Overcoming Cynicism
“The sky is falling! The sky is falling!” Most of us know the story of Chicken Little who ran
around warning the barnyard of impending doom. We all know people who are that way.
There’s a Chicken Little inside each of us.
As I stated earlier, the cynic is really a little chicken. We all get a little chicken when fear
and doubt cloud our thoughts.
All of us have doubts: “I’m not smart.” “I’m not good enough.” “So-and-so is better than
me.” Our doubts often paralyze us. We play the “What if?” game. “What if the economy
crashes right after I invest?” “What if I lose control and I can’t pay the money back?” “What
if things don’t go as I planned?” Or we have friends or loved ones who will remind us of
our shortcomings. They often say, “What makes you think you can do that?” “If it’s such a
good idea, how come someone else hasn’t done it?” “That will never work. You don’t know
what you’re talking about.” These words of doubt often get so loud that we fail to act. A
horrible feeling builds in our stomach. Sometimes we can’t sleep. We fail to move forward.
So we stay with what is safe, and opportunities pass us by. We watch life passing by as we
sit immobilized with a cold knot in our body. We have all felt this at one time in our lives,
some more than others.
Peter Lynch of Fidelity Magellan mutual-fund fame refers to warnings about the sky falling
as “noise,” and we all hear it.
Noise is either created inside our heads or comes from outside, often from friends, family,
co-workers, and the media. Lynch recalls the time during the 1950s when the threat of
nuclear war was so prevalent in the news that people began building fallout shelters and
storing food and water. If they had invested that money wisely in the market, instead of
building a fallout shelter, they’d probably be financially independent today.
When violence breaks out in a city, gun sales go up all over the country. A person dies from
rare hamburger meat in the state of Washington, and the Arizona Health Department orders
restaurants to have all beef cooked well-done. A drug company runs a TV commercial in
February showing people catching the flu. Colds go up as well as sales of cold medicine.
Most people are poor because, when it comes to investing, the world is filled with Chicken
Littles running around yelling, “The sky is falling! The sky is falling!” And Chicken Littles
are effective, because every one of us is a little chicken. It often takes great courage to not
let rumors and talk of doom and gloom affect your doubts and fears. But a savvy investor
knows that the seemingly worst of times is actually the best of times to make money. When
everyone else is too afraid to act, they pull the trigger and are rewarded. Some time ago, a
friend named Richard came from Boston to visit Kim and me in Phoenix. He was impressed
with what we had done through stocks and real estate. The Phoenix real estate prices were
depressed. We spent two days showing him what we thought were excellent opportunities
for cash flow and capital appreciation.
Kim and I are not real estate agents. We are strictly investors. After identifying a unit in a
resort community, we called an agent who sold it to him that afternoon. The price was a
mere $42,000 for a two-bedroom townhome. Similar units were going for $65,000. He had
found a bargain. Excited, he bought it and returned to Boston.
Two weeks later, the agent called to say that our friend had backed out. I called immediately
to find out why. All he said was that he talked to his neighbor, and his neighbor told him it
was a bad deal. He was paying too much. I asked Richard if his neighbor was an investor.
Richard said he was not. When I asked why he listened to him, Richard got defensive and
simply said he wanted to keep looking.
The real estate market in Phoenix turned, and a few years later, that little unit was renting for
$1,000 a month—$2,500 in the peak winter months. The unit was worth $95,000. All
Richard had to put down was $5,000 and he would have had a start at getting out of the Rat
Race. Today, he still has done nothing.
Richard’s backing out did not surprise me. It’s called buyer’s remorse, and it affects all of
us. The little chicken won, and a chance at freedom was lost. In another example, I hold a
small portion of my assets in tax-lien certificates instead of CDs. I earn 16 percent per year
on my money, which certainly beats the interest rates banks offer on CDs. The certificates
are secured by real estate and enforced by state law, which is also better than most banks.
The formula they’re bought on makes them safe. They just lack liquidity. So I look at them as
2-to 7-year CDs. Almost every time I tell someone that I hold my money this way, especially
if they have money in CDs, they will tell me it’s risky. They tell me why I should not do it.
When I ask them where they get their information, they say from a friend or an investment
magazine. They’ve never done it, and they’re telling someone who’s doing it why they
shouldn’t. The lowest yield I look for is 16 percent, but people who are filled with doubt are
willing to accept a far lower return. Doubt is expensive.
My point is that it’s those doubts and cynicism that keep most people poor and playing it
safe. The real world is simply waiting for you to get rich. Only a person’s doubts keep them
poor. As I said, getting out of the Rat Race is technically easy. It doesn’t take much
education, but those doubts are cripplers for most people.
“Cynics never win,” said rich dad. “Unchecked doubt and fear creates a cynic.” “Cynics
criticize, and winners analyze” was another of his favorite sayings. Rich dad explained that
criticism blinded while analysis opened eyes. Analysis allowed winners to see that critics
were blind, and to see opportunities that everyone else missed. And finding what people
miss is key to any success.
Real estate is a powerful investment tool for anyone seeking financial independence or
freedom. It is a unique investment tool. Yet every time I mention real estate as a vehicle, I
often hear, “I don’t want to fix toilets.” That’s what Peter Lynch calls noise. That’s what my
rich dad would say is the cynic talking, someone who criticizes and does not analyze,
someone who lets their doubts and fears close their mind instead of open their eyes.
So when someone says, “I don’t want to fix toilets,” I want to fire back, “What makes you
think I want to?” They’re saying a toilet is more important than what they want. I talk about
freedom from the Rat Race, and they focus on toilets. That is the thought pattern that keeps
most people poor. They criticize instead of analyze.
“I-don’t-wants hold the key to your success,” rich dad would say. Because I, too, do not
want to fix toilets, I shop hard for a property manager who does fix toilets. And by finding a
great property manager who runs houses or apartments, well, my cash flow goes up. But,
more importantly, a great property manager allows me to buy a lot more real estate since I
don’t have to fix toilets. A great property manager is key to success in real estate. Finding a
good manager is more important to me than the real estate. A great property manager often
hears of great deals before real estate agents do, which makes them even more valuable.
That is what rich dad meant by “I-don’t-wants hold the key to your success.” Because I do
not want to fix toilets either, I figured out how to buy more real estate and expedite my
getting out of the Rat Race.
The people who continue to say “I don’t want to fix toilets” often deny themselves the use of
this powerful investment vehicle. Toilets are more important than their freedom.
In the stock market, I often hear people say, “I don’t want to lose money.” Well, what makes
them think I or anyone else likes losing money? They don’t make money because they choose
to not lose money. Instead of analyzing, they close their minds to another powerful
investment vehicle, the stock market.
I was riding with a friend past our neighborhood gas station. He looked up and saw that the
price of gas was going up and thus the price of oil. My friend is a worry wart or a Chicken
Little. To him, the sky is always going to fall, and it usually does, on him.
When we got home, he showed me all the stats as to why the price of oil was going to go up
over the next few years, statistics I had never seen before, even though I already owned
substantial shares of an existing oil company. With that information, I immediately began
looking for and found a new, undervalued oil company that was about to find some oil
deposits. My broker was excited about this new company, and I bought 15,000 shares for 65
cents per share.
Three months later, this same friend and I drove by the same gas station, and sure enough, the
price per gallon had gone up nearly 15 percent. Again, the Chicken Little worried and
complained. I smiled because, a month earlier, that little oil company hit oil and those
15,000 shares went up to more than $3 per share since he had first given me the tip. And the
price of gas will continue to go up if what my friend says is true.
If most people understood how a “stop” worked in stock-market investing, there would be
more people investing to win instead of investing not to lose. A stop is simply a computer
command that sells your stock automatically if the price begins to drop, helping to minimize
your losses and maximize some gains. It’s a great tool for those who are terrified of losing.
So whenever I hear people focusing on their I-don’t-wants, rather than what they do want, I
know the noise in their head must be loud.
Chicken Little has taken over their brain and is yelling, “The sky is falling, and toilets are
breaking!” So they avoid their don’t-wants, but they pay a huge price. They may never get
what they want in life. Instead of analyzing, their inner Chicken Little closes their mind. Rich
dad gave me a way of looking at Chicken Little. “Just do what Colonel Sanders did.” At the
age of 66, he lost his business and began to live on his Social Security check. It wasn’t
enough. He went around the country selling his recipe for fried chicken. He was turned down
1,009 times before someone said yes. And he went on to become a multimillionaire at an age
when most people are quitting. “He was a brave and tenacious man,” rich dad said of Harlan
Sanders.
So when you’re in doubt and feeling a little afraid, just do what Colonel Sanders did to his
little chicken. He fried it.
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