Posted by Patrick Edwards on 9 January 2012
The Foundation Philosophy
For as far back as I can remember, I have been able to find success to things at which I put my mind and focus. To be honest, I had never really given much thought to why I seemingly have been able to excel in many vastly different environments with strikingly different objectives, whether it be in my personal life, academic excellence or in the field of finances.
In large part, I never really gave it much thought because I never really saw myself differently than anyone else in terms of achievement. Sure, like everyone, I am proud of my accomplishments (I am known to trade a war story or two if you get me talking long enough), but I never considered myself anything unique in business, finance or any other world. And while I was far from a protégé like Mark Cuban or Steve Jobs, I was, in hind-sight, able to find some moderate personal and financial success by the time I had reached my mid-twenties.
At a very young age, I noticed that people seemed to routinely ask me for advice in financial matters. What was I doing, what is the best way to earn money, what is the "smart play" on the stock market. Most of the time, these inquiries would amuse me, particularly prods for hot stock market tips. I knew next to nothing about Wall Street and the complexities of the stock market in my early twenties, and even now, although I have educated myself more on the area and own a few shares here and there, I am far from a Wall Street wizard; stocks really are not my thing. What I did take from the peppering of financial questions was that, at least financially, I was either doing decently well when compared with my peers, or at least appeared to be doing so.
That piqued my curiosity: what truths did I know about financial responsibility that I could pass along. I was determined to come up with something better than my standard line, "I really cannot help you because I really do not know what I am doing. I am really just a fortunate guy." So I did what I had grown accustomed to doing whenever I desire to identify a truth, I thought, prayed and reasoned. In time, I got the answer to the question I sought; and it was painfully simple. Most truths are.
The truth about financial responsibility is that it is a servant to the following taskmasters: 1) character; 2) integrity; 3) discipline; 4) logic/wisdom; and 5) drive. In non-poetic terms, if you can maximize the foregoing qualities in your life, and genuinely dedicate yourself to that end, you will be financially responsible, and financially successful, in whatever field of endeavor on which you focus. Exactly why and how these qualities dictate financial responsibility and sound financial practices (or even how to cultivate these qualities) is a topic that requires much more discussion than this article permits, but suffice it to say that honing and growing these qualities will do more for your financial well-being than anything I can tell you in a single paragraph.
I know, I know, for many readers this advice is too esoteric or wispy to grasp or to put to use. Most people want a list of 10 things to do or something that can be purchased, uploaded and installed in under 30 minutes. Do not get me wrong, there are lists and products that are helpful, but what I have provided for you are directed to ultimate truths, ultimate truths that have serviced me well as a foundation for my financial philosophy. Whether you realize it or accept it, there are divine (some people prefer the word "natural") laws and principles that guide reality. For example, gravity naturally exists whether we acknowledge it or not.
Its characteristics are guided in accordance with the divine laws and principles that shape this reality. It is simply an aspect of the way the world works. Gravity did not come into existence when Sir Isaac Newton scribbled down Fg=GMm/d2. In fact, the opposite is more accurate. The truth was the phenomena. Sir Isaac Newton's equation was simply his attempt to try to understand and capture that truth in a way that could be easily replicated and explained to others. The same can be said for any mathematical equation, chemical formula or academic model. It is a way for us to under the world as it exists. In a similar manner, there are ultimate truths about our financial reality. It is simply the way the financial world works. The qualities I listed above are calculated to leverage those ultimate truths.
One important point in this regard, most people respond to what I have just shared with you by saying something along the lines of "I wanted a hot stock tip and you give me some mystical secrets of the ancients." Do not lose sight of what I am saying because it does not come in a box with a bar code on it. These truths are not as nearly as mystical and philosophical as many take them to be.
Many of these truths have broad and straight-forward practical application that most people overlook. There are tons of practical, real-world business reasons why, for example, rational market actors want to do business with persons with high degrees of integrity and character and why such persons tend to excel in financial business environments that are, ultimately, built on relationships. Again, the social, technical and philosophical underpinnings for why this is the case is too complex for this article, but, in a nutshell, it is simply the way the world works. Try it. You will not be disappointed.
Life Tips
Here are a few tips that help keep me focused:
- Integrity is defined by what you do when no one is looking.
- Never think that you are not smart enough. There is an infinitesimally small percentage of the population that can achieve on shear genius and brain power alone. The rest of us each have to work at it.
- "Luck" can never be used to explain sustained wealth.
- Knowledge is what you know. Wisdom is the proper application of knowledge. With wisdom comes an understanding. In everything that you do, get an understanding.
- If you are in a hole, stop digging.
- When you are around experts, you should do more listening than talking. When you are talking, you should be asking more questions than making statements.
- If you have a great idea, write it down.
- There is a fine balance in responsible research and procrastination. Improperly managed, either can fatally factor into any investment. The simple remedy: measure three times, cut once.
- If you do not understand an investment, do not invest. If you cannot accurately explain an investment to someone else, you do not understand the investment.
- There is simply no "get-rich-quick" scheme in which you should invest.
- It is not all about you.
Literature
I am an avid reader and have read a ton of books, some of which relate to business and finance. Importantly, while I am always adding to and tweaking my approach to business and finances, I do not adopt a new approach every time I pick up a new book. You will never succeed under those conditions. As I discussed above, the ultimate truths are what they are; some books resonate with some people and lead to deeper understandings of those ultimate truths more effectively than other literature. The trick is to identify and understand those ultimate truths. Indeed, every piece of financial literature that is worth reading and ingesting, whether wittingly or unwittingly, is building on these ultimate truthts. Find what works for you. I will share with you what resonated with me.
Must read. There is only one book that I recommend as an absolute must read for everyone's financial and life management (at the risk of sounding cliché and predictable even), and that book is the Bible. I happen to be a man of deep faith, however, I honestly recommend the Bible for study to believers and non-believers alike. Whether you ascribe to a particular faith or not, I believe that no reasonable mind can contest that it is packed with financial wisdom, principles and life examples that have stood the test of time. Every financial truth and dilemma that has ever presented itself or that will present itself is touched upon in that single piece of literature. I will be the first to admit that is a complex read and a life-study (it is undoubtedly a marathon and not a sprint), but everything that you need to know is between the covers and spine and I would be remiss if I did not bring that to your attention.
If I could only read two pieces of literature. Outside of the Bible, the two literary works that have had the greatest impact on my financial life and outlook is, in order, The Richest Man in Babylon, by George S. Clason and Rich Dad, Poor Dad, by Robert Kiyosaki and Sharon Lechter. Honestly, these two books, again outside of the Bible, and in particular The Richest Man in Babylon, are basically all I use to manage my financial outlook; everything else is simply minor tweaks to the systems, strategies, understanding and architecture provided in those books.
If you are looking for a start, I can think of no better place than the Richest Man in Babylon. It contains the higher level strategy and softer management points that are necessary for long-term success, but also details the best concrete, well-defined, wealth management system that I have come across that you can implement tomorrow and that actually yields results. Use the system it advocates. It works.
Other Great Reads. I am not an advocate of tearing through tons of books at once because I believe information overload can introduce inefficiencies and can in fact be counterproductive. I recommend reading the references above, implementing a management system that works for you and then read the following references at your comprehension and retention pace to strengthen that system.
- The Secret directed by CreateSpace
- The 4-Hour Work Week by Timothy Ferriss
- The Richest Man Who Ever Lived: King Solomon's Secrets to Success, Wealth, and Happiness by Steven K. Scott
- The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It by Michael E. Gerber
- Good to Great by Jim Collins
- The 7 Habits of Highly Effective People by Stephen Covey
- How to Win Friends & Influence People by Dale Carnegie
- Cash Flow Quadrant: Rich Dad's Guide to Financial Freedom by Robert Kiyosaki and Sharon Lechter
- Purple Cow: Transform Your Business by Seth Godin
- The New Rules of Marketing PR by David Scott
