Rich is a Religion: Breaking the Timeless Code to Wealth

Rich Is a Religion

Breaking the Timeless Code to Wealth

Mark Stevens

John Wiley & Sons, Inc.

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Additional Praise for

Rich Is a Religion

“Mark Stevens has done it again. He has a wonderful ability to shed new light on much examined topics. In Rich Is a Religion, he is insightful and inspiring in his treatment of creating and protecting wealth.”

— Richard A. EisnerFounding Partner Eisner LLP

“In Rich Is a Religion, Mark Stevens shows us in a compelling way how money and life intersect, and that true wealth and personal contentment are one in the same.”

— Randal SelkirkManaging Director Mapleridge Capital Corporation

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Rich Is a Religion

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Rich Is a Religion

Breaking the Timeless Code to Wealth

Mark Stevens

John Wiley & Sons, Inc.

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Copyright © 2008 by Mark Stevens. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifi cally disclaim any implied warranties of merchantability or fi tness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profi t or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Stevens, Mark, 1947– Rich is a religion : breaking the timeless code to wealth / Mark Stevens. p. cm. Includes index. ISBN 978-0-470-25287-1 (cloth) 1. Wealth—United States. 2. Rich people—United States. 3. Investments—United States. 4. Wealth. 5. Rich people. 6. Investments. I. Title. HC110.W4S74 2008 332.02400973—dc22

2008019684Printed in the United States of America.10 9 8 7 6 5 4 3 2 1

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To my father, who taught me to challenge

every single thing in the world and to ask “Why?”

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vii

Contents

Acknowledgments ix

First, A Foundation and a Firewall 1

Chapter 1 The Epiphany 5

Chapter 2 The Vision 17

Chapter 3 The Invisible 33

Chapter 4 Fairy Tale Finance 47

Chapter 5 The Congregation 67

Chapter 6 The Atheists of the Religion of the Rich 87

Chapter 7 The Paradoxical Secret 105

Chapter 8 The Real Value 127

Chapter 9 The Metamorphosis 137

Epilogue: Dividing Day 149

Appendix: The Unconventional Wisdom of the Religion of the Rich: A Collection of Blogs 153

About the Author 173

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ix

Acknowledgments

T o the deli owners and the clothing merchants and the magazine prescription hawkers and the oblivious Whitneys and the hotel managers and the factory

foremen and the vast array of entrepreneurs who used my cheap labor in my formative years but wound up teaching me more than my more patrician peers learned at Harvard Business School. About money. About how you really make it and grow it and build a steel wall around it.

Thanks guys. The tuition check is in the mail.

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Rich Is a Religion

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1

First, A Foundation and a Firewall

I n life, we often think and talk about how we spend our days. In our personal fi nancial endeavors, we discuss how we spend our money. Surprisingly, the two are related

and have a powerful effect on each other, in ways that you may not now identify.

In this book, you are invited to see the connection and to act on it so that you can achieve fi nancial independence and security while also achieving peace of mind.

Think of it this way: If you “spend” your days, you sim-ply let them begin, end, and expire without reveling in the ultimate joy, the supreme gift, that life is—or, at least, that it can and should be. The goal of life should be not to “spend” your days, but instead to maximize the pleasure, exhilaration, joy of discovery, love, and achievement that are inherent in every day of your life.

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2

Correspondingly, if you simply “spend” your money, your life is a metaphorical trip to the mall. Yes, it may feel good to lavish yourself and your loved ones with costly material possessions—and no doubt feeling good is a lovely and essential part of the joyride of life—but before you allocate your money to anything, you need to think about it, really think about why and how you are spending your money. Rich Is a Religion will show you how to do so, by helping you understand:

What money is and what it is not. How you can invest what you earn in assets that will increase your wealth. The key steps you must take and the discipline you must practice to protect what you have, and what you will have, as your assets grow. How to make money while you sleep. The people you should go to when you have fi nancial questions, concerns, or challenges. Why it is important to reject the dangerous habits and myopia of the atheists of the religion of the rich. Why the most important money you have is the money that no one sees. Why you should stop trying to keep up with the Joneses and instead focus on keeping up with the Buffetts.

***

Before we begin this journey, I would like you to under-stand what I mean by the “religion of the rich.” You can think of this religion, this timeless code, as a prism that—

••

•

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•

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r i c h i s a r e l i g i o n

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First, A Foundation and a Firewall

3

if you are willing to put aside your current thinking—can serve as a medium for transitioning to a dramatically dif-ferent view of how real money is created and preserved by those who have it and keep it for life. Not all rich people are born rich, or get lucky, or any of the other clichés that you may have heard. Instead, many have acquired wealth through following a philosophy, a belief system, a different way of seeing the world and leveraging its opportunities. In this book, I will discuss this ideology and provide enlighten-ing and exceptional explanations on how you can become a member of this congregation.

As we move through a journey of discovery together, Rich Is a Religion will illuminate this fi nancial perspective; reveal how and why the philosophy, the methodology, and the action steps associated with it work; and provide insights into the dynamics of getting and staying rich that make the difference between doing well fi nancially and living a wealthy life . In addition, this book will reveal how the wealthy use money as an instrument of independence, confi dence, stability, and timeless value instead of simply indulging in the temporal rewards of luxury.

People who say money doesn’t matter are deceiving them-selves. People who say money is everything may never know why they feel unfulfi lled. In Rich Is a Religion I will reveal to you how to earn more money than you ever thought possible, how to expand your horizons, and how to build a fi nancial foundation and install a fi rewall to protect it.

And most of all, I will show you how to channel your money in order to maximize the gift of life.

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The Top 15 Reasons Why You Need This Book 1. You know you don’t have enough money. 2. You don’t know where your money goes. 3. You don’t invest money correctly. 4. You don’t know how much is enough to invest. 5. You don’t have enough money to retire. 6. You don’t know how to go about gaining wealth or

adding to the wealth you have. 7. You don’t trust your broker. 8. You don’t understand his or her advice. 9. All you do is work. 10. You don’t understand money. 11. Your life is unfulfi lling. 12. You think you know what you can do to change that. 13. You don’t think you can afford to do so. 14. You feel insecure about your fi nancial picture. 15. You wonder why others with similar incomes have so

much more than you.

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5

Chapter 1

The Epiphany

I t was a convection-oven July day in Manhattan, the kind of sizzler when the sidewalks are like beds of smoldering coals, sending blasts of heat all the way to your brain.

Even the offi ce towers were nearly steamy inside, as if the massive commercial air-conditioning systems were unable to compete with the solar barrage. And then another fi re, of sorts, ignited around me.

I was working with former Treasury Secretary Bill Simon. Born in Paterson, New Jersey, in 1927, the son of an insur-ance executive, Simon attended Lafayette College in Easton, Pennsylvania. He launched his career with Union Securities in 1952 and served as a vice president of Weeden & Co. before moving on to even greater success on Wall Street, cul-minating in his appointment as senior partner in charge of the government and municipal bond departments at Salomon Brothers. Then came the capstone of his career: President Richard Nixon appointed Simon as the 63rd Secretary of the

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6

Treasury in May 1974. Simon was reappointed by President Gerald Ford and served until 1977. His years of experience in Washington, D.C., changed both Simon’s view of himself and his stature in the world.

At fi rst, it was a shock to his system. “When I took a seat at my fi rst cabinet meeting, I thought

I was a pretty damn well accomplished fellow,” Simon recalls. “And then I’m suddenly sitting there surrounded by men of such vast knowledge of global politics and economics––Henry Kissinger, George Schultz, Eliot Richardson––that I felt small and inconsequential by comparison.

“At the end of my fi rst week of service, I realized how truly naive I was. I asked Nixon’s secretary, Rose Mary Woods, if I could see the President before heading home for the weekend, and she made room in his schedule. When I entered the Oval Offi ce to bid good-bye, Nixon snapped me right into place: ‘Home for the weekend! Bill, you are Secretary of the Treasury of the United States of America. You don’t go home for the weekend. You are home!’”

After his years with the Treasury Simon cofounded, with Raymond Chambers, CPA, a leveraged buyout (LBO) fi rm called Wesray Corporation. Among Simon’s home runs was an investment in Gibson Greetings in the early 1980s, which quickly grew from $330,000 to $66 million.

Throughout Simon’s life, he had the Midas touch. Throughout his life he was a member of a select group of people who use money as an instrument of independence, confi dence, and enduring value, instead of merely indulging in the temporal rewards of luxury and lavish goods.


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The Epiphany

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On that boiling July day when we were locked in his Manhattan offi ce, brainstorming a new business strategy, the man who had virtually invented the LBO business and become one of the richest men in America, took a call from his daughter, who was on her way to the Simon summer home in Southampton, Long Island.

The conversation began with predictable pleasantries between father and daughter. Suddenly, in a surprising turn of events, the discourse rushed headlong into a screaming match. Mr. Secretary, a brilliant thinker who dressed impeccably in a 1950s Brooks Brothers’ vision of quiet capitalism and who, in an odd juxtaposition of habits, dined daily on cream cheese and jelly sandwiches, had just discovered that his offspring was taking a taxi from Manhattan to Southampton rather than choosing the far cheaper option of a Hampton jitney. Simon exploded, charging his daughter with “fi scal irresponsibility of scandalous proportions.” It was as if she had charged every single item in Bergdorf Goodman’s department store on his American Express card and then tossed in a new Bentley Continental Flying Spur to transport all the goodies home.

How can we explain this volcanic response to the expense of a cab fare from one of the wealthiest men in America? How can we understand how a mogul can become livid over the news that a loved one would spend an extra $200 on transportation?

Further, this outraged response came from the same man who would bequeath his entire fortune of $350 million to charity (including AIDS hospices and low-income education groups) two years before his death on June 3, 2000. How was the once–middle-class Simon able to perceive and connect with

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8

the timeless code of wealth, to have his own independent view of the value of money and how it is to be used?

The answer is both complex and simple: He joined the religion of the rich . Simon’s actions at the nexus of money and life pro-vide us with exceptional and enlightening insights into what makes the members of this religion tick, and how they preserve their wealth.

Those who subscribe to the orthodoxy of this reli-gion are not simply any rich people. This group doesn’t include lottery winners or dream-come-true geeks who start a social networking website and get bought out by Google before they graduate from MIT. No, I am referring to a class of fi nancially independent people (most of whom live happily in complete obscurity) who manage to build and preserve wealth without the theatrics or the stroke of luck so often associated with this achievement. In fact, they often accomplish their goal of wealth quietly, deliberately, and even mystically.

***

What do I mean by the religion of the rich? Am I refer-ring to people who worship money? Or are they simply peo-ple who abide by a certain belief system?

I am referring to a class of fi nancially independ-ent people (most of whom live happily in complete obscurity) who manage to build and pre-serve wealth without the theatrics or the stroke of luck so often associated with this achievement. In fact, they often accom-plish their goal of wealth quietly, deliberately, and even mystically.

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The Epiphany

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Before we can answer this, let’s step back and put this into perspective. In the process, we will discover a better way to grow and manage money and to live a fulfi lling life. Money matters a great deal, but ultimately it’s your life that matters most. The religion of the rich always gives equal importance to both money and life. The vast major-ity of people think about money in only two ways: making it and spending it. In this narrow and myopic view, money is like sand moving through an hourglass: In it comes, out it goes. It does not have intrinsic value. Its only worth is measured by what it can purchase at the time . . . in the moment . . . now!

This means that money is not really the substance upon which wealth, of any size or scope, is based. It is simply a form of currency, or of barter, as were the beads, cloth, and hatchets used by Dutch settlers to buy Manhattan Island from the Shinnecock Indians, or the spices used as trad-ing commodities by the early explorers and traders, such as Marco Polo and Magellan.

You may think, at fi rst blush, that this all-too-common perception, this traditional way of viewing money, is correct. After all, it is only money—dollars and cents, hard cold cash. But before you put a lock and key on this belief, let me ask you, is a prayer just a string of words?

Technically, yes. Consider any prayer you have uttered during your life. Can you recognize this one?

“The . . . is . . . shepherd . . . my . . . Lord . . . want . . . not . . . I . . . shall . . .”

Is this a prayer or just a string of words? Let’s look at the same words in a different order:

“The Lord is my shepherd, I shall not want.”

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Now, is it just a string of words or part of something powerful and profound? Something to build a life’s philoso-phy on, and to provide a source of courage in a time of fear?

Clearly, the latter is true. And the same is true with money. If you see money solely as stuff that enables you to acquire other stuff, it will never amount to a value greater than the sum of its parts. Nor will it ever amass to a sum greater than the sum you earn on your job or by running your own busi-ness. Simply put, if you continue to view money as merely dollars and cents, you will always be locked into the earn-it, spend-it, build-nothing-of-great-value treadmill. Only if you view money as far more than simple fodder for consumption will it acquire exponential value.

To gain this perspective, you must treat the accu-mulation, spending, saving, and investment of money as a form of religion.

Now, don’t worry: I am not talking about some kind of holy wisdom or seeking to lay gospel upon you. By the religion of the rich, I do not mean worshipping a god or engaging in prayer or holy rituals. Instead, I am referring to a view of money that vests it with far more substance than a simple trading com-modity. It is a way of thinking about money that has greater connectivity to what most of us place at the top of life’s hierarchy of values: family, friends, fulfi ll-ment, enrichment, and independence.

This is the underpinning of the philosophy of the reli-gion of the rich. To become a member, you must look at

You must treat the accumulation, spending, saving, and investment of money as a form of religion.

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The Epiphany

11

money from a fresh perspective and see it in an entirely dif-ferent light. As you do, you will begin to understand and accept a set of more powerful core values, an orthodoxy, a means of thinking and behaving in a way that actually facili-tates the accumulation and preservation of wealth and the fulfi llment of life.

***

Voltaire said, “When it comes to money, everybody is of the same religion.” But that is not true. Yes, everyone earns money. Everyone spends it. But in between these goalposts of earning and spending is the place where wealth is created, or where it is not. This is also the place where a way of liv-ing, a full and wealthy life, is established, or it is not.

The big difference lies in the great expanse of gray area that lies between spending and earning. Here we fi nd two basic categories of people:

1. The vast majority who have absolutely no philosophy about how to manage their money.

2. A distinct and immensely important minority who are the members of the religion of the rich.

It is the latter we must learn from. It is the latter who turn simple currency into the currency of rich, full, and independent lives. It is the latter who progress far beyond the confi nes of a paycheck-to-paycheck existence. It is the latter who are the masters of their own fate.

The religion of the rich is a state of mind. Interestingly, much of its philosophy springs from the eddies of the great religions, Puritanism and Baptist in particular, but it is not focused on traditional religious orthodoxy. It is not

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12

about heaven and hell. It is not about prayer. It is not about morality.

It is, fi rst and foremost, about recognizing that there is something about money that is uniquely valuable to your life (beyond the number of zeroes in your bank account) if it is managed—that is, accumulated and protected—appropriately, with discipline and dignity and a sense of fi duciary responsibility.

Some people are born to the religion—not through the accident of birth or level of wealth, but through a way of thinking that comes naturally to them, such as intellectual curiosity or a strong appreciation for and sense of family.

Others can convert to the religion. They see its wisdom, they learn from their mistakes or the failings of others, and they come to understand what money is and what it is not. They shed the behavior that would prevent them from leading truly wealthy lives and proceed to achieve this goal by joining the religion.

It is up to you. And only you. You can join at any time that you have the vision and the discipline to do so.

***

The great seventeenth-century philosopher John Locke wrote that man is born with a mind like a blank slate: a tabula rasa. How and what he comes to think is imposed on him by parents, teachers, and others: what is seen or heard, what is taught, what is read. All these infl uences shape the person and his assumptions about the right way to manage (or fail to manage) money.

Although Locke never would have thought it at the time, his idea has powerful implications for the religion of the rich.

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The Epiphany

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As an adult, your mind is no longer a blank slate. Your mind is composed of the various ideas and opin-ions imposed upon you by others—and in the case of your fi nances, by the fi nancial media and fi nancial advis-ers. The religion of the rich challenges you to rethink all of your assumptions about how to build a life of wealth, regardless of the value of (or lack of it) in your net worth statement. In other words, it breaks down the overly complex hieroglyphics of popularized wealth-building strategies that have infl uenced you over time and provides you with new methods to achieve, protect, and enjoy wealth.

A case in point: All of the standard personal fi nancial plans available, and there are thousands of them, are based on counting. On numbers. On calculating yields and percentages. They are forms of simple math glorifi ed by brand names given to them by fi nancial services companies.

The profound difference between these cookie-cutter plans and the religion of the rich is that the latter is based on thinking before counting. Thinking beyond and apart from numbers to such intangibles as:

The limitations as well as the possibilities afforded by money. The life values that are truly dear to you and that enable you to sleep contentedly at night.

•

•

The religion of the rich challenges you to rethink all of your assumptions about how to build a life of wealth, regard-less of the value (or lack of it) in your net worth statement.

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The role of personal pride in your life . . . and from what source that pride is derived. What you will do with your wealth, now or when you acquire it, to ensure that you are fi nancially independent for life.

Thinking through these issues enables you to wipe away the words and con-cepts that have been written on your blank slate and to rethink your personal fi nan-cial strategy—all with a focus on the timeless concepts em-bedded in the religion of the rich.

At the bedrock of this religion is the understanding that the conventional wisdom on wealth creation and protection is off-base, narrow-minded, wrong, and, most important, useless for all who want to join the ranks of the rich. You will have to recognize that without a true philoso-phy to guide your personal fi nancial life, you will con-tinue along the standard path, which is formulaic, based on mathematical projections that are often erroneous, and designed to serve a salesman’s drive to enrich himself at the expense of the client . . . at your expense.

•

•

The profound difference between these cookie- cutter plans and the religion of the rich is that the latter is based on thinking before counting.

The art of living easy as to money is to pitch your scale of living one degree below your means.

—Sir Henry Taylor

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The Epiphany

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Think of it this way: Millions of otherwise intelligent men and women have allowed themselves to enter the august stages of their lives without suffi cient wealth to retire. Even if they want to continue working forever, there is a major difference between wanting to and having to. And the major reason they have to is because they have never been taught to think of rich as a religion. Instead, they think of it as numbers, charts, and projections. This is superfi cial and misleading. The numbers on a mutual fund’s performance graphic can provide a mathematical snapshot of how a bas-ket of stocks and/or bonds have performed in a given time frame, but so what? They can’t predict a single thing about the future. And, more important, they cannot change behav-ior. They cannot motivate people to truly change the way they view money. They cannot reveal the powerful truths that lie beneath the charts. The religion of the rich can and will change the way you handle and think about money. More importantly, it will facili-tate the accumulation and preservation of wealth.

***

In order to perceive the timeless code to wealth and begin embracing the religion of the rich, there are eight tenets that

The religion of the rich can and will change the way you handle and think about money. More importantly, it will facilitate the accumula-tion and preservation of wealth.

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will be revealed and discussed throughout this book. The Eight Tenets of the Religion of the Rich are:

1. Money is not simply currency; it is the currency of life. 2. Wealth is a private matter. 3. Always live below your means. 4. You can always live very well but being highly leveraged

is never living well. 5. The most important money you have is the money no

one sees. 6. Rich people are those who can write out a check when

they or their loved ones need the money. 7. Buying depreciable assets is spending; acquiring appreci-

able assets is investing. 8. The most rewarding achievement in life is to be content.

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Chapter 2

The Vision

W hen I was a high school freshman, I had a Wonder Years moment. One evening our neighbor (we called him Slim) burst into my family’s apart-

ment in Queens, New York, to announce that he had just sold his dry-cleaning business for slightly more than $1 million. He was a gangly, redheaded, gentle man, who from all out-ward appearances was no match for my father. He lacked my dad’s charm, intelligence, verve, ability to light up a room, and the strength of character that would intimidate almost anyone.

Suffocating under a tsunami of delinquent bills, my dad listened to the astounding news that his “lame” friend Slim had just landed more than $1 million in one day. And this was in 1961, when Queens’s middle-class toilers regarded a million bucks as a Forbes-list fortune.

Although my dad tried to look thrilled for Slim, I could see in his eyes that he was asking himself “Why Slim and not

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18

me? How could Slim be a millionaire while I’m broke? I’m three times the man he is. Or am I?”

My father was a vice president of sales for a plastics com-pany. He had a classic corporate offi ce, an English secre-tary, a Carte Blanche credit card, and Italian wool suits from Bloomingdale’s. He worked long hours and charmed people around the world into buying plastic inserts for photo albums. All of this razzle-dazzle made him feel like quite the hotshot.

What my dad didn’t realize was that Slim was a member of the religion of the rich. Seen through the lens of my dad’s myopic vision, Slim couldn’t be rich, because he went to work in washed-out khakis and always had ring-around-the-collar sweat stains on his Sears’ short-sleeved white shirts. Slim’s dry-cleaning stores were ramshackle establishments in the slummiest neighborhoods of Brooklyn and the Bronx. But, while Dad worked and spent, worked and spent, Slim instead:

Built a business of his own. Reinvested chunks of his profi ts in the business over the years. Spent his money judiciously and cautiously. Always lived below his means. Never had a dime of debt. Always had an exit strategy.

Throughout Slim’s adult life, he always planned for his payoff day. Now it was here.

On that day, I discovered a key piece of the life-and-fi nance puzzle. My 40-year-old dad was waging a constant battle with debt, and soon would fall victim to a fatal heart attack because of it. And while my dad wondered why Slim

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••••

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The Vision

19

was a millionaire and he was a debtor, Slim was not only cashing a big check, he was also opening a door to a new life he had also planned for years: living out the rest of his years on a gentleman’s farm he bought for cash in upstate New York.

On that day, I had a vision and saw the power of the religion of the rich. It came to me in sharp relief when I woke in the middle of the night—which was very unusual for me—and caught a glimpse of my father. He was stand-ing on the terrace of our sixth-fl oor apartment, smoking a Camel and looking out over the parking lot below, as if for the fi rst time the truth and reality of his life were colliding, and he was searching for answers. He was an intelligent man and a creative person, but because he had always counted money and spent it without giving it a moment’s thought, he had nothing to draw on. No basis for intel-ligent fi nancial actions. No starting point and—given the stress his reckless ways had placed on his health—no time to make a plan. In a sense, he was trapped in a vacuum.

This example is intended to illustrate one of the great powers of the religion of the rich: It is a philoso-phy that leads to a set of action steps that help you break the timeless code to wealth . It comes from within

. . . but because he had always counted money and spent it without giving it a moment’s thought, he had nothing to draw on. No basis for intelligent fi nancial actions.

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and radiates outward to affect how you live. It is never too late to adopt. In fact, it is essential to start now. As you begin to live this philosophy, its impact is organic. You can accumulate, retain, and enjoy more true wealth than you likely believed possible at any time, and every time, in your life.

The key to the religion lies in breaking The Timeless Code to Living a Wealthy Life. Think of it as a Rosetta Stone that translates the overly complex hieroglyphics of popularized wealth-building strategies and reveals the enduring inner truths.

Let’s get started.

***

All too often money management is viewed as a process. This is similar to saying that architecture is a set of instructions. This view is shallow and superfi cial, and omits the art, science, imagination, and use of the sixth sense that makes both in-spired architecture and money management magnifi cent, pro-ducing results that are greater than the sum of their parts.

Let’s look at money management through our Rich Is a Religion prism.

Typically, fi nancial services fi rms advise us to engage in an asset allocation process that provides for diversifi cation among a variety of stocks and bonds, thus creating greater opportunity and minimizing risk. While this objective may be theoretically valid, it can reduce the major facets of our lives to a rigid mathematical formula. This commonly prac-ticed way of allocating investments should not be the cor-nerstone of our thinking or of our behavior. Just one facet of it—and the elite fi rms and their advisers make that clear.

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21

The religion of the rich holds that the way we look at life, the way we live it, the way we assign a human value to money—regardless of the sum we have now or seek to accumulate in the future—must come fi rst. If it does not, we are building bridges to nowhere . . . if we are building bridges at all.

As seen in the example of my father, much of traditional money management is conducted in a vacuum, without any attempt to connect the means to the ends. Nowhere in life does this disconnected thinking lead to satisfying results, yet it is blindly accepted in the realm of fi nance. In every other endeavor, this behavior is rejected as thinking in reverse, or working toward a goal before you have fully envisioned the goal.

In order to illustrate this point, think of the process of choosing a profession. If I were to ask you to name the best career for a young person to pursue, you would not imme-diately come up with a random profession that you believe is fi nancially lucrative. Instead, you would ask me questions that enable you to visualize the talents, capabilities, and inter-ests of this individual. You may ask:

What does the individual want to do? What interests them? What aptitudes have they demonstrated?

How can we recommend a career without knowing these answers? We can’t!

I learned this fi rsthand. Before I was born, my father decided that I would go to Johns Hopkins Medical School and become a physician. Like many parents, my dad’s view of

•••

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22

success included a respected profession, such as medicine or law. In order to “make it,” or get rich, they believed I would have to study, work hard, enroll in a highly selective college, and then—and only then—would I be able to work in one of those esteemed professional fi elds. Therefore, when I was 10 years old, I began writing practice essays in preparation for undergraduate college admissions. The hole-in-a-wall bedroom I shared with my sister had also been transformed into a mini-laboratory, complete with chemistry and biology sets, ant farms, and a copy of Gray’s Anatomy that my father had bought for me. Every day I was working on experi-ments, reading about the human body, creating gases, dissect-ing frogs—all as a part of the early training of Mark, M.D.

My dad was engaging me in a process that he believed would culminate in my spending my life in the practice of medicine. Think of this as intellectual asset allocation: My father was assigning my brain, my life’s work, to an end goal that he believed was right for me.

The problem is, I never had any desire to be a doctor, or to cure people, or to go to medical school. It was a zillion miles away from the creative and entrepreneurial life I wanted to live. If I followed my father’s dream, I would have allocated tremendous amounts of my assets—my time, my intellect, and my energy—to something that would have no meaningful reward for me.

You can’t plan your career until you know what you want to do, nor can you rectify your own fi nancial failings or miraculously invent a fi scal/lifestyle philosophy by micro-managing your child’s evolution (as I later realized my dad was trying to do). Similarly, you can’t engage in a personal

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23

fi nancial process until you know what you want from your own life. And by this I mean going well beyond the boiler-plate evaluations that fi nancial salespeople conduct to cre-ate the appearance of personalized advice. In order to fully understand what your fi nancial goal is, you will have to ask yourself tougher and more substantive questions than: How many children do I want? Will they attend state or private schools? What year will I retire? or How much money will I need to retire on?

Instead, you will need to examine what kind of life you want to live. You must ask yourself questions such as: Do I want a life that is focused primarily on commerce, fam-ily interaction, artistic pursuits, or scientifi c discovery? Do I want to be single, get married, or remain married? Do I want to be part of an entourage or live in solitude? How much money must I earn in order to create and maintain wealth? Can I do so, through either my profes-sion or asset allocation plan?

There are no right or wrong answers to these questions. All of the answers to these questions are excellent choices, but remember that you must answer the questions based on the type of life that you want to live. You must ask yourself which answers are truly your own. Which answers will lead to fulfi llment? And which will simply satisfy agendas imposed upon you by others––parents, friends, or society at large?

I spoke with a brilliant mathematician, who now earns millions of dollars a year creating equations for quant-based hedge funds that make their money developing algorithms they can apply to trading in the fi nancial markets. Only three

•

•••

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24

years ago, this same man was a struggling academic who per-formed the life’s work he was expected to do, based on an aptitude for high school math and a family that encouraged a life in education. Although he was a whiz at math and num-bers, he hardly gave a second thought to money and the effect that wealth, of any amount, would have on his life holistically. Until he made the transition from academia to the fi nancial world, he fi rmly believed that his entire life would be devoted to theoretical inquiries. And then his perspective changed.

M athematician : I literally woke up one morning, my laptop by my pillow, looked around my bedroom, and thought I would like to begin earning money. I wanted to stay in the math world. I simply wanted to get rich in the process.

M ark S tevens : Do your peers in academia think you have sold out?

M athematician : Not at all. They have no desire to earn more than a professor’s salary. If they got rich, they wouldn’t know what to do with the money. Any time they would devote to hunting for a home, securing a mortgage, shopping for clothes, would deprive them of what they love best and want to do with the greatest passion: create and solve math problems. That I came to want more struck me, and I acted on it. At this stage in my life, to me, more is more. To them, less is more.”

Each to his own, but we have to know what our own goal is before we can reach it. We must think before we count, turning what now passes in many cases for personal fi nancial management on its ear. Only when we do so, can we begin to acquire great wealth and fi nancial security.

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For those to whom rich is a religion, this sorting out of personal goals, and the fi nances associated with them, is instinctive. They value money not pri-marily because of how much they can acquire, but because of what they can do with it. Yes, being rich at one level or another is important (and I want you to be richer than you ever dreamed possible), but what the wealth is used for, how it is treated, why it is protected, whom it is entrusted to, who knows about it, and what its limitations are––all these con-siderations are of great importance. If you are to man-age your personal fi nances wisely, your relationship with money will be complex, thoughtful, and timeless. This, more than any magic formula or tax haven, can signifi cantly increase and maintain your wealthy life and will pro-vide a model that you can learn from and adopt.

I am asking you to consider taking a big step, to rethink how you live an important part of your life that affects your lifestyle, outlook, family, career, friendships, and retirement (or lack of it).

True religion is real living; living with all one’s soul, with one’s goodness and righteousness.

—Albert Einstein

For those to whom rich is a religion, this sorting out of personal goals, and the fi nances associated with them, is instinctive. They value money not primarily because of how much they can acquire, but because of what they can do with it.

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26

Again, I am asking you to change the way you think about money, to use a new fi nancial prism through which you can see your fi nancial situation differently. As you gain this view, the religion of the rich will help you to create a platform of thoughts, values, direction, and belief upon which you can decide:

Who should manage your money. How your money should be managed. How your money should be spent. How much of it should never be spent, and why. How long you should work. What you should work at. How you should treat the intersection of money, family, and friends.

***

Although you may have already experienced an epiph-any that has turned you toward this new way of thinking, it is important that you take a step back and make sure that the religion of the rich is right for you. To begin your review, do you see a description of your fi nancial status or life refl ected in any of the following comments?

I work hard and make a good living, but I never seem to accumulate enough money to allow me to have peace of mind about my fi nancial status. People tell me I am successful but I don’t feel successful enough. I am in debt. My only option appears to be to juggle what I owe to a variety of creditors, pacifying one so

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•

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27

that I have the wiggle room to string along another and another, ad infi nitum. I have a successful career and I make a good living, but it seems all too often that the mail brings a collection letter and the threat of a lawsuit. I have fallen short of my personal goals, of my dreams for the lifestyle I want for myself and my family. I would like:

To trade up to a more comfortable and elegant home. To purchase a second home by the sea or in the coun-try, where I can escape to relax and recharge. To afford multiple annual vacations that are more lux-urious or stimulating than the cookie-cutter bargain getaways that I’m accustomed to. To make a fundamental change in my career, transi-tioning to the avocation I have a true passion for: teach-ing, cooking, painting, writing, and so on.

I don’t truly understand how my money is being invested now, if there is a real strategy behind it or simply a list of a la carte purchases. I have stocks, bonds, and other assets, but I don’t know the rationale for these investments and how they fi t together, or if they do so in a meaning-ful way. I don’t know if my investment adviser is my ally or sim-ply an opportunist. Most important, I feel as though I am a victim of a fi nancial world that I do not understand. I feel as if everyone around me has tons of money, but not me. My friends and family seem to earn so much money and go on lavish vacations, own luxurious cars, and so on, and I wonder why I don’t.

•

•

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•

•

•

•

•

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If you agree with any one or even several of these comments, then I urge you to open your eyes to the philosophies that defi ne the religion of the rich so that you can learn how to rid yourself of the burden of struggling to manage your money.

This is not a phobia. For the vast majority of people, those who are yet to begin living by the principles of the religion of the rich, money management is a myth. We can nav-igate from myth to reality by fi rst identifying what money is and what it is not.

Money Is: An important instrument for creating a lifestyle you deem to be desirable and fulfi lling. An asset base that provides you, when managed well, with the foundation for fi nancial independence. An enabler that can improve your lifestyle and provide a deeper cushion of fi nancial independence.

This is all that money should be. When it is deemed to be more than this, it is actually less, and a multitude of prob-lems arise. Correspondingly,

Money Is Not: A means to become the envy of your friends and family. A currency you can use to collect as many homes, cars, and articles of clothing as you desire.

•

•

•

••

We can navigate from myth to reality by fi rst identifying what money is and what it is not.

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29

An unlimited supply of anything . No matter how long a roll you may be on, in your business or on the job, always keep in mind Newton’s law that “For every action there is an equal and opposite reaction.” A stack of chips in a gambling casino. Yes, you can and often should take prudent risks in business and personal investing, but prudent is the key word. Never risk a sum that bets the farm, putting your lifestyle and your inde-pendence at risk.

As I write this book, the United States economy is being racked by a mortgage crisis widely known by the code name “subprime.” I say code name because few people want to admit what has caused the crisis. It has less to do with the machi-nations of fi nancial markets, housing sales, and interest rates than it does with human behavior—specifi cally, the desire of mortgage holders to make the Joneses green with envy.

The word mortgage (from the Latin words mort [death] and gage [pledge]) can be traced back to England, circa 1190, when it was used to describe a fi nancial instrument essen-tially designed to allow people to live above their means—that is, to buy what they could not really afford when they fi rst walked across the threshold. In the early days of the United States, mortgages were generally limited to 50 per-cent of a home’s value. But this changed dramatically in 1934 when Franklin Roosevelt’s New Deal created the Federal Housing Administration (FHA), which insured mortgage lenders against defaults. Over time, credit terms loosened, leading to conditions that enabled homebuyers to amass an Everest of debt that it would take them a lifetime to pay off. Many homeowners willingly fell into debt, struggling all the

•

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30

while to make the mortgage payments, or defaulting in mid-course.

The modern mortgage carries the message: Buy the dream you can’t afford now and pay for it later. This may be fi ne in principle, but how big is the dream? And how much faith does a home-owner have that the debt can be paid off? And what set of circumstances might arise in the future?

Will you have your job? Will your mortgage interest rate rise, and with it your monthly payments? Will your children have greater needs than you antici-pated, thus putting major pressure on your budget?

As the dream of what money can buy, given the power of leveraging, overtook the religion of what money is and is not, and as millions started buying not for the security and joy of owning a piece of America but in order to surpass, impress, and evoke envy in others, millions found themselves, not with a piece of the American dream, but with an American nightmare: house foreclosed, deposit lost, credit rating in the tank.

The addiction to having more than you can afford vio-lates the very essence of the religion of the rich. It sets off a negative chain reaction that:

Drives you to live above your means; this is never sus-tainable and leads inevitably to disappointment, hardship, and deteriorating credit.

••

•

•

The modern mortgage carries the message: Buy the dream you can’t afford now and pay for it later.

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Drains away every dollar that could be used to develop and build a portfolio of appreciable assets. Sabotages your fi nancial independence. Puts you on a treadmill that operates at the expense of taking the time to create a personal vision of life that will bring you true satisfaction and fulfi llment.

Remember what money is and what money is not. Most of all, remember that money is not a game—not when you are committed to managing it; not when you are determined to treat it as something you save, invest, protect, and safe-guard; not when you refuse to use it as a tool to create envy (what a Pyrrhic victory that can be!); not when you insist on living a wealthy life.

An informed way to look at the mortgage crisis and other bubbles that ripple through the economy, taking people’s dreams with them, is that for so many, the religion of money gives way to the game show of money . The millions of dreamers who thought they were buying the Taj Mahal for no money down and $500 per month really weren’t buying anything. They were amassing debt. Their aim was not to have a comfortable roof over their heads and a hearth for the family to gather around, but instead to put on a fi reworks display that would deceive them-selves and make others green with envy.

•

••

An informed way to look at the mortgage crisis and other bubbles that rip-ple through the economy, taking people’s dreams with them, is that for so many, the religion of money gives way to the game show of money.

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How stupid. How sad. How hollow. And most important, how self-defeating.

Adopting the religion of the rich can protect you from this and simultaneously build your wealth for life . . . wealth measured by your personal perspective and values.

***

One of my clients, a wild and woolly currency specula-tor who was fabulously wealthy in the 1980s, has a negative net worth today—in part because he never joined the reli-gion of the rich. He liked to tell me that wealth is like a golf cart. He said, “If you have to keep your foot on the pedal to have enough money to maintain your desired lifestyle, you don’t have wealth. You have income and that’s vastly differ-ent from wealth. If you don’t know the difference now, you will when the cart grinds to a halt.”

His did. He learned that lesson the hard way. You don’t have to because you will be a member of the religion of the rich . . . as soon as you open your eyes to this vision.

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Chapter 3

The Invisible

I fi rst met Carl Celian Icahn when he was working on amassing his fi rst billion dollars as a corporate takeover artist and a greenmailer in the wild and woolly Wall

Street of the 1990s. Carl had risen meteorically from the lower-middle-

class neighborhood of Far Rockaway, New York (where he was raised by a schoolteacher mother and a contentious father who worked occasionally as a cantor at the local synagogue), to 200-plus bucolic acres in the genteel and historic town of Bedford, New York (where I also lived). Yes, he had made a fortune—$1.2 billion at the time—but he had no interest in, or intention to, spend very much of it. Somewhere between his Spartan childhood and his years at Princeton University, he had converted to the religion of the rich. On the surface, he was the polar opposite of Bill Simon. Simon was Christian; Icahn was Jewish. Simon was proper and discreet; Icahn was loud and informal. Simon

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was a card-carrying member of the Establishment; Icahn rejected anything having to do with it.

But beneath the surface, where the truth usually resides, the two members of the religion of the rich had closely held beliefs in common. Like Bill Simon, Carl Icahn viewed his money as precious—as an asset he had worked hard and smart for, and that was critical to his independence. No way he was blowing it on toys to impress his fellow fi nanciers, his fraternity of speculators, his Princeton classmates, his Far Rockaway childhood buddies, or his Bedford neighbors (who included George Soros and Ralph Lauren). No, he was Carl, take it or leave it. And although he had moved into the rarifi ed atmosphere atop the socioeconomic ziggurat, he knew the value of money.

The fi rst time I played tennis with Icahn I brought two cans of new Wilson balls, a token of appreciation for the invitation to play a few sets on Carl’s estate. The setting was extraordinary. I drove up to a Checkpoint Charlie at the gates of Icahn’s Ponderosa, where a security guard cleared me through to the house. Carl was ready for battle––everything, including tennis, is war to Icahn. He drove us across the estate to his stunning personal tennis complex complete with a courtside English living room to observe matches, splendid dining room, professional kitchen, and well-appointed rooms for showering and dressing after the match.

But laced throughout this magnifi cent setting were traces of the religion of the rich: for example, the bottled water placed at courtside displayed a generic supermarket label, and the soap in the shower was TWA minibars, from the air-line Carl owned at the time.

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35

And when I moved to open the can of balls that I had brought, Carl shrieked, “What are you wasting those for?” Then, methodically, silently, he brought out a wire basket of comatose balls so played out that they’d lost most of their yellow fuzz.

The message was as clear as the one that Bill Simon had sent to his taxi-addicted daughter: “Why waste money on new tennis balls when I have an inventory of dead balls we can use for free? So what if they can barely bounce?”

And then there was the visit to Palm Beach. When my wife, Carol, and I met up with Carl and his wife-to-be, Gail Golden, in Palm Beach (at the time, he was in the midst of a divorce from his fi rst wife, Liba), we all stayed at an ocean-side hotel, sunning by the pool and talking about marriage, business, and chess. At 1 p.m. , we would move from the shore to have lunch under market umbrellas set gracefully around the hotel’s terrace, with a view over the sea. As we ordered, I could practically read Carl’s thoughts: I may be a billionaire, but lunch is not going to be on me. I don’t toss away $100 as if it were water.

When the fi rst day’s bill came, $88 for hot dogs, beer, and potato salad, I paid it. Carl was surprised and delighted. His expression was a bit like an employee’s when his boss treats him to a steak dinner that he can’t afford on his own. That night Carl paid for dinner and, without either of us saying a word, we entered into a perfectly fi ne practice whereby I paid for one meal and he paid for the next.

There’s nothing exceptional about sharing like this when two couples are vacationing. But I could see how much it meant to Carl that his wallet was being spared 50 percent

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of the time. Carl could literally buy the hotel and throw in lunch for every guest for a thousand years. Carl could treat them all to homes. But that was not and is not the point. Carl respected his money. Carl respected himself. Carl was going to spend and act like anyone else who happened not to be a billionaire. Because that is his religion and that is what helped him become and remain rich.

I saw even more deeply how much he abided by this ideology when we strolled around the grounds of his Bedford estate one lovely spring day. The property was for-merly owned by actress Jennifer O’Neill. With all of the land Carl acquired after he purchased the home, the estate amounted to a storybook setting for a man of great wealth and power. But, oddly, and at the same time true to form, Carl didn’t live in the mansion. Instead, he had constructed a pleasant but relatively pedestrian home on the property and lived there. It was a puzzle I couldn’t fi t together.

“Carl, your home is lovely and very comfortable, but why don’t you live in the mansion?” I asked. “It’s too beauti-ful to be left cold and empty . . . to be without an apprecia-tive owner.”

Icahn appeared shocked by the question. And then he stared me down before he answered.

I cahn : Do you know how much money it would cost to restore this place?

MS: I haven’t a clue, Carl, but what I do know is that it would be a rounding number for you. There’s no doubt you can afford it with pocket change. So what’s the issue?

I cahn : “They want $6 to $7 million to renovate this place. All kinds of fancy slate roofers who hold themselves as

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37

Michelangelos would be crawling all over here, send-ing me invoices, running up the charges to probably $10 million before I got a night’s sleep in the place.

And then, his mini-rant concluded as he moved to the core of the issue.

I cahn : Why the hell would I pay that? I’m fi ne where I am.

And he was. For Icahn, Simon, and millions of others who live wealthy

lives in desired obscurity, a key pillar of the rich-is-a-religion philosophy is that the most important money you have is the money others can’t see—the money you don’t wear around your neck or on your fi nger. It’s the money that’s tucked away, invisible to all but you and your family. The money that you can call on when a child needs help. The money you can rely on when you lose your job, or decide to bite the bullet and tell your biggest cus-tomer that you refuse to deal with people who have no respect for you and your business.

Here’s the key point: People who treat money as a reli-gion may not drive by in a Mercedes convertible but they can write out a check to pay for one whenever they need to . . . because the invisible money, the quiet wealth, is always there.

***

A key pillar of the rich-is-a-religion philosophy is that the most important money you have is the money others can’t see.

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When I was in high school, I worked as a busboy at the Bay Terrace Coffee Shop in Queens, which is one of the fi ve boroughs of the city of New York. In spite of its name, there was nothing royal about the place. But there was something exceptionally valuable about growing up there. It was rich in street smarts. You could learn life lessons, and money lessons, from almost everyone you met—like Sam, the uneducated hustler who owned the coffee shop. I learned from him as often as I could.

Sam was a walking, talking curriculum. A one-man MBA. Even better, a guy who knew how life worked in the real world as opposed to the fairy tales told in the superfi cial texts my teachers were ordering me to study.

One day Sam joined me in the walk-in freezer where I used to spend the fi rst hour of the workday, fi lling small paper cups with coleslaw. He took a seat atop two cartons of frozen french fries.

S am : You know, Mark, you work very hard. That impresses me. Kids today don’t want to get their hands dirty, but you do the job of three. This I admire. I see myself in you. So I am going to teach you something. You may not understand it now but you will later on in life. So listen to what I say, Mark.

I stopped fi lling the coleslaw cups in anticipation of a profound revelation. But when Sam imparted his wisdom, the wind went out of my sails.

S am : It’s not what you earn in life that counts; it’s what you keep.

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Sam continued talking, but I found it hard to absorb his message. I didn’t like what I heard in his opening salvo.

Why would I want to keep what I earn when I fi nally make some real money? I thought. I want to spend it. I want to live in a big house. I want to buy a Corvette. I want everything I don’t have in my parents’ crummy little apartment in Queens.

Wow, did Sam disappoint me. I just didn’t get it. About a year later, when my dad died, leaving my mom,

sister, and me with only $84, I got the point. And when I started meeting a broader mix of people in college and in the workplace who were rich and poor, and once-rich and once-poor, and everything in between, I got it in spades.

Sam wasn’t advising me to live like a miser or to deny myself a comfortable life in any way. Sam was advising me about a fundamental principle of the religion of the rich: the need to prioritize and save your money for when you really need to use it. If you feel the desire to surround your-self with luxurious things, that is absolutely fi ne, but in order to break the timeless code to wealth you may only do so after you have locked away a cache of protected assets that will enable you to live a wealthy life, a free and independent life, no mat-ter what happens to the play money you may want to spend over and above the substantial buffer that serves as your invisible for-tress of security.

Sam was advising me about a fundamental principle of the religion of the rich: the need to prioritize and save your money for when you really need to use it.

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Over the years, I have discovered through my own life’s journey that Sam’s advice is part of a list of unwritten but quietly observed doctrines of the religion of the rich. When you think about it, these principles are straightforward:

Don’t buy anything you don’t need. Don’t care whether you are perceived as being rich or being poor. Have assets that appreciate where others have fash-ions and toys.

***

As you can see, the members of this religion believe deeply that the best money is the money no one else sees. Money that is not displayed in mansions or yachts or the jewelry adorning a trophy wife, but rather is safely ensconced in a bedrock of secure investments that make the members of the club com-pletely independent.

“If you can wear all you have on your sleeve, you don’t have that much, and what you do have, you won’t keep for long,” Tom Carvel, founder of an ice cream empire and widely viewed as the fi rst suc-cessful franchisor in the United States, told me when I was in my twenties, still taking stock of the world and studying how the gears of life and money meshed. “The only real measure of success is the ability to write out a check. For every $100 I earn posttax, I put away, out of sight to the

••

•

. . . the members of this religion believe deeply that the best money is the money no one else sees.

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world, $50. When my fam-ily needs money, when I want to make a business investment, when I want to chuck it all and sit on a beach, I don’t have to ask anyone for anything. I can just write a check. I have built my life this way. The showboaters who live in palaces but need the next paycheck, the next bonus, to make it work, don’t understand wealth. They think it’s a game. It’s anything but. Wealth must be treated as sacred.

“Wealth is a secret only you and your closest fam-ily members need to know about. The less visible it is, the less likely it is to drift off to where you don’t want it to go.”

Tom Carvel became a wealthy man who could invest a high percentage of his earnings as he began to prosper. But even in 1929 when he was young and selling ice cream off a truck in Hartsdale, New York, he reinvested diligently in assets that would build his business and in turn his net worth.

This book is not written for the Carvels, the Buffetts, or the Simons. It is for those who have not yet achieved great wealth but would like to do so and who recog-nize that all the sales investment hype they have been bombarded with, and the get-rich-quick clichés they have absorbed, are gimmicks that must be discarded in favor of a way of thinking and behaving that is

The show-boaters who live in palaces but need the next paycheck, the next bonus, to make it work, don’t understand wealth. They think it’s a game. It’s anything but. Wealth must be treated as sacred.

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closer to a religion than a stock-selection seminar. The discipline to invest in assets of enduring value is central to joining the religion of the rich.

A key tenet of the timeless code to living a wealthy life is to avoid major expenditures that do not have a signifi -cant likelihood of growing in value. Cars, yachts, and lav-ish vacations bring pleasure, but the members of the religion of the rich underspend in these areas. It’s no accident that all of the Kennedys since the patriarch Joseph Sr. (who was ranked near the top of Fortune magazine’s list of the richest Americans upon its fi rst publication in 1957) never had to work for a living. Joe bought compounds by the sea. Joe bought the Merchandise Mart in Chicago (then the nation’s largest offi ce building). Joe bought acres in Palm Beach. Joe bought pieces of the great companies of the world. Joe bought the Hialeah Race Track.

When Jacqueline Lee Bouvier fi rst walked into the Kennedy’s world, she knew of Joe’s wealth. So she was stunned when she saw that the family’s Hyannis Port compound was furnished like, in her words, “a Howard Johnson’s.”

Unless furniture is antique, a subject that Joe Kennedy knew and cared little about, it never grows in value. According to Joe’s gospel, it’s a sin to spend real money on furnishings. Who needs it? Only showoffs, and they’re mostly either poor or will be!

A key tenet of the time-less code to living a wealthy life is to avoid major expenditures that do not have a signifi cant likelihood of growing in value.

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This mind-set, this way of life, opens a new dimen-sion, an invisible force, that is the key differentiator between the haves and have-nots. A diffentiator that drills beneath the skin and opens patterns of behavior we all can see and observe on the road to wealthy lives.

***

One of the great benefi ts of the religion of the rich––whether you have a fortune or simply a modest sum, but have real money in the bank and have learned the joy of living below your means–––is that you have fi nancial secu-rity . . . not security that is based on the number of zeroes in your net worth, but instead on your view of yourself, your personal worth, your discipline, and your values.

Too much of what passes as fi nancial advice and knowl-edge today lacks the wisdom of the street, the heart, the dreams, fears, and highly personal goals that cannot be pigeonholed into a precise asset allocation formula or Nobel prize–winning theory. When we talk about money, we should be extending our thinking beyond the quantitative to such personal issues as:

What truly makes us happy? If we didn’t need the money, would we do our jobs? If not, what would we do? Do we have a life compass? Do we follow it or ignore it? What do we want for our children, beyond a good col-lege education? Do we believe in retirement? If so, what does that mean? Doing less? Doing something else? Doing whatever strikes our fancy, day by day? Do we want to be married or divorced?

••

••

•

•

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As noted in Chapter 1 and in the tenets of the religion of the rich, money is not simply currency: It is the currency of life. If we have and protect the sums we need to realize our goals, we can truly live a wealthy life.

One of my clients recounted a time in his life when he knew that he had married the wrong woman and desperately needed to be liberated. He went to see his lawyer to discuss the fi rst steps toward a divorce. He was surprised when he was advised that he shouldn’t make any move in that direction.

C lient : And why is that? I don’t love her anymore. A ttorney : I’m not a love therapist. My objection is simpler

than that. C lient : Which is? A ttorney : You don’t have enough money to live the lifestyle

you’re accustomed to after splitting your assets with her. C lient : How much do I need?

The attorney responded by writing a dollar amount on a legal pad. My client, a driven man who always loved a challenge, said “Thank you,” shook his lawyer’s hand, worked and saved for two years, revisited the lawyer, and

. . . money is not simply currency: It is the currency of life.

Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.

—Franklin Delano Roosevelt

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advised him of the sum he had now accumulated. Taking his cue from the attorney’s method, he wrote the amount on a legal pad.

A ttorney : I’ll begin the divorce process tomorrow.

My client needed money to liberate himself from a rela-tionship he no longer enjoyed. He earned it and saved it to the point that he could close one door and open another. This is real-life personal fi nance. This, too, is the religion of rich.

***

I came to the religion through my personal evolution, in part, by observing my father. He was an intelligent man with an intentionally simple ethos: Work hard, play hard. He read Shakespeare, invented machines, created a new form of freshwater fi shing bait, sold plastic photo album inserts for a living, painted landscapes, hunted in northern Canada, and listened passionately to Puccini. Every penny he made he spent on stuff: rifl es, fi shing rods, books, golf clubs, extrava-gant gifts for my mother. He often spent it before he made it. And he had a wallet full of credit cards, all stretched to the max. He even pawned my mother’s engagement ring to pay for his toys.

For a reason that I’ll never learn (my father died before I could ask him, when I was 17), he took me with him to the pawnbroker the day he exchanged my mother’s engagement ring for $1,800 in cash. It looked like a banking transaction–––the shop was silent, businesslike, even secretive—but I knew there was something more to it when Dad made me swear to God not to “say a damn thing about this to Mom. Do you hear me—look at me—not a thing.”

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My father never got the religion of the rich, and he never got rich. He never even had the peace of mind of knowing there was a nest egg in the bank because he never created one. And he died at age 40, in part because he ran out of money, owed a great deal, and had no place to hide. I fi rmly believe that if he had learned the timeless code of the religion of the rich, he would be alive today. But he would have none of it. He was convinced that money was not worth thinking about, that he was a poet of life, and that art would prevail. That he could make it and spend it, make it and spend it, forever.

He was wrong.

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Chapter 4

Fairy Tale Finance

I t was the spring of 1984. The letter from Sam Walton arrived at Dion Friedland’s offi ce in Johannesburg, South Africa, looking like any other piece of mail piled on his

desk. But with one important difference: Given the name on the envelope––Wal-Mart––Friedland knew that this could be the kickoff for Chapter 2 of the most extraordinary journey in his life.

It was only months earlier that Friedland had received a letter from Wal-Mart’s founder, who was already the rich-est man in the United States, asking if Walton could visit and observe Friedland’s Dion Discount Stores. The South African owned the largest discount chain in his country and, although Wal-Mart was already a global retail giant, Walton was act-ing on his lifelong philosophy that he could and should learn from anyone who had made his or her mark in the world.

For fi ve grueling sunrise-to-sunset days, a tireless 67-year-old Walton studied Friedland’s mass-merchandising techniques

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(many of which are now standard at Wal-Mart) and interviewed Friedland’s customers, store managers, checkout clerks, mar-keting staff, merchandisers, and competitors. Friedland showed Walton the shopping centers he was building with his stores as the anchor tenant. Walton sucked it all in, and years later Wal-Mart replicated the idea of other stores across from the checkouts in its super stores. Moving from location to loca-tion, Walton—with his trademark legal pad and tape recorder in hand—collected a wealth of information on Friedland’s enterprise, which was named Dion after its founder. In return, Friedland had Walton address the management of Dion Discount Stores in several meetings, where Sam enthusiasti-cally shared his knowledge of retailing. Before starting his talks to the management, Walton insisted on learning the fi rst names of all of the 20 to 30 people present at each meeting. This was accomplished by Walton in a remarkably short time. Learning people’s names was a skill Walton had mastered that was an invaluable aid in motivating Wal-Mart employees.

His mission accomplished, Mr. Sam, as he was affec-tionately known within the Wal-Mart world, returned fi rst-class to the company town of Bentonville, Arkansas. This needs explaining. Friedland told Walton he would arrange Sam’s trip details with his assistant at Wal-Mart. In doing so Friedland told her the trip to South Africa was grueling and that Sam should travel fi rst-class. As it transpired, this was the only fi rst-class fl ight Walton had ever taken.

Walton absorbed his copious fi rsthand research and then returned the favor, inviting Friedland to visit him at his home in Bentonville. Dion jumped at the opportunity to observe a legend in action on his home turf and immediately accepted.

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And then Friedland began to daydream about the great Walton and what the retail czar’s lifestyle might be. A worldly man with great panache and a taste for the fi ner things in life, Friedland had notions about rich American Southerners and the way they build small-town palaces for themselves. Given that Mr. Sam was the richest of them all—a multibillionaire—Dion believed he would enter an American fairy tale kingdom in the form of the Walton estate: a Graceland in Arkansas. However, knowing Sam Walton personally and by reputation, he had reservations about just how lavish his lifestyle might be. Nevertheless, he was in for a surprise.

Dion recalled the experience as we strolled the beaches of Cap Juluca, his luxurious resort on the Caribbean island of Anguilla, where I was vacationing:

A Wal-Mart plane whisked me from Tucson airport to Bentonville, and the pilot drove me from the air-port to the Walton home. The scenery was all small-town American ticky-tacky: gas stations, rib joints, diners, and cardboard houses with dogs barking on the front lawns. I kept waiting to drive past these Spartan neighborhoods to the little enclaves of wealth you can fi nd in almost any part of the U.S. You know how suddenly the homes get bigger and the proper-ties more expensive and the Fords at the curbs give way to Lincolns.

But it never happened. The car pulled up to a modest three-bedroom ranch house, the kind of home one of

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my store managers would call his own, and proclaimed, “Walton residence.” I thought it was a joke, but it was truly Sam’s house. It was one of those moments when you rethink much of the calculus you’ve walked around with your entire life. You know that the pieces fi t together in a way you haven’t perceived before, but you can’t get a handle on it just yet.

The modest home Friedland saw was more than a home—and that’s what set off his mental chain reaction. It was a refl ection of the man who had been Arkansas’s fi rst Eagle Scout, built its most successful business from scratch, amassed enormous wealth, and was a member of the religion of the rich. The home was a symbol not of money, but of a philosophy, and a lifestyle that refl ected that mind-set.

Friedland said, “When I walked to the front door, a handwritten note on a piece of loose-leaf paper was Scotch-taped to the knob: At church. Be back soon. Let yourself in.

There were no butlers, no housekeepers, and no signs of anything but a working family living comfortably in a clean, sparse, and well-maintained home. A tennis court in the backyard was the only sign of indulgence, and it seemed out of place in this American Gothic setting. As Dion sub-sequently learned, Sam’s original house had burned down a dozen years earlier. To save money, Sam rebuilt the house using the same foundations. Dion’s bedroom at the house had an adjoining bathroom. The vanity was made of Formica and there was a large bowl of small cakes of soap Sam had meticulously retrieved from every Days Inn, Howard Johnson’s, and Holiday Inn he stayed in.

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Half an hour after Friedland let himself into the Walton abode, Mr. Sam and his wife, Helen (at one time the richest woman in the world), arrived, Helen in her unmemorable car and Sam in his battered pickup truck. Warm greetings ensued—the kind of genuine welcome that comes straight from the heart in a small town. As Sam went to change from his Sunday best to his civvies, Dion and Helen talked about life in retailing, the differences between Johannesburg and Bentonville, and the pleasures of spending a day at home with family and friends. Looking through a window toward the Walton tennis court, Dion remarked that Sam, a lover of the game, must be on the court every free moment he had.

Helen answered, “Well, not as much as you might think these days. As you can see, it’s a hard surface and that’s begin-ning to take a toll on Sam’s knees.”

Again, Dion had to recalibrate his mental calculus. “Helen, for Sam’s next birthday why don’t you simply resurface it with clay or Har-Tru? It will be much better for his knees.”

Mr. Sam’s wife—valedictorian of her high school class in Claremore, Oklahoma, and the daughter of prosperous banker and rancher L. S. Robson—had to think about this as well. She responded, “My, that would cost thousands—and then we would have no one to maintain it.”

Like the others you have met to this point—Simon, Icahn, Slim—the Waltons hold money in profound respect. They have a deeply ingrained sense of thrift that does not ebb and fl ow with the sums of money in their bank accounts. The only thing they would ever do to excess would be to work; and given their view that work is sacred and pure, they would never view any amount of it as excess .

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When it comes to money, they are determined to think about it and to protect it, before and if they ever spend it.

By contrast, Friedland freely admitted to me that as a young man he was not a member of the religion of the rich at the time his life unexpectedly intersected with Walton’s. First selling shirts to other students and then as a part-time sales rep while at law school, Friedland started his business, called Rave Discount Stores, at age 20, in 1963, while still at law school, with roughly a thousand dollars he had accumu-lated through his part-time sales ventures. In fi ve years his company went public through a reverse merger. He sold his business to a public company and ended up with 80 per-cent of the equity of the merged companies, now called Rave Stores. In 1969 he sold the public company to the sec-ond largest retailer in South Africa and, after retiring briefl y, started Dion Discount Stores in 1970. In 1978 he bought back Rave Stores (which by then had accumulated an enor-mous tax loss) for a song, and merged Rave Stores into his Dion Discount Stores.

As he became increasingly prosperous, he surrounded himself with trophies of success.

He believed that everything he touched would grow in value. But he would learn otherwise the hard way. Those without a sense of fi scal stewardship that is central to the religion of the rich rarely see the inevitable course of their spending. It is a costly myopia. In late 1985 Friedland sold Dion Stores and invested the proceeds in stock markets around the world, using leverage. By 1987 his wealth had grown substantially, but it was subsequently halved in a day: October 19, 1987, when the New York Stock Exchange crashed for the second time in history.

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Ten years later, the pain of the memory was written all over Friedland’s face. He recalled:

I wasn’t broke, but it’s very tough to lose 50 percent of one’s wealth in a day. It was a shattering experi-ence. For weeks I could do nothing but sit by myself in the dark of movie theaters and let time pass, all that hard work, all that success, all the publicity, all the joy, building my company to be the leading dis-count chain in South Africa constantly fl ashing through my mind. I didn’t want to see or talk to any-one. People would try to rally me, to lift my spirits, to put it all in perspective, but I could only see their lips moving. It was a lonely time, a time of great refl ec-tion. My world came to a crashing halt.

As my life to that point passed before my eyes, I believe my values were changing. No specifi c lessons I can point to, but as I was thinking and watching movies and guarding my privacy, the fog began to lift. I started waking up in better spirits and my confi dence began to return; and dreams of renewed success connected with this energy, and I returned, on a small scale at fi rst, this time investing in hedge funds while still using lev-erage. The next six years were good to me. These were golden years for George Soros’s Quantum Funds, and my leveraged investments prospered. By 1994 I had launched my global hedge fund company, Magnum Funds. Learning from my 1987 stock market catastro-phe, I was convinced that hedge funds were the best way to preserve and grow capital. Shortly thereafter I founded the not-for-profi t Hedge Fund Association.

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Never one to remain on a small scale, Friedland would turn on the jets, not only expanding his hedge fund com-pany but also developing Cap Juluca into one of the top hotels in the Caribbean while starting several other cutting-edge companies and growing his wealth again.

***

The investments made by men and women of all income levels promise fairy tale returns, but fairy tales are a charm-ing and childish form of fi ction.

In personal fi nance, the fairy tale begins with an allur-ing ideology and mentality that is imposed on us by others, which holds that our worth as people is in direct proportion to the number of dazzling objects we are able to surround our-selves with. This distorted view violates what money is and what money is not. Recently, I was fl ipping through a copy of Departures magazine. The pages were awash with $25,000 Patek Philippe World Time watches, $200,000 shares in NetJets Gulfstreams, $14,000 Ralph Lauren Ricky alligator bags, and $5 million vacation homes set on Jack Nicklaus golf courses.

Lo and behold, we may begin to view this dazzling array of beautiful things as a passport to a privileged lifestyle. Not one that we can aspire to, but one that is virtually required if we are to view ourselves as successful—if we are to take our place within the inner circle. The question is Who creates the circle and why do you want to be in it? Asked by Fox Business News why he doesn’t have a yacht, Warren Buffett said, “It would only complicate my life. I already have everything I want.”

Is the most successful investor in history outside of the winner’s circle because he has none of the Departures ’ toys

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except a NetJets (and only because he owns the company), has lived in the same house for nearly 50 years, and hasn’t bought a new suit in a decade? The notion that an endless necklace of beautiful things is a passport to a wealthy life is the platform on which Fairy Tale Finance is based.

In order to break the timeless code to wealth and stop believing in this fairy tale, we must challenge the mind-set that tells us that material possessions are symbols of wealth. We have to stop telling ourselves we need to live the “model” lifestyle; stop trying to keep up with the Joneses and instead work to keep up (so to speak) with the Buffetts. As there is no single authentic model, the vision of how you choose to live must be derived organically as opposed to being superim-posed on you by a stand-ard that no one else has the right to create. The religion of the rich is about libera-tion, freedom, letting go, personal choice, confi dence, substance, genuine joy, and beauty. It is about making the right moves, based on a personal philosophy and a determination to live a life that suits you and your family.

In order to break the timeless code to wealth and stop believing in this fairy tale, we must break away from the mind-set that tells us that material possessions are symbols of wealth. We have to stop telling ourselves we need to live the “model” lifestyle; stop trying to keep up with the Joneses and instead work to keep up (so to speak) with the Buffetts.

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Being a member of the religion of the rich means to be content. And this contentment can only be achieved if we know who we are and what we want. Yes, we want to create true wealth––and the more of it the better. The reli-gion of the rich holds this as a basic tenet of its philoso-phy and actions. But the wealth must be guarded, protected, and treated with a determined sense of stewardship. Pilgrim minister John Robinson (who traveled on the Mayfl ower ) wrote “Both poverty and riches have their temptations . . . and of the two states . . . the temptations of riches are more dangerous.”

To protect against the temptations of riches, to build wealth and to help assure a wealthy life in the tru-est sense, it is wise to create a “Living a Wealthy Life Compass” for every stage and crossroad you encounter. Think of this as a philosophical calculator that guides you in making the right decisions when it comes to the fusion of lifestyle and fi nance.

Let’s see how our compass applies to retirement. Ask yourself the following questions, and then refl ect the answers in your compass:

Do I really want to retire, now or at any point? If so, how do I defi ne retirement? If I change my profession, do I want work at a more appealing job or to make a major transition, perhaps to painting, writing, or teaching? Do I prefer a home, condo, or apartment? Can I make do with 1,000 square feet? Or do I aspire to, and do I really need, 3,000 square feet or more?

•••

•

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Will I be happier in a rural, suburban, or urban environment? Will I need to make more money or will my nest egg cover me? Is fi nancial peace of mind more important than pursuing a fairy tale lifestyle? How will that affect where and how I live?

Once you know what you really want, as opposed to hav-ing your dreams and goals created for you by fairy tale fi nance , you can reverse-engineer your planning to the dollar sums required to fulfi ll your goals. Most commonly associated with software development, reverse-engineering refers to the proc-ess of taking something apart and recreating it to achieve an enhanced result. As it applies to personal fi nance—specifi cally our drive toward building and maintaining a wealthy life—reverse-engineering involves a re-examination of many con-ventional values imposed upon us by a world that wants to tell you how to live your life. Instead, begin driving toward your own vision within a realistic fi nancial framework that provides you a passport to the religion of the rich.

Once you buy into a vision that others create for you, once you acquire assets for ego reasons, you are driven by money instead of being nurtured by it. Instead of the money work-ing for you, you work for it. This is joyless.

•

•

•

Instead, begin driving toward your own vision within a realistic fi nan-cial framework that pro-vides you a passport to the religion of the rich.

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Recently my wife and I had dinner with Kent and Zadie, a couple that my wife, Carol, met through our busi-ness. Within a half hour of their entering our home, I could tell that our guests were permanent riders on the impress-everyone roller coaster.

Immediately after saying our hellos and pouring a fi rst glass of Pinot Noir, Kent blurted out a statement masquerad-ing as a question: “Did I tell you we just purchased a 110-foot Palmer Johnson yacht?”

Did he tell me? I’d never met him before, so how could he have told me? What he didn’t say, but what I knew, was that Kent paid more than $3 million for a speedboat to have the right to brag about it. He admitted that he didn’t plan to use it much, as it was anchored in Bermuda, and, as Kent continued his bragalogue, “with my company grow-ing at such a meteoric rate, I don’t have much time for vacations.”

But to boast about the boat was another matter. Bill Simon, who had a zillion times Kent’s wealth, would never have even thought of doing that. One had religion; the other didn’t.

You see, it’s not how much money you have or keep that is the important issue. It is how and why you spend it. Or invest it. Or blow it. Or fail to respect it.

***

The religion of the rich provides a compass for the management of your life

It’s not how much money you have or keep that is the important issue. It is how and why you spend it. Or invest it. Or blow it. Or fail to respect it.

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and your money as one holistic process whereby the com-ponent parts reinforce each other. Let’s view this from the perspective of the career you build and sustain to generate your money (and hopefully, your wealth). Furthermore, let’s see how fairy tale fi nance comes into play.

Working hard is widely viewed as a virtue. Those who, in proverbial fashion, put their shoulders to the grindstone, burn the candle at both ends, or are early to bed and early to rise are widely perceived as the soldiers of success who will generate personal wealth and be the rich among us. This is partly true and partly fairy tale, and it is important that you know both sides of this equation.

The religion of the rich has a different take on the success/work axiom. The all-important prism that allows us to see things from a new perspective applies to all of the clichés about work.

A classic defi nition of work is the exertion or effort directed to produce or accomplish something; labor; toil (Dictionary.com).

This is one way of looking at it, but a mule can work like this. This defi nition suggests the all-too-common think-ing that life must be focused on producing things and that the harder we work and the more things we produce, the more successful we will be. But here’s the rub: This view holds that quantity dominates quality, but this is the diamet-ric opposite of how your life can be lived.

One of the key epiphanies of the religion of the rich is that the truly wise work toward an equation that reduces the amount of work engaged in while simultaneously increasing the amount of income gen-erated. The direct proportionality of traditional thinking or fairy tale fi nance—more work equals more money—is

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dismissed as small-minded and turned on its head, pre-senting the powerful revela-tion that less work can equal more money. The ultimate goal is to learn the art and science of making money while you sleep.

Millions of hardworking men and women toil away at their jobs, giving 100 percent dedication and commitment, only to come home every day exhausted and with no other option but to return to the treadmill the next day. In con-trast, think about the members of the religion of the rich we have met to this point. Bill Simon. My neighbor Slim, the dry cleaner. Carl Icahn. Warren Buffet. All are dramati-cally different, but all decided they would fi gure out a way to make money while they were sleeping. They would work hard, but they would not be beasts of burden. They would not allow limitations to be placed on their ability to achieve wealth and, most important, to live wealthy lives.

***

Let’s explore the importance of limitations; specifi cally, how limitations can be disguised as opportunities .

Assume you are paid by the hour and are compensated by what you believe is a substantial wage. Based on your education, skill, and experience, this may be $15, $50, or even $500 per hour. Based on your view of your own poten-tial, you may believe you are doing just fi ne, but in reality you have allowed yourself to operate within the confi nes of a stacked deck. When it comes to your career, you can make only as much money as there are hours in the day.

The ultimate goal is to learn the art and science of making money while you sleep.

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Consider this statement: “As a corporate lawyer, I earn $200 per hour.”

What the lawyer is really saying is: “I am a highly suc-cessful person earning $200 per hour in a world where most people would be jubilant to earn $25 per hour.”

But this is how Slim, the dry cleaner, might process the same statement: “I own fi ve stores. When I am at one, the four others are still pumping money for me. And if I stay home and sit in the sun and do nothing but listen to music and nap, I make money from all of my stores even though I am doing nothing.”

To the religion of the rich, the lawyer’s hourly-wage brag is hollow and a form of self-deception. If you are working by the hour, you have boxed yourself into a corner that has severe limitations written all over it. Sure, to some, a wage of $50 or $250 an hour may be attractive, but why impose limitations on yourself? If you change from an hourly fee to a success fee—in other words, claim a percentage of the favorable results your clients gain because of your brains and guts—your potential soars. There is no limit to your moneymaking ability.

At my fi rm, prospective clients frequently ask if they can engage our services by the hour. Almost always I say, “No, thank you, we don’t work that way.”

Why do I respond in this manner? Am I being cavalier? Am I set in my ways? Perhaps, but it is for a good reason. I have learned to make money while I sleep. When a client hires us to identify a strategy that will propel the growth of their business, the solution that we recommend may emerge through a sudden brainstorm or an epiphany that takes minutes to materialize. It can happen that quickly sometimes because we have the experience and the vision

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it takes to generate powerful business-building strategies. We can often identify catalysts for growth that others would fail to see and to create. Should we charge an hourly or a per-minute fee for that? Clients may like that, but my induction into the religion of the rich revealed how foolish and limit-ing that form of compensation is.

An hourly wage can actually penalize you for being smart and intuitive and for developing a sixth sense that oth-ers can benefi t from. In 1999, I woke up one September morning with an idea for an automated sales-lead genera-tion system. A few weeks later, I sold that idea for $1.1 mil-lion to the CEO of a major insurance company. Should I have charged for the one minute during which the mental thunderbolt of the automated-lead system hit me, or for the value it would bring to my client? I chose the latter. The cli-ent paid, and was happy to do so.

***

Throughout your life, no matter what you are doing now or how you are being paid for it, you need to migrate toward making money while you sleep. Look at the members of the Forbes 400: John Kluge, Forrest Mars, George Soros, Sanford Weill, Sumner Redstone. No one in that august group would even consider working by the hour. To get on the Forbes

Throughout your life, no matter what you are doing now or how you are being paid for it, you need to migrate toward making money while you sleep.

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List today, you need a minimum net worth of $1 billion-plus––and those are the poor guys in the club. They all know that accumulating wealth is more about how far you can see than how hard you can work.

On a fundamental level, consider two young women, Jana and Skye, newly minted graduates of Michigan University who set out on their respective careers. Jana is attracted by the lure of high hourly fees and enlists in New York University Law School. Skye, who sees greater possi-bilities and who balks at limitations, lands a job at Dunkin’ Donuts as a store manager trainee. To Skye’s friends, this is a shocking and even embarrassing career choice: a beautiful and talented Michigan graduate enlisting with the likes of Dunkin’ Donuts?

But Skye has a plan: to learn retailing not from the elite environs of Bergdorf Goodman but instead from the school-of-hard-knocks land of Dunkin’ Donuts. After toiling for seven months at a job well below her station (as identifi ed by the myopic observers and her would-be mentors who have only a short-term view of life and money), Skye moved on to a year-long stint at the Starbucks boot camp and then, backed by a $52,000 loan from her parents, opened her own muffi n shop in a college town. Her business model—based on all-natural muffi ns, unique coffee concoctions, and 24/7 operations—fi t student tastes and lifestyle to a T. Within a year, Skye had three stores, open every minute of every day, making money for its owner while she slept. All of this time, Jana was still in law school and lunging headlong toward an hourly-fee career that would pay only as long as her eyes were open and she was busy practicing law.

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She would not make money while she was sleeping. She placed a limitation on herself. This is in direct violation of the religion of the rich . . . of the timeless code.

***

Now, you may be thinking I am an hourly worker: a Wal-Mart warehouse supervisor, a physician, a court stenographer, a securities lawyer. Does this mean I can’t benefi t from the timeless code? That I cannot be a member of the religion?”

It means nothing of the sort. Fortunately, it is simply another fantasy of fairy tale fi nance. Nothing but your own refusal to transition to new ways of thinking about money and life and how they intersect can prevent you from join-ing and benefi ting from the religion of the rich . You are absolutely free to reduce the impact of any and all limitations to wealth generation or to completely eradicate them. It will take planning, time, resolve, and determination, but it can and should be done. The best part is that you don’t have to blow up your current career and start all over again—not overnight, anyway.

Assume that an hourly-wage career is your limitation. You can begin to transition to an open-ended opportunity by starting a business that another person—a friend, relative, or professional manager—runs for you in the start-up stages. You can invest in a franchise or launch an enterprise of your own from scratch. Yes, there is risk involved, but all of life has risk, and the winners embrace risk prudently and use it as a stepping-stone to personal and fi nancial growth.

The business you will own can provide an additional income stream, allowing you to make money while you

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sleep, and can also provide a pathway out of your hourly job if you choose to segue full time into growing the venture that has your name on the door (and the bank account).

George Soros—the Hungarian-born fi nancial specula-tor who has made most of his nearly $10 billion while he slept (through automated trades in global currencies)—took a path much like this.

While in his mid-thirties, Soros worked at the fi nancial fi rm of Arnhold and S. Bleichroeder, LLC, where he rose to the position of vice president. Although he didn’t work by the hour, his compensation was capped by the fi rm’s salary and bonus structure. Seeking to escape these bounds, Soros petitioned management to set up an offshore investment fund, First Eagle, for him to run. When investment regula-tions impinged on his ability to manage the fund at free will, he quit to go into business for himself. The fi rm he founded would evolve into the Quantum Fund, catapulting Soros into the ranks of the wealthiest people on earth.

Although the level of wealth gained by Soros is astro-nomical, anyone with the will, the insight, and the determi-nation can open new streams of income.

Last year, my company developed an online division to sell sales and management coaching products to the world. Think of the simple beauty of it: While I am fast asleep, peo-ple in the United States, China, Japan, Germany—every country on the planet—log on, make purchases, and effec-tively wire money into my account. While I am fast asleep, lost in dreamland.

***

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If you feel that a new business venture is not for you, it is still possible to make money while you sleep. Take the fol-lowing course of action:

1. Refuse to spend at least 20 percent of your monthly income.

2. Invest this sum as follows: 30 percent in U.S. Treasury bills. 30 percent in an S&P index fund. 30 percent in real estate or real estate investment trusts (REITs). 10 percent in high-risk/high-potential reward invest-ments in something that either you or someone who you trust has knowledge of.

A certifi ed fi nancial planner can help you to create this portfolio. Continue to invest in it according to this alloca-tion and let it work for you while you are at rest.

Sleeping and earning, sleeping and earning—this is a pillar principle of the religion of the rich .

•••

•

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Chapter 5

The Congregation

W hen I was a college student, I landed a part-time job at the Long Island estate of John Hay Whitney, an American aristocrat and one of

the 10 wealthiest men in the world. Until I went to work for him, I hadn’t heard of Whitney

nor did I have any idea that his kind of world existed out-side of novels and movie screens. During the 18 months I worked at Greentree, I never actually met Whitney, and to this day I have no idea what he looked like. I was simply absorbed, incognito, into his vast empire. It started out as a job and turned into a revelation.

My father had died and I needed a source of income to help make ends meet during my college years. I applied to the placement offi ce at C.W. Post College, where I was earn-ing my B.A. in political science. I was expecting a traditional student gig as a waiter or a supermarket stock clerk (work I’d performed throughout my high school years), so I was surprised to fi nd myself driving down the service entrance

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to a massive estate in Brookville, New York. The town itself was fi lled with Olde English mansions and its residents would host weekend fox hunts, dressed in the full regalia of scarlet coats and black riding breeches. It was like turning back the clock to the sixteenth century, particularly for a kid like me, who was more familiar with apartment-building fi re escapes than the traditions of the equestrian lifestyle.

The Whitney estate was baronial, replete with a majes-tic main residence and a network of smaller homes built to house the full complement of botanists, horse trainers, and dog breeders who supervised each of the Whitney fam-ily passions. In many ways, it was like a feudal manor: the Whitneys were the lords and ladies and the world-renowned experts who oversaw each facet of their empire were their vassals.

I was assigned to assist a famed botanist whose days were spent breeding new orchid strains to be named after members of the Whitney family. A lovely British man, he lived on the estate with his wife; the couple had left behind their family when they steamed across the pond to join the Whitney empire. They adopted me as a son at a time in my life when I need familial bonds, and the job became as important to me psychologically as it was fi nancially.

In the year and a half that I worked at the Whitney estate (and while it became my second home), the Whitneys didn’t visit even once, busy as they were at their other homes: the plantation in Georgia, town house in Manhattan, eques-trian farm in Llangollen, Wales, summer home on Fishers Island, near New London, Connecticut, and golfi ng cot-tage in Augusta, Georgia. That didn’’t stop a parade of the

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rich and famous, including members of England’s royal family—Queen Elizabeth II and Prince Philip—from taking up residence at the estate for weekend getaways of luxurious seclusion.

For the peasants like myself, it was verboten to enter the mansion at any time, except in the weeks before Christmas. At that point, we were charged with a multitude of holi-day tasks. I was assigned to the team responsible for hanging beautiful drapes of English holly on the inside of every one of the more than 250 windows.

It was then that I had one of my Rich Is a Religion epiph-anies. What I witnessed across the threshold of the Whitney’s inner sanctum took me completely by surprise. It was as if I had discovered a massive fraud.

The moment I was dismissed from work, I bee-lined for a Mobil station on Northern Boulevard, a few miles and another world away from the estate, to call my mother.

MS: For all we’ve heard about them, Mom, the Whitneys are not really rich. I was inside the house today, and I have to tell you, the pieces don’t fi t together.

M om : What do you mean Mark? What pieces? I saw that estate myself the day you drove me along the grounds. That’s not a home, it’s like a small country.

MS: I know what you think but I was in the house and . . . and the furniture is threadbare. If they are really rich, they would buy new sofas and chairs.

My blind spot, due in great measure to the fact that I had never before been exposed to the religion of the rich, was that while my world respected brand-new love seats

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from Macy’s, the Whitneys collected, preserved, and wor-shipped heirlooms. Why would they purchase new rugs when the Persian Tabriz treasures their grandparents pur-chased from traders in the eighteenth century only gained a more lovely patina and became increasingly valuable with age? They knew instinctively that new rugs mean that you have new money; heirlooms mean that you belong to The Religion. The Club.

***

John Hay Whitney was born into the club. His family roots were deeply planted in the religion of the rich. He was a descendant of both John Whitney, a Puritan who settled in Massachusetts in 1635, and John Bradford, who came over on the Mayfl ower . The family built the American Tobacco Company and earned fortunes in newspapers and fi lms. John Hay Whitney was the publisher of New York’s Herald Tribune and fi nanced the making of the Hollywood classic Gone with the Wind . The Whitneys consistently grew their wealth while indulging in their true passions: horse racing, botany, and philanthropy. The family entered four horses in the Kentucky Derbies of 1932–1934 and 1939, and John, an outstanding polo player, made the cover of the March 27, 1933, issue of Time as a world-class sportsman.

The Puritan ethos that is at the core of the reli-gion of the rich, of the timeless code, ran through Whitney’s DNA. The Puritans believed in amassing wealth and serving as God’s fi duciary to that wealth throughout one’s life. Although Whitney lived exception-ally well, he invested exclusively in appreciable assets, from his

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residences to the Tribune . The Whitneys were forever rich. They inherited great wealth, earned more, grew richer while they slept, protected it all, and viewed money and the power it can wield with great respect.

Yes, Whitney and his fellow members of the religion belong to an exclusive club. But not in the usual sense of a strictly defi ned organization, in which the mem-bers decide unilaterally who may be admitted and who may not. The good news is that you don’t have to be born into the club. This club is open to all who have the drive, determination, insight, and instinct to enter. You need no one’s permission. You simply need to know, to learn, and to practice the code that gains you entry and keeps you ensconced within the privileged cir-cles of the rich.

A key pillar of the code is to never view money prima-rily as the instrument that allows you to buy material assets and pleasures. For the most part, the rich view this earn-it, spend-it addiction as the Achilles’ heel of middle class dreamers who will never enter the doors of the club. Instead, those who practice richness as a reli-gion view money prima-rily as a means of attracting

They inherited great wealth, earned more, grew richer while they slept, protected it all, and viewed money and the power it can wield with great respect.

The good news is that you don’t have to be born into the club.

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more wealth for the power and the security that it provides. The material rewards may be inevitable, but this will not drive their behavior.

***

In the mid 1990s, Carl Celian Icahn was struggling to make TWA, the airline he had acquired, profi table. This was a daunting challenge given that the sick bird once owned by Howard Hughes had a cumulative profi t—after 50 years of fl ying millions of passengers around the world—of less than zero. To complicate matters, The Pension Benefi t Guarantee Corporation, a quasi-governmental agency, was threatening to hold Icahn personally liable for about $1 billion of employee retirement funds—at the time, the sum total of Carl’s wealth. If the government prevailed, and this was a period in history when corporate raiders were like clay pigeons in the cross-hairs of politicians seeking to bring them down, he stood the risk of being penniless. Interestingly, he never seemed to be ruffl ed by the threat. It was as if he believed he would always fi nd a way to outsmart his adversaries whoever they may be and however they may be plotting to defeat and humiliate him. His mission, I would learn from him over time, was far more important than the money he earned from it.

But unlike Carl, I kept dwelling on the PBGC threat looming over his fortune. And I decided to air my concern and to suggest a solution. One evening, as we were sitting down to a late dinner of steak and fries after a hotly con-tested tennis match, I made a suggestion:

MS: I know a guy who is expert at setting up private bank accounts in Liechtenstein. Why don’t you put away $50

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million there in a perfectly legal way, all with post-tax dollars? If the PBGC is successful in collecting most of your wealth, you will still have $50 million that in all likelihood they will never fi nd. I know you think that’s chump change, but it’s not. And if, God forbid, Carl, you were down to your last $50 million, it would serve as a base to build back from.

At the time we were in Carl’s home, within the lovely 200-acre compound that his smarts, determination, and imagination had purchased—and that his sense of religion had protected—and it could all be wiped away by a bureaucrat’s whim. The Liechtenstein plan made perfect sense to me, but not to Carl. It didn’t take him fi ve seconds to respond to my brainstorm.

CI: I don’t like the Liechtenstein idea. I don’t want to put any of my money out of my reach.

MS: And the reason is?

Icahn paused for a moment, pondered, stared at the ceil-ing, and then at me. I had the distinct feeling that he was debating, in real time, whether to reveal one of the secrets of his fi nancial methodology.

CI: I cannot do that because my money is my army and I need my army around me.

To those outside of the religion, Icahn’s money would be viewed as the ticket to a never-ending shopping spree, to jew-els, homes, cars, and every

I cannot do that because my money is my army and I need my army around me.

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imaginable toy under the sun. But to Icahn, money was a magnet, a force that enabled him to intimidate companies by buying signifi cant chunks of their stock, to force his way onto their boards of directors, to mount a steady drumroll of pressure and, ultimately, to acquire them or threaten to do so. This capitalist chess game could not be played without money, without his army, and to Carl, a chess player at Princeton, this part intellectual, part fi nancial bat-tle was and is the real joy in his life. One that has made him one of the wealthiest men in the world.

Here’s where the reli-gion becomes so powerful and interesting. It drives the accumulation and reten-tion of wealth because it diverts believers from the destructiveness of wanton consumption and directs them—Icahn, Gates, Jobs, Buffett, and the thousands who thrive in absolute pri-vacy well beneath the media radar screen—to the non-material things that matter most to them, whether that is mergers and acquisitions or fi shing in a pond with their children. They have the power, the fl exibility and the independence to

It drives the accumulation and retention of wealth because it diverts believers from the destructiveness of wanton consumption and directs them—Icahn, Gates, Jobs, Buffett, and the thousands who thrive in absolute privacy well beneath the media radar screen—to the nonmate-rial things that matter most to them, whether that is mergers and acqui-sitions or fi shing in a pond with their children.

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decide what they want to do and when they want to do it. Money is their bedrock, but not their be all, end all.

The fact that their professional joy brings them the trappings of wealth is of secondary importance. Most live well below their means . Warren Buffett is a perfect example. A devout member of the religion of the rich, Buffett—the son of a stockbroker and a congress-man—still lives in the home he purchased in Omaha’s Dundee neighborhood for $31,500 in 1958. In keeping with the Puritanical view of fi nancial stewardship, the Oracle of Omaha has bequeathed 83 percent of his $55 billion fortune to The Bill and Melinda Gates Foundation and plans to give it all away when he and his wife Astrid die. He has created a fortune investing money in what he perceives to be under-valued assets, but has no interest in the kind of consumption that is pervasive and destructive outside of the religion.

“It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to paint my picture every day for the rest of my life. And GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though . . . There’s nothing material I want very much” (Buffett, quoted in Roger Lowenstein, Buffett: The Making of an American Capitalist ).

***

Members of the religion of the rich do business with, gain fi nancial advice from, and socialize with an extended family—think of it as a board or a

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congregation—that is based on trust and an unwrit-ten bond that ties them together for life.

When Bill Gates wants to talk to a kindred spirit, he doesn’t call Donald Trump, but instead boards his jet for Omaha to meet Warren Buffett, 25 years his senior. And when Buffett wants business insights beyond his own extraordinary knowledge, he rendezvouses with Gates. And when John Hay Whitney wanted counsel on his vari-ous holdings, he would confi de in his sister Joan Whitney Payson, owner of the New York Mets and of a neighbor-ing estate on Long Island. They would stroll the expansive grounds and talk.

Carl Icahn seeks advice in a similar fashion. Here’s a man who can summon virtually anyone in the world to his home or offi ce. But when he wanted capital, before he had much of his own, and throughout his life when he wanted a sounding board, he would turn to his Uncle Elliot Schnall. It was Elliot who lent Carl the money to buy a seat on the New York Stock Exchange. It was Elliot to whom Carl turned when he wanted advice on whether to ask his fi rst wife, Liba, to sign a prenuptial agreement. It was Elliot he turned to when he decided to divorce Liba in order to be with Gail. And it was Elliot whose opinion he most valued when he selected a waterfront estate in East Hampton.

Also inside the inner circle was his brilliant and eru-dite mother, Bella, who played a major role in keeping Carl grounded, reminding him more often than he could bear it that, because he had never earned an M.D. after his name (she never forgave him for not becoming a physician), he was hardly a great success in her skeptical eyes.

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Still, Carl and his mother had a working partnership for life, based on a shared intellectual framework and a unifi ed view of the importance of fi scal discipline, of living below one’s means, and of having the personal courage to live life without concern for other people’s opinions about what you do and how you do it. The way that the religion of the rich keeps it all in the family—a family that is not necessarily limited to blood relatives but centered on close friends and advisers—provides powerful advantages:

You work with people who actually know you and care about your interests. You are surrounded by genuine advisers, as opposed to salespeople masquerading as advisers. Great companies often have an involved, honest, and outspoken board of directors. Your family of advisers fi lls this role for you. You manage the personal fi nancial side of your life within the cocoon of genuine love and affection given by an extended family.

***

When you contrast this with the superfi ciality of pure-business interactions, the advantages are clearly with the extended family: The differences are like night and day. No matter how many fi nancial brokers promise you a per-sonal, one-on-one relationship, they resort to cookie- cutter plans. You are hardly treated as a unique individual. You are a number no one really cares about. All the marketing lingo aside, it is not about relationships but instead

•

•

•

•

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is focused on the transfer of money . The real value of a genuine fi nancial relationship occurs between the lines. This takes a level of intimacy that only a club, an extended fam-ily, can provide. Some fi nancial fi rms can provide this . . . and this is what you should seek out and insist on.

When I met a woman I will call Francesca Z, she wanted my advice on growing her women’s out-door apparel business from $10 million to $15 million in annual revenues. It struck me that there was another, more compelling motiva-tion behind the all-business facade she presented to me. So I dug in, asking questions that probed deeper into her life than a traditional business consultant would usually ask.

As our talks continued through various dimensions, I saw that Francesca really wanted to sell her business and pursue another adventure in life. Business growth would be fi ne for her intellectual goals, but her heart was pulling in a different direction. And as I know so well, sometimes the mind is the enemy of the heart.

My fi rst job was to help Francesca have a heart-over-mind epiphany, but I couldn’t do it alone. In her soul, I knew she wanted to let go and start a summer camp for adults, who were themselves seeking to fi nd a new path in life but were lacking the direction and the courage to pursue that

The real value of a genuine fi nancial rela-tionship occurs between the lines. This takes a level of intimacy that only a club, an extended family, can provide.

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dream. Francesca had written her college thesis at Hobart on Adult Dreams—specifi cally, how to keep them alive and turn them into realities just at the time when the responsibilities of life become increasingly complex and rigid. Now, after decades of parenting and business building, she yearned to reconnect with her dreams of the past and open her camp for adults. To do so, to convince her to, at least, seriously consider this dramatic change in her life, I learned from our talks that I would have to earn the trust of her four older sisters: Karyn, Rose, Winter, and Monika. This was Francesca’s Board.

Tightly bound, both as friends and as siblings, the sisters looked to one another for advice, counsel, and guidance—and ultimately for a consensus on any major step that any one of them was about to take. They looked to one another to ensure that any change was truly a good idea when viewed from a lovingly objective perspective.

This rule of the siblings’ sorority applied to me, as well. I was neither a real nor virtual blood relation to the sisters. In their eyes. I was just another adviser. One who was advocat-ing that their sister leave the business she had built to pursue a dream she had put on ice years ago. These were the same sisters who had worked as a team to see to it that she re-invested her earnings over the years, resisting the temptation to get in over her head as her income grew along with the company’s revenues, and that she was always free of debt. This was so often contrary to the so-called advice she received from bankers, brokers, and agents. Only the Board of sisters was truly in Francesca’s camp. And Francesca recognized the value of that. When I advised her to pursue the dream of

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her youth, I would have to appeal to the Board for approval. Which I did.

And the verdict was “thumbs down.” Why? “Franny has always been a dyed-in-the-wool romantic,”

Karyn, her eldest sister, informed me. “This has led to doz-ens of daydream ideas that would have diverted her from her acumen as a business woman. We have always kept her on the right path, and look at what she has accomplished.

“Yes, she has a sentimental feeling for that Hobart the-sis and the summer camp it envisioned, but this woman, my sister, falls in love with sentiment and then it bites her in the butt. Three months into the camp and she would want out. She has worked tirelessly to build her business and has never in her life demonstrated as much focus for anything else. The time isn’t right to sell it. She can have that damn camp as a hobby when she retires rich.”

The Board was right. I was wrong. They knew her. I thought I did. Second-best is not good enough. Seventeen months after the no-camp verdict, a Hong Kong investor bought Francesca’s company for a high valuation of 13 times earnings. Two months later, a wealthy Francesca, with the time and the money to do anything she wanted, opened an apparel shop on Martha’s Vineyard.

The dream of the camp had passed.

***

We are all exposed to saturation advertising featur-ing clubby advisers whispering sage advice to clients in

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old English libraries, but, in some cases, this is a mar-keting machine at work, evoking the imagery of the rich-is-a-religion approach. My experience with Strong Funds is a perfect example.

I became acquainted with Strong in the mid 1990s when my fi rm was selected to guide Strong in creating up-sell opportunities with its investors. In classic Trojan horse fashion, Strong would offer the highest yielding (by a basis point or two) money-market accounts in the nation. Heavy print-advertising schedules would lure investors seeking maximum returns. The difference between Strong and the number two and three yielding funds was hardly signifi -cant, but the words “highest yielding” wield power, and the money poured in. That’s when the Strong machine would turn on the jets, contacting investors, thanking them for their dollars, and then selling them on transitioning the money into more profi table equity and bond funds. It was a perfectly legal but highly manipulative bait-and-switch scheme.

When the money-market investments were of consider-able size—I remember checks of $30 million coming in to take advantage of the “highest yielding” promise—Strong’s senior management would call the investors to initiate the switcheroo process.

Around the year 2000, Strong Funds was in a high-growth surge and management was on a recruitment binge, hiring hundreds of young men and women to be trained the Strong way. Led into a modern glass building in the midst of a Wisconsin deer-hunting preserve (it was odd and somewhat disquieting to know that the windows were bulletproof), the

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recruits were then seated at long rows of tables surrounded by computer banks and telephone equipment.

As described in its marketing propaganda, Strong inves-tors would be guided on the telephone by highly trained fi nancial advisers. But in reality, these kids—many fresh out of school and rammed through the Strong up-sell and cross-sell boot camp—worked from call center scripts designed to match superfi cial investor profi les with any of the dozens of mutual funds posted on the blinking computer screens before them.

Nothing could be less substantial. Nothing could be less knowledgeable about the client. The client they never met. The client they knew nothing of importance about. The client that was just a number on the screen; a voice on the phone.

These ranks of polite and neatly attired young people with virtually no experience were managing teachers’ life savings, truckers’ 401(k)s, young couples’ fi rst home invest-ment savings, and seniors’ nest eggs. Armed with telemarket-ing pitches and well-pressed suits, they were designated as fi nancial professionals. As fi nancial advisers. And every day, Strong sales managers spurred them on with production contests. With spiffs for producing more sales. With bonuses for getting more callers to buy.

I was at Strong headquarters often, and I can assure you that talk of the investors’ needs was near zero. This was a dressed-up version of a classic boiler room, where collect-ing assets was the mission. Genuine concern for the investors resided in the ad copy written for the brochures mailed daily

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The Congregation

83

to prompt more calls to the kids on the phones. It was as far from the sisters’ board or the elite fi nancial services fi rm as you could get. It was a world away from the special fraternity or sorority that the members of the religion, of any income or level of wealth, surround themselves with. Their members benefi t from a highly personal form of private banking that is aware of the pretense of the marketing machine and avoids it like the plague.

The believers in the religion of the rich have it right: You need a club of your own. The kind of club that John Hay Whitney built with Joan Payson. And that Bill has with Warren. And that Carl enjoys with Elliot. And that thou-sands of others enjoy with genuine advisers as opposed to brokers.

***

You know how you can tell a real adviser—one who should be a member of your fi nancial entourage? I learned many ways, but one method stands out.

It was during a time in my life when I was giving thought to selling my business and moving to the beach to develop intellectual property on my own. This is something I like to do and that I excel at.

So I called in a life guide who had been referred to me. A life guide can be skillful at preparing your fi nances to refl ect a major change that you are contemplating in your lifestyle. The way it would work is that I would describe my

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lifestyle plan, he would then design the fi nancial blueprint to refl ect it, and I would pay him for his work and move on to the new stage in my life.

Well, it didn’t quite work that way because this gentle-man, a certifi ed fi nancial planner, listened to my lifestyle plan and advised me not to pursue it. He suggested that I still had so much I could and should do with my company, MSCO, that to go to the beach now was premature. He advised that I continue to invest my brains and my money in MSCO and go to the beach any day or week I felt the urge to indulge in the sand and the surf.

Setting aside whether my guide was right from a phil-osophical perspective (I now think he was right-on), and looking only at his credibility as an adviser, by advising me to stay precisely where I was, he cut himself out of a fee. He sold me nothing except what he believed in his heart, and the fee for that was zero.

I don’t see him very often but I view him as a member of my Board—my congregation.

As members of the club:

We are both dreamers and skeptics. The religion of the rich encourages us to extract the maximum pleasure from life, and thus we must dream of how to achieve that. But once we have an intended path, the skeptical side, the side that recognizes the importance of fi scal discipline and fi duciary responsibility, demands that we question the validity, the effi ciency, the ROI of how we intend to get there.

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The Congregation

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With the religion of the rich as a life compass, there is a time when the dream meets the reality, and the acid test of wise personal fi nancial management is applied. We take no one’s word for anything. We demand evidence, facts, and supporting documentation. While others work to add complexity, we seek to simplify.

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With the religion of the rich as a life compass, there is a time when the dream meets the reality, and the acid test of wise personal fi nancial man-agement is applied.

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Chapter 6

The Atheists of the Religion of the Rich

I t’s a sight I will never forget. There he was, strutting through the black marble lobby of a Park Avenue offi ce tower, at age 29 already a Wall Street legend, a feared and

renowned fi nancial engineer and captain of industry. Saul Philip Steinberg. Born August 1939, Steinberg

attended the Wharton School of Finance, where he con-cocted a plan to build a business leasing IBM computers. Soon after graduation, Saul founded Leasco to bring his dream to life. The company fl ourished, its shares skyrock-eted, and with the clout this afforded him, Steinberg set his sights on Reliance Insurance, a 150-year-old Philadelphia-based fi nancial institution that he acquired with Leasco stock. Emboldened by his success and his soaring wealth (in 1969, Forbes reported that Steinberg made more money that year than anyone else in America under the age of 30), Saul

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aimed higher, mounting a hostile bid to acquire Chemical Bank, a true bulwark of the nation’s fi nancial infrastructure.

The idea of a 29-year-old Jewish kid acquiring the mighty Chemical Bank set off a fi re alarm that rang from the inner circles of Wall Street to New York’s state capitol to the Oval Offi ce, culminating in a call from President Richard M. Nixon, who suggested to Steinberg that, in so many words, he should drop his takeover blitz or face the wrath of a powerful elite who could make his up-until-now charmed life become rather miserable.

After buckling up for the showdown, Steinberg told BusinessWeek , “I always knew there was an Establishment . . . I just used to think I was part of it.”

And now, as a young member of the Reliance team, I was witnessing the wunderkind, entourage in tow, casting a magi-cal glow as if Botticelli had painted a halo around him, glid-ing past me in that New York lobby en route to the elevators and his executive suite in the sky.

At that exceptional point in time, Saul Steinberg appeared to have it all: prodigious fi nancial savvy, the ability to syn-thesize information and morph his vision into profi table corporate entities, the steely courage to go face-to-face with seasoned business titans, and a substantial fortune that would soar for more than two decades. Everywhere he turned, every-thing he touched, turned to gold. In 1984, King Saul made a hostile bid for the Walt Disney Company. Although he was stopped short of his goal, he bullied Disney into paying him $60 million in greenmail for his shares. And through-out, Reliance added hundreds of million of dollars of salary, bonuses, and dividends to Steinberg’s wealth.

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He believed it would go on forever, and embarked on a spending rampage designed to buy his way into the upper echelon of New York’s social stratum. Steinberg:

Married his daughter Laura to Preston Tisch (nephew of then–CBS president Lawrence Tisch) in a ceremony at the Metropolitan Museum of Art’s Temple of Dendur. Assembled one of the fi nest personal collections of Old Master paintings in the world. Spent north of $1 million on a 50th birthday bash for his third wife, Gayfryd, at their Long Island mansion. Purchased the 17,000-square-foot Manhattan duplex once owned by John D. Rockefeller. Spent tens of millions of dollars on furnishings for this lavish penthouse.

And then the fairy tale began to unravel. Saul Steinberg built his life around a simple, hollow goal: to suck in as much money as he could from every conceivable source and to spend it faster and more furiously than he could earn it. During his entire reign as a King of the fi nancial world, Saul exhibited exemplary discipline, personal control, or fi duciary responsibility. It wasn’t his money. It wasn’t God’s money. It was play money.

In June 2001, the former wunderkind, the prod-igy whom Nixon had to threaten not to steal away with Chemical Bank, the man who bought his moment of glory in Gotham’s inner circle the way Truman Capote charmed his way in, went belly-up. Bankrupt.

Before the news leaked out, Saul sold his apartment for $37 million. Dumped his antiques for $12 million. Snared

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$50 million for his art collection. All in a vain and unsuccessful attempt to keep his imperious self out of bankruptcy court.

But it was too little, too late:

Reliance Group, which had fallen under the control of state regulators, was hemorrhaging $2 billion a year. The man who had sat in the CEO’s offi ce for three decades was nearly broke. In the ultimate humiliation and fall from grace, Saul’s mother took the one-time boy wonder and his brother Robert to court for allegedly failing to pay their mom $6 million on a promissory note.

The only way to view this pathetic affair is to see it as a world-class reversal of fortune. One brought on by the engi-neer of his own rise and fall, by an otherwise intelligent man so obsessed with making money for the sake of consump-tion and the Broadway show that it can help egotists put on, that he broke all the rules that his saner self knew must not be broken.

***

In our society, the saga of Saul Steinberg is typically cate-gorized as a riches-to-rags story. A fi nancial reversal. A part of the ebb and fl ow of life that comes out of nowhere and sends its victims reeling while others—who simply happen to be more fortunate—are spared. But when it comes to personal fi nance and money management, this is usually not the case.

Steinberg and others like him are not victims of misfortune—they are atheists of the religion of the rich. The only thing they truly believe in is making money. And to

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these atheists, at any level of income or wealth, be it $1 million or $1 billion, the most cherished reward that comes with making money is the ability to smear it in the faces of everyone else. To make others sick with envy. To be the lifestyle yardstick every social climber has to measure themselves against.

When I say atheists of the religion of the rich, it is a fi g-ure of speech. They are not Godless. They are not immoral, uncivilized, or criminal. In fact, they may be devoutly reli-gious and have deep faith in God. I simply mean that when it comes to money, they have no genuine respect for it, except for what it can buy. They lack discipline, control, and with it a sense of fi duciary responsibility for protecting what they have earned.

Conversely, to the members of the religion of the rich, talking and thinking about money is done with respect. You think and talk about achievement. The money will follow. No religion worships money. All religions establish a higher calling, and the congregants have faith that this will produce results far beyond those gained by the tunnel-vision pursuers of cash.

David Swensen, the Chief Investment Offi cer for Yale University’s $22 billion endowment fund, is in the elite group of the most successful money managers in the world. Swensen earned a B.A. and B.S. at the University of Wisconsin–River Falls and then moved on to pursue his Ph.D. in economics at Yale. There he wrote his dissertation, A Model for the Valuation of Corporate Bonds.

Steinberg and others like him are not victims of mis-fortune—they are atheists of the religion of the rich.

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After a stint on Wall Street at both Lehman Brothers and Salomon Brothers, where he focused on engineer-ing innovative trading methodologies, Swensen joined the Yale investment team in 1985. He brought a strong con-viction that money management is a disciplined science. Challenging the traditional methods for achieving asset growth and protection, Swensen and his colleague, Dean Takahashi, created The Yale Model. This approach favors less diversifi cation than the standard investment gos-pel. Willing to challenge conventional thinking, Swensen rejected many of the sacred cows of institutional investing. He invested more of Yale’s endowment in relatively illiquid private equity, pursuing the higher returns he could extract from them. The results speak volumes—during his tenure, Swensen has added more than $16 billion to Yale’s $22 billion endowment assets and investment funds.

Swensen—a member of the religion of the rich—refers to his work as a calling . A man of fi scal discipline, he rails against mutual fund companies for charging excess fees and for failing to live up to their fi duciary responsibility and cites an inherent confl ict in the funds’ desire for high fees and high turnover of investments, while investors benefi t from the opposite.

Swensen lives a wealthy life, but not in the traditional sense of a fi nancial miracle worker. Although he has out-performed his peers at every other major university in the nation, chalking up an annual compounded growth rate of more than 16 percent over 20 years, Swensen rejects all over-tures to leave academia and accept the treasures that Wall Street is absolutely beside itself to bestow on him. Without a word of negotiation, he could increase his Yale compensation of slightly more than $1 million annually twentyfold, but he

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hasn’t even the slightest inclination to do so. In a New York Times article, Swenson said,

People think working for something other than the most money you could get is an odd concept, but it seems a perfectly natural concept to me. When I see colleagues of mine leave universities to do essentially the same thing they were doing but to get paid more, I am disappointed because there is a sense of mission in endowment work. ( New York Times , February 8, 2007)

Mission. Fiduciary responsibility. Endowment. These are merely words, but, like the 23rd psalm we discussed in Chapter 1, they string together to create a philosophy that is greater than the sum of its parts. And that links back to the Puritan ethic and its focus on earning wealth and then treating it with silent respect. The athe-ists of the religion of the rich marry their children at the Temple of Dendur. The members of the religion of the rich think fi rst and foremost about the quality of life that

their children will enjoy. In that same New York Times article, Swenson states:

“On one level you could always imagine some greater creature comfort or having more toys or more houses,” says Swensen, whose mother became

The atheists of the religion of the rich marry their children at the Temple of Dendur. The members of the religion of the rich think fi rst and foremost about the quality of life that their children will enjoy.

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a Lutheran minister after raising her family. “That would be nice. But it certainly does not drive me.

“One of the things I care most deeply about is that notion that anyone who qualifi es for admission can afford to go to Yale. Financial aid is a huge part of what the endowment does.”

When Swensen fi rst took his job at Yale, his Wall Street paycheck was sliced by 80 percent. In taking the plunge, he crossed through an emotional and intellectual divide that often keeps us from living the life we truly want to live. Swensen said:

I was worried that I would miss the money, but then I didn’t. So I worried no more.

In the fi nance world, it is very easy to measure win-ning and losing in dollars and cents. That has always seemed to be an inadequate measure. The quality of life is a better way to measure winning and losing. Money is only one element of that.

For every money-blinded Wall Streeter, there are tens of thousands of wealthy Americans who live in obscurity, prefer it that way, and are driven every day to make great products, perform exceptional feats of science, discover new technolo-gies, make heavenly music, send deserving kids to elite uni-versities, and write gorgeous prose. These are the things they worship. The money, they fi rmly believe, will follow. These people are members of the religion of the rich.

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Now that we know the practices of the members who believe in the religion of the rich (Swenson) as well as the unorthodox behaviors of the atheists (Steinberg), let’s con-sider the key steps to joining the religion of the rich:

Step #1: Ask yourself if you feel independently wealthy or are on a realistic track to being so.

Chances are you haven’t really tackled this one before because it makes you uncomfortable. You think of money in the classic transactional fashion—deposit a paycheck, purchase essentials, indulge in luxuries—and then place a modest percentage of the total in investments capable of appreciating in value.

This may seem just fi ne, but it is really a form of self-sabotage. Ninety percent of what you buy, you don’t need; most of it depreciates the minute you take possession of it. Cars, shoes, video games, and watches: These goods absorb and diminish wealth as opposed to building and preserving it. The religion of the rich does not advocate abstinence—it makes room for the pleasures of buying things that you simply adore or want to bestow on others (enjoying life is critical to our philosophy)—but it does call for prudent consideration of the trade-offs we are making whenever we allocate our money.

Think of it this way: You work, strive, follow orders, do your job (you may even do all of this exceptionally well), and then when you are paid for it or collect the profi ts from your endeavors, you place the preponderance of it in black holes that make it virtually impossible for you to achieve fi nancial independence. You earn and squander, earn and squander.

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Perhaps your so-called fi nancial adviser assures you that the modest sum you may invest will accumulate to $1 mil-lion in 20 years. But what will $1 million actually buy at that time? What will you want to do with your life? Should you be investing in appreciable luxuries now? Can the money you now squander be invested in other ways that bring imme-diate pleasure but also drive toward independ-ent wealth? The religion of the rich requires that you rethink your fi nan-cial life, not simply your investment plan , and in the process plot your course to true wealth.

Step #2: Question whether your fi nancial adviser is driven by concern for your well-being or by a relent-less pursuit of commissions.

Recognize now that you need someone who is more than simply a broker to join the religion of the rich. You need advice from true and trusted experts and friends who have cracked the timeless code and in doing so can utilize their wisdom to make money work for you, as opposed to your simply working to make money.

Step #3: Ask yourself if you honestly understand the fi nancial strategy your brokers say they are pursuing on your behalf.

Here’s why this is so important: Some would-be advisers create strategies that are designed to confuse. Hardly a

The religion of the rich requires that you rethink your fi nancial life, not sim-ply your investment plan, and in the process plot your course to true wealth.

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single broker calls herself a “broker.” Instead, they profess to deliver all manner of convoluted systems that sound so sophisticated and ingenious that people tend to believe they are sophisticated and ingenious—and who doesn’t want that? But the fact is, they are often gimmicks that leave these bro-kers with all they really care about, commissions, and leave their clients with mumbo jumbo they can never take to the bank. Borrowing a page from Warren Buffett, never invest in anything you don’t understand.

Step #4: Be honest: Are you rich in stuff and poor in hard assets?

In the past year, I have been invited as a dinner guest to three McMansions—sprawling homes with such little furniture that voices ricochet off the walls. Because of my personal knowledge of my gracious hosts, I knew they had leveraged themselves to the teeth to buy their trophy resi-dences. And that if they have to endure one bad year in busi-ness, one skimpy bonus, one sudden termination from their jobs, they are immediately vulnerable to losing it all. There is a simple but powerful rule here: If you have stuff, as lovely as the stuff may be and as much as it may impress the pants off anyone who sees it, if you stay up at night worrying about the sky falling on the show you are putting on, you are investing your dollars in the wrong place and violating a basic tenet of the religion of the rich.

Step #5: Do you know how to get to where you want to go fi nancially?

This is so much more complex than a number. If a number is your only target, it is unlikely you will ever achieve

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it or that you will be content if you do. Instead, the religion of the rich advises that you identify a success goal, an achievement, and structure your personal philosophy and your fi nancial strategy to attain this. A number can motivate very few of us because, after all, it is only a series of digits. A dream can propel us to our defi nition of success with genuine power and certainty because it is infused with depth and passion.

In college, I dated a beautiful girl who adored playing the piano . After a decade of taking lessons from some of the best teachers that her parents’ considerable wealth could afford, she could barely pull off chopsticks without sounding as though she was touching the keyboard for the fi rst time.

One of the things I admired about her, and which led me to fall in love with the Blonde Swan (as I called her), was that her lack of talent had no bearing on her love of the instrument. When she played, she would drift off to another world, a woman alone with Mozart.

Ambitious and driven, she was determined to make a great success of herself in business, putting her raw intel-ligence and prodigious math skills to work in corporate fi nance, to the extent that she could stop working within ten years with $20 million in the bank—and play the piano to her heart’s content without any need to earn a living from

A number can motivate very few of us because, after all, it is only a series of digits. A dream can propel us to our defi nition of success with genuine power and certainty because it is infused with depth and passion.

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it. Yes, there was a number ($20 million) in her life equa-tion, but the drive that sent her through Wharton and Bear Stearns and back to the Steinway her grandmother presented to her on her 16th birthday, came from the dream of living her days with a piano (to my frustration, the closest she ever got to a marriage).

Clearly, the religion of the rich does not pray at the altar of numbers. It understands their importance in the journey of building and preserving wealth, but it also understands that a personal philosophy, a higher calling, has to come fi rst. This philosophy builds the framework for all that comes after it.

Step #6: Do you know where you want to go?

Almost everyone says that they want to grow. To get pro-moted. To have more authority, teams to delegate work to, and, simultaneously, to have more free time and less pres-sure. But to do what? So often we don’t know. This lack of knowledge leads to personal confl ict, which saps energy, diminishes brain-power, and thwarts creativity.

Breaking the time-less code provides you with more than money: It helps you to create a fulfi lling and inde-pendent way of life as opposed to coasting on autopilot, hoping that all will somehow work out for the best. You have money to manage.

Breaking the timeless code provides you with more than money: It helps you to create a fulfi lling and independentway of life as opposed to coasting on autopilot, hoping that all will somehow work out for the best.

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You have a life to manage. Autopilot will not get you there. Much like my Blonde Swan, if we fi rst understand what we truly want from life, we can seek to achieve that and acquire the fi nancial resources it may require.

***

What we often forget in the mad quest for more is that so much of what we actually gain from the money we acquire is well beyond our tangible human needs. It is excess, and excess can lead to addiction and disease.

Former fi nance arbitrageur Ivan Boesky—the model for the Michael Douglas character, Gordon Gekko, in the 1987 fi lm Wall Street —amassed more than $200 million by specu-lating on stocks, often of companies likely to be subject to hostile takeovers. At the height of his notoriety as a brazen, frenzied trader, Boesky declared: “Greed is good.”

An absolute atheist of the religion of the rich, Boesky was investigated by the Securities and Exchange Commission in 1986, charged with insider trading, and plea-bargained his way to a 22-month prison sentence at Lompoc Federal prison camp near Vandenberg Air Force base in California. Barred from the securities business for the rest of his life, Boesky paid hundreds of millions in fi nes and never recovered from the blow to his integrity and reputation brought on by his fi nancial addiction and the legal fallout that ensued.

Boesky’s lack of fi duciary responsibility/religion of the rich brought him to his knees and left him disgraced.

His former home is less than a mile from mine (his ex-wife Seema still lives there). Every time I drove by the mansion, with its Fort Knox–style security system, I could sense a lack of wealth, which was apparent even at the pinnacle

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of his success. No happy kids in the yard. No loving cou-ple walking the trails in front of the estate. No tail-wagging golden retriever at the wrought-iron gates. The Boesky estate refl ected a blind pursuit of money for the sake of money. A pursuit without depth, love, discipline, or a healthy sense of frugality—all values that Boesky would ridicule.

In the vast majority of cases, this kind of life leads to an unhappy ending. I say this as a devout capitalist who has worked like a demon to achieve a level of success I could barely dream possible when I was a child living in a one-bedroom apartment in Queens. As an entrepreneur who has been focused on success all of my life, and who has become a multimillionaire for it, I understand the power and joys of money. But I also know its limitations. The most success I have ever had has been in my role as a father. And my kids never cared how much money was in my bank account. Nor has my wife Carol Ann, who has always loved me just for who I am and actually preferred me to make less money and spend more time with her. If this weren’t true, I would be poor today, regardless of the number of zeros refl ecting my fi nancial net worth.

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In living by the code, by the religion of the rich, I have held certain principles of my personal life/fi nancial manage-ment inviolate. These commandments have enabled me to avoid becoming an atheist of the religion of the rich and have enabled me to build wealth. I suggest you follow them too.

Never bet the farm . I have been self-employed through most of my adult life. My company is more than

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an income generator: It is a lifestyle enabler. I will never take a business risk, no matter how much of a “sure thing” it is built up to be, that would jeopardize the company and what it makes possible. If you can’t do the time, don’t do the crime . When I used to go fl y-fi shing in Westchester County with my dad, I fell in love with the historic and bucolic town of Bedford that would later become my home. I will never assume a level of risk that, should I lose, would require me to pack up and leave. Never care a whit about what others have, and don’t care at all what they think of you and your station in life . Nothing is more powerful than this mental liberation in grounding you and making you the master of your own destiny. Live below your means . I remember standing in front of a blue and white Dutch colonial home that one of my good friends wanted desperately to buy. It was his dream house and he was in love with it. The house carried a relatively steep price tag of $2.3 million but, given my friend’s income of roughly $1 million annually, it should have been well within his reach. And then he told me, wistfully and teary-eyed, that he lacked the cash for a down payment. After working successfully as an executive for a global apparel company for more than 15 years—spending every dollar and more on vacations, wardrobes, and jewelry for his wife—he’d spent a lifetime tossing money out the window with reckless abandon. Now he had zero for a down payment. I would never let that be my story, my fate.

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By following these principles, the religion of the rich protected me from becoming like one of the atheists that I discussed in this chapter. Right now, I could buy a home fi ve times the size of the one I own, but why? There isn’t a good reason in the world and the timeless code protects me from making such damaging mistakes.

To me, that statement, “You can never be rich enough!” is ludicrous.

Should Warren Buffett take back the money he has given to the Bill and Melinda Gates Foundation and work around the clock to accumulate more?

Should he tell his sister to stop sending money to truly desperate people who write to him? Should he leave Omaha for Park Avenue? Should he become Donald Trump?

You know the answers. Now think about it in the context of your own life, and in the context of your own religion—or lack of it.

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Chapter 7

The Paradoxical Secret

S ome years ago, I found myself at the Crescent Hotel, just outside Dallas’s central business district, giving a speech to a packed ballroom of real estate executives.

As I looked out over the men and women assembled on a chilly November day, it struck me that they all looked as if they had been dressed by central casting, fi tted out in the classic Ralph Lauren vision of plaid and tweed business casual.

“Do they all think alike, too?” I wondered. Given that the real estate market was in a slump at the

time, my talk on property marketing—specifi cally, how to engage in it, measure the results, and use this feedback loop to generate return on investment—struck a resonant chord with the attendees, all fi rm believers in the gospel of fi nan-cial discipline. My presentation met with an enthusiastic

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reception and I was regaled with a standing ovation at the conclusion. It was as if they had discovered the Holy Grail.

Content with the feeling of a job well done, I was still on the dais, gathering my papers, when I noticed a man dressed elegantly in a black Brioni suit and white silk pocket tie, a Fred Astaire double, standing directly below me. Exhibiting perfect etiquette, he waited patiently for me to look in his direction, complimented me on my speech, and then politely asked if I would be kind enough to be his guest for lunch at Beau’s, the lobby dining room. He said he found my presen-tation engaging and wanted to discuss a business proposition.

There was a sudden and unmistakable air of mystery about his request. My mind fl ashed to Hitchcock’s Strangers on a Train .

Something in the way he talked, and also in the silences that would occur mid-thought without apparent rhyme or reason, led me to believe that he was involved in something sinister. My intuition seemed to be well founded when he advised me that he served as the emissary for a reclusive real estate magnate who had dispatched him to hear my talk and would now like to meet with me personally. It would be a week or so before he could reveal the man’s identity but if I was interested, and it all came to pass, I was assured it would be very well worth my time fi nancially.

Well worth my time fi nancially . It now seemed even more clandestine and somewhat unsettling. But also, I must admit, I felt a thrill of expectation.

“What will be the nature of the meeting?” I asked. The emissary ran his fi ngers along the plush Italian silk

of his salmon pink Hermes tie. And then he looked directly into my eyes.

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“My client has followed your work. He is an admirer of your approach to management and business. Suffi ce it to say, he would like you to play a major role in turning around a distressed company he has recently purchased.”

After what appeared to be an intentional pause, he continued.

“Does that sound interesting to you?” I had a nagging feeling that something was awry, but

being an entrepreneur determined to explore all opportu-nities, I expressed interest, said I would need to learn more about the opportunity, agreed to sign a confi dentiality agree-ment and then—if all was up to snuff—I would meet with the potential client.

***

I left Dallas for San Francisco that afternoon, quickly changing time zones, climates, and business agendas. As the days passed, the memory of the Dallas speech faded, but the scent of the chance encounter with the emissary lingered. Part of me had moved on to other things; part of me antic-ipated my meeting with the mystery man and hearing his “business proposition.”

Three weeks to the day after I had checked out of the Crescent, I was sitting in the 15th-fl oor conference room of a prominent Boston law fi rm, waiting to meet the gentleman, whom I will call Hector, for the fi rst time.

I had learned that he was a graduate of Harvard College and Yale Law School and was the youngest child of a Brahmin family prominent in Beacon Hill Society. I was expecting the classic buttoned-down drone, raised in

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an immaculate Federal-style townhouse, a graduate of The Boston Latin School. But from all outward appearances, I was way off the mark. Hector seemed to be dressed in Southie hand-me-downs: a tattered polo shirt with a frayed collar, khaki chinos two sizes too big, and faded brown loafers that looked as if they’d been machine-washed in a Maytag. He had that unkempt and disheveled look that bor-ders on the antisocial. If you saw him walking down the street, you would look the other way.

But now, somehow and for some reason I was yet to dis-cover, we were brought together in a glass room overlooking the Boston skyline.

He took a seat next to me, did not shake hands, and never bothered to say hello. As he began to talk, his eyes fl uttered and then closed.

And then, with great theatricality, he spoke. “Mark, I know more about you and your work than you

would realize. I must say, I think it’s genius, pure genius. “Now I need you to apply that genius to me.” His eyes remained shut as he took off on a rambling

description of his business, his marriage, and his life. At fi rst his narrative seemed disconnected, even incoherent, laced as it was with lists of dates, facts, anecdotes, side bars, digressions, punctuations, backtracks, and then rich and colorful stories. And just as I thought he was truly off the deep end and that there was no use in trying to follow the twists and turns of his delusional monologue, he started to stitch it all together like a master raconteur. At the end, it was precise and powerful.

Here’s the short version: Upon graduation from Yale, Hector landed a job at Xerox, working in the general counsel’s

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offi ce assigned to the company’s research and development team at Xerox Park, where the computer mouse and graphi-cal user interface were developed.

On paper, his responsibility was to identify and protect the intellectual property that emerged from the brainiacs inventing all kinds of communication and document- imaging technologies. He found himself awed by the way genius pulled ideas out of thin air and turned them into tangible innova-tions. Entranced by the magic of the laboratory, he found himself completely disinterested in law but intrigued by the art and science of fi nancing promising new technologies. As he observed and contemplated and witnessed ideas turn into millions of dollars of revenue for the mother company, Hector found himself drawn toward the world of venture capital, to the extent that he started to give serious consid-eration to a career change. He had always been aware of the gambler’s instinct embedded in his DNA, and this transition (harrowing as it was to his family) refl ected that: As a venture capitalist you discover a potential gem of an idea, back it with extremely high-risk capital, go to market, and, if you have a hit, the dollars fl ow. The endeavor takes knowledge, brains, guts, determination, and—what is the rarest component and one that cannot be taught—a sixth sense for what will work and what will not.

Hector had that in spades. Quickly, he realized that making money for Xerox was

nowhere near as wise as making it for himself. He turned this epiphany into a venture capital fi rm. Based on his track record at Xerox Park, where he had morphed from a classic attorney into a business adviser, Hector attracted enthusiastic partners

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who poured millions into his fi rm, which made investments in information technology startups and then widened its scope by acquiring a cross-industry collection of distressed compa-nies that Hector and his analytical team believed were ripe for turnaround. The process was prudent and methodical, begin-ning with extensive research into target companies and then, when and if the green light for acquisition was fl ashed, mak-ing intelligent commitments of time and capital. Proving his initial investors right, Hector’s recipe produced winner after winner. He believed he had broken the code.

Always the gambler, Hector continued to bet and re-bet the farm. Virtually all of the fi rm’s profi ts were plowed back into the company, and the stakes and risk soared as the investment team, urged on by Hector, began increasing the number of acquisitions, the amount of capital investments, and the pace of deal-making activity.

On the personal side, this fever for high rolling played out as well. Hector purchased a 14-room townhouse in Cobble Hill, a 375-acre farm in Vermont, and a stunning villa in Tuscany complete with a fabled vineyard. These were all fi ne investments, but along the way, he also accumulated an entourage of free loaders (old friends from school, new acquaintances from the Boston club scene), seven cars (includ-ing a vintage Aston Martin and a Bugati), and an addiction to throwing lavish parties.

Clearly, this was now a man out of control. It was clear to everyone but Hector himself, who justifi ed his extravagance and the furious pace of his fi rm’s investments by declaring for the world to see and hear that he was the man . . . that his business acumen and his sixth sense were so strong that

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the fi rm’s fi nancial results justifi ed every step he made. Every chip he placed. Every luxurious and wildly extrav-agant thing he acquired. He was determined to put on a show, to be a highly visible fi xture on Boston’s social scene, just as his parents had been (in a much more discreet and demure way) before him.

In the thick of it all, Hector committed the sin of omission that proves to be the death knell for so many fallen capitalists: He did not know the Secret of the religion of the rich. Like many fi nancial sinners, he had forgotten about one of Newton’s laws—specifi cally, “Every action has an equal and opposite reaction.”

When the perfect storm hit, it hit with a vengeance. Three of the bigger distressed companies that the fi rm had acquired as its ambitions swelled, did not respond to injections of cap-ital and managerial expertise. For a variety of complex rea-sons, from badly damaged brands to killer competitors who had seized the high ground while the former managers were asleep at the wheel, the portfolio companies continued to deteriorate. Simultaneously, a frightening number of the sure-thing technologies Hector invested in were sitting in ware-houses, white elephants with cool designs and no buyers.

Hector’s response was to leverage every available asset to raise more money and to keep investing at an even faster

Hector committed the sin of omission that proves to be the death knell for so many fallen capitalists: he had forgotten about Newton’s law—specifi -cally, “Every action has an equal and opposite reaction.”

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pace to somehow sprint ahead of the bad luck and recon-nect with the winning streak that had launched his business. But Hector’s story really wasn’t about his company’s fi nan-cial performance, at either end of the earnings spectrum.

It was about addiction. It was about a personal Secret. Hector, and so many like him at all ends of the wealth and earnings spectrum, was a fi nancial atheist.

Hector demonstrated a complete lack of respect for money and an irrational need to spend it: to dig into his bank accounts and his pockets and to put every dollar in play. The thought of holding a dollar when he could gamble it or spend it was anathema to him. The idea of holding a large sum of money in a safe and relatively passive place in order to protect himself, to provide a cushion, to guard against a catastrophic reversal of fortune—well, that had no appeal to Hector.

When I fi rst met Hector at his law fi rm’s offi ces in the Boston sky, he had already slid down the slippery slope from a net worth of $410 million to a negative worth of minus $120 million. Put another way, he had no assets, only debt. Lots of it. Mortgages, car leases, option calls. And yet he couldn’t fully mend his ways.

I recall an evening we dined at Boston’s Ritz Carlton hotel. Hector took command of the ordering, selecting ossetra caviar, $500 bottles of Bordeaux, and topping the meal with Laphroaig single-malt Scotch. When the bill arrived and Hector placed his credit card on the silver tray, we were on our way to an embar-rassing series of rejections: American Express, Visa, Mastercard—all invalid (clearly, Hector hadn’t paid his bills). When I offered to settle up (primarily to end this black comedy), Hector waved me off as if I were insulting the rich man (which he no longer

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was). After a protracted argument with the restaurant manager, Hector was allowed to write a check, which, I was certain at the time, and still am, did not clear.

Over time, I got to know and like Hector and grew to understand that he was still very much a child. Even when an investment paid him a dividend check in the midst of his fi nancial morass, he would use the money to gamble on something, anything, rather than paring down a debt or stashing away the money so that he had something to call his own and to draw on. He would have none of it.

Hector did engage me to assist in the turnaround of one of his troubled companies. The checks for my services were paid slowly, but they were paid. On the other hand, the con-versations came easily and it was always intriguing to talk with him. I had never met anyone quite like Hector, and I enjoyed learning from his interesting and simultaneously out-of-control life.

Riding the Metroliner on a business trip from New York to Washington, D.C., I asked him how it felt to be freefalling from wealth and power, seeing his company and his money evaporate.

I could tell he’d thought about it, likely dreamed about it, many times.

“It was claustrophobic. That’s the best way I can describe it. It was as if I was in a tunnel and could see no light at the end. I would wake up at night in cold sweats. I didn’t want to talk to anyone. Almost every day, I went to the movies. By myself. I got lost in the fi lms, the stories, the dark.

“It was my escape. My salvation.”

***

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The atheists of the religion of the rich function under a shroud of secrecy . They never admit they are living beyond their means. They never acknowledge that they are closet addicts. Just the opposite: They concoct complex fabrications to make the world believe that the wealth (that is, the toys) they reveal represent merely the tip of the iceberg, supported by a steel-plated platform of personal earnings. It’s time to shed light on their plight (your plight?) and to replace the reckless abandonment of money mismanagement with the principles of the reli-gion of the rich. Imagine if Hector lived just one level of luxury below his means. If he had saved 5 percent of his earnings. If he viewed money as more than a com-modity. If he knew what he wanted from life and used his money to help achieve that. This applies to any-one, if you have $50,000, $500,000, $5 million, $50 million, or more. It’s not the sum at issue, it’s the philosophy behind it that counts most—that has the greatest impact on whether you will keep it, or grow it, or lose it.

The Hector story repeats itself every day, in thousands of similar scenarios. The number of zeroes may change, but the cause and effect remain the same.

In 1979, one of my close friends received a check for stock options totaling $435,000, a modest windfall at the

It’s time to shed light on their plight (your plight?) and to replace the reckless abandonment of money mismanagement with the principles of the religion of the rich.

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time. When he asked for my advice on what to do with the bounty, I suggested the following:

Purchase a waterfront home with a private dock that I had found for him in the lovely summer community of Shelter Island, New York. Given that he was an active sailor, it was the perfect package from a fi nancial and lifestyle perspective. Price tag: $200,000. Invest $50,000 in the Magellan mutual fund. Invest another $50,000 in a diversifi ed portfolio of blue chip and small-cap tech stocks. Put aside the rest for taxes.

The portfolio of assets I recommended would provide for:

A getaway to complement the family’s lifestyle and serve as a solid, waterfront investment. An investment base that was likely to experience long-term growth. A fi nancial safety net. Peace of mind.

Investing this way would be to follow the religion of the rich. But my friend had other ideas. He would beat the system. He would pay no taxes. Blinded by the fact that he would have to forfeit a percentage of his windfall to capital gains taxes, and determined to play in white waters he knew nothing about, he shopped for a tax shelter and placed the entire $435,000 in a so-called leasing straddle deal that, on paper, turned the tax obliga-tion into a tax credit and provided for an annual fl ow of income.

The religion of the rich knows that if something sounds too good to be true, it is. Three years later the IRS claimed

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the straddle to be a tax fraud, confi scated the funds, and pre-sented my friend with a tax bill in excess of $300,000. It took him years to pay it off, but worse yet was the opportunity he lost by failing to properly invest the money at the outset. Today, the Shelter Island home is valued at $5 million and the securities would have grown to millions of dollars more.

My friend’s experience brings to light a key point: In traditional personal fi nancial management, the score is kept by how well or how poorly investments perform. Accordingly, after much frustration with stock-picking formulas that fail to work on any level, millions have moved their money into index funds, which simply mirror the performance of the S&P 500. The vast major-ity of so-called money managers fail to accom-plish this benchmark, even though keeping up with the market would seem to be the least one should expect from a person who accepts the fi duciary responsibility of managing our money.

Money managers often can’t even outperform the market averages!

Let’s put this in perspective. If you do keep up with the S&P 500 in an index fund, and your returns in other

The vast majority of so-called money managers fail to accomplish this benchmark, even though keeping up with the market would seem to be the least one should expect from a person who accepts the fi duciary responsibility of manag-ing our money.

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investments fall 2, 4, or 6 percent or more behind the S&P, the tendency is to think that the portfolio that returns the most money is and always will be the best place to park your dollars. Driven by this current-performance mentality, you will place all of your money in index funds.

But this is myopic, and even small-minded. It fails to account for opportunity cost: That is, what you might have earned from a percentage of your money if you placed it in an entirely different form of invest-ment. My friend who invested in the tax straddle didn’t lose big time only because of his run-in with the IRS. More important, he failed to reap the appreciation he would have gained from the Shelter Island home he never bought and to benefi t from the run-up in the Magellan shares and the other equities he never acquired. He paid the huge price of opportunity cost.

Like any religion, this fi nancial ideology has a mystical secret that informs its members of how to effectively manage their money. Any time we are going to invest money, we—as members of this religion—must ask ourselves a very impor-tant question:

What is the full range of options for me now, how much risk will I accept, and where am I likely to reap the highest rewards?

It fails to account for opportunity cost: That is, what you might have earned from your money if you placed it in an entirely different form of investment.

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As I write this in the Spring of 2008, I am in the midst of making a $1 million investment in a new business. I am removing the funds from investments that have been earning me an average of 11 percent per year. That’s a nice return. But by locking the $1 million away at 11 percent, I pay the oppor-tunity cost of not earning more on my money. Knowing that I am climbing much higher up the risk ladder, I am willing to accept that fact of life in the light of the opportunity cost (or, hopefully, opportunity gain) of the new venture. If the new business succeeds, I could earn 10,000 percent on my money. There is no limit. I will own the company 100 percent, and if it fl ies and thrives and goes public, well, it could make me a fortune. I can only tap this kind of potential gusher if I look out over the risk/reward spectrum and factor in the huge, but often overlooked, issue of opportunity cost/gain. And if I can accept the risk of this investment failing totally, which you know I can (because I will never bet the farm), I am making this investment with dollars over and above the fi nan-cial bedrock I need to live a wealthy life.

Members of the reli-gion of the rich have always recognized the importance of opportunity cost/gain, and have thus placed part of their

Members of the reli-gion of the rich have always recognized the importance of opportu-nity cost/gain, and have thus placed part of their money in ventures that could race them past the returns that tradi-tional investments, such as mutual funds, can provide.

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money in ventures that could race them past the returns that traditional investments, such as mutual funds, can provide.

They widen the fi eld of vision to include investments in:

Small businesses. Venture capital. Commodities. Arbitrage. Real estate. Currency speculation.

***

The lexicon of money overfl ows with clichés and secrets. For every truth—and there are only a few sound principles—there are thousands of slogans, would-be pearls of wisdom, and outright lies masquerading as the truth. Worse than that: as the gospel. And even worse than that: as divine and irrefutable.

Adopting the religion of the rich requires that we sift through this landfi ll of personal fi nance and separate out the few pearls of wisdom from the gunk that only misleads and distracts. Only then will you fi nd the Secret to building wealth.

Let’s begin with the mistruths that do the greatest dam-age: the famous quotes that are now blindly accepted as fact:

Myth #1: Money goes to money. The implication is that only people with stockpiles of

cash to invest in all manner of hot stocks, promising busi-nesses, up-and-coming real estate, and so on, can really make money. Everyone else is relegated to just getting by.

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The facts that belie this myth are:

Money often goes away from money. The vast majority of the nation’s millionaires built their fortunes from dust.

In the excellent fi lm The Aviator (which I have seen more than ten times, and like even better every time I view it), we see a romantic portrayal of Howard Hughes as a charming risk taker who ultimately goes off the deep end. We see Hughes as an inventor and an aviator—which he was—but we don’t see him as the man who fi ts the common profi le of money going away from money. Precisely because the children of the wealthy often have little or no regard for fi scal discipline, they have no religion when it comes to money. Often times, they blow it on every indulgence and hair-brained scheme that comes their way. Hughes’s father made a fortune in the oil-drilling equipment business; his son did his best to squander the family fortune.

When I spent time with Bill Gates, he vowed that he would give none of his money to his children. Many wealthy people like Gates, including those whose wealth is a pittance of his, give their fortunes to charity (as we have seen). They do so because they (1) know money often goes away from money, and (2) given the right drive and incentive, money can go to those who have none . . . As it did to Gates, Icahn, Simon, Stevens, Slim, and many others.

Myth #2: The only way to think about money is to have a great deal of it.

Here again, the opposite is true. When Edith Wharton coined this phrase, she should have said, “The only way to have a great deal of money is to think about it.”

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As we have discovered, thinking about money, having a true philosophy about it, is the best way to make certain that you accumulate and protect it.

There is a sense in our society that thinking about money is somehow crass, superfi cial, and materialistic. How absurd. You put your energies and talents to work to earn it. To then simply treat it as if it were grains of sand—that is superfi cial. That is irresponsible. The less you think about money, the more you are likely to fall into the earn-it, spend-it, have-nothing-to-show-for-it treadmill that in the end keeps you awake at night, ironically, thinking about money, but in this case from a position of weakness. When you take the offensive position that Rich Is A Religion advo-cates, you need not, you should not, be obsessed with think-ing about money. You simply must:

Develop a philosophy for accumulating, enjoying, and protecting it. Maintain the discipline inherent in your philosophy.

Myth #3: A penny saved is a penny earned. Now, this myth has a powerful element of truth. Thrift

is a central tenet of the religion of the rich. But it is also misleading.

There are many, many misers who squabble over every purchase, squirrel away every dollar, and never allow them-selves the luxury of buying anything but the basic necessities of life.

After my father died, my mother married such a man. He would never go out to the movies. Why should he when TV was free? He would cut up old bedsheets into pocket

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handkerchiefs. He scrimped and saved and denied and pinched, and wound up with very little to show for his life.

Remember, to the members of the religion of the rich, money is the currency of life. It is not to be saved, every penny, for the sake of thrift, but instead to be earned and invested and allocated to fund a particular lifestyle. Although saving is vitally important, you must resist the temptation to confi ne yourself in a small space where you count pennies and fret that they will leave your embrace.

That is not the key to a life well lived . . . and a life well lived is the end goal of the religion of the rich. This is the Secret.

***

I know about the paradoxical Secret of the religion of the rich from a personal and painful perspective. I know what it is like to be poor. When I tell people that, they look at me skepti-cally. Why is that? Why do friends who have known me for my entire life, and with whom I have built a relationship of trust, think, “He wasn’t really poor.” I believe it is because they have never seen me in rags. Just the opposite, actually. They see a well-dressed person, educated, with a Mercedes SL and a lovely home, and they think “He was never really poor.”

Well, after my father died, he left my mother, sister, and me with $84, no assets, no income, and no savings. I quickly became the head of the household and found myself unable to pay the rent or buy food, and our leased car was repos-sessed, thus leaving us without transportation. It is a strange experience shared by few: to be without a dollar and no ready resources to fi nd one. I worked after school for the

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Whitneys, but that hardly amounted to suffi cient income. I needed my mother to get a job, but it was then that my mom informed me that she had quit high school in the last week of her senior year. The last week! Sinatra was in town at the Paramount and she preferred to dance in the aisles rather than to secure a diploma. Without that piece of parchment, getting any decent job would be nearly impossible.

So I fabricated a grand lie, called the New York City Board of Education and advised them that my mother had graduated from Central Commercial High School and I needed a copy of her diploma. Sure enough they came back to me a week later with the fact that she had never earned the document we needed so desperately at the time. Fully expecting that answer, but in no position to be confused by the facts, I went on the offensive.

We needed to survive.

MS: You know as well as I do that Central Commercial High burned down some years ago. Just because you can’t fi nd my mother’s papers in the rubble doesn’t mean you can deny a widow her degree. A degree she needs in order to feed and shelter herself and her two children!

Board of E ducation : The fi re has nothing to do with this. We have all the records. She never graduated.

MS: Do you really think I am going to let a bureaucratic foul-up force us onto the streets? I’m not asking for her diploma, I’m demanding it!

After debating and threatening for weeks, the board sent my mother a high school equivalency diploma. I admit she didn’t deserve it. I admit I lied. I admit it was all a ruse.

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But my family needed to survive and that survival was all up to me. So I did what I had to do, and we paid our rent and bought a used car and ate when we were hungry and enjoyed those simple pleasures. For a while, I didn’t know how we would survive. When I fi gured that out, when it was clear that we would make it, I was able to breathe again. And to move on. And to grow.

But never did I forget. The knowledge of poverty, and my father’s fi nancial

atheism, has remained with me my entire life. In part it has been a curse, because living with a lingering fear is a weight that subtracts some of the joy of life. In part it has served as a secret identity, because people do not seem to believe that it is a part of me. But my legacy from my father has also been a blessing because it brought me, full force, into the religion of the rich. For the rest of my life, I would continue to uncover the true secrets to earning and maintaining wealth by:

Respecting money as a resource that would keep me and my family from fear and hunger. Quietly investing signifi cant percentages of what I earned so that I would have a safety net under me. Avoiding virtually all debt. Never withdrawing funds from a savings or investment account to indulge myself. Living below my means. Never competing with anyone on fi nancial status. Never talking about money with anyone but close advis-ers or family.

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Never assuming that the money would just keep on coming; conversely, assuming that the fl ow could stop at any time for a zillion reasons. Never accepting the fi nancial advice of others if and until I accepted and believed it myself.

The comfort of wealth and a brush with poverty—the yin and yang of life—can both lead you to the Secrets of the religion of the rich.

Or not. It’s up to you.

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Chapter 8

The Real Value

P hilip Milton Roth, writer of the great American novel, has it all: fame, respect, admiration, talent, and wealth.

But Roth prefers to have it less . Because he prefers to live according to the belief that less is more. Throughout his adult life, Roth has been learning and work-ing and achieving to ever-greater heights, while at the same time paring down and altering his lifestyle into a rich sim-plicity that affords him great peace and contentment.

Born March, 1933, in Newark, New Jersey, Roth gained early fame and prominence in 1959 with the publication of Goodbye, Columbus , followed by a streak of best sellers: Portnoy’s Complaint , The Human Stain, and the Pulitzer–prize winning American Pastoral . His literary works have been made into motion pictures, and he has won a distinguished set of literary medals including The National Book Award, The National Book Critic Circle Award, and three PEN/Faulkner Awards.

At 75 years of age, and at the pinnacle of his standing among the world’s greatest novelists, Roth lives in a small

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Connecticut home, works in a simple cottage on his property, and is actively engaged in shedding material possessions save those he needs to eat, work, rest, and sleep in simple comfort. Money plays no apparent role of importance in his life; but beneath the surface it is the vital bedrock of his wealthy life. Because he has it, because he has always treated it with respect, he writes in a state of peace and contemplation, unlike his contemporary Norman Mailer, who wasted millions and had to churn out books to pay his bills. Instead, because Roth loves the pursuit of his art, he is passionately engaged in the life he chooses: writing carefully and slowly by day, reading classics at night, taking quiet walks in the New England woods, and sleeping peacefully after a glass or two of Pinot Noir.

One of the great and unheralded gifts in life is learning how and when to let go. To open your clenched fi sts, your tightly constructed way of thinking, and to recognize that you truly do not need any number of the things—including beliefs, assets, and emotions—you are cling-ing to.

There is a lovely purity and joy that can come with paring down. Those who are never introduced to the religion of the rich are often obsessed with adding on, adorning, extending, enlarging, complicating, and

There is a lovely purity and joy that can come with paring down. Those who are never introduced to the religion of the rich are often obsessed with adding on, adorn-ing, extending, enlarg-ing, complicating, and replicating—all under the blind assumption that more is always more.

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replicating—all under the blind assumption that more is always more.

That is not true. Yes, the religion of the rich advocates achieving wealth in order to live life the way you choose and to build a foundation of fi nancial security . And yes, it is joyous to surround yourself and your family with the things you fi nd beautiful and fulfi lling. But more for the sake of more, for the pursuit of conspicuous consumption, for the race to show the world what you have acquired, directly violates the religion of the rich because it diminishes the great-est gift you have: your God-given time on earth. And it defi es the wise and prudent methods of viewing and managing money. The race to acquire more of everything, for the goal of simply acquiring more of everything, controls the agenda and often leads to excessive risk and leverage, thus dismantling or eliminating the invisible wealth that must serve, safe and secure, as the bedrock of our fi nancial lives.

Paradoxically, the more you prune back, the more you really have. One of the great ways to truly have more, is to have less (by that I mean less that is vis-ible and conspicuous).

***

In the fashionable New York suburbs, it is now the rage to own a pied-à-terre in Manhattan in addition to a home in Scarsdale, Roslyn, or Bedford. Sure, the city apartment

Paradoxically, the more you prune back, the more you really have. One of the great ways to truly have more, is to have less (by that I mean less that is visible and conspicuous).

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may be a good investment, but it comes at a price. You may buy in an infl ated market, take on the obligation of another mortgage, furnish the apartment, pay the co-op fees, heat and cool the space, insure it, and on and on. All for the ration-ale of a good investment, you may add a costly complexity to your life that you have to work for, that you have to support, that takes a lump sum of cash out of your pocket, and that requires continuous fi nancial infusions. And for what real reason? For the belief that adding, extending, and building personal assets contributes to your personal value?

The religion of the rich does not advocate a Spartan life in any form. It simply suggests that you view your money, regardless of the sum you have, as something that deserves careful thought and consideration every time you think of spending or investing it on a major asset and/or obligation.

The religion of the rich suggests that you explore the options and the motives before purchasing the pied-à-terre. The country home. The expensive watch.

You must ask yourself:

Why am I making the purchase? Is the reason valid?

••

The religion of the rich does not advocate a Spartan life in any form. It simply suggests that you view your money, regardless of the sum you have, as something that deserves careful thought and consideration every time you think of spend-ing or investing it on a major asset and/or obligation.

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Would I still do it if I could tell no one about it? Is there a more productive investment in which to place the money? Does the purchase in any way threaten or diminish my fi nancial bedrock? What would happen if I lost my job or my business went bust? Would I have to sell the asset quickly? Could I? How do I know?

Let’s look at the purchase of the pied-à-terre through the rich-is-a-religion prism. Could you just as easily and far more economically stay at a hotel when you visit Manhattan (or any other destination), and allocate the money for a dif-ferent type of asset that requires no upkeep, adds to your net worth seamlessly, and holds less risk? Perhaps a portfolio of high-quality corporate bonds?

This takes us to the crux of the timeless code philosophy. Warren Buffett has lived in the same modest home for 50 years and, as we have seen, says he wants no new material possessions. True, Buffett is unique, but we can learn from him without seeking to be his ideological twin. Buffett provides an interesting compass for living a wealthy life:

Create as much personal wealth as you feel appropriate. Do so as long as you have passion for the process of wealth accumulation. Never treat the wealth you amass as a commodity. Allocate your wealth to building a wealthy way of living that holds the enjoyment of the gift of life as of primary and overwhelming importance. Protect your invisible wealth as your most important wealth.

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Never spend money on assets or objects if their perceived value could be acquired more effi -ciently, thus putting more wealth to work for you and your fam-ily, without giving up the pleasure you seek.

By simply staying at the Ritz Carlton in Palm Beach one weekend per month at an average of $1,000 per visit, you will spend $12,000 annually to enjoy the sun and the luxuri-ous experience of that appealing destination. Contrast this with the outlay of millions to purchase and maintain a Palm Beach home of equal stature to the Ritz, and those 12 weekends that you are in residence are far more expensive in terms of:

Adding unnecessary complexity to your life. Feeding a mortgage and the monthly costs of home ownership. Subtracting from your reserves of liquid assets.

As you contemplate this, recognize that simplic-ity can be rich and beautiful. No, it may not come to you easily . Like all of the principles of rich is a religion, you may have to work at it. You will have to challenge conven-tional wisdom. You will have to arrive at a new set of truths. And you will have to live them. Sure, purchasing a home in Palm Beach may reap signifi cant gains that you will not harvest by staying in hotels. But, what if values decline? Can

•

••

•

Never spend money on assets or objects if their perceived value could be acquired more effi ciently, thus putting more wealth to work for you and your family, without giving up the pleasure you seek.

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you accept this and do you want the obligations of owning the home? Should the money be invested elsewhere?

The members of the religion of the rich have a quiet, sober view of what they want from life. They often love their families and careers and work hard to protect wealth, but they simply do not lust after the vast Christmas tree of material splendors that drives so many to addiction. They may like and own nice homes in fi ne locations with com-fortable furniture, but they do not develop gaudy show-places. No trophies. Nothing designed to make others envious. Nothing they can’t pay for with cash or mortgages that are well within their reach. They can write a check when a loved one needs money, they can weather a reversal of fortune (such as the loss of a job), and although they are still subject to the inevitable risks of life on Earth, the need for money never keeps them up at night. They are content in part because they have fi nancial security. They got there and will stay there because they make the management of their money an art and a science. They see money for what it is and what it is not. They do not live for it. They have too much of real substance to live for.

***

When John D. Rockefeller’s family decided that the oil baron needed a country estate, a place to escape from his life in Manhattan, the city mansion, and Standard Oil’s offi ces, they honed in on a property in Pocantico Hills, New York. The world’s richest man wanted a relatively simple residence and the initial architectural renderings refl ected that.

But the patriarch’s son, John D. Rockefeller Jr., believed anything so austere was inappropriate for the richest man in

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the world. So what was intended to be an upscale country cottage evolved into a luxurious palazzo on 250 acres, com-plete with panoramic views of the Hudson River and stun-ning Beaux-Arts gardens.

Extraordinary, yes; however, this was not what John D. Sr. had in mind. His preference was for a comfortable country home. But as busy as he was with his oil empire and unwill-ing to cause a family rift over something as benign as a resi-dence, Rockefeller allowed Junior to take control of the project and his son built the showplace that he believed was fi tting for the great man.

Senior, a member of the religion of the rich, did impose a few nonnegotiable limitations. When I visited the home, named Kykuit (Dutch for sentinel, refl ecting the fact that the home overlooks the Hudson where, in colonial days, British ships could sail into New York), I was taken by its elegance but surprised that its entrance hall lacked the kind of grand staircase that is generally the crowning feature of such homes. This was no accident. I was advised that Rockefeller, always resistant to great displays of wealth, refused to allow an architectural feature that would force him to make an entrance . That violated his sense, not of style (he was not a man who thought much of style), but of the way that one should treat and display money.

Rockefeller based much of his behavior outside of the management of Standard Oil on key principles of the Baptist way of life: simplicity, discipline, and pragmatism. When, as a young man, he heard a preacher advise “Get money; get it honestly and give it wisely,” he recalled it was then that “the fi nancial plan of my life was formed.”

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The religion of the rich was always central to his thinking and his lifestyle. As a young man, Rockefeller announced that he wished to earn $100,000 in his life and to live for 100 years. He lived to within 26 months of his centennial birthday and he became the nation’s fi rst billionaire and earned more than $300 billion. Even more extraordinary than his nearly unfath-omable wealth (it refl ected a greater percentage of the gross national product than that of any American before or since) is that he lived a life of fi scal prudence. He loved money, he used it skillfully as a weapon of corporate war, but he also knew its limitations. This was a man who would leave the offi ce on weekdays to play with his children after school. This is a man who built an ice-skating rink behind his Manhattan mansion and required houseguests to skate with him. This is a man who was in retirement for the last 40 years of his life. This was a man who, from his very fi rst pay-check, gave 10 percent of his earnings to his church. This was a man who gave to worthy causes virtually his entire net worth. This was a man whose sprawl-ing family of survivors have distinguished themselves in government, business, the arts, and philanthropy.

This was a man who always understood the religion of the rich. And who practiced it for nearly a century. And whose heirs have gone on to follow suit.

***

You can only become truly accomplished at some-thing you love. Don’t make money your goal. Instead, pursue the things you love doing and then do them so well that people can’t take their eyes off you.

—Maya Angelou

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Here’s the great power of this religion:

If you are poor, it can help you to accumulate and pro-tect your wealth. If you are rich, it can help you to accumulate more wealth and preserve it. No matter how much money you have, you can put it to meaningful use.

It can help you understand how to integrate money into your life so that you truly enjoy your days, your loved ones, and your accomplishments.

•

•

•

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Chapter 9

The Metamorphosis

H aving read the previous chapters, let’s assume that you see value in converting to the religion of the rich, in eschewing the wasteful ways of your past,

and in treating money with a new respect; but you are con-cerned that you will be unable to do so because old habits are so hard to break. How do you make this life-changing transition?

You must begin by making a commitment. Not the garden-variety New Year’s resolution that tends to become a memory before you ever put it into action, but a commitment in which you give yourself over to a true metamorphosis. Make a pledge to yourself that is rock-hard and honor-bound, not simply because of the value you place in an oath— important as this is—but, even more critically, because it has the power to bring so much positive change into your life and reveal the timeless code to fi nancial freedom.

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The pledge can take any shape or form, but is most pow-erful if it comes embedded in a Metamorphosis.

I recall an exceptional day during my sophomore year in college. I could hardly know it would turn out to be excep-tional when I arose that morning, tossed the blankets aside, and dressed for school.

It was a gray day. My father had died less than a year before, and my household was in shambles. I had to scrounge for money every day, and sometimes it all felt like just too much to navigate. I was surviving. There was no joy.

Later that bleak day, walking through the student park-ing lot after class, a cold February rain began to fall from the wintry sky. At fi rst I was chilled and miserable and wished only to get to my car, drive home as fast as possible, and get back to my bed in the living room of our tiny apartment, depressed and alone, but warm and dry.

And then, 100 feet from my car, I was hit by a mental thunderbolt. It was as if the clouds had parted, it had stopped raining, the winter had turned instantly to spring, and the sun was warming my back.

It was then that I remember so distinctly saying to myself, promising myself, pledging to myself, “ I will never be ordinary. Whatever challenges I have to face, whatever adversities line up in my way, I will never succumb to them. I will never be ordinary.”

Slow but inexorably I began to challenge conventional wisdom. To rethink everything. To promise myself that I would never follow a course of life that I didn’t believe in, no matter how widely admired and pursued it may be. That is how I built my career. That is how I fathered my children.

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That is how I have accu-mulated, invested, enjoyed, and protected my money. That is how I have created a richly rewarding lifestyle. That is how I made myself a multimillionaire who can sleep peacefully at night.

And this is how you will break the timeless code to well-being, also.

*** The Metamorphosis is the process you go through when

you open your mind to seeing things differently and begin embodying the fi nancial practices that have been discussed in Rich Is a Religion .

A popular math question asks whether you would prefer to have a $1 million lump sum of cash placed in your hand this moment to keep forever, or to have one penny today and to have it doubled every day for 30 years.

The natural instinct is to take the fast $1 million and run. But when you do the math, that turns out to be a miserable choice indeed—one that may be practiced by the atheists of this religion. When you add it up, the penny today doubled every day for 30 years comes out to equal a much larger sum of money than that up-front initial million dollars.

Several forces are at work here:

The power of compounding . Einstein referred to the power of compounding as “the eighth wonder of the world.”

•

That is how I have created a richly reward-ing lifestyle. That is how I made myself a multimillionaire who can sleep peacefully at night.

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A wonder that turns a penny into a fortune. And that same wonder can propel your fi nances if you value each dollar and put the great bulk of your discretionary income into appreciable assets. The power of perception . At fi rst blush, the $1 mil-lion in cash appears to be the wise choice. As does buying the McMansion, taking advantage of the off-shore “tax shelter,” living a life of self-indulgence (beyond your means) based on the premise that time or inheritance or the fates will see to it that it all works out in the end.

But this way of seeing the world, your life, and your wealth, is a mirage, a misconception, a myopic vision. At every stage you must take responsibility for:

Achieving what you really want. Avoiding the sand traps along the way to that goal. Having the guts, the gumption, and the creativity to work your way out of the inevitable pitfalls that you will encounter. Ignoring conventional wisdom and plotting a path you believe is right for you.

All of this is part of the metamorphosis. You may have to change the way you think and act from the bottom up and the top down. You will have to pledge to put this change into action. You must make an oath with yourself never to be ordinary or submit to ordinary fi nancial decisions.

•

•••

•

. . . Value each dollar and put the great bulk of your discretionary income into appreciable assets.

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After all, ordinary people have a tendency to make a mockery of money. Specifi cally:

They may count it, but never think about it from an intellectual or philosophical perspective. They may be devoid of a fi nancial philosophy. They may live way beyond their means. They may believe the only real money is that which others can see, which others can ogle and envy. They may have their homes repossessed. They may fail to put aside money to educate their children. They may be in a position where it is impossible to change careers or retire or live life the way they yearn to. They may survive but never thrive.

In the end, these people are the athiests of the religion of the rich. In Chapters 6 and 7, you have learned how to avoid that fate, but now you must learn how to undergo the metamorphosis so that you know how to fully practice the religion of the rich.

***

As you undergo the Metamorphosis, your thinking changes. Consider the following scenario and how you will respond to it before and after your personal Metamorphosis.

A friend who has recently purchased a lovely second home in Bermuda advises you that the original buyer of a similar property has just lost his fi nancing and the property is about to go back on the market. If you act quickly, you can snap it up. It is a deal of a lifetime.

•

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•

•

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Get tough on this one. Ask “Why the hell do I need a second home?”

It sounds at the outset like a compelling opportunity. A property deal that fell apart. A chance for you to participate where there was none before. A friend who is there already and happy with what he has purchased.

In a scenario like this, which takes shape so often, a sense of urgency develops. Be aware of a facet of human behavior that we should keep watch for: the rush to seize a sale even if the product on sale is not something we par-ticularly want.

As a member of the religion of the rich, you will want to avoid the stampede mentality and explore the property, the “exceptional opportunity,” the fi re sale, through a different clearer lens. As a member of the religion, you must ask yourself:

Do I really want this or do I want to keep others from claiming it? Is an asset really a great opportunity because the deal someone else had for it fell apart? Do I really need a home in Bermuda? Will I actually use it? Is it for bragging rights? Am I about to become a vic-tim of a land rush mentality? Can I comfortably afford it? Have I done my own due diligence to confi rm that this is truly a great buy that can generate a ready profi t should I choose to cultivate that?

Sure it is a lovely idea in the abstract, but home owner-ship is never in the abstract. It is brick and mortar, upkeep, insurance, dollars and cents, opportunity cost—and all subject

•

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to the vagaries of the roller-coaster nature of the real estate market.

Once you have moved through the Metamorphosis and become a member of the religion of the rich, your response to the Bermuda property (and to so many opportunities like it that may come your way), will likely follow this pattern of reasoning:

Isn’t the money better off sitting where no one can see it? Is this the highest, best use for the money? Am I falling victim to an atheistic temptation? Do I need more complexity in my life? Is my fi nancial baseline already bulletproof, thus allowing me to make luxury purchases?

***

As you may have learned from this book, one of the reasons that the con-version to the religion is so important is that it pre-vents us from falling victim to the irrational urge to spend money on market-ing gimmicks dressed up as investments.

From his earliest days as a retailer, Sam Walton

•

••••

One of the reasons the conversion to the religion is so important is that it prevents us from falling victim to the irrational urge to spend money on marketing gimmicks dressed up as investments.

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learned that if he placed an abundance of merchandise, any merchandise, on a table and priced it especially low, it would sell out within hours. Sam recognized the fact that many people would snatch up the sale items simply to keep oth-ers from getting them. A fever would develop and that, more than any tangible value in the goods, would drive sales.

Even though I have been a member of the religion of the rich for my entire adult life, now and then I have lapses in judgment, each of which comes back to haunt me.

On a weekend ski vacation with my family in Killington, Vermont, I noticed a new lodge being built within walk-ing distance to the lifts. Luxury condos were up for sale well in advance of fi nal construction. After an exhilarating day on the slopes with my boys—six and eight years old at the time—I walked into the sales offi ce and fell headfi rst like a teenager in love into the dream of “owning a piece of Killington.”

Acting with my heart before my mind had a second to weigh in, I wrote out a deposit check and soon after bought a condo. We owned it for about 15 years. We had lovely times there. My sons thought it was heaven. My wife and I would go up there alone at times for romantic weekends.

One problem: It was a miserable investment from the start. The price was too high, the maintenance fees never stopped rising, and the value plummeted as new housing was built throughout the area. When I fi nally sold, it was for less than half what I had paid for the place.

Clearly, you can’t time everything in life. Surely, there was great joy derived from that condo. But my family and

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I could have rented a place for weekends or stayed in hotels and saved hundreds of thousands of dollars if I had put the potential purchase through the rich-is-a-religion fi lters before we bought.

But remember, no one is perfect—even saints become sinners at times. Therefore, if you stray from the path of the religion of the rich and fi nd yourself engaging in atheistic, nonsensical fi nancial behaviors, remind yourself of the rich philosophy and begin practicing its tenets again.

***

We can think of this Metamorphosis as a change in the ways we think and act about money:

We require every major fi nancial decision to pass through a series of fi lters that serve as our personal due diligence. The fi lters serve to review the decisions from a money-fused-with-life-goals perspective. We view many fi nancial products vendors with a skepti-cal eye, believing at the outset that they are more inter-ested in promoting their fi rms’ asset- collecting marketing machines than serving our wealth- accumulation and wealth-protection interests.

•

•

•

We require every major fi nancial decision to pass through a series of fi lters that serve as our personal due diligence.

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When I fi rst met Rebecca, the daughter of a wealthy and illustrious family high up on the social pyramid of Houston’s oil community, she told me that her 92-year-old mother lived to “make other people miserable.”

When I inquired what she meant by this, she recounted a life of misery with a woman who never seemed to like any-thing but money.

MS: Is she still obsessed with money? R ebecca : Oh, absolutely. MS: You said she is 92 and in poor health. What does she do

with her money? R ebecca : She loves the “show.” MS: What do you mean by that? R ebecca : She owns four grand homes, but they are never

big enough. So she keeps adding new wings to them, and then wings onto the wings, to the point that the homes are now laughably large and terribly ugly.

MS: Does she entertain in them? Have many house guests? I don’t get it.

R ebecca : She has no friends. She can barely get around. I don’t think she even visits the wings after they are built. But she keeps on building. It’s like an addiction.

Ah, yes, the misuse of money can become an addiction. There is always something new to have. Something wonder-ful to buy. Something bigger than what used to appear big. And, as in the case of Rebecca’s mother, it doesn’t make us richer. It does just the opposite.

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The religion of the rich celebrates success. Encourages the attainment and protection of a lovely lifestyle. But it knows where the traps are, and in which direction the addic-tions lie, and it teaches and encourages you to avoid them like the plague they are.

Once you move through the Metamorphosis, you do it naturally. You are not ordinary. You are wealthy for life.

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Epilogue

Dividing Day

A ll of life is a series of Dividing Days . These are the points in time when we leave

something behind and move on to something new. Sometimes we move on simply for the sake of experiencing the new, which can often turn out to be a superfi cial choice; but at other times—the stirring and exceptional times—it’s because we have divined something superior that we aspire to.

The journey refl ected in Rich Is a Religion represents one of those exceptional times. Making the commitment to follow the philosophies described in this book can be the moment when the baggage of the past is left behind, along with its wasteful habits and its self-imposed obligation to live a life that curries favor with others while failing to fully nourish our own.

On vacation on the island of Tortola in the British Virgin Islands, I met a couple, Ian and Karla, who had retired there from Chicago. They had built a major corporate-search fi rm

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from scratch, reinvested the profi ts over the years, opened branches in London and Tokyo, and, after 27 years, decided to indulge in the beachfront life they had always promised them-selves. They sold the business, sold their house, sold their car, sold their furniture, put their furs and wool suits into storage, and escaped to the new latitude they now called home.

They had made more than enough money to never work again. And that’s precisely the way they planned it. But what they didn’t know, and still don’t, is that they were not the masters of their own destiny. They abdicated that role to others.

The day I met them I was eating lunch at a marina, enjoying a grilled bronzini and chilled Stag’s Leap Cabernet Sauvignon, when a third party introduced us. Ian and Karla joined me at my table and it was then that I learned of their life in Chicago, the corporate-search business, their dreams of the beach, and how they had arrived, at last, in paradise. It was a lovely story and a real-life fairy tale.

Caught up in the beauty of it all, I pointed to the Caribbean all around us and said, “It must be wonderful to soak this in every day.”

It was as if I were showing them something for the fi rst time. As it turned out, they had already come to look past it. As if the sea and the palm trees and the cloudless skies weren’t even there.

“Who has time to notice?” Karla asked. Time to notice? Why was time an issue at all? “This island may appear to be laid back,” Ian explained,

“but it’s actually home to a small but highly successful expa-triate community from the United States. They have started


Dividing Day

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new businesses here or run their established companies out of a Tortola base of operations. They are real fi recrackers. Go, go, go. And they make lots of dough. We thought we had a lot before we met them, but they have put things into a new perspective.”

I was still perplexed about the time issue when Karla jumped back in.

“I don’t want to sound egotistical, because we’re not that kind of people, but we’re used to being the ones at the top of the success ladder. We just felt, I don’t know, suddenly overshadowed. As if the great successes we thought we had achieved in the United States were a fi gment of our imagina-tion or a fl ashback to the past.

“Just at the time this was really hitting home with us—more than that, seriously disturbing us—an oppor-tunity emerged here to create a major real estate develop-ment company. We jumped on it and, well, like I said, who has time to look around? We’re back at work again, almost 24/7.”

When I asked Ian and Karla if they enjoyed this unex-pected turn of events, the answer was disturbing.

“Yes and no,” Ian said. “The business is good and we feel, well, competitive again, but now we have to put off those walks on the beach one more time.”

You know by now that they don’t have to put off any-thing. But they don’t see that. They don’t even see clearly that they are putting off life. And doing so in order to fi ddle with other people’s minds.

Ian and Karla have never had a Dividing Day or rewrit-ten their Rosetta Stone. They have never transitioned from


what they have been told they have to do to what they truly want to do. They have never subscribed to the ideals of the religion of the rich. Yes, they were success-ful. Yes, they worked hard for their success. Yes, they built a wonderful business. And I congratulate them for that.

But the religion of the rich is about making money, pro-tecting it, and using it to live a wealthy life. It all boils down to a seeming paradox: Money Is Not Really Money . It is an instru-ment, a facilitator, a vehicle of empowerment that enables you to revel in your days the way you see fi t:

To work for yourself, and yourself only, if that is what you prefer. To engage now in the endeavors you promise yourself you will get to some day in the future. To have the peace of mind that comes with a rock-hard fi nancial base. To indulge yourself and your family with everything you desire, knowing that you will not jeopardize your fi nan-cial well-being.

We have seen that together. We have traveled together through a Dividing Day.

There is no going back!

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•

•

•

I’d like to live as a poor man, with lots of money.

—Pablo Picasso


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Appendix

The Unconventional Wisdom of the

Religion of the Rich: A Collection of Blogs

Rich Is a Religion is a book about unconventional thinking. Specifi cally, it is about the intersection of life and money. The traditional approach is to bal-

kanize the two. You think and talk and write about life, or you think and talk and write about money. The issues are sep-arated, as if they were completely distinct.

In the heart of this book, this notion has been challenged. I have asked you to think about many of the important things in life—money, lifestyles, family, careers, sunsets—as inexora-bly bound together. And to think about how the decisions

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that are made on one issue have a powerful infl uence on all issues. If we do it all correctly, we can achieve the two most powerful things that we can aspire to as human beings:

Live lives that are greater than the sum of their parts. Maximize the greatest gift any of us ever receive, which is the gift of life.

In this Appendix, I have included some of the high-lights from my blog, “Unconventional Thinking.” After careful review, I have chosen these particular blogs because I believe they refl ect the ideology and philosophy that make up the belief system of the members of the Religion of the Rich.

The Thing about Beauty Rich Is a Religion The Mind Is the Enemy of the Heart The Sun Never Shines at Night—The Moon Never Cries in the Morning The Iceberg and the Palm Tree Five Minutes to Forever Life Flies By . . . and the Dreams Wave Back In Pieces on the Ground At the Sign of the Crass

The Thing about Beauty

In the enchanting Robert Redford fi lm, A River Runs Through It, a minister father advises one of his young sons to take back a homework report he wrote and “cut it in half.”

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The Unconventional Wisdom of the Religion of the Rich

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When the boy, eager to have his studies behind him so that he can take to the Montana spring and fl y-fi sh, returns the report to his dad, he is instructed to “cut it in half again.”

The loving father, who brings a sense of discipline and frugality to his child, is in the process of teaching him the wisdom and the power of Less Is More.

So much of what we do and see in twenty-fi rst century life is based on the belief that More Is More. More words. More money. More homes. More people reporting to you at work. More to-do’s on your calendar.

Recently, I met with an editor, a smart and engaging young woman, who visited me to discuss this book. She asked if we could make it longer. To which I responded, I have nothing left to write on the subject. All that I want to say, I have written in the manuscript.

I know from experience that the publishers’ sales teams like a beefy book with lots of pages. I challenge that, believing that people don’t weigh books; they want ideas, entertainment, or both, and if that comes in 100, 200, or 400 pages, they don’t care. Particularly for the kinds of books I write, it’s the take-away that counts.

An enlightened and open-minded graduate of Columbia University, the editor agreed, and instead of wasting time talking about tonnage, we engaged in an interesting and rewarding discussion about content and philosophy.

We agreed that in this case, and in many others where the instinct is to pile it on, that Less Is More.

In A River Runs Through It , one of the minister’s sons, played by a young Brad Pitt, is, in half of his personality, a



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human metaphor for the power of less. He fl y-fi shes with a simple elegance of wrist movement. He dances in a way that his feet barely touch the fl oor. He radiates a charm that overwhelms everyone he comes in contact with, just a smile and a bright-eyed confi dence that is as silent as his lure skimming the surface of the river.

In the end, which is tragic because part of him lives by More Is More, the narrator, playing Pitt’s brother in the fi lm, says that he was more than handsome and charming and talented.

He was beautiful. So often in life, we want to smother beauty by adding

and accumulating and expanding and enlarging and direct-ing and controlling and twisting the thing of beauty—the idea, the invention, the person—into what it is not and was never meant to be.

Before you touch it, before you vow to change it, before you decide to take over and apply “the rules,” stare at it for a while. It may be perfect as it is.

And if it is, tell it so.

Rich Is a Religion

Okay, so the nation is stuck in the quicksand of a subprime crisis, millions are driving away from their split levels, banks are hemorrhaging red ink, the battered stock market is teetering on a free fall, and President Obama’s fi rst day as Commander-in-Chief will be focused on declaring war on a full-blown recession.



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As wise and creative as he may prove to be, he will likely tackle it the wrong way: the economists’ way, with all kinds of technical maneuvers that fi ve people in the Monetary Brain Trust pretend to understand. They will jiggle the dis-count rate and manipulate the money supply and create guaranteed mortgages and dole out health insurance and play 101 Washington games that completely avoid why we got into this morass in the fi rst place and why we will do it again and again and again and again.

We formalize it all and make it sound inevitable by call-ing it economic cycles, but it’s really just a total personal failure on the part of Americans to treat money with the respect it deserves. Does this mean to worship money? Of course not. But it does mean to respect what money can and cannot do for you.

We all work for money. We all earn it. We all want it. The difference between the members of the religion of the rich and the atheists of the rich is that the former truly achieve fi nancial independence from it while the latter watch it slip through their hands. And no matter how much they earn, they never feel rich. And they never are.

The idea is not to make as much money as you can, but instead to live life as fully and completely as possible. Of course, the two intersect. You need money to own a nice home (one you can actually afford), to vacation, to send your children to school, to weather the inevitable storms and curve balls, to indulge in luxuries now and then, to retire if and when you want, and to walk away from your boss or your client when they don’t deserve your time and your talent.



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The only way to have this kind of wealth, this wealthy life, this independence, is to:

Recognize that the most important money you have is the money no one can see . It is the money you don’t spend, it is the money that builds your fi nan-cial bedrock, it is the money you worked for, yes, but that then turns around and works for you because it is invested in appreciable assets. Learn the importance of making money while you are sleeping . No one of real wealth earns it, grows it, and keeps it by simply working harder. They work smarter. They fi nd a way to create a portfolio and/or to build a business that generates profi ts while they are fast asleep in their beds or dozing on a beach. Stop spending a dime to impress other people . This is incredibly shallow, hollow, and self-defeating. It prompts millions to buy homes and cars and Christmas gifts they cannot afford. It makes them slaves to jobs they hate, to bosses and careers they detest. It assures they will never have fi nancial independence. It is the real reason for the mortgage crisis. It is the real reason people don’t have the money to retire after a life of labor. It is the real reason why people with no money for health insurance spend hundreds on lottery tickets. It is the real reason why men, women, and entire families with very signifi cant incomes have no money in the bank and need sleeping pills to escape the night.

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Working hard is noble. Working smart is even better. Making money this hard, along with smart work, produces a wonderful reward.

But unless you treat that money with respect, unless you live below your means, unless you treat the creation and protection of wealth as a near reli-gious experience, you will always wonder why it’s you who comes up short.

When it’s no mystery at all.

The Mind Is the Enemy of the Heart

When people are proud of themselves, it is often for their minds. Those complex calculating machines that sit on our shoulders and turn everything in life into decision trees.

Is this good? Is it right? Is it fair? Will it be good and right and fair months from now?

Years? Days? The decision machine, the mind, keeps analyz-ing the variables. Looking for the perfect answer . . . in an imperfect world. How absurd. How naive and self-defeating: looking for the perfect in an imperfect world.

The heart, at the other side of the spectrum, keeps pumping out passion. Like a child untainted by rules of the system, it reacts to what it sees as good in life and what it wants to embrace, without a single caveat: It is true, sponta-neous and alive. Unchecked, unfettered, and unplugged.



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This is the titanic struggle in life, in business, in love. As businesspeople, we must all beware of this. And we must wonder as we approach our prospects, our markets, what will prevail: the mind or the heart. Will people like your products or services and buy them, or will their minds squash the deal with concerns on price and practicality. Do I really need this? Is this priced well? I already have black shoes, what right do I have to buy more? Is that good use of my money? Am I being a responsible person? What will others think?

The Mind, you see, has no heart and, in the worst cases, zillions of cases, it holds the heart hostage. And the prospect will not buy. Will not indulge in its dreams and will succumb to the “what if ’s.”

But there is a way to reverse this and empower the heart to prevail. To buy what the prospect sees and likes and wants even though the heartless calculator of the mind fi nds end-less reasons why this is not good or right or fair. That is how to transition prospects from like to love. In cases where the prospect, the customer, falls in love with what you are selling and how you are selling it, the heart will take over and the sale will be made regardless of the million-and-one reasons the mind will invent to deprive the soul of the joy of the expensive, the impractical, the unacceptable, the inappropri-ate. Standing in front of a beautiful new car that is slightly out of your reach, ignites the mind/heart battle. If the design and packaging makes you fall in love, you will buy and fi nd a way to keep it. And love it. And live your life your way, with a wonderful sense of abandon.

People divide into these camps: those who lead with the heart and the others who are paralyzed by the mind. As a



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businessperson, your mission is to melt the mind and light the heart. If you don’t, they will walk away empty-handed. A sure sign that they liked but never loved. And as in human relations, a sure sign that they are deprived of each other. The mind thought the desire to death and killed it. No one buys jewelry, Prada, iPhones, vacations to St. Barts with their minds. They buy with their hearts. Find a way to show them the love when there is no glamour—the rustic appeal of LL Bean boots, the quiet charm of most anything that carries the Martha Stewart brand—and you will make the critical transition from like to love.

From the mind to the heart. And in those cases where you can’t walk away, there are prospects of passion just across the street.

The Sun Never Shines at Night—The Moon Never Cries in the Morning

Everything in life is doomed at the start. There is no question that it will have a trajectory; the only mystery is how long and far the fl ight will last. A heat-seeking missile embedded within whatever you have built, simply waits for the right time to fi re and bring it to the ground. Why? We haven’t a clue. But in our moments of champagne euphoria, it is good to be armed with the knowledge of the truth. With the knowledge that this too will pass. With the knowledge that behind it, another rocket is ready to launch. Another journey ready to be taken. Renewal is one of the true majesties of life. Interestingly, we think the end, of a business, a job, a passion, a relationship, tells us something about the beginning. But the



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polar opposite is true. The beginning and the end are born at precisely the same time. But in the giddiness of the new we refuse to see that it is an imposter for the end. All of the fault lines and limitations and physics and DNA that will destroy it, are there in full view when the opening toasts are made.

Imagine if we looked for them. If we engaged in due dili-gence at the start. Hunted down the enemies of the good and the beautiful and the successful—the enemies of longevity—and destroyed them before they ruined what we have built. What we adored. What we looked at with amazing pride. What we had every right to be proud of because we vested it with care and intellect and creativity and drive and faith. Blind faith. Reckless faith. Joyous faith.

It would change nothing. You have to throw yourself at the things you create in life with wonderful abandon and let them fl y for as long as the gods allow. Probably the truest axiom is that the secret to life is enjoying the passage of time. That’s all you need to do . . . and it is endlessly wonderful. Because when the business dies, you can form another. When the job turns into a drudge, you can walk across the street. When the strategy or the campaign fails—and ultimately it will—you can rethink it and raise the curtain on A ct II.

It is just important to know at the start—not to dwell on it but to know—that there will inevitably be an A ct II. And you are alive. And you can seize it. We all have to live know-ing that there is so much we do not and cannot understand. The trick is to never to let that mystery hold us hostage. Or stop us from taking risks.

Until we know why the sun never shines at night and the moon never cries in the morning, we are on our own.



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Free to build and create and manage and love, knowing the uncertainty just makes it more enthralling.

The Iceberg and the Palm Tree

There are two kinds of people in this world. We’ll call them icebergs and palm trees. (Truth be told, there are likely thou-sands of types, but this is my blog and I’m in the mood to be simplistic. To make a point, of course.)

Anyway, back to my hypothesis, which I do believe in. In fact, which I think about all the time, some more than others, and when I do think about it, well, it opens up entire vistas of thought. Of insight. Of epiphanies.

Icebergs are impressive, but only from a distance. They can be beautiful in shape, pristine in color and composition, imposing in their steadfastness, and they can be impervious to the elements that swirl around them. In human terms, they are stoic, silent, predictable. But get up close, scratch the surface, and it’s all just ice. It’s all rather cold. It’s all terribly inhuman. It doesn’t cry or think or change. It may melt, but that’s not the same thing as soaking in the moon and fi nding a way to chase it.

Palm trees give themselves up to the forces of the moment—the breezes, the gales, the tropical storms that emerge from nowhere and paint the day black—happy to twist and bend and make passionate love to the natural forces that rise up and make life so interesting, so compel-ling, so intriguing.

In my life, in all of the things I am so fortunate to expe-rience at work and at play (which are really one and the



164

same to me), I interact with and observe the icebergs and the palm trees. As I look for answers, adventures, innovations, collaborators, leaders, romantics, fi ghters, business build-ers, catalysts, friends, kindred spirits, inventors, new ways of growing MSCO, drivers of excellence for our clients and business partners, allies in my lust for life . . . in all, it is the palm trees and only the palm trees that meet the test.

I need to be surrounded by palm trees. It is only they who will not only accept the fates, the

risks, the uncertainties, but will use the crazy quilt of life’s forces, of God’s forces, of the unknown, of the unpredictable, to continuously chase the moon, to reshape themselves, to give themselves with abandon to what they cannot see, or measure, or insure because they know, in most cases instinc-tively and subconsciously, that an iceberg is an inanimate object and a palm tree is a living thing.

The fi nest thing in life is to walk directly and confi -dently into the unknown. That is where success, in all of its forms, lies.

Five Minutes to Forever

It is ironic that from the earliest days of our cognizant lives, we are programmed to fear its end. Especially, the last fi ve minutes.

This entire notion, this ripe fear and in many cases dread, is preposterous. We have no idea where we came from, and why we arrived in the world, but we are certain that in death we are leaving it. That it represents an end. A fi nality.

How is it that we admit to looking backward to our arrival on earth with no knowledge but to look forward to



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our departure with great certainty. A certainty that has no basis. No founding. It is mindful of our predecessors who were convinced that if they sailed into the horizon, they would fall off the face of the earth.

Little did they know that the truth was the polar oppo-site: that they could sail into the horizon for eternity.

The fact is we are preoccupied with living a long life when life as we know it is never long. If we live 100 years, it is but a blip. And to complicate matters—but to introduce an essential reality—whose life was longer, Mozarts’s or Jane Smith’s, who died at 98 after a 60-year career as an insur-ance actuary? And who hated her work from the moment she left college and took a seat in her cubicle at Homestead Life Insurance Co?

We have a monumental choice before us all: to be in the life fulfi llment business—meaning we live every day without concern for when it ends (if it does)—or to be in the life protection business—meaning we spend nearly every day seeking to postpone or circumvent the inevitable.

All too many people do the latter. And in the process, they waste so much of the joy of being alive on this earth. They seek safety. They run from risk. They make sure not to work too hard. They are sticklers about having balance in their lives (whatever that means). They look askance at those who burn the candles at both ends, walk the high-wire without a safety net. Start companies with their life savings. Quit “good” jobs for careers that bring them joy. Abdicate the throne to marry a lover.

The only way to truly live, to achieve success as a man-ager, artist, factory worker, actor, CEO, mother, father,



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friend—is to do it with abandon. Without fear of when it will end. The more you try to control the ending, the less control you have over it. It won’t ask for your permission. It won’t ask for your timetable. It will just end. Nothing you can do will stop it.

And that’s the good news. You can let go. It’s out of your hands. And even better, the last fi ve minutes here may be the countdown to forever.

Life Flies By . . . and the Dreams Wave Back

Everyone has a dream. Martin Luther King Jr.’s was a mother of a dream. Yours may appear petty in comparison . . . to every-one but you. It is yours and it is magnifi cent and sweeping and grand: the best that can be. But the question is, will it ever make the cosmic transition from dream to reality?

The truth is, life races by and the dreams wave back. And you keep promising that you will turn the dream into reality, but you don’t. You blame it on the gods and circumstances and religion and tradition and other people, but it’s you that builds the wall you refuse to pass through. Just you.

Life is a precious gift. To refuse to live it to its utmost, to the extreme—in effect, to seize the dream—is a form of “sin.” Not the kind you go to hell for, but a more insidi-ous kind that deprives you of what can and should be the most important thing in your life. When King Edward VII of England fell passionately in love with Wallis Simpson, the only way he could fulfi ll his dream and marry her was to do the undoable: abdicate from the throne. Which he did in a heartbeat. In doing so, in breaking the rules others had set



167

for him, he reversed the general and passive order of things: His dreams took fl ight and life threw a kiss for his courage and his passion.

I walk into countless meetings and hear of dreams. I fl y in planes and hear of dreams. I attend conferences and hear of dreams. And I love dreamers because they have the elec-tricity of life. But so often it remains static electricity. “My career would be what I really want it to be, but . . . ,” “My company would break new ground in our industry and achieve truly dramatic breakthroughs, however . . .”

Dreams are like snowfl akes. They dance from the sky and powder the world with possibilities and in most every case, melt and disappear, leaving nothing but what might have been in their place.

Those who took the snowfl ake in mid-fl ight and refused to let it melt dominate the history of the world. Abraham Lincoln would not let the dream of a great and enduring republic van-ish. That fact that there were armies of men slaughtering each other did not stop him. Franklin Roosevelt had a dream of a near broken America rising up from its despair to its fi nest potential. That he could not stand without braces did not stop him from carrying the whole damn world on his back. Edwin Land’s daughter asked him why it took so long to produce a photograph and he dreamed and created instant photography. Rosa Parks dreamed of sitting in the front of a bus. And with the threat of death all around her, that is precisely what she did.

At this moment, in companies and fi rms and homes around the world, millions of dreams are out there, in holding patterns, waiting to take fl ight. Will yours? Life will fl y by.



168

The question is, will your dreams wave back? Snowfl akes of the mind?

In Pieces on the Ground

You dream a thousand days and nights and work to the point of exhaustion to build something of great and endur-ing value. And then you turn around to see that it has fallen from the sky. Crashed to the earth. Lying there in pieces on the ground. What you do at that moment of truth is of overwhelming importance to your success, or lack of it, as a businessperson, marketer, entrepreneur, liver of life, lover, inventor, and romantic.

It begins by recognizing that it is not really a moment of truth. It is a phase of a continuum. If you are to make your true mark as a businessperson, marketer, liver of life, lover, inventor, romantic:

You must recognize right there at that moment of head-on confrontation with the realities of life, that the pieces can be put together again. Or that they can be re-arranged into a different type of satellite that will follow another fl ight path. Or that you can scrap all of the pieces you built your dream on and fi nd others and others and others until you create the code breaker and the great and enduring achievement of your life stays in orbit. A beauti-ful vision to behold. Everyone is a genius, a winner, a king or a queen when a product, a service, a company, a love takes off. When it soars from a laboratory, a boardroom, or a country road, and glides into the blue. But few of the kings, queens, and geniuses retain those titles when they are



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standing there, alone and pole-axed, staring at the pieces on the ground.

The greats, which we all can and should aspire to be, view these moments as beginnings, as challenges, as calls to action to fi nd out what went wrong and how to fi x it. Or more than that, to rethink everything from the blueprint stage and up and to create a new kind of satellite, software, company, that defi es convention, fl ies in wild gyrations as opposed to predictable orbits, and creates a new category far different than what you dreamed of from the start.

A category that fi rst came to you when you stared at the pieces on the ground and saw not the disconnects but instead where the wise and true connections could be made. Anyone can walk away from anything, depressed, defeated and even bitter that it didn’t have a happier end-ing, a more fruitful result, a more stunning breakthrough. John McEnroe was just another talented mid-level kid on the tennis circuit until he walked on the court one day, saw the pieces on the ground, and said, “This isn’t about beau-tiful ground strokes, it’s algebra. It’s all about angles.” With that he rearranged the pieces and became champion of the world.

It’s what we do when we see the broken pieces, not the achievements, that makes the difference in our lives. In our grand and blessed continuum.

At the Sign of the Crass

I am up from the streets. I have been poor. Not a dime in my pocket. And I know how to fi ght. To go through hell



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to survive . . . and then thrive. And I know the cliché rules of business and life that “nice guys fi nish last” and that “you have to attack before you are attacked.” And that the best route to success is to be manipulative, combative, and ruth-less. And I say that is crude and untrue and crass . It may lead to momentary successes but not to rich, proud, enduring, exceptional success. It is time to rethink the Sign of the Crass and call it for what it is: shortsighted, unethical, and ultimately self-destructive.

The great religions of the world—call them the Signs of the Cross or the Star or whatever their primary symbols may be—light a different path to success. Has Warren Buffett become one of the wealthiest men in the world by cheating and lying? Of course not. He has hundreds of friends and business associates who have been by his side for more than a half century. He has given most of his wealth to charity. His sister answers the neediest letters and sends money to those truly desperate and deserving of help.

Next door to you there are unknown Buffetts. They are successful beyond their wildest imaginations. And they have never plundered or deceived or even gone back on a hand-shake. Their word is their bond. Really. The bottom (and top) line is that they are determined to lead successful lives, yes, but ethical ones as well. They never want to look back wishing they could redo it all. They don’t want to ask God to forgive them for the shabby way they have conducted themselves. We all sin. We all wish we had a life eraser. None of us can go back in time. There is no easy button. But we



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can make a pact with ourselves to conduct ourselves in ways that aren’t seen as very cool today: with candor, with under-standing of others, with a passion for friendship and men-toring, with the goal of seeing others surpass their dreams, as well as with respect for life and God. We all come to that fork in the road every day: Will you follow the Sign of the Crass or the Sign of the Noble?



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About the Author

Mark Stevens is a bestselling author; CEO of MSCO, Inc., a results-driven management and marketing fi rm; and a popular media commentator on a host of business matters, including marketing, branding, management, and sales. Stevens is known for delivering business insights fi lled with blunt truths and unconventional wisdom.

In his latest book, God Is a Salesman: Learn from the Master (Hachette Book Group USA/Center Street, 2008), Stevens advocates transforming the current culture of sales from an emphasis on superfi cial transactions to one based on faith, trust, and relationships. In God Is a Salesman, Stevens delivers a life- and career-altering guide, based on the principles of the world’s great religions, for anyone who sells anything—and everyone sells something. Stevens shook the marketing estab-lishment with his enormously popular BusinessWeek best seller, Your Marketing Sucks (Random House/Crown Business, 2003), and redefi ned the rules of management with Your Management

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Sucks (Random House/Crown Business, 2006). He is the author of 24 business-related books, including the best sellers: The Big Eight, King Icahn, and Sudden Death: The Rise and Fall of E. F. Hutton (a Wall Street Journal best seller and Library Journal “Business Book of the Year”).

Stevens’ fi rm, MSCO, represents a stellar roster of clients . Through integrated marketing campaigns, MSCO focuses on achieving results for its clients instead of garnering awards that serve egos. Mark Stevens possesses an innovative and iconoclastic view of the business world. His incisive under-standing of critical business issues is geared toward achieving extraordinary growth and success for his clients.

Mark Stevens is an in-demand speaker at organiza-tions from Nike and Oracle to the Culinary Institute of America. Stevens delivers more than 40 speeches annually and is a regularly featured media commentator, lending his insights and opinions to everything from Carl Icahn on Fox Business Network, Associated Press, CNN International, and Bloomberg TV, to Tom Cruises’s image (Fox’s The Big Story ) to CNBC, Bloomberg TV, MSNBC, NPR, and Bloomberg Radio on the annual subject of Super Bowl advertising to “Before You Tie the Knot: Tips on Creating a Successful Business Partnership” ( Wall Street Journal ), “Your Business Just Ran Over My Toe” (Life’s Work/ New York Times ) to “No Law Against Being Friends” (Cindy Adams/ New York Post /Paris Hilton Goes to Jail) to Kate Moss’s personal crisis (Page Six/ New York Post ) to “Why Successful Business People Don’t Sleep” ( New York Times ) and “Be a Better Boss” ( Forbes.com ).

His wildly successful blog, “Unconventional Thinking,” is in the top 1 percent of all published blogs (out of 95 million


About the Author

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blogs). He has just launched a new blog focused on sales called “Invisible Selling,” and is a regular guest blogger for Brandweek.com and the Digital PR blogger for PR News Online .

Recent Books by Mark Stevens

God Is a Salesman: Learn From the Master Your Management Sucks Your Marketing Sucks Extreme Management: What They Teach at Harvard’s Advanced Management Program

Books by Mark Stevens have been published in the United States, the United Kingdom, Ireland, Australia, New Zealand, South Africa, China, Germany, Spain, Japan, Russia, and Brazil.

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Rich is a Religion: Breaking the Timeless Code to Wealth

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