The only (legal and morally correct) way to make money in this world is to sell a product or services for a profit. So in order to become rich, you have to sell a lot of high quality products and services because the higher the quality of your products and services, the higher the price people are willing to pay for your products and services. To put it simply, if you want to be rich you have to be a businessman.
Being a businessman means you have to sell a product or service but it does not necessarily have to be your own products and services. You can be a salesman or a shopkeeper where you sell products made by others and earn a commission on the selling price as a profit. You can employ a cook to bake cake for you and open a bakery shop. In short, you are the middleman. You can earn a lot of profits if you can sell a lot of good quality products and services, even if they are other people’s products and services.
So what about working as an employee in a company? Is this activity also considered as being in business? Well, when working in a company you are providing services to the company for a fixed monthly salary. It is similar to being in business but there is a slight difference. There is limitation in the money you will earn when working as an employee compared to being a business owner. You are limited by the number of raises and promotions that you will earn throughout your working career and you are also limited by the amount your company is willing to pay you for your services. At the same time you are essentially trying to climb the corporate ladder with a pyramid structure in order to earn higher salary but as the shape of the pyramid is smaller towards the top, this means that the competition will be tougher as you climb higher towards the top. This will be explained more in the ‘Rule of the Pyramid’ chapter.
But then why doesn’t everyone stop working as an employee and become a businessman? This is probably because being an employee is easier than being a businessman and provides job security compared to being in business which essentially comes with risks. There is no right or wrong choice of your career but what I am trying to say is that if you want to be really rich, then you have to be in business. You don’t have to resign from your job to be in business. I myself am an employee and I plan to be an employee for a long time due to the job security However, at the same time I am also a businessman by creating a product (this book) and investing my money to buy assets (properties and stocks). You can start with the easiest way to make money by being an employee and work your way to become a businessman.
In his book ‘The Cashflow Quadrant’ by Robert T. Kiyosaki author of ‘Rich Dad Poor Dad’, he developed a conceptual tool to categorize the four major ways income is earned. Depicted in a diagram, this concept entails four groupings as follows:
- E: Employee — Working for someone else.
- S: Self-employed or Small business owner — Where a person owns his own job and is his own boss.
- B: Business owner — A person owns a business to make money; typically where the owner's physical presence is not required.
- I: Investor — Investing money in order to receive a larger payout in the future.
Robert T. Kiyosaki argued that people in the right quadrant are better off than people in the left quadrant since they have people or money working for them. The problem with being in the right quadrant is you need to have good system, knowledge, skill and probably large capitals to be a successful business owner and investor. One of the ways to achieve this is to start small as self-employed and work hard to make your business grow. You can then establish a good business system and employ people to work in your company. At the same time, you can set aside a portion of your money to invest in income generating assets such as properties, stock market, unit trust etc. This will generate passive income and when this is established you can then choose to do whatever you want: early retirement, travelling around the world if you wish and you will still earn income from your assets and companies. Choosing to become rich via working as an employee and climb the corporate ladder until you reach the top management level is also one possible ways to become rich but with job security as an employee comes the limitation of the number of raises and promotions throughout your career and the competition to climb the corporate ladder.
So for the rest of the rules of becoming rich, I will focus on being a businessman / investor because I believe that is the best way to become rich. Being a businessman is about buying/ making / selling a product to make a profit. You need to have 3 important attributes to be a successful businessman. The 3 attributes are the following:
- The knowledge and ability to render quality products/services.
- The knowledge and ability to render products/services with the required quantity to meet the market demand
- The right skills, attitude and personality.
Out of the 3 attributes, the most important attribute is attribute no.3. This is because attributes no. 1 & 2 depends on knowledge of someone which could be hired or acquired by you through learning. Only selected few will have the skills, attitude and personality to be a successful businessman.
The good news is that all the 3 attributes can be hired or acquired through learning and practice. Therefore, in theory, all of us are potential businessman, but in reality, people are reluctant to change. Furthermore the road to business is a hard and a harsh one because any business will involve risks. Only selected few are willing to take the risk and to do what is necessary to be involved in business.
Let us examine the 3 attributes one by one. For attribute no. 1 & 2, one needs two type of knowledge. The first type is general knowledge and the second type is specialized knowledge. General knowledge is basic knowledge that one needs in order to do any business; for example, one needs to know simple calculation in order to calculate profit/loss to operate a business. Other examples are bookkeeping/accounting knowledge, law and regulation to form and maintain a company, inventory management, project management etc. Even if one do not have this type of knowledge, one can always hire an educated person as an employee or a consultant to perform the specific task required. For example, one can hire an accountant to perform bookkeeping/accounting task. One can also hire a lawyer to take care of legal aspect of maintaining a company. This is an important principle in business. If it is cheaper to hire an educated person to perform a task than for a businessman to spend money and time learning the required skill, then it makes sense to hire someone to do the job.
The specialized knowledge is far more important that the general knowledge. Specialized knowledge is the knowledge necessary to produce the end product/service of your business. For example, if you are in the programming business, then the specialized knowledge is the knowledge to create new program for the customer. If you are in the food business, then the specialized knowledge is the knowledge to prepare the dish for your customer. Specialized knowledge, even though can be hired is far more important to be mastered by the business owner. Among the reasons are; if you hire an educated person with a specialized knowledge more skilful than yours, then it makes sense for him to operate his own business since this is more profitable to him. The other reason is so that you as a business owner will not be cheated by your supplier, your customer or even by your own employee/consultant.
So usually, a businessman will be involved in a business that he/she likes to do, do it better than an average person and have extensive specialized knowledge on the subject. This specialized knowledge is his/her core genius. So if you want to be in business, first find out what you like to do, do it better than an average person and if you don’t have the specialized knowledge on the subject, start to acquire the necessary knowledge on the subject. You can do this by learning on the subject through reading, taking courses etc. If you focus on learning this specialized knowledge for a period of time, this specialized knowledge will then be your core genius. Choose a business which is in line with your core genius to improve your chances of being a successful businessman.
Next, we are going to examine the skills, attitude and personality part. What is the right skills, attitude and personality to be a businessman? To answer this question, I will ask another question. Have you ever heard of a phrase as follows ‘He who cannot smile cannot become a businessman?’ I am not sure where I’ve heard that phrase before, but I’ve read it somewhere. How true do you think that phrase is? Have you ever gone to a shop where the owner did not smile at you and then did not serve you by asking what you want? I certainly have and guess what; I did not set my foot ever again on the same shop. That is human nature; we like to be treated nicely. If the first thing that a person failed to do is to be nice to other people, then he/she is not fit to become a businessman for sure.
What about the time when you keep going to the same shop to buy something even though there are other shops which sell the same thing at slightly cheaper price? I certainly have done this and the main reason is because I like the shop owner. This is human nature as well, we tend to associate with people who we like. People certainly are more likely to do business with a person who he/she likes.
The two above are examples of the required traits for a businessman. I believe there are countless traits which make a good businessman. I group the traits to be a successful businessman in 3 different categories. They are Defense, Offense and Neutral. Defense is about the traits to minimize the outflow of money from your business. Offense is about the traits to maximize the inflow of money to your business. And neutral is about the traits that are generally good to have for a businessman. These different grouping are best explained through examples. Table 1 below list down the traits attributed to the 3 groups.
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Table 1: The traits required to be a successful businessman |
When I list down all the traits above and informed that these traits are good for a businessman, I do not mean that they are only good for a business owner. Ordinary people can also apply the traits listed above to their personal life to improve their personal wealth and wellbeing. The traits in table 1 are just examples of the traits that I can think of and is in no way exhaustive. As a mental exercise for you, perhaps you could fill in additional traits which fit in the 3 groups in table 1.
To put it simply, Defense skills, attitude and personality is about saving your money, about not wasting your money on unnecessary items and about minimizing the spending of your money to as low as possible. Offense skills, attitude and personality is about maximizing your income to as high as possible, for example by working hard, taking calculated risks and investing some money in an investment vehicle. Neutral personality is about having the characteristics which will assist you strongly in your business for example to get a good business opportunity, to increase your chances of making a sale and to get a good deal etc.
People have strength and weaknesses and people tend to fall under one type of personality group in the table above. For example, I have always been a Defense type. I have always been careful with spending my money and try to save as much money as possible. Fortunately, I also have a little bit of Offense by investing the money I saved in assets that generates either dividend yield or capital gain.
The good news is that even if you are only strong defensively, you still have a chance to increase your wealth substantially even to a point of becoming a millionaire. In the book ‘Multiple Stream of Income’ by Robert G. Allen, he calculated that it takes around 32 years for your money to reach 1 million if you save just 1 dollar a day in an investment vehicle that pays 20% dividend annually. This is just an example because people don’t normally save a dollar a day but it shows that just by being defensive, you have a chance of becoming a millionaire in your lifetime. Although this action looks easy, not many people have achieved this feat because the majority of us lack the important trait to be a successful Defensive persona which is being disciplined.
Sadly, there is a limit to a Defense which is limited by the amount of money that you can save as part of your income. So, in order to accelerate the growth of your wealth, you have to improve your Offense. How do you gauge your Offense? For example, in Malaysia
There are many ways to achieve this. Apart from the obvious action of changing your job with a different company that pays higher salary, you can also attempt to improve your Offense by creating multiple streams of income. I am not going into details on how to achieve this but a good book on this topic is the book highlighted in the previous paragraph: ‘Multiple Stream of Income’ by Robert G. Allen. So how much Offense power can you improve yourself? Well, if you are as talented as Bill Gates and created a successful business entity, you can earn as much as USD 222 million per month (Calculated from Bill Gates net worth reported by Forbes magazine in 2007, USD 56 billion divided by the number of years Microsoft went public, since 1986 up to 2007). Well, Bill Gates is the end of the spectrum. To be more realistic, if you can earn more than the industrial average, for example higher than RM 5000 per month then you have definitely improved your Offense.
So ask yourself, are you business material? If you do not have the knowledge and 3 attributes to be a businessman right now but you are still interested to become a businessman, well you can start working to acquire the necessary knowledge, attitude and personality traits to become a businessman. Remember that some skills and knowledge need not to be learned by you but can be hired. As for the attitude and personality traits the good news is that people are able to change their attitude and personality traits. As change is required, it is not an easy job, but as the Malay saying goes: ‘If you want something you will put forth a thousand efforts; on the other hand, if you don’t want something you will put forth a thousand reasons’. According to the famous motivator, Dato’ Dr Fadzillah Kamsah, if you consistently perform an action for 40 consecutive days, then it will become a habit. This is a good way to change your attitude, develop your habit and shape your personality.
To conclude this chapter, the general rule of becoming rich is to be in business. In order to do this, find out your core genius and acquire the necessary knowledge in that subject. Then shape your skills, attitude and personality into Defense, Offense and Neutral and off you go to become a successful businessman.
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