Episode 069 - The quest to be RICH

The definition of ‘rich’ differs from one person to the next, but I think that whatever your definition, we can all agree that the quest to obtain wealth is worthy. Anyone who tells you anything to the contrary isn’t doing you a service. In this episode I want to explore the concept of ‘rich’ and break down some false assumptions that people have to help you break free of the shackles of western society and find your path to freedom.

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Show Notes

First, let me explain how I define rich:

Rich is the ability to live a free and unconstrained life, without anyone telling what you can and cannot do, think or be, with adequate surplus wealth that you can draw down from to cover your burn rate.  

There are many terms for this out there - Financial Freedom, Financially Independence, etc. but most don’t get to the core of what is the goal - you want to be secure in whatever life throws at you, and have abundance so that you can indulge in things that are in excess of your basic necessities.

Everyone will define this differently.  I believe the biggest mistake that most people make is that they don’t associate ‘rich’ with ‘unconstrained’ or ‘free’.  You see, rich isn’t just about money.  Yes, money makes up a large portion of it in a western society, but if you use $USD or your local Fiat currency as a measurement of your freedom, you miss the point.  Being rich and measuring it only in money is your first mistake.

Let me give you a couple of hypothetical scenarios:

1.  Mike makes $400,000 salary, has a $1m retirement fund (like a 401k), and lives in an upper class suburb, with a family of 4.  Drives a nice new sports car, kids are in private school, he is the sole contributor of money to the family, has all the trappings of wealth, etc.  Mike thinks he is rich.

2.  Mary makes $75,000 income from her 10 rental properties, has no retirement fund, lives in a modest suburb in an inexpensive city, drives an older used but reliable car, kids are in public school, and she’s an avid painter & artist.

These are examples of people that we see everyday.  They go to the same supermarkets we shop at, they sit in the same traffic.  You see them at the intersection waiting for the lights to change and you make assumptions based on your understanding and belief system of their ideals and lifestyle.

Yet who is actually rich?

If you asked most people this question, they would choose #1.   They would be wrong.  But it would be understandable why they would be wrong.  Society told them that Mike was rich because society told you that what Mike has fallen for is what you should fall for, and therefore we must celebrate Mike because one day you could be Mike.

But you wouldn’t be rich.  Because with the larger salary comes all the burdens.  Mike is expected to perform at a level at his employment that is associated with his high salary.  If Mike can’t perform at that level, the employer will terminate Mike before they would terminate a lower salaried person, simply because Mike’s cost to the company is higher.  But since Mike is an “executive”, he can use his networking and political skill to protect his position better than others, but that comes with a level of effort and the constant fear that if he makes a political mistake, he is gone.  Mike’s output must be at a value level that is supportive of his costs, which means Mike probably has to work weekends, he has to work late, and he spends less time with the family.  The constant stress that comes with supporting this high salary means that his spare time is more of a recovery from exhaustion, than having enough time to detach from his job.  He becomes his job, and keeping everyone else happy.

Mike can’t take vacations easily because he fears that if he was not there, some other person will be trying to kick him off the org chart at work and take his job.  Because Mike is exhausted, he spends his spare time just recovering from work.  He doesn’t have the energy to do things around the house (and its a big house), so he hires gardeners, cleaners, constant handyman labor, etc.  He appears wealthy so all of his hired help charge 2x the price to him that they would charge to others because they think he has tons of cash.  This is a common theme that follows Mike everywhere.  As a result, he can’t trust anyone so he lives in this antagonistic way with people because he thinks they are trying to steal from him.  And they are - because his house looks audacious, he spends 5x more on home security because thieves are constantly canvassing him.  Everyday someone comes to his front door trying to sell him something because he looks rich.  Every scammer is out there targeting him, and even his govt doesn’t trust him to be paying his fair share, so Mike is subject to more scrutiny, more tax audits, more risks of lawsuits, etc.   Mike’s broadcasting of wealth is just more burden to protect it and Mike runs the risk of losing himself in the process.

Mike’s “things” own him - he doesn’t own them.  His big, beautiful house, costs 10x more in property taxes than most.  His choice of what city or suburb that reflects his upper class life comes with it the costs associated with clean and manicured streets and parks, so far removed from actual nature and escape from the city.  Mike’s car costs 5x more for maintenance because it is something “special”.  When Mike does get to take vacation with the family, it is a $20K experience.  They get to travel to far off places but because of Mike’s schedule, he has to be on call by the company, and that means they only ever get to be tourists.  They can’t really see where they have landed because they fall prey to only spending time in the 5 star hotels, and doing the odd chaperauned day trip out to see things.  And because they look like rich people, every street hawker, beggar, thief, etc. is targeting them forcing Mike to go constantly into defensive posture and that doesn’t let him relax that much.  

Mike’s relationship with his wife has changed from one where both partners wanted to be in the marriage to one where they are shackled together in the marriage because they become reliant on the money.  No partner wants to break from the relationship because of the fear of divorce, the costs, the disruption to the family unit, etc.  and yet they are just in that relationship because they feel shackled to it.  They remember when they met each other and fell in love, but that was at a time when Mike had nothing and Mike’s true soul and self were laid bare and that is what Mike’s wife fell in love with.  Since Mike’s aspirations and ambitions took over, Mike is a small example of that former self, and Mike’s wife cries out to have “the old Mike back” and not this aggressive, defensive and arrogant man.  Both partners know that the percentage chance of this marriage staying together favors failure over longevity unless Mike changes and they choose to find a different path - together.  More than likely they will find a different path - apart.

Yet society told Mike that what he has done - what he has become - should be the goal of everyone.   From the age of 18, society told Mike that is what to do.  Seek out wealth.  Seek out riches.  It becomes so important that the banking industry attempt to sell the trappings of being rich to those that have no hope of being rich, and that ends up in selling their future selves out to the banks by way of expensive student loans, credit cards, car loans, mortgages, etc. all so that society can be like Mike.

Now let’s look at Mary.  Mary has a modest life.  She has no job.  She chose to live frugally after she left school, saved her money when she had little debt and has always focused on keeping her burn rate low.  When all of her friends wanted to party, she chose not to.  She offered to have them over to her apartment, but they wanted to live like Mike does - not like Mary does.  Society told them to quest for Mike’s “Mo Money” lifestyle, and that was juxtaposed with Mary’s philosophy.

Mary moved to a less expensive part of town.  Lower property taxes, but to a property that she could afford.  With the surplus income from her early employment, she put money down on real estate that she could rent out, and was patient about it.  Her tenants - the very same friends that wanted to party all the time - had no problem paying her rent, so she took it, paid off the mortgages early and then had a steady stream of income for little work in managing her properties.  With the equity in one, she leveraged it to buy more.  1 became 2, 2 became 4, 4 became 8, eventually getting to a point where all her tenants were making her wealthy.

Meanwhile society increased its valuation on the real estate to higher and higher levels.  But Mary didn’t care because it wasn’t about the value of the real estate - she knew that she would have to pay taxes on the wealth if she sold one, and then what would she do with the money?  Probably buy more real estate.  So she found herself at a place when money didn’t run her life and freed up her time to quit her job, focus on her art, and just manage her assets.

Her tenants are self-sufficient and Mary eventually hires a property management firm to take over the day to day needs of the tenants, just receiving the rents deposited in her bank account, each month like a regular flow of income.  Since Mary made living frugal as a habit early, it is not a burden to her.  She can forget about any negative feelings about saying NO to things, because she’s done that since her early years, so each month she brings in more wealth than she can spend, decides to buy insurance based assets (like Gold), and also maybe speculate on some dividend stocks to further bring in money each month like an ever flowing stream of income.  

Mary decides that she wants to pursue her art, but finds that the level she wants to do it at requires her to move to Paris for a year.  She can - her income is adequate to fund it, so she does.  That turns to spending another year in Milan, Italy, and eventually after learning different languages, seeing how the world works outside of her small town that she is from, she realizes that there is so much out there to motivate and expand her horizons that she eventually finds herself in an inexpensive country in South America, gets a 2nd passport there and becomes part of their culture.  All the while interfacing with her property managers back home ensuring that the ever flowing income from the rental properties is more than enough to fund a very inexpensive burn rate that her new country has.

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This is just two different scenarios, in which there are dozens of variations.  There are rich business people that make 10x Mike’s income and have scaled up Mike’s situation by quitting the job and creating their own companies.  But they have just replaced an employment position for being self-employed.  They still carry the weight & burdens that Mike had with employment, but transfered more responsibility onto their shoulders as they now have to be their own payroll & HR department.  But they removed the income ceiling, so they can now go for it.  The problem is that only about 1 in 10 of those businesses make the epic returns.  They don’t tell you on CNBC about the majority small business failures out there - that doesn’t sell the social narrative of what you should strive for, because if you don’t strive no bank is going to own your soul or your financial future.  You must keep striving because it makes the bankers rich.

Robert Kiyosaki, author of “Rich Dad, Poor Dad” puts this into four quadrants - Employed, Self-Employed, Business Owner and Investor.   It is a path that simply looks like an evolutionary journey forward.  And yet Mary didn’t follow that path.  She went immediately from employed to investor.  That path skipped over the self-employed and business person position.  That is certainly possible, but it means that the skills of being self-responsible that comes from the education in taking away the support system of a job is a massive leap.  I suggest that you can make that leap successfully, but you need some exposure to the way that capitalism works in order to avoid the pitfalls of it.  

The problem most people have is that if they understand this path, they think that their 401K or IRA investments are enough - that they can be one of the “investor class” with that, and that the stock market will support them.  But that’s not the whole story.  The problem is that this path is being governed by society and oversight of public officials.  They are following a path dictated to them by tax policy and not by prudent and critical analysis.  They are not allowed to take any income from their investments until they reach some government mandated age or pay severe penalties, and they strive for some hybrid approach (like a Roth IRA) where they could extract from it without penalty by forgoing the tax deferment.  

This is what mainstream financial advisors would say.  But when you speak to those very advisors, are they Mary’s or are they Mikes?   99% of them are Mikes.  They have all Mike’s problems and shackles, so they sell you what makes them money.  Not what makes them free because if they were truly successful and rich, they wouldn’t be selling you anything.  They would be buying more smart income assets and becoming rich by action - not by selling anything.

The thing that is often never discussed is that life is a marathon - not a sprint.  The concept of questing to be rich comes with it the “get rich quick” schemes that are out there.  Those schemes make bold promises that if you do X, you will get rich.  They appear on the 3AM Infomercials on TV, and are sold as some cult based experience.  They know that the psychological needs of a society that has been sold a bill of goods that supports governance and obedience over individuality and freedom can be countered by a similar group-think approach that their cult can harness.  So they start to make swanky marketing videos at some 5 star resort by the ocean, interviewing average Joes & Janes on how they made millions by doing some MLM scheme, or following some guru’s teachings.  

That’s not rich.  That’s groupthink (again).  The same groupthink that manipulated people into considering what they define rich as.  Yet the term “Rich” has been marketed more towards “get rich quick” and it plays to everyone’s psychological desire to quest forward and make a better life for themselves.  The old adage, “Be careful what you wish for, because when you get it, you might not like it” is very true.  But that’s not enough to stop the quest.  We humans are an ever evolving species and we MUST quest forward.

And then there is the polar opposite of all of this - those that criticize and slander the rich.

This alternative breed are common, and we know they are out there.  With 8 billion people on this planet, their failure in self-governance and self-reliance based on their inability to accept that society works better as a free market than a governed group is better realized by throwing shade at those that are at least trying.  To try is evil to them.  Why?  Because they probably tried and failed.  And they found solace in the groupthink of others that tried and failed because - remember - only 1 out of 10 enterprises succeed and if those enterprises grow to employ many, if they are not willing to succumb to the mission of the enterprises, they choose a mission of their own that is in a capitalistic world that doesn’t support them in anyway so they live outside of the mainstream, and choose to slander the majority that live within it.

They look to alternative forms of governance that have clearly failed in history.  And yet our short memory syndrome attempt to allow them to “explore” things that clearly don’t work - communism, socialism, etc. knowing full well that there is no such thing as “everyone is equal” because the human psychology of evolving and questing to better itself, cannot be put aside and cannot be muzzled.  But in order to meet their groupthink ideals, those very societies have attempted to suffocate any rebellion and often by force.  Keeping their citizens from leaving their country, from having any hope of self-governance or reliance.  With still current evidence all around us, in such countries as Venezuela, North Korea, China, and many others, where human disent typically results in incarceration, torture and death to “send a message” the rest of society that you must follow the herd and not reject governance, that this is considered the path forward against the concept of being free.

Any person who is preaching that a path of giving up your freedoms for the social good, is no better than the 3AM Infomercial that promises something that can never be.  Yet we have so much of our society transfixed on these “celebrity politicians” that sell this to us.  

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Rich is about freedom.  Freedom doesn’t have to be measured in currency.  Although the core of freedom has to be able to withstand the pressures from a society that only deals in a currency.  True freedom is to return yourself to Mike’s former self - his soul laid bare, his personality transparent and his positive virtues exposed, along with his weaknesses.  To find a way to protect against attack but not to expose yourself to it in plain sight.  You don’t need to advertise your wealth with a swanky car at the intersection.  You will be the one being car jacked.  You don’t need to sell your soul to an employer so that 80% of your waking life is given to the will of the corporation.  The shackles that come with that life isn’t fee - it is 100% constrained.  You resent it, you pine to escape it, and yet every day that you are stuck in that world, losing more of yourself to it, you are less powerful to escape it.

Freedom is more like Mary.  Living a life of purpose, broadly able to travel and find who she is.  Not being burdened by money, because she owns smart income assets that provide essential services to people.  Services that are necessary and critical in times of abundance, but also in times of hardships.  Mary knows that life is a sine-wave of good & bad, up and down, positive & negatives.   But her ability to navigate through life’s choppy waters is based on having a destination in mind.  The problem is that most of us don’t have that destination.  Mike’s ship might be luxurious, but he has no destination to point at.  Only to meander at sea, hoping to never sink, but ever being a target of others around him.  Mary’s ship is adequate to the task, but she has purpose.  She knows where she wants to go - and she realizes that it may not be just one place, but that she just has to get there.  

So who are you?  Are you Mike or Mary?  Are you following social mantra towards being “rich” but with no purpose?  Have you had time to find your purpose before you start your journey towards it, like Mary?  Is there a method to your madness?

The day will come when your income is taken from you.  Yes, it happens.  Are you best prepared for that day?  Are you on the critical path of survival?  If you were not around tomorrow, could your family survive in your absence?  Or if you were sick for 3 months, could your income survive without your hands-on involvement?

If the answer to this question is NO, then you are not rich.  You are not free.  And it seems that the more money you have, the less free you can become.  It isn’t how much of what you have that matters - it is the WHAT of what you have.  Assets that provide income without needing a lot of TLC.  And the TLC is measured in your time.  You also want, what my friend Lynette Zang refers to as, “Dynastic wealth”.  That is assets that grow over time, don’t lose their value to any external entropy such as inflation, and perform under both boom and bust cycles.  You want to provide what people need - not what people want.  This is critical.

And providing those core services has to be done with less than 5-10% of your waking time.  If you fall into the trap of Mike in which more than 50% of your waking time is devoted to your job to provide those services, you are not free.  You are shackled, and it might not be to money or debt.  But it is to “turning up to work” everyday.  Because if you fail to do that, and you lose all that income, what was the point?

I have to periodically re-state what being unconstrained is about.  You must define the destination of your journey before you set off on it.  If you don’t, you won’t take with you the necessary supplies, protection and assistive things that you need to be successful.  You may sink the ship when the waves get nasty.  And if all you are doing is to focus on having a bigger and better ship, but have no destination to send it off, you are living in the world of “analysis paralysis” as we call it - never able to make  a move forward for fear of getting it wrong.  That’s not helping your life.  Each day that passes is one less you have to live, so you better get busy trying or you’ll get busy dying, as they say.

But never lose yourself in the process.  If you do that, you are not rich.  You are an abject failure.  Those that quest for riches and find themselves consumed by the responsibiities towards it, have failed.  I’ve done that many times.  I didn’t learn that as much energy and ambition that I had needed to be managed, and that cost me big in life.  I realize now that I’ve made choices in life that I regret, and those regrets will eat you up inside.  The older you get, the more scarred you become from them because you can’t go back in time and fix things.  So you life with the regrets.  

You can’t fix everything.  But what you can fix is yourself.  Your quest to be rich may be structurally flawed and you must have some litmus test that determines if you are on the right path.  It is ok to pivot.  It is ok to change direction.  Like a ship on the ocean, if you chose a path that proved to be bad, then change it.  You are still out there on the ocean - just point the ship towards a different path.

But you have no business being on the ocean in the first place if you don’t have a direction to sail towards.  Your first job, should you choose to accept it, is to find that destination.  It won’t be your final destination, but it will be one destination.  A moving ship towards a valid destination is unstoppable.  And you should be that ship.  If you are in the ocean - floating & not moving, you will be sunk by the first big wave that comes along and they are always out there.  You must research and find your inner calling.  Maybe that means making small trips to visit places that teach you about that calling.  That will organically provide you with evidence that you can determine if you find passion with, or if you don’t.  And that evidence from actual participation is the only true evidence you can count on.  

I get it.  It is not easy.  Life is like that.  Study any teachings of psychology and you’ll realize that it is about struggle.  But most importantly, don’t fall prey to misunderstanding the concept of being RICH.  Rich is not to be without struggle.  And for 90% of people, it isn’t about being unconstrained.  Money itself is a set of chains that bind.  Don’t become a victim to wealth.  But with that, don’t stop pursuing it.  But do so with purpose.  

I hope that my clarification of what I believe strongly in regards to what RICH really is helps you to challenge or move towards defining what your definition of it is.  The one thing I think we can all agree on, is that it is NOT evil to be rich.  It is not bad to quest towards it.  It should be celebrated, but what rich is is so poorly defined in society that the parasites out there that should extract your wealth to benefit their wealth must be exposed and we must avoid them at all costs.

When someone sells you something that will make you rich, first know your personal definition of what rich is.  Then apply critical analysis of that opportunity against your definition quickly and trade-off the opportunity with solid critical analysis.  If the opportunity still stands tall after the scrutiny, then maybe that is your candidate.  Don’t spend all of your life in critical analysis though - there’s a very limited shelf life to most opportunities because everyone else wants in on it too.  Early adopters get the best rewards, but 1 in 10 succeed so you have a 9 in 10 chance of failure.  It comes down to luck and reducing the odds in your favor.  That doesn’t mean life is a gamble - casinos know the mathematics around randomness and systems.  You should too.  It is part of your preparation for your journey, and the best systems you should have is a clear and definitive path towards what makes you truly rich and that can only happen when you define what rich actually means to you.

We’ll see you on the next episode.