Wouldn’t you love to be wealthy? Most people readily confess that they would, and yet they do almost nothing about it.
Ask them why, and they typically state a range of reasons, including: A lack of resources, inexperience, skepticism and hostility of their surroundings, the absence of a mentor, a failed initiative in the past, the absence of a supportive societal culture, an adverse business environment and so on.
I can assure you, these are nothing but convenient excuses. To support my argument, think about this. As per Bloomberg, 73 of the 100 richest people in the world are self-made. Of these 36 had poor parents, 18 had no college degree and 8 had poor parents and no degree.
Notably Larry Ellison (Oracle), Li Ka-Shing (Cheung Kong etc.) and Leonardo del Vecchio (Luxxotica) are orphans. The parents of Amancio Ortega (Zara), John Fedricksen (Meisha etc.), Sheldon Adelson (Las Vegas Sands), Invgar Kampard (IKEA), Francois Pinault (Samsonite, Gucci etc.) were a railroad worker, a welder, a cab driver, a farmer and a lumber miller respectively.
So why is it that the illustrious entrepreneurs listed above achieved great wealth despite adverse conditions? Because they had unyielding commitment.
Someone who is ardently committed to creating wealth will instinctively show initiative rather than exhibiting inaction. They will also show a range of habits that include seeing and acting on opportunities, systematic planning, problem solving skills, commitment to work, concern for high quality, coordinating and organising skills, perseverance, persuasion skills, assertiveness, and self-confidence.
These are formally identified as the entrepreneurial competencies. The good news is that they can be learnt.
While most of us remain in awe of the wealthy, we’re not inclined to probe their journey to wealth. Instead, I have studied their early life to identify commonalities in their actions. I have not included people who attained wealth by inheritance or marriage, but through hard work.
Based on it, I present to you the seven traits of the wealthy.
1. Own a wealth-creation engine
The core belief that dominates their thinking is that wealth creation can never be outsourced or gained by partaking in someone else’s vision, but by persuading others to participate in your vision.
The wealthy do not ‘act in theaters’ owned by others. Quite the reverse, they’re the ones who:
- Write the script (the business narrative)
- Conceive of an output that is highly valued by customers
- Organise resources accordingly: By devising sufficient incentives for others to act in their theater and/or persuade them to part with their resources – employees, investors, asset owners etc
- Assign roles to people
- Coordinate activities.
While they may invest elsewhere, the point is that it is never their primary wealth creation engine.
2. Resource-ownership is futile
The early life of most of the wealthy can be traced to humble or even disadvantaged settings. But a lack of resources never stopped them from reaching for their dreams. Their beliefs are:
- Never restrict vision and goals to resources currently controlled, but rather set ambitious vision and goals, and then find ways to organise resources
- Seeking resource-ownership is futile, as most resources are put to unproductive use by their owners, who will readily part with it for superior returns
- It’s critical to devise ways of moving resources out of an area of lower and into an area of superior productivity and greater yield.
Accordingly, they develop a set of skills that are rare, unique and can’t readily be sourced from the market. These skills include:
- Seeking opportunities where imperfect competition exists
- Networking for accessing private information
- Deal making to gain from temporary opportunities
- Harnessing creativity of others
- Harnessing innovation
- Bringing all elements together.
3. Access to private information
They manage risk by acquiring private information. This type of information has limited distribution and is unavailable to the public. Their beliefs are:
- The acquisition of information is an investment
- Networking is a key to access to private information
- Networks should be open and global, not local and closed
- The choice of people in the network should be guided by people’s competencies and resourcefulness and not closeness
As Prof. James O Fiet states, ‘An entrepreneur is a person who optimises the tradeoff between investing too much and too little in specific, risk reducing information.’
4. Believe in imperfect competition
In perfect competition, all participants earn the same levels of profits. None can get wealthy that way. If they could, there would be no incentive for them to bear above-normal levels of risk in return for average levels of profits. So the wealthy chose to operate where:
- Imperfect competition exists
- They have access to private information to manage risks
- They can benefit from a situation where others are excluded by design.
5. Crafty deal making
The wealthy are proficient in this art. I have seen sufficient evidence that:
- As alert discoverers, all they see are deals around them
- They instinctively engage in deal-making all the time
- With private information they know dynamics better than others
- While the rest consciously discard temporary opportunities to make money, they do not.
6. Unique key for choosing and rejecting ventures
Given alternatives, the wealthy trade-off between the probability of and magnitude of loss in a peculiar manner:
- They undertake alternatives with a high probability of a loss as long as it is small
- They avoid any choice where the loss could be ruinous, even if its probability was low
- They would reject an opportunity if they could not assess its risk.
7. Consulting and/or Intellectual Property
Let me explain this through an anecdote. Recently two homemakers confronted me on which entrepreneurial opportunities they could pursue.
Step one was figuring out what they were passionate about. We drew a blank except that they ‘liked’ shopping for sarees (a dress worn by Indian women). So, what could we do with this interest? I could only think of Indian weddings. The brides buy around 30 to 50 sarees.
The affluent spend upwards of R50 000 or even multiples of R50 000. Then there are Non Resident Indians and Persons of Indian Origin across the globe. That is a huge market. With specialist skills, one can be a consultant.
Surely, you would need to master what goes into making a saree – processes, materials and their sources, weaving techniques, designs, custom designs, number of man-hours it takes, pricing etc. and then of course the import of the occasion, customs and so on.
Be it any field, mastering skills takes years to perfect. However, it can be your primary wealth creation engine. Parallel to that, you should seek avenues for sharing it with others through books, videos, lectures etc, thereby creating intellectual property, and a second (and often more successful) revenue stream.
Create a portfolio of micro businesses
You do not necessarily need to be an entrepreneur to create wealth. An alternative is to learn to think, assess and invest in micro or small enterprises, just as venture capitalists and private equity firms invest in medium or large businesses.