How to get rich
Posted by: Brian Dennehy
(I wanted to re-publish this blog from 2016 after I re-read it a few days ago. I really believe I left the most important point until the last paragraph, so wanted to emphasise it at the beginning. Reading widely and building your knowledge is vital. But if you don’t have the temperament, the discipline and focus to act on it, you are little more than a well-informed and (possibly) entertaining dinner guest. Do enjoy the read.)
My attention was captured by a "how to get rich" headline from an unusual source which is typically both thoughtful and challenging. It's not what you think. It might not be what you want to hear. But I recommend listening.
I read all sorts of material, certainly not all about investing. So when I spotted an email subject line telling me "how to get rich" it certainly spiked my attention, as it was from a source which normally covers philosophical issues not investment.
I was pleasantly surprised when they quickly came clean and told me they were not literally going to answer that question - this wasn't going to fall into the "charlatan trying to flog get-rich-quick schemes to the desperate and gullible" category. Good.
It was about the conditions you need to "get rich quick", a metaphor for success in ANY field.
The original author (Jared Diamond
) was concerned with what had defined the success and extraordinary progress of some parts of the globe over hundreds and thousands of years, while others barely moved out of caves, or even became extinct.
A key ingredient to the lack of success or even extinction (a "total loss" in investment parlance) was isolation. In contrast, successful groups were prepared to take on board ideas and innovations from outside, and be inspired.
That's the macro picture, at the level of regions and nations.
What about at a micro, or personal level?
As Diamond says, the world has already tried thousands of things. All you have to do is learn from them. The world’s most successful investment partnership certainly knows that - Warren Buffett and Charlie Munger.
Before looking more at this duo, let me introduce you to Steve Siebold. Starting out as a broke student he began to interview more than 1,200 of the world’s wealthiest people. It took three decades and in the process he became a self-made millionaire.
He wanted to understand what made them tick; was there some formula they had in common?
They read. A lot. This was the one thing they all had in common.
These guys never isolated themselves from the ideas of others.
But nor did they waste time. They would rather be educated than entertained.
Apparently 67% of rich people watch TV for no more than one hour a day.
Only 6% of these people watch reality TV, while 78% of the poor do.
Charlie Munger has two things to say on the subject:
“The best thing a human being can do is help another human being know more”
“Go to bed smarter than when you woke up”
It's not just about reading. It requires critical reading if you are to learn
More particularly Buffett says:
“We don't read other people's opinions.
We want to get the facts, and then think.”
He says he spends 80% of his day reading and thinking, which can be 500 pages every day.
The problem? All of us have the ability to build our knowledge. But most of us won't put in the time. Most of us will find excuses, similar to the ones we trot out when asked why we don't go to the gym - even though we pay for a gym membership!
But if you focus, you can do it. You can carve out an hour in the day to read. And it doesn't require that you end up all sweaty and getting leg cramps!
Buffett told this story:
“Charlie, as a very young lawyer, thought to himself “Who’s my most valuable client?”. And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning… Everybody should do this, be the client and sell yourself an hour a day.”
Think about this hour. On the one hand you could check Twitter or Facebook, mindlessly trawl through the BBC online, reply to a few emails which aren’t either that important or time sensitive. Or you could invest one hour in yourself.
But remember that reading and building your knowledge isn’t enough. Otherwise it becomes what I call gym membership syndrome – you kid yourself into thinking that having the membership is the objective – actually going to the gym is the objective!
Similarly, once you have built this knowledge you have to have the temperament, the discipline and focus, to act on it.
Why not start today by reading Have you lost £941,710?
and then quickly decide how you will act based on what you learn. Over to you.