Ten Roads to Riches

Repost: http://www.think-differently.org/2009/07/ten-roads-to-riches.html

For Ken, true "riches" start at around the $100M plus point. You have to have some standards! This book is about what kind of paths you can take to get there.

Ken's thesis is that, putting aside factors he considers beyond our control such as winning the lottery or benefitting from an inheritance, there are really only 10 ways that people get really wealthy: 10 roads to riches! These are illustrated in his diagram:

The 10 roads, in a nutshell, are:

1. Build your own business ("the richest road") - and to build it either to sell or to last
   
2. Become a CEO
   
3. Become a "ride along" - a trusted second in command the CEO needs and trusts who profits with the firm
   
4. Become excellent and successful at what you do (sport, writing, music) and famous - or better yet manage a portfolio of other people who are excellent and famous
   
5. Marry really really well
   
6. Steal it legally - become a Plaintiff Lawyer
   
7. Manage other people's money well, and both win
   
8. Invent income - create an ongoing income stream you own, from an invention, a song, a merchandising line, movie rights to stories, and other means
   
9. Become a real estate Baron
   
10. Save and invest wisely, consistently and effectively ("the road most travelled")
    

The roads can be combined: for example Ken founded his own company (road 1) which focused on managing other people's money (road 7).

The first thing I did after buying and opening this book, of course, was to scan through and see which road or two I related most strongly to.

But the most fascinating thing was how much I learned from and enjoyed each chapter, even those I did not expect to gain a lot from. For example, I have no intention of becoming rich by marrying really really well (if I marry really really well my first criteria for "really really well" is not how much money my potential partner has). But the chapter contains a story about a young woman who developed a strategy for meeting wealthy men and put this strategy in to action in a way that was fascinating.

On another note, his strategies for gaining the CEOs job are terrific!

The best thing though was the pithy insight. Ken has clearly learnt a thing or two along the way after 24 years of running his company.



Preface: Why Ten Roads?

Acknowledgments.

Chapter 1 The Richest Road.

Picking a Path.

Newer or Better?

Built to Sell or Built to Last?

Bootstrap or Finance?

Public or Private?

The Big Bulls Eye.

Founders Are Quitters-Just Do It.

Chapter 2 Pardon Me, Thats My Throne.

Gray Hair and Dues Paying.

A CEO volution (Through My Fathers Eyes).

How to Lead.

How to Get the Job.

The Big Payday.

CEOs and Superheroes.

The Best Part.

Chapter 3 Along for the Ride: Ride Alongs.

Why Ride Along?

Pick the Right Firm.

Be the Right Guy.

Chapter 4 Rich . . . and Famous.

The Talent Show.

Potholes Ahead No One Sees!

Mogul Meandering.

Chapter 5 Marry Well. Really Well.

How to Marry a Millionaire Billionaire.

Like a Fine Wine-Well Maintained.

Men Can Play Too!

Love, Marriage, and Money.

Chapter 6 Steal It-Like a Pirate, but Legally.

Crusader or Pirate?

Raiders Road.

The Richest Legal Road.

Tort Us and the Scare.

Target Practice.

When a Pirate Becomes a Villain.

The Inside Track.

Chapter 7 OPM-Not Opium: Where Most of the Richest Are.

Basic OPM Career Rules.

Steps to OPM Wealth.

Hedge Your Bets.

Private Equitys Big Bucks.

Dont Break the Law.

Love Capitalism, Not Social Acceptance.

Chapter 8 Inventing Income.

The True Inventors.

Writing for Dollars.

Political Pensions-and Good News.

If You Cant Be President . . . .

Think Tanks Run Amok-a Sham Scam.

Chapter 9 Trumping the Land Barons.

Monetize It.

The Fools Bargain.

Getting Started.

Buy, Build, or Both?

Where to Be and Not to Be, That Is the Question.

Chapter 10 The Road More Traveled.

Income Matters.

Saving Grace.

Get a Good Rate of Return (Buy Stocks).

The Right Strategy.

Bonds Are Riskier Than Stocks. Seriously.

Like Hetty?

Conclusion.

Notes.

Index.

Venture Capital's Open Secret Forbes.com 8/09

Velocity

Venture Capital's Open Secret

Brian Caulfield, 08.25.09, 04:30 PM EDT

TheFunded.com pitches a streamlined term sheet

BURLINGAME, Calif. -- Sell a company for $50 million and you'd think the company's founders would be some very rich people.

Not necessarily. That's because conditions in the term sheets many start-ups sign in order to raise funding can quickly leave a founder's equity "sliding towards zero," says Adeo Ressi, founder of TheFunded.com, an online community for entrepreneurs looking to raise venture funding. Here's how it works. Start with a common clause called a "liquidation preference." It gives an investor the right to, say, 30% of the proceeds of a sale if they own 30% of the company. Fair enough, right? Well, many start-ups agree to terms that give investors 1.5 or even two times that amount.

Now add such a 2x liquidation preference to a "participation clause" that returns the investors money to them, in full, on top of their out-sized share of the proceeds of any sale. That lets an investor double dip, pushing the investors take to $39 million, and everyone else's down to $11 million.

Now add in a clause awarding certain shareholders "dividends" that result in investors getting a bigger chunk of the company over time. After a while, the numbers no longer work out for those working at the company. "The management looks around and says 'I could continue working 70-hour weeks, and I'm not going to make any money,'" Ressi says.

The terms basically give investors a much bigger share of a company's upside than their chunk of the company's equity would imply. Ressi experienced this firsthand when he sold a company he founded. On paper he owned 20% of the company. In reality, he walked away with less than 5%.

That's why Ressi is pitching a streamlined term sheet. The terms include a 1x liquidation preference and no participation clause. In short, the term sheet is a way for Ressi to express his point of view, which, considering the state of the venture capital industry, might be worth listening to. Particularly if you're an entrepreneur.

Forbes 9 09 Armageddon averted?

Armageddon Averted, or Was it?

David Malpass, Forbes.com 9.09

U.S. economic activity is in a bottoming-out process, with increased auto production offsetting the declines in services. After their worst plunge since the Great Depression, GDP and industrial production are down 4% and 15%, respectively, from their peaks, both probably hitting troughs in the second quarter.

This doesn't mean the damage is light or the outlook rosy. Unemployment topped 14 million--nearly 10% of the labor pool--due to sudden job losses, from which many won't recover. Even assuming that an expansion started on the Fourth of July, when auto plants began reopening, nominal GDP in 2010 will be $1.2 trillion less than was projected in many 2008 forecasts ($14.4 trillion, not $15.6 trillion), a devastating setback equivalent to 60 million $20,000 cars.

Taking full advantage of the crisis, Washington has increased its already strong control over jobs and the allocation of capital. Employment nationwide is down 4%, yet the Washington, D.C. area has managed to maintain head count throughout the crisis. Housing, mortgages, the accounting system and bank lending decisions all suffered Washington takeovers. The government is now deciding which companies may issue FDIC-guaranteed debt, which chemical to use to destroy clunkers and whose auto dealerships to close. First mortgages normally take strong precedence over second mortgages, but even that key principle of contract law is at risk in Washington's vote-driven haste to modify mortgages and delay foreclosures.

Post-clunker auto demand depends more on Washington's next generation of expensive environmental subsidies than on designs or production costs. Giant corn markets hinge not on rainfall but on whether Brazil and the environmental lobby can get Washington to lower the tariffs blocking ethanol imports.

In one of its most intrusive expansions, Washington has become the nation's allocator of capital, setting detailed capital requirements and accounting rules in ways that channel credit to favored states, industries and uses. Small businesses and consumers are bearing the brunt of this credit market shift.

The alternative has been clear from the beginning: a focused credit market reopening after the Lehman fiasco, based on faster Fed asset purchases and more global capital to offset losses and deleveraging. This would have stopped the credit crunch suffered by small businesses and kept unemployment lower.

A good jobs and investment environment depends on a strong and stable currency, restrained federal spending, less harmful legislation, dependable contract law, limits on taxation and countercyclical capital regulation. These steps need to be supported by market processes that tend toward lower, not higher, equity and commodity volatility. On most points the Bush Administration went the other way: It spent heavily and encouraged market volatility by free-floating the dollar, repealing the uptick rule and protecting the opaque big-bucks credit-default-swap market. Paradoxically, it imposed pro-cyclical mark-to- market limits on regulatory capital as the bubble built and then deadly capital dilution after it popped. Instead of reversing these mistakes, the Obama Administration has maintained most Bush policies, while adding tax risks and even more spending.

Reversing the Capital Outflow

As a weak recovery takes hold, some will pat themselves on the back for averting Armageddon, even though the actual outcome is worse than almost any 2007 prediction. Instead of flooding our markets with capital, global investors will think of getting as far away from the U.S. and the dollar as possible. Commodities, currencies and foreign debt and equities have been hugely out-performing investments in the U.S. This lowers the cost of new capital abroad, even as we systematically increase our own cost of capital with tax increases, volatility and the erosion of contract law.

The flow of capital away from the U.S. is broad, deep and long-term. Investors can buy 20-year debt denominated in Brazilian reals or Chinese yuan, a monumental shift in the allocation of long-term capital. U.S. companies are shifting operations offshore in order to build and innovate more profitably. Meanwhile, the U.S. government is trapping billions of tech dollars--the lifeblood of innovation--offshore through an excessive repatriation tax. This is blocking much-needed industry consolidation, because an acquirer is forced to pay for the offshore cash without getting access to it.

A costless starting point for breaking the U.S. out of the Bush-Obama malaise would be to stabilize the dollar. In June 2008 Federal Reserve Chairman Ben Bernanke advocated a "strong and stable" dollar, a revolutionary step had it been implemented. Unfortunately, the idea was forcefully shelved during the subsequent G8 meetings.

The rush to buy commodities despite high prices and no yield is a loud speculative bet that Washington will keep pushing the dollar down in an extravagant attempt to save manufacturing jobs in toss-up states. As with the regulatory credit crunch, Washington's weak-dollar policy mistake could be reversed. If this happened, jobs and GDP would recover faster than they will on the current big-government, weak-dollar path.

David Malpass, global economist, president of Encima Global LLC; Paul Johnson, eminent British historian and author; Lee Kuan Yew, minister mentor of Singapore. To see past Current Events columns, visit our Web site at