How much is your attitude about money costing you?
How much more money could you have if you changed your attitude? That’s what we’ll talk about today.
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There’s a dangerous undercurrent running through our society.
What is it?
For some, the mega-million dollar lottery couldn’t have happened at a better time – the day before April Fools’ Day. You probably heard of the prank about the rich lottery winner.
According to the spoof, one of the winners was a Wall Street baron. He is described as an incredibly disdainful man.
The commentary about the rich lottery winner sheds much light on how society views the rich. More specifically, it highlights how wrong the myths are about the wealthy.
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How does the public react? Many people lump all the wealthy together. Like any stereotype, it’s not helpful.
Sure, perhaps 1% of the 1% are like the wealthy winner in the prank. But that leaves 99.99%. What are they like? It’s clearly mapped out in great books like The Millionaire Next Door and The Millionaire Mind, by Thomas Stanley.
We feel it is so important to discuss these myths with you because they are dangerous. You can pretty much guarantee that you will never be rich if you adopt these attitudes.
As bad as that is, these myths hold back our whole economy as well as the economy of the world. You can’t create wealth for yourself or anyone else until you understand how wealth is created.
With that background, let’s look at the myths perpetrated in this spoof.
Myth #1) Ill-gotten gains
The caption to one of the pictures says the winner had been arrested for stock fraud several years ago. Let’s ignore the fact that there’s a huge difference between being arrested and being indicted. And there’s another difference between being indicted and being convicted.
Let’s get done to the real killer. Many people think that the only way to get rich is to harm others. The reality is that most people who amass wealth of any significance do so by adding value in the lives and/or businesses of others.
The article quotes a Wall Street colleague of the winner. This peer is describing how the winner got so wealthy. “He basically buys up a company, fires everybody, puts them all out on the street, then when the stock price goes up he sells everything and just walks away. He’s such an asshole. We all just love him here.”
It begs the question – are rich people destroyers of companies? Yes, in some cases. If the assets of a company are worth more separately than they are as a bundle, then the company should be broken up. Most likely, companies like this are in industries that are experiencing significant disruptions. More jobs and more prosperity will be created if the capital invested in companies like this can be allocated to more productive companies who are capitalizing on the new technology.
But once again, the percentage of people who get rich doing this is incredibly low. The reality is that you’re much more likely to get really rich by building companies up rather than tearing them down.
Myth #2) Mega money
The article says that this rich winner made $900 million last year. How many people in the world have ever made that much money in a year? Almost none.
The reality is that the wealthy are your next door neighbor. They are business owners who most of their neighbors may describe as upper-middle class.
Myth #3) Conspicuous consumption
Yes, some wealthy people do consume conspicuously. The article describes how the winner picked the numbers:
“I went with numbers that have a special place close to my heart. I currently own two Bugatti’s. I have four mansions. I own twenty-three different multinational corporations. I spent thirty-eight million dollars on my last yacht. I own real estate in forty-six different countries and my girlfriend is twenty-three.”
And adds what he will use the money for: “This will help me fix up one of my estates in the Cayman Islands that I’ve kind of let go in recent years. I’ve also been thinking about buying a couple more Gulfstream G550 jets.”
If you want to get rich, the reality is that you will likely have none of those. Thomas Stanley’s recent book, Stop Acting Rich, asserts that the main reason more people aren’t rich is because they act rich before they get rich.
If you want to build a fortune, you will need to spend frugally while you build your business. You won’t live in a mansion. You won’t drive a hot sports car. And you probably are married and have never been divorced. So, even the girlfriend doesn’t fit into the equation, despite popular misperception.
Myth #4) Not sharing fairly
According to the spoof, this hideous winner only paid 2% in taxes on his $900 million of earnings last year. It says that he’s bummed because he won’t be able to escape the full tax on his lottery winners. He says, “I guess for a moment or so I’ll have to join the ‘regulars’ and pay my fair share.”
According to research from The Tax Foundation, the top 1% of taxpayers in the United States earned just under 17% of all income. But they paid nearly 37% of all income taxes.
So, the reality is that the wealthy do earn a disproportionate share of income but pay a much more disproportionate share of income taxes. Wouldn’t we all be better off by focusing on lifting everyone one up rather than constantly demonizing the rich?
Most people want to get rich. So let’s focus on creating prosperity for all. We can do it. We need to make the pie bigger rather than worrying about who has the biggest slice.
Myth #5) Disdain common people
One of the quotes by the wealthy winner talks about the “riffraff behind the counter.” In other words, rich people have a disdain for the common person. It’s a myth.
The reality is two-fold. As we saw in Myth #3, most wealthy people are common people. They live in the same neighborhoods. They drive the same cars.
In addition, the truly rich often sell their products and/or services to common people. In other words, common people are their customers. And they love their customers!
So to be truly rich, don’t act at all like this fake lottery winner. Don’t buy into the myths about the wealthy.
You’re not likely to win the lottery. However, you can create wealth. The most proven path is by owning your own business, watching your finances, and building relationships with people. It leads to BIGG success!
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We were recently walking through the retail business area of our campus – our campus “downtown” you might call it. In the middle of the main block, two storefronts in a row were boarded up.
It’s a reminder that small businesses fail. The dreams of two or more entrepreneurs were unrealized. Lives were disrupted. Money may have been lost.
Like us, you’ve probably heard it over and over again. It usually goes something like this:
“Starting a business is risky. Ninety percent of all entrepreneurial ventures fail within the first year.”
Some people say two years or five years. It doesn’t matter; the number is daunting.
We think the origin of this number stems from The State of Small Business: A Report to the President for the year 1994. We got it via Entrepreneurial Finance by Janet Kilholm Smith and Richard Smith.
The 90% number so often quoted is a misinterpretation of the data. The research actually showed that nearly 91 businesses ceased operations for every 100 startups, on average for the five years from 1990 to 1994.
To understand the misunderstanding, let’s say 100 new jobs were created in the past year while 91 people got laid off. Would we say we had a 91% job loss rate? Or would we say the net gain is 9 jobs?
When it comes to jobs, net gains are reported. When the subject is startups, the failure rate is cited. Why the difference?
Scott Shane takes a different approach in his excellent book, The Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By. His data shows that, if 100 entrepreneurial ventures were started today, the expected number of failures each year would be:
While his numbers look a whole lot better, the odds are still stacked against startup entrepreneurs. But statistics are funny things.
The Bureau of Labor Statistics recently released the results of a long-term study on labor market mobility. You can go to their news release if you want the details. In general, they showed that if 100 people started a new job today, only 67 would still hold that same job in a year. In five years, only 32 will hold the same position in five years.
So the survival rate for jobs is lower than the survival rate for startups!
We can hear the chorus of objections.
Some of these employees may have been promoted.
Others may have elected to take another job – maybe even a better one.
Of course, some were involuntarily let go.
Even then, many of them may have been eligible for unemployment.
In any case, they didn’t have money at risk like entrepreneurs do.
Well said! However, it also highlights what we often ignore when we cite statistics about the failure rate of startups:
Some of the startup entrepreneurs may have ceased operations for a better opportunity – as an employee or an entrepreneur.
And then there’s the statistic we haven’t talked about yet. In fact, almost no one ever talks about it. Its source is the same as the 90% statistic mentioned earlier.
Only 9% of startups cease operations with unpaid obligations, on average.
Few entrepreneurs actually walk away owing money. They may have lost what they invested. However, no one else did. Suddenly, entrepreneuring doesn’t sound quite as risky as we are led to believe by popular lore
Freedom or security is the age old argument. It turns out there are risks in both employment and entrepreneuring. Successful entrepreneurs are masters at risk mitigation.
You can reduce the risk of leaving your job with a little advance preparation. Test yourself against these 10 signs you’re ready to quit your job and start a business. And check out The Entrepreneur Equation by the amazing Carol Roth.
Image in this post from nosheep
