The Ways The Wealthy Got There
(And How You Can Too!)
THE TEN ROADS TO RICHES
(KEN FISHER/Wiley/August 2008/228pages/$24.95)
THE TEN ROADS TO RICHES
The Ways The Wealthy Got There
(And How You Can Too!)
MAIN IDEA
When you get right down to brass tacks, there are only ten methodical and legal
waysyou can get rich:
If you genuinely aspire to be rich, figure out which of these roads makes the most sense
for you and then focus all your efforts into getting as far down your chosen road as
possible.
“Why ten roads? Why not five? Or 100? It’s just the observation of this roads scholar
from studying wealthy people all my 36 year investment career. I’ve got over 25,000
wealthy clients I’ve studied carefully – some for decades. As a 24-year Forbes columnist
I’ve studied and written about the annual Forbes 400 list of richest Americans for
decades – and been on it and the Forbes global billionaire list myself since 2005 – and
know people on both lists in and out of America, and interacted with many more very
wealthy people. From allmyobservation, I can tell you they all fit into ten basic
categories. Follow one of these ten roads. Or a combination. For example,
becomeCEOof a firm you didn’t start, build it up, sell it off, use the proceeds to start your
own firm, which ends up even more successful. If you can do two at once it’s faster.
Harder, but faster. But most wealthy folks travel one road their whole lives. That works.
It’s more than enough.”
– Ken Fisher
About of Author
KEN FISHER is founder and CEO of Fisher Investments, a money management firm.
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He is also a self-made billionaire ranking #271 on the 2007 Forbes 400 list of America’s
richest people and at #677 on the 2008 Forbes Global Billionaire list. Mr. Fisher has
been a columnist with Forbes magazine for more than 24 years and is the author of four
other books: The Only Three Questions That Count, Super Stocks, The Wall Street
Waltz and 100 Minds That Made the Market. Mr. Fisher is a world class researcher
specializing in finance and business topics. Mr. Fisher is a graduate of Humboldt State
University.
The Web site for this book is at www.tenroadstoriches.com.
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This is the richest road to wealth that exists. If you can start your own firm and build it
into a large enterprise, you can create astounding amounts of wealth. This road is not
for the faint-hearted – very few new businesses ever survive more than four years and
even fewer grow to become large companies. But if you have what it takes, this is a
great road to take.
The advantages of this road are:
■ You can start and build a new firm regardless of your educational level or business
background – high school dropouts are on an equal footing with Ph.D’s when it comes
to starting a new business.
■ Women are also on an equal footing to men when it comes to starting new
businesses from the ground up. There are no glass ceilings.
■ You have to have loads of tenacity and understand the business of business –
tactical thinking, leadership skills, business acumen, etc.
■ You’ll need to know your product and industry inside and out to get ahead. This won’t
be hard if you choose a field you’re passionate about and interested in.
■ There are lots of good role models to learn from and follow – for example Bill Gates
(net worth $59 billion), gambling mogul Sheldon Adelson ($28 billion), Oracle CEO
Larry Ellison ($26 billion), Google founders Sergey Brin and Larry Page ($18.5 billion
each), information mogul Michael Bloomberg ($11.5 billion), Nike’s Phil Knight ($9.8
billion) and so on.
■ If you can imbue your organization with a great culture, your new firm can literally
take on a life of its own beyond you as a founder. This is an interesting and potentially
profitable phenomena.
So what does it take to become a successful founder and business builder? There are
nine essentials:
1. Pick the right path – select a niche or market segment where you can bring about
substantial and important change that will add value for your customers.
2. Start small but have large dreams – build a business model which is scalable so you
can later take advantage of centralized buying, mass advertising and technology to
become a large enterprise.
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3. Decide whether you’re doing something newer or better – and keep in mind it’s
usually more profitable to make a better version of what already exists.
4. Decide early on whether you’re building your company to sell or building it to last –
because these take different mindsets and different options. If you’re going to keep
your company, think like an owner.
5. Decide whether you will bootstrap or find financing – both routes will work. If you’re
building to sell, outside funding makes sense. If you’re building to last, bootstrapping is
often best.
6. Think carefully before you choose to go public – an IPO has prestige but it’s a pain. If
you stay private, you’ll have more freedom, control and privacy over your financial
affairs, all of which are not bad.
7. Ignore the naysayers – because the bigger you get, the more people there will be
who feel they should attack you. Be tough and grow a thick skin as you build your
business.
8. Know when to quit business functions – founders quit everything else, find some quiet
space and focus of what needs to happen to make their businesses soar. They hand
more and more day-to-day responsibilities to others so they can have time to think.
9. Never quit your clients – stay in close touch with them even when you’ve grown large
enough to have great sales representatives in action. Get alongside your clients and
find out what frustrates them. Ask:
“What can we be doing better?” Look at their challenges and come up with new or
enhanced products and services that will help them get the things they want done
completed.
Being a CEO of a large firm can be highly lucrative. At least half of the CEOs of the
largest firms in America earn more than $8.3 million a year which is pretty impressive
money. The job can be exceptionally thankless– nobody credits the CEO when things
go well but CEOs always get vilified when big failures arise. To top it all off, the media
love to portray CEO pay packets as excessive and unwarranted.
BecomingCEO of an existing business does have some noteworthy and worthwhile
advantages:
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■ You can come in and take an existing firm and lead it to new heights. This will earn
the admiration of your employees and the plaudits of investors.
■ It will take ages to work your way to the top of the executive ranks of any company
and you’ll have to pay your dues along the way but at least you’ll be earning while you
are learning. You won’t have to scrape together start-up funding.
■ If you develop the leadership skills which are needed to do well as a CEO, you can
keep your seat for a long period of time – giving you the opportunity to earn millions
year after year.
“It used to be a millionaire was considered rich. That’s pretty much never true now.
Financial planners will tell you to withdraw no more than 4 percent per year from your
assets, depending on circumstances. For some, much less. But a millionaire taking 4
percent with 30 years to live would be getting below median income where I live, near
pricey San Francisco. Not poverty – but not rich. So it still comes back to you deciding
what’s rich for you. Feeling rich is being rich. It’s just a matter of making one of the roads
that lead to big wealth work for you.”
– Ken Fisher
So what exactly does it take to have a long and successful tenure as a high profile
CEO? There are at least six requirements:
1. Enjoy what you do – be completely passionate about your company, your industry
and everything that involves.
2. Start small and trade-up – don’t try and become CEO of IBM or General Electric right
off the bat. Spend some time in the minor leagues where you can make mistakes
without too much publicity before trying to lead a major enterprise.
3. Work your way to the top aggressively – and there are several ways to do this:
• Ride-along withsomeone else headed for the top.
• Buy the firm and start running it.
• Get known as a turnaround specialist.
• Network so you will be recruited for the job.
4. Exhibit great leadership – show up, roll up your sleeves and get to work. Do what’s
required to succeed. Have the ability to let your employees knowyou’re trying to look
out for their interests. Bring out the best in your people and they will welcome you as
their leader.
5. Lead from the front – get out where the action is with customers rather than hanging
around at head office all the time. Spend time with your employees – travel with them,
socialize with them, stay in the same dingy hotels they do. If you can cultivate a “We’re
all in this together” mindset and everyone sees you walking the talk, they will love it.
6. Never lose your common touch – even when you hit the big time. Keep spending time
with your entry-level employees and small clients. Lead by example. If you’re
approachable, people will trust you and be loyal to you. That can be incredibly helpful.
“I guarantee some roads, or parts of roads, may offend you. But that’sOK– again, ten
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roads. Every one of these roads is valid for someone – although offensive to someone
else and that someone may be you. Sorry! Don’t shoot the messenger. If a road seems
frivolous or offensive, that’s not your road. I’m just trying to show you the roads and not
offend.”
– Ken Fisher
If you identify a superstar who is headed for stellar business success, you can hitch your
wagon to their star and work hard in the background to help them succeed. Ride-alongs
play critical roles for high profile businesspeople and can make very good money
themselves.
Charlie Munger, Warren Buffett’s sidekick, is himself a billionaire (net worth $2 billion).
So too is eBay’s first employee Jeffrey Skoll, Steve Ballmer (who later moved
to the hot seat at Microsoft) and Hank Greenberg (net worth $2.8 billion). These guys
have all done well by adopting a ride-along strategy.
The advantages of this strategy as a road to wealth are:
■ You stay under the radar – you get to do the interesting hands-on work but the CEO
gets the accolades when things go well and the public criticism when things go wrong.
■ You can get lots of perks and great pay.
■ You can pretty much write yourownticket and take on any project which takes your
fancy whenyou have the complete trust of the CEO.
■ There is less intense competition – a CEO can have any number of ride-alongs.
■ You can say things the CEO would find too politically incorrect which might be a bit of
fun.
■ You still have to be very good at what you do and accomplished in your own right to
survive as a ride-along. The CEO doesn’t want to be seen as carrying dead weight for
nothing. You will need grit, determination and a well balanced ego to survive.
To make it big as a ride-along and follow this path to long-term success, there are some
pretty obvious requirements:
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1. Pick the right horse to ride – find the right executive to link up with. The heights you
reach will be determined in large part by the person you’ve chosen to link up with so
make sure they have vision, skills and trust. You’ll be spending a large chunk of your
working career interacting with this person so make sure the chemistry is right to start
with.
2. Select the right firm – it needs to be positioned and active in the right industry, have
access to the best technology available and so forth. It’s going to take time for your
superstar to work his or her way to the top so do something you really have your heart
in.
3. Make a conscious decision whether to go with a start-up scenario or into an
established firm – either route can work. New ventures generally entail more risk but
that’s offset by the potential to earn greater rewards. Riding with a visionary CEO who
takes an existing firm through a product revolution and grows it into a massive firm can
also be lots of fun and highly rewarding so it’s not necessarily an all-ornothing decision.
You need a solid business strategy and a great management team.
4. Be 100% loyal and trustworthy – live and breathe the vision so there’s no question
you’re onboard. A good ride-along needs to be able to point out to the aspiring CEO
when he or she is wrong without offending them. You also need to be competent and
capable so people don’t think you’re on the payroll because you married into the family.
You have to be prepared to learn everything and be able to fill any role at a moment’s
notice.
5. Have a genuine “will do it” attitude – which is actually the next level up from a “can do”
attitude. Can do is based on your capabilities. Will do means you stretch outside your
comfort zone, jump at whatever assignment is important for the firm and get moving
down the learning curve. Will doers volunteer for the assignments nobody else wants
to take on and make them work. They demonstrate their loyalty by doing whatever is
required.
Does everyone dream about one day becoming rich and famous? It seems that way, but
this route to riches has two distinct forks:
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If you’re starting young enough, you may have the talents required to become a
successful:
• Actor or actress
• Professional athlete
• Rock star or professional musician
Heading down the talent road to riches is full of loads of potholes. For everyone that
makes it, an awful lot do not. And a career dependant on harnessing your talents can be
very unpredictable and fickle. This is the toughest road to riches there is. To succeed,
you’ll need to:
1. Start early.
2. Have competent managers – who understand how to provide the right guidance.
3. Be personally responsible – so you avoid the tendency to spend every cent you earn
as soon as you make it. You need to invest in a secure future.
4. Get a good contract in place as soon as you can – to provide you with some degree of
financial certainty and planning capacity.
5. Keep working at it – because one-hit wonders rarely make much money. Hollywood
A-listers make big money over and over because they are delivering a well-known
performance. You’ll need to structure your performance to do something similar.
A more reliable way to riches in the talent field is to become a media mogul – to own
your own recording studio, cable company, network, record label, magazine, sports
team, etc. Moguls bring together various pieces of talent and make them into
commercially viable products.
Moguls can do very well. Michael Bloomberg built his net worth of $11.5 billion by
bringing together a financial information service. Charles Ergen, the founder of
EchoStar, is worth $10.2 billion. Others to do well in this area of commercial activity
include Rupert Murdoch ($8.8 billion), Sumner Redstone ($7.6 billion) and David Geffen
($6 billion) who is a co-founder of Dreamworks as well as the founder of Geffen
Records.
To find success as a mogul:
1. Understand your market – you need to have an intuitive feel for what the market will
like and how it is evolving over time. The newest content is not always the best and you
need to know what will be hot and what will not.
2. Get into situations where you can buy low and then later sell high – which usually
entails investing in emerging talent or assets before they hit the big time. This is risky
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because what you’re investing in may flop. If you get this right, however, you get in on
the ground floor of something which is on an express ride upwards in value – clearly
not a bad position to be in at all.
3. Diversify – the media market has always been extremely fickle. It’s almost impossible
to forecast what will be doing well and what will not two years from now. If you diversify
intelligently, you can be ready to profit whichever way the market goes. Savvy moguls
today tend to have exposure to TV, cable, satellite, radio, movies, Internet and
traditional print media.
“Becoming rich usually means doing good and often living an exciting life. Where would
humans be today had Bob Noyce not co-invented the integrated circuit? He chose a
path to riches and benefitted the world immensely – rich, poor, in between, everyone.
We see that beneficent effect repeatedly in people who changed the world for the better,
doing good, getting rich, and enjoying their lives.”
– Ken Fisher
The notion of marrying for money is often decried but it isn’t at all new. In many societies,
marrying up the social or financial chain was roundly applauded. In Europe, for example,
marriages have been arranged between families of comparable wealth for centuries.
The idea of a beautiful peasant girl marrying the earnest prince and living happily ever
after sharing his wealth has been the staple of folk lore the world over.
Is this path to wealth still available today in twenty-first-century cultures? Well yes it is
but people aren’t quite so obvious about it. Most people will generally try and marry
someone they love and want to be with first and foremost. If it turns out that person
comes from a very wealthy family, then that’s the icing on the cake, but money in and of
itself can never be a long-term replacement for genuine love and affection.
When moneyed marriages end in divorce, the settlements can be pretty impressive.
Wendy McCaw, former wife of telecom magnate Craig McCaw, was awarded $460
million – about $23 million a year for the 20 years she was married. Neil Diamond’s
ex-wife Marcia Murphey got $150 million for her 25-year marriage. Lionel Richie’s
former wife Diane Richie was awarded $20 million when their marriage broke up after
eight years. From a purely financial perspective, irrespective of the personal issues
involved, that’s reasonably good money.
Of course, marriages do not need to break down for all kinds of benefits to accrue.
Senator John McCain’s wife Cindy has a net worth much greater than his. Christopher
McKown, president of a health care consulting business, has been married to Abigail
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Johnson (net worth $15 billion) for more than 20 years. Stedman Graham has been
dating Oprah Winfrey (net worth $2.5 billion) for years without feeling the need to get
married. Oprah has even stated Graham won’t be included in her will, but he has
benefitted from her wealth and connections in building his own consulting firm.
In today’s society, most people can freely chose their mates. If you aspire to marry well:
1. Find the right place to hang out – or in other words go to where billionaires and
multi-millionaires of the opposite sex are more likely to be. Make it feasible for you to
meet people of wealth in social get togethers. This is not to say you should become a
celebrity stalker but is simply suggests you should deliberately try and be in places
where you are more likely to bump elbows with the wealthy.
2. Keep in mind many of the wealthy are work-consumed rather than sitting around
doing nothing – so get creative in engineering ways to meet them. Charity work and
political fund-raising have always been good ways to meet and interact with the
mega-wealthy. You might also be able to attend investment seminars put on by
suitable candidates.
3. Never forget age matters – and the simple fact is most wealthy people tend to be
older. A young heiress to a vast family fortune will most likely already be surrounded
by potential marriage candidates. Your odds will improve if you hang out with a more
mature crowd and if you look for those who are more mature and available, either
through divorce or otherwise.
4. By all means get a prenuptial agreement – where you specify in writing what you’re
worth should the marriage fail. If you fail to do this in a common law state (there are
41 in all) you may end up with nothing should the marriage not work out. Common law
states consider each spouse has completely separate legal and property rights . In
the absence of a prenuptial agreement, asset distribution on divorce is at the judge’s
discretion. Don’t let that situation arise. And if your marriage doesn’t work out, make
sure you get a good divorce lawyer.
5. Don’t do anything stupid – like making it obvious you married for the money rather
than because you were both in love. Get your life together. The media glare that have
accompanied the Heather Mills McCartney and Anna Nicole Smith divorce cases
should be good object lessons about the importance of acting sanely. If you
remember the world is watching and act accordingly, you stand a better chance of
being treated fairly.
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In the good old days, Robin Hood used to roam Sherwood Forest robbing from the rich
and giving to the poor. Today, Robin Hood would get more business as a plaintiff’s
lawyer. The lawyers who engineer some of the vast class action lawsuits can become
very rich indeed.
To some people, these lawyers are crusaders who brazenly fight big bad companies to
save the little guy. Others view plaintiff’s lawyers as pirates or thugs. It really doesn’t
matter. The simple fact is plaintiff’s lawyers can make vast amounts of money if
everything pans out as planned. Around $247 billion was awarded in civil cases in the
United States alone in 2007 with plaintiff’s lawyers getting typically between 20 to 40
percent of that amount, plus expenses. No one working in law makes more than
plaintiff’s lawyers with the possible exception of legal counsel for a start-up firm which
goes stellar.
The median pay for all lawyers across the nation in 2006 was $102,470. Joe Jamail a
legendary plaintiff’s lawyer, won a $3.3 billion verdict for his client and picked up a fee of
$400 million. Erin Brockovich, as immortalized in a movie starring Julia Roberts, earned
a fee of $143.2 million for her firm by helping average people take on a utility company.
Savvy plaintiff’s lawyers know how to work the system to maximum advantage. They
feed information to the media anonymously so they don’t attract the judge’s displeasure.
They know how to stall proceedings so the pressure to settle out of court ratchets up on
the defendants. They understand how to use appeals to drag the legal process on even
further, creating still more opportunities for the parties to agree to a settlement to make
the whole thing go away. It’s easy for a plaintiff’s lawyer to make outrageous legal
claims and it’s very difficult for them to ever prove you’ve been bringing a frivolous
lawsuit against them and to collect any damages or even reimbursement of legal
expenses.
If being a plaintiff’s lawyer is the road to wealth you choose, you’d better become very
good at everything that’s required. This means:
1. Get properly set up – pass the state bar exam where you want to practice and meet
all of the legal requirements to become a plaintiff’s lawyer.
2. Identify the right targets – villainous big corporations who ride roughshod over the
very people they are supposed to be serving. Any company perceived as having deep
pockets will be fine but the most likely targets will be:
• Pharmaceutical firms selling complex products.
• Tobacco firms.
• Big oil companies.
• Asbestos suppliers and manufacturers.
• Public companies whose share price’s plummet.
3. Find downtrodden clients – poor people who have been treated unsympathetically.
Those with sick kids, low incomes and harrowing stories are best. The media will
have a field day telling their stories as background to the dispute.
4. Organize class action lawsuits – because this is where the biggest bucks come from.
5. Try and pick complex subjects – where there is lots of science involved. The jury will
have a hard time keeping track of what’s being discussed and will therefore default to
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the expectation the big firm did something wrongand the little guy needs protecting.
6. Don’t expect to make many friends – get comfortable with the idea lots of people will
dislike what you do for a living. If you really need a friend, get a dog. Plaintiff’s lawyers
make lots and lots of enemies.
“The good news is – and few will tell you this – making $30 million or so in your lifetime
isn’t that hard. Example: Build a not-so huge business that in 10 years grows to $15
million in revenue. If it has a 10 percent profit margin, you have $1.5 million in profits. If
it’s worth 20 times earnings – not extraordinary – there’s your $30 million. After a few
years, you’ll know if your firm is scalable or not – if it can grow much larger. If so, you
could be very wealthy. If not, sell, collect $30 million, and go be happy. Or maybe start
something else. Or retire! It’s up to you.”
– Ken Fisher
Helping rich people manage their money is a very common road to wealth for yourself.
It’s not at all hard to make between $2 and $50 million in fees in just a few years. Even
better, you don’t even need any formal qualifications to enter the field. As long as you
act ethically and meet all the applicable legal requirements of acting as an adviser, the
sky’s the limit.
No question about it heading down this road to wealth requires that you be a good
salesperson. If you learn to sell, you can learn about finance and investments as you go
along. The real key here is to keep the clients you get by offering them exceptional
levels of service and help. Once you learn to sell yourself, the rest will follow.
The two options for this kind of business are rather obvious:
■ You can be commission-based – earn a commission on each financial product you
sell your clients.
■ You can be fee-based – provide your services for a specified percentage of assets
involved.
Both models work just fine but by and large the fee-based money managers tend to do
better. Wealthy fee-based asset managers include Edward Johnson III ($10 million net
worth), George Soros ($8.8 billion), Charles Johnson ($6 billion) and Charles Schwab
($5.5 billion). Commission-based managers who are wealthy include Warren Buffett
($52 billion), Hank Greenberg ($2.8 billion) and Arthur Williams ($1.8 billion).
Once you get people to trust you to manage their money for them, it then becomes
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possible to start your own hedge fund for stock market investment. Or move into private
equity where you can fund leveraged buyouts. Or move into other kinds of financial
engineering. As long as you know what you’re doing, comply with all applicable laws
and avoid things like Ponzi schemes, you can make big money by charging the going
rate of 2 and 20 – two percent of managed assets annually and 20 percent of the annual
gains generated.
If managing other people’s money appeals to you as a viable road to riches, the steps
you need to follow are:
1. Understand how capitalism works – there are always winners and losers. For every
dollar you gain, someone else loses a dollar. That’s what free markets are about. Be
passionate about capitalism.
2. Get your clients – either by selling them on what you have to offer or by being referred
by someone they respect. Both avenues work so get marketing in savvy ways.
3. Keep your clients – by exceeding their expectations. As long as you’re careful not to
over-promise and you’re good at what you do, then you will be able to perform every
week and every year. Your mantra should be: “Under-promise. Educate.
Over-deliver”. And teach your clients high returns without risk cannot exist except in
fairy tales so make sure you diversify enough.
4. Provide great customer service – not only be available to them but know your clients,
understand their needs and give them suggestions for moving forward from here. Get
to know how often they like to be contacted, agree to a service level and then move
heaven and earth to exceed their expectations. The more clients you can keep
through exceptionally good service, the more money you will make. It genuinely is
that simple a dynamic.
5. Comply with the law in absolutely every way – don’t bend any applicable regulations
or leave anything in a gray area. Be squeaky clean and ready to be audited at all
times.
6. Focus on your core competencies – set up a team comprising a dynamic sales team,
great customer service team and traders. Then let everyone focus on their area of
specialization. Don’t let your salespeople manage money. Don’t have your research
people providing customer service. Segment responsibilities, have everyone focus on
their core competencies and get good at managing the overall organizational
structure which is required. Your job will be to orchestrate a great performance which
is a skill in and of itself. Put everything together and you’ll do well. You will make good
money by helping the wealthy manage their assets.
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Inventors always get rich, right? If you can come up with a gadget everyone wants to
buy, a book everyone wants to read, a movie everyone wants to see or even an
experience everyone wants to enjoy, you’ve got it made? Well, yes and no. Inventing is
great but it’s when inventing gets matched up with astute marketing that impressive new
revenue streams can get going.
Politics is also a career where you have opportunities to invent your own income. Even
complying with all the laws which govern conflict of interest situations, politicians can
make good money as consultants, heads of think tanks, and from speaking fees,
appearance fees, as book authors and so forth.
The advantages of this as a strategy for creating your own wealth are numerous:
■ If you can invent things and patent what you invent, then you’ll earn a cut every time
your product is made and sold. This can be great money if you have a mass market
product.
■ If you write an enduring book, you can make money not only from royalties but also
from movie rights, the sale of DVDs, writing prequels or sequels, etc.
■ Songwriters have longer earnings careers than performers and less pressure as well.
You’ll get paid every time your song is performed which can equate to good money.
■ If you come up with new and novel customer experiences or even marketing vehicles
you can do well. Ron Popeil who pioneered long-form TV commercials now called
infomercials has a net worth of more than $100 million. If you can come up with the
next efficient way to market things, you can perhaps do even better.
■ The possibilities in ways to invent an income for yourself are limited only by your
imagination.
Obviously to make a million dollars or more on this road, you need to start with a million
dollar idea and then put all the pieces together. To make this happen:
1. Figure out where your talents lie – are you a good singer, a good writer, an inventor,
an aspiring politician? Keep in mind you’ll have to toil at your craft for years before
you’re likely to really hit the big time.
2. Develop some intellectual property which is centered on an enduring theme – good
triumphing over evil, little guys beating the odds, etc. Develop a product which will
endure forever rather than get left behind as society advances.
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3. Monetize what you’ve put together – put together some kind of physical embodiment
of your creative spark. Write a book or compose a song, deliver an experience, make
a movie, or whatever it takes. Be able to transform it into other add-on products
further down the road.
4. Patent or otherwise protect what you have – by filing the appropriate patent forms,
copyright applications or apply for other forms of intellectual property protection. Plan
on owning this as an asset forever and never selling it, only renting it to others.
5. Start marketing what you have – let people know about what you have to offer and
how to get it. Become your own spokesperson and get active in promoting what
you’ve developed. Look at all the angles. Seek out licensing arrangements, joint
ventures and other marketing vehicles. Get the word out far and wide.
6. Plan for the future – once you start the ball rolling, figure out how you will keep your
source of income growing in the future. Look at whether you need to be developing
add-ons or complimentary products which will add to your revenue stream. Put in
place contracts with others which will provide you with an income for a specified
period. Try and come up with something new which will be even better. Get some
hands-on involvement in developing the next-generation product which will supplant
your original offering. And don’t forget to set aside some of your cash flow for a rainy
day which may come in the future. This is much easier to do when things are going
well.
There’s no question you can make good money buying and selling real estate,
developing raw land into commercial or residential buildings or by buying rundown real
estate assets and fixing them up for profit. The key here is leverage – real estate is the
one area where you can borrow a lot of money and benefit from the growth in value of
not only your own contribution but also the money you’ve borrowed.
Real estate investment as a wealth building strategy offers some quite compelling
advantages:
■ It is largely unregulated – you can negotiate your own terms with the other party and
whatever you agree to stands.
■ Lots of sources for finance exist. Borrowing on real estate assets is a long-standing
commercial practice.
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■ If you have the vision to take a raw piece of land and put up buildings other people
want to buy, you can do very well. The upside potential of real estate development is
massive.
■ There are lots of ways to make money through real estate. If you can find a vacant
building, renovate it and then fill it with solid tenants, it becomes feasible to refinance
it for much more. There are all kinds of real estate games which can create wealth.
■ When working with real estate, you can pick and choose your jurisdiction. If you don’t
like the economy in one state, it’s very simple to move to another state with much
better real estate investment conditions. You don’t have to move your factory and set
up a new one or do anything extreme. Simply cease operating in one market and start
operating in another at any time. That flexibility is great.
There are loads of books which tell you how to become a real estate baron but their
formulas usually boil down to seven key steps:
1. Learn to love and appreciate leverage – the fuel that makes real estate such an
attractive vehicle for building personal wealth.
2. Monetize your real estate assets – buy low and then increase the value of your real
estate by filling it with tenants. This creates immediate cash flow which in turn creates
leverage for your next deal.
3. Don’t fool yourself about your true costs – but make reasonable allowances for the
costs of owning real estate. These will cut into your returns without any doubt
whatsoever.
4. Don’t think you can make money flipping real estate quickly – it can’t be done over an
extended period. Sooner or later, you’ll run into problems. Steer away from real estate
flipping.
5. Find vibrant markets – always try and buy or sell in markets which are humming
rather than those that are dead. Business-friendly communities with low taxes will
always be the best markets to target.
6. Create solid pro forma financial statements – this is something all potential investors
will need to look at. If you don’t know how to do this, take a class or buy software
which will do this for you. You’ll need a business plan to attract investors and the
heart of your business plan will be your pro forma.
7. Know the laws, especially the local building code – because this will guide many of
your decisions. Have a good working knowledge of zoning regulations, building codes,
and all the finer details.
“America is a land of real estate moguls – home ownership is near 70 percent! Don’t let
the recent residential hoopla dissuade you – there’s huge money in being a land baron.
Like other roads, it’s not easy. Successful land barons don’t just have a knack for finding
tasty, unappreciated land and willing investors. They have the strategic vision of
successful firm founders. Essentially, they are founders. Fail to create a realistic and
actionable business plan and you likely won’t do well on this road.”
– Ken Fisher
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Saving your money and then investing it to earn reasonable but not necessarily
sensational investment returns doesn’t sound very sexy at all. The simple fact is
industriousness, frugality and consistency do pay. Compound interest is an incredibly
powerful engine for creating wealth.
The basic strategy here is obvious:
Of course, even with this basic strategy, there are all kind of tweaks and fine-tuning that
can take place. Finding a well-paying job is a familiar challenge to most people, with all
the various cost-benefit trade-offs that are entailed in figuring out whether or not to
invest in further education and so forth. Once you get a job, you then keep looking for
ways to increase your earning power.
If you spend everything you earn each week, you’ll never move forward with any kind of
wealth accumulation. You have to come up with ways to save money that you then
invest. If you can save $3,000 a month for your 30-year working career and invest that
money in something like the stock market that generates long-term returns of 10 percent
a year, you will have a net worth of around $6 million by the time you’re ready to retire
because of the magic of compounding interest.
Once you’re in the habit of saving money and investing it each month, there are only
three logical investing goals:
1. You invest to achieve growth.
2. You invest to create an income.
3. You want some mix of growth and income.
More than likely, you will want to achieve modest growth and a reasonable ongoing
income from your investments. The only vehicle for achieving that is to invest in stocks,
pretty much all of the time. Since you probably won’t have any expertise in picking
stocks (and there really are no magic fail-safe formulas) , you should invest in an index
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which represents the world market as a whole.
The value of the world stock market is currently made up of:
• About 41 percent U.S. companies.
• 47 percent developed foreign stocks.
• 12 percent stocks in emerging markets.
Therefore, you should buy index funds or exchange traded funds (ETF) which match
those world weightings:
• 41 percent in an S&P 500 index fund or ETF.
• 47 percent in Europe, Australia& Far East index fund.
• 12 percent in an emerging markets index fund or ETF.
Once the net worth of your investment portfolio exceeds $500,000, you then start
investing in individual stocks rather than index funds. Buy shares in the largest stocks
by market capitalization in each market.
The ideal here is to set up your investment program and then forget it. Be a passive
investor. Stay invested in the stock market, even whenthe market suffers a downyear or
two. Over the long haul, nothing has ever outperformed the stock market as a whole.
Resist the urge to dabble in bonds and other investments. All you will end up doing is
diluting the impact of compound interest on the value of your investments.
As unglamourous and mundane as this road to wealth appears, it is the road most
traveled. It’s wide enough and accessible enough for anybody who earns a paycheck to
travel down. Frugality and industriousness don’t attract much attention or media
coverage but they do work flawlessly when coupled together with consistency.
Just to reiterate the basic steps involved in traveling this road to wealth:
1. Get a decent job which pays a reasonable wage – and save as much of each month’s
paycheck as you can. If you can’t save, you can’t get started down this road.
2. Figure out how much money you will need when you retire – and have a set target for
how much you need to save each month. Adjust for inflation and be very conservative
about your anticipated investment returns.
3. Specify how much you need to save each month – and create a separate account
where you put that money each month. Work to bulk this amount up progressively
over the years. Obviously the more money you can save and invest earlier, the better
returns it will generate later on.
4. Get to work saving – be frugal. Increase your earning power. Do whatever it takes to
get a raise and then salt the extra money away into your savings program. Be
disciplined and structured in your spending.
5. Make your money work for you – invest in stocks. Start with index funds and then
gradually move into investing in individual stocks. Remember, you’re trying to get rich
slowly but surely this way so invest accordingly.
“Are there really just ten roads? Yes and no. There are more ways to get wealthy than
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you can plan for. For example, I can’t write a book on how to inherit $50 million. Either
you’re closely related to the rich or you’re not. I believe from studying it, people who
create their wealth on these ten roads end up more happy than the few who get lucky
getting wealth in ways that can’t be planned for. The people who made their own wealth
earned it and are confident about themselves relative to their money. May your own
journey start now. If you’ve decided none of these ten roads is right for you, at least by
reading about the ten roads you’ve saved yourself the trouble of going through life and
finding yourself at the end of a dead-end road.”
– Ken Fisher
* * *
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