Tariq Saleim's Blog - Posts Tagged "money"
On The Money
TECHNIQUE # 1 - WORK SMART, TAKE RISKS
“Hard work does not make people rich. If hard work is all you have to offer in exchange for material success then there is little hope for you. My words may seem harsh but I deem it necessary to use such harsh words to dismiss your delusions about hard work and its deemed connection to material success.
“Observe the janitor in your building who works hard day after day cleaning people’s excretions. Who can argue that his job is not hard? He can be the best janitor in the world but if that is all he can do then that is all he will ever be; a janitor. Go to a construction site and notice the hard work being put in by laborers. The amount of physical labor they put in is staggering; yet most of them are poor. Go back to fifteen and sixteen centuries and read accounts of European and American slavery. Slaves worked hard all their lives but most of them died in poverty.
“It is obvious that in all these examples (and several others which have not been presented here) hard work is not the solution and more is needed.
“If you want to make money then, in your chosen field, go beyond just hard work; learn to work smart. This is one technique which has helped countless individuals and businesses. It is not a new concept and has been around for a very long time. Yet, it is amazing how so many, individuals and businesses alike, miss the point totally. In simple terms it means focusing ones efforts on activities, customers, products etc., which yield the maximum benefit (in this case this benefit being material success). Instead of wasting time, energy and resources on things which are not yielding results, one switches around to find what generates better results.
“Education usually gives people the ability to work smarter, when compared to people who are not educated. Doctors, lawyers, accountants, engineers, teachers, writers, actuaries (and similarly other educated professionals) are able to squeeze more material success from their eight to ten hours workday because they have learned to work smartly. At some point in time they worked hard in acquiring a certain skill set, which later in life they are able to sell smartly. Educated businessmen are usually able to market their products / services better by employing right marketing strategies, targeting correct customer segment, investing in research and development, etc.
“This combination of hard work plus smart work is an extremely powerful money making technique. Millions of people (if not billions) have turned their lives around through effective application of this single most effective skill set. If you are able to fathom this concept and apply it in your daily life you will notice marked improvement in results.”
He took a brief pause to see if there were any questions; there were none so he started talking again.
“Hard work and smart work, however, is not the full story. Rich people do not only work smart but they chose to go beyond that; they learn to take risks. One significant differentiating attribute between rich and the wannabes is their ability to take risks. Rich take risks, sometimes calculated, at times outright foolishly, but they truly take huge risks.
“Beyond a certain point, material success or lack thereof, is not a competence issue but rather a risk appetite issue.
“Rich understand this simple yet not so commonly known concept very well. Their love of material success is supported by a huge appetite for taking risks and this is how they make it big. Of course, for one such person that makes it big, there are several who are washed away because risk by its very nature is uncertain. Sometimes it delivers, at times it does not and that is why it is called risk.
“In the field of Economics, there is a concept of 'Diminishing Marginal Returns' which simply means that the more you have of a certain commodity, say commodity A, the less you are willing to give away of something else for more of the same commodity A. For example, if you are very thirsty, the first glass of water that you drink has a much higher utility. By the time you have had two glasses of water you are no longer thirsty. In fact having a third glass may actually make you feel uncomfortable. Theoretically speaking if you only have enough money to buy three glasses of water, you would be very willing to pay for the first one, may be for the second one as well but will definitely ponder before purchasing the third one. This is simply because the third glass of water does not have the same utility for you as the first glass.”
Someone from the audience raised his hand. Asad requested one of the organizers to pass him a microphone so that his question could be heard easily by everyone.
“Sir my name is Jeremy and I am a student of Law. I have a question for you.”
“Please go ahead,” Asad replied politely.
“You have just spoken about the concept of diminishing marginal returns; do you believe that it also applies to money?” questioned the student.
“Thank you, let me try to answer that for you,” replied Asad. “It would be easy to assume that concept of diminishing marginal returns does not apply to money which means people would be willing to have more of it irrespective of how much wealth they hoard already. However, in reality it does apply. It is true that most people would want to have more wealth than they already hold; however, their risk appetite experiences considerable reduction as they become wealthy. They are no longer willing to take risks which they were once happily undertaking because money does have diminishing marginal returns.
“At some point in time, all of us want to eliminate, hedge, and reduce risks from our lives. Little do we realize that this is not possible in conclusive terms; nevertheless we still try. For some people this happens very early on when they have very little money. They decide they will not be taking anymore risks and play safe from this point onward. For some it happens much later in life when they have amassed a lot of wealth and decide to take it easy. For most of us it happens somewhere in between the two extremes. However, everyone at some point in time decides to stop taking risks. It is this decision which determines the extent of one’s material success in the longer run.
“Rich people and families have huge risk taking capacity, especially the first generation ones. Second and third generation rich are generally known for their love of maintaining status quo, enjoying life’s finest charms and avoiding unnecessary risks.”
Asad felt that he had answered the question appropriately. He looked at the student and asked, “Have I answered your question Jeremy?”
The student nodded his head and said thank you. After that, he handed over the microphone back to the organizer who had given it to him in the first place. Asad started talking again.
“It is wrong to assume that rich only risk their capital; they risk a lot more. They may at times break laws and regulations as well and risk legal repercussions. At times they risk their reputation by getting involved in dishonest and immoral practices. They risk their hereafter (i.e. if you believe in God, heaven and hell) by indulging in evil practices and spreading corruption and so on.
“In summary, our ability to take risks (and not just with our capital) goes a long way in determining how successful we would be in financial terms. If we are always looking for safety and avoid risks in general then it is extremely difficult to make big bucks. We may still be able to live comfortably; however, it would be difficult to enter the big league.
“Your risks are yours to take. No one can tell you how much risk to take and when to stop. It is entirely your call. Some people are able to live at ease with extremely high level of risks; others are uncomfortable with the least bit of it. It is very personal and subjective.
“Know this in no uncertain terms that many incompetent people have been able to amass staggering amount of wealth by taking unprecedented risks with their capital, reputation, lives and prevalent laws and regulations. At the same time, some highly intelligent souls were barely able to make a living because of their nonexistent risk appetite.”
*********
Excerpts from - On The Money
Publishing Date - October 2014
“Hard work does not make people rich. If hard work is all you have to offer in exchange for material success then there is little hope for you. My words may seem harsh but I deem it necessary to use such harsh words to dismiss your delusions about hard work and its deemed connection to material success.
“Observe the janitor in your building who works hard day after day cleaning people’s excretions. Who can argue that his job is not hard? He can be the best janitor in the world but if that is all he can do then that is all he will ever be; a janitor. Go to a construction site and notice the hard work being put in by laborers. The amount of physical labor they put in is staggering; yet most of them are poor. Go back to fifteen and sixteen centuries and read accounts of European and American slavery. Slaves worked hard all their lives but most of them died in poverty.
“It is obvious that in all these examples (and several others which have not been presented here) hard work is not the solution and more is needed.
“If you want to make money then, in your chosen field, go beyond just hard work; learn to work smart. This is one technique which has helped countless individuals and businesses. It is not a new concept and has been around for a very long time. Yet, it is amazing how so many, individuals and businesses alike, miss the point totally. In simple terms it means focusing ones efforts on activities, customers, products etc., which yield the maximum benefit (in this case this benefit being material success). Instead of wasting time, energy and resources on things which are not yielding results, one switches around to find what generates better results.
“Education usually gives people the ability to work smarter, when compared to people who are not educated. Doctors, lawyers, accountants, engineers, teachers, writers, actuaries (and similarly other educated professionals) are able to squeeze more material success from their eight to ten hours workday because they have learned to work smartly. At some point in time they worked hard in acquiring a certain skill set, which later in life they are able to sell smartly. Educated businessmen are usually able to market their products / services better by employing right marketing strategies, targeting correct customer segment, investing in research and development, etc.
“This combination of hard work plus smart work is an extremely powerful money making technique. Millions of people (if not billions) have turned their lives around through effective application of this single most effective skill set. If you are able to fathom this concept and apply it in your daily life you will notice marked improvement in results.”
He took a brief pause to see if there were any questions; there were none so he started talking again.
“Hard work and smart work, however, is not the full story. Rich people do not only work smart but they chose to go beyond that; they learn to take risks. One significant differentiating attribute between rich and the wannabes is their ability to take risks. Rich take risks, sometimes calculated, at times outright foolishly, but they truly take huge risks.
“Beyond a certain point, material success or lack thereof, is not a competence issue but rather a risk appetite issue.
“Rich understand this simple yet not so commonly known concept very well. Their love of material success is supported by a huge appetite for taking risks and this is how they make it big. Of course, for one such person that makes it big, there are several who are washed away because risk by its very nature is uncertain. Sometimes it delivers, at times it does not and that is why it is called risk.
“In the field of Economics, there is a concept of 'Diminishing Marginal Returns' which simply means that the more you have of a certain commodity, say commodity A, the less you are willing to give away of something else for more of the same commodity A. For example, if you are very thirsty, the first glass of water that you drink has a much higher utility. By the time you have had two glasses of water you are no longer thirsty. In fact having a third glass may actually make you feel uncomfortable. Theoretically speaking if you only have enough money to buy three glasses of water, you would be very willing to pay for the first one, may be for the second one as well but will definitely ponder before purchasing the third one. This is simply because the third glass of water does not have the same utility for you as the first glass.”
Someone from the audience raised his hand. Asad requested one of the organizers to pass him a microphone so that his question could be heard easily by everyone.
“Sir my name is Jeremy and I am a student of Law. I have a question for you.”
“Please go ahead,” Asad replied politely.
“You have just spoken about the concept of diminishing marginal returns; do you believe that it also applies to money?” questioned the student.
“Thank you, let me try to answer that for you,” replied Asad. “It would be easy to assume that concept of diminishing marginal returns does not apply to money which means people would be willing to have more of it irrespective of how much wealth they hoard already. However, in reality it does apply. It is true that most people would want to have more wealth than they already hold; however, their risk appetite experiences considerable reduction as they become wealthy. They are no longer willing to take risks which they were once happily undertaking because money does have diminishing marginal returns.
“At some point in time, all of us want to eliminate, hedge, and reduce risks from our lives. Little do we realize that this is not possible in conclusive terms; nevertheless we still try. For some people this happens very early on when they have very little money. They decide they will not be taking anymore risks and play safe from this point onward. For some it happens much later in life when they have amassed a lot of wealth and decide to take it easy. For most of us it happens somewhere in between the two extremes. However, everyone at some point in time decides to stop taking risks. It is this decision which determines the extent of one’s material success in the longer run.
“Rich people and families have huge risk taking capacity, especially the first generation ones. Second and third generation rich are generally known for their love of maintaining status quo, enjoying life’s finest charms and avoiding unnecessary risks.”
Asad felt that he had answered the question appropriately. He looked at the student and asked, “Have I answered your question Jeremy?”
The student nodded his head and said thank you. After that, he handed over the microphone back to the organizer who had given it to him in the first place. Asad started talking again.
“It is wrong to assume that rich only risk their capital; they risk a lot more. They may at times break laws and regulations as well and risk legal repercussions. At times they risk their reputation by getting involved in dishonest and immoral practices. They risk their hereafter (i.e. if you believe in God, heaven and hell) by indulging in evil practices and spreading corruption and so on.
“In summary, our ability to take risks (and not just with our capital) goes a long way in determining how successful we would be in financial terms. If we are always looking for safety and avoid risks in general then it is extremely difficult to make big bucks. We may still be able to live comfortably; however, it would be difficult to enter the big league.
“Your risks are yours to take. No one can tell you how much risk to take and when to stop. It is entirely your call. Some people are able to live at ease with extremely high level of risks; others are uncomfortable with the least bit of it. It is very personal and subjective.
“Know this in no uncertain terms that many incompetent people have been able to amass staggering amount of wealth by taking unprecedented risks with their capital, reputation, lives and prevalent laws and regulations. At the same time, some highly intelligent souls were barely able to make a living because of their nonexistent risk appetite.”
*********
Excerpts from - On The Money
Publishing Date - October 2014
Multiple Incomes
“The rich, very skilfully build multiple income streams over a period of time. When one income stream starts generating an excess over their immediate needs, they transfer this excess to assets, investments, and businesses that will start generating new income streams over time. Strikingly dissimilar to this, poor and working-class people increase their expenses to match their incremental income and thereby never generate the excess that could be used for setting up multiple income streams.”
Becoming rich
"Focus on becoming rich and not just looking rich. These are two very different concepts, involving two different approaches to life and resulting in widely differing finishes. The poor and working class usually exhaust their scarce resources in trying to showcase a certain level of affluence that they do not really have. Whereas what is really needed is they apply the bulk of their meager resources to becoming truly rich. This difference in one’s consumption and investment pattern determines who will end up striving to look rich and who will end up actually rich. If you have savings of one hundred thousand dollars and you spend it all on a fancy sports car, you may fool some people into believing that you are rich, but in reality you are poorer than you were before you made this purchase. You now have an asset that is depreciating and will be worth little in five to seven years."
Leverage is a tool
“Avoid leveraging yourself to the hilt. Leverage is just a tool; it multiplies the effect of movements in market prices. When prices move up, it multiplies that move several times in your favor for assets that you own. When prices move down, it multiplies that negative movement against you by several times. On any given day, it can make or break you.”
Sell hope...
As long as you sell hope, you will always be in business. When you sell a lipstick, you are not selling something that gives color to women's lips. You are selling the hope of looking prettier, sexier, better than before. When you sell a luxury watch for thousands of dollars, you are not selling a time telling device. You are selling status, class, confidence, a hope of being different. Every successful business sells hope and you must do so to be successful.
