Introduction

Money plays important role in life. Having money gives you independence  and peace of mind. You can’t live a good life if you are spending your days worrying about money. Money determines where you live, where your kids go to school, etc. Wealth is a great equalizer. If you have money, you have power. Wealth is freedom, security, and peace of mind.

But you can’t wear your brokerage account or ride on your bank account. Money is never the end, it’s just a means to an end. Even if you are wealthy, your life won’t mean much if you don’t have good health, good relationships, personal interests, and something that motivates you to get out of bed every day.

Part One

Dollars and Sense

In 2009, Jay, the author’s friend who was an art dealer invited him to dinner because he was worried about his money. Though Jay had made wise choices in his portfolio, his portfolio had taken a hit. Jay was 65 and wasn’t sure if he could retire. The author looks at his financial statement and convinced Jay that he had enough to retire. Jay had nothing to worry about.

Jay was grateful but the author is not sure why. He didn’t suggest any changes to the portfolio. He didn’t recommend any actions. All he did was change Jay’s perspective. That’s all that mattered.

Are the rich smarter than you?

The verdict is clear. The more educated you are, the more money you make. A high school graduate will never make as much as someone who has a doctoral degree. But those who earn more are not necessarily the richest. To determine real wealth, you need to look at their balance sheet – assets minus liabilities.

We associate millionaires with Lexus cars, Rolex watches, big mansions, and country clubs. The ultra-rich fit this description but most millionaires live a completely different lifestyle.

• They live in a house that costs less than $400,000
• They don’t own a second home
• Don’t own a boat
• Don’t spend much on luxury items

It’s the “aspirationals” who buy the Mercedes convertibles and Louis Vuitton purses.  They act rich but are not rich. These people probably make six-figure incomes but their balance sheets tell a different story. If you spend heavily on consumer goods, you can’t save a lot of money. Saving is key to building wealth.

Savvy marketers convince you that you are what you buy. TV and billboard ads reinforce this message. But millionaires see things differently. They became rich not by winning the lottery or by getting an inheritance. They got rich by maximizing their income, minimizing expenses, and investing the difference.  They are not big spenders.

Millionaires value spending time with their kids and grandkids, planning investments, entertaining friends, visiting museums, and, raising funds for charities. The cost of doing these activities is small.  They are disciplined savers. They understand that success is not about flaunting wealth.  They know that being rich depends on how they spend themselves, not how they flaunt their wealth.

Are you losing your soul?

We spend years at jobs chosen by our younger selves. Many employees are disengaged. Work is not just responsibilities, obligations, money, and benefits. Many people are stuck in jobs due to fear – fear that they won’t be able to make it financially if they quit the job that they don’t love.

Ideally, your job should give you meaning. Find a job that allows you to express yourself. That may mean taking a temporary pay cut.  People who are happiest and most engaged are those who are deeply involved in their work or community. The highest reward for your work is not what you get paid but rather what you become.

Impatient optimism..and radical generosity

When you ask Americans what their important goals are, they tell you that they want to get rich. That’s because money gives you freedom and the ability to make choices.

Wealthy individuals like Andrew Carnegie, Henry Ford,  David Packard, and Bill Gates made their fortune in business but are very generous. They use their wealth to help people. They know how to make money but also how to give it away.

You can’t Google this

People today are addicted to their phones. They text and surf too much. When they read, they just skim. They prefer scrolling from page to page. But we all have a choice. Log off and pay attention – to things and people. Studies show that spending time close to nature creates greater attentiveness, stronger memory, and improved cognition.

The only thing that really matters

George Valiant, a Harvard Medical School professor conducted a longitudinal study of Harvard students. His study offers profound insights into the human condition. His study revealed that the only thing that matters in life is your relationships with other people.  Your human connections – to parents, siblings, spouses, friends, neighbors, and mentors – matter. True success is “more about us than me”.

The principle thing

Principles are the collective wisdom of our species. They tell us what is valuable and what is not.  There will always be arguments on doctrine but there is little disagreement on core principles such as honesty, compassion, forgiveness, tolerance, perseverance, justice, humility, clarity, and gratitude.

Ralph Waldo Emerson said it best. “Nothing can bring you peace but yourself. Nothing can bring you peace but the triumph of principles”.

The one thing that changes everything

Trust is the confidence in an individual or an organization. Trustworthiness is universally accepted as part of good character. Its value can hardly be overstated.

The difference between high trust and low trust relationships is night and day. In a high-trust relationship, you can say the wrong thing and the listener will understand you. In a low trust relationship, you have to choose your words carefully and you may still be misunderstood.

Trust must be built up, protected, and valued. It’s the one thing that changes everything.

The trouble with happiness

Every year thousands of books are published on happiness because everyone wants to be happier. But happiness cannot be pursued on its own, it’s a by-product. It is achieved indirectly by producing something beautiful or by making someone else happy. In fact, the search for happiness is the biggest source of unhappiness.

There is no joy without sorrow. Periods of unhappiness are natural and valuable. Contentment saps motivation. Dissatisfaction is a great motivator of progress.

We often equate happiness with money. Studies show that once people are lifted out of poverty, their happiness is not dependent on income but rather on love and meaningful work. Happiness also depends partly on genetics, health, circumstances, and coping skills.

The happiest individuals are those who are busy and unconcerned with themselves.  Real contentment comes from the feeling that life is worthwhile and that it is dissolved into something meaningful and great. That leads to gratitude. Gratitude is an important part of happiness.

The key to personal freedom

Millions of Americans are stretched financially. These folks wanted to improve their circumstances and enjoy the best life has to offer. But conservative spenders don’t lack ambition, imagination, or money. They spent years cultivating an attitude of restraint.

Here are four ways to reclaim your financial freedom.

• We are wired to feel dissatisfied with our circumstances. Without that, early humans would not have survived.
• We tend to want things we don’t really need and won’t appreciate things once we acquire them.
• Stop treating life as an ongoing competition for social status
• Instead of focusing on what you want, try appreciating what you have – your family and friends

We have the choice to make a conscious choice to reject a consumptive lifestyle and live a simple, happy life.

Change your perspective, change your life

We tend to long for an era long gone. We overlook how good life is today. Our ancestors lived a life of brutality, ignorance, and delusions. They didn’t live long either – a man’s life expectancy was in the 40s.

Today’s world is not perfect. But life is certainly better than your ancestors’.  You can improve your life by just changing your perspective.

How your world will, at last, be built

James Allen, the author of  “As a Man Thinketh” had a rough life. At age 15, he was forced to work as a factory knitter and private secretary. It’s a short book you can read quickly. The premise of the book is that your underlying beliefs shape your character, your circumstances, and ultimately, your destiny. Your thoughts create your destiny.

Be careful what you feed your mind as the food you feed your body. Your life will be largely what your thoughts make of it. A man can only rise, conquer and achieve by lifting his thoughts.  Your life will be perfected by inward development.

Cherish your vision and your ideals. You will build your world.

The most important job on earth

You will hear parents often complaining about their kids – their poor grades, lack of respect, bad manners, and a general feeling of entitlement. What you don’t hear is the role parents play in creating this state of affairs. Parents should spend more time thinking about the way they parent.

Parents should educate their kids about the consequences of their behavior. This requires frequent communication and sometimes punishment. The average parents spend three and a half minutes a week in meaningful conversations with their kids. That’s simply not enough.

Teach the kids what’s right and wrong and the importance of hard work. Set an example for your kids. They watch you like hawk. Parenthood is a sacred task. As parents, we should not live with regrets of “should have told them”.

One of life’s greatest miracles

A Jewish proves says that God created moms because he couldn’t be everywhere. Your mother was your first teacher, your strongest supporter, and your first love. She took care of you when you were sick and she carted you to places.  Moms do everything. It’s hard to overstate their influence.

If she’s around, cherish her. If not, cherish her memory. She is one of life’s greatest miracles. She loved you before you were born. After you were born, she sacrificed everything for you.

Power of negative visualization

Norman Vincent Peale wrote the boo, “The Power of Positive Thinking”.  Peale’s idea was simple. Create your world with your thoughts. Accomplishments start with the faith that you can accomplish them.

But humans are insatiable. We are trapped in a hedonic treadmill. We work hard to achieve something. Those achievements satisfy us for a while. But we soon adapt and become dissatisfied again. We go on and set the bar higher. Our life becomes a pastiche of unfulfilled desires.

To solve this, Stoic philosophers came up with negative visualization. Negative visualization is spending each day imagining that you have lost the things that you value most. For example, think that you have lost your job, your house, and your possessions. This may sound bleak but everything in your life is “on loan” to you and could be lost. Seneca, a stoic philosopher, advises us to live life as though each moment is our last.

Negative visualization has a number of benefits. It works well for people who are happy and those who are not. A good time to practice this is when you are standing in line or stuck in traffic. By thinking about the impermanence of everything in the world, you invest in all your activities with more intensity, higher significance, and greater awareness.

How to reclaim your life

We are overwhelmed with clutter in our homes. Some people even move to bigger homes to accommodate more clutter. Studies show that clutter has severe health ramifications – depressions, anxiety, asthma, headaches, moodiness, low self-esteem, fatigue, and low motivation. Clutter steals your space, makes you forget your priorities, takes up your time, and erodes your spiritual self.

Make some hard choices. Dig yourself out of the clutter. No one else is going to help you get rid of your clutter.

Why it’s one of the seven deadly sins

Pride is one of the deadly sins. A lot of families are proud of their family tree. In some cases, they could use some trimming. It’s great to have distinguished ancestors. But the glory belongs to them, not us. Our responsibility is to work hard and become worthy ancestors ourselves. It’s best to have an inch of a dog than a mile of pedigree.

The ruling passion of the noblest minds

We don’t talk about honor much these days. Honor is the good opinion of others – a natural consequence of character, integrity, and fair dealing. Who we are depends on what we are prepared to stand up for. Honor means standing up for the right principles both personally and as a nation. Here are some questions to decide if you have personal honor.

• Do we treat others fairly?
• Do we speak respectfully of those people and institutions that deserve respect?
• Do we act with courage and personal integrity?

PART 2: Wealth beyond measure

Are you uncurious?

Curious people are interested in the world and all the things in it. They seek out new friends and experiences.  As children, we start out with curiosity. But then we are given rules and obligations that constrain our curiosity. We are told to stay away from controversial topics, not talk to strangers, and not challenge parents, teachers, and pastors. By the time we reach adulthood, we are jaded and close-minded. We only talk to and praise people who share our point of view.

Lack of curiosity leads to stereotyping, discrimination, ignorance, inflated confidence, and dogmatism. Be curious because high curiosity opens up multiple perspectives. It leads to better analytical ability, problem-solving skills, and overall intelligence.

When you are curious, you are energized. You are learning and making discoveries. Curiosity makes you interesting.

The road not taken

In the first half of the country’s history, Americans did tough and physical jobs. Today, most of us work in white-collar jobs and rarely do any physical labor. Regular exercise helps fight off cold, flu, reduces the risk of chronic diseases, and slows the aging process. A brisk 30 to 45-minute walk reduces the risk of stroke and the risk of high blood pressure.

Walking has always had a close association with poets, philosophers, and spiritual leaders. A good vigorous walk will do more for unhappy people than all the medicine and psychology together.

They make us all richer

Art is the quintessential human activity. Art objects are the best creations of the human mind. Art teaches you the significance of life.  Art helps you see things in new ways. It expands your perceptions and mental capacities. It clears the mind and enlarges the soul.

Artists make our life richer. They create objects of beauty and meaning that have the power to move us. Going to an art museum can be a life-enhancing and spiritual moment.

Are you ready for the grand tour?

Travel broadens the mind, increases tolerance, and connects you with fellow human beings. Travel introduces you to exotic foods, great architecture, and jaw-dropping landscapes. Exploring the world is like attending a classroom without walls. Have patience and curiosity. Travel will fill you with surprises.

Foreigners are not people who dress oddly, eat bizarre foods, speak in incomprehensible languages and drive on the wrong side of the road. Traveling abroad teaches you acceptance and humility. But travel doesn’t always have to someplace exotic. There are plenty of places in the US that you can visit to broaden your perspective. Whether you want to visit all 50 states or all seven continents, your travels will give you a new way to see things.

The quintessence of life

Many of us remain interested in music. But music is the universal language of emotion that bypasses the intellect and tackles the heart directly. Music is deeper than pictures and words. It can move us, lift our sports, change our mood and get us dancing.  Appreciating classical music is a skill that can be learned. All you need is a little attention, some imagination, and abstract thinking.

What women really want?

This is a question that men have tried to answer for centuries. But 99% of women like chocolate. Chocolate is the near-perfect food. Eating chocolate reduces your risk of stroke. It improves blood flow and blood pressure. It has antibacterial ingredients to fight tooth decay. Chocolate also slows the aging process.  Chocolate is a luxury anyone can afford. Avoid milk chocolate as it is high in calories, saturated fat, and sugar.

An incandescent drop of American fire

Hummingbirds are a joy to watch. They are the smallest warm-blooded creature on earth. They have the highest metabolic rate of any creature on earth. They are only able to store enough energy for the night.  Since they burn calories furiously, they must refuel often.

Hummingbirds migrate by late October to Central America. They make the 2,000-mile migration with very few places to stop. Hummingbirds are a reminder that the universe is mysterious and sublime, that life is rich and beautiful, and that most exotic things can’t be owned.

The most civilized thing in the world

The US is now one of the world’s leading wine-producing, wine-consuming, and wine-exporting countries in the world. All 50 states in the US have wineries.  President Thomas Jefferson loved wine and had a big impact on the future of viticulture. He loved drinking wine for pleasure.

Winemaking is simple but the process has been refined over thousands of years. A bottle of wine is made for sharing – that can’t be said for a bottle of beer.  Wine is a powerful expression of culture as literature, painting, or music. Drinking good wine with good food with friends is one of life’s most civilized pleasures.

How to eat like a zen master?

Have you ever sat down to eat and in a few minutes the sandwich has disappeared? But you are so consumed by your plans for the day or your conversations that you never actually tasted the food.

Vietnamese monk Thich Nhat Hanh insists that we live mindlessly and on autopilot. We are always planning for the future. We miss our appointment with life.  He says that you can change your mealtime into a spiritual experience by taking a few simple steps.

• Honor the food. Turn off the TV and remove all distractions – laptop, cell phones, etc.
• Engage all our senses – notice the color, smell, and texture of the food.
• Serve modest portions – eat small portions. They are healthier and less wasteful.
• Savor small bites – this allows you better enjoy the taste of the meal
• Eat slowly – this allows you to avoid overeating. Set your fork down between bites.
• Eat regular meals – skipping a meal makes you prone to yearn for fast food and vending machines. Plan and stick to regular meals.
• Eat a plant-based diet – It’s not just compassionate towards animals but it’s also healthier.

Follow these steps and your meals will be more enjoyable. You will also eat less. Studies show that reducing calories is key to longevity.

The sublimest activity of the human mind

Poetry is language at its most distilled and powerful. Yet only 8.3% of American adults read poetry in a year.  You don’t have to struggle with difficult poems, start with the simplest haiku. Haiku uses simple imagery to create images that heighten our awareness.

Drunken Money Ice Cream ..and the wisdom of Thornton Wilder

The author describes his visit to New Orleans where enjoyed listening to music and eating great food. What does it have to do to search for a good life? Enjoy what’s on your plate. Take it in.

The lost art of conversation

The average American watches four hours of TV every day. That’s two full months in a year. We are surrounded by cell phones, iPods, iPads, video games, and the internet.

Before the age of electronic media, people spent time taking long walks, learning musical instruments, fishing, and playing chess. They also read books – to learn and to be entertained.  People also engaged in conversations. They spent talking about their interests and argued about the issues of the day. They told each other their dreams and let those around them know how they felt about them.

What success really means

Kenny Rankin was a jazz singer. He wasn’t as famous as Michael Jackson. He rarely made the news like the big stars. He mostly played in small clubs and bars.

Kenny didn’t have a pretentious bone in his body. Despite his talent, he spent most of his career in obscurity. But he spent his life exercising his talent, doing the things he wanted to do. He never took a single singing lesson in his entire life.

What are your sins of omission?

Sins of commission are well known. What about sins of omission? We all know that it is wrong to drown someone. But what if you watch someone drown and don’t do anything?

Research shows that our decisions about whether we act are based on our upbringing, personal values, and culture. Our culture is based on individualism – a self-centered perspective where we figure out what is best for us, not what is best for everyone.  Our indifference is reinforced by the popular perception, “People get what they deserve”.

There is no cure for moral indifference. Tickling someone’s conscience is not always going to result in behavioral change.

The beauty of flowing down

Many people are financially independent but not wealthy. That’s because their schedules are packed and they have no free time. It’s hard to find a balance between achievement and enjoyment.

Slowing down has a number of benefits. Doctors say that slower breathing is one of the simplest ways to better health. Deep breathing lowers stress and reduces systolic blood pressure. Eat slowly and you will eat less. There is a lag time between stretch receptors in the stomach and your brain getting the message that you are full.  Slowing down prevents accidents. Slowness can even be a part of successful investing.

Slowing down allows you to appreciate the beauty and enables you to connect with people around you. It allows you to enjoy what you have before it’s gone.

When entertainment becomes art

The author found jazz music in his 30s but was immediately hooked. Jazz music can transform your environment and change your life. Yet very few American adults watch a jazz performance.  Refresh your music collection with jazz music or even better, stop by your local club and hear jazz music.

Do you have a secret?

Secrets are fascinating. Everyone has them. Frank Warren started a project in which he asked people to send in their secrets. The secrets people sent in varied – some were heartbreaking, some insightful, and some just nutty. These secrets show that we are all on a spiritual journey, even when we feel most lost.

Are you amusing yourself to death?

Watching TV is not good for you. Is TV more fulfilling than what you would be doing if you weren’t watching TV? Most programming is mindless junk. The time you spend watching TV is the time you are not spending pursuing your goals, living out your dreams, or just interacting with friends and family.

In praise of idleness

Americans idolize hard work, industry, and self-sacrifice.  But many cultures encourage idleness. Success is not always measured by achievement. Too much work leaves us culturally impoverished and spiritually indigent.

Downtime is an energizing force. It allows you to clear your head and gives you strength. It improves concentration, strengthens immune systems, and improves skills.

Best lives are not lived in a hurry. The greatest end of living is the true enjoyment of it.

The tyranny of the new

Newspapers often swoon over a sensational new artist insisting that his work expresses the deepest human emotions. But the works of Mozart and Shakespeare are truly magnificent. But no newspaper or talent agency has the incentive to bring their work to your attention.

Your access has never been easier. Your library will give you access to the greatest books free. Not everyone can afford the fine French wine or the best sports car, but all of us can experience the greatest products of human imagination for little to no cost.

Why you should know “The Indispensible Man”

George Washington led the right against the forces of England and won our independence. He was elected President for two terms. He presided over the Convention that drafted the American constitution. But his greatest act that made him famous was his resignation as commander in chief after the war. This was completely new. In history, great generals had received material and political rewards in line with their achievements. They went on to acquire more power.

Washington also resigned from the Presidency and traveled far and wide. That’s what cemented his greatness – he asked for nothing and took nothing.

Revelation at 4500 ft

The author took a trip to Rancho Santana on the Pacific coast of Nicaragua. He took an arduous nine-hour round trip up the volcano that is 4500 ft above sea level.  While the hiking team’s clothes and shoes were ruined by mud, they enjoyed the beautiful view from the top. They even swam in the cold lagoon. His friend compared this experience to going to a church.

Part three: Knowing and believing

Tolstoy’s forbidden book

Leo Tolstoy was one of the great novelists of all time. By his mid-40s, he was wealthy, in good health, and attained fame. But he felt that his life was meaningless.

For 15 years, he researched the greatest spiritual thoughts from Epictetus, Marcus Aurelius, Lao-Tzu, Buddha, Pascal, the New Testament. He published his work called “The Calendar of Wisdom” in 1912. But the new Soviet Regime banned the book due to its spiritual and religious quotes.

The book emphasizes that we only live for a short time but that knowledge is limitless. The most critical knowledge is not a particular skill or discipline but rather the wisdom about how to live our lives.  Don’t compare yourself to others, compare yourself with perfection. The place we occupy is not important but the direction we move is. Strive for goodness without any expectation of rapid success.

A shameless veneration of heroes

Heroes provide us with vivid examples of excellence.  They show us how the human spirit expresses itself. They inspire and galvanize us. We may not lead like George Marshall or paint like Rembrandt,  but they provide brilliant stars to steer by.

A path to personal freedom

Buddhist principles make you a better person. Buddhism is a philosophy, a code of ethics, and a way of life. Buddha recommended a middle way between extravagance and asceticism. He taught the world that wisdom begins with recognizing four noble truths.

• There is suffering in every life.
• Our suffering is caused by attachments and cravings
• If we end attachments and cravings, our suffering will end.
• You can achieve this by following the Noble Eight Fold Path to enlightenment.

Here are the basics of the Noble Eight-Fold Path.

1. Right view – see life as it really is, not as it appears
2. Right intentions – approach others with compassion and understanding
3. Right speech – speak the truth in a non-hurtful way
4. Right action – Behave so as to harm no one
5. Right livelihood -Earn your living in a legal and nondeceitful way
6. Right effort – Strive to improve your behavior and character
7. Right mindfulness – Be awake to the present moment

Buddhism teaches you that contentment is determined more by your state of mind than external circumstances. Many of us fail to recognize how much of our happiness is determined by the way we choose to perceive our situation.

Your greatest risk

Ask anyone want he or she wants out of life. You will hear the familiar – a great job, a loving family, a nice home, or a comfortable retirement, But most people have never paused to consider their grand goal in living. But ancient Greeks and Romans obsessed over these questions. They wanted to discover how to best live. Their answers evolved in Stoicism, a philosophy that is not widely understood today.

The word stoic is used to describe someone unmoved by joy or grief. A stoic is someone without passion. Ancient Stoic philosophers gave a framework to heal suffering and achieve tranquility.

• Contemplate the transitory nature of the world around you
• Live in the present without fear of future
• Banish negative emotions
• Live according to your own nature
• Pursue virtue
• Seek courage and wisdom
• Live simply and frugally
• Master desire, to the extent you can

Instead of pursuing and enjoying what matters most, we may wake up one day to find that confusion and distraction have squandered your life. That’s the greatest risk of all.

Are you part of “The Great Conversation”

Perennialist believe that you should learn and pass along to your children and students those things that are of everlasting importance. “The Great Conversation” is a broad discussion of what constitutes the best life. It’s a conversation that is evolving, it’s never static. Perrnialist understood the connection between compassion and successful living.

Absorb as much as you can of 3000-year heritage and take a minute out of your busy life to ask, “Am I becoming the kind of person I want to be?”.

A 2600-year-old manual for living

No one can tell you with certainty what financial markets can do. That’s the beginning of investment wisdom.  The Tao Te Ching is a 2600-year old collection of brief poems that describe a vision of what our lives would be like if we lived in harmony with the way things are.

Tao Te Ching talks about the wisdom of inaction and what you cannot change – the state of the economy, the death of a loved one or the behavior of adult children. Taoism offers an alternative view of abundance – one that maintains dignity over acquiring social position and enjoying free time over acquiring possessions.

Stop feeding your ego and enjoy the fruits of your labor. The experience of inner peace is the true gauge of accomplishment. The art of abundance is often a matter of recognizing, appreciating, and celebrating life as is.

If you knew what Jim Brown knows

Jim Brown is one of the best athletes ever. He liked to wager on his tennis matches. On one occasion, a man approached Brown about a wager on a tennis match with his nine-year-old son. Brown agreed but as soon as he got on the court, he realized that he had made a mistake. The kid he was playing was Andre Agassi.

Every successful investor develops an abiding sense of humility – a respect for the unknown and the unknowable.  Life is one long session in humility. It’s natural to seek experts to guide us. But outside of physics and chemistry, predictions need to be taken with a grain of salt.

The noblest expression of the human spirit

Truth is the noblest expression of the human spirit. Yet it is always in short supply. With TV, radio, and the internet, people watch and read whatever pleases them. It’s called selective exposure. Rather than dealing with the unpleasant sensation of having our beliefs tested, we simply stay clear of information that contradicts our beliefs.

What we believe to be true is dependent on our upbringing and the society we live in. Truth comes from either tradition, authority, or by reason and evidence.

Science does an excellent job of telling us what is. It cannot tell us what ought to be.

The Art of living consciously

Dr. Nathaniel Brandon, a leading authority of self-esteem, believes that our greatest calling is to live consciously. True satisfaction and peace of mind are found only when our values, interests, goals, and behavior are in alignment. For example,  let’s say that a young father views the relationship with his child as a high priority and watching TV as a low priority. But he spends most of his time watching TV. His values and his behavior are out of whack.

Conscious living means being present to what are doing when you are doing it. When you are in the office, focus on your work.  Brandon suggests sentence completion exercises. Write down 5 or6 endings rapidly, without pausing to think.

An example would be: If I bring 5% more consciousness to work,

• I’d be more productive
• I’d procrastinate less
• I’d spend less time on email, etc.

How to let your life speak

The Quakers have a fascinating history. They originated in the mid-seventeenth century in England. They left for the New World in search of religious freedom but didn’t find it among New England Protestants or the Puritans.

The Quakers practiced simplicity in all things – including modesty and plainness in dresses. Weddings were a simple exchange of vows. They never viewed scientific inquiry as a threat. It was just another part of their search for greater understanding.  Take the Quaker wisdom – live by example, let your life speak.

A legacy of Inspiration

Mohandas Gandhi is remembered for a lot of things – fighting against discrimination, poverty, and civil rights. But is best remembered for his contribution to humanity’s inner life.

He lived a simple and unassuming life. He wore modest clothing and ate plain vegetarian food. He fasted for self-purification and as a protest. He also dedicated his life to the purpose of discovering the truth – something that could be revealed only to those with a deep sense of humility.

The only thing new in the world

We think that our future looks perilous. But our ancestors have seen worse. In the 1930s, businesses struggled, unemployment was high and stock prices plunged 89%. There were draughts, world wars, and many other struggles.

Yet Americans have always risen to meet the challenges. History reminds us of the great sacrifices and triumphs of those who came before us. It may look like we are facing tough economic times but the future has always been fought with uncertainty. History gives us a sense of proportion. It tells who we are and where we have been. In difficult times, courage, determination, and patience matter.

The university on your shelf

Books do more than decorating a room. They give the room personality. A room without books is a body without a soul. You will learn more about someone based on what they read than by talking to them.  Unfortunately, many have given up on reading.

Everyone should start collecting books and have a bookshelf. Warren Buffett and Charlie Munger read every day for hours.  Whether you are seeking the practical, spiritual or theoretical, there are great books on the topic.

We are all Greeks now

Ancient Greece was filled with discoverers and innovators. Pythagoras proved the math laws. Euclid worked on geometry, optics, and music theory. Socrates, Plato, and Aristotle founded Western philosophy. Alexander set out to conquer the world.  Greeks also invented the idea of freedom.

The Greek legacy of reason, investigation, and individual freedom led to the remarkable ascendancy of the West. We are all Greeks, said British poet Percy Shelly.

The wisdom of Hillel

Jerusalem has more history than some continents. It’s home to dozens of dozens of sacred sites and a perennial destination for millions of religious pilgrims. The great rabbi Hillel argued that any interpretation of the scripture that bred hatred or disdain for others was illegitimate.

Religion aligns us with our moral axis. It allows us to live with realities that don’t have any easy explanations and problems that can’t be solved: mortality, pain, grief, despair, and outrage at justices, poverty, and cruelty.

We will always fall short as individuals and nations. But the search for spiritual attainment is Jersusalem’s unique gift to the west.

Meditations of the Philosopher  – King

Marcus was the emperor of Rome for two decades until he succumbed to the plague. When he had quiet moments, he composed one of the great works of Stoic philosophy, known today as his Meditations.

The book is an inner dialogue. Marcus wrote the book for himself, not posterity. Here’s a sampling.

• If you are pained by the external things, it’s not this that disturbs you, but your own judgment about it.
• Wisdom and right action are the same things.
• Kindness is unconquerable, so long as it is without flattery or hypocrisy.
• The noblest way of taking revenge on others is by refusing to become like them.

Marcus wrote in the Meditations, “Stop philosophizing about what a good man is and be one.”

Part Four: Matters of life and death

Americans are deeply religious people but are also deeply ignorant of religion. A significant percentage of the population feels that religion is under attack by modern science. We don’t think twice about getting on a place and crossing the Pacific. That’s because we know that science works. The same goes for medical treatments. But when it comes to modern cosmology or evolutionary biology, many pretend that scientists don’t know what they are talking about. Religion that is afraid of science that dishonors God.

Discovering a new sense of the sacred

The scientific enterprise is not just about discovery. It’s also about humility. Science promotes knowledge and critical thinking. Conclusions are based on observation, experimentation, and replication.  Scientific conclusions are never final, they are always subject to revision.

In 2000, NASA launched the Kepler Space Telescope to discover planets outside our solar system. Space exploration gives us awe and wonder. It is also a reminder that we belong to a planet, a galaxy, a cosmos that inspires devotion as much as discovery.

The highest of arts

A large portion of the population feels like it’s not really living the life. They are caught up in boredom or existential angst. Philosopher Thoreau believed that as we get older, we fall into a routine, gradually and mindlessly beating a track for ourselves. We lose our gusto for living.

Thoreau believed that personal peace and serenity are found only in communion with nature. Nature is key to spiritual attainment. Nature offers the solitude to think about how we spend our time. A successful life is built on simplicity, independence, magnanimity, and meaningful work.

We are only here for a visit. Life should be ecstasy.

Emerson: The quintessential American

Emerson is America’s own philosopher, our first literary giant, the father of the environmental movement, and the founder of the American religion – a distinctive blend of individualism and self-reliance. His interest was in the principles that unite us. He, like Thoreau, believed that solitude in nature leads to true enlargement of mind and spirit.

Emerson recognized that most of our difficulties start between our ears. The key to resolving problems is to upgrade your thinking. He also warned about the trap of materialism. Financial success is never in the amount of money we have but in the relation of income to the outgo. Emerson said, “Nothing is at last sacred, but the integrity of our own mind.”

The life you can save

Today many children around the world die because they don’t have enough to eat. Others die from easily treatable conditions like malaria, measle, or diarrhea. In the West, we think that we are living a morally good life if we are not doing anything to hurt anyone else. But what are we doing to alleviate the suffering of others? It’s not just a matter of ethics, it’s a matter of conscience. If you are considering donating, consider the International Rescue Committee (IRC).

Coming of age in the Milky Way

Seven decades of observation and experimentation reveal that the universe kicked off with a titanic explosion approximately 13.7 billion years ago. That’s a tough thing to conceptualize. Explanations of our origin strike a deep chord in most of us. Astronomers, physicists, and cosmologists often are in wonder about the scale, the majesty, the harmony, and the elegance of the universe.

The literature of truth

The number of scientifically literate adults in the US is about 20%. Without minimal scientific understanding, we can’t possibly have informed opinions about important issues. Fortunately, it’s not that hard to change scientific illiteracy. Subscribe to the Scientific American magazine, rent the BBC documentaries such as those made by Attenborough or read The Canon – A Whirligig Tour of the Basics of Science.

Science is a window of truth. Science helps us evaluate the claims, the medical advice, and not fall to pseudoscience.

Your connection to everything

We often confuse science with metaphysics. Metaphysics, which transcends disciplines, investigates the nature of being. Science is more pedestrian, collecting data through observation and experiments, developing theories to explain the evidence, and subjecting claims to scrutiny through peer review.

Do science and religion really need to square off? Science documents the factual character of the natural world, and develops theories that coordinate and explain the facts. Religion delves into the meaning and values – subjects that the factual domain of science might illuminate but can never resolve. Science will tell you the age of rocks and the religion the rock of ages. Science tells you how the heavens go, and religions tell you how to go to heaven.

Astronomer Carl Sagan saw irrationality and dogmatism as enemies of both science and religion. He found amazement and humility in the investigation of the heavens, as well as a profound sense of the sacred.

The difference between knowing and believing

Science is a tool for understanding the natural world and advancing technology. It helps us distinguish what we might like to be true from what is probably true.

Religion, on the other hand, addresses more questions beyond the purview of science – questions like “Should I do this?”, and “What will happen if I do”. It underscores the primacy of love, the brotherhood of men, and the value of the individual.

Yet, at their best, both emphasize the important principle – one that scientists and theologians can equally embrace: a deep sense of humility.

Lessons of Haiti

Haiti is the poorest country in the Western hemisphere. An earthquake left hundreds of thousands dead or injured, and millions homeless.  It’s not just Haiti though. Hurricanes, death quakes, and other natural disasters occur with depressing regularity throughout the world.

These crises help put our own world in perspective. The security of your job, the performance of your 401(k), and the size of your bank account are small compared to the trauma of having a child or a grandchild trapped inside a collapsed house.

Your trip to the “Undiscovered Country”

Afterlife is a key component of every religion. The opposing idea is that “when we die, and that’s it”. 80% of Americans believe in some form of afterlife. In non-Western cultures, they approach 100%. There is something reassuring about cosmic justice – the idea that we will each be held to account.

Skeptics of the afterlife wonder why we would fear death or mourn agonizingly the death of loved ones if there is an afterlife. We don’t have proof of an afterlife.

Accepting rather can ignoring death can cause a radical shift in perspective. You realize how important it is to live fully rather than face the pain of not having lived.  Meditating on our health helps you develop an attitude of equanimity, an acceptance of your ultimate fate.

The beginning of wisdom

Our greatest inhibitor is our fear of failure. It can paralyze us, keeping us from applying for the promotion, taking the risk, meeting the girl, asking for the order, and experiencing the unknown. It’s always easier to stick with the safe, uncomfortable, and unfamiliar.

Yet, every time we choose safety, we reinforce fear. We nurture it. Only when we overcome this debilitating emotion we really begin to live. When you overcome fear, you get freedom from anxiety, freedom from a life unlived. Fortune really does favor the brave.

Of lost souls and lucky stiffs

Obituaries don’t always cover the most important milestone. An obituary is not just a notice of death, it’s a story of a life. Summing up life is an awesome responsibility. The goal is to honor the deceased, inform the community, to help families learn more about one of their own members and perhaps about themselves.

Obituaries don’t talk about the pay raises, the financial statements, or the Rolex Presidential. They remind us of the importance of family, friendship, and community, and inspire us to emulate the best qualities of the deceased.

How to pull the universe out of a hat

Science has a long history of upending our nations about the nature of reality. Only in recent times, we have known that time is relative, that the universe is expanding, and that all living things share a common ancestor.

Steve Hawkins, a professor at the University of Cambridge for 30 years, and a recipient of many awards and honors in science says that we live in a multiverse – ours is one of many universes that appeared spontaneously out of nothing, each with different laws of nature. Cosmos does not have a single existence or history, but rather every possible history.

There is room for faith to coexist with reason when it comes to the question about the beginning of the universe. Any discussion of the ultimate origins must begin with a basic acknowledgment – we simply don’t know.

It makes everything meaningful

Death is part of the tapestry of life. We couldn’t live without it. It’s sad to contemplate leaving this world or losing someone. But at some point, we become old and frail. Life loses its quality and death becomes a blessing.

Without death, we couldn’t honor those who came before us. We couldn’t set goals. We couldn’t prioritize our lives. Time would not be precious. Death separates the meaningful from the trivial.

The truth about myths

Myths have existed across all times and cultures. Human beings invented tales that placed our lives in a larger setting and gave them meaning and direction. The hero myth is designed not just to provide us with an icon but to allow us to tap into a vein of heroism within ourselves.

Myths are stories of our search through the ages for truth, for meaning, and for significance. We need for life to signify, to touch the eternal, to understand the mysterious, to find out who we are. Myths convey universal truths. They are about self-discovery and self-transcendence, one’s role in society, and the relationship between the two.

Your place in “The Great Story”

Paleontologists estimate that Homo sapiens emerged from East Africa roughly 200,000 years ago. Since then we have claimed from savages to scientists. We have had notable developments in the following areas.

• Speech
• Fire
• Conquest of animals
• Agriculture
• Social organization
• Morality
• Tools
• Education
• Writing
• Mathematics

Big History: The Bing Bang, Life on Earth and the Rise of Humanity is a 48-lecture course taught by David Christian. Big History is a crash course in your connection to everything – other people, the natural world, the rest of the cosmos. We are united, not just as a global community but as a cosmic one. Big History offers a vital perspective – a map of your place in space and time. We will never stop asking who we are or where we are headed, it’s pretty mind-blowing to discover where we have been.

Seven principles of spirituality

Here are seven areas where people can agree on spirituality

1. You recognize the eternal mystery. When did time begin? Where does space end?
2. You are in the genuine sense of awe. The Milky Way is bigger than our brains can imagine.
3. You appreciate the sacredness of life. No one knows how life began or how widespread it may be in the universe
4. You are profoundly grateful for your life.
5. You have a well-developed ethical sense. On morality, there are two primary rules – treat others as you would be treated and when you say you are going to do something, do it.
6. You strive for higher consciousness and wisdom. It means striving to live the best life while also recognizing the limits of your understanding.
7. You seek a life of meaning. What is the purpose of life? Where do we find meaning?

If you follow the seven principles, will that make you a spiritual person? Maybe.  Spirituality is not unlike Justice Potter Stewart’s famous litmus test for pornography: we may not be able to define it. But we know it when we see it.

The Psychology of Money –  Book Summary

Our personal experience creates our reality

Our personal experience with money guides how we think. But our personal experience is a small part of what happened in the world. If we had lived through the great depression, we may view the world differently compared to someone in Australia. a country that has not seen a recession in 30 years.

The challenge for most investors is that no amount of reading or open-mindedness can simulate the power and fear of uncertainty. Most investors believe that they can easily hold stocks through the next recession. But when their stocks are down 50%, they struggle with fear and uncertainty. We are all newbies – there is a lot we have not seen.

Role of luck and risk

Most of us attribute our financial outcomes to the quality of decision-making. But luck plays a big part too. Investors like Warren Buffet may be beneficiaries of luck and those who lost their fortune may have been victims of risk.

Housel tells the story of Bill Gates. He was lucky enough to go to a school that had a computer. He was good friends with Kent Evan, who was in some ways smarter than Bill Gates but unfortunately died in a mountaineering accident before graduating high school. He could have been one of the founders of Microsoft if not for fate.

Never Enough

As we acquire more money and assets, we want to make more. We move the goalposts and try to keep up with the Joneses.  Social pressure is real. Rajat Gupta (ex McKinsey CEO) and Bernie Maddoff too much risk that destroyed their reputations because they just couldn’t be satisfied with what they had.

Compounding is powerful

Warren Buffet is worth $84.5 billion but he made 96% of that money after his 50th birthday. Buffett started investing when he was 10. Buffett was an exceptional investor but it was time that did the heavy lifting for him and made him a billionaire. If he had gone about like a normal person and didn’t start investing until his 20s, even with his extraordinary returns he won’t be a billionaire.

Making Money vs Keeping Money

Making money and keeping money take two different skill sets. To make money, you must be willing to take risks. But to keep the money you earned, you must be frugal and paranoid. You need a survival mindset to keep the money you earned. Plan to be financially unbreakable and let compound interest do the magic.

Understanding long tails

Not every one of our financial decision is going to be good. In fact, a majority of our decisions may be bad and we may still come out ahead. That’s because long tails – the farthest distribution of outcomes have a big influence on your financial outcomes. What we do as investors day to day may not matter but what decides our investment returns is what we do during a small number of days (eg. during market crashes, recession, etc.)

Controlling your own time is the best reward

The wealthiest person is not the one that has the most money but it is the one who can get up and choose to do whatever he wants. Having control over our life gives us more satisfaction than having material things. Big salaries, houses, and boats can’t match the emotional high you get when you can set your own schedule.

Ferraris are not worth it

Showing off wealth by buying an expensive car is not worth it. Most folks driving these expensive vehicles are looking for respect and admiration, which are best acquired by showing humility, kindness, and empathy.

Wealth is what you don’t see

We love to spend money on things that make us look attractive. But real wealth is income that is not spent. Wealth is the nice car or house that we don’t buy. The hidden nature of wealth makes it hard to imitate those who are wealthy.

Save money – It’s the one thing you have complete control over

How much wealth we have is not determined by our income or investment. Our wealth is primarily determined by your savings rate and we have complete control over how much we save. The more we limit our expenses, the more we can save. Once your basic needs are met, maybe you need a bit more (comfortable basics). Beyond that, any spending is just a reflection of our egos.

Our savings give us flexibility and control over time. With a high savings rate, we can take a lower-paying job or wait to make the right investments.

Being reasonably rational is enough

We humans don’t need to make optimal decisions all the time. A complicated spreadsheet may help us arrive at the perfect solution but we won’t be able to sustain that decision for long (eg. investments, habits, etc.). Aim for reasonable decisions and we can stick with those for the long run.

History is a misleading guide

History is the study of surprising events. Yet we use history as a guide to the future. When it comes to investing, future economic events that are likely to move your portfolio the most are things that history will not guide you. History is an imperfect guide because it doesn’t consider the structural changes and innovations that have happened since events of the past.

Allow room for error

Benjamin Graham called it the margin of safety. It’s allowing room for error in case your decisions are wrong.  The extra margin allows you to stick around long enough for the odds to turn in your favor. Avoid single points of failure. If you are relying on one thing, remember that it will eventually break. A good example is relying on a single paycheck for short-term needs with no savings.

We change a lot

Long-term planning is difficult because our goals change more often than we think. We are very poor at forecasting what our future selves will need. We are good at realizing how much we have changed in the past but still underestimate how much we are likely to change in the future. As an example, young people pay a lot of money to remove tattoos that they got as teenagers (and paid a lot of money for it).

Everything has a price

If we want to be a good investor, the price we pay is volatility, fear, doubt, uncertainty, and regret. Only by paying this price, will we get good returns. Everything in life has a price and they are not always in dollars. Find out what the price is for what you want, and be willing to pay that price.

What game are you playing?

Everyone is playing a different game in the market. A day trader is playing a different game from someone who primarily invests in index funds.  People have different goals and time horizons. Don’t be persuaded by the actions of others. Stay true to your goals. If you are investing on a 30-year time horizon, short blips such as recessions or poor earnings don’t matter as much.

Pessisimism is seductive

Pessimistic arguments sound smarter and make intellectual sense. Pessimists tend to extrapolate the present without assuming that markets adapt. So optimism is the best way because the world does get better for most people over time.

Stories are powerful

The more we want something to be true, the more we are willing to believe a story. We all have an incomplete understanding of the world. But we form a narrative to fill the gaps. Stories give us an illusion of control.

When I first read the title of the book and Galloway’s bio, my first question was, “How is a business school professor and an entrepreneur qualified to write a book on happiness?”.  After reading the book,  I believe that Galloway brings a unique perspective to the topic of happiness based on his experiences that are very different from what you find in most self-help books written by psychologists. The book is divided into small, easy-to-read chapters. The author shares interesting real-life anecdotes that keep the reader entertained.

The Algebra of Happiness – Book Notes And Summary

Introduction

Scott Galloway teaches brand strategy courses at NYU’s Stern College of Business. In the last three-hour lecture of his class called “The Algebra of Happiness”, he talked about love, success, and the definition of a life well-lived.  In May 2018, he posted an abridged version of his course on YouTube and it received millions of views in the first couple of weeks. That’s when Galloway decided to write a book on the topic.

Galloway attended UCLA but he wasn’t a very good student. He graduated in five years with poor grades. But he was able to get a job in investment banking at Morgan Stanley, partly motivated by his roommate who wanted to be an investment banker.  After a few years, he attended Berkeley’s Haas School of Business and got an MBA. While at Berkley, he got interested in brand strategy and founded a strategy firm.  He also incubated several e-commerce firms and hit a home run when one of his firms, Red Envelope, went public in 2002.

Here are few key insights everyone should understand about life and success.

• From your mid-twenties to your mid-forties – work and stress take a toll. But life gets better from your fifties as your children grow up and you start recognizing that your time on the planet is limited.
• When you are young, “balance” is not what you need. The slope of trajectory for your career is set in the first five years after graduation.
• A good indicator of success is how much time you spend sweating every day. Put in the work in your younger years.
• Choose your spouse carefully. Find a real partner to share your struggles and successes – someone who will soften the rough edges, someone who’s a good teammate, and someone whose goals and approaches to life are in sync with yours.
• Where you live matters a lot. Your zip code can be your destiny. When you are young, get credentialed and move to a city. It gets difficult to move when you are older.
• Money brings you happiness up to a point. But once you reach a certain level of economic security, the correlation between money and happiness flattens. Find out what you like – whether it’s cooking, wiring, playing the guitar, or mountain biking. Hobbies add a texture to your personality.
• Compound interest is the most powerful force in the universe. Put money away and invest early and often. Compound interest works not only for money but also for relationships. But a little effort every day into your relationship to make them flourish.
• Economic security is not your salary. Stay invested in the stock market because you are not smart enough to jump in and out of the market. Being rich means your passive income is greater than your monthly expenses.
• Research shows that drinking too much is a good predictor of unhappiness.
• People overestimate the amount of happiness that things will bring them but underestimate the long-term positive effect of experiences. Drive a Hyundai but take your wife to a nice place for dinner.
• Spend time with your parents when they are old. You will cherish that time for the rest of your life.
• Everyone experiences failure and tragedy. The key to success is the ability to mourn and move on.
• Your successes and failures are not entirely your fault. Be less hard on yourself. One of the keys to a healthy relationship is forgiveness. You or your spouse will screw up. Learn to forgive and not hold grudges.

Success

Stay thirsty

Talent is important and will help you enter a crowded VIP room. But talent alone Is not enough. You need hunger to succeed. Where hunger comes can help you understand the difference between success and fulfillment.  Find something you are good at. The rewards and recognitions that come from being very good at something will make you passionate about it.

Embrace adulthood

Every commencement speaker will ask you to follow your passion and never give up. Instead, find something you like, put hours of practice into it, and be great at it. Nobody starts their career being passionate about tax law. But great tax lawyers are passionate about peers who like them and can create economic security for their families.

Careers are like asset classes. If a sector becomes overinvested with human capital, returns on those efforts are suppressed. Don’t be attracted to cool things. Most rich people make their money in boring businesses – think insurance, pesticides, or iron/ore smelting.

The adult in the room

Everyone loves to talk about how rewarding it is to raise kids. But people rarely talk about how rewarding it is to take care of their parents. A good time to start is when you graduate. Tell your parents, “I got this”. Become a source of solutions to your parents versus stress.

Getting the easy stuff right, and Email

Have good manners. Show up early. Follow up. It’s not hard, is it? Galloway had plenty of difficulties responding to people on time and following up. His email to a student who showed up at his class an hour late and was kicked out became an embarrassment for himself and NYU.

Believe you deserve it

70% of Americans suffer from some kind of imposter syndrome. But realize that most successful people reach beyond their grasp. Believe that you deserve it. Share your achievements with the people you love and care about.

Find your charm

Galloway loves talking to people – the bigger the crowd the better.  He is an introvert one-on-one but an extrovert when talking to a group. He uses his classes to hone his speaking skills. Find something you like and work on it.

You are (probably) not Mark Zuckerberg

Entrepreneurship sounds exciting. You work 80 hours a week and then need to write a check to keep the company afloat. It’s not easy to raise money from other people. Business failures are hard to hide and embarrassing to explain. Entrepreneurship is also a sales job. Are you comfortable calling people, again and again, especially people who don’t want to hear from you? Even Google has to hire thousands of people to sell Google to the masses.

Being successful in a big firm is hard. You have to play nice with others, suffer injustice, and deal with office politics. But on a risk-adjusted basis, it’s still better than entrepreneurship.

When to take cover

Here are the signs to look for that the market or a company is about to end up on the wrong side of cyclicality.

•  Lofty valuation metrics (eg. P/E ratios)
• Countries and firms start building huge buildings
• CEOs’ egos are out of hand –  they go on a buying spree (buying companies at lofty valuations), get featured profiles on magazines
• Mediocre kids with 2 years of tech experience make six figures
• Bidding wars for real estate
• When times are good, people look for youth. When times are bad, people look to gray hair for leadership

What to do if you think you might be in a bubble

Whether a company is successful depends on when it is created. Companies created as the economy is coming out of recession are likely to be successful. Companies started in boom times struggle because people, services, and real estate are expensive. 

If you are doing well, realize that you are probably caught up in a boom. Being humble and living within your means will prepare you financially and psychologically for the next economic cycle. 

Measure what matters

Wealthy people claim to not think about their money much. But the truth is they are obsessed with money. They spend 80-hour weeks for decades to make their money. 

Benchmarks, metrics, and milestones range from meaningless to profound.  Reviewing the metrics in your life is a very useful exercise. How often you meet your parents? How many followers do you have on social media (if that matters to you in a meaningful way)? Your number of followers gives you feedback about your work.

Know the ends vs the means

We need to understand that professional success is the means. It’s not the end. The end is the economic security of your family and having meaningful relationships with your friends and family. 

Learn from rejection

Galloway encountered many failures and rejections in his life. But he feels that enduring those rejections (from universities, peers, investors, etc.) has been hugely rewarding. For many people, the fear of rejection is a bigger obstacle than talent or the market. Take a risk every day and get comfortable by stretching beyond your comfort.

If you are not an employee, employ yourself

Entrepreneurs are glorified by the media. In reality,  90% of entrepreneurs start companies because they don’t have the skills necessary to be an employee. 

Most employees are happy to commute when traffic is high, go to irrelevant meetings for decent pay. Bu working for yourself means you are in charge. Everything you do is for you, not for the company. 

At small companies, the guy who runs the place can be a jerk. A few “A Players” work their asses off, but you can get by with hundreds or thousands of well-mannered B+ players in big companies.

When you are an employee, you don’t know what your managers have planned for you. They are the ones who determine your economic well-being.  Galloway was insecure economically and that pushed him to entrepreneurship. It was not his vision.

Be a role model

Galloway had two men who shaped his life when he was 13 – his mother’s boyfriend Randy and Cy Cordner, a stockbroker at Dean Witter.  Randy gave Galloway $200 to invest in the market and Cy educated him on the markets. These two men made Galloway visible and worthy of their time. Galloway is grateful that these two men took a passional interest in the well-being of a child that wasn’t theirs.

Love

The Ends

Love and relationships are the ends and everything else is just the means. Love is love received, love reciprocated, and love given unconditionally. The most important decision in your life is who you have kids with. Find someone who is kind, competent, and who you enjoy being with. 

When it comes to love, everyone likes to punch above their weight class. That’s fine but don’t fall into the trap of believing that someone is better because they are not interested in you.

1+1>2

Marriage is beneficial economically. Two people combined make better decisions than single people.  Married couples in their 50s have 3x more assets than single people. 

Try to be a better partner in a marriage.

Don’t keep score – We like to inflate our contribution to the relationship and minimize our partner’s. Don’t track who does what – that just wastes energy.  Be generous and do as much as possible for your partner and often. When your partner messes up, forgive. Forgiveness is a key attribute to happy relationships.

Don’t let your wife be cold or hungry

Don’t skip lunch. Don’t leave your house without energy bars. Make sure your wife is comfortable whether it’s in the car or a restaurant. 

Express affection and desire as often as possible

Affection, touch, and sex solidify your relationship. Being with the right partner creates meaning for the human species.  Express affection and make your wife feel secure in the relationship.

Keep your kids close

Build meaningful relationships with your kids. Small investments made several times a week pay off dividends. When your kids get older, they will remember that their parents chose them over anything else. When you get old, your children will comfort you, so you can sleep in peace, just like you did for them when they were young.

I love you

From his own failed first marriage and from watching his friends, Galloway learned a lot about love. Love is a willingness to take the life you have built for yourself and tear it up for the other person (this came from his therapist).  Most of us suspend our lives until the kids come around. Very quickly, the answer to most questions is, “whatever is best for the kids”. Still, kids are great and make you a better person in every way.

Montezuma’s revenge

Instinctively, you will do anything for your kids. Even the things you hate become just inconveniences in the presence of people you love. You are saying – my life is yours and I love you.

Valentine’s day

Tell people you love them. Galloway tells the story of his Crossfit instructor who gets a call from his grandfather. The grandfather, Galloway interprets, said ” I love you” to his grandson at least six times in a short conversation while the grandson was at work. The takeaway here is – invest time with your kids so that you can interrupt your kid’s kid at work and tell them how much you love them.

Take affection back

Touch is fundamental to human communication, bonding, and health. Yet, we live in society whether men are asked to refrain from touching each other. Italian men kiss each other on the lips. Kiss your kids. Over time, you kids will stop what they are doing and develop a respect for the moment. They will know that everything else can wait.

Divorce

Galloway’s immigrant parents were living the  American dream. Two people with eight grade education worked hard and flourished in the American economy. Then they got divorced and Galloway got to see his dad only on weekends. But he has fond memories of the time they spent as a family and lived near a beach.

Attach to people

Affection strengthens bonds, provides access to resources, and communicates your potential as a parent. Galloway credits his success to two things – being born in America and having a mom who was passionate about his well-being. His mom was divorced and was making $15,000 per year but she made him feel connected.  She gave him confidence that he had value and that he was capable and deserving of things.

What makes a home

The American dream is homeownership. That’s the case even though homes are not any better than other investments once you account for maintenance. A good proxy for your life isn’t your first home but your last. Towards the end of your life, you are not adding much value. The people who look after you are very generous or are reciprocating your love and support.

How to deal with the end of a life

Where you die and who is around you at the end is a signal of your success or failure in life. Take care of caregivers because they support your parents while you are not there or help you with things you can’t do. 

There is no manual on how to deal with the end of life. Make time to care for your parents but don’t put your career on hold. Economic security is important and people live longer than their prognosis. 

Relive their life. Look at pictures and share stories. Leave nothing unsaid. If they are sick, they may say mean things. It’s not them, it’s the illness speaking.

Love a kid who isn’t your own

50% of marriages end in divorce. Then there’s death and disease. That leaves a lot of kids in single-parent households where the odds are worse for the kids. Become passionate about the well-being of a child who isn’t yours. It will make you more human. 

Appreciate how fortunate you are

Galloway lost many friends to AIDS, which was termed a “gay disease” in the 1980s. Society decided that they weren’t victims. Ronald Reagan never mentioned the word, “AIDS”, in his eight years in office. Few of his friends caught a break when science made treatments possible.

Find your own heaven

When you are with your family, loved and in peace, you are in heaven. In life, we all want more – more money, more praise, more relevance, and a cooler experience. The only time you feel satisfied ever is when you are with your family.

Love the ones you are with

We don’t spend enough time thinking about the mother of all important decisions that will set the tone for the rest of our lives – picking the right mate. The right partners that share the joy with you. Students spend a lot of time choosing their career but not enough time thinking about their future partner. The dopamine rush you get when you are excited to see someone you love keeps you young. When you are with people you love – family, friends, and colleagues, you are blessed with happiness.

Kids: It’s all about them

We segment our kids into favorites. As awful as it sounds and makes you a terrible parent, know that your favorite child changes back and forth.  Kids keep score and you will work hard to satisfy their needs.

There are very few absolutes. Getting to a place economically, emotionally, and spiritually where you love someone completely without expecting anything in return is absolute. Your life is finite. Focus on loving, forgiving, and pursuing. 

Health

Be strong

Work out regularly (most CEOs do as well). Demonstrate your physical and mental strength at work. Stay calm in the face of stress. Stay calm and don’t sweat over your next presentation or project.

Cry – it’s good for you

In our society, men don’t cry. It’s considered a weakness. But crying relieves stress brought on by the onslaught of emotions that are difficult to process. As you get older, you will realize the finite time you have. You want to freeze time and have the moments when you feel something.  Crying in the company of others or thinking about loves ones is healthy and brings joy.

Trade closeness for harmony

Galloway doesn’t have a close relationship with his dad and sister but it’s harmonious. They like taking a trip every few years and having a great time.  Taking care of parents can be taxing but it’s rewarding. Find meaning in taking your parents around in a wheelchair.

Get lost in the moment

The fastest-growing demographic is the centenarians. The secret to a long life is good genes, a healthy lifestyle, and loving others.  But then there are “x-factors” – a friend who dies too young. 

Try to stay in the moment. It takes a lot of effort. It’s true that delayed gratification can build a better future for you and your family. But staying in the moment can help you enjoy your life than working your ass off with a promise of some reward in the future.

Don’t be an assh*ole

Be nice. Even billionaires, contrary to what is shown on TV, are generous and well-behaved. Being grateful is consistently correlated with greater happiness. Gratitude helps people feel more positive emotions, relish life’s experiences, improve their health, deal with adversity and build strong relationships.

Praise and admire others. Complementing others is not a zero-sum game. Acknowledging others’ accomplishments and attributes take nothing away from you. If anything, they help you in the long run.

Sustenance > Addictive substances

Food, sex, and kids. We are wired to be addicted to the things fundamental to the survival of the species. Offer your kids not a dopamine hit (eg. video game) but sustenance. Be there, be predictable. 

Who is this book for?

The Algebra of Happiness has nuggets of wisdom for readers of all ages but young people in their early twenties are likely to benefit the most from the advice. This book also makes a great high school or college graduation gift.

Other Resources

Listen to Scott Galloway’s interview on Bloomberg here. In the wide-ranging interview, Galloway discusses Uber, Lyft, and WeWork in addition to his book.

Here is a highly-rated 10-minute video of Galloway discussing his principles. I guarantee you that it will be worth your time. Also, check out Galloway’s Youtube channel for his latest views on technology and business.

Best Behavioral Finance Books

Thinking, Fast and Slow by Daniel Kahneman

Daniel Kahneman won the 2002 Nobel Prize in economics.  Thinking, Fast and Slow distills a lifetime of work into easily digestible pieces. The book focuses on two modes of thought – System 1:  fast, automatic, and emotional and System 2: slow, logical, and deliberative.  The book also looks at biases, heuristics, and decision-making. This book will change the way you think.

Irrational Exuberance by Robert J. Shiller

The title Irrational Exuberance refers to the investor behavior that drives up stock prices with little regard to the fundamentals. Reading this book will help you avoid the common mistakes investors make in the markets. Schiller says the speculative behavior of investors is a result of a naturally occurring Ponzi scheme where investors bid up asset prices until external factors end the Ponzi scheme.

Inefficient Markets – An introduction to Behavioral Finance by Andrei Shleifer

The efficient market hypothesis (EMH) has been a well-accepted concept in investing for more than 30 years. EMH states that stock prices must equal their fundamental values because investors are rational or because arbitrage eliminates pricing inefficiencies. This book floats an alternative theory – behavioral finance, which focuses on investor sentiment and psychology. The book collects research from many technical papers and is recommended for readers who would like to take a deep dive into behavioral finance.

Winner’s Curse by Richard H. Thaler

In each chapter of the Winner’s Curse, the author takes a real-world problem (eg. lottery, betting on horses, etc.) and compares the predictions of theoretical models and actual human behavior. It’s clear that people behave irrationally from an economic perspective which ensures that they don’t get the gains they expect. The book includes a collection of articles that the author has written. The book is an excellent introduction to behavioral finance and you will find yourself exploring the field of behavioral finance further after reading it.

Predictably Irrational: The Hidden Forces That Shape Our Decisions by Dan Ariely

The author Dan Ariely is a well-known behavioral economist and is a professor at Duke University. The book, Predictably Irrational,  contains interesting anecdotes on the psychological traps that humans fall prey to. The author discusses the experiments he has conducted over the years and their conclusions. The book is an interesting read and will keep you entertained. You will have a better understanding of your irrational self after reading this book.

Book Summary – One Up On Wall Street

Advantages of dumb money

Don’t listen to professionals. The amateur investor has a number of advantages compared to the so-called experts. If the amateur investor can make use of these advantages, he can easily beat the professional money managers. As you go about your daily life, look out for stores that are expanding rapidly or products you start seeing everywhere. Find out if these companies are public and research them. You will find 10 and 20-baggers before any Wall Street firm.

Chapter 1: The Making of a Stockpicker

Your genes don’t determine whether you are a good stock picker. Almost all of Lynch’s relatives distrusted the stock market, partly due to growing up during the Great Depression.  Lynch lost his father when he was seven, which forced his mother to go to work. Lynch also found a part-time job at 11 as a caddy. Since there were a lot of CEOs of big corporations playing golf at exclusive clubs, Lynch figured that the best way to learn the board room was through the locker rooms of these clubs. Stock tips were also frequently discussed during rounds of golf and Lynch paid close attention to them.

At Boston College, Lynch mostly avoid math, science, and accounting and focused on art subjects such as history, psychology, and political science. In retrospect, Lynch fees that studying history and philosophy prepared him to be a better stock investor because investing is an art, not a science.

He bought his first stock when he was a sophomore in college – Tiger Flying Airlines. In less than two years, the stock was a five-bagger and he sold some of it to pay for graduate school at Wharton.  He applied for an internship at Fidelity at the suggestion of Mr. Sullivan, the President, who he met at the golf course.  As an intern with no background in finance or accounting, he was put to work in researching companies and writing reports.

At Wharton, he met his wife Caroline. After graduating, he served in the Army in Korea and missed the stock market while he was there. He returned to Fidelity as a permanent employee and research analyst. In 1977, he took over the Fidelity Magellan fund when it had 20 million in assets and 40 stocks. He bought more stocks bring the total number of stocks to more than 150 and the asset value continued going up.

Chapter 2: The Wall Street Oxymorons

Professional investing is an oxymoron. Professionals can’t invest in stock until respected analysts put the stock on their buy list. A stock is not attractive until some institutions have bought the stock. There is a “Street Lag” when it comes to owning stocks. Professional investors also have spend hours justifying the investment to their bosses and their clients. Professional investors also have to own a lot of stocks and can’t go to 100% cash. But as an individual investor, you are not tied by the rules that professional money managers have to abide by.

Chapter 3: Is this Gambling, or What?

Stocks have returned more than bonds historically. When you own a stock, you are a partner in an expanding business. When you invest in bonds, you are just a source of cash to someone, and the most you can get is your money back with interest. Stocks are riskier than bonds but the risks can be mitigated by investing appropriately.

Chapter 4 – Passing the Mirror Test

A lot of people lose money in stocks. How many people do you know that lost money in the house? Far less. That’s because an investment in a house is rigged in the investor’s favor. You can borrow more than 80% of the money needed to buy a house. It’s a leveraged investment with little downside risk (but not zero). You don’t have to pay taxes on the gains until you sell the house. Invest in your home before you invest in stocks.

If you need the money in the next couple of years, don’t invest in the stock market. Even blue-chip stocks can go down in a two to three-year time frame. Invest in stocks only what you can afford to lose without it having any effect on your daily life.

A stock investor needs to have patience, self-reliance, common sense, tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, willingness to independent research, willingness to admit mistakes, and the ability to ignore general panic. That a LOT of qualities required to be an investor. An investor must be comfortable making decisions without perfect information.  History shows that humans are terrible stock market timers. Long-term investors become short-term investors when the market falls and sell for huge losses.

Chapter 5: Is this a Good Market? Please Don’t Ask

People are always interested in whether the stock market is good at the moment. But that’s not an easy question to answer. Economists work hard to predict recession but they can’t seem to get it correct twice in a row. Experts studying stock charts, put-call ratios,  Fed policy, and foreign investment can’t predict markets with any useful consistency.

Focus on businesses and ignore the general market. Your job is to pick the right stocks. If it is an overvalued market, you will not find a single company to invest in because none of the stocks will be reasonably priced.

Chapter 6: Stalking the Tenbagger

The best place to find a tenbagger is closer than you think – it is in your backyard, your shopping mall, or where you work. Being “in the business” gives the average stock picker a huge advantage to pick winners from small, fast-growing companies. compared to Wall Street, which always gets the news late.

Chapter 7: I’ve Got It, I’ve Got It – What is it?

The size of the company has a lot to do with what kind of returns you can get. Big companies are stable but they don’t make huge moves. On the other hand, smaller companies can make gigantic moves in a short amount of time. All else being equal, you will do better with smaller companies.

Lynch prefers to put stocks in categories because it helps him develop a story. Then you can fill in the details to help you guess how the story will play out.

• Slow Growers – These companies are large and aging. Grow slightly faster than GDP, around 2% to 4% per year
• Stalwarts (medium growers) – These companies are faster than slow growers but only grow 10% to 12% per year
• Fast Growers – Grow 20% to 25% per year. These are the companies that are likely to grow 10-to 40-baggers
• Cyclicals – Companies whose profits rise and fall in a regular if not predictable fashion (eg. autos, steel companies, etc)
• Turnarounds – These are depressed companies that are on the verge of bankruptcy. These companies have no growth and people expect them to never come back up.
• Asset Plays –  These companies have something valuable but Wall Street has overlooked them.

A company doesn’t stay in one category forever. In fact, fast growers burn out, slow down and become stalwarts. The reverse can also occur – a slow grower can find growth and surprise investors.

Chapter 8: The Perfect Stock, What a Deal

If you have to choose between a great company with excellent management in a competitive and complex industry or a so-so company with mediocre management in a simple industry with no competition, go for the latter.

Lynch’s favorite attributes of companies

1. It sounds dull, or even better, ridiculous – companies with names such as Automatic Data Processing, Pep Boys – Manny, Moe, and Jack are boring but businesses and stocks are going up.
2. It does something dull – Take the case of Crown, Cork and Seal, a company that makes bottle caps. Professional investors stay away from boring businesses until some big news comes out. Then these stocks become trendy and overpriced, and it is time to sell.
3. It does something disagreeable – These companies are not just boring, they are disgusting.  But they grow their earnings every quarter and their stock follows suit.
4. It’s a spin-off- Companies don’t want spin-offs to get in trouble because that would bring bad publicity. Hence spin-offs have strong balance sheets and are primed to be successful as independent companies
5. Institutions don’t own it and analysis don’t follow it – these stocks were not followed by analysts at or they were once popular but analysts have abandoned them
6. The rumors abound: It’s involved with toxic waste and/or the mafia – Despite being in an industry that almost everyone despises, Waste Management is up to 100-fold. Lynch prefers these kinds of industries and companies.
7. There is something depressing about it – Service Corporation International (SCI) is in the funerals business, again something people like to not think about or ignore. The company was ignored by institutional investors for years.
8. It’s a no-growth industry – everyone wants to invest in high-growth industries. But there are great opportunities in no-growth industries where there is little competition
9. It’s got a niche – There is a lot of value in exclusive franchises to a company. Once you have an exclusive franchise, you can raise prices and the stock prices tend to follow. Drug companies benefit from products that no one is allowed to make.
10. People have to keep buying it – think drugs, soft drinks, razor blades, etc.  People need to keep buying them and the companies that make them stick around for a long time
11. It’s a user of technology – Companies like Automatic Data Processing that benefit from cheaper computing are able to increase profits.
12. Insiders are buyers – Insiders have the best information. Anytime an insider buys a stock, it means that they think the stock is undervalued.
13. Company is buying back shares – When a company buys back its shares, it reduces the share count and earnings per share goes up. This in turn causes the stock prices to go up.

Chapter 9: Stocks I’d Avoid

Avoid the hottest stock in the hottest industry. These stocks tend to go up fast. They get a lot of publicity but eventually fizzle out. Beware of companies that are touted as the next Intel or Disney.

Chapter 10: Earnings, Earnings, Earnings

Earnings are what makes a company valuable. A P/E ratio is a useful measure to check whether a stock is overpriced, fairly priced, or underpriced. There are five ways a company can increase its earnings: reduce costs, raise prices, expand into new markets, sell more of its products, sell money-losing operations. Analyzing how a company can improve its earnings will help you develop a story about the company.

Chapter 11: Two-minute Drill

Before you invest in any stock, give yourself a two-minute monologue about the “story” of the stock. It doesn’t matter which of the six categories the company falls in, develop a story to explain why you are investing in the company.  If it is a fast-growing company, ask yourself “how can the company continue to grow?”.

Chapter 12: Getting the Facts

One area where professional investors have an advantage is being able to talk to the companies directly. Amateur investors can’t call a CEO and ask questions but they can use their broker to get information on the company. Many brokerages are happy to provide analyst reports if you ask. Read their annual filings, especially the balance sheet.

Chapter 13: Some Famous Numbers

If a company has a new exciting product, find out what percent of sales this product  (and the product line) represents. The following metrics are important when analyzing a company.

• Percent of sales – if a company has an exciting product, check the percentage of sales for that product and product line
• Price/Earnings ratio-  P/E ratio that is half the growth rate is positive, P/E ratio that is twice the growth rate is negative
• Cash – more cash on the balance sheet, the better
• debt – pay attention to the debt and the debt structure
• Book value – don’t just look at book value, understand what these values are. What a company counts as assets may not be worth much
• Cash flow – free cash flow is what’s leftover after normal capital spending. A company can have modest earnings but excellent free cash flow.
• Inventories – check the balance sheet to check if inventories are piling up. It may be a red flag.
• Pension plan – a company must pay its obligation even if it goes bankrupt
• Dividends – cushions the company from falling too much
• Growth rate – Companies with a 20% plus growth rate tend to be multibaggers
• Bottom Line  – For long-term holdings, the stock must have a high profit margin.

Chapter 14: Rechecking the Story

After you have identified a stock, it is important to re-visit the story to confirm that it’s still valid. You can read quarterly reports and research on the company to check whether earnings are holding up as expected. A company goes through three phases – start-up phase, rapid expansion phase, and the mature phase.  Each phase may last several years and the rapid expansion phase is where the most money is made. In the mature phase, the company runs into limitations.

Chapter 15: The Final Checklist

For stocks in general

• P/E ratio – is it high or low relative to its peers in the industry
• Percentage of institutional ownership
• Insider buying is positive
• Earnings growth
• Cash position

Slow growers

• Are dividends safe? What percentage of earnings are paid as dividends?

Stalwarts

• Check the long-term growth rate of the company.
• How did the company navigate the previous recession

Cyclicals

• Watch out for inventory levels, and the supply-demand relationship
• Anticipate a shrinking P/E as companies as business recovers and investors look forward to the next cycle

Fast Growers

• 20-25% earnings growth is preferable
• Is the company able to replicate success in more than one city or area?
• Does the company still have room t grow?
• Is the stock’s P/E ratio at or near its growth rate? (good sign)
• If only a few institutions hold it, it’s a good sign because the stock is likely to go up in the future

Turnarounds

• What is the company’s debt position? Can the company survive or will debt holders take over the company?
• Are costs being cut?
• Can the business come back?

Asset plays

• What is the value of the assets?
• Is the debt manageable?
• Is a corporate raider or activist investor involved to help shareholders benefit from an increase in share prices?

Chapter 16: Designing a Portfolio

An average investor can design a portfolio to generate a 12%-15% return. A small portfolio can own between three and 10 stocks. Spread your money between the different categories of stocks to minimize risk.  Younger investors have more years to make mistakes and find great stocks. Portfolio design changes as you get older.

Chapter 17: Best Time To Buy and Sell

The best time to buy a stock is around the end of the year. Tax-loss selling and institutions cleaning up their portfolio (selling losers) drives stock prices down and allows patient investors to pick up bargains.

Here are some general sell signs

• Company announces massive  share issuance
• Sales of business units bring in less cash than expected
• Reduction in corporate taxes considerably reduces a company’s tax loss carryforwards
• Institutional ownership has grown and reaches 60%

Slow growers

• Company has lost market share for two consecutive years
• No new products
• Acquires unrelated businesses and overpays for them

Stalwarts

• P/E is too high
• New products have mixed results
• No insider buying
• Major division is vulnerable
• Growth rate is slowing down

Cyclical

• Sell at end of the cycle (if you can predict it)
• Costs rising and plants operating at full capacity
• Competition is heating up (especially from foreign companies)
• Demand is slowing down

Fast Grower

• End of the expansion phase
• Top executives join rival firm
• High P/E, decreasing growth rate

Turnaround

• After a successful turnaround
• Debt has declined
• Inventories are rising
• P/E is inflated relative to expected earnings

Asset Plays

• Is there a corporate raider in the wings?
• Institutional ownership hits 60%

Chapter 18: The Twelve Silliest (and most dangerous) Things People Say About Stock Prices

Here are 12 statements for which investors intuitively know the answer but struggle to execute.

1. If it’s gone down this much already, it can’ go down further
2. You can always tell if a stock hits a bottom
3. If it’s gone this high already, how can it possibly go higher?
4. It’s only $3 a share. What can I lose?
5. Eventually, they always come back
6. It is always darkest before dawn
7. When it rebounds to $10, I will see
8. What me worry? Conservative stocks don’t fluctuate much
9. It’s taking too long for anything to ever happen?
10. Look at all the money I have lost: I didn’t buy it
11. I missed that one, I will catch the next one
12. The stock has gone up, I must be right OR the stock has gone down, I must be wrong

Chapter 19: Options, Futures, And Shorts

Don’t waste your time trading options and futures. You will most likely lose your shirt. Warren Buffet thinks futures and options must be outlawed and Lynch agrees with the Oracle of Omaha.

Shorting a stock can be dangerous to your portfolio. You need high conviction, courage, and resources (money) to hold the stock if it does up after you buy.

Chapter 20: 50,000 Frenchmen Can Be Wrong

You hear financial news constantly that discusses the upcoming market declines, America’s debt, and savings rates, tax policies, etc. There is always something to worry about. But Lynch remains optimistic about America, Americans, and investing in general.  He has faith in human nature, capitalism, and the country’s future prosperity. Ignore the noise and always look for new investing ideas. You will not find every tenbgagger but you will find a lot of them.

Bottom Line

One Up On Wall Street is an easy read and many principles covered in the book are still relevant today. Take the time to do your own research on stocks and hold for the long-term to achieve extraordinary returns.

More Peter Lynch

Here’s an excellent interview Peter Lynch gave during the depths of the dot com recession in 2002. 

Book Summary  – 100 Baggers – Stocks That Return 100 to 1 and How To Find Them

It takes time

The stock market, on average, returns 10% per year.  Certainly, some stocks return more than 10% per year but to make 100x (10,000%) it takes decades even if your stock returns 25%+.  Patience is an important thing when it comes to making money.

These days, most investors don’t own a stock for very long. If you hold a stock for decades, you are likely to be labeled a “bagholder”. But big returns come with time, and patience is key. If you hold a stock for many years, you will inevitably run into periods where the stock underperforms. But history shows that holding on to stock during drawdowns is key to making outsized rewards in the market.

Research matters

You are not going to find 100-bagger stocks if you don’t do research. Focus your time on energy on finding stocks that will deliver outsized gains. Look through 52-week highs and research new investment themes that are likely to last for decades.

Growth is important

100-baggers tend to be growth stocks – stocks that grow revenue and earnings over time. The company should be able to maintain margins as it grows. Many growth companies may not have earnings in their early years but they should show consistent top-line growth. Stocks that grow the top line by just cutting prices are not likely to perform well.

Stocks with lower multiples are better

You will find stocks that grow 100x among the 52-week highs and not among the 52-week lows. While stocks at 52-week lows may have a lower P/E, those stocks are not likely to deliver big gains. While stocks at 52-week highs are likely to be expensive (higher P/E, P/S, etc.), look for stocks that have lower multiples relative to their peers.

High return on capital

100-baggers have high returns on capital. While return on capital varies by industry, the higher the return on capital, the better the stock returns.

Smaller companies are better

A company that already has a trillion-dollar market cap is unlikely to go up 100x. Look for smaller companies that have room to grow in their market over many years, which in turn will lead to better stock performance.

Owner-operator companies are better

Companies that are led by founders such as Walmart, Apple, and Amazon tend to outperform. Founders in these companies own a big stake in the company and have the right incentives to run the company effectively. Even if the founders leave the company after many years, these companies do well because the founders built the right culture within their companies.

Luck helps

As with anything, luck matters. But if you do things methodically over long periods of time, you increase your chances of landing 100-baggers.

Sell rarely

While you may have to sell shares of poorly performing companies, think hard before you sell. Is the underperformance temporary, or will is the stock expected to underperform for years? Every 100-bagger went through periods where the stock was down 50% or more. Having the conviction to hold through these drawdowns is key.

Bottom Line

The book doesn’t have any original research but it does give you a good road map to find and hold 100-bagger stocks. The book has a list of 100-baggers stocks in the appendix. Just going through the list will give you the inspiration to find your own 100-bagger.

But Eufy offers excellent cameras without any monthly subscription fee. Eufy is owned by a well-known electronics company, Anker. Its products are of high quality and come with a very good mobile app. You can use the Eufy app to receive notifications if motion is detected, for two-way audio communication, and for managing your cameras.

Eufy has a few versions of its camera – the differences between them are minor. Eufy also has a doorbell. All of them have no monthly subscription fees.

• Eufy Cam 2 (1080p)
• Eufy Cam2 Pro (2k)

Let’s take a look at the top features of Eufy cameras.

Eufy Cameras – No Monthly Subscription Fee And a Lot of Extras

2 Versions – 1080p and 2K

Eufy’s cameras come in two resolutions – 1080p and 2K. Get the 2K version if you need high video quality but most people will find the 1080p quality more than adequate.

The video resolution for the two are 1920×1080 for 1080p version and 2048×1080 for the 2K version. The difference in video resolution between the two versions is much bigger than what the numbers represent.

Need A Hub (Home Base)

Eufy cams only work with a Home Base. So when you buy the camera kit for the first time, you need to buy the kit with a home base. Later on, you can just buy add-on cameras to expand. The home base can connect up to 16 cameras.

Remember that the cameras connect to the Home Base and not directly to your wireless router.  So where you place your Home Base matters. The closer it is to your cameras, the better the quality of the network connection. As long as you stay with 15 ft of the hub, you should get a good signal.

Wire-free And A Good Battery

Cameras are wire-free and come with a battery that holds a charge for 365 days according to Eufy.  How long the battery lasts depends on a number of factors such as the number of times motion is detected, the recording duration you set, and the temperature to which the cameras are exposed. In reality,  cameras hold a charge for about 6 to 9 months for the most common settings.

Easy DIY Installation

The cameras can be easily mounted on a wall. Indoor cameras can be installed with magnetic mounts and outdoor cameras can be installed with screws.

Excellent, Responsive App

The Eufy Security App has a clean design, is intuitive, and works well.   The Eufy app is more responsive than other apps such as Arlo’s. The app also allows two-way audio communication with the camera (Quick note: Two-way audio does not work with HomeKit. You can hear but not talk to the camera)

Integration

Eufy works with the  Apple HomeKit, the Google Assistant, or Amazon Alexa which gives you options on how you want to monitor your cameras.

Data Stored Locally

All your video data is stored in a local 16 GB SD card. So you don’t have to worry about the privacy and security issues around having your videos in the cloud.

Eufy cameras have all the standard features you expect from a camera these days – motion detection, two-way audio, night vision, and data encryption. I was concerned that the motion detection may be delayed due to local storage. But I get a notification with 3-4 seconds of motion detection, which is not much different from my Arlo, which has cloud storage.

Bottom Line

Eufy cameras are a great alternative to cameras that come with monthly fees. You get excellent video quality and a great app. These cameras are easy to install and have a battery that could easily last six to nine months.

There are a lot of websites focused on generating passive income.  While those websites add value, I prefer to read books that are thought-provoking and inspire you to take action.

Here is my list of books. Each book offers nuggets of wisdom on generating passive streams of income.

Passive Income: 40 Ideas to Launch Your Online Business

As the title says, this book gives you 40 ideas to get out of your 9-5 lifestyle. Some ideas such as peer-to-peer lending, e-book publishing, and Amazon FBA were familiar to me, some like vlogging were new.

My idea of passive income is generating income with little to no work on my part.  Though most of the 40 ideas listed are passive, some such as online consultancy and forex trading are not passive.  You will need to put in the time to make these ideas work.

This is a great starter book for those looking to start a business that generates passive income.  Most readers will find that they are capable of doing at least one of the ideas listed to generate passive some.

The Book on Rental Property Investing

Rental properties are a great way to build wealth.  Some people have told me that it’s not a passive investment because you have to deal with tenants and property repairs.  While that is certainly true, I do think that a case can be made that investment in rental properties can generate passive income if you manage the property well.

This in-depth book provides insight into buying single and multi-family properties, financing strategies, and most importantly managing these properties well for income.  Brandon Turner, in addition to being a real estate investor, is an author at Bigger Pockets.  The book directs readers to the bigger pocket website for legal forms, guides, etc.

Beginner and experienced investors will find a lot of tips and strategies from this book to generate passive income through real estate and build wealth.

How to Make $100,000 per Year in Passive Income and Travel the World

This book teaches you how to generate multiple streams of passive income and get out of the 9-5 race once and for all with 14 detailed ideas.  What I really liked about the book while most books give you broad and general strategies, this book gives you step by step instructions on the various ways to generate passive income

Of the several ideas covered in the book from building membership sites to royalty companies to dividend investing,  most readers will be able to find one that suits their interest.

Four Hour Work Week

In the Four Hour Work Week, Tim Ferriss teaches you how to get the most out of life in less time.  Ferriss makes a lot of bold claims in this book that some of you may find unrealistic but the book exposes you to a perspective you rarely get from other books.

The book emphasizes the importance of setting a well-defined goal, eliminating distractions, automating income, and defining your job free from others’ expectations.

The author is a productivity nut looking to optimize every aspect of his life. I don’t agree with everything in the book but it is an eye-opener for folks looking to build passive income.

Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You and Your Partner

If you are in a relationship, you know that unless the two partners are in sync on financial matters, it is almost impossible to build wealth.  The book teaches couples to identify core values and build a financial plan.

The book provides ideas on managing your credit card, investment, and even long-term care.  It also details the common mistakes couples make in their personal finances.

Reading this book together will motivate couples to take control of their finances and start investing in the future. If you are newly married, I would highly recommend reading this book because it will help you get started financially in the right direction.

Bottom Line

Reading books is not just a good hobby. It is a great way to relax but is also a way to get new ideas.  A good book can motivate you to start investing and generating passive income. Whether you want to own a rental property or an online business, books can provide the spark to get started.  Books listed above are a great way to start reading.

Rich Dad, Poor Dad – Book Summary

Introduction

The author had two fathers – a rich one and a poor one. His biological father, the poor father, was highly educated, had a Ph.D., and went to Stanford, University of Chicago, and Northwestern University.  The rich father never completed eighth grade.

Both men had fantastic careers and earned substantial incomes. But the poor dad always struggled financially. The rich dad became one of the richest men in Hawaii, leaving behind millions of dollars. The poor dad left bills to be paid.

Having two fathers helped the author compare their advice and then choose for himself. He spent much of his time reflecting on the contrasting ideas.

We learn about money from our parents and not at school. The rich dad always exercised his brain when it came to finances whereas the poor dad put it to sleep. The rich dad would ask, “How can I afford it?”, whereas the poor dad would simply say, “I can’t afford it”.

The rich dad believed that he didn’t work for money, the money worked for him.

The Rich Don’t Work For Money

Most people work very hard for little money. They prefer the illusion of job security and a three-week vacation every year. After a lifetime of service, they are happy to get a small pension when they retire.

People are driven by fear and greed (desire). First, they work hard to get a paycheck because the fear of not having money motivates them. Then once they get that paycheck, greed sets in and they think about all the things money can buy. The pattern of fear and greed takes over their life. It’s a rat race – offer them more money and they will spend more money.

Kiyosaki and his friend Mike were able to get free comic books from the distributor because they worked at the rich dad’s store. They set up a library that was open between 2:30 pm and 4:30 every day. Children could pay a 10-cent admission fee and read as many books as they want. In 3 months, they made $9.50. They paid Mike’s sister $1 to manage the library. The two friends learned an important lesson: you can make money even when you are not there.

Make money work for you, even when you are not physically there. Don’t be dependent on your employer for money.

Why Teach Financial Literacy?

Know the difference between assets and liabilities. An asset is something that puts money in your pocket. A liability is something that takes money out of your pocket.  The rich spend their money acquiring assets. The poor and middle-class people acquire liabilities that they think are assets.

Kiyosaki talks about a typical story young recently married couple. They live in an apartment initially but slowly save money and then move into their own dream home. Both have careers and incomes. As time goes on, their income goes up, their expenses go up as well. Their liabilities column is full of mortgage and credit card debt. They are now trapped in a rat race. Growing incomes are matched or exceeded by their growing liabilities.

Most people work for everyone but themselves. They work for the owners of the company, then for the government (through taxes), and finally for the bank that owns their mortgage.

A person can be highly educated, professionally successful, and financially illiterate. The poor dad thought that his home was an asset whereas the rich dad thought his home was a liability. A bigger home meant bigger expenses. The author agrees that a home is an emotional thing and many people may not agree with his assessment that a home is a liability.

Kiyosaki cites three reasons why owning a home is not a good investment.

• Loss of time – you could have invested in other assets that grow more in value during that time
• Loss of additional capital – Homes have high maintenance expenses, instead, we could have invested in other assets
• Loss of Education – Most people only have homes and retirement savings in their asset column. Nothing else. This costs them valuable investment experience. They lose the opportunity to become sophisticated investors because they own too few assets.

The middle class is constantly struggling because their primary income is through their salary. As their wages increase, they pay more in taxes.  Their expenses go up in line with their salary increases, setting up a rat race. They treat their home as a primary asset, instead of investing in income-producing assets.

When your income from your assets fully covers your monthly expenses, you are no longer dependent on your wages. If you quit your job, you could still cover your monthly expenses. You should reinvest excess cash flows from assets back into assets. As long as you keep your expenses lower than your cash flows from these assets, you are getting richer.

Mind Your Own Business

Most people struggle financially because they work for someone else. They have nothing at the end of their careers to show for their efforts. To become financially secure, you need to mind your own business. Your business revolves around your asset column, not your income column. If you are thinking, “I need a raise” or “I will go to school to get more training so I can get a better job”, you are still focused on the income column. But financial security can only be attained if you put money to purchase income-generating assets.

Keep your daytime job but start buying real assets, not liabilities.   Invest in businesses that do not require your presence and can be managed by other people. Real assets fall into the following categories.

• Stocks
• Bonds
• Income-producing real estate
• Notes (IOUs)
• Royalties from intellectual property such as music, scripts, or patents
• Anything else that has value, produces income or appreciates, and has a ready market

Kiyosaki loves real estate but notes that it may not be the case for everyone.  His real estate strategy is to start small and keep trading to bigger properties. Doing so delays paying taxes on his grains and allow value to increase dramatically. He also loves small-cap stocks but generally sells them within a year.

When you have money, it is okay to indulge in luxuries. An important difference between rich people and poor people is that rich people buy luxuries last while poor and middle-class people buy luxuries first. For poor people, these luxuries make them look rich but in reality, they just get deeper into debt. The rich buy luxuries with the income from their assets whereas the poor buy luxuries with their own sweat, blood, and children’s inheritance.

The History of Taxes And The Power Of Corporation

When the idea of levying taxes was initially proposed, only the rich were taxes. The idea was accepted by the majority because the poor and the middle class were told taxes were created to punish the rich. But the rich saw this differently because they don’t play by the same set of rules as everyone else. They created corporations, which helped limit their risks. This became popular in the days of sailing ships. The rich will put their money into a corporation to finance the voyage. The corporation would hire a crew to sail to the New World to look for treasure. If the ship was lost, or the crew lost their lives, their loss would be limited to the money invested in their voyage.

But over time, the government needed more money and started taxing everyone including people at the very bottom of the economic ladder. A corporation is just a file with legal documents sitting in some attorney’s office and registered with a state government agency. A corporation is a legal body without a soul.  It became popular because the income-tax rate of a corporation is less than individual income-tax rates. In addition, certain expenses could be paid by the corporation with pre-tax dollars.

An average American works four to five months for the government just to cover their taxes. That’s way too long. Every time you try to punish the rich, they find a way out. They have the money, power, and the intent to change things.  They have accountants, attorneys, and can persuade politicians to change laws or create loopholes. Consider the “1031 exchange” – it allows a real estate seller to delay paying capital gains taxes on a piece of real estate sold through an exchange of a more expensive piece of real estate. As long as you keep trading up, you will not be taxed on gains until you liquidate.  It’s a great way for the rich to accumulate assets.

If you work for money, you give power to your employer. If money works for you, you keep the power and control it.  As Kiyosaki started working for Xerox, he was disappointed every time he looked at his paycheck.  His deductions were getting bigger as he made more money. Who was he working for? Who was he making rich? He started building his real estate assets in Hawaii when the real estate was set to boom in the area.  In less than three years, he was making more from his real estate than he was from his sales job at Xerox.

Financial knowledge is made up of 4 parts.

• Accounting – The financial literacy to read numbers. The ability to read and understand financial statements allows you to identify the strengths and weaknesses of any business
• Investing – It is the science of making money.
• Understanding markets – this involves understanding supply and demand. You need to understand the technical aspects of the market – which ones are driven by emotions and which ones are driven by fundaments.
• The law – You need to understand the tax advantages and protections provided by the law. Anyone who understands that will get rich faster than someone who is an employee or a small business owner. It’s the difference between someone walking and someone flying
  • Tax advantages – A corporation can do many things employees cannot like pay expenses before paying taxes. Employees earn and get taxed, then try to live on what’s left. A corporation earns, spends everything it can, and is taxed on what’s left. It’s one of the loopholes the rich use. Board meetings in Hawaii, car payments, restaurants meals, etc. can be legal expenses for a corporation.
  • Protection from lawsuits -We live in a litigious society. It is important to protect your assets.  When someone sues a rich person, they will quickly find out that he owns nothing. He controls everything but owns nothing. Corporations provide legal protection for your assets.

The Rich Invent Money

In the real world, it’s not the smart who get ahead but the bold. Each of us can be brave and brilliant. Yet we struggle with self-doubt and excessive fear. To be financially successful, technical knowledge alone is not sufficient. You need to have courage.

Kiyosaki uses a CASHFLOW game to teach people how money works. The game helps people understand the interactions between the income statement and the balance sheet. The goal is to increase the cash flow from your assets to exceed your monthly expenses. Once you do that, you get out of the rat race. Though the game is simple, many participants in his course struggle to understand the underlying concepts. They feel that playing the game is a waste of time and that they didn’t get anything from the course.

Your mind is the single most powerful asset you have. If it is trained well, it can create enormous wealth. The author gives an example of the Phoenix real estate market. The real estate market was tough and homes were selling for $20,000 to $25,000 below market. He was able to buy the property with almost no money down and sell it for profit in a short amount of time.

You have two options.

• Option 1: Work hard. Pay 50% in taxes. Save the rest and get 5% interest (which is also taxed)
• Option 2: Take the time to develop financial intelligence. Harness the power of the brain and build the asset column

To have huge gains, you must take risks. Secure investments are often sanitized – that is they are made safe, so your returns will be less. Your financial intelligence will help you assess risks properly to improve your asset column. Taking risks should not be compared to gambling. It’s gambling if you don’t know what you are doing. It’s gambling if you are throwing money into a deal and praying.

There are two kinds of investors.

The first kind buys packaged investment through the retail outlet, financial advisor, or a stockbroker. It could be a mutual fund, REIT, stock, or a bond. It is a simple way of investing. It is like buying something from a shelf at a store.

The second kind of investor creates investment. He assembles all the pieces of the deal the same way someone assembles a computer. They are called professional investors.  You need three main skills to be this kind of investor.

• Find an opportunity that everyone missed.  Use your financial intelligence to evaluate opportunities that are not immediately visible to others
• Raise money – you don’t always need a bank to raise money. These people know how to raise capital from others.
• Organize smart people – Intelligent people hire people who are more intelligent than they are, and work with people more intelligent than they are.  When you need advice, choose your advisers carefully.

There are always risks in every transaction. Manage risks, don’t avoid them.

Work to learn – Don’t work for money

Job security meant everything to the educated dad. Learning meant everything to the rich dad.

Kiyosaki runs into talented people who earn too little. He tells the story of a journalist he met in Singapore. She had incredible writing skills but was unwilling to take sales courses that would have greatly helped her income. She believed that the salespeople she had met in her life were in it for the money but that she was a “professional”. Most people are just one skill away from increasing their income exponentially.

A newspaper reporter could take some courses in copywriting and sales. Instead of working at the newspaper, she could work at an advertising agency. She could learn valuable skills in public relations. She could write her novels at night. She will have the skills to better sell her book and become a “best-selling author”.

Kiyosaki’s rich dad encouraged him to learn a little bit about a lot. Kiyosaki worked for years in different areas of the rich dad’s company. He wanted Kiyosaki to know a little bit about every aspect of his business empire.

The hardest part of running a company is managing people. Upon returning from Vietnam, Kiyosaki joined Xerox as a salesman because it had one of the best sales training programs in America. His poor dad was ashamed. Being an intellectual, he thought that salespeople were below him.

Jobs is an acronym for “Just Over Broke”. Most schools don’t financial intelligence is intelligence. Most workers work and pay bills.  Workers worked hard enough not to be fired, and owners pay just enough so that workers don’t quit. Most workers focus on working for pay and benefits that reward them in the short term but are often disastrous in the long run.

Kiyosaki recommends young people seek works where they will learn, more than what they will earn.  Workers should take a long view of their life. Look beyond job security. Consider taking a second job that will teach them. Kiyosaki recommends joining multi-level marketing companies to learn sales skills.

The poor dad wanted Kiyosaki to specialize. To him, specialization was a way to get paid more. But knowing a little about a lot of things will pay dividends in the long run. Even companies groom leaders by moving them from department to department so that they are ready to lead the company one day.

The main management skills needed for success are:

• Management of cash flow
• Management of systems
• Management of people

Kiyosaki believes that sales and marketing are specialized skills.  The ability to communicate to another human being, whether are customers, employees, bosses, or children, is the base skill for all personal success. Being technically specialized has strengths and weaknesses. But without communication skills, technical people will not earn much.

The rich dad gave a lot of money away – to churches, to charities, and his foundation. He knew that to receive money, he had to give money. Giving money is the secret to most wealthy families. His poor dad didn’t have much and was hoping to give some money away one day when he had some money saved up.

Overcoming Obstacles

There are five reasons why financially literate people don’t build their assets and cash flow. They are

• Fear
• Cynicism
• Laziness
• Bad Habits
• Arrogance

Overcoming fear

Everyone has fear of losing money – even the rich. What’s different between the rich and the poor is how they handle the fear.  To avoid losing money, most people play it too safe.  But in life, winning always follows losing. It’s like learning to ride a bike. You fall down many times but eventually, learn to balance the bike and ride it.

For most people, the reason they don’t win financially is that the pain of losing money is far greater than the joy of being rich.  Failure makes you stronger and smarter.  Be inspired by your failures and turn them into rallying cries.

Most people have a balanced portfolio and play it safe. But if you have little money and want to become rich, you must be focused, balanced. Thomas Edison, Bill Gates, Donald Trump, George Soros, and George Patton succeeded because they were focused.  The poor pot their eggs in too many baskets. The rich focus and follow one course until they succeed.

Overcoming cynicism

All of us have doubts. Most people are poor when it comes to investing because they are running around yelling, “The sky is falling”. The cynics never win. Cynics criticize and winners analyze. Analysis allowed winners to see that the critics were blind, and to see opportunities that everyone missed. Finding what other people miss is the key to success.

When you are in doubt and feeling a little afraid, do what Colonel Sanders did to his little chicken. He fried it.

Overcoming laziness

Busy people are the laziest.  We all hear stories of a businessman who works hard. The wife is left to take care of the children. He thinks he is doing the best for the family. He has relationship problems with his wife and his work performance slips. He eventually loses his job.

People are too busy to take care of their wealth and health. The cause is the same in both cases. They stay busy as a way of avoiding something they don’t want to face. They are lazy by being busy.

“I can’t afford it” shuts down your brain. “How can I afford it?” opens up possibilities, excitement, and dreams. Many people feel guilty about their greed or desire. It’s old conditioning from childhood.  To get out of the rat race, be a little greedy. It is the best cure for laziness.

Overcoming bad habits

Our lives are a reflection of our habits than our education.  The poor dad paid his bills on the first of the month but he had  very little leftover. He has poor habits because he pays everyone else. What about paying himself?

To become financially stronger, pay yourself first.  If you pay yourself last, you become weaker.

Overcoming arrogance

Every time you are arrogant, you lose money. People use arrogance to hide their ignorance. When you know you are ignorant in a subject, start educating yourself by finding an expert in the field or by reading a book.

Getting started

Gold is everywhere. We are just not trained to see it. Just like riding a bike. At first, you wobble a little but eventually, it will be a piece of cake. Here is the 10-step process that Kiyosaki suggests

Find a reason greater than reality: the power of spirit

Most people want to be rich. Then reality sets in. The road to financial freedom looks difficult with too many hills to climb. It’s easier to just work for money as an employee.  Your purpose is a combination of “wants” and “don’t wants”. Your wants may be to have control over your time and money. You “don’t wants” may be to not work all your life. Without a strong reason or purpose, everything in life is hard. Find your purpose.

Make daily choices: The power of rich

Our spending habits reflect who we are. Poor people have poor spending habits. The poor don’t build their asset column. The choices you make every day decide whether you get rich. Invest in your education because your mind is a real asset. Most people simply buy investments rather than learning and investing.   Kiyosaki only paid $385 for a course on real estate. That made him at least $2 million.  Take a long view on wealth. Don’t believe in get-rich schemes.

Choose friends carefully: the power of association

Seek out friends who have money for their knowledge. People with a lot of money often report that their poor friends ask them for a loan or a job, but never ask them how they made their fortune.  Smart investors don’t time the markets. If they miss one wave, they wait patiently for the next one.

Master a formula and then learn a new one: the power of learning quickly

You become what you study. Your mind is powerful, so be careful what you put in your head. Kiyosaki took a course on buying real estate foreclosures. He put his learnings into action for three years. Once he mastered that formula, he was looking for other formulas. He attended classes designed for traders. Though he didn’t learn from every class, he did pick up a few things that made him a more profitable investor.

Pay yourself first: the power of self-discipline

This is the most important step in your path to financial freedom. Most people pay their bills first and pay themselves last. Paying bills is important but take care of your asset column first. Be astute enough to manage your finances such that you don’t get in a tough financial situation. To pay yourself first, keep the following in mind.

Don’t get into large debt. Keep your expenses low.

When you come up short, use the pressure to make more money and resist the urge to dip into your savings or investments

Pay your brokers well: the power of good advice

When selling a home, many people want to sell it themselves. They take the “For Sale By Owner” route. Or they use discount brokers. We live in an information age where information is priceless.  A good broker can save time and money since he has his ears on the market. Note that not all brokers are the same. Find a broker who has your best interests at heart – the ones that will spend time educating you.

Be an Indian giver: the power of getting something for nothing

“Indian giver” refers to cultural misunderstanding. When the first European settlers came to America, they were shocked by some of the practices of  American Indians. If a settler was cold, the American Indian would offer a blanket, which the settlers assumed for a gift. When the settlers asked for the blanket back, the settlers were offended.

A question every investor should ask is: how fast can I get my money back? Wise investors look for more than ROI. They look at the assets they get for free once they get their money back. An example would be investing in stock but once the stock starts moving in your favor, take your initial investment out, but let the rest ride. It’s essentially free money.

Use assets to buy luxuries: the power of focus

Use your desire to consume to inspire and motivate you to invest. Most people focus on borrowing money to get the things they want. The earlier you train yourself to be the master of money the better.

Choose heroes: the power of myth

Heroes don’t just inspire us. They make things look easy. If you are a real estate investor, learn how he negotiates and puts together deals. When it’s your turn to make a deal, you will subconsciously be acting like Trump.

Teach and you shall receive: the power of giving

Whenever you feel short or in need of something, give what you want first and it will come back in buckets. It applies to not just money but a smile, love, or friendship.

 Some To Do’s

• Stop doing what you are doing. Reassess what you are doing for better results
• Look for new ideas – Read books for new investing ideas.
• Find someone who has done what you want to do
• Take classes and attend seminars
• Make lots of offers if you want to do real estate
• Jog walk or drive a certain area for 10 minutes once a month
• Shop for bargains in all markets
• Look in the right places.
• Think big
• Learn from history – All big companies start as small companies.
• Action beats in action

Though the book doesn’t provide a step by step program on becoming a millionaire, the stories in the book give the reader how he or she can become a millionaire as well.

The book shows that millionaires systematically saved and invested their way to wealth.  They don’t live in mansions or drive flashy cars but are instead frugal people who live below their means.

The millionaires don’t chase status and live in modest neighborhoods.  They rarely sell their investments, preferring to hold them for long term gain.

UAWs and PAWs

The term Under Accumulator of Wealth (UAW) is used to represent people who have low wealth relative to their income.  The authors note that the UAW style is based more on consumption than savings of income.

Prodigious Accumulators of Wealth (PAW), on the other hand, accumulate a good amount of money relative to their income.  Many millionaires the authors studied were PAWs.

The authors introduce a formula to define an Average Accumulator of Wealth (AAW).  AAW is calculated as follows:

Net Worth = (Age x Current Total Income From All Sources)/10

Let’s take a 50-year old doctor who earns $250,000.  If his net worth as calculated by the formula above is below $1.5 million, he is considered a UAW.  On the other hand, if someone making just $50,000 a year has a net worth more than $250,000, he is considered a PAW.

Critics of the authors’ formula have argued that the formula ignores the fact that older people benefit from their assets compounding whereas younger people don’t.

Here are the common traits shared by the millionaires the authors studied.

Millionaires live below their means.

This makes logical sense.  You cannot accumulate great wealth if you spend more than what you have.

They spend their time and money in ways leading to wealth.

Millionaires spent time planning their investments.  They made it a priority to invest their time in managing their investments before spending time on other things.

They do not worry about social status.  They preferred financial independence instead.

The book notes that many doctors and lawyers have low wealth relative to their income because they are trying to keep up with their peers.  Millionaires, on the other hand, don’t try to keep up with the Joneses.

They did not receive financial assistance from their parents.

They accumulated wealth on their own.  They rarely inherited large amounts of money.  This gave them the incentive to save and invest their assets over time.

They don’t financially support their children.

Not financially supporting grown-up kids frees up money for savings and investments.  This, in turn, helps them accumulate wealth to become millionaires.

They work in the right jobs. Many millionaires work for themselves

Many millionaires worked in jobs that allowed them to grow earnings over time.  Many of them owned businesses, which allowed them to minimize taxes and accumulate assets.

Conclusion

Millionaire Next Door is a classic personal finance book with interesting anecdotes from millionaires.  The book breaks down the habits that helped them accumulate wealth over the years.  It’s recommended reading for anyone looking to build good financial habits.

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