How to Get Rich by Felix Dennis is one of those books that are not what they look like on the surface. I avoided reading the book several times just because of the title.
Nevertheless, after people kept recommending it, I decided to give it a try.
I was expecting the typical self-help approach on accumulating wealth, but instead, I found a wealth of great anecdotes and life wisdom.
From the start, Dennis tells you that accumulating wealth is non-sense and advises against it if you do not have the compulsion to get rich.
The book was published in 2006, but most of the advice is still applicable today. If you can find the gems buried across the pages of this book, you will end up becoming wiser than before you start it.
Below I share some of my notes and learnings from the book.
What type of person can get rich?
Dennis classify people into three buckets:
- Young and inexperienced: you have stamina and nothing to lose. According to Dennis the perfect combination to get rich.
- The slightly better off and on their way up: this would be the young professionals who are afraid of losing what they have already accomplished.
- Senior managers or professionals: these are the people who are already established and the ones who are less likely to become rich. They have something to lose, and they may have kids, a family, and responsibilities that will refrain them from doing the necessary to become rich.
Dennis advise to this last group? Get yourself a young and fearless partner with tons of stamina, very much like Stephen Schwarzman with Peter Peterson. They were more than 20 years apart.
The addiction to making money
This is something that I also heard from Naval Ravikant. Those who get really rich develop a level of anxiety and obsessiveness to get money that it is tough to turn off.
Dennis mentions the same. For him making money is a drug. Not the money itself but the making of the money. There’s some endorphin rush in the thrill of the hunt that is really addictive.
Your Passion and Getting Rich
To follow your passion is common advice these days. Not always the correct advice, I must add. It really depends where you want to go.
According to Dennis, following your passion could be contrary to your goals if you want to be rich.
In this chapter, the author talks about the need to know the difference between our inclinations, what we like and are attracted to do, and separate them from our aptitudes, what we are capable of doing.
Even if we know what we can do, then there’s always the temptation to succumb to our inclinations, which does not necessarily mean that you can become rich.
He quotes the example of this woman that was an excellent salesperson, but she decided to quit everything to become a painter.
Also, when you are in the search process, you have to be attentive to opportunity, and when you see an opportunity, you have to grab it by the forehead and jump with the 2 feet, right into the fire giving it all you got.
He also talks about choosing growing industries to find new companies with little capital generating many opportunities.
And another exciting thing is that you can become an “expert” in a field very quickly if it is a new field. Investors love “experts.”
Execution is the Key
Ideas do not count. Execution is the key.
You have to make things happen. Thinking about it is not going to create a company for you.
If the idea doesn’t work, change it. But don’t forget to execute flawlessly.
Look for the competition. Don’t be afraid to copy a winning strategy.
Accepting outside capital or not
Dennis was a hustler. He didn’t like asking for external capital in exchange for “a piece of the action.” He outlines this very clearly with different stories in his life where he required outside capital.
He says it’s better to always depend on the small fish to finance your venture; small fish are friends, colleagues, family, and fools may be. There’s always a way to hustle capital.
He gives an excellent example of how he managed to get capital for his first comic publication. It was a stream of deals and favors that he managed to later re-pay.
He says that the world is awash with cash only because of the low interests rates, and everybody is hunting for returns. The thing is that if you are going to ask for a loan, then there are high minimums.
Never Give In
Over and over again, Dennis shares anecdotes about the determination you must have to get rich.
He was living in an apartment, almost homeless, burning fire inside to keep warm with his girlfriend. He was determined to be an owner; he was determined to be rich. He had a perfect job offer, his girlfriend begged him to take it, but he won’t cave.
Dennis is an avid reader of biographies, and in this chapter, he shares some episodes from Van Gogh’s life and his determination to be a master painter.
That’s some good advice; if we read biographies and learn about great people’s lives, we will learn a ton about determination and the mistakes they committed along the way.
Are you Making One of The Most Common Startup Errors?
Before trying to get rich, the first and foremost important thing is understanding if we have the compulsion to do it. Of course, everyone has the desire to be rich. But do you have the compulsion, the inner demons, as Dennis put it, to get rich?
If you don’t have them, Dennis’s advice is not even to try to attempt it. The road is long, lonely, and challenging. It will cost you much.
On the subject of success, to quote the author, ‘ success is never permanent; failure is never fatal. The only thing that counts is to never, never, never give up.’.
You have to be always constantly re-examining your assumptions and being flexible. Always thinking about what can go wrong, what can change that will affect my business, and keeping costs low.
On the subject of talent, Dennis has a really strong position. You cannot do without it. You have to identify it, hire it, nurture it, reward it, protect it. And, when the time comes, fire it as he put it in the book.
It’s interesting how to sees talent as a pure resource that he wants to acquire when is undervalued (when they are young), nurture it, make them grow professionally, and then part ways when they are in the mid-40s or 50s, and he would have to overpay them to make them stay.
On the other hand, he would make the impossible to retain talent. He tells the story of how he retained a top senior executive who wanted to work in America just offering him the chance to be the CEO and build the subsidiary from scratch.
That way, he managed to get that person to stay in the company.
Funny how he ends up the section on talent: (…) talent does most of the work for you. Just as it has done since the beginning of recorded history.
Do You Have What it Takes to Get Rich?
Which are the personal traits that are necessary to get rich? Dennis gives us a detailed enumeration of them.
First and foremost, as this is not a self-improvement book, he says that no one can be improved by reading a book.
He says that the chances of becoming a millionaire are minimal, and most of us are too nice, are too comfortable, and sensible ever to become rich.
Besides that Dennis, tells in crude detail which is the damage that we will get in trying to get rich. There’s a coarsening of our nature that will result in our pursuit of riches. And besides that, it will take time. Lots of time that is actually in short supply in this life.
No one can make you feel inferior without your consent, said Eleanor Roosevelt.
Do you believe in yourself? Truly believe in yourself, asks Dennis. If you don’t believe in yourself, why should anyone else believe in yourself?
Self-belief is perhaps more critical than persistence to becoming rich, according to Dennis. If you don’t have it, the only way of becoming rich will be from lottery or inheritance.
Another trait he talks about in this chapter is how you develop commercial instinct or just trusting your gut. The skill of knowing when a product is going to be a commercial success is something you develop over the years after watching hundreds of products test the markets.
According to Dennis, you can’t get rich painting by numbers. You can only do it by becoming a predator, waiting patiently and remaining alert, constantly sniffing, and by bringing massive, murderous force to bear upon your prey when you pounce.
One interesting observation Dennis makes on creating different baskets of assets and diversifying risk is that the biggest basket he ever created wasn’t the first or the second; it was the 20th. You have to keep building; you have to keep going knowing that even if that basket is not big enough, it definitely will help you create bigger baskets in the future.
Do You Need Luck to Get Rich?
Which is the role of luck in getting rich? Dennis acknowledges there is some to all of it, though there’s more than Dennis recognizes.
Nevertheless, he has an interesting take on the role of luck and making money.
He mentions the example of a friend, Albert, who is better than him in every aspect of the business but that is not more successful than he is. He attributes this to misfortune.
Luck is what happens when preparation meets opportunity. If you keep grinding every day, you will someday be successful; you have to keep going, keep trying. Luck is like the wind to the sails of a boat; if you are constantly changing course when the wind arrives, you will not capture it.
Dennis mentions that the reason why Albert is not as successful is that:
- He changes his plans often, always chasing the last fad in the markets. He always looks for the green grass over the hill.
- He is prey, not a predator, so he is unwilling to fight for what is rightfully his. Flight not fight. To get rich, you have to be a fighter. You have to be bold and be brave. Stay on course; stop looking for the green grass over the hill.
- Dennis advice not to take the quest for wealth seriously. It’s just a game, chum.
The Art of Negotiating
Certainly one of the primary skills if you want to get rich.
An excellent chapter about the minutiae of negotiations: little exchanges like salary rises, etc., are not negotiations. The only negotiations that exist are the negotiations for really big numbers or for selling a company.
The little minutiae like who will buy coffee for the office etc. must be handled by managers.
Dennis tells how he sold his first magazine three times the initial offer using the elephant and the flea metaphor.
Besides that, he gives excellent advice for negotiation:
- The other part of the negotiation is always the enemy; they are not there to make friends. They are the enemy, and they want to steal from you.
- If you are a terrible negotiator, and most of us are, you have to recognize it and have a number and conditions where you will not back off.
- The other technique in this situation is to send some emissary with answers to all the possible conditions that may appear during the negotiation.
- The strengths of each part are always evident, but the weaknesses are hidden, find them, be a thorough investigator.
- Big companies have Institutional Money as their masters. They ask for growth from the big companies in hot markets, and that’s why you have to understand if the big company is in a hurry to buy growth or not. There are always other elephants to whom you can sell your company.
- In the end, the balance of weakness is what is going to decide the matter.
- While in the negotiation, empty your mind and make the other party believe that you will not sell if your required price is not met.
- Always hire all the professional help you can manage—Devil’s in the details.
- If your advisors are heading in a direction that you are not comfortable with, fire them.
- Avoid auctions like the plague; you will always overpay if you are on the buyer’s side.
- Use silence as a weapon. Generate silences on purpose by listening. The other side will often weaken their bargaining position.
- At the last moment, choose a rogue element to your advantage to include in the negotiation.
- The other side may have managers with different opinions and styles. Divide and rule. Exploit these differences.
- Permit no weaknesses in your camp. If your executives are doing this, then you have to take them out of the negotiation.
- Whatever you agree with during the negotiations, fulfill the bargain.
Ownership, Ownership, Ownership
Ownership to Dennis is not one of the most important things. It’s the only thing.
Ownership is the only thing that counts if you want to get rich. You must never cede a share. Never. You have to avoid giving up a single share at any time.
You can pay your employees with huge bonuses but never give up a share.
Ownership can buy you time and can help to make decisions more quickly.
Ownership will help you achieve your financial goals faster.
In this chapter, Dennis talks as well about the absurdity of the whole enterprise of getting rich. Rich is better than poor, but Dennis advises not to take it too seriously.
Delegate if You Want to Get Rich
You will only get rich when you start to delegate when you begin creating businesses and nurturing talent, and making them grow.
When you are in the startup phase, it is very easy to determine who the talent is, you want to teach them and promote them, so they stay with you in the company.
Dennis doesn’t run any of the businesses he owns. Of course, he is on the board of all of them as chairman, but he doesn’t get involved in day-to-day operations.
Though, he pays attention to reward those employees that generated good results for their company during the quarter or the year. He would handwrite a note and invite them to his private office.
He does not micromanage because he knows that micromanaging scares talent.
To keep control of his companies, he has some ground rules or decisions the company cannot make without his express approval:
- 1.They may not vote anyone on or off the board.
- 2.They may not physically move the headquarters of the company.
- 3.They may not dispose of or shut down any substantial asset.
- 4. They may not purchase or launch any substantial new product or business.
- 5.They may not award themselves bonuses or salary increases.
Focus and Keep an Eye on the Ball
The goal here is to get rich legally rich as quickly as you can. Then you have to keep an eye on the ball.
You have to identify the industries where wealth is gravitating and then go where the money is.
Dennis mentions that he made some mistakes when he was beginning because, after an initial success in the publishing business, he thought he should become the best publisher in the world, a big mistake.
The magazine publishing business is a shallow pit, not much growth there. So he writes that he could have become a millionaire way before if he had gone where the money is.
Focus on the ultimate goal; if you are an entrepreneur, go where the money is and build businesses there. That’s Dennis’s advice.
What about timing?
If you are lucky and have good timing, then you will have a margin for inexperience. Dennis’s timing was perfect; he was really in the right moment in the right place when Bruce Lee passed away. He then created a book in weeks; he sold magazines and merch about Bruce Lee for years.
Once they saw the opportunity, they moved fast. They had good timing in creating and scaling a business. They did lose a little bit of focus thinking in branching out to other magazines, but still, they did very well.
You cannot get rich only by relying on good timing and being in the right industry. You need a good team.
Stupid people are easy to hire, but they won’t make you wealthy; you need to employ clever and industrious people who are risk-averse and don’t want to run their own startup.
To build your qualified team, Dennis gives some excellent advice:
- Never hire an important employee or choose a supplier alone.
- Go further than reading the person’s references.
- During the interview, make notes and speak little.
- Pay employees well. Bonus tied to performance are better.
- Don’t leave senior employees in any job too long.