How to Get Rich 2 – The Search, Ideas and Capital

Today’s post is our second visit to How to Get Rich by the late Felix Dennis.

The search

Chapter four begins with the search for a career or calling.

None of it matters a damn if you want to get rich. If you want to make huge sums of money, then earning a living by slowly [worming] up the greasy pole is rarely the way to do it.

Felix worries that a regular salary is addictive and that working for someone else will blunt your desire to take risks.

If you want to be rich, you are not looking for a `career’, except as a launchpad or as a chance to infiltrate and understand a particular industry.

You should have no long-term, or even medium-term, requirements of the first two or three companies you work for.

He is also scathing about teamwork:

Get used to one thing. You are not part of a team ­ although you may have to pretend you are. You may have to adopt the idea of teamwork to help yourself understand better how individuals, departments, companies or industries function.

Team spirit is for losers, financially speaking. It’s the glue that binds the losers together. It’s the methodology employers use to shackle useful employees to their desk without having to pay them too much.

We are on our own in our quest to become rich:

Those who can never be rich may not want you to become rich.

It’s the same with close friends and family members. Consciously and outwardly they may want you to succeed beyond your wildest dreams. But subconsciously, often without being aware of it themselves, they might be far happier if you failed or only succeeded to a limited degree.

Felix moves on to which industries you should investigate:

First off, forget glamorous. One of the richest self-made men I know digs holes in the ground to dispose of household waste.

Too many people want to make a blockbuster movie and live in Beverly Hills. Not enough people want to dig holes.

But a growing sector is a good idea:

A swelling tide raises all boats, including yours. New or rapidly developing industries, whether glamorous or not, very often provide more opportunities to get rich than established sectors.

Other reason to choose a growing area include ignorance and capital:

To get rich, you will need capital, and to acquire capital you need to be where loose capital is searching for a home. If you are quick at grasping concepts and jargon, you become an `instant expert’. The owners of capital love `experts’.

Growing industries with relatively low start-up costs offer more opportunities for those who want to get rich than declining industries, or those that require huge start-up investment.

Felix also cautions that ideas do not make money:

Capitalism demands that whoever takes the most financial risk calls the piper’s tune.

The biggest rewards go not to those individuals who came up with the idea, nor to those individuals who built the empire. They go to those entities or individuals who funded the enterprise and own the most stock. Always bear this in mind.

Depressingly, the only way for a start-up entrepreneur to succeed is often to part with equity in return for an infusion of capital.

But entrepreneurs should endeavour to retain control of their company:

No matter what promises or verbal guarantees you receive from investors, the issue will eventually come down to control.

Whoever controls a business can force its sale. Whoever controls a business can implement a merger. Whoever controls a business can fire you. Whoever controls a business, is likely to take a great deal more money out of it than the minority shareholders.

Felix recommends that individuals ruthlessly analyse their talents:

We create an image of ourselves in our childhood and youth (often at the urging of parents, siblings or friends), and subsequently attempt to graft reality onto this image. More often than not, the graft doesn’t take.

Your parents, likely as not, will be of little use here.

Advice from a mentor or godparent can useful to the young, but after the age of thirty, all that is left is a process of trial and error.

The great idea

Chapter five is about the fallacy that all it takes to make you rich is a great idea.

You cannot patent an idea. You can only patent your own method for implementing an idea. Many people have become rich despite never having had a single great idea in their lives. I count myself among them.

I have lost count of the number of men and women who have approached me with their `great idea’, as if this, in and of itself, was some passport to instant wealth.

Felix uses Ray Kroc’s version of the fast food concept (in McDonald’s) as an example of how implementation trumps ideas.

He also warns against “not-invented-here” syndrome.

• You should “steal” good ideas from your rivals.

He uses the way that FHM stole Loaded’s best ideas to become more successful as an example.

Apple is an even bigger example, though Felix uses them as an example of the great idea fallacy since Steve Jobs was often obsessed with ideas that were ahead of their time.

• Nor would he allow his machines to communicate with the rest of the computing world.

Apple never achieved much of a foothold in PCs but was bailed out by the iPhone.

• Just as Jobs himself was bailed out financially by the success of Pixar.

Capital

Chapter six is about obtaining capital.

There are only six ways of obtaining capital. You can be given or inherit it; you can steal it; you can win it; you can marry it; you can earn it; you can borrow it. The first four of these are beyond the compass of this book.

Earning it is a long-term game plan. For the majority of people who start with nothing and seek to be rich, borrowing money in one form or another becomes a necessity sooner or later.

And this is not so difficult:

There is simply too much money in the world; too much capital seeking too few investment opportunities.

But most capital providers want a piece of the action and are only interested in lending large sums.

• Which is the venture capital approach.

VCs want their (strictly, their investors’) money back in a relatively short time, so they are not for everyone.

Felix preferred to get his seed capital from what he calls the “fishes” (VCs, in contrast, are dolphins, because they are always flipping):

Fishes come in all shapes and sizes. Friends, acquaintances, relatives, business colleagues, small investors, friendly bank managers of the old school, professional advisors, ex-employers, suppliers and vendors are among them.

He explains in detail how he got started in publishing through the favours of friends and acquaintances.

Some will argue that what I did back in 1972 could not be emulated today. But human nature does not change and, at bottom, we are cooperative animals. Many people are indulgent towards the young ­ after all, we were all once young ourselves.

Venture capitalists, major investors and bankers all have their part to play in providing capital for individuals and start-up companies. But if it is at all possible, give me the fish over the sharks and dolphins every time.

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That’s it for today.

• We’re about two-sevenths of the way through the book, so I expect to write another five articles in this series, plus a summary.

Until next time.