Chapter Seven - OVERCOMING OBSTACLES
The primary difference between a rich person and a poor person is how they
manage fear.
Once people have studied and become financially literate, they may still face roadblocks to
becoming financially independent. There are five main reasons why financially literate
people may still not develop abundant asset columns that could produce a large cash flow.
The five reasons are:
1. Fear
2. Cynicism
3. Laziness
4. Bad habits
5. Arrogance
Overcoming Fear
I have never met anyone who really likes losing money. And in all my years, I have never
met a rich person who has never lost money. But I have met a lot of poor people who have
never lost a dime—investing, that is.
The fear of losing money is real. Everyone has it. Even the rich. But it’s not having fear that
is the problem. It’s how you handle fear. It’s how you handle losing. It’s how you handle
failure that makes the difference in one’s life. The primary difference between a rich person
and a poor person is how they manage that fear.
It’s okay to be fearful. It’s okay to be a coward when it comes to money. You can still be
rich. We’re all heroes at something, and cowards at something else. My friend’s wife is an
emergency-room nurse. When she sees blood, she flies into action. When I mention
investing, she runs away. When I see blood, I don’t run. I pass out.
My rich dad understood phobias about money. “Some people are terrified of snakes. Some
people are terrified about losing money. Both are phobias,” he would say. So his solution to
the phobia of losing money was this little rhyme: “If you hate risk and worry, start early.”
That’s why banks recommend savings as a habit when you’re young. If you start young, it’s
easier to be rich. I won’t go into it here, but there is a staggering difference between a
person who starts saving at age 20 versus age 30. One of the wonders of the world is the
power of compound interest. The purchase of Manhattan Island is said to be one of the
greatest bargains of all time. New York was purchased for $24 in trinkets and beads. Yet if
that $24 had been invested at 8 percent annually, that $24 would have been worth more than
$28 trillion by 1995. Manhattan could be repurchased with money left over to buy much of
Los Angeles.
But what if you don’t have much time left or would like to retire early? How do you handle
the fear of losing money?
My poor dad did nothing. He simply avoided the issue, refusing to discuss the subject.
My rich dad, on the other hand, recommended that I think like a Texan. “I like Texas and
Texans,” he used to say. “In Texas, everything is bigger. When Texans win, they win big.
And when they lose, it’s spectacular.”
“They like losing?” I asked.
“That’s not what I’m saying. Nobody likes losing. Show me a happy loser, and I’ll show you
a loser,” said rich dad. “It’s a Texan’s attitude toward risk, reward, and failure I’m talking
about. It’s how they handle life. They live it big. Not like most of the people around here,
living like roaches when it comes to money, terrified that someone will shine a light on
them, and whimpering when the grocery clerk shortchanges them a quarter.”
Rich dad went on. “What I like best is the Texas attitude. They’re proud when they win, and
they brag when they lose. Texans have a saying, ‘If you’re going to go broke, go big.’ You
don’t want to admit you went broke over a duplex.”
He constantly told Mike and me that the greatest reason for lack of financial success was
because most people played it too safe. “People are so afraid of losing that they lose” were
his words.
Fran Tarkenton, a one-time great NFL quarterback, says it still another way: “Winning
means being unafraid to lose.”
In my own life, I’ve noticed that winning usually follows losing. Before I finally learned to
ride a bike, I first fell down many times. I’ve never met a golfer who has never lost a golf
ball. I’ve never met people who have fallen in love who have never had their heart broken.
And I’ve never met someone rich who has never lost money.
So for most people, the reason they don’t win financially is because the pain of losing money
is far greater than the joy of being rich. Another saying in Texas is, “Everyone wants to go to
heaven, but no one wants to die.” Most people dream of being rich, but are terrified of
losing money. So they never get to heaven.
Rich dad used to tell Mike and me stories about his trips to Texas. “If you really want to
learn the attitude of how to handle risk, losing, and failure, go to San Antonio and visit the
Alamo. The Alamo is a great story of brave people who chose to fight, knowing there was
no hope of success. They chose to die instead of surrendering. It’s an inspiring story worthy
of study. Nonetheless, it’s still a tragic military defeat. They got their butts kicked. So how
do Texans handle failure? They still shout, ‘Remember the Alamo!’”
Mike and I heard this story a lot. He always told us this story when he was about to go into a
big deal, and he was nervous. After he had done all his due diligence and it was time to put
up or shut up, he told us this story. Every time he was afraid of making a mistake or losing
money, he told us this story. It gave him strength, for it reminded him that he could always
turn a financial loss into a financial win. Rich dad knew that failure would only make him
stronger and smarter. It’s not that he wanted to lose. He just knew who he was and how he
would take a loss. He would take a loss and make it a win. That’s what made him a winner
and others losers. It gave him the courage to cross the line when others backed out. “That’s
why I like Texans so much,” he would say. “They took a great failure and turned it into
inspiration… as well a tourist destination that makes them millions.
But probably his words that mean the most to me today are these: “Texans don’t bury their
failures. They get inspired by them. They take their failures and turn them into rallying cries.
Failure inspires Texans to become winners. But that formula is not just the formula for
Texans. It is the formula for all winners.”
I’ve said that falling off my bike was part of learning to ride. I remember falling off only
made me more determined to learn to ride, not less. I also said that I have never met a golfer
who has never lost a ball. For top professional golfers, losing a ball or a tournament
provides the inspiration to be better, to practice harder, to study more. That’s what makes
them better. For winners, losing inspires them. For losers, losing defeats them.
I like to quote John D. Rockefeller, who said, “I always tried to turn every disaster into an
opportunity.”
And being Japanese-American, I can say this. Many people say that Pearl Harbor was an
American mistake. I say it was a Japanese mistake. From the movie “Tora, Tora, Tora,” a
somber Japanese admiral says to his cheering subordinates, “I am afraid we have awakened
a sleeping giant.” “Remember Pearl Harbor” became a rallying cry. It turned one of
America’s greatest losses into the reason to win. This great defeat gave America strength,
and America soon emerged as a world power.
Failure inspires winners. And failure defeats losers. It is the biggest secret of winners. It’s
the secret that losers do not know. The greatest secret of winners is that failure inspires
winning; thus, they’re not afraid of losing. Repeating Fran Tarkenton’s quote, “Winning
means being unafraid to lose.” People like Fran Tarkenton are not afraid of losing, because
they know who they are. They hate losing, so they know that losing will only inspire them to
become better. There is a big difference between hating losing and being afraid to lose.
Most people are so afraid of losing money that they lose. They go broke over a duplex.
Financially, they play life too safe and too small. They buy big houses and big cars, but not
big investments. The main reason that over 90 percent of the American public struggles
financially is because they play not to lose. They don’t play to win.
They go to their financial planners or accountants or stockbrokers and buy a balanced
portfolio. Most have lots of cash in CDs, low-yield bonds, mutual funds that can be traded
within a mutual-fund family, and a few individual stocks. It is a safe and sensible portfolio.
But it is not a winning portfolio. It is a portfolio of someone playing not to lose.
Don’t get me wrong. It’s probably a better portfolio than more than 70 percent of the
population has, and that’s frightening. It’s a great portfolio for someone who loves safety.
But playing it safe and balanced on your investment portfolio is not the way successful
investors play the game. If you have little money and you want to be rich, you must first be
focused, not balanced. If you look at any successful person, at the start they were not
balanced. Balanced people go nowhere. They stay in one spot. To make progress, you must
first go unbalanced. Just look at how you make progress walking.
Thomas Edison was not balanced. He was focused. Bill Gates was not balanced. He was
focused. Donald Trump is focused. George Soros is focused. George Patton did not take his
tanks wide. He focused them and blew through the weak spots in the German line. The
French went wide with the Maginot Line, and you know what happened to them.
If you have any desire to be rich, you must focus. Do not do what poor and middle-class
people do: put their few eggs in many baskets.
Put a lot of your eggs in a few baskets and focus. Follow One Course Until Successful.
If you hate losing, play it safe. If losing makes you weak, play it safe. Go with balanced
investments. If you’re over 25 years old and are terrified of taking risks, don’t change. Play
it safe, but start early. Start accumulating your nest egg early because it will take time.
But if you have dreams of freedom—of getting out of the Rat Race—the first question to ask
yourself is, “How do I respond to failure?” If failure inspires you to win, maybe you should
go for it—but only maybe. If failure makes you weak or causes you to throw temper tantrums
—like spoiled brats who call attorneys to file lawsuits every time something doesn’t go their
way—then play it safe. Keep your daytime job. Or buy bonds or mutual funds. But
remember, there is risk in those financial instruments also, even though they may appear
safe.
I say all this, mentioning Texas and Fran Tarkenton, because stacking the asset column is
easy. It’s really a low-aptitude game. It doesn’t take much education. Fifth-grade math will
do. But building your asset column is a game in which attitude plays a major role. It takes
guts, patience, and a great attitude toward failure. Losers avoid failing. And failure turns
losers into winners. Just remember the Alamo.
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