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Following in Your Parents Footsteps
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Tom Peters, author of In Search of Excellence has been saying over and over again, “Job security is dead. ” Yet, many people continue saying to their children, “Go to school so you can find a secure job.” Many people struggle financially simply because they have their parents' ideas about money. Instead of creating assets that bought assets, most of our parents worked for money and then bought liabilities with that money, innocently thinking they were assets. That is why many people go to school and get good jobs because that is what their parents did or advised them to do. Many struggle financially, or live paycheck to paycheck because that is what their parents did. When I teach my investment classes, a very important exercise is for students to compare what they are doing today to what their parents did or advised them to do. Many times, students realize that they are either following closely in their parents' footsteps or are following their parents' advice. At that point, they have the power to question these old ideas that have been running their lives.

If a person truly wants to change, adopting a better idea is often a good idea. My rich dad always said, “If you want to get richer faster, simply look for ideas that are better than the ones you are using today.” That is why, to this day, I read biographies of rich entrepreneurs, listen to audiotapes of their lives, and listen to their ideas. As rich dad said, “Ideas need not be new; they just need to be

better—and a rich person is always looking for better ideas. Poor people often defend their old ideas or criticize new ones. ”

Only the Paranoid Survive

Andy Grove, the chairman of Intel, titled his book Only the Paranoid Survive. He got that title from Dr. Joseph A. Schumpeter , a former Austrian minister of Finance and Harvard Business School professor. Dr . Schumpeter expressed this idea of only the paranoid surviving in his book Capitalism , Socialism, and Democracy. (Dr Schumpeter was the “father” of the modern study of growth and change in economics—dynamics—just as Lord Keynes was the “father ” of the study of static economics—statics.) It is Dr . Schumpeter's idea that capitalism is creative destruction; a perpetual cycle of destroying the old, less-efficient product or service and replacing it with new, more-efficient ones. Dr. Schumpeter believed that governments that allow the existence of capitalism, which tears down weaker and less efficient businesses, will survive and thrive. Governments that put up walls to protect the less efficient will fall behind.

My rich dad agreed with Dr. Schumpeter , which is why he was a capitalist. Rich dad challenged Mike and me to constantly challenge our ideas because if we didn't, someone else would. Today, people with old ideas are those who are falling behind the fastest, even though the world is only a little more than ten years old. The world we face today reminds me of the song “The Times They Are A'Changin'.” A line from that song goes, “For you'd better start swimming or you'll sink like a stone. ” Although that song was written approximately 40 years ago, it will reflect the next 40 years more and more. In other words, just because you're rich or poor today does not mean you will be in the near future.

Your Past Success Means Nothing

In the near future, those who do not risk failing will ultimately fail. My poor dad looked upon failure as a noun, and my rich dad looked upon failure as a verb—and that difference made a big difference over a lifetime. In Future Edge, Joel Barker wrote, “When a paradigm shifts, everyone goes back to zero. Your past success means nothing.” In this fast-changing world, paradigms will be changing faster and faster , and your past successes could mean nothing. In other words, just because you work for a good company today does not ensure that it will be a good company tomorrow. For this reason, Grove chose the title of his book: Only the Paranoid Survive.

Even employee benefits are changing. Not only has the Information Age changed the rules of retirement plans, the change from Defined Benefit Pension Plans to Defined Contribution Pension Plans, the change has also affected some employee benefits. Recently a friend who works for an airline said, “It used to be easy to get free flights on airlines, which is one of the benefits of being an airline employee. But today, with airlines auctioning off empty seats on line, the planes are flying full and I find it harder to use a benefit I love.”

A Tale of Two Texans

Most of us have heard of Ross Perot and Michael Dell. Both are Texans, and both made their money in the Information Age economy. Yet recently, an article in a financial magazine stated that Perot's wealth has actually gone down substantially while Dell's wealth continues to skyrocket. So what is the difference? It's not the industry, since both are in the Information Industry. I'll let you come to your own conclusions.

As this book draws to a close, I will leave you with some ideas about the changes that we all face today, changes that were brought on once the Berlin Wall went down and the World Wide Web went up. In his book, The Lexus and the Olive Tree, New York Times foreign affairs columnist Thomas L. Friedman describes several changes between the Industrial Age and the Information Age. Some of the changes are:

Cold War Globalization

1. Einstein's E=mc 2 Moore's Law

During the Cold War , Einstein's theory of relativity—E=mc 2 —ruled. In 1945, when the United States dropped the atomic bomb on Japan, America became the economic power of the world and took military dominance away from England. During the 1980s, everyone thought Japan was about to beat the United States economically, and the Nikkei stock market surged. But Japan's period of economic dominance was short lived because the United States redefined itself. The United States redefined itself because it shifted from

E=mc 2 to Moore's Law . Moore's Law says that the power of the microchip will double every 18 months. Today, America is the leading world power because it leads in technology as well as weaponry.

If America had remained in the weapons race only, we might be a bankrupt nation like the former Soviet Union. When the Berlin Wall came down in 1989, America's capital markets shifted quickly into the Information Age. That freedom to change quickly is the financial power provided by a free capitalistic society. Japan as well as England cannot change that quickly because both countries have too many ties to the days of the feudal system—otherwise known as the monarchy, an Agrarian Age institution. Unconsciously, those countries are waiting for the monarch to lead them. In other words , innovation is often hampered by traditions. That idea is true for individuals as well as nations. As rich dad said, “Old ideas get in the way of new ideas.” I am not suggesting getting rid of old traditions, but rather that we are in the Information Age and so we need expanded ideas as well as old ideas .

Cold War Globalization

2. Weight of missiles Speed of modems

When the Berlin Wall came down, E=mc 2 changed to Moore's Law . The power in the world shifted from the weight of nuclear warheads to how fast your modem is. The good news is that a fast modem costs a lot less than big missiles; speed matters more than weight.

Cold War Globalization

3. Two world powers in charge No one in charge

During the Cold War, there were two superpowers: the United States and the Soviet Union. Today, the web makes the idea of a borderless world and a global economy a reality.

Today, the electronic herd, which is the thousands of fund managers who control great sums of money, have the power to affect world politics more than politicians . If the electronic herd does not like the way a country is managing their financial affairs, they will move their money elsewhere at the speed of light. That is what happened in Malaysia, Thailand, Indonesia, and Korea just a few years ago. The same thing could happen to any country. It is not the politicians that have the power today, as they did in the Industrial Age. In the Information Age, it is the power of global electronic money that often dictates a country's affairs.

Bill Gates crossed the border from the United States to Canada. When the customs agent asked him if he had anything of value to declare, he pulled out a stack of floppy disks wrapped in rubber bands. “This is worth at least $50 billion. ” The customs agent shrugged, thinking he was talking to a nut and let the richest man in the world pass through the border without paying anything in taxes. The point is that the bundle of floppy disks wrapped in rubber bands was worth at least $50 billion. That bundle of floppy disks was the prototype of Microsoft's Windows 95.

Today, super-rich individuals like Gates often have more money and more influence over the world than many large nations. Such power caused the U .S. government, the strongest government in the world, to take Gates to court for monopolistic practices. When that case started, a friend of mine said, “The

frightening thing is that Gates can afford to hire better attorneys than the U .S. government can.” That is because the U.S. government is an Industrial Age institution and Gates is an Information Age individual.

Following in this line of thinking, George Soros wrote in The Crisis of Global Capitalism that many corporations had much more money and power than many Western nations. That means there are corporations today that could damage the economy of an entire nation just to benefit a few shareholders. That is how much power many corporations have.

In the next few years, many changes, both good and bad, will occur . I believe that capitalism will be unleashed to its fullest extent. Old and obsolete businesses will be wiped out. Competition as well as the need to be cooperative will increase (e.g. , there will be mega-mergers such as the one of AOL with Time Warner). Notice that the younger company buys the older one. These changes are all happening because the genie known as technology has been released from the bottle, and information and technology are now cheap enough for everyone to afford.

The Good News

The good news is that for the very first time, the 90/10 rule of the rich no longer needs to apply. It is now possible for more and more people to gain access to the great world of infinite wealth, the wealth found in information—and information is infinite, not restricted as land and resources were in ages gone by. The bad news is that the people who cling to old ideas may be brutalized by the changes upon us as well as by the changes yet to come.

If rich dad were alive, he might say, “This Internet craze is much like the California Gold Rush of the 1850s. The only difference is that you do not need to leave your home to participate in it, so why not participate in it?” He would probably go on to say, “During any economic bonanza, there are only three kinds of people: those who make things happen, those who watch things happen, and those who say, ‘What happened?'”

Although I started with Einstein's Theory of Relativity as an obsolete idea from the Cold War, I also think of Einstein as a true visionary. Even then, he recognized an idea that is even truer today—“Imagination is more important than knowledge.”

The really good news is that for the first time in history, the Internet gives more and more people the ability to see the other side of the coin if they go there with open eyes .

Taking my ideas and creating an asset with those ideas was one of the best challenges I have undertaken. Although not always successful, with each new venture my skills increased and I could see a world of possibilities that few people see. So the good news is that the Internet makes it easier for more people to access a world of abundance that for centuries has been available to just a few. The internet makes it possible for more people to take their ideas, create assets that buy other assets, and have their financial dreams come true.

We've Only Just Begun

Karen and Richard Carpenter sung a great song titled “We've Only Just

Begun.” For those of you who think you may be too old to start over again, always remember that Colonel Sanders started all over again at 66. The advantage we have over the Colonel is that we are all now in the Information Age, where how young we are mentally matters, not how old we are physically. After all, Merrill Lynch reported, “The world is 10 years old.”

Your Most Important Investment

You are making an important investment by reading this book, regardless of if you agree with it or not, regardless of if you understood it or not, and regardless of if you ever use any of the information or not. In today's ever -changing world, the most important investment you can make is an investment in on-going education and searching for new ideas. So keep searching, keep challenging your old ideas.

One of the main points of this book is that you have the power to create a world of not enough money as well as a world of an abundance of money. In order to create a world of an abundance of money it does require a degree of creativity, a high standard of financial and business literacy, seeking opportunities rather than seeking more security, and to be more cooperative instead of competitive. Rich dad guided me in shaping my thoughts by saying, “You can choose to live in a world of not enough money or too much money. That choice is up to you. ”

A Final Word

Rich dad's advice to the average investor at the beginning of the book was, “Don't be average. ” Regardless if you invest to be secure, comfortable, or rich, please have a plan for each level. In the Information Age, an age with faster changes, fewer guarantees, and more opportunities, your financial education and investor knowledge is vitally important. And that is why rich dad's advice of “Don't be average” is vitally important today.

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