05 May, 2009

What sets the rich apart…

What does a great car on the road provoke you to think? Envy at the guy behind the wheel and the disparaging thought that it must have been bought with illgotten wealth… or, that’s great, but it is far beyond me… or, is it – that’s a great car which he is driving and I will drive one like that, one of these days.

If you are thinking like the last guy, you are bound to come into money - the cribbers club be damned! It’s only this guy who will work towards it – thinks like the rich and will be rich. The focus of others is elsewhere and they are bound to pound the pavements for the rest of their lives, without ever courting success. So, what sets the rich apart?

Also refer Who do you think is rich?

Rich do not get there by short cuts

Get-rich-quick schemes do not make anyone rich. Many are tempted by the “amazing returns” some of these schemes promise. But if the scheme and the returns were indeed true, probably the risks associated would be very high. Many do not understand this basic tenet and wander into the territory that angels would fear to tread. Many pyramid schemes, doubling money in double quick time, extremely high interest for deposits, property investments at much below market prices etc., all belong here.
Rich are careful but not fearful. They also know that, if it is too good to be true, it probably is. They do not need the shortcuts for they have a knack of smelling opportunities and cashing in.

Risk taking ability

Risk & rewards are interrelated. When one looks at cashing in on any opportunity, there is always some risk associated with it. Weighing the risks and assessing potential returns is a process that needs to be done while evaluating any opportunity. Risk is not bad. If there are no risks, there would be no rewards too. Taking calculated risks is important. That is what the rich do all the time. Buying good stocks or property at a time like this would be a calculated risk. There is a risk of erosion of value, in the short term. But there is a great opportunity of getting excellent returns in the medium to long-term.

Has the guts to go against conventional wisdom

Rich do things their own way. They consider the options and may end up choosing a path that may defy conventional wisdom. In that sense, they might be pioneers in their own right. They evaluate the options using the knowledge base they have, check against the touchstone of their experience, consult advisors whose wisdom & counsel they value and finally come to a decision, taking into account their feel & intuition on the matter. Unconventional thinking may work well for them as they evaluate things differently and come to different conclusions.
They may be the ones who want to completely change the upholstery and the furniture now, taking advantage of discounts in this downturn – makes sense to them as it had to be done anyway and it’s better at half the cost, would’nt it? They may be the ones taking their families on long holidays now, buying cars, buying homes… Others have bottled up and are conserving cash.

Playing smart

I had read an anecdote on an Argentine billionaire who wanted to get into oil business. There were several established players and he was a rank outsider. He did his homework first. He was aware of a huge beef surplus in Argentina. He then knew about a shipyard in UK that was on the verge of closure. He went there and struck a deal for a supertanker against a delivery of beef from Argentina, which they gladly agreed. He then went to the third country ( oil producer ) and told them that he’ll buy their oil if they engaged his supertanker to ship it to Argentina. And he was in business. Playing smart is how the billionaires got there in the first place. They are masters of that game.

Sprats to catch a whale

Rich understand that they may not know everything. They do not go by hearsay – they have the right people to do everything. They engage bright minds to work for them – be it running their companies, managing their money, taking care of their properties or advising them on business. They spend money to amplify their chances of success. They do that as they know that their wealth pile will be smaller if they tried to do everything on their own. Throwing a sprat in return for a whale, is something they do all the time.

Rich make their money sweat

Ironically, the rich understand the value of money more than anyone else. They evaluate thoroughly before they commit. They spend on things which need to be done or which will help them leverage. For instance, they commit to invest money on a holiday timeshare, where one gets a weeks holiday in a resort for the next couple of decades. They are saving money here in the long-term, though they are paying upfront.
Their money management otherwise is top drawer too. They don’t allow money to vegetate in SB accounts. On the contrary, they manage their money in such a way that they make it run that bit harder – by having overdraft facility ( so that they can invest their surpluses ), investing in debt funds, diverting to short term deposits etc. The savvy among them may write options using their underlying investment. They may raise money with their longterm stock holdings, their properties etc. to fund money needs. In short, they have quiver full of ideas, to shoot with.

Rich don’t crib.

They make things happen. They change their environment with a single mindedness of purpose. Our software industry is truly the poster boy of business. Though their invincibility has come under a cloud of late, the captains of this industry have steered the industry from nothing to international stature – all with little help from the government. People with the rich mindset, make things happen. Sometimes they complain too – the bad roads and lack of accommodation in Bangalore were sore points, IT industry captains complained about. But then, they learnt to live with monumental apathy of the government. Infosys built hotel rooms, many companies invested in state-of-the-art video conferencing facilities & built campuses in other locations. The rich always find a way.
You find rich and poor in every country. Both exist amidst the same system, same opportunities & problems. It’s just their difference in their mindsets that set them apart. Their background, lack of opportunities, lack of capital, education – do not matter for the rich. The poor complain about these all day, though!

Published in DNA Money on 5th May, 2009

No comments: