WHY SOME
ENTREPRENEURS GET RICH–
AND WHY MOST DON'T
Donald J. Trump and Robert T. Kiyosaki
Published by Plata Publishing, LLC at Smashwords
Copyright 2011 Plata Publishing, LLC
Smashwords Edition, License Notes
This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.
*****
Dedication
To the entrepreneurs of today who struggle, strive, and succeed
and to the entrepreneurs of tomorrow who will see opportunities
where others see only obstacles...
Visionaries all who act boldly and leave their unique imprint, their Midas Touch, on the economic landscape of our world.
Authors’ Notes and Acknowledgments
We would like to thank all the people who contributed to our lifelong passion of entrepreneurial learning. Without them this book, which is based on our experiences, would not have been possible.
We’d also like to acknowledge our wins and our losses, our successes and our failures because, without life’s balance of ups and downs and the personal and professional growth that comes with it, we would not be where we are today.
A special thank-you goes to Meredith McIver and Kathy Heasley who provided editorial assistance. Special thanks as well to Allen Weisselberg, Michael Cohen, Rhona Graff, Jonathan Gross, and Kacey Kennedy at The Trump Organization and Mike Sullivan, Marian Van Dyke, Anita Rodriguez, Michael Joe, Rhonda Hitchcock, Darrin Moore, and Mona Gambetta at The Rich Dad Company and Plata Publishing. Their collaborative efforts and entrepreneurial insights helped bring our vision of Midas Touch to life.
Finally, we’d like to thank all the entrepreneurs who are innovating, risking and overcoming every hurdle to better their lives, their families’ lives and the lives of billions of people around the world.
There is nothing more noble than entrepreneurship, and we applaud you for your efforts, for your success and for your contributions to our world.
Foreword
by Mark Burnett
Entrepreneurs have a singular drive that gets them where they’re going. It’s a focus that is so intense that nothing can derail them or their plans.
Years ago, long before meeting Donald, I read his first book, The Art of the Deal. At the time, I was selling T-shirts on the beach in Los Angeles. In between customers, I was constantly reading The Art of the Deal. I especially appreciated that it was written for someone like me—someone who had never been to business school. I was in total awe of this real estate mogul, Donald Trump, and never believed I would set eyes on the man himself, let alone meet him. I certainly never imagined that I would be in business with him.
One of the most memorable stories I can remember from The Art of the Deal was the story about how Donald can spot “a loser.” He explained that a loser is the person with a for-sale sign on a dirty car. While this seems obvious, it’s amazing the number of people who do exactly this in various ways in various businesses.
Robert has sold well over 30 million books in countries all over the world. He obviously has a message that people want or need to hear. He sees himself primarily as a teacher, and I admit that I see Donald as a teacher as well. The Apprentice has an educational subtext that he taps into very well, and I think it’s one reason the TV show has had the resonance and longevity that it has had. These two teachers, these two titans of business, have a message for all of us.
As Midas Touch points out, entrepreneurship is something that has become somewhat of a responsibility these days, or should be. That’s why this book is timely. We need people who have the talent to create jobs. Those who have the skills or ability to be an entrepreneur need to develop these skills in order to contribute to our society. This book comes from two highly accomplished entrepreneurs with very different backgrounds who cover the bases from different perspectives.
Anyone wanting to enter the leagues of entrepreneurship should give this book a thorough read.
Entrepreneurs are characterized by singular focus and powerful drive. I saw that aspect of Donald a long time ago, and Robert has it as well. I can tell you that their drive is palpable. They don’t stop, and the successes they have achieved are remarkable. I hope you will take the time to listen to what they have to say.
Preface
Dreamer… or
Entrepreneur?
One entrepreneur, a mechanically minded man since childhood, saw his chance to change the world. He saw a way to better it for people everywhere. So he set out, not to build his fortune, but to build his dream of a new way of life for everyday people.
He struggled with the challenges of honing his idea, prototyping countless versions of his product—each one a slight improvement over the last—and building his company. But his greatest struggle was with people who couldn’t see his vision, who couldn’t expand their focus and see things as they could be, rather than as they were. The battles were many, but he kept going. He doubted himself, made plenty of sacrifices along the way and got sidetracked many times. He failed often and, because he always loved famous sayings, he called failure “the opportunity to begin again—more intelligently.”
He wasn’t a good student and learned very little in school, but he did love to take things apart to see how they worked. “Dismembering watches” was a favorite pastime. He had no advanced degree, but he did attend night school to hone his skills. His mind was brilliant, and eventually he became a much-loved teacher of his craft. He attracted students who, like him, were enthusiasts. In the late hours of the night, they would volunteer their time to work on projects and learn in the process. His ability to attract talent and work with others was enviable. In his business, he surrounded himself with people who knew what he did not.
He succeeded at raising money from investors who believed in his product. The problem was that they didn’t always believe in his vision. He grew despondent because they only focused on money. At one point, he was fired from his own company, the company that bore his name. A lesser man would have called it quits and found a job.
Years earlier, he had given up a steady job with a prominent company. Entrepreneurship didn’t pay very well so his family moved countless times into ever more modest surroundings. Ironically, while still working his day job, inspiration came from his iconic employer, a man he had idolized from childhood and had the honor to meet one day, just for a moment. In a few quick strokes, he sketched his innovation. The man before him pounded his fist on the table and said, “Young man, that’s the thing. You have it. Keep at it.”
“That bang on the table was worth worlds to me,” the entrepreneur told his patient wife. “You won’t be seeing much of me for the next year.” In truth, success took more than a year. It took decades.
Answers rarely come through a eureka moment, and they didn’t for Henry Ford. He observed the world around him and slowly arrived at his opportunity and his purpose. He demonstrated that an entrepreneur need not be the inventor of a new technology. His wild success came through something more valuable—a brand. Custom-made cars, the standard of the time, didn’t align with Henry Ford’s view of the world. He wanted to give everyone a luxury only the rich could then afford.
He wanted to change the world and believed the secret was an automobile with a gas combustion engine, assembled in a factory, where one car was the same as the next. His hero and famous employer, Thomas Edison, believed that too. That’s why he pounded his fist on the table, reinvigorating Henry and prompting him to keep going through many years and many failures.
Henry dared to dream big. One Sunday he heard his minister preach, “Hitch your wagon to a star,” and he told his sister, “That’s what I’m going to do.” That was in 1893. Ten years later, on July 23, 1903, Chicago dentist Dr. Ernst Pfenning bought Ford Motor Company’s very first Model A.
Henry Ford had done it. No longer a dreamer, he was an entrepreneur.
INTRODUCTION
Entrepreneurs
are Different
This is a book about entrepreneurs, and what makes entrepreneurs different. This is a book for those people who are already entrepreneurs or for those who would like to be.
This is not a textbook written by college professors who teach entrepreneurship. It doesn’t paint a rosy picture or provide a clinical, step-by-step path to success. Both are unrealistic, and this book is very realistic. That’s because it’s a book written by entrepreneurs who have won, failed, and battled back to win, again and again. And in it, we openly tell our stories.
The entrepreneur’s ability to dream, win, lose, and win again and again is often called entrepreneurial spirit. It is what separates the entrepreneur from everyone else in business. It is also what separates those who want to be entrepreneurs from those who can be entrepreneurs.
This book has been in the works for nearly three years. We have continued our efforts on it because we both believe that only entrepreneurs create real jobs. And when the world experiences unprecedented levels of unemployment, jobs are what this world needs.
Chronic unemployment causes social unrest which can lead to revolution. The 2011 riots in the Middle East are cases in point. They are uprisings fueled by people who are willing, capable and eager to work, but who lack opportunity. They live in societies with chronically high unemployment. China shudders at the thought of their exports slowing and is horrified at the possibility of millions of unemployed workers. The U.S. government shares similar concerns and spends billions attempting to create jobs through government legislation and programs.
The problem is that no government, neither ours nor theirs, can create real jobs. Only entrepreneurs can do that. Only entrepreneurs can see the future and bring it to life—risking, losing, and winning—over and over. In the process, they create new industries and opportunities for people all over the world.
Another problem is that schools do not create entrepreneurs. Schools are designed to create employees. That is why people say, “Go to school to get a good job.” Most students, even graduates of MBA programs, go on to become employees, not entrepreneurs. Millions of students leave school each year saddled with massive student-loan debt, unable to find jobs. Today, too many people, young and old, are looking for jobs, or are afraid of losing their jobs. We need more entrepreneurs who can create businesses and jobs.
Since the market crash that began in 2007, the biggest crash since the Great Depression, many have been waiting for the economy to come back. The economy will come back, but it will not be the same economy. The old economy of the Industrial Age is dying, and a new economy of the Information Age is emerging. The rules of this new economy, an international economy, will not be the same. And the old ideas from the Industrial Age—job security for life, pensions, benefits, and labor unions—will not be able to survive in our new Information Age.
Many of today’s Fortune 500 businesses that were born in the Industrial Age will fade away. The Fortune 500 companies of tomorrow will emerge from this crisis, led by a new era of entrepreneurialism and a new class of entrepreneurs.
This book is written for these entrepreneurs and for the people who want to become these entrepreneurs. This book is not about business. It is about what it takes to become a successful entrepreneur.
As entrepreneurs, we share with you our thoughts and beliefs, our wins and our losses all accumulated over decades. You will learn what makes us succeed, when 9 out of 10 entrepreneurs fail. We will share how we managed to go beyond success and wealth, turning our businesses into international brands, a feat many entrepreneurs dream of, yet few achieve. More importantly, we share with you what keeps us going when others give up, and why we seek greater challenges. In this book, our second together, we share what gives us the Midas Touch, the ability to turn the things we touch into gold, and how you can have it too.
We’ve divided this book into five chapters, each one representing one of the five fingers of the Midas Touch hand. In each chapter, following our individual stories, we’ve included a “Distilling It Down” section that delivers an objective review of the key points. “Points to Remember | Things to Do” completes each chapter with action items you can apply to your own life.
The five fingers represent the five key factors every entrepreneur dreaming of success must master. These factors are not taught in school.
The Midas Touch hand is the ideal metaphor to represent the attributes critical to entrepreneurial success. Master every finger, and you’ll discover the magic of why some entrepreneurs are wildly successful, and why most are not.
The thumb stands for strength of character. Without it, entrepreneurs cannot withstand the inevitable failures and disappointments that come with creating something out of nothing. Uncharted territory is full of dangers.
The index finger stands for focus. Entrepreneurs must have the proper focus to really succeed.
The middle finger, the longest finger, is all about the brand, which reflects what you stand for. Without a solid brand and a willingness to let the world know about it, you won’t have the Midas Touch.
The ring finger is about relationships: how to find a good partner, be a good partner, and build different types of relationships to achieve success.
Finally, the little finger is about the little things. It’s not about simply mastering the details. You will see that little things can become big things that can set you on a course of exponential success. You will learn how to find the little thing that can become a big thing for your customers and for your business. Each of these factors is important on its own. Together, when all the awareness, skill, learning, and knowledge are in your hands, that’s when the true Midas Touch power really shines. And our world could use some entrepreneurial shine. In fact, to solve the global problems of unemployment and the lack of job security and financial security, the world needs more entrepreneurs. We particularly need more wildly successful Midas Touch entrepreneurs.
CHAPTER
ONE
The Thumb
Strength of Character
“Life is like a grindstone. Whether it grinds
you down or
polishes you up depends on what you’re made of.”
– Anonymous
Turning Bad Luck into Good Luck
Robert Kiyosaki
In early 2000, I was in the Australian outback, far from civilization, on vacation with some friends, roughing it in one of the most beautiful parts of the world. It had taken me nearly a week to get to the remote campsite in Australia.
One evening, my satellite phone rang. It was my wife Kim, who was back home in Phoenix.
“Guess what?” she asked excitedly. “Oprah’s producer called, and Oprah wants you on her program in Chicago.”
“That’s great,” I replied. “But why me?”
“She wants to talk about your story and your book, Rich Dad Poor Dad.”
“That’s good,” I said. “Keep me posted.”
“She wants you on her program in a few days.”
“In a few days?” I moaned. “I just got here. Do you know how long it took me? Two days of flying and almost four days of driving. Can’t we schedule it for a later date?”
“No. We’ve worked really hard to answer all their questions. The producer even called rich dad’s son to verify that the story of your two dads was true. They’re excited, and they want you now.” Kim paused before continuing, “Don’t pass this up. Just turn around. You’ll have new tickets waiting for you at the Sydney airport.”
Six days later, I arrived in Chicago.
Oprah’s program was televised from her own studio, Harpo Productions. A lovely young assistant escorted me from the green room into the studio where Oprah’s adoring fans were already seated.
The room was electric. Oprah’s fans were anxiously awaiting her entrance. For a moment, I forgot why I was there. I forgot that I was about to be on television with the most powerful woman in show business. I knew her television viewership was estimated to be over 20 million people in the United States alone, with syndication in over 150 countries around the world.
Gazing around, I saw two chairs in the middle of the stage. I thought to myself, “I wonder who the second chair is for?” My heart froze as I realized… the second chair was for me!
The room suddenly erupted with applause as Oprah took the stage. She was much more impressive in real life. After she said a few words to the studio audience and her television viewers, the assistant gently took my elbow and said softly, “Let’s go.”
I took a breath and thought to myself, “It’s too late to start practicing.”
An hour later, the program was over. The crowd applauded, and Oprah said good-bye to the world. Once the television cameras were turned off, she turned to me, pointed, smiled, and said, “Rich dad, I just sold you a million copies of your book.”
At that time, Rich Dad Poor Dad was self-published. This meant I did not have to share my profits with a publisher. Although I’ve never been good at math, I did understand money. After expenses, I made a profit of five dollars on every book. If Oprah’s estimate was correct about selling a million copies of the book, simple math told me I just made $5 million in one hour, before taxes. It was a profitable day in many ways. I didn’t know it at the time but, in one hour, I had gone from being an unknown to becoming world-famous. As you probably know, fame can be much more seductive than money.
The reason I self-published Rich Dad Poor Dad was because every publisher I sent it to turned it down. Most publishers were polite, but simply told me they had no interest in the book. Two sounded like my English teachers telling me I needed to learn how to write. One publisher said, “Your story is preposterous! No reader will ever believe it.” And an editor who specializes in financial books rejected it, saying, “You don’t know what you’re talking about.” He was referring to my lesson in Rich Dad Poor Dad where I stated, “Your house is not an asset.” Of course, after the subprime crisis, millions of foreclosures, and all the homes that are worth less than their mortgages, I wonder if that editor would reconsider my message in Rich Dad Poor Dad.
Taking the rejection in stride, Kim and I self-published 1,000 copies of the book and quietly released it at my birthday party in April 1997.
From 1997 to 2000, Rich Dad Poor Dad grew by word of mouth. Friends would hand it to friends, and friends would give it to family members. The book slowly climbed its way to The New York Times bestseller list, the only self-published book on the list at the time. Oprah’s producer called shortly after the book made The New York Times bestseller list. Ten years later, in 2010, I estimated that Oprah’s push helped me sell over 22 million copies of Rich Dad Poor Dad in over 100 countries. The book has now been translated into more than 50 languages. That is the power of Oprah.
Immediately after the show aired, the press came to call. Most loved the simple story of my two dads. A few were skeptical, critical, or condemning.
Failure Leads to Success
Several TV hosts and magazine articles labeled me an “overnight success.” Every time I heard or read those words, I chuckled. While it was true that I went from obscurity to world-famous in one hour, I was hardly an overnight success. In 2000, I was 53 years old. For most of those 53 years, I was far from successful.
Thomas Edison, inventor of the light bulb and founder of General Electric, once said, “I haven’t failed. I’ve found 10,000 ways that don’t work.”
Edison’s quote summarizes why most people fail to become successful entrepreneurs. The quote also explains why most entrepreneurs fail to develop their Midas Touch. Simply put, most people fail to become successful because they fail to fail enough.
Relative to the Midas Touch, the thumb represents your emotional maturity and strength of character. Without the thumb, the other four fingers lack the stability to handle the daily challenges, the ups and downs, wins and losses, that all entrepreneurs face every day.
What Do You Lack?
Many people say that two things stop most new entrepreneurs:
1. The lack of capital
2. The lack of real-life business experience
From my own experience, I would add a third item:
3. The lack of emotional maturity and strength of character
Of these, I believe the third one, the lack of emotional maturity and strength of character, is the main reason why people fail as entrepreneurs.
The world is filled with smart, well-educated, talented people who fail to develop their God-given talents or gifts. How often does the student voted “Most Likely to Succeed” fail to succeed? Most of us know people whose lives are tales of woe, tragedy, or betrayal, who blame their failures on other people or on a bad start in life. We all know people who have great ideas about how to make millions of dollars, but are too lazy to get off the couch. We all know people who live in the future, and fail to take action today. There are millions of people who want to change the world, but cannot change the conditions of their own lives. And we all know people who lie, cheat, and steal, and yet lie again to themselves, believing they are people of integrity. Without the emotional maturity and strength of character represented by the thumb, most people are denied access to their Midas Touch.
If I Had Known Then What I Know Now
When speaking to a group of “wanna-be” entrepreneurs, I often begin by saying, “If I had known how much I did not know, I might not have started.” I also say, “If I had known how hard it was going to be, I might not have started.” To give these budding entrepreneurs some “brightness of future” though, I usually add, “I’m glad I did not know, because if I did, I might not be successful today.” I then begin to tell them about my failures, because failure was my path to success.
Don’t Read Any Further
In the following pages, I will share a few real-life experiences about pain and failure. Why do I want to tell you about my pain and failure? The answer is simple. If my pain and failure discourage you from becoming an entrepreneur, then I have done you a big favor.
While almost everyone has the ability to become an entrepreneur, not everyone needs to become an entrepreneur. There are easier ways to live your life.
Life and success seem easy for some people, but I do not know any of these people. As my rich dad often said, “Success requires sacrifice.” I have yet to meet a successful person who did not sacrifice tremendously for that success. For example, medical doctors pay a steep price in terms of time, money, energy, and relationships to become doctors. So do most high-performance athletes, movie stars, music idols, political leaders, and social leaders. Success in business is no different.
Sacrifice is the price a person pays for success. Unfortunately, most people are not willing to pay the price. It is easier to be average, comfortable, safe, secure, and live life just below success.
Stories of My Own Stupidity
Albert Einstein once said: “Only two things are infinite—the universe and human stupidity. And I’m not sure about the former.”
I am living proof of Einstein’s insight. My stupidity is infinite.
The following are examples of my stupidity when I started my first business called Rippers, a nylon-and-Velcro surfer-wallet business, which grew into a big business. To preface the story, I had started a number of smaller businesses before creating Rippers, but none had taken me to an international level as the nylon-wallet business did. The interesting thing is that I did not want to be in the nylon-wallet business. I fell into the business through my stupidity.
Story #1: A Fool and His Money
As most people know, the number-one skill of an entrepreneur is the ability to sell, because sales equals income. Since I did not know how to sell, I took my rich dad’s advice and got a job working for the Xerox Corporation at the age of 26, not because I liked copiers, but because Xerox had a great sales-training program. Although I was not good in sales, I studied, practiced, took extra classes, and slowly but surely, after three years, was consistently one of the company’s top sales agents and actually started making some money. From 1974 to 1976, I managed to save $27,000 (which back then was a lot of money) to start my first business.
There is a saying that goes: “A fool and his money are soon parted.” Well, I was the fool, and my money was soon gone. This is how I parted with my money.
A friend called me to ask if I would invest in his company. He promised I would have the money back in a month plus 20% interest. My friend John had been a very successful entrepreneur (emphasis on the words “had been”). So I believed he was smart, successful, and would take care of my money for 30 days. Besides that, a 20% return on my money was tempting. So, I handed him the money, and he handed me back a promissory note.
A month later, I called John to collect my $27,000 plus $5,400 in interest. As you may have already guessed, he did not have the money. He blamed his CFO, Stanley, a CPA by training, for the mix-up.
“I told Stan to buy more product so we could ship it to our retailers,” said John, “but Stan paid off some old bills instead. Now we have no product, no money, and no profits. If Stanley had bought materials like I told him to, I would have the money to pay you.”
While John’s explanation made business sense, I had a bad feeling in my gut. I should have said something, but I bit my tongue and bought his story. In reality, I believed his story because I needed to believe it. I needed to believe John. If I didn’t, I was afraid I would not get my money back.
Obviously, Stanley, the CPA, did not know my rich dad’s lessons. But it was not only Stanley who was in the dark. Most people do just what Stanley did. They work for money, then pay bills, and save what is left over. This is why most people live paycheck to paycheck. Entrepreneurs must know how to spend money to create more money—spending time and money on marketing, advertising, and sales promotions and offering sales incentives to sale representatives.
In times of crisis, for example, times when sales are low and income is low, most people tend to do what Stanley did—save money, or pay bills. This generally spells disaster. In a crisis, a time with low income or low sales, smart entrepreneurs know that they need to spend money on sales and marketing promotion, even if they have to borrow the money. When the sales start coming in, then they can pay bills and pay back the money they borrowed.
During the global financial crisis which began in 2007, most people are doing what Stanley did. They are cutting back, paying off debt, and trying to save money. This conservation of cash causes the economy to slow even faster. Businesses and individuals following Stanley’s course of action may not recover when the rest of the economy does. They will be far behind the businesses that were spending and moving forward during bad times.
Story #2: History Repeated
When I asked how I could get my money back, John told me that the only way to get it back was to give him more money. Now you may think that I would have been smart enough not to fall for this line, but I did. Over the next three months, I raised over $50,000 from friends for John and his struggling business. As you may have already guessed, the money was gone as soon as I handed him the checks.
So how do you raise money? The answer is: You have to practice. In my Xerox sales training, I was taught to make 100 cold calls to get 10 leads. Out of those 10 leads, you get one sale.
To raise money for John, I wrote up a simple business plan, created a small promotional flyer, and began knocking on doors. Same sort of thing as with Xerox—I made cold calls until I reached my goal.
At the time, John’s company was selling soap on a rope, shaped like a microphone, for people who like to sing in the shower. I found investors for his company.
Let me restate it: The ability to sell is an entrepreneur’s most important skill. If you are not good in sales, then you must find a partner who is.
I was still working for Xerox when my friends began to call, asking for their money back, plus 20% interest. As my fear went up, as is the rule, my intelligence went down.
I was too naïve to know that it was stupid for me to be raising money and promoting products for a business that was mismanaged. I was unknowingly participating in a little Ponzi scheme, a smaller version of Bernie Madoff’s billion-dollar scandal. Thankfully, I eventually paid back the money.
Slow and steady always wins the race. There are few grand slams in life, and promoting a business or an idea takes time.
Story #3: Come On Board
Again, like a fool, I asked John what I could do to help him get my money back. His brilliant idea was for me to join his company, make the money back, and help him save his company. And guess what? I took him up on his offer. So I worked hard at Xerox during the day and, after work, I crossed the street to John’s office in downtown Honolulu to work on a plan to save his business.
Entrepreneurs need to work 24/7 during the start-up phase, often working for free for months and even years. It’s the number of hours worked for free that defines entrepreneurs and separates them from employees.
The number of hours working or practicing for free also determines the level of success you will have in anything. For example, professional golfers invest years in study and practice before they get paid—if they get paid.
That is why it is best to keep your daytime job and build your business in your spare time. You may think otherwise, but you just might be working for free for a long time.
Story #4: A Desperate Glimmer
With all the money gone, John, Stanley, and I were desperate. This is where the idea for the nylon-and-Velcro surfer wallets came into being. Since we were surfers and sailors, we already used nylon wallets. We sewed the wallets ourselves out of old sails from yachts.
John thought these wallets would be hot sellers. He was certain nylon wallets were going to be the product that saved his company. Although I was not as certain as John, we began working on our business plan and soon we were the first in the nylon-wallet business.
The benefit of this whole experience was that I was learning to design, package, manufacture, and market a completely new product. The lesson was expensive but, in hindsight, priceless. Even though I would not want to relive any of it, this horrible experience is what led to the creation of my CASHFLOW board games, which continue to generate passive income today.
Story #5: Stress and Fear
John was wrong. The nylon-wallet business was not hot. We were now in more debt than before, and we were going broke faster.
Out of total desperation, I showed John and Stanley an idea for another new nylon product, this time a product I had designed. John and Stanley were surfers and sailors. I liked running. Runners had a problem: Where do they put their key, an ID card, and some money while they’re running? Running shorts had no pockets and sticking all that stuff in your shoe or sock wasn’t an option either. So I came up with an idea for a small mini-wallet that attached to the shoelaces of a runner’s shoe.
Now completely broke with maxed-out credit cards, we launched our “Rippers Shoe Pocket” for runners at the New York sporting-goods show.
Believe it or not, that product became one of the “Hot New Products of the Year” in the sporting-goods industry. The Rippers Shoe Pocket even made news in Runner’s World, Playboy, and Gentlemen’s Quarterly magazines.
Entrepreneurs must learn how to handle stress and fear. Stress and fear must motivate entrepreneurs to become more creative, learn faster, and increase their knowledge about people and business.
In other words, entrepreneurs must be very fast learners and seekers of new knowledge, innovation and ideas. Fear is the entrepreneur’s motivation to learn. If fear paralyzes you, keep your daytime job.
What this really means is that business grows only if the entrepreneur grows.
Story #6: Holding The Bag
Soon we were shipping wallets all over the world. Although we were internationally successful, our company was still going broke. We had much more cash flowing in, but even more cash was flowing out. In a last-ditch effort, John asked me to raise even more money, which I did. I still remember the day I walked into his office with a check for $100,000 from an investor. John and Stanley smiled and thanked me.
A few days later, I was in Chicago at a sporting-goods trade show, selling Ripper products. At the end of the show, I called Honolulu to report my results.
Jana, our receptionist, answered the phone. She was crying.
“What’s wrong?” I asked.
“I hate to tell you this, but John and Stan closed the company today. They took what money was left, and I believe they left town. I don’t know where they are.”
If I did not have a heart attack then, I will never have a heart attack. The shock that went through my body was like being hit by a bolt of lightning. I felt like someone had kicked me in the guts. That phone call was the beginning of the descent to one of the lowest points in my life.
I returned to my hotel room on Chicago’s Lake Shore Drive and stared out at Lake Michigan. Over and over again, I asked myself, “How could I have been so stupid?”
John and Stan were gone. Their debts were paid off. I was left holding the bag for nearly $1 million in loans, money I had raised from friends, family, and investors. I had no job, no business, no home, and no wife. She left me once the money was gone, when I sold our condo to pay off the credit cards so I could use them again.
I had hit the wall. I could not go any further. I could feel my life forces draining out of me as I asked myself, “How could I have been so stupid?” over and over and over again.
Rich dad had repeatedly warned me about doing business with John and Stanley. He often called them “clowns” or “con men.” The problem was that I did not want to listen to him, so I ignored his words and warnings about John and Stanley. Rich dad said, “A con man can only con you when you want something for nothing.”
Sitting alone in my small hotel room in Chicago, I began to let rich dad’s words sink in. I began to ask myself, “What did I want for nothing?” If I could figure that out, I could find out why I had been conned.
I wish I could say I found a definitive answer. But so far, over the years, the answer I found for myself is, “I’m lazy. That’s why I am conned.”
A few examples of how laziness contributes to being conned include:
Employees who believe in job security
Voters who vote for politicians who promise to look out for the voters’ best interests
Investors who believe their financial planners’ advice to invest for the long term in stocks, bonds, and mutual funds
People who believe that getting good grades in school assures them of job security for life
Desperate people who fall for pitches like, “Buy my book and become a millionaire overnight,” or “Take this pill and lose 10 pounds without exercising”
Anyone who believes the following statements to be true:
“We don’t need money. We can live on love.” (As long as you live with your parents.)
“I’m going to win the lottery.” (Or get struck by lightning.)
“My husband and I have the highest of integrity.” (This claim cost me millions.)
“Safe as money in the bank.” (It must not be very safe then.)
“The government will solve the problem.” (You’re in trouble.)
I am sure you can add your own favorite con jobs to this list.
You Don’t Know What You Don’t Know
Although rich dad warned me about John and Stanley, he did not try to stop me. Instead, he would say, “Children do not know what ‘hot’ means until they touch the stove.” So, he let me touch the stove.
His real lesson was: “You do not know what you do not know.” Entrepreneurs learn quickly. He would say, “The moment a person quits his job and becomes an entrepreneur, what he does not know will immediately appear.”
One reason why 9 out of 10 businesses fail in the first five years is because the entrepreneur becomes overwhelmed by what he does not know. It is what he does not know that destroys the business, even if he did well in school.
Con Men Are Great Teachers
Rich dad used to say, “The moment you begin your business, the con men and women will appear.” He did not say con men or con women are bad. In his mind, con men and con women appear to do you a favor, to teach you lessons you need to learn. This is why he often said, “Con men are great teachers.” He also added, “Just don’t become one of them.”
He taught me, “One of the most important jobs of entrepreneurs is to protect their employees from the real world.” By this he meant that the world of business is one of the most hostile, vicious, and dangerous environments you can work in. One of the lessons I had to learn in my development as an entrepreneur was how to protect my employees from the real world.
I was anxious to learn this lesson. I had seen my own dad—who was an honest, hardworking, and well-educated teacher and administrator—become raw meat once he left the safety of the school system. He had run for lieutenant governor of the State of Hawaii as a Republican. He lost the election and became unemployed in his early fifties. Taking his life savings and retirement money, he purchased a famous ice cream franchise and lost everything. Simply put, he was safe as long as he worked for the school system, a system he had been in since the age of five. The moment he stepped outside the system in his early fifties into the real world of business, he was eaten alive. In less than a year, he lost everything he had worked for his entire life.
This is why emotional maturity and strength of character are essential in the world of entrepreneurship.
Murphy’s Law
Most of us have heard of Murphy’s Law: “Anything that can go wrong will go wrong.” Most entrepreneurs fail because they simply do not know what they do not know, and they fail to fail fast enough to discover those things they need to know. In other words, success comes from failure, not from memorizing the right answers.
This is why so many so-called smart, well-educated people, like my dad, do not do well in business. They are smart in the world of the classroom, but are not smart in the world of business.
The Definition of Success Is Different
Success in the world of the classroom means not making mistakes. When your report card is perfect, you get an A+. The opposite is true in the world of business.
If you take a look at most MBA programs, the focus is on minimizing risk and not making mistakes. This is why so few MBAs become entrepreneurs. Most get their MBA with the hope of becoming highly paid employees. The same is true with law school and accounting graduates. They are trained and paid to not make mistakes.
To be successful in the world of entrepreneurs, especially in the early stages, a person must learn to fail, correct, learn, apply what was learned, and fail again. This is also the path to developing your Midas Touch.
This is why I started by listing my mistakes in the nylon-wallet business. This is why I respect Donald Trump. The first book of his I read was The Art of the Deal. The next book was The Art of the Comeback, an even more powerful book because he pointed out to the world his mistakes, what he learned, and how he came back. That showed me his strength of character.
Turning Bad Luck into Good Luck
Possibly the most important skill entrepreneurs can develop is the ability to turn bad luck into good luck. To do this requires emotional maturity and strength of character.
We all make mistakes. Mistakes are important because, when we fail, we have the opportunity to discover and develop our emotional maturity and improve our strength of character.
One of the reasons I believe John and Stanley failed to grow from a bad experience is because, instead of facing their troubles when times got tough, they lied, deceived, and ran. In other words, when times got tough, their true character appeared. When bad things happened, they turned bad luck into worse luck.
I’m not saying I put myself above them. I will never be on a short list for sainthood. Although I was raised in a great family, I did not always reflect my parents’ high ethical and moral values. I was a good kid in high school, never drinking or doing drugs, but I could not wait until I left home. The moment I left, I did my best to do the exact opposite of what my mom and dad told me to do. A number of times I should have gone to jail.
In my process of becoming an entrepreneur, I had to return to my mom and dad’s values, which meant I could no longer lie, cheat, or steal, especially when I was in trouble. Here are just a few opportunities that I seized to improve my emotional maturity and strength of character.
When I lost the investors’ money, my rich dad encouraged me to go back to them and apologize. I then agreed to pay them back. It took almost six years to fulfill my commitment.
Rather than run from disaster, rich dad advised me to rebuild the company. With my brother Jon and my friend Dave, we sifted through the wreckage of Rippers and rebuilt the business. I learned more about business by facing my mistakes and rebuilding the company than I ever would have learned by running away.
I realized that I had to learn faster. Because I was lazy, I didn’t do well in school. Today, although still a poor student and poor reader, I continually read books and articles about business and attend seminars. Here are a few of the things I have learned:
Inside every mistake is a gem of wisdom.
One of my best teachers, Dr. R. Buckminster Fuller, today considered one of the world’s greatest geniuses, stated, “Mistakes are only sins when not admitted.” Whenever I find myself upset about a mistake, I take responsibility for it, even though I would rather blame someone else. I then take the time to find the gem of wisdom in that mistake. Once I find the gem, the discovery gives me the energy to move forward.
Blame means to “be lame.”
I often meet unsuccessful and unhappy entrepreneurs who continually blame others for their mistakes. They don’t learn from their mistakes nor do they grow from the experience. What they fail to realize is that within those mistakes is the wisdom for a more positive future. Blaming is the worst sin of all.
Face your mistakes and admit to them.
Many people carry around their mistakes and regret having made them. Or they pretend they never make mistakes and then go on to repeat them. Others become criminals and lie about their mistakes. Again, they turn a bad experience into something even worse. The fact is that if a person makes a mistake and lies, blames, justifies, or pretends they did not make a mistake, they recede. They do not advance. A good example was President Bill Clinton when he lied to the world about having sex with a White House intern. He could have been one of the greatest presidents but instead, he will be remembered for his lack of moral character, for cheating on his wife, and also for lying about it on television. It takes courage to face your mistakes and admit to them. It takes no courage to lie.
Mistakes Are the Gateway to Your Midas Touch
In school, making mistakes is bad. The students who make the fewest mistakes are called “smart.” But in the world of business, making a mistake, admitting the mistake, and then learning how to turn that bad “luck” into good luck, is essential for success. Einstein stated that “only two things are infinite—the universe and human stupidity.” However, I would add that a human being’s ability to learn is also infinite.
As an entrepreneur, your mistakes may hurt your business, but so can your employees’ mistakes. Often, if you attempt to correct employees and ask them to take responsibility and learn from their mistakes, they may leave, look for a new job, and let you be the one to pay for their mistakes. This is one reason why most entrepreneurs remain small with as few employees as possible. If an entrepreneur is a poor leader or lacks people skills, employees can be liabilities, not assets.
Making matters worse, employees can turn into criminals when the going gets tough, or when you turn your back, or when they believe that the money you have earned belongs to them. There are many crooks and con men in the business world. In the world of criminals, there are two basic types of crimes: violent crimes and white-collar crimes. Violent crimes generally involve a victim and a weapon or traumatic force. Most white-collar crimes are not prosecuted because lying, stealing, cheating, and incompetence, without a weapon or bodily harm, are tough to prove. In other words, in business, the biggest criminals you will meet are often honest, well-educated who lack emotional maturity and strength of character. They turn into criminals when things do not go their way.
In my life, I have not lost anything to violent crime. I have lost the most money to people who did well in school. They were smart people who believed they were the smartest people on earth and could never make a mistake, nor admit to making a mistake. This is not intelligence. This is arrogance, a tragic character flaw. An arrogant person cannot take feedback, learn, change or correct in a fast-changing world. They get left behind.
One of the most important lessons taught at military school is the ability to take feedback. On the first day of military school, feedback is truly in your face. It was amazing how many very smart young men cracked, cried, and quit simply because of this in-your-face pressure.
Entrepreneurs are always taking feedback, especially from their customers, bankers, workers, and sales force. Without straightforward feedback, entrepreneurs cannot make sound decisions.
If the entrepreneur is surrounded by “yes-people” or “butt-kissers,” the business is in very big trouble.
The Mentor Difference
All public companies listed on the stock exchange are required to have a board of directors. So should you. Even if you have nothing but an idea, it is important to have good advisors. At minimum, you should have three advisors: a CPA, an attorney, and a mentor. Your mentor should be someone who is a successful entrepreneur in the business you plan on entering. For example, if you want to start a restaurant, talk to successful entrepreneurs who started their own restaurant and ask them to be your coach or mentor.
Both Donald and I had a coach and a mentor. We both had rich dads who were entrepreneurs.
Many new entrepreneurs make a big mistake by asking for advice from a successful employee, rather than from a successful entrepreneur. There is a world of difference between the two.
A Final Thought
Murphy’s Law states: “Anything that can go wrong will go wrong.” Combine that with the Peter Principle: “In a hierarchy, every employee tends to rise to his level of incompetence.”
One of the reasons many businesses fail to grow is because the entrepreneur has reached his or her level of incompetence. In order for entrepreneurs to grow, they need to break through their level of incompetence, which means more education through more mistakes. It might take another 10,000 mistakes, as Edison stated when he was asked how it felt to fail so many times before inventing the light bulb.
I will use the metaphor of golf to better explain the Peter Principle. Let’s say a golfer shoots a consistent 72. He or she is often called a “par golfer” or “scratch golfer.” As most golfers know, there is a tremendous difference between a “par golfer” and a professional golfer, even though the difference is only a few strokes. Let’s say pro golfers need to shoot a consistent 70 to survive on the pro tour. Any golfer knows there is a world of difference between a player who shoots a consistent 70, and a player who shoots a consistent 72.
That two-stroke difference is the Midas Touch.
If It Weren’t for Bad Luck
Donald Trump
The fact that Robert ends with a reference to golf and explains the two-stroke difference as the Midas Touch is not only a great example but is one that’s near to my heart. Most people know I’m passionate about golf—and golf-course development.
I am currently developing a golf-links course in Aberdeen, Scotland. I found this ideal location after visiting over 200 sites in Europe over a five-year period. I was patient because I wanted to find the perfect place, and I eventually did. The Trump International Golf Links Scotland is now in development, and the five years of site selection were followed by several more years of intense negotiation, particularly related to environmental concerns. I became almost an expert at geomorphology (the study of landform movements, which became something of a buzzword) due to the immense sand dunes on the oceanfront property. There was resistance from some people to my proposed development of this land, and great enthusiasm from others. It was the perfect recipe for a saga—so much so that a Scottish author wrote a book about the process I went through. He had enough material to fill hundreds of pages. (For those of you who are into golf or great stories, the book is titled Chasing Paradise by David Ewen, and the subtitle is “Donald Trump and the Battle for the World’s Greatest Golf Course.”)
I had to deal with business leaders, government supporters, and the locals. Even Sir Sean Connery got into the action by supporting me when I was facing a lot of opposition. Some people were sure I would ruin this land and not preserve it.
It became a story of international interest, which had its pros and cons. A popular American magazine had a cover story on one of the locals who didn’t want to move from his house, which brought him fame and recognition as never before. His house, and whether he moved or not, wasn’t of great consequence to our building project, but it became a great source of publicity for the owner as well as for the project itself.
The environmental statement for this land took up two five-inch-thick books. Everything in there had to be addressed, along with the business issues of the development. This site is of historical significance to Scotland, and it would be an expensive development for me at nearly one billion pounds (£). However, the construction project would create approximately 6,230 short-term jobs, and the development itself would support 1,440 long-term jobs.
Our research, both business and environmental, was extremely detailed. We worked with the Scottish National Heritage and spent countless hours working out every detail. To give you an idea of the scope of this project, Trump International Golf Links Scotland will include a golf academy, 950 condominiums, 500 houses, a 450-room hotel, 36 golf villas, and accommodations for 450 staff members. That’s in addition to the golf links. It’s an enormous development and there wasn’t anything easy about getting it going.
While I was going through all this, I remained positive and knew that I had the tenacity that Robert speaks about regarding the Midas Touch. I knew I was in for some challenges—years of them—but I also knew that, with persistence, I would come out on top with a great golf course that enhanced the economy of the surrounding area without negatively impacting the environment. My passion was already there. I really believed in the project. And thanks to the public encouragement of Sir Sean Connery, many people began to understand why the development would be in the best interests of Scotland’s citizens.
During this time, I had many other interests to take care of, but never did it become a “back-burner” development. That’s a key to good luck. Nothing should be relegated to the back burner if you want to excel on a big level. Everything is important.
Even though people may think I have great people doing all the work for me (and I do have great people), I stay very involved. I know every detail of this project. I took trips to Scotland repeatedly, not for pleasure, but to be on the job sites and to meet with our contractors, community officials, and the Scottish National Heritage. It was hardly leisure time. When it comes to this project, there’s no overnight success story here. But every minute has been worth the effort.
Mistakes Are Made; Things Change
For those of you who are looking to be entrepreneurs or to grow your entrepreneurial business into something bigger and better that makes a greater impact, this is an important consideration. Every minute counts.
Here’s my rule of thumb, no pun intended: If you can count the amount of time you put into a project on your fingers, then you haven’t spent enough time on it. You will have to work on a project until you think you can’t do it any longer. You will have to take a lot of criticism and negativism and hear “no” repeatedly. It will get worse before it gets better.
But if you remember the meaning of the thumb in Midas Touch—it stands for emotional maturity and strength of character—you’ll reach your goal. It’s a well-known fact that I experienced a financial turnaround of enormous proportions in the early 1990s. I never went bankrupt although a lot of people thought I did, but I owed billions of dollars. It was not a great situation to find myself in. It would be easy to see this as bad luck, but I didn’t see it that way.
I knew the economy and real estate ran in cycles, but what happened in New York was devastating to many people. Real estate took a huge nose dive and the city hit some hard times, and those hard times included me. A lot of people were wiped out. My biggest mistake was that I lost my focus and was playing too much. I’d go to the fashion shows in Paris and didn’t have a firm hold on my businesses. I just thought everything would keep rolling along with the money flowing in. My father once said that everything I touched turned to gold and I started to believe that. Things were easy and lucrative. It seemed that I didn’t have to pay attention, so I didn’t. I got a good wake-up call when things turned from onward and upward to onward and downward.
Fortunately, over time, I was able to regain my focus and my fortune. I actually became much more successful after my big loss. One of the reasons is that I had always seen myself as a lucky guy, and I still do. I didn’t let the experience of a big loss change my view of who I am. I saw the whole thing as a “blip” and nothing more. I knew I had the skill set to get back into the game, just as a golfer knows and uses the same technique to get out of the sand trap and sink a birdie.
Do I still make mistakes? Yes, of course. But just as I did during my financial meltdown, I realize that I have no one to blame but myself. I take full responsibility because I am responsible for any situation I get into. As Robert points out, that’s one gateway to the Midas Touch. Everyone makes mistakes, but it’s what you do with them and what you learn from them that matters. And that’s all part of emotional maturity and strength of character.