All About You — Day 25: To Succeed Faster, Fail Faster

I had two fathers, a rich one and a poor one. One was highly educated and intelligent: he had a Ph.D. and completed four years of undergraduate work in less than two years. He then went on to Stanford University, the University of Chicago, and Northwestern University to do his advanced studies, all on full financial scholarships. The other father never finished the eighth grade.

Both men were successful in their careers, working hard all their lives. Both earned substantial incomes. Yet one struggled financially all his life. The other would become one of the richest men in Hawaii. One died leaving tens of millions of dollars to his family, charities and his church. The other left bills to be paid.

Both men were strong, charismatic and influential. Both men offered me advice, but they did not advise the same things. Both men believed strongly in education but did not recommend the same course of study.

If I had had only one dad, I would have had to accept or reject his advice. Having two dads advising me offered me the choice of contrasting points of view; one of a rich man and one o a poor man.

Instead of simply accepting or rejecting one or the other, I found myself thinking more, comparing and then choosing for myself.

The problem was, the rich man was not rich yet and the poor man not yet poor. Both were just starting out on their careers, and both were struggling with money and families. But they had very different points of view about the subject of money.

For example, one dad would say, “The love of money is the root of all evil.” The other, “The lack of money is the root of all evil.”

As a young boy, having two strong fathers both influencing me was difficult. I wanted to be a good son and listen, but the two fathers did not say the same things. The contrast in their points of view, particularly where money was concerned, was so extreme that I grew curious and intrigued. I began to start thinking for long periods of time about what each was saying.

Much of my private time was spent reflecting, asking myself questions such as, “Why does he say that?” and then asking the same question of the other dad’s statement. It would have been much easier to simply say, “Yeah, he’s right. I agree with that.” Or to simply reject the point of view by saying, “The old man doesn’t know what he’s talking about.” Instead, having two dads whom I loved forced me to think and ultimately choose a way of thinking for myself. As a process, choosing for myself turned out to be much more valuable in the long run, rather than simply accepting or rejecting a single point of view.

One of the reasons the rich get richer, the poor get poorer, and the middle class struggles in debt is because the subject of money is taught at home, not in school. Most of us learn about money from our parents. So what can a poor parent tell their child about money? They simply say, “Stay in school and study hard.” The child may graduate with excellent grades but with a poor person’s financial programming and mind-set. It was learned while the child was young.

Money is not taught in schools. Schools focus on scholastic and professional skills, but not on financial skills. This explains how smart bankers, doctors and accountants who earned excellent grades in school may still struggle financially all of their lives. Our staggering national debt is due in large part to highly educated politicians and government officials making financial decisions with little or no training on the subject of money.

I often look ahead to the new millennium and wonder what will happen when we have millions of people who will need financial aid and medical assistance. They will be dependent on their families or the government for financial support. What will happen when Medicare and Social Security run out of money? How will a nation survive if teaching children about money continues to be left to parents—most of whom will be, or already are, poor?

Because I had two influential fathers, I learned from both of them. I had to think about each dad’s advice, and in doing so, I gained valuable insight into the power and effect of one’s thoughts on one’s life. For example, one dad had a habit of saying, “I can’t afford it.” The other dad forbade those words to be used. He insisted I say, “How can I afford it?” One is a statement, and the other is a question. One lets you off the hook, and the other forces you to think. My soon-to-be-rich dad would explain that by automatically saying the words “I can’t afford it,” your brain stops working. By asking the question “How can I afford it?” your brain is put to work. He did not mean buy everything you wanted. He was fanatical about exercising your mind, the most powerful computer in the world. “My brain gets stronger every day because I exercise it. The stronger it gets, the more money I can make.” He believed that automatically saying “I can’t afford it” was a sign of mental laziness.

Although both dads worked hard, I noticed that one dad had a habit of putting his brain to sleep when it came to money matters, and the other had a habit of exercising his brain. The long-term result was that one dad grew stronger financially and the other grew weaker. It is not much different from a person who goes to the gym to exercise on a regular basis versus someone who sits on the couch watching television. Proper physical exercise increases your chances for health, and proper mental exercise increases your chances for wealth. Laziness decreases both health and wealth.

My two dads had opposing attitudes in thought. One dad thought that the rich should pay more in taxes to take care of those less fortunate. The other said, “Taxes punish those who produce and reward those who don’t produce.”

One dad recommended, “Study hard so you can find a good company to work for.” The other recommended, “Study hard so you can find a good company to buy.”

One dad said, “The reason I’m not rich is because I have you kids.” The other said, “The reason I must be rich is because I have you kids.”

One encouraged talking about money and business at the dinner table. The other forbade the subject of money to be discussed over a meal.

One said, “When it comes to money, play it safe, don’t take risks.” The other said, “Learn to manage risk.”

One believed, “Our home is our largest investment and our greatest asset.” The other believed, “My house is a liability, and if your house is your largest investment, you’re in trouble.”

Both dads paid their bills on time, yet one paid his bills first while the other paid his bills last.

One dad believed in a company or the government taking care of you and your needs. He was always concerned about pay raises, retirement plans, medical benefits, sick leave, vacation days and other perks. He was impressed with two of his uncles who joined the military and earned a retirement and entitlement package for life after twenty years of active service. He loved the idea of medical benefits and PX privileges the military provided its retirees. He also loved the tenure system available through the university. The idea of job protection for life and job benefits seemed more important, at times, than the job. He would often say, “I’ve worked hard for the government, and I’m entitled to these benefits.”

The other believed in total financial self-reliance. He spoke out against the “entitlements” mentality and how it was creating weak and financially needy people. He was emphatic about being financially competent.

One dad struggled to save a few dollars. The other simply created investments.

One dad taught me how to write an impressive resume so I could find a good job. The other taught me how to write strong business and financial plans so I could create jobs.

Being a product of two strong dads allowed me the luxury of observing the effects different thoughts have on one’s life. I noticed that people really do shape their life through their thoughts.

For example, my poor dad always said, “I’ll never be rich.” And that prophesy became reality. My rich dad, on the other hand, always referred to himself as rich. He would say things like, “I’m a rich man, and rich people don’t do this.” Even when he was flat broke after a major financial setback, he continued to refer to himself as a rich man. He would cover himself by saying, “There is a difference between being poor and being broke. Broke is temporary, and poor is eternal.”

My poor dad would also say, “I’m not interested in money,” or “Money doesn’t matter.” My rich dad always said, “Money is power.”

The power of our thoughts may never be measured or appreciated, but it became obvious to me as a young boy to be aware of my thoughts and how I expressed myself. I noticed that my poor dad was poor not because of the amount of money he earned, which was significant, but because of his thoughts and actions. As a young boy, having two fathers, I became acutely aware of being careful which thoughts I chose to adopt as my own. Whom should I listen to—my rich dad or my poor dad?

Although both men had tremendous respect for education and learning, they disagreed in what they thought was important to learn. One wanted me to study hard, earn a degree and get a good job to work for money. He wanted me to study to become a professional, an attorney or an accountant or to go to business school for my MBA. The other encouraged me to study to be rich, to understand how money works and to learn how to have it work for me. “I don’t work for money!” were words he would repeat over and over. “Money works for me!”

At the age of 9, I decided to listen to and learn from my rich dad about money. In doing so, I chose not to listen to my poor dad, even though he was the one with all the college degrees.

…

Choosing not to listen to my highly educated dad’s advice and attitude about money was a painful decision, but it was a decision that shaped the rest of my life.

Once I made up my mind whom to listen to, my education about money began. My rich dad taught me over a period of 30 years, until I was age 39. He stopped once he realized that I knew and fully understood what he had been trying to drum into my often thick skull.

Money is one form of power. But what is more powerful is financial education. Money comes and goes, but if you have the education about how money works, you gain power over it and can begin building wealth. The reason positive thinking alone does not work is because most people went to school and never learned how money works, so they spend their lives working for money.

My First Business

My first business failed in 1956. I was nine years old.

My second business succeeded in 1956. I was still nine years old. If not for the failure of my first business, my second business would not have succeeded.

Failing as a Strategy

There are two primary reasons why entrepreneurs fail. One is that the would-be entrepreneur is so afraid of failing he or she freezes and then does nothing. He or she gets up and goes to work—always with some excuse why he or she is not ready to quit his or her job and start his or her business. The usual excuses include not enough money, too risky, the time is not right, kids to feed, and many others.

The second reason entrepreneurs fail is that they do not fail fast enough. Many small business owners and self-employed business owners succeed to a point and then stop growing. The business plateaus or begins to die. The business reaches a certain size and then fails to grow. Once again, the entrepreneur needs to risk failing before the business can begin growing.

The fear of failing is the primary reason why so many people do not succeed in life or are not as successful as they would like to be. This occurs not only in business, it occurs in all aspects of life. I remember in high school never going on a date because I was so afraid of being rejected. Finally, just before graduating, I asked a beautiful classmate for a date to the senior prom, and to my surprise, she said, “Yes.” We had a miserable time but at least I was making progress.

Another Difference between an Employee and an Entrepreneur

“You learned this at nine?” the host asked.

“That’s correct,” I replied. “Like most people, I do not like failing. I hate it. Yet, that business failure early in life gave me a glimpse into the future. I saw my process for success. Some people get ahead by knowing all the right answers. These people generally do well in school. That is not my process. I get ahead by failing. That is why I have started so many different businesses. More have failed than succeeded. Yet the ones that have succeeded have been pretty big successes, like the success of The Rich Dad Company, my real estate company, and the two public gold- and silver-mining companies I helped found. Also, I did not make much money early in my career as an entrepreneur, but now later in life I make more money than most people.”

“So the secret to your business success is being willing to make mistakes and then learning from them.”

“Yes. That is my job as an entrepreneur. My job is to set new goals, create a plan, make mistakes, and risk failing. The more mistakes I make, the smarter I become and hopefully the company grows and prospers from the lessons learned.”

“Yes,” I replied. “That difference is the key difference between an entrepreneur and an employee.”

“So you take risks. Is that what you do as an entrepreneur?”

“Sounds like a double standard,” said the host.

“It’s business,” I replied. “Failing is not fun but it is necessary for progress.”

“So do you like failing?” asked the host.

“The new you?” shrieked the radio host. “What kind of hocus pocus is that?”

“Oh, absolutely,” I replied, working hard not to get caught up in her skepticism. “We live in very different worlds because we are very different people. One of us lives in a world that thrives on risk. The other lives in a world that avoids risk. Different worlds, different people.”

There was a silence for a moment. The host seemed to be gathering her thoughts. “And that is why so many employees do not make it as entrepreneurs?”

“It’s one of the reasons but not the only reason,” I said gently. “It’s not easy transitioning from a world of avoiding mistakes to a world of actively making mistakes.”

“But you make it sound easy,” said the host. “You seem so nonchalant about failing.”

“I never said it was easy, but it does get easier,” I replied. “Look, the point is an entrepreneur has a lot to learn and needs to learn it quickly. There is not the luxury of a steady paycheck for an entrepreneur for an entrepreneur. He or she must make mistakes and correct quickly. If he or she avoids making mistakes, or pretends he or she hasn’t made a mistake or blame someone else for his or her mistakes, the learning process will overwhelm the entrepreneur and the business fails.”

“You have to learn quickly because you’re making something out of nothing,” added the host. “There is nothing there to support you.”

“Especially in the beginning of your development as an entrepreneur. Yet as you get better, you can go from nothing to something very quickly. One of the great joys of being an entrepreneur is the ability to take an idea and turn that idea into a successful business in a short period of time. Centuries ago, alchemists were trying to turn lead into gold. An entrepreneur’s job is to turn an idea into gold.”

“It’s almost money for nothing,” said the radio host.

“Almost,” I replied. “If you can do that, you’ll never need a job. You can go just about anywhere you want in the world and strike it rich. I do business in over eighty countries. One of my mining companies operates in China and the other operates in South Africa. An employee or a self-employed person’s scope of business is often limited to a town, state, or country.”

“So it is a different world,” conceded the host.

“Yes,” I replied. “That is the world of an entrepreneur. If you are good, you are free to travel the world and do business. Most employees need to apply for a work visa before they can work in another country. An entrepreneur may enter a country as a corporation, or form a joint venture with another corporation in that country. Training yourself to be an entrepreneur is developing your potential to access a world of nearly unlimited wealth.”

“And to do that, you need to learn to turn your failures into successes.”

“That’s correct,” I replied.

“And what if you fail and lose money?” she asked.

“It’s just part of being an entrepreneur. I do not know many entrepreneurs who have not lost money at one time or another.”

“But if an employee lost the company’s money, the employee would be fired,” said the host with an edge in her voice.

“In many companies they would be,” I replied quietly. “My point is that it is the fear of losing money that costs people the most money. They are so afraid of losing … they lose. They settle for a steady paycheck. They may not lose much money in their life, but they lose out on the potential for great wealth.”

Truth During the Commercial Break

“I need to take a commercial break,” said the host as she shut down the studio. The sound engineer then took over and began to play the commercials that supported the show.

“I’ve wanted to quit my job for years,” said the host, feeling safer in her soundproof room and not broadcasting to the world.

“But you are paid too much to quit,” I said, completing her thoughts.

Nodding, she said, “Yeah, that’s it. I’m not paid a lot, just enough so I won’t quit and go somewhere else. I need my paycheck. My husband and I make a lot of money but with four kids in school, there is no way we can do what you are talking about.”

Although I did not agree with her point of view, I did let her know I understood how she felt.

“So, what would you say to me? How do I break out? I need that paycheck. I need this job, even if it doesn’t pay much. I feel I am trapped in a room, with walls that are closing in around me. What can I do?”

Taking a moment to collect my thoughts, I finally asked, “Do you remember the example I used of the baby learning to walk?”

“Yes, I do,” said the host. “And once they can walk the baby becomes a child. And once they learn to drive they become a young adult.”

“And that is how we learn anything in life. We learn by first having a desire for a change, we want something better. You may have enjoyed your work at one time but now you know it is time for a change, it’s time to move on, just as a baby somehow knows it is time to change, it’s time to stop crawling. At some magical point in time, the baby knows when the time is right, when it’s time to do something different. The baby begins by clinging to something, like a pants leg of a parent or the leg of a table. Babies wobble as they are learning to bridge the gap between crawling and walking. They do this repeatedly, and then one day they let go and fall down. The baby failed. Instead of quitting, which is what many adults would do, the baby repeats the process again and again. Then one day, the baby’s mind, body, and spirit come into alignment and the baby can stand. Soon after standing, the baby learns to walk. The baby becomes a child.”

“Then comes bicycles and then comes cars,” said the host. “Babies become children and children become adults.”

I completed the thought by saying, “Yes, and the same process is similar for entrepreneurship. I just happened to start at nine, failed at nine, and succeeded at nine. You can do the same if you are willing to risk going through your learning process.”

“So you are confident in your skills as an entrepreneur?” asked the host.

“No, not really. I am confident in my ability to make mistakes, correct, and improve my business. I am a better entrepreneur today and I plan on getting better. But no, I am never fully confident in my skills as an entrepreneur, because I do not rest on my laurels, or my past successes. I constantly put myself in situations where I am beyond my skills. I am always on edge, always tentative, always testing myself. That is the way I continually get better.”

“And that is why you start new businesses even if you fail?” asked the host.

“I start new businesses even if I succeed. That is why I have so many businesses, businesses that run without me. That is my secret to great wealth. Most employees have one job. As an entrepreneur, I have multiple businesses.”

“That’s why you do not want to be self-employed or run the business.”

“Yes, I remember,” said the host. “I just did not get the significance of those businesses. I did not realize those tiny businesses would have such a profound impact on your life.”

Nodding again, I said, “I found my strategy for life at the age of nine.”

The sound engineer then informed us the commercial break was over and it was time to continue the interview. The host turned on her microphone and said, “We only have a few minutes left, so let’s wrap this up. You’re telling us that an entrepreneur’s job is to make mistakes and an employee’s job is to not make mistakes. Is that your message?”

“Yes, it is. At least that is the way I see it. If I am not taking calculated risks, not making mistakes and growing the company, I should be fired. If my employees make too many mistakes, I might have to let them go. That is why I hire smart employees who hate making mistakes. They do their job, I do mine.”

“That is why we say to our kids, ‘Go to school so you can get a good job,’” said the host. “Schools are training our kids to be employees.”

“Yes,” I replied. “If you do well in school you’ll probably do well in the corporate world or in government.”

“Did you like school?” asked the host.

“Not really,” I replied. “I did not do well in school because I made too many mistakes. I was a C, D, and on several occasions, an F student. So in school, I figured out that since I was already good at making mistakes I might as well become an expert at making mistakes. That is why I am an entrepreneur, not an employee. I am not that academically smart. No one would hire me for a high-paying job. I don’t like following orders, so I’d probably never be promoted. I like changing things and doing things my way rather than doing what I am told to do.”

“You would definitely not get a job at this radio station,” said the host.

“I might not get a job here—but I do know how to buy this radio station and hire people smarter than me to run it for me,” I added with a hint of humor in my voice.

“Okay, we have to wrap this up,” said the host. “Do you have any other examples that show that making mistakes and failing is essential to being an entrepreneur? Is there anyone else, another example besides you that can support this point of view?”

“What does he mean it takes at least a thousand failure to qualify you to invent the light bulb?” the host asked.

“It means, if you or I wanted to invent a light bulb today, instead of just buying one from the store, we would probably fail at least a thousand time before we knew how to make a light bulb.”

“So he was labeled a scatterbrain in school and failed a thousand times before inventing the light bulb,” said the host. “That means he is an inventor. How does that make him an entrepreneur?”

“Do you know what company he founded?” I asked.

“No, I do not.”

“He founded General Electric, one of the most powerful companies in the world. Originally known as Edison General Electric, one of the original twelve members of the Dow Jones Industrial Average, and of the original twelve only GE has survived to this day. Not bad for an addle-minded scatterbrain who failed a lot.”

The interview was over.

Learn from Your Mistakes

My rich dad believed in learning from your mistakes. He did not view mistakes as bad but simply as opportunities to learn something about business and yourself. He said, “Mistakes are like stop signs. Mistakes say to you, ‘Hey, time to stop … take a moment … you don’t know something … It’s time to stop and think.’” Rich dad also said, “A mistake is a signal that it’s time to learn something new, something you did not know before.” Along that line of reasoning he also said, “Too many people are too lazy to think. Instead of learning something new, they think the same thoughts day in and day out. Thinking is hard work. When you are forced to think you expand your mental capacity. When you expand your mental capacity your wealth increases.

“So every time you make a mistake, stop, and take the opportunity to learn something new, something you obviously need to learn. When something does not go your way, or something goes wrong, or you fail, take the time to think. Once you find the hidden lesson you will be thankful for the mistake. If you are upset, angry, ashamed, blaming someone else for the mistake, or pretending you haven’t made a mistake, you haven’t been thinking hard enough. Your mental capacity hasn’t expanded enough. You haven’t learned the lesson. So keep thinking.”

Poor Dad’s Philosophy on Mistakes

Bad Luck to Good Luck

His First Big Failure

In earlier books, I wrote about coming home from the Vietnam War and having to decide in which dad’s footsteps I would follow. I was about twenty-five at the time and both my dads were just turning fifty. At the time, my poor dad had just lost his bid as the Republican candidate for lieutenant governor of the State of Hawaii. Since he ran for office against his boss, the governor, my dad was informed that he would never work in state government again. So, he was unemployed and out of work at the age of fifty.

Blaming Not Learning

Within just a few months of opening his ice cream business, my dad knew it was in trouble. Once friends stopped coming by to buy a cone, the store was virtually empty. My dad would sit there for hours, all by himself, without customers. Instead of taking a moment to stop, think, and ask for guidance, he fired his employees to reduce costs, worked longer and harder in the business, fought with his partners, and then spent the remainder of his money by hiring and attorney, and went after the franchisor. In other words, he used up his money blaming the franchisor for his problems. Out of money, the business finally closed. It was obvious that my real dad had taken bad luck and turned it into more bad luck. Instead of stopping, learning, and correcting, he could not admit that he might be making mistakes. Instead of making things better, he made matters worse.

With his political campaign loss and the loss of his first and only business, he remained angry and defeated until he died, nearly twenty years later. That is why this lesson on mistakes, bad luck, and being dumb and dumber yet getting richer and richer is so important to me.

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The Entrepreneurial Process

…

Since a new entrepreneur is creating something out of nothing, it is obvious that mistakes will be made. In order to succeed, a new entrepreneur needs to be committed to going through these steps as quickly as possible.

1. Start the business.
2. Fail and learn.
3. Find a mentor.
4. Fail and learn.
5. Take some classes.
6. Keep failing and learning.
7. Stop when successful.
8. Celebrate.
9. Count your money, the wins and the losses.
10. Repeat the process.

The Dreaded Disease

It is impossible to become an entrepreneur without starting a business. It would be like trying to learn how to ride a bicycle without a bicycle or me wanting to learn to be a racecar driver without a racecar and a track. My rich dad said, “The main reason to start a business is to have a business to practice on. If you do not have a bicycle to practice on, how can you learn to ride a bike? If you do not have a business to practice o, how can you learn to be an entrepreneur?”

…

Dumb and Dumber

This chapter is entitled Dumb and Dumber Gets Rich and Richer as a tribute to Jim Carrey. For those of you who have ever watched a Jim Carrey movie, you may have noticed that the dumber he is on screen, the richer he becomes. The same is true with entrepreneurship. If you are a person who needs to always look good, sound smart, never make mistakes, and have all the right answers, then being an employee or a self-employed person might be a better path for you.

When I first started out, I looked like the biggest clown in town. My businesses would go up and come crashing down. Soon my reputation as an entrepreneur in the business community of Honolulu was laughable. If not for my rich dad guiding me and encouraging me to learn from my mistakes and go out and make more, I might have quit my process. I found it painful to play Jim Carrey’s screen characters in real life.

Yet as the years went on, the mistakes were bigger but not as painful, simply because I was becoming an expert at making mistakes. Instead of running through five or six stop signs, I did stop, think, learn, correct, and expand my capacity as an entrepreneur before going on. Today I can honestly say I am richer than many of my peers, many who did well in school or had higher-paying jobs early in life, simply because I was willing to be dumb and dumber for years. That’s part of paying the price to succeed.

Turning Bad Luck into Good Luck

When we were just entering high school, rich dad taught his son and me how to turn bad luck into good luck. At the time, both Mike and I were sinking fast in our sophomore year of high school because we were flunking English. Mike and I were not great writers.

Instead of being upset with us, rich dad said, “Let this setback in school make you stronger, not weaker. If you can turn this bad experience into a good experience you will be further ahead of your classmates who passed the course.”

“But we both have F’s on our report cards,” Mike protested. “That record travels with us all the way through college.”

“Yes, the grade travels with you, but so does the lesson in life. In the long run, this lesson in life can be far more important than your grades if you take this bad incident and turn it into a good incident.”

Mike and I were really angry with our English teacher. We were depressed and felt like failures. Looking at us, rich dad chuckled and said, “Your teacher is winning. You guys are losing because you’re acting like losers.”

“What can we do?” I asked. “He’s got the power. He’s already flunked us and the whole school knows it.”

“He only has the power to flunk you,” smiled rich dad. “You have the power to take your anger and do something even more stupid, like slash the tires on his car, which I suspect has crossed your minds, or do something good, like take your anger and do well in school, or do well in football, or in surfing. Take your anger and turn it into greatness. Then you will win. If you take your anger and slash the tires on his car, you will take a bad situation and make it worse. You’ll probably spend time in jail if you do what you are thinking.”

The Power of Emotions

That day rich dad taught us that as humans we have four basic emotions. They are:

1. Joy
2. Anger
3. Fear
4. Love

He then taught us that each emotion could be used in two basic ways, for good or for bad. For example, I could feel joy and use the joy for a bad purpose, I could drink heavily, which would be using the emotion of joy for a bad purpose. I could also use the emotion of joy and send thank-you notes to everyone who helped me in life. The same is true with all four basic emotions, even love.

Today, I still do not like my English teacher, yet I am grateful that he flunked me. If not for that F, I might not have studied harder to get through college and I might never have become an international best-selling author. In other words, that F at the age of fifteen, combined with my first business failure at the age of nine, has made me a millionaire over and over again. Best of all, not only did I learn many lessons about life and myself; I learned to turn my anger into joy, and I learned that being dumb and dumber can make me become richer and happier.