Robert Kiyosaki was the first person to make me think about my financial future. I was very young and I didn’t have the habit of reading. In school they always make you read some books to try to make you interested in reading. The main flaw in their approach is that they choose totally inappropriate books. I know they are books that have a social and historical importance, but when you are 13 the last thing in your mind is history and society. If they want to make children interested they should try giving them something really interesting. Teenagers won’t get the depth of complex issues. You have a bunch of 13 year old kids in your class, give them some spaceships, monsters and semi nude woman, that will make them read it to the end. Well, back to the topic. At 15 I had never really got to the end of a single book, not even the school ones. Preparing to go on a 6 hour bus trip and browsing through some comics at a book store, I saw Robert Kiyosaki’s “Rich dad, poor dad”. I saw it and thought “why not?”. Bought the book and read it during the trip. It fascinated me at the time. Now, I don’t know what you think of Kiyosaki, and I know his books present a distorted vision of many things, but I must admit that, at 15, his book gave me an insight that changed everything for me, and I recommend it.
Many books after that I bought Warren Buffet’s biography, “The snowball: Warren Buffett and the business of life”. A magnificent work of art from Alice Schroeder.
As almost anyone who bought it, I wanted to discover how did he get from almost nothing, to richest man in the world. These are some of the things I learnt:
Thrift – Every penny counts. Sometimes it looks like it doesn’t, but in fact it does count. If you can get the best price on something, get it! Don’t be afraid of asking for a discount, it is your money and you probably didn’t get it easily. Now, there is a book called “Economia 3D” from Martin Lousteau, Argentina’s former financial minister, which cites a curious behaviour of ours when we buy stuff. In the biography, sometimes it looks like Warren is excessively tight-fisted, bargaining for a sixteenth of a cent at the price of stocks, an amount that, at the quantity he was buying in this specific occasion, wouldn’t save him more than 100 dollars (out of millions), but he knew it still was 100 dollars. Lousteau says that when you go buy a pair of shoes, and at a store 2 blocks away it is 10 pounds cheaper than the one near you, you would probably walk the 2 blocks. But if you are buying a 50′ TV, and it is 10 pounds cheaper at a store two blocks away, you certainly wouldn’t go there to save the 10 pounds. Why is that? It happens because we see the money as part of a total. So, if 10 pounds represents 1% of the total amount, it doesn’t matter, but if it is 30% of the final price, then it becomes really important. It is an illusion, money is a fungible asset. It means that if I have a 10 pounds note, and you have another 10 pounds note, regardless of the fact that they are two independent notes, they both have the same value. 10 pounds is worth 10 pounds if it is part of a million or part of twenty pounds, learn to save it.
Business people are not heartless evil bastards – The economist Thorstein Veblen, in his book The Theory of the Leisure Class, depicted a gloomy bourgeoisie. At his sight business people were cheaters, liars, dodgers, always trying to take advantage of everyone, people who lacked character and sense of ethics. A view that, as well pointed out by Robert Heilbroner, was in fact true in most of the cases at his time (1899). In late nineteenth century that wasn’t that true anymore. Nowadays business people greatly value good character, honesty and trustworthiness. To be a respectable business person you can’t lack these qualities. Indubitably, there are still lots of cheaters and dodgers gaining lots of money, places like wall street are proof of that, but their number is getting smaller every day.
Warren Buffett and his life are proof of this truth. One of the main factors that led him to better places, bigger deals, and good connections was his honesty. His honesty was witnessed by his partners and passed forward by them. He built a reputation, and by his reputation was recognised and rewarded. No one likes dishonest people. No one likes people who are not trustworthy. Plato in his dialogue The Republic, masterfully demonstrates the advantages of justice, as opposed to injustice. It is stressed that the unjust will act unjustly with both just and unjust, and that if two unjust try to relate to each other, each trying to take advantage of the other, they will reap separation as consequence of their injustice, and separation from everyone will lead to stagnation. It is also shown that even a group of unjust people set out to perform unjust acts, like pirates in their piracy or a country in the attempt to enslave another country, would never have success in their enterprise if there were not justice between themselves. Thus concluding that no goal can be achieved without justice. True in life, true in business.
If you are smart, you can do anything – Warren, the man of simple tastes, often asked his employees for hard things. They maybe didn’t have a clue of where to begin, but he wasn’t bothered by that. As he says, he believes that if you are smart, you can do anything. And that’s completely true. Louis Jacques Fillion has a famous definition for “entrepreneur”, he says “The entrepreneur is a person who creates, develops and accomplishes a vision”. I have a simpler version which I like better, it is “The entrepreneur is a person who makes things happen”. In my short experience trying to set up a micro company and make its business plan, I faced a scenario very unlike those presented to me in high school and university. There was no guideline, I had to go and do stuff, if it wasn’t possible I had to find a way, everything was hard and subjective, I could do things anyway I wanted, but I should have in mind that every single wrong choice I made would cost me a lot. Facing this sight I felt like I was the worst and less prepared person on earth, that I was useless and that there was no way I was going to make it to the end. I was lazy, a bit shy and had no negotiation skills at all, I thought I was doomed and I thought it 10 times a day. But one thing I didn’t think; I never thought I was dumb. If there was anything my family got to stick to my mind, was that I am intelligent. They repeated it so much that I wound up believing it. And here is one of the richest men in the world saying that if I am smart I can do anything. It motivated me, and in the end I really finished the business plan.
If you are smart you will find a way. And you don’t even have to be truly smart, it is enough if you believe you are smart, and you’ll be able to do anything.
Be good at what you do – Buffett bought his hometown newspaper, the Omaha Sun, and with it he won the Pulitzer prize. In one occasion a friend wanted him to manage his company, Warren was reluctant but in the end he accepted to do it in his spare time. The friend was happy anyway, he knew that if Warren was going to do it at all, he would do it well. Be like this! Warren Buffett didn’t get where he are because he was lucky, he got there because he was great on what he did. Let people say they know that if you are going to do something, you are going to do it well. It doesn’t matter if you want to play with puppets, if you do it well you will have success.
People sometimes look at rich people with a certain envy , maybe even stating that they are not worthy of all that. But the fact is that those who got there by the work of their hands are in fact worthy of their achievements. They are people who are good at what they do (of course there are those who are born rich and are good for nothing, but if you want to improve you should stop looking at them and pay more attention to those who built fortune out of nothing. Because in the end, if you are envy you are probably closer to nothing than to rich).
What is that that you do better that anyone else? If you don’t know you should start thinking about that.
Entrepreneurship – “Entrepreneur is a person who makes things happen”. When Warren wanted something, he found a way to do it. In his time he didn’t have internet to search for things, but still he went through the darkest lists to find the more underground companies in a price that was good to him. He found them, he went to their headquarters and talked to people there, he searched and found important information about them, everything without a single computer. Sometimes it was hard, sometimes people didn’t want to pay attention to a weird tight-fisted boy from Nebraska. But still he kept going on and insisting and trying, again and again. That’s entrepreneurship. You don’t have to be a founder of a company or a CEO to be an entrepreneur — In fact Warren Buffett himself never found a company, only investment partnerships. Entrepreneurship is to go and change things, make things better. If you take action and solve a problem, or improve something, without anyone ask you to do it, then you are being an entrepreneur.
Remember, your salary is determined by the problem you solve. If you want a promotion, show your boss you can solve more, or bigger, problems. Or you may want to start a business; starting a company is not for everyone, it is a risky venture. But remember, who takes more risks gets bigger profits. It is completely possible, and certainly easier, to get ahead and have a good money in a normal job, but if you think there is a problem you can solve better than anyone else, if there is a business in your mind that burns in your chest, go for it!
Once in an interview for PBS, Steve Jobs said something that is indeed an ode to entrepreneurship. Amazingly motivational. Deserves to be quoted ipsis-litteris, and here it is:
“When you grow up you tend to get told the world is the way it is and your life is just to live your life inside the world. Try not to bash into the walls too much. Try to have a nice family life, have fun, save a little money.
That’s a very limited life. Life can be much broader once you discover one simple fact, and that is – everything around you that you call life, was made up by people that were no smarter than you. And you can change it, you can influence it, you can build your own things that other people can use.
The minute that you understand that you can poke life and actually something will, you know if you push in, something will pop out the other side, that you can change it, you can mold it. That’s maybe the most important thing. It’s to shake off this erroneous notion that life is there and you’re just gonna live in it, versus embrace it, change it, improve it, make your mark upon it.
I think that’s very important and however you learn that, once you learn it, you’ll want to change life and make it better, cause it’s kind of messed up, in a lot of ways. Once you learn that, you’ll never be the same again.”
Unbending meritocracy – Uoh, this guy can be unbending sometimes. In the book there is a term that is often used — to buffett. To say that someone was buffetted meant that the person had to give in to Warren’s insistence, be it in stock negotiation, child raising or anything. He had strong opinions about money and inheritance, he didn’t agree with dynasties, he believed that everyone should work hard to achieve their goals. He was totally against people who made money and left everything for their children. Children should make their own money. Later on in life he did give in a little bit, settling with the following idea: “Give your children money enough to do anything, but not enough to do nothing”. He did pay his children education, but little more than that. In the end he donated most of his fortune to the Bill and Melinda Gates Foundation.
In formal studies, never forget the big picture – Warren graduated on the University of Nebraska–Lincoln but was little worried about his diploma. Afterwords he went to Columbia Business School and got his Master of Science in Economics diploma, but did this just because his admired authors Benjamin Graham and David Dodd gave classes there. He wanted to learn stuff, not to have a paper saying he studied 3 or 4 years somewhere. You see some CEOs and business people who are very successful and don’t have a undergraduate degree, and also see a lot of people with a bunch of degrees unemployed. It happens because people lose focus, they forget that the purpose of a determined course in university is to teach you something, and that what these institutions in fact offer you is a set of information they gathered that they believe are important and could help you to perform a specific office. Let’s give a special attention to the part that says “they believe are important”. Many universities, mainly in very dynamic fields like computation, teach obsolete stuff, that can’t help much and could be learnt much faster and better outside the classroom.
I am not in any way against universities, but I think that the way people look at them should be tweaked a bit. James Altucher has a different opinion, he thinks parents shouldn’t send their kids to university at all. He has a small book called 40 alternatives to college (click to read the ebook).
The early bird catches the worm – The other day on twitter I asked Marco Gomes, a young entrepreneur, founder of a Brazilian publicity company called boo-box, if he woke up every day at a specific time. He said he religiously woke up every single day at 7:30. Another manager of a big company (Which I really don’t remember who. But believe me, it is true) said in an interview that he woke up at 5 every day to read the newspaper before everyone else. Warren also woke up very early in the morning during his whole life. If you want to do stuff, to make things happen, you’ve got to wake up early. You have to be awake before the world’s gears begin to work.
Shepherds don’t think like sheep. If you think like everyone else, the best you can be is like everyone else. Wake up early, be ahead of everyone else when the word open his eyes in the morning.
Simple is better – If you are in charge of people in your company, or if you own a company, or if you want some day to own a company, or if you are just curious, or if you are neither of these things, you should read Jack welch’s book Winning. The content of the book is marvellous, but the way it is written is just enchanting. It looks like a friend of yours is talking to you in a barbecue about things that happen in businesses. He uses informal language, and is very clear and concise in his points. He stresses that candour and clarity are critical to the functioning of every part of a company. I’d like to go further and broaden this idea, stating that candour and clarity are indispensable not only in companies, but in every part of our life. The way he achieved such clarity was saying things in a easily understandable way, trying not to use complicated words or constructions that could be misinterpreted in some way. Warren Buffett did exactly the same during his whole life. Everywhere you see a quote from Warren you will notice that the language he used wasn’t any far from that we use in our day to day. It is very easy to complicate things, but it’s laborious to make it simpler.
As for my financial future, God only knows. One thing is sure, Warren Buffett’s life taught me these and many other things, but I don’t remember all of them now and I don’t have the book in my hands to give it a look and remember everything — and you wouldn’t read a ten thousand words post anyway.
I hope these principles can be of some use to you, just as they were of great use to me, made me improve. We are changing every day, and our future is determined by what we do today.