Rich Idiot

Road To Becoming A Rich Idiot

Julie Rains — Fri, 04 Apr 2008 02:21:38 +0000

Ever met a rich idiot? I’ve known at least two. Not counting my telephone conversation with self-proclaimed Rich Idiot and multimillionaire Robert Shemin (author of “How come THAT idiot’s rich and I’m NOT?”), I’ve also shaken hands with a guy who impressed me with his simplicity and wealth. We met briefly in a parking lot before a company meeting: I was dressed in standard corporate attire; he wore a khaki jumpsuit with his first name (“Don”) stitched in red. A college dropout, Don had just purchased my employer, a food processor with an Ivy League grad as its chief executive and a Ph.D. at the helm of its largest subsidiary. So what do Robert and Don (#346 of Forbes’ The Richest Americans in 2005) have in common?

Other than being action-oriented and not overly analytical, they both aggressively bought or controlled assets offering future benefit. Robert acquired rental properties in Nashville, Tennessee. And Don (Tyson) as President and CEO of Tyson Foods led the Arkansas-based publicly-held company on an asset safari, acquiring Mexican Original in 1983; Holly Farms, 1989, Arctic Alaska Fisheries, Inc. and Louis Kemp Seafood, 1992; Cargill’s U.S. broiler operations, McCarty Farms, Inc., and Culinary Foods of Chicago, 1995; and Mallard's Food Products of Modesto, California, 1997.

In his book, Robert tells readers that “…true assets share these three characteristics:

They have value.
You own or control them.
They provide you with future benefit (a.k.a. money).

Rich Idiots check off each of these essentials before they buy anything.”

In Robert’s ideal world, you too will be a rich idiot, owning or controlling assets that generate income, spending time with your family and friends, and enjoying your favorite activities, all without stressing about money or your to-do list. Here's his map (partial list) of the road to riches:

1) Set a goal for the amount of money you’d like to accumulate and your time horizon, which may range from 5 to 30 years. Don’t set multiple goals: set one goal that you will pursue relentlessly. Per Robert:

“Setting too many goals is like taking aim with a shotgun. Setting one goal is like taking aim with a laser beam.”

2) Figure out a way to produce income that doesn’t require direct, daily actions from you (aka residual income or as Robert mentions making money while you wash your hands or comb your hair) such as:

Investing in the stock market
Owning rental properties (Robert says that rental properties should always generate a positive cash flow; borrowing on the right property at a low interest rate can increase your investment return via Rich Idiot Debt Thinking; see my Rental Property Cash Flow Evaluation spreadsheet that helps me understand his idiotic thinking)
Running a business that allows you to benefit not only from your work but also from the efforts of others
Creating intellectual property that will generate payments (e.g., royalties from a licensing agreement, patent, or creative work)

3) Do one thing each day that will bring you closer to your goal. Take action rather than (over) analyze what you should do.

4) Learn from the “repercussions of your previous actions,” making mental connections to what has succeeded and failed in the past, and always applying what you already know to new business ventures, office procedures, investing strategies, etc.

Sound simple? It is. Nevertheless, I found it helpful to consider that radically changing or slightly modifying my actions based on my experiences is much more effective than pure persistence.

5) Access the power of other people (what Robert calls "OP Power"), rather than trying to do everything yourself.

There are 4 types of other people you should engage:

Mentors who have experienced success in the fields you are pursuing
Idea people who have an idea but need business expertise (yours) or have developed a business model that you can replicate
Team members who contribute to your productivity by doing things that are time-consuming for you and/or just not your expertise (professionals such as CPAs and attorneys as well as employees, independent contractors, or outside firms who provide services to you and your company)
Investors who will help fund a new business, major asset purchase, or project

The OP Power concept and Robert’s discussion of working all the time or thinking he should be working while managing his business resonated most with me. He handled all the day-to-day operations associated with his rental properties such as finding renters, collecting rent, sourcing contractors, and keeping the financial records. Here’s his story:

“…though I was working all the time, I wasn’t making a ton of money. Even my weekends were filled with business, because whenever I took a Saturday off, I’d spend it worrying about all the stuff I hadn’t finished on Friday. And when I took a Sunday off, I’d spend it worrying about all the stuff that was waiting for me Monday morning.

What’s more, I felt tired, cranky, and fearful that I’d make a lot of mistakes that would cost me my hard-earned money. The point is I was trying to do everything.

What happened? I got some really good advice and took it. What was the advice? It’s the same advice I’m giving you…Don’t do it all alone.”

How should you find qualified people to help you run your business? I asked Robert that question when we spoke. He told me that I should find them the same way I might locate a good doctor (or mechanic or beautician):

Ask people you trust for recommendations
Check references and verify credentials
Arrange a meeting
Make sure that you feel comfortable working together

Robert assured me that many successful people are willing to help those who are genuinely interested in receiving guidance.

But don’t stop there. Monitor what your other people are doing, check your results periodically, and adjust your actions as needed.

6) Anticipate and prepare for potentially asset-robbing events such as natural disaster, divorce, death, disability, and taxation. Robert advises to get insurance coverage, sign a prenuptial agreement, and exercise tax deduction and tax reduction strategies.

7) Keep cash flow positive.
Even the asset rich can run out of cash as Robert learned when tornadoes blew through his hometown of Nashville, Tennessee (USA) and location of his 40 or so rental properties. He had to spend thousands of dollars in repairs and came close to running out of cash and credit while waiting for his insurance check. When his son asked to go to the movies, Robert scraped coins out of a jar to buy their tickets.

He did get his property insurance payments in time to avoid bankruptcy but retooled his business approach (see #4) and began tracking cash flow and reviewing his cash position every Friday.

What is the one thing that holds people back from acquiring assets and becoming wealthy? “Fear of making mistakes,” Robert told me. So go ahead and try, learn, and move forward because “the wealthy make a lot of mistakes.”

I received a copy of "How come THAT idiot's rich and I'm NOT?" in exchange for a book review. Though I've never sought to emulate Don Tyson, I was intrigued by his grassroots approach to interacting with people: he personally handed out flyers to hourly workers guaranteeing their benefits, quickly winning their support for Tyson's acquisition of Holly Farms.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Spiritual Insights From A Rich Idiot

Julie Rains — Wed, 20 Feb 2008 02:47:07 +0000

The last person I thought would impart valuable spiritual wisdom is self-proclaimed rich idiot and wealth guru Robert Shemin, author of “How Come That Idiot’s Rich and I’m Not?" (release date of March 4, 2008). I spoke to him by telephone during a break from his charity work with street children in Medellín, Colombia. The question I posed to him, “Of the four spiritual concepts from your book: abundance, forgiveness, commitment, and gratitude, which is most essential to being wealthy?” His answer surprised me.

Gratitude

After some deliberation to absorb my question (I had taken 4 of the concepts most intriguing to me though there were others), Robert decisively stated “gratitude.” He tells me that (North) Americans don’t seem to be grateful for what they do have but rather focused on what they don’t have.

Compared to the poverty of Brazilian street children that he works with through Brazos Abiertos (Open Arms), even those on welfare in the USA have a standard of living that seems wealthy, according to my informed source. Robert recommends volunteering at a homeless shelter or with another charitable agency to put your life and financial status into perspective.

Independent of my discussion with Robert, I have been considering gratitude and its value, not necessarily for building wealth but for enjoying life and coping with difficult circumstances. Recently, I discovered a new meaning in the New Testament miracle story of a few loaves and fish feeding several thousand people. Just in case you’ve never heard the story (an account is found in the book of Matthew, Chapter 15, verses 32-39), Jesus is talking to a large crowd for a few days and someone realizes that it’s time to eat. They’re in the wilderness with no grocery stores or restaurants nearby. Jesus wants to feed everyone (4,000 men plus women and children) before they go home so he figures out what is available food-wise and it is seven loaves and a few small fish.

Normally, what would happen?

Economists would declare a scarcity
Financial planners would blame poor planning or lack of food insurance
Blogosphere residents would proclaim poor life choices or lousy decision-making skills on the part of Jesus and his disciples or the crowd

What did Jesus do? He gave thanks. Clearly, there was not enough but he gives thanks for the small amount that he has.

This morning, I checked some friends’ blog as mom, dad, and 20-something daughter chronicle the daughter’s battle with leukemia. She has had a bone marrow transplant and recently developed pneumonia as a result of her still growing strong but less than perfect immune system. Their updates (while in the hospital) are peppered with mentions of gratitude and thankfulness. Meanwhile, the illness has created a financial hardship, despite all working and having health insurance.

Will being grateful mean that everything will turn out rosy? Does being grateful make you wealthy? No. In his book, Robert proposes gratitude as a preparation to becoming wealthy. Why? Because no matter what your net worth, if you aren’t grateful, then your riches won’t bring you contentment, happiness, or freedom.

Abundance

Though gratitude was #1 in Robert’s mind, I also want to mention some of his other spiritual ideas, beginning with part of the Rich Idiot quiz (designed to determine readiness for rich idiocy):

“The Universe is an abundant place and there’s more than enough for everyone.
a) I believe we live in a world of scarcity and that if one person gets a big slice of the pie another winds up in need.
b) I agree that the Universe is an abundant place and that there’s more than enough for everyone.
c) I believe that the Universe favors some people over others and distributes wealth unevenly.”

According to Robert, (b) is correct and if you want to be rich, then you need to think that there is plenty for all.

This idea reminded me of a book by Henri Nouwen called "The Life of the Beloved." He contrasted the worldly notion of being chosen with a Christian perspective. Typically the act of being chosen means that one has been selected for the basketball team, a college scholarship, a management training position, etc. and that someone else has been rejected. Christians, presumably, believe that all can be chosen or beloved, and one person's chosenness does not automatically exclude another from being selected.

Consider how having the idea that we can all be wealthy vs. thinking that one person’s wealth always takes away from another person’s wealth manifests itself in day-to-day interactions.

As a career-services professional, I provide writing services for business clients. Those who believe in positive outcomes for all tend to be pleasant and successful; they engage me, willingly pay what I consider reasonable rates, and receive services that allow them to land new positions or earn promotions, often with pay increases 10-30x (or more) the amount they paid me.

There are others, fortunately few, who seem to feel pressed upon to hire me, as if my free time were spent concocting ways of extracting more money from them. Though I endorse skepticism when appropriate, I do wonder if such a win-lose approach saturates their thinking, shades conversations, and prevents them from cultivating collaborative, profitable relationships.

Are there times that one person wins (market share, a new account, a college scholarship, the race) and another loses? Yes. Still, thinking abundantly can help you approach opportunities and make moves that will benefit you and your customers, employees, shareholders, etc.

Forgiveness

Robert proposes that forgiveness is part of spiritual preparation to become wealthy: “The first thing you have to do is to forgive. ‘But I’m not holding any grudges,’ you protest. Give me a break. Let’s do a quick checklist of possible forgiveness targets.” He lists many who may have wronged or angered others:

Parents
Siblings
Spouse
Kids
Friends
Coworkers
Neighbors

“But our list isn’t complete. One of the most important acts of forgiveness is forgiving yourself.”

Forgive yourself for (my list):

real estate you sold too early
real estate you should have bought but didn’t
investment you didn’t make
investment you did make and shouldn’t have
credit card debt you ran up

This idea may not have resonated with me if I had not read Philip’s post on letting things go about a couple who still mourned the perceived loss of wealth when they sold real estate that later became extremely valuable. “Move on,” we want to shout to the couple and others like them, who are so focused on the past that they likely miss the opportunities of the present.

Commitment

Robert proposes that instead of focusing on not being broke or not having debt you should commit to pursuing a healthy income and wealth; that is, be bold and take positive actions that will lead to new and better results. Commitment itself doesn’t lead directly to riches but achieving a goal requires commitment.

I’m not saying that you should get all your spiritual guidance from a book entitled “How Come That Idiot Is Rich and I’m Not?” but the book may help you (as it did me) change your mindset and remove some mental blocks about pursuing wealth. And, I found his idea that true wealth = time to do what you want to do with no money worries refreshing.

I’ll explore his practical advice on becoming rich in an upcoming post.

Robert Shemin, JD/MBA, made his fortune in real estate, and has diversified into other businesses and equity investments. He has written several books on real estate investing and is a motivational speaker. I received a preview copy of “How Come That Idiot’s Rich and I’m Not?” in exchange for a book review.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: