How to Get Rich 3 – Giving Up, Errors and Virtues

How To Get Rich

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

Never Give in

Chapter 7 is about not giving in.

Getting rich, and in particular, starting your own business as Felix did, is not a straight path.

  • It’s important not to be discouraged when times are bad.

I would not be a wage slave. I would not take `no’ for an answer. I would not give in. I was going to be rich. Some how. Some way. Some day soon.

Felix uses Van Gogh as an example, which is pushing it.

  • The paintings are fantastic, but he never sold one other than to restaurants and inns for food and drink, and he went mad and finally killed himself.

I cannot help it that my pictures do not sell. Nevertheless, the time will come when people will see that they are worth more than the price of the paint.

But if you can ignore the ending, his dedication to his art is inspiring.

Five errors

Chapter 8 looks at the five most common start-up errors.

Desire and compulsion.

According to Felix:

All error springs from flawed assumptions.

The first error is to confuse a desire to be rich with the need to be rich.

Wishing for or desiring something is futile without an inner compulsion to achieve it.

If you are not driven by demons to be rich, then don’t try.

In another context, we have the words of a famous writer to a student who was thinking of giving up:

You mean you could stop? And you haven’t?


On my MBA, the catchphrase of the finance professor was “cashflow, cashflow, cashflow”.

  • If you want to understand what’s really going on in a situation, look at the cashflows. (( He actually had a second catchphrase which was just as useful – “Are these guys on drugs?” ))

And as any business, finance or accounting student knows, there is only one way to go bust – you run out of cash.

Not only does a lack of cash flow eventually doom any enterprise, it just as surely prises control of any entity from its owner or majority shareholder.

And of course, it’s the control which will eventually make you rich.

Once you lose control of a business, then no bank, white knight, investor or new owner is likely to permit you to gain control again.

Few enterprises start their life with positive cash flow, and it’s interesting to note that since Felix wrote the book, two trends have emerged:

  1. positive cashflow startups are remaining private for longer
  2. lots of firms are coming to public markets still needing future injections of cash, perhaps for years

Cash flow is something that any entrepreneur must fully comprehend from the get-go. Balance sheets are a matter for accountants, banks and auditors.

Felix has a point here.

If cash flow is good, then no matter how badly run or poorly managed a company is, there is always a decent chance of turning its fortunes around.

Companies with bad cash flow are either non-viable or are expanding too quickly.

Felix’s advice on improving cashflow centres on keeping expenses and overheads low, and on chasing up debts personally.

Here are a few highlights:

  • Never sign long-term rent agreements or take upmarket office space.
  • Never indulge in fancy office or reception furniture. A vase of beautiful flowers every week creates a better impression.
  • Check all staff travel and entertainment claims with an eagle eye.
  • If you’re going to be late paying, call the vendor’s boss. Give a date. Stick to it.
  • Always meet payroll, even at the expense of starving yourself that week.

Felix also cautions about factoring debt.

When you do business with a company that factors debt, you make over your debts to them. They charge a fee and percentage of the debt. A swingeing percentage.

Bingo! You have solved your cash-flow crisis. Except you haven’t. Not in the long run. Factoring is a deal with the devil, and just like Faust, you will have the worst of the bargain.

Reinforcing failure

If something fails, stop doing it and start doing something else, right?

Easy to say, harder to do.

  • The tricky part is identifying failure early enough.
See also:  How to Get Rich 2 - The Search, Ideas and Capital

Felix uses the personal example of CD-magazine Blender, into the launch of which he pumped millions of dollars before accepting that it wouldn’t sell.

There’s also the matter of timing in general.

Felix discusses how network effects can transform the prospects of existing technologies from failure to success.

  • He uses the dreaded fax as an example, as well as the failure of Laker’s SkyTrain service, decades before cheap air travel became ubiquitous.
Thinking small and acting big

Felix tells the story of his first hit in 1974 – Kung Fu Monthly, a magazine about Bruce Lee that he published for ten years.

Thinking big. That’s the secret. Of the dozens of independent magazine publishers in Britain back in the 1970s, hardly one of them dared to think big enough to get on an aeroplane and hawk their wares in the biggest market in the world.

Those few that did so, licensed their magazines in America. They never thought to create a partnership and risk their own capital.

But you also have to act small:

Just because you have a success or two under your belt doesn’t mean you have it made.

Felix quotes Churchill:

Success is never permanent; failure is never fatal. The only thing that really counts is to never, never, never give up.

Felix is warning against complacency.

Every day you have to hit the ground running, putting in more hours than even your most dedicated member of staff. You have to stay flexible. You have to be willing to listen and to learn and to emulate success elsewhere.

Felix speaks from experience:

In the late 1980s and early 1990s I spent millions of dollars on drinking, taking drugs and running around with whores.

My business suffered and my health suffered. Some good people I trusted stopped working with me. And it very nearly killed me.

After a health scare, Felix gave up the drugs and stuck to wine.

Skimping on talent

Felix says there is only one talent you need to become rich:

You need the talent to identify, hire and nurture others with talent. Talent is the key to sustained growth, and growth is the key to early wealth.

Which means that you need to be flexible:

Talented people want a good salary, of course, but surprisingly often they are more attracted to new opportunities and challenges.

Felix also advises to get them while they are young:

By the time talent is in its mid-to-late forties or early fifties, it will have become very, very expensive. Young talent can be found and underpaid for a short while, providing the work is challenging enough.

And to get rid of talent when it is old:

Finally, it will reach a stage where it is being paid based on past reputation alone. That is when you must part company with it.

Cardinal virtues

We’ve already covered the importance of persistence.

Persistence is important, no doubt about it, and requires a concerted effort of will and stamina to maintain. But it is not an end in itself.

Felix cautions against confusing it with stubbornness:

Stubbornness implies you intend to persist despite plentiful evidence that you should not.

We must all surrender at some time, to love or desire or death. But never give in easily. If you can, attempt one step further along the road than appears sensible before giving in.


Felix rates self-belief above persistence, and quotes Eleanor Roosevelt:

No one can make you feel inferior without your consent.

Felix talks about those the ancients described as having the “the look of eagles”, and offers up Churchill as a recent example from England.

Without self-belief nothing can be accomplished. With it, nothing is impossible.

Trust your instincts

Felix describes how he invested in The Week:

I had the `feeling’ – when the hair rises slightly on the back of your arms and neck and you know you are on the scent of something you shouldn’t be doing ­ but you’re going to do anyway.

Felix calls this commercial instinct.

So I invested heavily in The Week. It lost money. I bought out all of the minority investors, except for Jolyon Connell, the founder, and the editor, Jeremy O’Grady. Slowly, almost imperceptibly, The Week began to take off.

I met famous people, I mean really famous people: prime ministers and presidents and movie producers and A-list movie stars, who were only interested in talking to me because I owned The Week.

The Week is now the most profitable magazine I own in the UK. Pound for pound (revenues divided by cost), it is the most profitable magazine I have ever owned. It has more paid subscribers in Britain than one of the most venerable magazines in the world, The Economist.

I am happy to say I am one of them and have been for 20 years.

See also:  How to Get Rich 2 - The Search, Ideas and Capital

Any serious private investor already knows that diversification is the only free lunch in investing, but it’s refreshing to hear an entrepreneur speak in similar terms.

I am one of the richest self-made men in Britain for two reasons. I own my company outright, and I began to make more baskets the minute the first had a few eggs in it.

Diversification is a good idea even if your new idea cannibalises your original one:

Strangling your own baby, in order to grow, is far more common than you might think. If you have a successful monthly magazine, for instance, and then launch a weekly in the same category, you will inevitably weaken sales of your original title.

So should you launch the weekly magazine? A thousand times yes! Because if you do not launch the weekly edition, then your rivals will do it for you.

Felix quotes some instances of businesses which didn’t respond to change, notably the CD sellers when MP3 files appeared.

  • Kodak (digital cameras), Sony (iPod) and Nokia (smartphones) are other great examples.

And he mentions Richard Branson as someone who has built himself a lot of baskets.

How many baskets should you go for? As many as make sense. In the beginning, keep them related to your core business. Just like Richard did.

Of course, you shouldn’t diversify until your first idea is throwing off cash.

This advice is not designed for your start-up phase. [Then], you concentrate on that one basket as if your life (and the life of your first-born) depends upon it.

And once you start diversifying, keep going:

The biggest basket I ever built wasn’t my first or second. It was my twentieth. But if I hadn’t built the second, I would never have reached the twentieth.

Listen and Learn

When you stop listening, you stop learning. And if you stop learning, it’s time to get out of the kitchen and let someone else do the cooking.

Listening is the most powerful weapon after self-belief and persistence you can bring into play as an entrepreneur.

Of course, it’s an inefficient tool:

If you have experience, a little investment cash and will make the time, then the world will bring to your door an amazing collection of visionaries, con artists, madmen and budding entrepreneurs.

Most of your time will be wasted. But what is not wasted will make you richer.

That’s it for today.

  • We’re almost half-way through the book now, so it’s possible we might complete in six rather than seven articles (plus a summary).

Until next time.

Mike is the owner of 7 Circles, and a private investor living in London. He has been managing his own money for 40 years, with some success.

You may also like...

Leave a Reply

Your email address will not be published.

How to Get Rich 3 – Giving Up, Errors and Virtues

by Mike Rawson time to read: 6 min