Thursday, February 7, 2019, Delray Beach, Florida


From My Work-in-Progress Basket

The Challenge of Charity: My Failure to Help Marcus and Gabriela

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First I felt ashamed. Then I was hopeful. Then I was disappointed. Now I’m resigned.

Marcus and Gabriela came to work for us in 1999 after we built a second home in Nicaragua.

Marcus tended the landscaping. Gabriela kept the house. Antonio, my Nicaraguan partner, had recommended them to us. Their parents and siblings had worked for him.

They were very young at the time – in their late teens or early twenties. But they were already burdened with the responsibility of being parents. Gabriela’s husband worked in construction. Marcus’s wife worked part-time cleaning at a local restaurant.

Neither spoke a word of English, so we had to communicate in the very rudimentary Spanish I had at the time. They showed up every morning at 7:30 and worked, not energetically but dutifully, until 3:30. Then they were gone. In those early days, they left without saying goodbye.

They were shy and I did my best to relax them in that American sort of egalitarian way. But Nicaragua, like all countries, lives with its history. And the vestiges of Spanish colonialism still existed. Most upscale households in Nicaragua employ domestic workers, who are, I gathered from observation over the years, treated with respectful condescension.

I asked Antonio what I should pay them. He told me $150 a month.

“A month?”

“That’s the going wage,” Antonio assured me. ”If you pay them much more, it will cause problems in the community – for them now, and for you later on.”

I knew that he was right, but I wasn’t going to accept it…

I sat down with Gabriela and Marcus and told them that if they wanted to earn more money, I could give them jobs that fell outside of their normal duties. Marcus could give a room a new coat of paint. Gabriela could plant flowers along the side of the garden. That sort of thing.

And they could do these extra chores during their regular hours, I told them. (Which would work out just fine for me, because I didn’t really have eight full hours of work a day for them.)

I thought they would be delighted with the opportunity, but they were not. Nestor, a local friend and colleague, explained their lack of enthusiasm.

“They probably think you are trying to take advantage of them by asking them to do extra work,” he explained. “Even for extra money.”

“Huh?”

It was another vestige of the country’s history – in this case, the years it had existed as a Communist state.

But although they were reluctant to do “extra” work, they were not averse to asking for financial “help” with family problems – a sick parent, a leak in the roof, etc. I was more than happy to give them what they needed, but I insisted that they work the “extra” hours for the extra money.

For a few years, it seemed to be working well. They used the extra money they earned to buy themselves bicycles, cell phones, and clothing.

But when I had the opportunity to visit their homes, it was clear that the extra money had bought them all sorts of things that put them in the upper economic ranks of Limon, the hamlet they lived in. Still, like everyone else in the area, they were living in simple mud and wood shacks.

Despite free-market views to the contrary, this huge gap between their homes and mine bothered me. I had to find a way to increase their income yet again so they could at least have proper windows, doors, and floors.

So I came up with a solution that was popular among charity advocates at the time: I’d give them micro-loans to start their own side businesses. My idea was that they would follow the strategy I’ve recommended for years to other would-be entrepreneurs: Start small. Test the product and the pricing and the pitch as quickly and efficiently as possible. And then, if the business starts to take off, expand.

Considering their earlier reluctance to do extra work for pay, they were surprisingly open to the idea of having side businesses, businesses that could be run by an unemployed sibling or relative while they were at their regular jobs.

I told them, stupidly in retrospect, to choose the businesses they wanted to have. (I thought that this would provide them with the extra motivation they might need to succeed.)

Gabriela decided on a children’s clothing store. Marcus decided to open up a pulperia, a rustic version of a mini 7-Eleven, in front of his house.

Two very bad ideas! READ MORE

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Thursday, January 24, 2019, Delray Beach, Florida


From My Work-in-Progress Basket

A Letter From a Man Whose Mother Is a Bank

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I received a letter this morning that began as follows:

Dear Mark – I hope all is well with you and yours. I want to reach out to you because you can help me…

I looked at the signature. A name I didn’t recognize. Perhaps I had forgotten. I asked Gio to look him up in our files. She couldn’t find him.

Notice his rationale for “reaching out to me.” It was because I could help him.

I was intrigued. Either I did know the man and he was making a claim on that relationship, or we had no relationship and he was oblivious to how arrogant his request was.

His letter continued:

I am living at home in a toxic environment trying to launch my internet business. I haven’t worked for months; jobs are hard to land these days. I do not want any handouts, I just want the opportunity to explain my circumstances.

He went on to tell me all about his life… his dreams and his challenges. He explained that his current financial problems were “not his fault” but the fault of his “dysfunctional family.”

And then, in the very next sentence, he mentioned that he had been using his supposedly dysfunctional mother “as a bank for almost nine years.”

I was now reading with the utmost interest.

“My livelihood is on the line,” he said. He had “boxed himself” into a fast-disintegrating financial corner, but he was not going to give up. Where there is hope, he believed, there is hope!

And what was that hope? Words of advice from me? Perhaps a free copy of Automatic Wealth? Or Seven Years to Seven Figures? Or Living Rich?

No.

“To be totally transparent with you,” he said, “Money will take care of the aforementioned problems.”

Aha! So it was as easy as that. All he needed was some quantity of my money. All I had to do was sign a check and send it off… and presto! He would be in fine shape.

Every week, I get letters from people asking for advice. And I answer every one of them. Sometimes with a quick suggestion but usually by suggesting that they read one of my books. But it’s rare that I get a request like this.

I believe that no one has an inherent right to wealth. I believe that we are born into a universe that guarantees us nothing. But I also believe that the acquisition of wealth – enough to sustain oneself – is a fundamental human responsibility.

It requires three things:
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Miscellaneous Essays

Wealth Building for Beginners (Even if You Are Not Young Anymore)*

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4.- “The Most Powerful Force in the Universe”

Legend has it that Albert Einstein was once asked what he considered the most powerful force in the universe. He answered, “Compound interest!”

It’s commonly thought that Einstein was joking when he made that famous pronouncement. I’d like to think he was serious. Compound interest is indeed one of the most powerful forces in the universe of making money. But it’s also one of the most profoundly powerful forces in every area of human enterprise.

Whether your goal is to create a new vaccine, build a faster computer, design a better building, or eliminate poverty, the time and effort you invest in your goals will compound over time, providing you with increasingly greater rewards.

When it comes to wealth building, the more time you have to invest, the easier it is to become wealthy. So starting when you’re young gives you a major advantage. However, the advice I’m going to give you here will work for you no matter how old you are or where you are right now in your wealth-building goals.

A simple example of the power of compound interest

If you took a penny and doubled it every day for a month, how much would you come up with? A hundred dollars? A thousand dollars? How about a million dollars?

Not even close. If you start with just a single penny and double it every day for 31 days, you’ll end up with… $21,474,836.48. More than twenty-one million dollars in a single month!

Your original penny will have turned into two. But then those two will have turned into four, those four turned into eight, and so on. The growth of your money will have accelerated, or sped up, not only because your original penny was collecting interest but also because all the pennies your received as interest also began to earn interest. And so the growth built up – or compounded.

That’s how we get the term compound interest.

There are three components to compound interest:

  1. How much you invest
  2. What return you get on your investment
  3. How much time you stay invested
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Miscellaneous Essays

Wealth Building for Beginners (Even if You Are Not Young Anymore)*

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1.- Wealth Matters: You Decide How Much

Making money is not the most important thing in life. And getting rich shouldn’t be your number one goal.

But money does matter. And building wealth is necessary if you have any hope of (a) living well and (b) retiring one day.

This is true for just about everyone. And what’s equally true is that nobody – not your parents, not your spouse, not your children – is going to care about your financial comfort more than you.

That’s the way it is. Forget about the mental bullshit you hear from social idealists: that everyone deserves a “living” wage and that it’s the government’s job to “even out” the wealth gap.

The truth is that we are all born into this world naked, nearly helpless, and without any guaranty of being taken care of by others. As soon as we are able, we must learn how to fend for ourselves.

You may not like to think about money. But like it or not, you and you alone are responsible for your financial situation. And your financial health will affect your ability to enjoy every aspect of your life.

This series of essays is meant for relatively young people, and the younger you are the more powerful the secrets you learn here will be. But it applies to older people too – people in their 30s and 40s (and even 50s) that have not been successful at building wealth and want to start fresh with a proven plan.

The strategy I’m going to give you is not remarkable in any way. And there will be few aspects to it that will strike you as especially clever.

The reason for that is important. “Clever” financial strategies are almost always complicated and expensive. They work very well for the financial professionals that sell them to you. But they rarely if ever work for you.

I sometimes talk about financial “secrets.” But the truth is, there are no secrets to building wealth. There are universal principles – powerful, eternal principles – and there are tried and true practices that work. The thing is that 98% of the investing population ignores them.

It’s true. If you have the good fortune to be under the age of 40 and are of average to above-average intelligence, the “secrets” to becoming wealthy are no more difficult to grasp than the secrets to playing poker. Or playing the trumpet.

And that’s why, as you read what I have to say here, you may find yourself thinking, “I’ve heard that before.” And “I know that.”

Well you probably have heard it before. Because if you’ve been reading about wealth building for any length of time, you’ve been hearing about the most successful wealth builders in history.

But hearing something and knowing it are two very different things. My purpose in writing this series of essays is not just to teach you what I’ve learned but to tell it to you in a way that will motivate you to do something with it. To try out some of the strategies and techniques I’ll be recommending. To get the knowledge of them from your ears to your brain to your gut.

I want you to know the truth of these principles and strategies deeply – and eventually I want you to know them reflexively. So that your day-to-day decisions about your career and your investments will come naturally to you. So you will make the smart moves and avoid the most common mistakes.

When you get to that point, you will find that your net investible savings (my definition of financial wealth) will increase steadily. Somewhat slowly at first but at a more rapid pace as the months pass. And one day you will realize that you are making more money passively than you are making from working. That is the day you will look back and be glad you took this step.

This was my experience. And it was the experience of dozens of people I personally mentored, as well as hundreds of people that came to my lectures or read my books and wrote to me. People such as:

  • HP, who was stocking shelves in a supermarket when I met him and now earns more than $400,000 a year
  • SP, a recent college grad making $14,000 a year who went on to build a business that gave him a net worth of approximately half a billion dollars (and still growing)
  • RP, who had just gotten out of jail when I began mentoring him, and who now lives in a multimillion-dollar house and enjoys a fantastic lifestyle working less than 30 hours a week

(These are just three. I’ll tell you about dozens more in future essays.)

None of these people did anything extraordinary or had any special luck. They just faithfully followed the rules you will soon learn and found that their wealth increased almost automatically.

What I mean by “Automatic Wealth”

Some years ago, I wrote a book titled Automatic Wealth that made it to some of the bestseller lists. The thesis was simple. Most of the world – and I include doctors and lawyers and college professors in this group – work their tails off throughout their lives, struggling to make ends meet, and end up with little or nothing to show for it. But some people – including many that aren’t well educated and have no family connections – seem to find a way to escalate their income and their savings year after year so that it starts to build automatically. Like they have a printing press in the basement.

You might know people like this. If you do, I’m sure you would agree with me that some of them are not particularly bright or even financially sophisticated. They are plumbers and car salesmen and small business owners and people that make money by selling things on the Internet.

I know lots of these people and I can testify: Many of them have very ordinary minds. Ordinary in terms of academic intelligence. But they have learned something in their guts – a sort of emotional intelligence – that they apply to their careers and their investments. And it’s this reflexive knowledge that has allowed them to build the wealth they have built.

Again, I’m talking about a dozen or so principles and practices that you will find easy to understand and, if I do my job, easy to put into practice until they become automatic.

When you get to the automatic wealth building stage, things get much easier. I don’t know when I got there exactly. I’m sure it took me longer than it will take you. But I can tell you this: When I got there, I no longer thought about making money. I no longer had “make more money” on my to-do-next-year list. I was able to pay attention to other things – my family, my friends, and my hobbies. And the machine kept on going.

That’s what I mean by automatic.

Now let’s back up for a moment and deal briefly with the other word: wealth. What does it mean to be wealthy?

I’ve asked countless people for their definition and have received many interesting answers. Among them:

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