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.
Build Solid Back-Room Basics For Business Success
What do South African entrepreneurs really know about what goes on behind the scenes building of businesses?
South Africa has a vibrant start-up culture with great ideas starting out with a bang, but closing down with a whimper because entrepreneurs picture the glory at the destination, but not the nitty gritty of the journey to get there.
Be smart about scale
When I started out, I literally did everything myself. I negotiated and signed leases, I arranged the furnishing for our apartments and managed the interior décor process. When guests started using our apartments, I signed them in at reception, and then carried their bags.
At that stage, there was no money in my business to pay for attorneys, interior designers and decorators and there certainly wasn’t enough money for porters.
However, when we got to 70 apartments, it didn’t make sense for me to be a porter any longer, so I hired someone to do that job, explaining clearly what I expected of him. Before I did that, though, I spent time designing incentives for him so that he would be more affordable for me, and so that he could earn as much money as possible.
Related: Training Is A Two-Way Trick
Know your talents – and your limitations
There are certain things I’m really good at, but I know without a doubt that sales isn’t one of them – and without sales, you don’t have a business. I couldn’t afford a top-flight salesperson, but I knew that I could attract the right talent with the right business model. I set some high targets for Pamela Niemand, but offered her one third of the business if she met them. We both won: she earned a share in a successful, trend-setting business, and my trend-setting business became successful!
Use your skills – but know when to hand over
My background in corporate finance meant that I had all the accounting skills I needed when we first started out, but I knew that the time would come when I would need someone focused on that side of the business full time. Doing it all myself first meant that I could brief my first full-time accountant clearly and with a deep understanding of what would be required – and that I could help that person find and fix any challenges based on my experience.
In summary, my simple advice to anyone starting out would be to bootstrap your business yourself without investors or staff for as long as you can, but don’t over-extend yourself. Know when to delegate tasks away so that you can focus on what you’re really good at – but don’t do it before you have a solid understanding of what’s required. Know what you’ll never be able to do, and bring in that resource from the beginning – but do it based on performance-based incentives, so that your fledgling business doesn’t lose out if your early hires don’t perform.
The Myth About The Relationship Between Entrepreneurs And Taking Risks
This is the true relationship between entrepreneurs and the apparent illusion of risk.
“I can’t be an entrepreneur or start a business. I don’t have the appetite for risk.” This line is spoken regularly to brave few that leave the perceived safety of a job, take the plunge and venture into the unknown world of being an entrepreneur. However, there is a gross misunderstanding in the appetite for risk that entrepreneurs are believed to have innately inside of them.
The little-known truth is that the majority of entrepreneurs don’t like taking risks and according to Luca Rigotti and Mathew Ryan in their paper that explores a model for quantifying risk and its translation into enterprising action, the results were very interesting.
Risk is explained by these theorists as taking action where the outcomes are unpredictable as well the factors leading to that outcome are unknown. One of the theorists in this area, Saraswati, who coined the term “tolerance for ambiguity” has a more accurate description of what the outside world deems taking a risk.
In simple terms, entrepreneurs don’t go head-first into the shark infested water because they like the idea of danger and potentially being eaten alive; or the thrill of being able to say that they survived whilst others perished in a pool of maimed flesh. They carefully calculate that the sharks have been fed recently, some of the sharks are ragged tooth sharks that whilst looking like they are set to devour a human being, are actually incapable of opening their jaws wide enough to bite. For those sharks that still have space or who smell blood and can’t resist the urge to kill, the entrepreneur has a cage set up that he can retreat into quickly and a knife with which to protect himself.
Tolerance for ambiguity is the careful evaluation of what is known at the moment where a decision must be made and an open-mindedness for what is not known. This, coupled with the agility to change course when new information is presented, has earned the label of high risk appetite. The appetite is not for the risk, but it is the ability to move down a path, when all the information is not known.
I likened it to a person moving around in the dark holding a candle. The candle casts a light that illuminates a limited parameter around the person holding the candle. What is beyond the light that the candle casts, is unknown and potentially a risk. But as the person moves forward, the light reveals what was unknown and in the shadows. As the light reveals new information and new challenges added to what they have already learnt, the person can make better informed decisions. The tolerance is in not knowing what lies in the shadows yet to be illuminated by the candle and then the confidence in his or her own ability to act on what new information is discovered.
None of this behaviour is risky or irresponsible. There is careful consideration for what is known and a tolerance for what is unknown. And once there is more information available, a calculated next step is taken and more information is assimilated into what is now known. This is the true relationship between entrepreneurs and the apparent illusion of risk.
7 Skills Every Entrepreneur Needs To Adopt Today
Want to know what skills can help you build confidence and your business? Here are seven…
For some people, becoming an entrepreneur is as easy as stepping off a bus. They have a big idea, they bring it to life, they hire employees and the next thing they are in a building smothered in branding and living the business dream. For others, the idea and the passion are there but they are unsure as to how they can make these into a sustainable reality. Entrepreneurial spirit isn’t like instant coffee – you don’t add ideas and suddenly get all the skills you need to thrive.
Want to know what skills can help you build confidence and your business? Here are seven…
1. Believable vision
Make sure that your vision is believable and achievable. It has to live in the realms of possibility, not as a blue-sky idea that looks good on paper but wouldn’t work in reality. You need to be able to live this vision so make it realistic and achievable. This will not only keep you on track, but your employees as well.
2. Be inclusive
You need to ensure that every person who works with you feels as if they are part of your vision and understand it. They need to relate to where the business is going and how it plans to get there. Many leaders don’t understand why employees are not engaged with their business and it’s because many of them don’t actually understand what the business does.
3. Communication is critical
If you don’t have fantastic communication skills, then now is the time to hone them. When it comes to building employee morale, commitment and engagement, nothing works as effectively as constant communication. The same applies to client relationships. You need to repeat the vision and ethos of the company at every opportunity and you need to be part of the team that does this communication.
4. Be visible and transparent
You are communicating, now you need to make that communication genuine by being both open and clear. People respond incredibly well to transparency. They feel as if they are part of something that recognises their value and contribution and it fosters a more inclusive company culture. Often toxic cultures come about thanks to a lack of communication and visibility. People know when things are being kept secret and react negatively to it, regardless of whether they’re an employee, a customer or a manager.
5. Be practical
You aren’t going to build an empire in a fortnight so focus on a realistic and practical business strategy that has clear benchmarks and even clearer goals. Communicate these with the company and keep everybody on the same page. Practical and achievable means long-term success.
6. Build opportunities
As people become immersed in your company and part of its growth they will also need opportunities to grow. You need to tie their careers to the business and create opportunities for them.
7. Be human
It takes people to build a culture, a company and a future. It’s essential that you are human in your interactions and your treatment of others. The impact that a down to earth and authentic attitude can have on a company is extraordinary.
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