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How do you Create Real Wealth in an age of Intense Competition and Wealth Destruction?

By : Ziad K Abdelnour| 26 May 2014
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I am in the money business; always have been and always will be. No surprise I am approached by hundreds of young ambitious entrepreneurs every year asking:

How do you create real wealth in an age of intense competition and wealth destruction?

Let me keep you give you my 2 cents…. and allow me to be as blunt as I can. Political correctness is not and has never been my forte.

1. Don’t be delusional. You need to see reality as it is first, not as you would want it. Most people do the latter and plan and live by wishful thinking. It is a fact that the vast majority of people want to LOOK rich, not BE rich. The two are opposites: the first requires spending money, and the second requires saving it. Don’t pretend to do both. Most importantly, know your probabilities and statistics. Lotteries are statistically the same as burning your money, as far as your profit is concerned. You’re probably more likely to slip and crack your head open, die in a car accident, drown, or be murdered TODAY than EVER make big money as a novelist or artist.

2. Know what the standards are. When polled, 80% of Americans believe they’re above average in many different fields. It’s because a lot of them have no clue what average is. That extends to the standards of the fields you’re trying to compete in. A man thought he was “good at math” because he could balance his checkbook, thought he could be an engineer, and failed remedial geometry, long before reaching the three semesters of calculus and several other math courses most engineers take. A man who thinks he’s tough may not make it through military basic training, let alone Special Ops.

3. Find a wealthy and accomplished mentor early in your life, offer to work for peanuts and learn everything you can. If you want to make and keep money, you need to know how successful people have done it and are likely to do it in the future. Beware though of confirmation bias: If you only like hearing what confirms your beliefs, you’re digging yourself a hole. Always be on the lookout for evidence that you’re wrong, then analyze the heck out of it. The intent in here is not just to study millionaires and billionaires, and understand how they made their money but go beyond the veneer and see what really makes them the way they are.

4. Go to a high ranked program at a highly reputed school (ideally top 5), to gain skills/knowledge/connections that are directly applicable to an industry that pays extremely well and has a shortage of highly skilled workers (e.g., finance or tech). Some will argue that they get the same education at a lesser school, but you won’t get the same reputation, connections, and network. A master’s or other graduate degree is often worth the additional investment and sometimes necessary. Besides the experience, it signals you as being able to go through the rigorous and competitive admission process and prevail. The education must be cheap relative to the earning potential it provides, or paid by someone else. It’s a bad investment if it costs more than it makes. As a side note: Not everyone wastes their college years partying and “discovering themselves.” While you’re out getting drunk, someone else is studying their rear end off, both in school and how to increase their wealth, and doing their absolute best to beat the crap out of you to those lucrative jobs. Education never ends. I’m always reading and learning. Learn how to do that too.

5. Forget about slaving at a pathetic corporate job. If you’re employed, you will be laid off when you don’t expect it or can least afford it. No job is safe. And if you have one of those jobs, if you expect to work 40-hour weeks or less, you will probably be out-competed, and at the very least you’re leaving a lot of profit uncollected. The very rich own businesses. Being paid a salary means that someone else is paying you money to make even more money for them. Time to wake up. Some people dream of great accomplishments, while others stay awake and do them.

6. Be a problem solver at something you really love. Integrating passion into a profession is often underrated/overlooked when it comes to making money because people only focus on the big bucks. But when you love what you do, you’ll advance your skills and want to keep learning. Be the absolute best at what you love doing. You will be paid in direct proportion to the value you deliver according to the marketplace. You have to leverage on the right platform at the right time using your highly profitable skill. Above all, it must be the right “YOU”. You wake up and you say “I have a problem.” Can you say a million people have the same problem?” Go find a solution for a million people.

7. Pick and start your own business. Everyone is always on the lookout for “the next big thing.” The next big thing is finding rare earth minerals on Mars. That’s HARD WORK. Don’t do it. Pick a business that every merchant in the world needs. You don’t have to come up with the new, new thing. Just do the old, old thing slightly better than everyone else. And when you are nimble and smaller than the behemoths that are frozen inside bureaucracy, often you can offer better sales and better service. Customers will switch to you. If you can offer higher touch service as well, they will come running to you. Remember John D. Rockefeller’s (the world’s first billionaire) priceless wisdom: “The secret of success is to do the common things uncommonly well.”

8. Surround yourself with the right friends. Your income is the average of the income of the 5 people that you are usually surrounded with. So get in the company of the millionaire or better billionaire. They know better ways to make millions than most the losers out there.

9. Take out the blood sucking middleman in everything you do and try to get as much as you can to the direct source. Will save you lots of headache and aggravation along the way.

10. Get customers. This is probably the most important rule for any entrepreneur. People want to find and take the “magical path”: get VC money, quit their jobs, build a product, and then have millions in customers. It NEVER works like that. Build your customer base FIRST.

11. Don’t be afraid to take calculated risks early once you have some skills. It’s easy to make up a 10k – 50k loss when you have your whole life ahead of you. Risk is what you control and fortune is really all about risk. Bottom Line: Fortune comes from big money bets on very low probability events.

12. Question all assumptions. Think about how they might be broken, and how you could profit by breaking them. Disrupting “the ways things are done here” or “the ways things have always been done in the industry” are how many companies made it big, from McDonald’s to Facebook, DropBox, Zappos and the like.

13. Don’t be stupid by following the crowd. By the same token, keeping up with your family, friends and neighbors in terms of what they buy, and where they vacation is a sure way to an empty bank account. Keep in mind that many of them live beyond their means, and paycheck to paycheck. Be different. Be unconventional, but do it for logical reasons. I do different things all the time, usually by breaking poor assumptions.

14. Don’t hold to any one financial pundit, even someone proven like Warren Buffett. Everyone is wrong some of the time. I’m particularly suspicious of those that tell us what to do in their shows, books, and seminars: They make most of their money off the rubes that pay to watch. Do you really want to trust them? By the same token, understand who makes the big incomes in the US and the mechanisms that make the money. A few examples: ultra high-end restaurateurs often run their restaurants at a loss and profit on cookbook sales, a.k.a “food porn.” Carried interest protects hedge funds and private equity firms from taxes. US presidents currently make $400k/year during their terms, but make a heck lot more from speaking fees afterwards. The way to bigger money is often not obvious.

15. Pay yourself first. especially when you are in your twenties. Max out your contributions to tax-sheltered retirement accounts, or at the minimum put in an amount that maxes out your company match. The money I contributed in my twenties now accounts for a nice part of my net worth, even though I contributed much more each year in my thirties and later. Such is the power of compound interest.

16. Behave and grow up. Avoid risky/adolescent behavior that can result in lawsuits or being charged with/convicted of crimes such as getting involved in physical fights, unsavory actions, etc.. Even if you don’t get a criminal conviction, legal action will destroy current wealth and block you from future wealth. Besides, risky behavior that has a very small chance of resulting in death or permanent impairment can and will screw you if you do it long/often enough.

17. Learn and appreciate the value of Money. Perhaps the most important idea: Avoid catastrophic events, financial or otherwise. If you lose 90%, you need to make a 900% profit to get back to break even. It’s very hard to recover from major losses. Avoid remotely questionable or unsafe investments, like the vast majority of restaurants. The same goes for investments in fickle markets, like most collectibles and others. On the same note, never buy items that depreciate, such as cars, boats, planes, etc.. If it floats, flies, or runs on wheels, just lease it. No need to buy.

18.Once married, stay married. Divorce is one of the greatest wealth destroyers in the developed world. Get a prenuptial if there’s any question; there shouldn’t be a question, but you should probably get one anyway. If you marry, marry someone even more frugal than you and wants to build wealth with you. If you care about money more than children, do not have children and do not do anything that might cause you to have children. If you want children and don’t already know that they’re the biggest time and money sink you’ll ever encounter, you’re fooling yourself.

19.Build trust while you sleep. This rule is often “Make Money While You Sleep.” Find a way to get online businesses as customers. Start blogging. To blog well you need to be totally transparent or it won’t work. Then put your posts on the top social sites and watch your business grow. Be aware though. Blogging is not about money. Blogging is about trust. You don’t sell ads on your blog , you don’t get the big book deal, but you do build trust and this leads to opportunities. My own blogs have made me a total of zero cents but has created for my Firm and myself personally millions in opportunities.

20. Never rest on your laurels. Always keep developing and looking for opportunities. There are always people with more money, free time, speed, motivation, energy, experience, intelligence, skills, connections, or anything else, compared to you. You have to compete hard, fast, and smart. You have to leverage whatever advantages you have, fix anything that’s unacceptably weak, and keep building your assets, skills, understanding of your business and the world at large, reputation, and network.

Now if you are a dumb ass good for nothing and cannot grasp or execute on any of the above, then do yourself a big favor and get married to a similar dumb ass billionaire’s girl and have your kids memorize the above rules…. You will thank me for it for the rest of your life.

Comments

  1. Jon TedescoJon Tedesco

    As a serial entrepreneur, I like most everything you are saying in this article. Would disagree on the having children though. Where would you and I be if our parents subscribed to this theory? Keep up the good work. You can check out some of my projects on my Pinterest site at pinterest.com/jontedesco

  2. Issac MaezIssac Maez

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  3. Pingback: How do you Create Real Wealth in an age of Intense Competition and Wealth Destruction? | Ziad K Abdelnour - Secrets of Wealth Creation in the Age of Welfare Politics

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