Just One Thing: Mission Statements

You don’t need a mission statement to build your business. I’ve helped build dozens of successful multimillion-dollar businesses without one. The largest company I helped build, which grew from $8 million to $1.6 billion, never had a mission statement.

So you don’t need a mission statement. But you do need a mission. In fact, you need two – two missions based on the two things that every business must do to survive and prosper:

  1. It must offer a product or service that its customers are willing to buy.
  2. It must be profitable.

If you can’t distinguish your product or service in some way from the competition, people won’t buy it. And if you can’t sell your products and services profitably, you’ll soon run out of money and have to close the business.

Which is why every business must have two basic goals: to create value (or the perception of value) for the customer, and to sell it profitably.

These are the universal missions. They must be pursued relentlessly. There can be no other objectives with greater importance.

The founder/CEO must devote 80% of his time to them. So must all of the key managers.

You can write them down if you want to, but you don’t have to. You do, however, have to make them top priorities by caring greatly about them and by expecting everyone that works for you to do the same.

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Principles of Wealth #32* 

Most people fear entrepreneurship because they believe it takes genius, courage, and luck. In fact, these factors are rare contributors to success in start-up business ventures. The factors that matter most are common sense. humility, cautiousness, a relentless work ethic, and perseverance. 

Have you read a story like this recently?

A bright young college kid has an idea about a revolutionary new way of doing something. He mentions the idea to a few people that he respects. They tell him he’s crazy. It’s a bad idea. It won’t work.

He won’t be dissuaded. He drops out of college, recruits a few friends, and spends a year and all his money creating his better mousetrap. When it’s ready to go to market, he’s got no money left, so he borrows from his family.

The pressure is on. If it doesn’t work, he’s lost time, all his money, his family’s money, and his self-esteem. But lo and behold, the market is thrilled by his new product. Investor money pours in. His company grows. A few years later, he’s a billionaire and lauded as a genius.

That’s the entrepreneurial story dreams are made of. The reality for 99% of entrepreneurs is quite different.

It begins not with a big, world-changing idea but with a modest notion of how some business he knows (usually as an employee) could be better in some way. He works on his idea evenings and on weekends, testing it in bits and pieces with whatever money he’s been able to save. And then, several years later, when his idea is no longer just an idea but a proven concept, he launches his business.

He doesn’t quit his job. He runs his new business as a sideline. It grows in fits and starts. Three or four years later, sales reach the million-dollar mark and he quits his job and runs his new business full-time.

Some years later, revenues reach $10 million and his net worth exceeds a million dollars.

* Fact: 80% of entrepreneurial millionaires start their businesses from scratch, using their own savings.

* Fact: The average time it takes for a successful business to reach $1 million in sales is 7 years.

As in many other areas of life, the truth about entrepreneurship is less exciting than the stories we read in magazines and bestselling books. That’s not because risk-everything/ win-huge doesn’t happen. It does. But it happens very rarely. One out of a thousand startups has the sort of success that makes for a good movie. The rest are mundane.

There are two reasons we keep hearing these exciting stories.

The first and most important reason is the very fact that they are exciting. Who wants to write a book or make a movie about a guy that uses common sense and grit to grind his way to merely millionaire status?

The second is that when founders of super-successful businesses are interviewed, they prefer to talk about the fun and the thrilling moments they remember. Why bore the writer with accounts of the daily grind?

Also, because they don’t want to look like braggarts, when asked about the success of their business they will usually attribute it to luck – the luck of having great people as employees and the luck of good timing.

And there’s some truth to that. When you look back on an extremely successful career, it often does feel like luck. But when you are starting out and looking forward, you aren’t looking at a crystal ball. You are looking at 16-hour working days, six or seven days a week.

But all this is actually good news for anyone wishing to start a business. The facts tell us that luck and genius are not necessary prerequisites.

What you do need are:

* Enough common sense to come up with or recognize a sensible idea

* The humility to modify your idea if facts prove it wrong

* Cautiousness about spending your money so it doesn’t run out

* A relentless work ethic

* And enormous perseverance

* In this series of essays, I’m trying to make a book about wealth building that is based on the discoveries and observations I’ve made over the years: What wealth is, what it’s not, how it can be acquired, and how it is usually lost.

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An Interesting Speculation 

I’m a conservative investor. I own mostly income-producing assets with cash and precious metals as a back-up. The stocks in my portfolio are industry-dominating billion-dollar businesses with consistent histories of giving dividends.

But I’m also a consultant to the financial advisory industry. And in that capacity, lots of interesting stock stories come into my inbox.

And every once in a while, I read one that is so persuasive that I break my rules and take a gamble. I do that when (1) the source is an analyst I respect, (2) the facts are compelling, and (3) the recommendation is for a stable, profitable business whose value is equal to or greater than the share price.

Here is one of them… SoftBank Group (OTC:SFTBY).

It’s an over-the-counter stock that was recommended by Alex Green. As the name suggests, it’s a holding company that buys shares of internet and software startups.

The head of the firm is Masayoshi Son – universally known as “Masa” – the second-richest man in Japan, with a net worth of more than $20 billion. Alex calls him one of the world’s savviest entrepreneurs. “Masa has busily launched, bought, and sold dozens of technology firms over the past 40 years,” Alex says. “His $20 million investment in Alibaba in 1999, for example, is worth more than $120 billion today.”

The company has three divisions. One that owns businesses outright (Boston Dynamics). Another that takes large stakes in public companies (48% of Yahoo Japan & 84% of Sprint). And its $100 billion Vision Fund, devoted to tech-oriented venture capital.

It’s this third division that Alex is most interested in. Vision Fund looks for companies with a market share of 50% to 80% – and then takes stakes of 20% to 30%, providing the capital that allows them to grow fast and go global. Dozens of its holdings are so-called “unicorns,” companies worth at least $1 billion in the private market.

But it’s not just the strategy that Alex likes. It’s the fact that SoftBank is not a passive investor.

“Masa and his team of managers identify trends, act quickly, and – while the fund may hold an investment for years or even decades – are not shy about getting out when the price is right. Vision Fund, in fact, has a long history of getting in early on the best technology startups, ones that even seasoned venture capitalists can’t access – and ordinary investors can only dream about.”

Recently, Alex says, SoftBank started Vision Fund 2. It quickly raised more than $100 billion as many of the world’s leading tech and finance companies – such as Apple, Microsoft, and Goldman Sachs – lined up to invest.

All that sounds interesting enough. But the thing that really hooked me was that, according to Alex, the share price of SoftBank has actually declined a bit since he recommended it to his readers a few weeks ago.

“This is due primarily to the company’s $11 billion investment in The We Company… and the sharp reduction in the previously planned $24 billion valuation of its IPO. Yet the effect on SoftBank is minimal. Were the company to go public with, say, a $10 billion valuation, it would lower the Vision Fund’s net asset value by just 2%.”

In his original recommendation, Alex estimated that SoftBank was worth twice the current share price. “That may have been far too conservative,” he now says. “Barron’s reports that ‘based on the sum-of-the-parts math, Vision Fund is being valued at negative $52 billion. That’s right, negative. Talk about undervaluation. And, remember, Vision Fund is just one component of this much larger holding company.”

On the negative side, you’ll have to overcome a few obstacles. For one thing, it’s not easy to study SoftBank because, other than Alex, no one seems to be following it. Plus, the company is based in Tokyo and its website is in Japanese. And if you are interested in placing a bet on SoftBank, you’ll have to use a broker that is comfortable working on the OTC market.

Meanwhile, keep in mind that there’s a positive side to these impediments. Thanks to the extra effort it requires to invest in SoftBank, the company is relatively obscure. Even so, it has pretty good liquidity. (The average volume, Alex says, is close to a million shares a day.)

As I said, this is not the sort of investment I typically make. I consider it a speculation and I don’t recommend speculating as a prudent way to build wealth. But SoftBank is a rule-breaker for me because of the exceptions I laid out above. The facts are compelling. It’s a recommendation by one of the most successful and trusted analysts I know. And it’s currently priced at less than its intrinsic value.

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Principles of Wealth #31* 

There are several assets that have a higher historical ROI than stocks. By adding one or two of them to your portfolio, you can reduce your exposure to stock market risk while boosting your overall results. 

Income-oriented real estate (rental real estate) is one of those assets. The historical return on real estate stocks (REITs) is almost 11%. This is one point higher than the historical return on the stock market in general. But if you invest directly in rental properties, you can safely ratchet up the return in a way that you can’t do it with stocks. I’m talking about an ROI of 12% to 15%.

Let’s look at the math:

Scenario One: Let’s say you have $200,000 to invest and use it to buy a rental property generating rental income of $25,000 a year. (This is the range you’d be looking for.) After deducting expenses – taxes, utilities, repairs, maintenance, and so on – you’d expect a gross profit of about 60% of that or $15,000. And then let’s assume you have the property managed at a cost of $100 a month (8% of the rent). Your net income would be $13,800.

Scenario Two: You use that same $200,000 to cover a 33% down payment on a $600,000 property. Assuming the same ration of purchase price to rent, you could expect rental income of $75,000. Deducing the same percentage of expenses (40%), you’d be left with $45,000 before management fees and about $41,000 afterwards. Then you’d have to pay for the mortgage, which, at 5%, would run you about $20,000. Your net cash flow would be $25,000.

In the first scenario, you bought a $200,000 property and netted $13,800. That’s a return of about 7%.

In the second scenario, you used that same $200,000 to buy a $600,000 property, financing $400,000, and ended up with a net of $25,000, which is 12.5%.

And that, you may be interested to know, is about what I’ve averaged on my rental real estate investments over the past 30 years.

But that’s only part of the story. That return of 12.5% is what I get in the early years of renting out the property. As time goes by, the rent goes up while the mortgage goes down. Eventually, of course, there’s no mortgage at all. The rental fees have paid it off.

So the actual ROI on rental real estate, if you hold it for, say, 5 years, is going to be around 15%, and it will grow higher from there.

And remember, rental real estate is just one of several asset classes that will give you 12% to 15% returns safely. And these higher ROIs are – in my opinion –safer than investing in stocks or even REITs, because you know the property better and you have some control over what you charge and what you spend.

So getting back to the original point: Some asset classes, such as rental real estate, can give you ROIs that are 2 to 5 points higher than stocks with, in some cases, less risk. The prudent wealth builder will take advantage of these.

Here’s how you might do it. Let’s say you divide your investments into 3 buckets: An index fund giving you 10%. A Warren Buffett type portfolio giving you 12%. And rental real estate giving you 15%. Your average ROI would be 12.3%.

The difference between 10% and 12.3% may seem insignificant. But over a career of investing, it can make a huge difference.

A thousand dollars invested every year at 10% would give you $5 million in 40 years. The same investment earning 12.3% would give you more than $10 million – twice the return for an ROI that was better by just 2.3 points.

The takeaways:

* Over the long term, there is a huge difference between a 10% ROI, a 12% ROI, and a 15% ROI.

* Trying to get much-higher-than-average ROIs will almost certainly make you poorer.

* So shoot for 10% with stocks and add other asset classes to your mix where you can expect to get 12% to 15% safely.

* In this series of essays, I’m trying to make a book about wealth building that is based on the discoveries and observations I’ve made over the years: What wealth is, what it’s not, how it can be acquired, and how it is usually lost. 

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“It is an unfortunate human failing that a full pocket-book often groans more loudly than an empty stomach.” – Franklin D. Roosevelt


Inside the Mind of the Not-Quite-Rich Leftist 

I’ve never been inside his/her mind, but I have been inside my own 21-year-old mind, and so this is what I imagine… 

The world is full of people that have less than I do. I see them on the streets, in the media, and even in my workplace. They are just scraping by.

It’s depressing. They live in dirty, crappy houses. They drive, if they drive at all, dented-up, gas-guzzling junk heaps. They have no idea how to dress. Their hygiene could be better. And to be honest, they don’t seem all that bright.

I generally keep my distance from these people. I observe them from afar. But you can’t avoid them. They’ll be waiting on you in a restaurant or sitting next to you at a ballgame or even standing next to you in line at the supermarket.

It’s not that I’m afraid of them. Quite the opposite! I feel tolerance – even compassion – for them. I’ve talked to a lot of these people over the years – when they come to my house to do repairs or are driving me to the airport –  and I have to tell you, many of them are salt-of-the-earth. I mean good-hearted, earnest, even hardworking.

I feel a little embarrassed by the fact that I clearly make more and have more than they do. Embarrassed and more than a little guilty. I worry that they may think badly of me for being better off. Meanwhile, I genuinely wish the best for them.

I truly hope for a better world – a  world where everyone makes at least a living wage and has free health care and all the basics to lead a comfortable and respected life.  (A world, frankly, that doesn’t make good and sensitive people like me feel guilty.)

But hoping for a better world – however much it proves that I have a good heart – is not enough. I have to do something to make that world a reality.

Luckily, there is something concrete that I can do. I can align myself with smart and caring people that think and feel as I do. I can get on social media sites and join organizations that promote ways to fix the unfair wealth and income gap. And I can vote for candidates that share my good intentions.

And the great thing is, there is an easy fix. We simply have to raise taxes on the rich to pay for the solutions we need.

Who are the rich?

Well, not me. Yes, yes, I’m in the top percentile of the country in terms of my income and my net worth. But I’m not rich. I’m just comfortable.

And anyway, I worked hard for what I have. And I deserve it. Hell, if you want to know the truth, I deserve more. I mean, hell… I work my ass off. I’m busting it and, yes, I am doing well. But I’m not rich.

The rich fuckers are the people that have a lot more than I do. Like my SOB boss… and that idiot broker who built that vulgar mansion on the corner.

They’re the ones that are going to pay for our plans. And they should pay. I mean really, we know what they are – rapacious, unscrupulous monsters that are getting rich off of the hard work of honest people like me. And what’s worse, they are exploiting all those unfortunate people that are making less than half of what I’m making.

These scumbags make their money by breaking the rules and sometimes breaking the law. It’s a disgrace the way they get away with it. And to think… I have more integrity than any of them. But they just skate by, getting richer every day and acting like they deserve it.

If they had two brain cells to rub together, they would welcome the chance to solve all of the problems of the world by paying for it out of their taxes.

That’s definitely the solution to the wealth and income gap. Just take back most of the ill-gotten gains that the rich stole in the first place and give it to the good people that deserve it.

That’s what I think we should do. It’s the obvious solution, and I feel good about it. And I feel very good about being one of the people that are actively changing the world for the better by writing books and essays, by making speeches, and by telling “our truth” to whomever will listen.

[Coming soon: Inside the Mind of the Not-Rich-Enough Conservative] 

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“You ain’t got to wait on a cab no more; just call your Uber, and it pulls up.”

– Trip Lee


Uber: A Great Idea, a Bad Strategy, a Cheapskate Market 

For as long as I can remember, taxi service in the Big Apple has been horrendous.

The taxis are generally filthy on the outside and dingy on the inside. Legroom is cramped because the drivers favor driving hood-style, with the seat pushed as far back as possible. Half of them speak very little English. And few of them have any idea about how best to get you where you are going.

I can put up with all that. But I don’t like feeling that my life is in peril because of the reckless way they drive.

I was in New York City several times in 2009 when Uber was launched. The cars were new and spotlessly clean. The drivers were nicely dressed, courteous, and helpful. They spoke fluent English and took you quickly and comfortably to your destination, relying on Google Maps and/or Ways. Plus, they offered limousine-styled amenities, such as tissues and chewing gum.

And there was more…

Using Uber, you didn’t have to deal with cash or credit cards or feel compelled to leave an undeserved tip. Arriving at your destination, you simply thanked the driver and hopped out. If you forgot something in the car, it could be quickly located and returned to you.

Another thing… you didn’t have to worry about your driver mugging you. You knew that he’d been through some sort of vetting process. And besides, there was accountability: Your ride was electronically recorded, and (afterwards) you could anonymously rate his service.

Great Expectations 

My early experiences made me a big fan and a loyal customer. I recommended Uber to everyone, and I stayed with them when other personal transportation services popped up.

I liked Uber for ideological reasons, as well. As a free-market believer, I loved the idea that Uber was opening up thousands of jobs for people that needed to make more money. I loved the fact that they were for the most part unregulated, supporting my view that regulation usually increases costs while simultaneously decreasing quality. And I felt certain that Uber’s high standard of service would, through competition, improve the quality of service throughout the entire taxi industry.

Such were my hopes…

Recent Reality 

Things have changed since those halcyon days.

If you use Uber Black, you will get limousine-quality service today. But you will be paying limousine prices, which is typically two or three times the cost of the basic Uber X service.

If you opt for Uber X, which competes price-wise with taxis, you may have a different experience.

Case in point: K and I were going from the Baccarat Hotel on West 53rdto LaGuardia at 8:30 in the morning. She called for an Uber X and we waited six minutes for it to arrive. Meanwhile, a dozen available taxicabs drove by. Okay, fine.

The car arrived – a small black Honda with dents along the passenger side doors. The driver pulled up in front of the hotel and idled there, while he seemed to be finishing some sort of video game on his iPhone. The hotel’s valet had to knock on the window to alert him of our presence.

The interior of the car was… not filthy, but miles from clean. The driver had a thick mustache and an equally thick accent. We exchanged pleasantries, and I, having the sniffles, asked for a tissue. He didn’t have one. K asked if he had a URL plug-in. He said it wasn’t working.

He drove maniacally, gunning the engine when traffic opened up and slamming on the brakes just before crashing into the car ahead. He cut right and left to gain a few feet, as if he were rushing us to a hospital.

“There’s no hurry,” I said at one point. But he wasn’t paying attention. He was busy screaming out his window at the other drivers with whom he was engaged in some insane life-and-death contest.

And then, to our astonishment, he missed the exit to the airport, even though his GPS was telling him to take it. I brought this to his attention, and he told me that the GPS was wrong. That it’s frequently wrong, and that he knew a faster way.

Five minutes later, he handed me his phone and asked me to locate the airport for him. I’m not kidding.

I did a little online research and found that I wasn’t alone in thinking that Uber’s “quality of service” was slipping. There were dozens of complaints.

What Went Wrong? 

The decline could be linked to driver compensation.

Uber’s amazing early growth spawned lots of copycats that were competing on price. (Lyft, Zipcar, Getaround, Car2Go, Zimride, etc.) But rather than building a protective moat for itself around its initially good service, management apparently decided to enter into and dominate the competition by offering cheaper services and cheaper fares for Uber X, which was, by far, its primary service.

Initially, Uber X cars were smaller, less expensive vehicles – but they were clean and the service was great. And they were cheap. Significantly cheaper than taxis. I remember thinking that the fares were barely enough to cover gas and maintenance. I estimated that if the driver was making minimum wage he would be lucky.

I expected Uber X fares to rise as Uber’s popularity spread and the company enjoyed its market dominance. They didn’t. In fact, they seemed to be getting cheaper.

And then there’s this…

Uber has done an amazing job of growing its business and its revenues. As of 2019, it was operating in 785 cosmopolitan areas and servicing 110 million users worldwide. In the USA alone, it has a 69.0% market share in the personal transportation industry.And that’s to say nothing of its ventures into other industries – such as food delivery, where it has gobbled up a 25% market share.

Revenues are impressive – moving up to the billions in recent years. But as for profits… there aren’t any.

Uber isn’t profitable. It never was. Its business strategy was always about gaining market share (which it did) and then going public and getting a huge market valuation. The idea is to use all those billions not only to build the business but also to pay off the founders and the early employees that were promised stock shares in lieu of large salaries.

This is the strategy of “Unicorn” companies – businesses that aim to transform the world with “destructive” (i.e., radically innovative) technologies, using investor funds to keep getting bigger until one day they can figure out how to make a profit.

Before Uber’s IPO (initial public offering), market pundits were projecting a valuation of $120 billion. Does that seem crazy? A business whose revenues are $3 billion a year being worth 40 times sales?

Well, that’s what the experts were saying.

But after the IPO, prices dropped pretty quickly – by 15% within days. This happened at the heels of Uber’s most recent quarterly report, where the company posted losses of $5.2.billion.

You read that right. $5.2 billion!

And here’s the kicker: Almost $4 billion of that went to “stock-based compensation expenses” – stock option payoffs to founders and early employees. Another $400 million to $500 million will be shelled out in the third quarter.

Facing continued losses, Uber’s COO and CMO stepped down and its marketing department headcount was reduced by a third.

 How Did It Happen? 

My early admiration and hope for Uber has been dimmed if not dashed.

I blame what’s happened on three things:

First, Uber was launched as a gain-market-share-now, make-profits-later enterprise. It was a strategy that worked very well for Google and Apple and even Amazon, but failed to work for countless, now nameless, dot.com start-ups. A strategy that ate up billions of hard-earned investment dollars, making millions of foolish investors poorer.

Second, Uber’s decision to enter into a price war with other unprofitable companies was not, in retrospect, a wise one. In maintaining its market dominance, profitability – and perhaps even the hope of profitability – went down the drain.

And the third reason, which I suspect is what forced Uber to get into the price war, was that it discovered there was no significant market for the kind of high-quality service they had been offering: reliable transportation in clean cars driven by courteous drivers.

I blame that on the American consumer. I don’t know why, but when it comes to transport Americans (and maybe the rest of the world) have only one criterion: cost. Nothing else – comfort, ease, courtesy, or even safety – seems to matter. The company that offers the cheapest fares gets the lion’s share of the market.

We saw this happen in the aviation industry decades ago. When carriers came along and started offering fares that were sometimes half or a third of what conventional carriers were charging, the big players jumped into the fray and began offering discounts of their own. These discounts were irregular and often deceptive, but they were sufficient to keep the planes full, at least for a while.

Then some of the big guys dropped out, unable to stay profitable. And the rest of them started cutting back on amenities and then services and then legroom. The luxury service that was de rigueurin the early 1980s when I started flying no longer exists except in first-class international travel. Passengers may gripe about how the quality has deteriorated – but when it comes time to book that flight from LaGuardia to Fort Lauderdale, they are going to take the one with the cheapest fare.

I’m all for cheaper fares and crappier service for those that want it. But why can’t we have quality for those that are willing to pay more?

We have it with hotels. We have it with restaurants. We have it in just about every retail and consumer business I can think of. But with airlines and personal transportation services, it’s bad and getting worse.

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Principles of Wealth #30* 

If you have realistic expectations, you can do very well with stocks.  

I’m what you might call a chicken-shit investor. But there have been a few times when I’ve taken a risk – invested good money in a speculative deal that promised big returns.

Most of them were direct investments in start-up businesses brought to me by friends. They all came with exciting stories, as well as the promise of huge gains.

Fortunately, I had enough sense to limit those investments to what I could afford to lose without feeling like an idiot. That was, depending on the level of the friendship, $25,000 to $50,000. The idea was to roll the dice out of magnanimity, but not to end up being angry with my friends or myself if the investments went south.

And they all went south.

I’ve had a similar experience with stocks. Several times, I plunked down $5,000 or $10,000 in some IPO or low-cap growth stock recommended by an analyst who made a very convincing case for it. Again, the stories were exciting and the projected returns were not only astronomical but seemed inevitable.

How did they do? Well, like most stock investors, I have a poor memory when it comes to losses. But I’m pretty certain that every one of them went bust.

These experiences were exceptions, not the rule – because my usual practice when investing has been, as I said, chicken-shit. I like to put my hard-earned money in the most conservative investments I can find.

My goal has never been to crush the market. I never tried to make double or triple typical returns. My primary goal was to not lose the money I had saved.

Following this chicken-shit strategy, I spent the first 20 years of my investing career doing what Warren Buffett recommends: putting my money into index funds designed to give average stock market returns.

The average return on large-cap stocks over 100 years has been about 10%, and that’s what I got.

Take 10%, Buffett would say, and be happy with it.

But that’s not what most individual investors do. Instead of playing it safe and making long-term profits of 10%, they risk their money on short-term, speculative “story” stocks with huge “potential” that they pick themselves. And they end up making, on average, only 3%.

As it turned out, 10% worked out pretty well for me. It was a whole lot better than my much smaller portfolio of speculative bets. Ten percent better, in fact.

Then, in 2010, with the help of two colleagues, I switched from index funds to a portfolio of individual stocks comprised of large-cap, dividend-giving companies. Those were Warren Buffett type companies – the kind that dominates their industries, have a distinct market advantage (a moat, Buffett calls it), and are so large that there is a 99% chance they will be around for 40 to 50 years.

In addition, because they are so big and so protected and have a history of giving dividends, they gave me the prospect of less volatility. In other words, I was hoping to squeeze out another point or two of ROI while reducing my risk.

It’s been almost 10 years since I started that portfolio, and it has been significantly less volatile than the general market. Plus, it’s given me average returns of more than 12%.

Two points may not sound like much. But if you let that modest advantage accumulate over time, it can be significant.

Let’s look at the math:

Twenty thousand dollars invested in stocks yielding 10% will grow to about $900,000 over 40 years. Over 50 years, it will grow to $2.3 million.

That same $20,000 invested in stocks yielding 12% will grow to about $1.8 million in 40 years and $5.7 million in 50 years!

As you can see, you can do very well with a stock portfolio earning 10%. But you can do much better – more than twice as well – at 12%.

The takeaways:

* It’s foolish to try to crush the market, and arrogant to think you can.

* Don’t risk your money on short-term bets. Set your goals at historically proven market rates.

* A modest increase in ROI over the long term can make a huge difference.

* In this series of essays, I’m trying to make a book about wealth building that is based on the discoveries and observations I’ve made over the years: What wealth is, what it’s not, how it can be acquired, and how it is usually lost. 



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“One good thing about music, when it hits you, you feel no pain.”

-Bob Marley


I like sad music. Sometimes I love it. Many of my favorite tunes are melancholy.

I’m listening to one of those now: Bach’s Prelude and Fugue in G Minor.

I’m also reading an interesting essay by Markham Heid:

“Why Listening to Sad Music Makes You Feel Better” 

In the essay, Heid talks about the “science behind the coping benefits of melancholy art.”

Studies on what some researchers call “pleasurable sadness” suggest that different people enjoy sad art for different reasons,” he says. One reason, according to Jonna Vuoskoski, an associate professor in the Department of Musicology at the University of Oslo in Norway, is that it evokes emotions that people enjoy having, such as nostalgia, peacefulness, and wonder.

Another reason, says Heid, is that it can act as a sort of safe therapy for people that have suffered emotional hardship. He quotes Tuomas Eerola, a professor of music cognition at Durham University in the UK: “The fact that the music or art is non-interactive is actually an advantage in situations of loss and sadness since there is no judgment, no probing. An artwork or song that a person can relate to can provide comfort without the baggage of social interaction with another human being.”

Oliver Sacks put it this way in his book Musicophilia: Tales of Music and the Brain.Reflecting on a moment he experienced on the fifth anniversary of the September 11 attacks, he wrote:

“On my morning bike ride to Battery Park, I heard music as I approached the tip of Manhattan, and then saw and joined a silent crowd who sat gazing out to sea and listening to a young man playing Bach’s Chaconne in Don his violin. When the music ended and the crowd quietly dispersed, it was clear that the music had brought them some profound consolation, in a way that no words could ever have done.

“Music, uniquely among the arts, is both completely abstract and profoundly emotional. It has no power to represent anything particular or external, but it has a unique power to express inner states or feelings. Music can pierce the heart directly; it needs no mediation. One does not have to know anything about Dido and Aeneas to be moved by her lament for him; anyone who has ever lost someone knows what Dido is expressing. And there is, finally, a deep and mysterious paradox here, for while such music makes one experience pain and grief more intensely, it brings solace and consolation at the same time.”

This ties into a recent study by the University of South Florida on the musical preferences of people diagnosed with major depressive disorder. Contrary to what many assumed, the researchers concluded that such people do not choose sad music to intensify their negative feelings. They do it to relieve themselves from them. They report feeling “calmed” by melancholy music.

I have no doubt that listening to sad music moves people in positive ways. But despite the many studies that have been done, we still don’t know why. The explanations offered by researchers aren’t wrong, but they don’t feel like revelations. They are more like circular arguments – tautologies. Saying sad music is therapeutic isn’t any more informative than saying sad music makes you feel good.

Here’s my explanation: The most important thing we know – deep down at the bottom of our souls – is that we are temporary, that we are going to die. Everything we do to resist that terrible fact and everything we do to deny it is ultimately futile. Believe what we want about the universe and creation, our DNA  constantly informs us that one day our individual consciousness will cease to be.

Music is not only the universal language, it is the most profound language we have. It connects us not just to other people but to our inner selves. Sad music makes that connection. It helps us relax the egoistic impulse to resist the inevitable and come to peace with it.

And that is why sad music makes us feel better. It lightens the load of our denial and lets us understand that slipping into the unconscious universe may not be so terrible after all.

Want to listen to some sad music right now? Here are 19 suggestions:

* “Requiem Mass in D Minor” by Wolfgang Amadeus Mozart

* “Sono andati?” (from La Bohème) by Giacomo Puccini

* “Hallelujah” by Leonard Cohen

* “Hometown Glory” by Adele

* “Nimrod” (from Enigma Variations) by Edward Elgar

* “Back to Black” by Amy Winehouse

* “May It Be” by Enya

* “Adagio for Strings” (from String Quartet, Op. 11) by Samuel Barber

* “Stay With Me” by Sam Smith

* “Adagio in G Minor” by Tomaso Albinoni

* “I Can’t See Nobody” by Nina Simone

* “Come, Sweet Death” by Johann Sebastian Bach

* “Eleanor Rigby” by The Beatles

* Serenade for Strings in E Minor, Op. 20 (2ndmovement) by Edward Elgar

* “I Will Remember You” by Sarah McLachlan

* “Dido’s Lament” (from Dido and Aeneas) by Henry Purcell

* “Candle in the Wind” by Elton John

* Symphony No. 6 in B Minor, Op. 74(4thmovement) by Pyotr Ilyich Tchaikovsky

* “Famous Blue Raincoat” by Leonard Cohen

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Sad Stories in an Age of Pity Porn 

 “The only thing that’s the end of the world is the end of the world.”

– Barack Obama

An acquaintance of mine, a bright guy, has created a large Internet following by what I think of as failure porn – telling stories about how he fucked up prior business relationships, lost gobs of money, and ended up in a darkened street crying.

He’s a good writer. His stories are compelling. But I’ve always wondered if he isn’t worried that this never-ending chronicle of screw-ups might diminish his credibility. Would it make his readers question the sagacity of his advice?

Apparently not. These confessionals have built him a big and loyal following. If it ain’t broke, why fix it?

Still, I’m skeptical of this approach.

On the one hand, it takes courage to admit to one’s mistakes and vulnerabilities. On the other hand, it can come off as an appeal for pity, which I see as a form of weakness. There is virtue in keeping a stiff upper lip.

I suppose the difference is in the intent.

When the purpose of confessing your mistakes and shortcomings is to give your audience hope, it is good. But if the purpose is solely to evoke sympathy, I don’t like it.

An example of the former:

One of the most inspiring presentations I ever heard by a fiction writer was given by Amy Tan, who, rather than give us examples of how skillful she was or how successful her novels were, read her first attempt at writing a short story. It was awful and brave and courageous. But most of all, it was kind. It gave us would-be fiction writers permission to feel that we could one day improve.

An example of the latter:

The other day, I read a blog by an up-and-coming guru complaining that his mother used to wash his mouth out with soap when he said bad words. At first, I thought he was being satiric, that he was poking fun at those overly indulgent parents that denounce such time-honored childhood sanctions. In fact, he was serious. He saw his childhood self as abused. Not only did his mother sanitize his dirty mouth, she occasionally spanked him! “I felt like I had no one to protect me,” he said. He grew up feeling “inadequate” and having occasional bouts of imposter syndrome. “It was all her fault,” he explained.

The very same day, I read an essay in the NYT Magazinetitled “I Was a Low-Income College Student. Classes Weren’t the Hard Part.”

In this mini-memoir, the author described his experience as a student at Amherst College. He was there, apparently, on a football scholarship. All his expenses were paid. But once, during school break, when most kids went home, he discovered that the cafeterias were closed. He was “expected” to pay for his own meals, he was shocked to learn. He managed to do so, he said, by working extra shifts as a “gym monitor.”

This wasn’t his first experience with “hardship,” he said. “Back home in Miami,” we knew what to do when money was tight.” They ate the 29-cent burger special at McDonald’s.

“Without that special,” he said, “I’m not sure what we would have done when the week outlasted our reserves before payday. But up at Amherst, there was no McDonald’s special, no quick fix.”

It gets worse.

As a teenager growing up in Coconut Grove, a teacher once yelled at him after he and some friends were fooling around in the parking lot. “She saw black, boisterous boys and deemed us, and me, less than,”he said. “She didn’t see my drive to succeed.” (Note to reader: I have worked in Coconut Grove. As far as I know, it’s all very posh and very artsy.)

And at Amherst, despite living in privileged circumstances for free, there was emotional trauma and financial pressure from his family. He would get calls from them about “bad news” from his old neighborhood. And sometimes they would write to ask for money.

“Neighborhoods are more than a collection of homes and shops, more than uneven sidewalks or winding roads,” he wrote. “Some communities protect us from hurt, harm, and danger. Others provide no respite at all.”

He put all that cruelty and trauma to work for him as a professor at the Harvard Graduate School of Education, teaching a course he titled CREAM (Cash Rules Everything Around Me). In the class, he examines “how poverty shapes the ways in which many students make it to and through college. Admission alone, as it turns out, is not the great equalizer. Just walking through the campus gates unavoidably heightens these students’ awareness and experience of the deep inequalities around them.”


My mother didn’t spank us. She used hairbrushes. She used them so well, we didn’t have one that still had a handle. My father didn’t use hairbrushes. He used his belt. The buckle end. The wallpaper behind my bed was shredded from it.

But I don’t talk about that because I don’t want you to feel sorry for me. I don’t feel sorry for myself. I didn’t feel abused then and I don’t feel like I was abused now. I was very lucky to grow up in a family where, one time out of the 10 times I deserved a whooping, I got one.

As far as having to be a “gym monitor”(doesn’t sound too grueling) for extra money? I worked full-time all through college to pay for all my expenses, including tuition and books. I worked three jobs in graduate school. It took me a bit longer to graduate, but I did it… and with honors.

I could only wish I grew up in neighborhood as nice as Coconut Grove where a childhood trauma might consist of being yelled at by a teacher. I got my ass kicked regularly before and after school until I got tough enough to defend myself. I’ve been tied up and thrown in holes. I’ve seen friends die from overdoses and killed in war. I’ve been sexually molested. I’ve had a loaded gun put to my head by a car thief and have been shot at by cops.

As for “surviving” on McDonald’s burgers? I wish I could have been so lucky. Fast food was way above our budget. We ate B&J sandwiches for breakfast and lunch, vegetable soup for dinner, and drank powdered milk. And, yes, I wore hand-me-downs, etc., etc.

And as for helping out the family, check out “Shameless” on Showtime if you want to know how finances in our family worked.

Looking back at all that now, I’m nothing but grateful.

So please, spare me your soft-core pity porn. Unless you’ve got a hard story to tell me, speak to someone else about your oppression.

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Even when I’m traveling, I try to get in some sort of Jiu Jitsu practice. When I was in New York a few weeks ago, I took two lessons from Paul Schreiner, one of Marcelo Garcia’s instructors and a great student of the game.

A lesson with Paul is not cheap. It costs as much as three months’ worth of group lessons at your local grappling school. But if you are up for learning, you will have spent your money wisely.

Paul taught me lots of good technique and strategies. But what I came away with are two mistakes I’ve been making more or less consistently for the past 20 years.

These are very basic mistakes. The sort of thing I should have corrected before I got my blue belt. That I’ve been able to perform as well as I have all these years is a miracle. I’ve obviously developed some unconscious compensating movements – but I’ve no doubt that I will be considerably better once I actually correct the mistakes.

I had the same experience when I used to write advertising copy. I’d write a sales letter or space ad that I felt proud of and then test it – only to discover that it didn’t work at all. Analyzing the dismal results, I could see the mistake immediately. It was usually some fundamental rule I broke in writing the headline or the lead.

The same holds true for my personal relationships. Looking back on conversations that went south, I can usually spot a freshman communications error: failing to acknowledge the other person’s perspective or, worse, denigrating it in some way.

It would be interesting to create a series of basic rules for every endeavor – a list of things one knows but often forgets. Let’s see… what would that be for entrepreneurial ventures?


20 Very Basic Business Mistakes That Will Kill Your Start-Up Idea 

  1. Starting a business to serve a market need that doesn’t exist
  2. Spending good money and time making the product before testing the idea
  3. Believing that your great idea is worth a lot of money.
  4. Believing that the market is wrong when it doesn’t like your idea rather than understanding that there is something wrong with your idea
  5. Believing that being first to the market is the most important thing
  6. Hiring MBAs from Harvard and Wharton
  7. Spending money and time protecting your idea before proving the concept
  8. Spending money and time perfecting your product before proving that it can sell
  9. Spending time and money on anything irrelevant to market-testing your idea, such as renting an office, printing business cards, etc.
  10. Underpricing your product
  11. Overpricing your product
  12. Going into retail
  13. Having a business plan that’s based on general advertising
  14. Having a business plan that’s based on raising millions
  15. Having a business plan whose ultimate goal is exiting for big cash
  16. Not paying attention to someone in the industry that takes the time to explain to you why your idea can’t work
  17. Not moving forward with your idea simply because some expert said it can’t work
  18. Believing you have to start with a “vision”
  19. Believing that your business has to “touch” a million people
  20. Thinking you can hire marketing and sales talent if you don’t have it yourself

It took me about 10 minutes to jot down the above list, but it took 40+ years to fully understand it. I’m tempted to say that if I’d had it when I was young, I’d have arrived at success much sooner and enjoyed much more of it.

It’s unlikely that I’ll be starting any new businesses any time soon. (I’ve promised K I wouldn’t.) But this list might be helpful to you or someone you know.

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