The 12 Secrets of Self-Made Multi-Millionaires (12 Lessons)
Being Comfortable With Risk
(Please listen to the audio file first! It is more in-depth. Then study the text and take any action that the text suggests!)
The Seventh Secret is that Multi-millionaires are comfortable with risk.
Accept change as a constant in today’s world. Expect it. Welcome it. Recognize that large companies and traditional industries can no longer guarantee permanent employment or career security. Take advantage of the fact that smaller, rapidly growing, highly flexible, entrepreneurial companies are creating most of the new jobs.
There’s an old saying, “If it ain’t broke, don’t fix it.” This means that if you’re successful for the time being, you should just keep doing more of the same thing in the future – but this is very dangerous thinking entering the twenty-first century. The new reality is, “If it ain’t broke, it’s obsolete!” To survive and move ahead in today’s volatile world you need to continually challenge your assumptions, upgrade your skills, and become more adaptable and resilient to the reality of constant change.
Even if you never own your own company or business, you must behave as if you’re self employed for the rest of your life. If you’re currently working for someone else, never confuse your personal, long-term interests with those of your employer.
Set up your own training department, in your own mind, home, and cubicle, and make sure that the most important employee, yourself, is continuously updating his or her skills and education.
When I was doing the research for my book and audio program, The Psychology of Winning, I came across a study of a native tribe in South America. The people in the village had been dying prematurely from a strange illness for many generations. Scientists finally discovered that the disease was carried by an insect that lived in the walls of their adobe homes. The natives faced several possible solutions. They could destroy the insects with a pesticide. They could tear down and rebuild their homes. They could move to another location where the insects weren’t found. Or they could do nothing and continue to die young, just as they had for generations.
What did they choose to do? Incredibly to me, they chose to remain as they were. They took the path of least resistance and risk. Many people I meet have a similar attitude about achieving personal success. They realize if they do certain things, they can succeed. The things require change, however, and they resist the change. They allow themselves to stay as they are and, in many cases, to die without ever really living. I have always kept this little poem in mind, as I have faced the unknown:
There was a very cautious man, he rarely laughed he rarely cried;
He rarely risked, he rarely tried
He rarely sang, he rarely played
He rarely laughed, he rarely prayed
And then, one day, he passed away
But his insurance was denied
They said because he never lived
He never really died.
Fear is always related to the unknown. As you gain knowledge about a subject, situation, circumstance, or person, fear tends to dissipate and you become comfortable with risk.
Total security is a myth. Virtually everybody I meet talks about wanting security.
Employees are terrified that industries might suffer from environmental treaties as a result of global warming. People worry that foreign competition may endanger our standard of living. People want a world without disruptions, negative circumstances, problems. They want to live risk-free. But life is inherently risky, especially today.
Driving in the rain on our freeways is a risk. Entering a new relationship is a risk.
Starting a company is a risk. The biggest risk is one you should avoid, however. That’s the risk of doing nothing. Doing nothing sets you up for atrophy, where you wither and rust out, rather than wear out from activity.
Those who take the calculated risk every day, stretching their comfort zones, reaching for new peak experiences, venturing into uncharted territories, create their own security. Those who seek security, risk becoming unprepared, inflexible and obsolete in a rapidly changing world. Everyone in today’s global village is at risk. The only security comes from within.
In order to deal with risk, and creating financial security, it is important to go through a fundamental check-off list of the do’s and don’ts of financial risk-taking. Here are a few do’s and don’ts that I also included in my four cassette audio program, Being Your Own Boss. They are important enough to listen to over and over again:
- Don’t invest unless you can stand the downside. In other words, if you feel the possible advantages of the investment outweigh the possible disadvantages, and you can stand to lose the investment without great financial distress, do consider the investment. If you can’t stand to lose what you have invested, or if it isn’t insured, don’t consider it, unless it represents only a fraction of your portfolio.
- Don’t ever buy an investment, on the phone. Just say no.
- Don’t invest in a mutual fund with a new manager
- Don’t use a stock broker or insurance agent as a financial planner. Hire one on a fee for service basis, who does not specialize in investment vehicles
- Don’t buy penny stocks, commodities, leveraged buying or options in an aggregate of more than 5 percent of your total investment portfolio.
- Don’t invest in raw land unless it’s in the path of immediate development, you plan to build there, or leave it to your heirs.
- Don’t let market movements make buy or sell decisions for you
- Don’t pay minimum balances on your credit cards. You could invest the interest.
- Don’t follow the advice of investment market letters until you have consulted The Hulbert Financial Digest to determine the validity of any claims
- Do invest for the long haul
- Do ask your bank to lower the interest rate they are charging on your Visa or Master Card account. If you have been faithfully making your payments, they should lower your rate by a point or so, if they want to keep your business.
- Do match your investment strategies to your time horizon
- Do have realistic expectations. No get rich quick schemes or lotto mentality.
- Do keep hope, greed and fear in check by committing to investment discipline
- Do limit your real estate investments to those you can control or to publicly traded companies
- Do limit the majority of your stock investments to exchange-listed stocks
- Do understand that social security benefits will be cut to a fraction of the current payout
- Do formulate an investment strategy and stick to it!
What we have just discussed is not risk-avoidance, but calculated risk. Some people who are risk-avoiders have no investment strategy at all because they are afraid of losing money. Because they are seeking maximum security, they are impacted by cost of living increases and increasing taxes. Risk-taking should be based on knowledge, patience and common sense.
Thirty years of research and experience in working with high performance winners has convinced me that fear of the costs of success is the major reason most people are unsuccessful. The costs of success include:
- Taking responsibility for giving up non-productive habits and invalid assumptions
- Leading ourselves and others down a new and unfamiliar path
- Working more to reach a goal and being able to delay gratification along the way.
- And being willing to weather criticism and jealousy from people who would like to keep us stuck in place with them.
The greatest challenge you face in reaching your dreams is to withstand the pressure from friends, associates and family members who will try to convince you that you will not be successful in what you are trying to accomplish.
Today, more and more individuals realize that risk creates reward. The national mindset is shifting. Those who thought they had entered “safe” careers a generation ago now enter entrepreneurial arenas that encourage and require risk taking and personal accountability.
Suddenly, risk takers are the new heroes. The thing about risk is that no one is completely comfortable being a pioneer. But. then, most people regret what they didn’t do, rather than what they went for in life.
Be prepared to sell your ideas to an in different world. Don’t expect people to care about or even get excited about your plans. They won’t unless your ideas solve their late problems or create an opportunity they can instantly grasp. They still won’t until they are convinced of the benefits.
You are bound to be criticized for risking. If you can’t stand the heat, you’ll never be able to take a risk. Size up the resistance. Anticipate where the heat will come from. And be flexible enough to overcome objections to your approach.
Challenge your assumptions about risk taking. Interview risk takers about how they approach the issue. Learn how they size up risks, how they measure the upside and the downside.
You don’t have to take the full risk all at once. You can turn an avocation into your vocation gradually, after you’ve gotten all the bugs out of it. You can test market your idea on a limited basis. Take incremental steps.
You don’t have to assume all the risk yourself. Partners or lenders can share risk. And the people you recruit to share your dream can also. As we interviewed innovators around the country, we discovered that most of them were exceptionally adept at team building.
The key to dealing effectively with venturing forth into unknown territory or challenging situations is commitment and diligent training. No train, no gain!
When I worked with our Apollo astronauts they attributed their confidence to training that had prepared them to deal with any problem that could realistically be expected. In a real way, you share the needs of the astronauts who choose space travel, when you face your future as a self-directed leader and entrepreneur in today’s marketplace.
Self-Test: Based upon this lesson, do you consider yourself more of a security seeker or a risk taker? What is your response to the concept that change is constant and that there will always be risks in creating your own security? If you are a risk taker, do you tend to pursue “get-rich-quick” offers? Journal your feelings.
The Science of Getting Rich • The Richest Man in Babylon • Acres of Diamonds
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The 12 Secrets of Self-Made Multi-Millionaires (12 Lessons)