population rate of 0.34!?)

The point is: It’s impossible to say right now – based on the available data – whether the lockdowns have worked, or will work, at reducing the eventual death toll.

Social distancing definitely slows the spread of the virus. (That has been clear since the beginning. None of the reputable epidemiologists ever said anything but that.)

But slowing the virus is useful only to keep hospitals from being overwhelmed (which never happened) and to allow for an adequate production of ventilators (which health practitioners now acknowledge can be problematic for COVID-19).

What we can say with certainty is that the lockdowns resulted in a worldwide economic collapse that will be with us for years to come.

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