3. Choose friends carefully: the power of association
First of all, I do not choose my friends by their financial statements. I have friends who have
actually taken a vow of poverty as well as friends who earn millions every year. The point
is that I learn from all of them.
Now, I will admit that there are people I have actually sought out because they had money.
But I was not after their money; I was seeking their knowledge. In some cases, these people
who had money have become dear friends. I’ve noticed that my friends with money talk
about money. They don’t do it to brag. They’re interested in the subject. So I learn from
them, and they learn from me. My friends who are in dire financial straits do not like talking
about money, business, or investing. They often think it rude or unintellectual. So I also learn
from my friends who struggle financially. I find out what not to do.
I have several friends who have generated over a billion dollars in their short lifetimes. The
three of them report the same phenomenon: Their friends who have no money have never
come to them to ask them how they did it. But they do come asking for one of two things, or
both: a loan, or a job.
WARNING: Don’t listen to poor or frightened people. I have such friends, and while I
love them dearly, they are the Chicken Littles of life. To them, when it comes to money,
especially investments, it’s always, “The sky is falling! The sky is falling!” They can
always tell you why something won’t work. The problem is that people listen to them. But
people who blindly accept doom-and-gloom information are also Chicken Littles. As that
old saying goes, “Birds of a feather flock together.”
If you watch business channels on TV, they often have a panel of so-called experts. One
expert will say the market is going to crash, and the other will say it’s going to boom. If
you’re smart, you listen to both. Keep your mind open, because both have valid points.
Unfortunately, most poor people listen to Chicken Little.
I have had many close friends try to talk me out of a deal or an investment. Not long ago, a
friend told me he was excited because he found a 6 percent certificate of deposit. I told him I
earn 16 percent from the state government. The next day he sent me an article about why my
investment was dangerous. I have received 16 percent for years now, and he still receives 6
percent.
I would say that one of the hardest things about wealth-building is to be true to yourself and
to be willing to not go along with the crowd. This is because, in the market, it is usually the
crowd that shows up late that is slaughtered. If a great deal is on the front page, it’s too late
in most instances. Look for a new deal. As we used to say as surfers: “There is always
another wave.” People who hurry and catch a wave late usually are the ones who wipe out.
Smart investors don’t time the markets. If they miss a wave, they search for the next one and
get themselves in position. This is hard for most investors because buying what is not
popular is frightening. Timid investors are like sheep going along with the crowd. Or their
greed gets them in when wise investors have already taken their profits and moved on. Wise
investors buy an investment when it’s not popular. They know their profits are made when
they buy, not when they sell. They wait patiently. As I said, they do not time the market. Just
like a surfer, they get in position for the next big swell.
It’s all “insider trading.” There are forms of insider trading that are illegal, and there are
forms of insider trading that are legal. But either way, it’s insider trading. The only
distinction is: How far away from the inside are you? The reason you want to have rich
friends is because that is where the money is made. It’s made on information. You want to
hear about the next boom, get in, and get out before the next bust. I’m not saying do it
illegally, but the sooner you know, the better your chances are for profits with minimal risk.
That is what friends are for. And that is financial intelligence.
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