Thursday, 19 February 2009

The Black Book Of Executive Politics

What Office Politics Are All
About


Introduction
People who fail come in all shapes and sizes. In my years in business, I’ve seen them all. Some rose through the ranks quickly, only to stall and drop for good like

punctured balloons. Some were geniuses who were perennially underappreciated and
under rewarded. But most were simply hard-working people with good ideas and
instincts–like you, perhaps–who got stuck in permanent ruts and never quite scrambled
out to enjoy the light of day.
I’ve also seen a handful of people who–regardless of education, intelligence,
manners, appearance or other obvious factors–have had the knack of rising steadily
through the ranks and the staying on top through both fat and lean times. They were
people who, either consciously or instinctively, knew the art of political survival.
Early in my career I began to watch people, and I can tell you with certainty
what makes them different: The ability to question and discard some, if not all, of the
rules that snare and finally drown the people they leave in their wake.







What’s Holding You Back?

There are hundreds of rules our society tells us to accept blindly and never
question. Rules so ingrained in most of us since childhood, we don’t even feel the
crippling limitations they impose on our daily life. Rules such as these:





Good communication and cooperation gets more work done.
























There are two sides to every question. (Variant: Everybody’s entitled to an
opinion.)

Behave consistently if you want other people to respect you.
Always insist on getting credit for your ideas–and on giving it when it’s due.

To get people to do things for you, you first have to get them to like you.

The best way to deal with other people is to treat them as you would like to be
treated. (Did anybody ever ask you to treat them the way you like to be treated?
Sure it’s the golden rule, but nine times out of ten it’s just as bad for others as it
is for you–or worse.)

Nonconformity has no place in business–you have to fit in and be a team player.

Do these opinions sound like an inventory of the mental baggage you’ve been

lugging around? If so, good. We’ve got something to work with.


A Note on Morals

I do not condone immoral or amoral behavior. What I do advocate, however, is
getting things done by throwing out an overblown, overly polite, crippling world view
that keeps most of today’s executives tripping over themselves to avoid offending other
people. I advocate acting aggressively and effectively–something that, in the end,
benefits everyone.
Will you take a chance with me? If I can get you to toss out or just bend one or
two of the stale, outmoded, useless ideas I’m about to impart in the following pages, I
guarantee your career will change in ways you’ll hardly believe. If you’re ready, here
we go.



Your Political Roadmap


B efore you can apply the techniques explained in this book, you’ll need an organized,
clear picture of the lines of power that exist within your workplace.

Start with a sheet of ledger-sized paper and follow these instructions. When
done, you’ll have a directory of up to 40 people–enough to list all your contacts if you
work for a small firm. If you work for a larger company, select the people you’ll
include based on a roster of your department and allied departments. Include every-
one with whom you’ll be likely to interact on the job. (A company phone list is a great
tool for this purpose.)





Start with the highest-ranking people. Write their names in a row across the top
of the page. Make a circle about two inches in diameter around each name. Allowing
space for comments. Beneath the top-ranked people, write the names of the people
who report to them, and continue down the chart past your level so that there is enough
room for one or two ranks of names beneath you. Note: If you have to list more than 25
people, arrange the slips on the ledger, then copy the names onto the master sheet
when you have arranged them according to rank.
Your next step is to write one or two of your impressions and comments about
each person in his or her circle. Be sure in include information about the type of
relationship you have with each one, interests you share, and potential areas of conflict.
Next–and this is the crus of the matter–indicate all reporting relationships by drawing
lines between the circles using a blue pen (some of the lines will have to be curved).
Using a red pen, draw lines to indicate any personal or strong political alliances you have
perceived between people, which may or may not coincide with reporting lines.
One each line, write one or two facts about the reporting relationship. Use a
pencil so you can update information when necessary. Examples: John reports to Mary,
but only on budget; Sue is too completely dependent on Elaine, and can’;t make a
decision without consulting her.
Don’t leave this roadmap lying around–it is a valuable political tool. It allows
you to visualize instantly all the relationships and cross relationships that exist in your
workplace, putting you at an instant advantage over people who try to carry around all
this information in their head. It gives you a view of the areas where you can exert
influence on people . . often without talking to them directly. It can even help you
chart a path to your next promotion or analyze power factions within your support
staff.
Don’t fail to update your roadmap every two or three days. When you’re
dealing with a large number of individuals, you’ll be surprised how frequently new
situations evolve.
You’ll be amazed at the power edge this tool will give you. But, after all, that
why you’re reading this book.



Your Personal Power Inventory


T o solidify your position and win advancement in today’s competitive business
climate, you have to apply all the abilities and assets you have at your disposal.
Don’t fall into the following patterns that used to be politically effective, but that fall far
short of the mark today:





Working harder and harder. Political advancement does require that you do an
excellent job to earn respect. But throwing hard work alone at the problem is not
enough.




















Relying on a limited support base. You could build a system made up of a
limited group of friends from your college, community, or elsewhere. But using
this approach exclusively is too limiting and cuts off more support than it
provides.

Trading favors. The old back scratching can win self-advancement. This
approach has its usefulness as an isolated technique, but relying on it exclusively
turns you intro a caricature of an oily schemer.



Your Keys to Power

When thinking politically today, you have to uncover the many tools you
possess that you’re not using, overcome any resistance you may have to activating
them, then apply them aggressively in a structured pattern of getting ahead.
Consider the assets you may not be using:

































Beliefs and interests. If you have strong political, moral, spiritual, or other
beliefs, don’t keep them a secret on the job. Hobbies, sports, and other interests
can also gain you an immediate set of connections.

Heritage. While discriminating against people makes you an anachronistic legal
liability, don’t be reluctant to take advantage of your cultural, religious, racial, or
national background when selecting a firm to work for or when building
alliances.

Education and schooling. Look for well-placed alumni of your alma mater.
Review what you studied to be sure you are not neglecting skills ort interests
that could help you rise on the job.

Appearance. An average appearance shouldn’t slow you down in business–but
if you’re better than average looking, you already stand apart from the crowd.
Don’t rely on good looks exclusively, but count them as an asset that can help
you look the part for a leadership role.

Linguistic ability. If you grew up speaking a second language or acquired
proficiency through study, you have a valuable tool. Use it to build ties to others
who speak the same language, and look for opportunities to help your business
move into foreign markets or establish ties abroad.

Community. Do you live in the same community as colleagues or members of
upper management? Sharing a commute–or some talk about town politics and
other community concerns–can strengthen a valuable alliance.






























Home. If you can use your home to host power parties, why not?

Family. Don’t be reluctant to call upon your relatives for advice or help. And
sharing talk with colleagues about children’s schooling and other family matters
can establish a comfortable common ground with fellow workers. If your
spouse can offer advice to your colleagues on various concerns such as real
estate, investments, etc., don’t be shy about taking advantage of it.

Possessions. Do you collect paintings, cars, or stamps? Don’t hesitate to make
these interests known at work–you may find a network of other people who
share you interests.

Personality. You can build an alliance based on this elusive factor. Do you have
a keen sense of humor? Are you a hard-boiled skeptic or grump? There traits
can work for you. Look for people who share your outlook and stop by to laugh
about some recent event, or exchange grumpy thoughts.

Style. Are you a sophisticate, a jock, a chic dresser, a tweedy rumpled type, or
something else? You may have to make some stylistic modifications to survive
in certain businesses, but look for colleagues who share your approach–you’ll
experience a higher level of comfort and better communication with them.





Your Executive Style


I n order to advance, you’ll need to be taken seriously. Curiously, the most successful
people I have known have rarely shared an awful lot of traits, either physical or

intellectual, or attitudinal. What, then, is the style that draws leaders upward toward
the board room, and how can you acquire it?





Individuality. Don’t try to anticipate what other people might like–simply
espouse enthusiastically what you do. While sharing pursuits with others is
important, having an involved, enthusiastic life is what will make you attractive
to others–not whether they share all your interests and pursuits.
In an effort to cultivate corporate style, many young managers try to emulate the

attitudes, interests, and outlooks of all their colleagues. They try to fit in, and finally do
just that–right into pigeonhole-sized niches they built for themselves. My view: Trying
to conform to corporate culture is a mistake–if your business is inhospitable to your
style and way of thinking, trying to conform will only make you a fish out of water.
You’re in the wrong business.

































Standards. Carefully define what your business and personal principles really
are–then stick by them staunchly, no matter how difficult the circumstances.
Example: If you are fully committed to the profitability of your department and
it’s time to let some workers go, fire those who are least capable–regardless of
your personal feelings. Central issue: Do you want to make friends or earn
respect?

Focus. The ability to concentrate completely on a task and get it done is central
to gaining advancement. And unlike intelligence, this ability can be developed.
Focus is also the most important part of what is often called “executive pres-
ence.” To see it in action, observe the person of power in a meeting. While
others are veering off toward other issues, this person will not be dissuaded
from his or her goals.

Appropriateness. Treat serious issues with a serious attitude. While telling a
few jokes to blow off steam may break the tension of difficult situations, it will
make you appear uncommitted.

Sobriety. Nothing will undermine your credibility more quickly than having a
few drinks at lunch and returning to the workplace smelling of alcohol. Even
worse: drinking and acting out of character at a holiday party or picnic. What
you do at home is your affair–but what you do at work is your business. By the
same token, inappropriate romantic or sexual liaisons will push you right off the
corporate ladder (see Sexual Come-Ons in the Office).





How to Tell What a Person Can Do For You:
A Tale of Two Executives


T he most common mistake people make in deciding which contacts are the most
worthwhile is jumping to conclusions–failing to allow enough time to develop a full

picture of a contact’s strengths and connections. Here’s an example:
About 10 years ago, a firm I was working for hired two young marketing
executives whose duties, in part, included assuming the workload of an older, semi-
retired man. One of the young executives immediately dismissed the older man as a
has-been and started to propose all sorts of new programs and projects. The other
young executive realized that the outgoing man was a virtual gold mine of information
and political connections and started using him to establish a broad network of client
contacts. Today, the smarter young man is situated near the top of the company’s
structure. The other guy is right where he started–probably still making dumb snap
judgements that block his path to success.





So, if you’re wise (and you must be if you’re reading this book), pay attention to
the following points when deciding which contacts to cultivate and how to use them:





Do your homework. As noted above, the worst mistake is jumping to a prema-
ture judgement based on appearance or prejudice. Learn everything you can
about a contact’s history, both before joining the company and after. If appropri-
ate, simply ask the person about his or her history, activities, and ideas.
If you’re trying to learn about someone who is inaccessible because he or she

outranks you, your only means of gaining a picture of his or her influence is to ask
everyone you can about what the subject of your inquiry did in the past, and about his
or her major accomplishments. Ask about your subject’s management style, and about
the types pf subordinates he or she prefers to work with. Don’t forget to ask, too, about
education, interests, personal life, etc.




























Confirm your findings. In a casual way, confirm your findings with other
people. One technique: Say to another colleague: “We’re really lucky to have
Chris here, after she spearheaded the development of that successful line at
Plum Software.” Watch and listen carefully to gauge your confirming contact’s
reaction.

Hone your observations. Using the roadmap created before, begin to develop a
picture of the person’s responsibilities, reporting lines, and activities. As you
gather information, enter it into your roadmap. Note projects or programs the
person is currently overseeing, or has headed up in the past.

Go outside the firm. If my hunches are right, the smarter young executive in
the example above made some calls and learned that the older man’s expertise
was highly respected in the field. Fact: By going outside your firm, you’ll nearly
always learn things that you can’t learn within. For example, if your subject
brought an extraordinary amount of success to his or her former employer–a
success that your firm has never been able to match–odds are that someone
outside your firm will provide more detail about it than a co-worker will.

Consider the person’s status and age. No matter how much a young, fast-
moving manager may know, odds are that he or she won’t share the information
freely with you. The same may be true for middle-ager. It is a truism–but often
true nonetheless–that older managers are the most likely to be forthcoming with
help, ideas, and political assistance for people with the meat of their career still
ahead of them. You can cultivate the support of younger managers, but it will
usually take more time to achieve the same advantageous position that comes
more easily with many older colleagues.





Political Mistakes from Which
You Will Never Recover


N ow that you’re on your way toward building a bullet-proof political network, it’s
time to give you a list of things you shouldnever do. An unfortunate byproduct of

political structures is that they will network against you as well as for you if word gets
out that you’ve made a blunder.
Be especially careful of the following political gaffes:







































Bad timing. Before asking someone for help, consider whether your relation-
ship is ready to bear the weight of what you are requesting. Example: If you
haven’t progressed beyond establishing that you and your contact share an
interest in travel, it’s too soon to ask for help in winning a new sales territory.

Toe Stepping. Before you look to people for support, consider the positions
they occupy. Example: If a new territory or set of responsibilities is up for grabs,
asking the head of another department for help in winning them may be a
serious misplay if he or she is considering making a play for them also. Excep-
tion: If your alliance with them is exceptionally strong and well maintained,
asking for support can result in their dropping out of the competition, sometimes
without resentment. Alternatively, it may open up discussion of a mutually
beneficial approach to the problem.

Relying on foundations alliances. If you’re friendly and cordial with another
manager, that’s not enough to enable you to rely on him or her for strong
support. Be sure that there is a variety of other supporting factors–and a history
of cooperation–to add a foundation to your relationship.

Overusing an alliance. The more valuable an alliance, the less often you should
use it fro help with big projects. (Note: A strong ally will be working silently for
your interests in many small ways without your knowing it every day.) If you
walk into a highly placed colleague’s office too often to ask for a big favor, the
quality of your connection will erode quickly. Analogy: Think of an alliance as a
rechargeable battery–after using it, you have to energize it before tapping into it
again. After getting a favor, return a favor in a big way, or do some high-level
stroking to keep the alliance running strong.

Posturing. When trying to win support or influence someone, it is very dangerous
to infer that your project should be supported because you are strongly con-
nected to someone at the top. First, the inference is a threat. Second, if the top
person turns out to be a less-than-staunch supporter in this instance, you’re
going to lose face with everyone. Third, everyone will know that you are
















strongly connected to the bigwig anyway, and will weight that information in
deciding whether or not to support you. Blowing your own horn only makes
you a blowhard.

Letting alliances lapse. If the very person who can help you is someone with
whom you used to enjoy close political ties–but you’ve been neglecting him or
her lately–it’s a serious blunder to count on picking up your former close
relationship where it left off. It is also a serious misplay to start currying favor
suddenly by taking the person out to lunch, calling him or her up to chat, etc.,
before making a pitch for support. Best: Maintain close ties to your colleagues,
letting none of them lapse. Next best: Come clean. Tell the person that you are
aware you haven’t been in close touch lately, but that you have good memories
of the projects you’ve shared in the past, and that you are calling to ask for
support. Strengthen this approach with an immediate offer of support for one of
your contact’s current concerns.








2





The Influence Game


How to Tell How Much Clout
an Opponent Really Has


A ll of us have gotten into neck-and-neck races with another department head or
executive. It can be as elemental as a two-person fight for one promotion slot, or as

complicated as a political struggle to increase staffing during crunch times.
In direct competition, you are comparing yourself to your adversary: your work
records, lengths of employment, a lot of things. But beyond all these variables–and the
sum total of them all–is the elusive factor known as clout.
Roughly defined, it is the degree of acceptance that upper management has
accorded to you–versus other people–based on your past efforts, personality, and
political strength. No two employees have the same clout. It’s one of the most impor-
tant factors in determining who will succeed in a life-or-death struggle.

Clout vs. Posturing

An insecure opponent will usually resort to posturing: alluding to connections,
dropping names, and bragging about how much he or she has contributed to the firm
in the past. Alternatively, a close political ally of your opponent may drop by to
convey this information to you indirectly.
If your adversary throws up this smoke cloud, don’t be discouraged. He or she
may actually be in a position of power. You won’t know until you confirm the follow-
ing information. Don’t be intimidated prematurely or you may lose the fight.





Activity. Is this person still on the same committees that he or she served on two
or three years ago?






















Connections. What personnel changes have occurred above the person? Did he or
she lose an umbrella of support when a close supervisor left?
Staff. How many people does this person supervise? Has this number gone up
or down over the last year? Over the last two years? Why did the people leave?

Positioning. Where is your company heading? Considering current company
policy and plans, compare the role of your department to that of your adversary.
For example, a head of marketing may have an advantage over a head of sales in
a firm that is moving away from field sales and into direct marketing promo-
tions.

Personality. If you find your opponent unpleasant, odds are that upper manage-
ment does too. Unless they need an ogre to do the job, you are probably at an
advantage.





Fighting Intimidation:
How to Spot Deceitful People


I t’s great to solidify your power and build your political network. The downside is
that you are going to become the target of carping from envious–and often mali-
cious–people who will try to intimidate you, bruise your self-image, and make you feel
your growing power is of no significance.
Your best strategy–the only one, really, if you’re going to win–is to study power
plays with objectivity and learn as much as you can. The wonderful truth is that they
offer you the chance to learn a tremendous amount about your enemies and oppo-
nents–far more than you could if they were silently dreaming up plots against you.
They’re making the mistakes, and you’re reaping the benefits.
Here are the most common types of detractors, and what you can do about them:
















Self-aggrandizers. These opponents routinely exaggerate accomplishments or
political clout. When the company president says good morning to them in the
hall, they come by to tell you they just had a policy meeting. Key: Over a period
of time, look objectively for discrepancies between what a person says and what
you see is happening. Perennial self-aggrandizers are generally not taken
seriously by anyone. Unless there are some mitigating factors (the posturer is
the president’s nephew, for example), you need not take them too seriously
either.

Insinuators. They engage in Iago-like intrigue. Example: Your opponent stops
by to tell you that the controller had to rewrite your quarterly earnings report











































because it was disorganized. A real snake may even infer that he or she is on
your side and offer to help you complete projects to avoid further trouble.
Defense: Confirm any reports directly with all those concerned. Insinuators are
dangerous because they’ll take their intrigue on to other people after they have
failed with you–they are also often highly magnetic people who gain credibility
with other people for awhile. Your best defense is to wait until this type of
person plays the same card too often and is exposed for what he or she is.
Mistake: Warning another employee that the insinuator is a chronic liar can drag
you into a morass of charges and countercharges.

Sleight-of-hand artists. This type tries to throw you off by providing some
spurious information. Example: Just before a meeting, he or she will tell you:
“That idea of yours will never get approved–the vice-president proposed the
same thing last year and it got shot down.” Defense: It’s hard not to fooled once
or twice by this type–especially if he or she is clever–but make sure you’re not
fooled from then on.

Strategists. When you’re cooperating on a project with this type, he or she says
there’s no pressure and starts off at a sluggish pace. When you follow the lead
and start slowly, he or she secretly catapults forward, finishes far ahead of you,
then turns in his or her work early to make you look like a snail. Defense: Do
your work at your own pace, and don’t be intimidated. Just because the strate-
gist thinks he or she is earning points with upper management by these antics
doesn’t mean it is the case.

Bullies. People who try to bulldoze or intimidate you are hard to analyze. Your
best defense is to assess their clout objectively, and firmly stand your ground
despite all attempts to sway you.



Gaining an Advantage

The bottom line is that you must understand what motivates these forms of
aggression–and formulate appropriate defense strategies. It is almost never productive
to retaliate in kind. You’ll gain more by understanding the behavior, anticipating its
repeated use, and turning that knowledge to your advantage.




Times When It is Necessary
to Use Your Clout





T he greatest enemy you can have in the workplace is a false sense of comfort. It
makes you numb to warning signs that some setback is being planned for you, and

also blinds you to potential opportunities for future advancement. You’re at most
risk–and most in need of political support–at the following times:

















































The risky project. Lending your support to a new project can advance your
position, or deal you a real setback if the project bombs. Be selective about the
projects you back. It’s better to be remembered for three remarkable successes
than for four remarkable successes and one o=r two failures.

Reduced responsibilities. If your company changes direction and your respon-
sibilities change, find out fast what your new role will be. Fact: A temporary
cutback in responsibilities usually tuns into a permanent downturn in your
firm’s need for you.

Increased responsibilities. Taking on an additional work load or department
can be a boon for your career, but make sure the job is manageable and that the
work suits your abilities. Find out as much as you can about who did the job
before, why he or she is not doing it any longer, and what the company goals are
for the new department or projects. Key: Avoid mismatches. If the new duties
are allied to what you’re already doing, odds are that you’ll be able to handle
them. But if management is dumping something on you just because you’re
perceived as capable, watch out. Example: A sales manager I knew was asked to
assume responsibility for customer fulfillment. Even though fulfillment was a
small department in the firm, the job was so different from his sales duties that
he had to continuously shift mental gears. Worst of all, the physical layout
required that hr have two separate offices on different floors. He spent half his
time returning phone calls he had missed.
You’re catapulted up. Management loves you and wants to offer you a crack at
real responsibility and accountability. Variation: A very risky, high-visibility
project. Opportunity has knocked, but be sure that your skills and contacts will
support you. You don’t want to be a victim of a “Let’s see if young McCarthy
can handle this” experiment.

You’re making a fortune. You’ve moved ahead, have been in the same job for a
number of years, and there are other executives eager to do your job for half the
money you’re making. Unless your political connections are rock solid–and
almost nobody’s are–your best plan is to move either up or out before you’ve
spent more than two or three years on your lofty perch.

A change of location. Before you take a job in a branch office, make sure that
it’s not a trip to nowhere. Example: I know a man who, two years before retire-
ment, was offered a job to direct the Canadian division of an American-based

























firm. He called some contacts outside the firm and learned of a strong rumor
that the division was about to be closed. He refused the post, and the division
did close within the year.

You’re stalling. You’re not at the top, but your upward progress has stopped.
Warning signs: You’re not included in meetings or invited to join newly formed
committees. Your staff is being reduced. You’re getting positive feedback on job
reviews, but no promotions. If you’re being glad-handed, odds are that a knife
is being sharpened for your back. It’s time for some fence mending. You may
even have to leave if you’re allowed your support network to erode.

You’ve got a new boss. To avoid landing back at the starting line, learn as much
as you can about the new person. Early on, try to find some common political
ground with the new supervisor and make an assessment of his or her manage-
rial style.




The Story of Mr. O–
The Incredible Power of Opinion


O f all the commonly held, stale misconceptions in our society, one of the most
damaging is the idea that there are two valid sides to every issue. We’re all
supposed to believe that other people’s views are just as valid as ours, and that they
deserve equal consideration.
This hidden rule impedes progress. How many times have you been in a
meeting that generated no ideas because everyone was trying to be open to everyone
else or–at best–proposing lukewarm solutions to avoid offending anyone?


Enter Mr. O

One of the most remarkable and effective executives I’ve had the opportunity to
observe at close working range owed much of his success to breaking this rule. For our
purposes here, let’s call him Mr. O. Having started as head of a branch office, he had
been promoted to director of operations for an electronics company in just a few short
years. When I collaborated with him, Mr. O had remained on top for nearly a decade,
solidifying his position at the same time as he guided his growing company to a
position of prominence in its field.
Mr. O was not a visionary genius. He was hardly ever armed with some
polished, fully formed idea. But what he did have–every single time–was an opinion.
In fact, the ability to be opinionated was really the only thing that set him aside





from his colleagues. He would stride into a meeting armed with some idea of plan he
believed was irrefutably brilliant, and everyone present would be forced to either react
positively, or propose–and defend–another approach to the problem.
Plans were made, and projects completed effectively, simply because Mr. O’s
opinions acted like a fulcrum for other people to use in their thinking and work. I
observed that ideas from almost everyone on the staff were being implemented–not just
the ones from this man. Yet he was the reason for the firm’;s progress. And it was he
who got the credit, a salary well into six figures, and his picture in glossy business
magazines.



How to Double Your Chances of
Getting Others to See Things Your Way–
A Checklist for Negotiators


T he more you want something you’re about to negotiate for, the more you’re likely to
weaken your chances by over preparing and over documenting you case.

You’re far more likely to win if you make smart preparations rather than hard
preparations. Review the following checklist:




























Keep things simple. Distill your ideas into a few sentences, and keep support-
ing paperwork minimal for the negotiating session itself.

Structure your presentation. Reveal your biggest idea immediately, without
preambles. Example: Don’t say “I have a proposal so far-reaching I predict it will
make $2 million this year alone.” Just present your idea clearly and let predic-
tions follow. If your first points are well received, go on to make your second
and third points–but resist the temptation to keep throwing in lesser and lesser
points–they only weaken your stance.

Anticipate objections. Be sure to do your homework on how management is
likely to react to your proposal. Research how is has treated similar proposals in
the past, and anticipate objections your opponents are likely to make.

Build in some sacrifices. To protect the meat of your proposal–the things you
really don’t want to see cut out–add a few chips you’re willing to give up. You
can then bargain them away and end up with the parts that mean the most to
you.

Don’t try to score all the points. Your position will actually be strength-
ened–and cooperation much more likely–if you accede to some ideas from





























people who are critiquing your presentation.
Meet resistance flexibly. When you care a great deal about a project, you may
tend to overreact when anybody raises questions. Best: Treat objections with
humor, and try to foster an atmosphere of cooperation–it implies that your
project is already underway. If negotiations stall completely, try to ascertain
what aspect of your aspect of your proposal is really bothering the other side.
Don’t become argumentative, but try to read between the lines of what is being
said. As a last resort, consider throwing one of your sacrifice chips away to get
things moving.

Don’t give away the store. Accept a certain number of modifications to your
plan or idea, but don’t let it get converted into another person’s project that
you’re now expected to supervise. If you see this happening, offer to withdraw
the entire proposal for further development.

Rise above politics. It’s funny advice to be giving in this book, but try not to
consider whom your opponents are when you’re actually making a presenta-
tion–even if they are right the in the room. The more important your proposal,
the more vital it is to appear to have the interests of the entire company at
heart–especially when top management is in attendance. Don’t betray any
aggressive feelings toward your opponents or act condescending toward
them–even if you think they are stupid, and even if they are.




How to Take Intelligent Risks That
Lead You Upward


Y our career will never get anywhere unless you are willing to stick your neck out
periodically and try something truly risky. This shows that you have vision and

courage.
But being the driving force behind a number of unsuccessful projects won’t win
you any points with anyone, and can quickly deflate your self-esteem. Before taking on
the risk, assess the dangers:










What are the worst–and best–things that can happen? Example: If the worst
thing that can happen is that you’ll irritate your staff, and the best thing is that
you’ll contribute significantly to the bottom line, the risk is worthwhile.

Do I have the total support of the people I need? Look at your political
roadmap and consider whom you will need to support you. If necessary,
reinforce your critical political alliances.


























Is it fun? If you can convince yourself, your staff, and your superiors that the
task is challenging and fun, you’re far more likely to gain needed support. Ploy:
Frame the undertaking in an appealing way to gain support–similar to Tom
Sawyer whitewashing Aunt Polly’s fence.

What are the implications for my career path? If you undertake a risky assign-
ment and succeed, you become strongly associated with what you have done–a
tie that will exert a force on what people ask you to do in the future. Consider
the implications before acting.

What are the theatrical possibilities? Don’t take on risk silently. Consider
ways to frame it in such a way that it builds your visibility and reputation.



The Solitary Risk

When the time comes to take on something risky all alone–going to the president
to complain about your supervisor or to ask for a chance to lead a new division–you are
in a sacrificial situation: You’re ready to take on great risk on the chance that you’ll win
out. Follow these steps:


















Understand and minimize the risk. Have a concrete plan for what you’ll do if
you lose. Example: If your complaints about your boss fall on deaf ears, your
only recourse may be to leave the firm. Check your financial resources and
chances for employment elsewhere. Ask: Am I really desperate enough to take
these risks now, or should I wait until I am in a stronger position?

Analyze the outcome if you succeed. Are you ready to deal with what you’ve
taken on? Trap: Romanticizing the joy of how wonderful it will be to advance
yourself rapidly by taking a big chance. It can be wonderful–but the wise risk
taker knows what he or she is getting into well before it’s a done deal.

Prepare. Don’t just reinforce your key political connections two or three days
before you make your move. If you’re playing with this degree of risk, you had
better keep your fences mended–and reinforced–at all times.
to be continued....
DOWNLOAD PDF VERSION

Wednesday, 18 February 2009

Choosing an Online Bussines

Let's simplify the process of choosing an online business and say there are basically four ways to start an online business -- and really, there's no reason you can't do all three.

However, you may want to choose one and focus on that first.

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You can "start from scratch" and develop your own product or service to sell.

For example, if you are an artist or crafter you might make your own products and offer them for sale or you can offer a service such as career counselling or matchmaking.



You could even enter the lucrative market of creating information products. The internet business ideas are endless.

2. Start an Online Business with Affiliate Programs:

If you don't have your own product or service to sell, you can market someone else's products through affiliate programs. With an affiliate program, you are paid a percentage of sales that are made when you refer someone to a company's website.

Usually the buyer must click on your affiliate link and make the purchase immediately. Some affiliate programs will track visitors from your link and pay a commission for within a period of time, such as within 3 months of the visit.

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Usually independent representatives sign on under another representative or sponsor who will provide information and support to get you started.

4. Start an Online Business by Reselling Products You Buy at Wholesale:

If you don't want to develop your own products, you can resell other people's products. You can buy them at wholesale and ship them out from your home. Or you may prefer the ease of having somebody dropship the products for you.

This means the company from which you buy wholesale does all the shipping for you. You just take the orders.

By the Way......Job or business?
Many people, particularly moms, start out looking for an online job.

Moms want to work from home so they can care for their children while continuing to contribute to the household finances.

They quickly learn that online jobs are few and far between and far too often pay money for promises of work that never materialize.

Often, people who have great work at home jobs brought those jobs home from an office.

They started out employed in an outside job and later convinced their employer that it was beneficial to the company to allow them to work from home.

Handbook of International Law ( chapter 1.)-cambridge Univ press.

CHAPTER 1 ; INTERNATIONAL LAW

The truth is that international law is neither a myth on the one hand, nor a panacea on the other, but just
one institution among others which we can use for the building of a better international order.1


Oppenheim. Oppenheim’s International Law, 9th edn, London, 1992, p. 3–115


Shaw, International Law, 5th edn, Cambridge, 2003, pp. 1–246


Higgins, Problems and Process, Oxford, 1994, pp. 1–55


Brownlie, Principles of Public International Law, 6th edn, Oxford, 2003, pp. 3–68


Parry, The Sources and Evidences of International Law, Cambridge, 1965


First let us clear away any misunderstandings about private international law and transnational law.


Private international law/conflict of laws


Private international law is an unfortunate term for what is more properly and accurately called
conflict of laws. That is the body of rules of the domestic law2 of a state which applies when a legal
issue contains a foreign element, and it has to be decided whether a domestic court should apply
foreign law or cede jurisdiction to a foreign court.3 Many of the rules are now found in legislation.
Naturally, over time the domestic rules grow closer as states come to adopt similar solutions to the
same problems, but they remain domestic law. Established in 1893, the Hague Conference on
Private International Law seeks primarily to harmonise domestic rules on







1. J. Brierly, The Law of Nations, 5th edn, Oxford, 1955, Preface, reprinted ibid. in 6th edn, Oxford, 1963.


2. See p. 12 below, including its relationship to international law.


3. Dicey and Morris, Conflict of Laws, 13th edn, London, 2000, p. 3; Cheshire and North, Private
International Law, 13th edn, London, 1999, p. 7; J. Collier, Conflict of Laws, 3rd edn, Cambridge, 2001,
pp. 386–94.




Page 2


conflict of laws, and since 1954 has concluded some thirty-six multilateral treaties.4 These must be
distinguished from treaties that seek to unify or harmonise states’ substantive domestic laws, such as
on carriage by air or sea, or intellectual property.5 UNIDROIT is an international organisation with
fifty-nine member states that seeks to harmonise domestic laws, especially commercial.6 Despite its
name, it is neither a UN body nor a UN specialised agency. But UNCITRAL is a UN body charged
with promoting the harmonisation of international trade law.7


A legal matter can raise issues of both international law and conflict of laws, particularly on
questions of jurisdiction,8 and today the distinction between international law and conflict of laws
can be blurred as more international law, treaties in particular, reaches right down into the internal
legal order, as exemplified by the law of the European Union.9 Nevertheless, it is still vital to
appreciate the distinctions between different categories of law, their purpose and how they develop.


Transnational law


This term seems to have been coined to describe the study of any aspect of law that concerns more
than one state, in particular conflict of laws, comparative law (the study of how the laws of different
states deal with a particular area or issue of domestic law), supranational law (European Union law)
and public international law, particularly in the commercial field. It may bring useful insights into
the development of law, but one should not be led into believing that we are now living in a world
where all laws of whatever type are rapidly converging. Within many states, especially federations
and even in the United Kingdom, there are separate systems of domestic law, and this is likely to
continue for a very long time.


The nature of international law


International law is sometimes called public international law to distinguish it from private
international law, though, as already explained, even this can lead to misunderstandings. Whatever
the connections international law has with other systems of law, it is clearly distinguished by the fact
that it is not the product of any national legal system, but of the states



4. Oppenheim, p. 7. See www.hcch.net.


5. Oppenheim, p. 6, n. 11.


6. See www.unidroit.org.



7. See p. 389 below.


8. See p. 43 below.


9. See p. 466 below.



Page 3


(now over 190) that make up our world. In the past, international law was referred to as the Law of
Nations.10 Although it had been developing over many centuries,11 international law as we know it
today is commonly said to have begun properly with the Dutch jurist and diplomat, Grotius (Hugo
de Groot), 1583–1645, and with the Peace of Westphalia 1648.12 That event marked not only the
end of the Thirty Years War but also the end of feudalism (and, with the Reformation, obedience to
the Pope) and the establishment of the modern state with central governmental institutions that could
enforce control over its inhabitants and defend them against other states. But since those states had
to live with each other, there had to be common rules governing their external conduct. Although
rudimentary rules had been developing ever since civilised communities had emerged, from the mid-
seventeenth century they began to develop into what we now recognise as international law.


But is international law really law?


Unfortunately, this question is still being asked, and not only by students. The answer depends on
what is meant by law. Whereas the binding nature of domestic law is not questioned, new students
of international law are confronted with the issue: is international law merely a collection of
principles that a state is free to ignore when it suits it? Whereas every day newspapers report crimes,
it is usually only when a flagrant breach of international law occurs that the media take notice of
international law. This can give a distorted impression of the nature of international law.
International law has no ready sanction for its breach. Because there is no international police force
or army that can immediately step in, international law is often perceived as not really law. Yet the
record of even the most developed domestic legal systems in dealing with crime does not bear close
scrutiny.


Although it is as invidious as comparing apples and oranges, in comparison with domestic crime
states generally do comply rather well with international law. If, as H. L. A. Hart argued,13 law
derives its strength from acceptance by society that its rules are binding, not from its enforceability,



10. See J. Brierly, The Law of Nations, 6th edn, Oxford, 1963. See especially pp. 1 on the origins of
international law.


11. See Shaw, pp. 13–41; A. Nussbaum, A Concise History of the Law of Nations, rev. edn, New York,
1954.


12. 1 CTS pp. , 70, 198 and 319


13. The Concept of Law, Oxford, 1961.




Page 4


then international law is law. The raison d’être of international law is that relations between states
should be governed by common principles and rules. Yet what they are is determined by national
interest, which in turn is often driven by domestic concerns. Those matters on which international
law developed early on included freedom of the high seas and the immunity of diplomats. Both were
vitally important for the increasing international trade, the famous 1654 Treaty of Peace and
Commerce between Queen Christina and Oliver Cromwell epitomising this new reality.14 As we
will see when we look at the sources of international law, its binding force does not come from the
existence of police, courts and prisons. It is based on the consent (express or implied) of states, and
national self-interest: if a state is seen to ignore international law, other states may do the same. The
resulting chaos would not be in the interest of any state. While the language of diplomacy has
changed over the centuries from Latin to French to English, international law has provided a vitally
important and constantly developing bond between states. As this book will show, today in many
areas of international law the rules are well settled. As with most domestic law, it is how the rules
are to be applied to the particular facts that cause most problems.


To look at the question from a more mundane point of view, international law is all too real for
those who have to deal with it daily. Foreign ministries have legal departments. Some are large: the
US State Department has some 150 legal advisers; the UK Foreign and Commonwealth Office
thirty-five, including some seven posted in Brussels, Geneva, New York and The Hague. Their task
is to advise on a host of legal matters that arise in the conduct of foreign affairs. They also have the
conduct of cases involving international law in international, foreign and UK courts and tribunals. If
international law is not law, then they and their legal colleagues in other foreign ministries are
drawing their salaries under false pretences. Which brings one to international lawyers.


International lawyers


Although more students are studying international law, it is not easy for a young lawyer to practise
it. Even in large law firms that have international law departments, the bulk of their work is
commercial arbitration. The involvement of barristers and advocates in international law is usually



14. 1 BSP 691.



Page 5


incidental to their normal work. Most of the distinguished practitioners of international law who
appear before international courts or tribunals are professors of international law. As a rule, foreign
ministry legal departments are staffed by diplomats who have legal training, but who alternate
between legal and political posts. Few have legal advisers who during their careers do little other
than law, the British Diplomatic Service being a prime exception. There are jobs for international
lawyers also in the United Nations and other international organisations.


Sometimes the media will describe a person as an ‘international lawyer’, yet he may at most have
a practice with many foreign clients, and be concerned more with foreign law and conflict of laws.
Yet, when the media is full of stories questioning the lawfulness of a state’s actions, some domestic
lawyers rush to express their opinions, usually critical. They are not always wrong, but usually
display a lack of familiarity with international law, apparently believing that the reading of a
textbook or an (apparently simple) instrument like the UN Charter is enough. The fact that some
textbooks are lucid and make international law accessible, does not mean that a domestic lawyer,
however eminent, can become an expert on it overnight. The difficulties that the judges of the House
of Lords (the UK’s final appeal court) had in grappling with international law in the Pinochet case,
despite having been addressed by several international law experts, are amply demonstrated by their
differing separate opinions.15 Some domestic lawyers have specialised in particular areas of
international law such as aviation, human rights or the environment, without a good grounding in
international law generally. A tax law expert will necessarily have a sound knowledge of contract,
tort and other basic areas of domestic law, without which it would be difficult to advise effectively.


The sources of international law


International law differs from domestic law in that it is not always that easy to find out what the law
is on a particular matter. Domestic law is reasonably certain and found mostly in legislation and
judgments of a hierarchy of courts. In contrast, international law is not so accessible, coherent or
certain. There is no global legislature (the UN General Assembly does not equate to a national
legislature), and no formal hierarchy of international courts and tribunals. As with the (mainly
unwritten) British



15. R. v. Bow Street Stipendiary Magistrate, ex parte Pinochet (No. 3) [2000] 1 AC 147; [1999] 2 WLR
825; [1999] 2 All ER 97; 119 ILR 135.



Page 6


Constitution, an initial pointer to the international law on a given topic is often best found in the
textbooks. They will explain that international law is derived from various sources, which are
authoritatively listed in Article 38(1) of the Statute of the International Court of Justice (annexed to
the UN Charter) as:




1.




international conventions, whether general or particular, establishing rules expressly
recognised by the contracting states;


2. international custom, as evidence of a general practice accepted as law;

3. the general principles of law recognised by civilised nations;


4.


subject to the provisions of Article 59,16 judicial decisions and the teachings of the most
highly qualified publicists of the various nations, as subsidiary means for the determination of
rules of law.



Treaties


The reference in (a) to ‘international conventions’ is to bilateral and multilateral treaties. For the
moment it is enough to say that, as with domestic legislation, treaties now play a crucial role in
international law, important areas of customary international law having now been codified in
widely accepted treaties. In consequence, custom and the other sources of international law are no
longer as important as they used to be. But that does not mean that custom is on a lower level than
treaties. There is no formal hierarchy of the sources of international law. As between parties to a
treaty, the treaty binds them. As between a party to a treaty and a non-party, custom will apply,
including custom derived from treaties.17 General principles of law, judgments and the opinions of
writers are of less importance as sources. (The law of treaties is dealt with in some detail in Chapter
5.)


Customary international law


Customary international law – or simply ‘custom’ – must be distinguished from the customary law
that is an important part of some states’ domestic law and deals largely with family matters, land and
suchlike. In international law a rule of custom evolves from the practice of states, and this can



16. Decisions of the Court are binding only on the parties to the case (res judicata).


17. See p. 8 below.





Page 7


take a considerable or a short time. There must be evidence of substantial uniformity of practice by a
substantial number of states. In 1974 the ICJ found that a customary rule (now superseded) that
states had the right to exclusive fishing within a twelve nautical mile zone had emerged.18 State
practice can be expressed in various ways, such as governmental actions in relation to other states,
legislation, diplomatic notes, ministerial and other official statements, government manuals (as on
the law of armed conflict), and certain unanimous or consensus resolutions of the UN General
Assembly. The first such resolution was probably Resolution 95( ) of 11 December 1946 which
affirmed unanimously the principles of international law recognised by the Charter of the Nürnberg
International Military Tribunal and its judgment.


When a state that has an interest in the matter is silent, it will generally be regarded as acquiescing
in the practice. But if the new practice is not consistent with an established customary rule, and a
state is a persistent objector to the new practice, the practice either may not be regarded as evidence
of new custom or the persistent objector may be regarded as having established an exception to the
new customary rule.


But to amount to a new rule of custom, in addition to practice there must also be a general
recognition by states that the practice is settled enough to amount to an obligation binding on states
in international law. This is known as opinio juris (not the opinions of jurists). Sometimes the
recognition will be reflected in a court judgment reached after legal argument based on the extensive
research and writings of international legal scholars. In themselves, neither judicial pronouncements
nor favourable mention in a UN resolution, even when adopted by a large majority, are conclusive as
to the emergence of new custom. 19 But in Nicaragua v. US (Merits) (1986)20 the International
Court of Justice found that the acceptance by states of the Friendly Relations Declaration of the
General Assembly21 constituted opinio juris that the Charter prohibition on the use of force now
also represented custom. There is however a growing tendency for international courts and tribunals,
without making a rigorous examination of the evidence, to find that a customary rule has emerged.
In Tadic the International Criminal Tribunal for the Former



18. Fisheries Jurisdiction (UK v. Iceland; Germany v. Iceland), ICJ Reports (1974), p. 3, at pp. 23–6; 55
ILR 238. For the present law, see p. 318 below.


19. See the Namibia Advisory Opinion, ICJ Reports (1971), p. 6; paras. 87–116; 59 ILR 2; and the
Legality of Nuclear Weapons Advisory Opinion, ICJ Reports (1996), p. 226, paras. 64–73; 110 ILR 163.


20. ICJ Reports (1986), p. 14, paras. 183–94; 76 ILR 1.


21. ILH (1970) 1292.








Yugoslavia ruled that it had jurisdiction over war crimes committed during an internal armed
conflict even though its Statute does not provide for this.22



Page 8



Establishing opinio juris can be difficult and everything will depend on the circumstances. 23 It is
easiest when the purpose of a new multilateral treaty is expressed to be codification of customary
international law. Even if the treaty includes elements of progressive development,24 if it is widely
regarded by states as an authoritative statement of the law, and constantly and widely referred to, it
will soon come to be accepted as reflecting the customary rules, sometimes even before it has
entered into force. This was certainly the case with the Vienna Convention on the Law of Treaties
1969, which even now has only 101 parties.25 Although many provisions of the UN Convention on
the Law of the Sea 1982 (UNCLOS) went beyond mere codification of customary rules in most
respects, the negotiations proceeded on the basis of consensus.26 It was therefore that much easier
during the twelve years before UNCLOS entered into force for most of its provisions to become
accepted as representing customary law.


An accumulation of bilateral treaties on the same subject, such as investment treaties, may in
certain circumstances also be evidence of a customary rule.27


General principles of law recognised by civilized nations28


Compared with domestic law, international law is relatively under-developed and patchy, though in
the last fifty years it has developed several important new specialised areas. International courts and
tribunals have always borrowed concepts from domestic law if they can be applied to relations
between states, and by this means have developed international law by filling gaps and strengthening
weak points. Such concepts are chiefly



22. See the decision of the Appeals Chamber: www.icty.org, Case IT-94-1, paras. 65 et seq; 105 ILR 453.


23. Shaw, pp. 68–72.


24. See n. 26 below.


25. See p. 52 below. See also A. Aust, ‘Limping Treaties: Lessons from Multilateral Treaty-making’ (2003)
NILR 243 at 248–51.


26. See H. Caminos and M. Molitor, ‘Progressive Development of International Law and the Package
Deal’ (1985) AJIL 871–90.




27. See p. 373 below.


28. ‘Civilized’ should not be seen as a demeaning term; the Statute is merely referring to states that have
reached an advanced state of legal development.







legal reasoning and analogies drawn from private law,29 such as good faith and estoppel.


Good faith



Page 9



The obligation to act in good faith is a fundamental principle of international law, and includes
equity.30 Article 2(2) of the UN Charter requires all Members to fulfil their Charter obligations in
good faith. Similarly, the Vienna Convention on the Law of Treaties 1969 requires parties to a treaty
to perform the treaty (Article 26), and to interpret it (Article 31(1)), in good faith.31 The principle is
not restricted to treaties but applies to all international obligations.


Estoppel


Known as preclusion in civil law systems, estoppel has two aspects. A state that has taken a
particular position may be under an obligation to act consistently with it on another occasion. And
when a state has acted to its detriment in relying on a formal declaration by another state, the latter
may be estopped from denying its responsibility for any adverse consequences.32


Norms


Sir Robert Jennings, a former President of the International Court of Justice, once famously said that
he would not recognise a norm if he met one in the street. But, some international lawyers speak of
norms of international law. In English, norm means a standard. Use of the word seems to have been
popularised by Professor Hans Kelsen,33 who saw international law as at the top of the hierarchy of
law. The term is used more by civil lawyers than common lawyers. It may be useful in theoretical
analysis of certain international law issues.34 Unfortunately, it is also used loosely to cover not only
principles and rules but also lex ferenda (see



29. See H. Lauterpacht, ‘Private Law Sources and Analogies of International Law’, in E. Lauterpacht
(ed.), International Law: Being the Collected Papers of Sir Hersch Lauterpacht, Cambridge, 1970–8, vol.
2, pp. 173–212; B. Cheng, General Principles of Law as Applied by International Courts and Tribunals,
Cambridge, 1953, reprinted 1987.


30. Oppenheim, pp. 38 and 44.


31. See further pp. 79 and 90 below, respectively.


32. Oppenheim, pp. 1188–93. See p. 57 below about the possible legal consequences of an MOU.





33. General Theory of Law and State, Harvard, 1945.


34. See for example D. Shelton, ‘International Law and “Relative Normativity”’, in M. Evans (ed.),
International Law, Oxford, 2003, pp. 145–72.



Page 10


below), but without a clear distinction being made between established law and aspirations.35 The
term is very rarely found in treaties.


Judicial decisions


Although, formally, judgments of courts and tribunals, international and domestic, are a subsidiary
source of international law, in practice they may have considerable influence. Because judgments
result from careful consideration of particular facts and legal arguments, they carry persuasive
authority. There are relatively few international courts and tribunals, but thousands of domestic
ones; and most cases involving international law come before domestic courts, often final courts of
appeal.36 The cumulative effect of such decisions on a particular legal point can be evidence of
custom, though domestic courts sometimes get international law wrong.


Teachings of the most highly qualified publicists


The role played by writers on international law is also subsidiary. In the formative days of
international law their views may have been more influential than they are today. Now their main
value depends on the extent to which the books and articles are works of scholarship, that is to say,
based on thorough research into what the law is (lex lata), or may be, rather than comparing the
views of other writers as to what the law ought to be (lex ferenda). A work of rigorous scholarship
will inevitably have more influence on a court, whether domestic or international.


General international law


One sees this phrase from time to time. It is a rather vague reference to the corpus of international
law other than treaty law, and therefore includes those treaty principles or rules that have become
accepted as also customary international law.37


Obligations erga omnes


In Barcelona Traction (Second Phase), the International Court of Justice pointed out that certain
obligations on a state are owed to all states,



35. See ‘Soft law’, p. 11 below.


36. See the cumulative indexes to International Law Reports, published by Cambridge University Press.





37. See p. 6 above. On Statements of international law, see (2003) BYIL 585–6.



Page 11


or erga omnes (for all the world). These include jus cogens and important human rights.38 Certain
treaties have been held to create a status or regime valid erga omnes.39 Examples include those
providing for neutralisation or demilitarisation of a certain territory or area, such as Svalbard or
outer space; for freedom of navigation in international waterways, such as the Suez Canal, or for a
regime for a special area, such as Antarctica.40


Jus cogens


Jus cogens (or a peremptory or absolute rule of general international law) is, in the words of Article
53 of the Vienna Convention on the Law of Treaties 1969:


a norm accepted and recognised by the international community of states as a whole as a norm from which
no derogation is permitted and which can be modified only by a subsequent norm of general international
law having the same character.


The concept was once controversial.41 Now it is more its scope and applicability that is unclear.42
There is no agreement on the criteria for identifying which principles of general international law
have a peremptory character: everything depends on the particular nature of the subject matter.
Perhaps the only generally accepted examples of jus cogens are the prohibitions on the use of force
(as laid down in the UN Charter)43 and on genocide, slavery and torture. This is so even where such
acts are prohibited by treaties that parties can withdraw from.44 It is wrong to assume that all the
provisions of human rights treaties, such as due process, are jus cogens or even rules of customary
international law.45


‘Soft law’


There is no agreement about what is ‘soft law’, or indeed if it really exists.46 Generally, it is used to
describe international instruments that their



38. See Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory Advisory
Opinion, ICJ Reports (2004), paras. 154–9; ILM (2004) 1009.


39. See M. Ragazzi, The Concept of International Obligations Erga Omnes, Oxford, 1997, pp. 24–7; and
p. 354 above.


40. See pp. 354 et seq below for details.


41. See . Sinclair, The Vienna Convention on the Law of Treaties, 2nd edn, Manchester, 1984, pp.



203–41.


42. For an in-depth discussion of jus cogens, see Sinclair, pp. 203–26.


43. See p. 224 below.


44. See p. 101 below.


45. See p. 245 below.


46. See Birnie and Boyle, International Law and the Environment, 2nd edn, Oxford, 2002, pp. 24–7.



Page 12


makers recognise are not treaties, even if they employ imperative language such as ‘shall’, but have
as their purpose the promulgation of ‘norms’ (see above) of general or universal application. Such
non-treaty instruments are typically called Guidelines, Principles, Declarations, Codes of Practice,
Recommendations or Programmes. They are frequently found in the economic, social and
environmental fields. The Rio Declaration on Environment and Development 1992 is one.47
Because the subject matter is usually not yet well developed, or there is a lack of consensus on the
content, it cannot be embodied in a treaty. But the soft law Universal Declaration of Human Rights
1948 has been the source for many universal and regional human rights treaties. Many ‘soft law’
instruments can be regarded as MOUs in the sense that there is no intention that they should be
legally binding.48


Comity


In their international relations states also observe certain rules of comity.49 These are not legally
binding, but rules of politeness, convenience and goodwill, such as the reciprocal provision of free,
but limited, on-street parking for diplomats.50 Later some may become binding rules. Courts may
also rely upon comity as a reason for not accepting jurisdiction in a case, but this seems to be due to
a misunderstanding. The courts are then really applying either a rule of conflict of laws or acting
with restraint in exercising their jurisdiction in accordance with principles of international law.51


Domestic law


The law that applies within a state is described variously as ‘national’, ‘internal’ or ‘municipal’ law,
though most international lawyers now seem to favour ‘domestic law’. That term will be used here,
even though it can sometimes be confused with family law.


For international lawyers, the most important aspect of domestic law is its relationship (interface)
with international law.52 Most judgments on



47. ILM (1992) 876; B&B Docs. 9; and see p. 330 below.


48. See pp. 53, 55 below as to the meaning of MOUs.


49. See Oppenheim, pp. 50–1; Brownlie, p. 28.


50. See Parking Privileges for Diplomats (1971) 70 ILR 396; and E. Denza, Diplomatic Law, 2nd edn,
Oxford, 1998, pp. 164–5.




51. See p. 160 below.


52. See generally Oppenheim, pp. 52–86; E. Denza, in M. Evans (ed.), International Law, Oxford, 2003,
pp. 415–42.



Page 13


issues of international law are made by domestic courts, and by this means much of international law
has been developed and will continue to do so.53 Although international law exists on the
international plane, much of it is now intended to reach deep into the internal legal order of states
and so operate in domestic law. This is most obvious with treaties, many of which have to be
implemented in domestic law to be effective. International law does not allow a state to invoke its
domestic law to justify its failure to perform a treaty,54 but this applies equally to the rest of
international law.55 The way in which domestic courts deal with an issue of international law is
therefore important. (The place of treaties in domestic law is explained at pp. 79–86 below.)


How customary international law is applied by domestic courts is entirely dependent on the
constitution and law of each state. Most treat customary international law as part of domestic law
and, therefore, unlike foreign law, does not (as in common law systems) have to be proved by expert
evidence, but is usually a matter for legal argument. The chief difference of approach is between
those constitutions that provide that customary international law is supreme law (e.g. Germany), and
those where it is not. In the latter case, if there is a conflict between customary international law and
(1) the constitution, the constitution prevails (e.g. the United States), or (2) legislation, the
legislation prevails (e.g. the United Kingdom and most Commonwealth states). The latter rule
reflects the pure form of dualism.56


Subjects of international law


By ‘subjects’, is not meant topics, but those persons or entities to which international law applies. It
obviously applies to states since they have always been a fundamental concept of international law
(see the next chapter).57 But can international law apply also to natural persons (individuals) and
legal persons (like corporations)? Such persons are not creations of international law, and are not
regarded by most authorities as subjects of international law to whom international rights (and
obligations) attach directly.58 Instead they are generally seen as ‘objects’ of international law.



53. See the consolidated index to the 126 (and counting) volumes of International Law Reports published
by Cambridge University Press.


54. Article 27 of the Vienna Convention on the Law of Treaties (see p. 79 below).


55. Oppenheim, pp. 82–6.


56. See further in respect of treaties, at pp. 81-3 below.


57. Oppenheim, p. 16.




58. For a thought-provoking view, see Higgins, pp. 38–55.



Page 14


Although international law increasingly gives rights to, and imposes obligations on, persons, the
notion that they therefore enjoy rights under international law goes too far. Such rights can be
enforced by or against persons only through action by states. A person with a claim against a foreign
state cannot himself take his claim to an international court or tribunal. Either his state has to do it
for him,59 or there must be some mechanism established by the two states (usually a treaty) under
which he can himself bring his claim directly before an international tribunal.60 Likewise, if under
international criminal law or the law of armed conflict persons are liable to be prosecuted in
domestic or international courts for serious breaches, that can be done only if states have agreed on
the establishment of the necessary international or domestic means to do that,61 and both will need
some domestic action by states. In short, international rights and obligations still exist on the
international plane.62


An important subject of international law is now also the international organisation (see pp. 196 et
seq below).


National liberation movements


With the development of the law relating to non-self-governing territories and the principle of self-
determination, certain rebel movements – now usually referred to as national liberation movements
(NLMs) – may be in the process of acquiring the status of a subject of international law,63 though,
with the notable exception of Palestine, most of the peoples represented by NLMs have now
obtained statehood for their territories. This process was helped by permanent observer status in the
United Nations being accorded to NLMs that were recognised by the Organization of African Unity
(now the African Union) or the League of Arab States, so in practice excluding secessionist
movements.


NGOs


Even if they operate internationally (like Amnesty or Greenpeace), non-governmental organisations
(NGOs) are bodies established under



59. See pp. 183-84 below.


60. For example, under bilateral investment treaties, see p. 373 below, though enforcement of an award
may need to be done in domestic law.


61. See pp. 263 et seq below.



62. See also pp. 251 et seq below on the relationship between international and domestic law.


63. See Oppenheim, pp. 162–4; Shaw, pp. 220–3; Brownlie, pp. 61–2.



Page 15


domestic law. Although they have proliferated enormously in the second half of the twentieth
century, and been very active and sometimes influential on the international scene, they are not
subjects of international law.64 They are essentially providers of information, lobbyists or pressure
groups, and as such may properly be regarded as so-called non-state actors. The International
Committee of the Red Cross (ICRC) has a rather special status.65



64. Oppenheim, p. 21.


65. See pp. 196 and 262 below.

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Tuesday, 17 February 2009

Rich Dad Poor Dad ( Part.3-end)

8. CHAPTER EIGHT
by : Robert T. Kiyosaki
Overcoming Obstacles


Once people have studied and become financially literate, they may still
face roadblocks to becoming financially independent. There are five main reasons
why financially literate people may still not develop abundant asset columns.
Asset columns that could produce large sums of cash flow. Asset columns that
could free them to live the life they dream of, instead of working full time
just to pay bills. The five reasons are:
1. Fear.
2. Cynicism.
3. Laziness.
4. Bad habits.
5. Arrogance.


Reason No. 1. Overcoming the fear of losing money. I have never met anyone
who really likes losing money. And in all my years, I have never met a rich
person who has never lost money. But I have met a lot of poor people who have
never lost a dime. . .investing, that is.
The fear of losing money is real. Everyone has it. Even the rich. But it's
not fear that is the problem. It's how you handle fear. It's how you handle
losing. It's how you handle failure that makes the difference in one's life.
That goes for anything in life, not just money. The primary difference between a
rich person and a poor person is how they handle that fear.
It's OK to be fearful. It's OK to be a coward when it comes to money. You
can still be rich. We're all heroes at something and cowards at something else.
My friend's wife is an emergency room nurse. When ; she sees blood, she flies
into action. When I mention investing, she runs'j away. When I see blood, I
don't run. I pass out. My rich dad understood phobias about money. "Some
people are terrified of snakes. Some people are terrified about losing money.
Both are phobias," he would say. So his solution to the phobia of losing money
was this little rhyme: "If you hate risk and worry. . .start early."



That's why banks recommend savings as a habit when you're young. J If you
start young, it's easy to be rich. I won't go into it here, but there is a large
difference between a person who starts saving at age 20 versus age 30. A
staggering difference.
It is said that one of the wonders of the world is the power of compound
interest. The purchase of Manhattan Island is said to be one of the greatest


who controls the past controls the future, who controls the present controls the past.
bargains of all time. New York was purchased for $24 in trinkets and beads. Yet,
if that $24 had been invested, at 8 percent annually, that $24 would have been
worth more than $28 trillion by 1995, Manhattan could be repurchased with money
left over to buy much of L.A., especially at 1995's real estate prices.
My neighbor works for a major computer company. He has been there 25 years.
In five more years he will leave the company with $4 million in his 401k
retirement plan. It is invested mostly in high-growth mutual funds, which he
will convert to bonds and government securities. He'll only be 55 when he gets
out, and he will have -a passive cash flow of over $300,000 a year, more than he
makes from his salary. So it can be done, even if you hate losing or hate risk.
But you must start early and definitely set up a retirement plan, and you should
hire a financial planner you trust to guide you before investing in anything.
But what if you don't have much time left or would like to retire early?
How do you handle the fear of losing money?
My poor dad did nothing. He simply avoided the issue, refusing to discuss
the subject.
My rich dad, on the other hand, recommended that I think like a Texan. "I
like Texas and Texans," he used to say. "In Texas, everything is bigger. When
Texans win, they win big. And when they lose, it's spectacular."
"They like losing?" I asked.
"That's not what I'm saying. Nobody likes losing. Show me a happy loser,
and I'll show you a loser," said rich dad. "It's a Texan's attitude toward risk,
reward and failure I'm talking about. It's how they handle life. They live it
big. Not like most of the people around here, living like roaches when it comes
to money. Roaches terrified that someone will shine a light on them. Whimpering
when the grocery clerk short changes them a quarter."
Rich dad went on to explain.
"What I like best is the Texas attitude. They're proud when they win, and
they brag when they lose. Texans have a saying, "If you're going to go broke, go
big. You don't want to admit you went broke over a duplex. Most people around
here are so afraid of losing, they don't have a duplex to go broke with."
He constantly told Mike and me that the greatest reason for lack of
financial success was because most people played it too safe. "People are so
afraid of losing that they lose" were his words.
Fran Tarkenton, a one-time great NFL quarterback, says it still another
way: "Winning means being unafraid to lose."
In my own life, I've noticed that winning usually follows losing. Before I
finally learned to ride a bike, I first fell down many times. I've never met a


who controls the past controls the future, who controls the present controls the past.
golfer who has never lost a golf ball. I've never met people who have fallen in
love who have never had their heart broken. And I've never met someone rich who
has never lost money.
So for most people, the reason they don't win financially is because the
pain of losing money is far greater than the joy of being rich. Another saying
in Texas is, "Everyone wants to go to Heaven, but no one wants to die." Most
people dream of being rich, but are terrified of losing money. So they never
get to Heaven.
Rich dad used to tell Mike and me stories about his trips to Texas. "If
you really want to learn the attitude of how to handle risk, losing and failure,
go to San Antonio and visit the Alamo. The Alamo is a great story of brave
people who chose to fight, knowing there was no hope of success against
overwhelming odds. They chose to die instead of surrendering. It's an inspiring
story worthy of study; nonetheless, it's still a tragic military defeat. They
got their butts kicked. A failure if you will. They lost. So how do Texans
handle failure? They still shout, 'Remember the Alamo!'"
Mike and I heard this story a lot. He always told us this story when f he
was about to go into a big deal and he was nervous. After he had done all his
due diligence and now it was put up or shut up, he told us this story. Every
time he was afraid of making a mistake, or losing money, he told us this story.
It gave him strength, for it reminded him that he could always turn a financial
loss into a financial win. Rich dad I knew that failure would only make him
stronger and smarter. It's not that! he wanted to lose; he just knew who he was
and how he would take a loss. He would take a loss and make it a win. That's
what made him a winner and others losers. It gave him the courage to cross the
line when others backed out. "That's why I like Texans so much. They took a
great failure and turned it into a tourist destination that makes them
millions."
But probably his words that mean the most to me today are these: "Texans
don't bury their failures. They get inspired by them. They take i their failures
and turn them into rallying cries. Failure inspires Texans to ' become winners.
But that formula is not just the formula for Texans. It j is the formula for all
winners."
Just as I also said that falling off my bike was part of learning to ride.
I remember falling off only made me more determined to learn to ride. Not less.
I also said that I have never met a golfer who has never lost a ball. To be a
top professional golfer, losing a ball or a tournament only inspires golfers to


who controls the past controls the future, who controls the present controls the past.
be better, to practice harder, to study more. That's what makes them better. For
winners, losing inspires them. For losers, losing defeats them.
Quoting John D. Rockefeller, "I always tried to turn every disaster ' into
an opportunity."
And being Japanese-American, I can say this. Many people say that Pearl
Harbor was an American mistake. I say it was a Japanese mistake. From the movie
Tora, Tora, Tom, a somber Japanese admiral says to his cheering subordinates, "I
am afraid we have awakened a sleeping giant." "Remember Pearl Harbor" became a
rallying cry. It turned one of America's greatest losses into the reason to win.
This great defeat gave America strength, and America soon emerged as a world
power.
Failure inspires winners. And failure defeats losers. It is the biggest
secret of winners. It's the secret that losers do not know. The greatest secret
of winners is that failure inspires winning; thus, they're not afraid of losing.
Repeating Fran Tarkenton's quote, "Winning means being unafraid to lose." People
like Fran Tarkenton are not afraid of losing because they know who they are.
They hate losing, so they know that losing will only inspire them to become
better. There is a big difference between hating losing and being afraid to lose.
Most people are so afraid of losing money that they lose. They go broke over a
duplex. Financially they play life too safe and too small. They buy big houses
and big cars, but not big investments. The main reason that over 90 percent of
the American public struggles financially is because they play not to lose. They
don't play to win.
They go to their financial planners or accountants or stockbrokers and buy
a balanced portfolio. Most have lots of cash in CDs, low-yield bonds, mutual
funds that can be traded within a mutual-fund family, and a few individual
stocks. It is a safe and sensible portfolio. But it is not a winning portfolio.
It is a portfolio of someone playing not to lose.
Don't get me wrong. It's probably a better portfolio than more than 70
percent of the population, and that's frightening. Because a safe portfolio is a
lot better than no portfolio. It's a great portfolio for someone who loves
safely. But playing it safe and going "balanced" on your investment portfolio is
not the way successful investors play the game. If you have little money and you
want to be rich, you must first be "focused," not "balanced." If you look at
anyone successful, at the start they were not balanced. Balanced people go
nowhere. They stay in one spot. To make progress, you must first go unbalanced.
Just look at how you make progress walking.


who controls the past controls the future, who controls the present controls the past.
Thomas Edison was not balanced. He was focused. Bill Gates was not
balanced. He was focused. Donald Trump is focused. George Soros is focused.
George Patton did not take his tanks wide. He focused them and blew through the
weak spots in the German line. The French went wide with the Maginot Line, and
you know what happened to them.
If you have any desire of being rich, you must focus. Put a lot of your
eggs in a few baskets. Do not do what poor and middle class people do: put their
few eggs in many baskets.
If you hate losing, play it safe. If losing makes you weak, play it safe.
Go with balanced investments. If you're over 25 years old and are terrified of
taking risks, don't change. Play it safe, but start early. Start accumulating
your nest egg early because it will take time.
But if you have dreams of freedom-of getting out of the rat race- the
first question to ask yourself is, "How do I respond to failure?" If failure
inspires you to win, maybe you should go for it-but only maybe. If failure makes
you weak or causes you to throw temper tantrums-like spoiled brats who call an
attorney to file a lawsuit every time something does not go their way-then play
it safe. Keep your daytime job. Or buy bonds or mutual funds. But remember,
there is risk in those financial instruments also, even though they are safer.
I say all this, mentioning Texas and Fran Tarkenton, because stacking the
asset column is easy. It's really a low-aptitude game. It doesn't take much
education. Fifth-grade math will do. But staking the asset column 'J is a high-
attitude game. It takes guts, patience and a great attitude toward failure.
Losers avoid failing. And failure turns losers into winners.'' Just remember the
Alamo.
Reason No. 2. Overcoming cynicism. "The sky is falling. The sky is
falling." Most of us know the story of "Chicken Little," who ran around warning
the barnyard of impending doom. We all know people who are that way. But we all
have a "Chicken Little" inside each of us.
And as I stated earlier, the cynic is really a little chicken. We all get
a little chicken when fear and doubt cloud our thoughts.
All of us have doubts. "I'm not smart." "I'm not good enough." "So '$ and
so is better than me." Or our doubts often paralyze us. We play the. | "What
if?" game. "What if the economy crashes right after I invest?" Or "What if I
lose control and I can't pay the money back?" "What if things don't go as I
planned?" Or we have friends or loved ones who will remind us of our
shortcomings regardless of whether we ask. They often say, "What makes you think
you can do that?" Or "If it's such a good idea, how come someone else hasn't


who controls the past controls the future, who controls the present controls the past.
done it?" Or "That will never work. You don't know what you're talking about."
These words of doubt often get so loud that we fail to act. A horrible feeling
builds in our stomach. Sometimes we can't sleep. We fail to move forward. So we
stay with what is safe and opportunities pass us by. We watch life passing by as
we sit immobilized with a cold knot in our body. We have all felt this at one
time in our lives, some more than others.
Peter Lynch of Fidelity Magellan mutual fund fame refers to warnings about
the sky falling as "noise," and we all hear it.
"Noise" is either created inside our heads or comes from outside. Often
from friends, family, co-workers and the media. Lynch recalls the time during
the 1950s when the threat of nuclear war was so prevalent in the news that
people began building fallout shelters and storing food and water. If they had
invested that money wisely in the market, instead of building a fallout shelter,
they'd probably be financially independent today.
When the riots broke out in Los Angeles a few years ago, gun sales went up
all over the country. A person dies from rare hamburger meat in Washington State
and the Arizona Health Department orders restaurants to have all beef cooked
well-done. A drug company runs a national TV commercial showing people catching
the flu. The ad runs in February. Colds go up as well as sales of their cold
medicine.
Most people are poor because when it comes to investing, the world is
filled with Chicken Littles running around yelling, "The sky is falling. The sky
is falling." And Chicken Littles are effective because everyone of us is a
little chicken. It often takes great courage to not let rumors and talk of doom
and gloom affect your doubts and fears.
In 1992, a friend named Richard came from Boston to visit my wife and me
in Phoenix. He was impressed with what we had done through stocks and real
estate. The prices of real estate in Phoenix were depressed. We spent two days
with him showing him what we thought were excellent opportunities for cash flow
and capital appreciation.
My wife and I are not real estate agents. We are strictly investors. After
identifying a unit in a resort community, we called an agent who sold it to him
that afternoon. The price was a mere $42,000 for a two-bedroom townhome.
Similar units were going for $65,000. He had found a bargain. Excited, he bought
it and returned to Boston.
Two weeks later, the agent called to say that our friend had backed out. I
called immediately to find out why. All he said was that he talked to his
neighbor, and his neighbor told him it was a bad deal. He was paying too much.


who controls the past controls the future, who controls the present controls the past.
I asked Richard if his neighbor was an investor. Richard said "no." When I
asked why he listened to him, Richard got defensive and simply said he wanted to
keep looking.
The real estate market in Phoenix turned, and by 1994, that little unit
was renting for $1,000 a month-$2,500 in the peak winter months. The unit was
worth $95,000 in 1995. All Richard had to put down was $5,000 and he would have
had a start at getting out of the rat race. Today, he still has done nothing.
And the bargains in Phoenix are still here; you just have to look a lot harder.
Richard's backing out did not surprise me. It's called "buyer's remorse,"
and it affects all of us. It's those doubts that get us. The little 1 chicken
won, and a chance at freedom was lost.
In another example, I hold a small portion of my assets in tax lien
certificates instead of CDs. I earn 16 percent per year on my money, which
certainly beats the 5 percent the bank offers. The certificates are secured by
real estate and enforced by state law, which is also better than most banks. The
formula they're bought on makes them safe. They just lack liquidity. So I look
at them as 2 to 7-year CDs. Almost every time I tell someone, especially if they
have money in CDs, that I hold my money this way, they will tell me it's risky.
They tell me why I should not do it. When I ask them where they get their
information, they say from a friend or an investment magazine. They've never
done it, and they're telling someone who's doing it why they shouldn't. The
lowest I yield I look for is 16 percent, but people who are filled with doubt
are willing to accept 5 percent. Doubt is expensive.
My point is that it's those doubts and cynicism that keep most people?
poor and playing it safe. The real world is simply waiting for you to get rich.
Only a person's doubts keep them poor. As I said, getting out of the rat race is
technically easy. It doesn't take much education, but those doubts are cripplers
for most people.
"Cynics never win," said rich dad. "Unchecked doubt and fear creates i a
cynic. Cynics criticize, and winners analyze" was another of his favorite
sayings. Rich dad explained that criticism blinded while analysis opened -< eyes.
Analysis allowed winners to see that critics were blind, and to see
opportunities that everyone else missed. And finding what people miss is | key
to any success.
Real estate is a powerful investment tool for anyone seeking financial
independence or freedom. It is a unique investment tool. Yet, every time I
mention real estate as a vehicle, I often hear, "I don't want to fix toilets."


who controls the past controls the future, who controls the present controls the past.
That's what Peter Lynch calls "noise." That's what my rich dad would say is the
cynic talking. Someone who criticizes and does not
analyze. Someone who lets their doubts and fears close their mind instead
of open their eyes."
So when someone says, "I don't want to fix toilets," I want to fire back,
"What makes you think I want to?" They're saying a toilet is more important than
what they want. I talk about freedom from the rat race, and they focus on
toilets. That is the thought pattern that keeps most people poor. They criticize
instead of analyze.
" 'I don't wants' hold the key to your success," rich dad would say.
Because I, too, do not want to fix toilets, I shop hard for a property
manager who does fix toilets. And by finding a great property manager who runs
houses or apartments, well, my cash flow goes up. But more importantly a great
property manager allows me to buy a lot more real estate since I don't have to
fix toilets. A great property manager is key to success in real estate. Finding
a good manager is more important to me than the real estate. A great property
manager often hears of great deals before real estate agents do, which makes
them even more valuable.
That is what rich dad meant by " 'I don't wants' hold the key to your
success." Because I do not want to fix toilets either, I figured out how to buy
more real estate and expedite my getting out of the rat race. The people who
continue to say "I don't want to fix toilets" often deny themselves the use of
this powerful investment vehicle. Toilets are more important than their freedom.
In the stock market, I often hear people say, "I don't want to lose
money." Well, what makes them think I or anyone else likes losing money? They
don't make money because they chose to not lose money. Instead of analyzing,
they close their minds to another powerful investment vehicle, the stock market.
In December 1996,1 was riding with a friend past our neighborhood gas
station. He looked up and saw that the price of oil was going up. My friend is a
worry wart or a "Chicken Little." To him, the sky is always going to fall, and
it usually does, on him.
When we got home, he showed me all the stats as to why the price of oil
was going to go up over the next few years. Statistics I had never seen before,
even though I already owned a substantial share block of an existing oil company.
With that information, I immediately began looking for and found a new
undervalued oil company that was about to find some oil deposits. My broker was
excited about this new company, and I bought 15,000 shares for 65 cents per
share.


who controls the past controls the future, who controls the present controls the past.
In February 1997, this same friend and I drove by the same gas station,
and sure enough, the price per gallon had gone up nearly 15 percent. Again, the
"Chicken Little" worried and complained. I smiled because in January 1997, that
little oil company hit oil and those 15,000 shares went up to more than $3 per
share since he had first given me the tip. And the price of gas will continue to
go up if what my friend says is true.
Instead of analyzing, their little chicken closes their mind. If most
people understood how a "stop" worked in stock-market investing, there would be
more people -investing to win instead of investing not to lose. A "stop" is
simply a computer command that sells your stock automatically if the price
begins to drop, helping to minimize your losses and maximize some gains. It's a
great tool for those who are terrified of losing.
So whenever I hear people focusing on their "I don't wants," rather than
what they do want, I know the "noise" in their head must be loud. Chicken Little
has taken over their brain and is yelling, "The sky is falling and toilets are
breaking." So they avoid their "don't wants," but they pay a huge price. They
may never get what they want in life.
Rich dad gave me a way of looking at Chicken Little. "Just do what
Colonel Sanders did." At the age of 66, he lost his business and began to live
on his Social Security check. It wasn't enough. He went around, the country
selling his recipe for fried chicken. He was turned down 1,009 times before
someone said "yes." And he went on to become a
multimillionaire at an age when most people are quitting. "He was a brave
and tenacious man," rich dad said of Harlan Sanders.
So when you're in doubt and feeling a little afraid, just do what Col.
Sanders did to his little chicken. He fried it.
Reason No. 3. Laziness. Busy people are often the most lazy. We have all
heard stories of a businessman who works hard to earn money. He works hard to be
a good provider for his wife and children. He spends long hours at the office
and brings work home on weekends. One day he comes home to an empty house. His
wife has left with the kids. He knew he and his wife had problems, but rather
than work to make the relationship strong, he stayed busy at work. Dismayed, his
performance at work slips and he loses his job.
Today, I often meet people who are too busy to take care of their wealth.
And there are people too busy to take care of their health. The cause is the
same. They're busy, and they stay busy as a way of avoiding something they do
not want to face. Nobody has to tell them. Deep down they know. In fact, if you
remind them, they often respond with anger or irritation.


who controls the past controls the future, who controls the present controls the past.
If they aren't busy at work or with the kids, they're often busy watching
TV, fishing, playing golf or shopping. Yet, deep down they know they are
avoiding something important. That's the most common form of laziness. Laziness
by staying busy.
So what is the cure for laziness? The answer is a little greed.
For many of us, we were raised thinking of greed or desire as bad. "Greedy
people are bad people," my mom use to say. Yet, we all have inside of us this
yearning to have nice things, new things or exciting things. So to keep that
emotion of desire under control, often parents found ways of suppressing that
desire with guilt.
"You only think about yourself. Don't you know you have brothers and
sisters?" was one of my mom's favorites. Or "You want me to buy you what?" was a
favorite of my dad. "Do you think we're made of money? Do you think money
grows on trees? We're not rich people, you know."
It wasn't so much the words but the angry guilt-trip that went with the
words that got to me.
Or the reverse guilt-trip was the "I'm sacrificing my life to buy this for
you. I'm buying this for you because I never had this advantage when I was a
kid." I have a neighbor who is stone broke, but can't park his car in his garage.
The garage is filled with toys for his kids. Those spoiled brats get everything
they ask for. "I don't want them to know the feeling of want" are his everyday
words. He has nothing set aside for their college or his retirement, but his
kids have every toy ever made. He recently got a new credit card in the mail and
took his kids to visit Las Vegas. "I'm doing it for the kids," he said with
great sacrifice.
Rich dad forbade the words "I can't afford it."
In my real home, that's all I heard. Instead, rich dad required his
children to say, "How can I afford it?" His reasoning, the words "I can't afford
it" shut down your brain. It didn't have to think anymore. "How can I afford
it'" opened up the brain. Forced it to think and search for answers.
But most importantly, he felt the words "I can't afford it" were a lie.
And the human spirit knew it. "The human spirit is very, very, powerful," he
would say. "It knows it can do anything." By having a lazy mind that says, "I
can't afford it," a war breaks out inside you. Your spirit is angry, and your
lazy mind must defend its lie. The spirit is screaming, "Come on. Let's go to
the gym and work out." And the lazy mind says, "But I'm tired. I worked really
hard today." Or the human spirit says, "I'm sick and tired of being poor. Let's


who controls the past controls the future, who controls the present controls the past.
get out there and get rich." To which the lazy mind says, "Rich people are
greedy. Besides it's too much bother.
It's not safe. I might lose money. I'm working hard enough as it is.
I've got too much to do at work anyway. Look at what I have to do tonight. My
boss wants it finished by the morning."
"I can't afford it" also brings up sadness. A helplessness that leads to '
despondency and often depression. "Apathy" is another word. "How can I afford
it?" opens up possibilities, excitement and dreams. So rich dad , was not so
concerned about what you wanted to buy, but that "How can 'f j I afford it?"
created a stronger mind and a dynamic spirit.
Thus, he rarely gave Mike or me anything. Instead he would ask, "How can
you afford it?" and that included college, which we paid for ourselves. It was
not the goal but the process of attaining the goal we desired that he wanted us
to learn. The problem I sense today is that there are millions of people who
feel guilty about their greed. It's an old conditioning from their childhood.
Their desire to have the finer things that life offers. Most have been
conditioned subconsciously to say, "You can't have that," or ;
"You'll never afford that."
When I decided to exit the rat race, it was simply a question. "How can I
afford to never work again?" And my mind began to kick out answers and solutions.
The hardest part was fighting my real parents' dogma of "We can't afford that."
Or "Stop thinking only about yourself." Or "Why don't you think about others?"
and other such words designed to instill guilt to suppress my greed.
So how do you beat laziness? The answer is a little greed. It's that
radio station WII-FM, which stands for "What's In It-For Me?" A person needs to
sit down and ask, "What's in it for me if I'm healthy, sexy and good looking?"
Or "What would my life be like if I never had to work again?" Or "What would I
do if I had all the money I needed?" Without that little greed, the desire to
have something better, progress is not made. Our world progresses because we all
desire a better life. New inventions are made because we desire something
better. We go to school and study hard because we want something better. So
whenever you find yourself avoiding something you know you should be doing, then
the only thing to ask yourself is "What's in it for me?" Be a little greedy.
It's the best cure for laziness.
Too much greed, however, as anything in excess can be, is not good. But
just remember what Michael Douglas said in the movie Wall Street. "Greed is
good." Rich dad said it differently: "Guilt is worse than greed.


who controls the past controls the future, who controls the present controls the past.
For guilt robs the body of its soul." And to me, Eleanor Roosevelt said it
best: "Do what you feel in your heart to be right-for you'll be criticized
anyway. You'll be damned if you do, and damned if you don't."
Reason No. 4. Habits. Our lives are a reflection of our habits more than
our education. After seeing the movie Conan, starring Arnold Schwarzenegger, a
friend said, "I'd love to have a body like Schwarzenegger." Most of the guys
nodded in agreement.
"I even heard he was really puny and skinny at one time," another friend
added.
"Yeah, I heard that too," another one added. "I heard he has a habit of
working out almost every day in the gym."
"Yeah, I'll bet he has to."
"Nah," said the group cynic. "I'll bet he was born that way. Besides,
let's stop talking about Arnold and get some beers."
This is an example of habits controlling behavior. I remember asking my
rich dad about the habits of the rich. Instead of answering me outright, he
wanted me to learn through example, as usual.
"When does your dad pay his bills?" rich dad asked.
"The first of the month," I said.
"Does he have anything left over?" he asked.
"Very little," I said.
"That's the main reason he struggles," said rich dad. "He has bad
habits."
"Your dad pays everyone else first. He pays himself last, but only if he
has anything left over."
"Which he usually doesn't," I said. "But he has to pay his bills, doesn't
he? You're saying he shouldn't pay his bills?"
"Of course not," said rich dad. "I firmly believe in paying my bills on
time. I just pay myself first. Before I pay even the government."
"But what happens if you don't have enough money?" I asked. "What do you
do then?"
"The same," said rich dad. "I still pay myself first. Even if I'm short
of money. My asset column is far more important to me than the government."
"But," I said. "Don't they come after you?"
"Yes, if you don't pay," said rich dad. "Look, I did not say not to pay.
I just said I pay myself first, even if I'm short of money."
"But," I replied. "How do you do that'"
"It's not how. The question is 'Why,'" rich dad said.


who controls the past controls the future, who controls the present controls the past.
"OK, why?"
"Motivation," said rich dad "Who do you think will complain louder if I
don't pay them-me or my creditors?"
"Your creditors will definitely scream louder than you," I said,
responding to the obvious. "You wouldn't say anything if you didn't pay
yourself."
"So you see, after paying myself, the pressure to pay my taxes and the
other creditors is so great that it forces me to seek other forms of income. The
pressure to pay becomes my motivation. I've worked extra jobs, started other
companies, traded in the stock market, anything just to make sure those guys
don't start yelling at me. That pressure made me work harder, forced me to think,
and all in all made me smarter and more active when it comes to money. If I had
paid myself last, I would have felt no pressure, but I'd be broke."
"So it is the fear of the government or other people you owe money I to
that motivates you?"
"That's right," said rich dad. "You see, government bill collectors are
big bullies. So are bill collectors in general. Most people give into these
bullies. They pay them and never pay themselves. You know the story of the 96-
pound weakling who gets sand kicked in his face?"
I nodded. "I see that ad for weightlifting and bodybuilding lessons in
the comic books all the time."
"Well, most people let the bullies kick sand in their faces. I decided to
use the fear of the bully to make me stronger. Others get weaker. Forcing myself
to think about how to make extra money is like going to the gym and working out
with weights. The more I work my mental money muscles out, the stronger I get.
Now, I'm not afraid of those bullies.
I liked what rich dad was saying. "So if I pay myself first, I get
financially stronger, mentally and fiscally."
Rich dad nodded.
"And if I pay myself last, or not at all, I get weaker. So people like
bosses, managers, tax collectors, bill collectors and landlords push me around
all my life. Just because I don't have good money habits."
Rich dad nodded. "Just like the 96-pound weakling."
Reason No. 5. Arrogance. Arrogance is ego plus ignorance. I "What I
know makes me money. What I don't know loses me money. Every time I have been
arrogant, I have lost money. Because when I'm arrogant, I truly believe that
what I don't know is not important," rich dad would often tell me.


who controls the past controls the future, who controls the present controls the past.
I have found that many people use arrogance to try to hide their own
ignorance. It often happens when I am discussing financial statements with
accountants or even other investors.
They try to bluster their way through the discussion. It is clear to me
that they don't know what they're talking about. They're not lying, but they are
not telling the truth.
There are many people in the world of money, finances and investments who
have absolutely no idea what they're talking about. Most people in the money
industry are just spouting off sales pitches like used-car salesmen.
When you know you are ignorant in a subject, start educating yourself by
finding an expert in the field or find a book on the subject.



9. CHAPTER NINE
Getting Started


I wish I could say acquiring wealth was easy for me, but it wasn't.
So in response to the question "How do I start?" I offer the thought
process I go through on a day-by-day basis. It really is easy to find great
deals. I promise you that. It's just like riding a bike. After a little wobbling,
it's a piece of cake. But when it comes to money, it's the determination to get
through the wobbling that's a personal thing.
To find million-dollar "deals of a lifetime" requires us to call on our
financial genius. I believe that each of us has a financial genius within us.
The problem is, our financial genius lies asleep, waiting to be called upon. It
lies asleep because our culture has educated us into believing that the love of
money is the root of all evil. It has encouraged us to learn a profession so we
can work for money, but failed to teach us how to have money work for us. It
taught us not to worry about our financial future, our company or the government
would take care of us when our working days are over. However, it is our
children, educated in the same school system, who will end up paying for it. The
message is still to work hard, earn money and spend it, and when we run short,
we can always borrow more.
Unfortunately, 90 percent of the Western world subscribes to the above
dogma, simply because it's easier to find a job and work for money. If you are
not one of the masses, I offer you the following ten steps to awaken your
financial genius. I simply offer you the steps I have personally followed. If


who controls the past controls the future, who controls the present controls the past.
you want to follow some of them, great. If you don't, make up your own. Your
financial genius is smart enough to develop its own list.
While in Peru, with a gold miner of 45 years, I asked him how he was so
confident about finding a gold mine. He replied, "There is gold everywhere. Most
people are not trained to see it."
And I would say that is true. In real estate, I can go out and in a day
come up with four or five great potential deals, while the average person will
go out and find nothing. Even looking in the same neighborhood. The reason is
they have not taken the time to develop their financial genius.
I offer you the following ten steps as a process to develop your God-given
powers. Powers only you have control over.


1. I NEED A REASON GREATER THAN REALITY: The power of spirit. If you ask
most people if they would like to be rich or financially free, they would say
"yes." But then reality sets in. The road seems too long with too many hills to
climb. It's easier to just work for money and hand the excess over to your
broker. I once met a young woman who had dreams of swimming for the U.S Olympic
team. The reality was, she had to get up every morning at 4 a.m. to swim for
three hours before going to school. She did not party with her friends on
Saturday night. She had to study and keep her grades up, just like everyone
else.
When I asked her what compelled her with such super-human ambition and
sacrifice, she simply said, "I do it for myself and the people I love. It's love
that gets me over the hurdles and sacrifices."
A reason or a purpose is a combination of "wants" and "don't wants." When
people ask me what my reason for wanting to be rich is, it is a combination of
deep emotional "wants" and "don't wants."
I will list a few. First the "don't wants," for they create the "wants." I
don't want to work all my life. I don't want what my parents aspired for, which
was job security and a house in the suburbs. I don't like being an employee. I
hated that my dad always missed my football games because he was so busy working
on his career. I hated it when my dad worked hard all his life and the
government took most of what he worked for at his death. He could not even pass
on what he worked so hard for when he died. The rich don't do that. They work
hard and pass it on to their children.
Now the wants. I want to be free to travel the world and live in the
lifestyle I love. I want to be young when I do this. I want to simply be free. I
want control over my time and my life. I want money to work for me.


who controls the past controls the future, who controls the present controls the past.
Those are my deep-seated, emotional reasons. What are yours? If they are
not strong enough, then the reality of the road ahead may be greater than your
reasons. I have lost money and been set back many times, but it was the deep
emotional reasons that kept me standing up and going forward. I wanted to be
free by age 40, but it took me until I was 4? with many learning experiences
along the way.
As I said, I wish I could say it was easy. It wasn't, but it wasn't hard
either. But without a strong reason or purpose, anything in life is hard.


IF YOU DO NOT HAVE A STRONG REASON, THERE IS NO SENSE READING FURTHER. IT
WILL SOUND LIKE TOO MUCH WORK.


2. I CHOOSE DAILY: The power of choice. That is the main reason people
want to live in a free country. We want the power to choose.
Financially, with every dollar we get in our hands, we hold the power to
choose our future to be rich, poor or middle class. Our spending habits reflect
who we are. Poor people simply have poor spending habits.
The benefit I had as a boy was that I loved playing Monopoly constantly.
Nobody told me Monopoly was only for kids, so I just kept playing the game as an
adult. I also had a rich dad who pointed out to me the difference between an
asset and a liability. So a long time ago, as a little boy, I chose to be rich,
and I knew that all I had to do was learn to acquire assets, real assets. My
best friend, Mike, had an asset column handed to him, but he still had to choose
to learn to keep it. Many rich families lose their assets in the next generation
simply because there was no one trained to be a good steward over their assets.
Most people choose not to be rich. For 90 percent of the population, being
rich is "too much of a hassle." So they invent sayings that go, "I'm not
interested in money." Or "I'll never be rich." Or "I don't have to worry, I'm
still young." Or "When I make some money, then I'll think about my future." Or
"My husband/wife handles the finances." The problem with those statements is
they rob the person who chooses to


think such thoughts of two things: one is time, which is your most
precious asset, and two is learning. Just because you have no money, should not
be an excuse to not learn. But that is a choice we all make daily, the choice of
what we do with our time, our money and what we put in our heads. That is the
power of choice. All of us have choice. I just choose to be rich, and I make
that choice every day.


who controls the past controls the future, who controls the present controls the past.
INVEST FIRST IN EDUCATION: In reality, the only real asset you have is
your mind, the most powerful tool we have dominion over. Just as I said about
the power of choice, each of us has the choice of what we put in our brain once
we're old enough. You can watch MTV all day, or read golf magazines, or go to
ceramics class or a class on financial planning. You choose. Most people simply
buy investments rather than
first invest in learning about investing.
A friend of mine, who is a rich woman, recently had her apartment
burglarized. The thieves took her TV and VCR and left all the books she reads.
And we all have that choice. Again, 90 percent of the population buys TV sets
and only about 10 percent buy books on business or tapes on investments.
So what do I do? I go to seminars. I like it when they are at least two
days long because I like to immerse myself in a subject. In 1973, I was watching
TV and this guy came on advertising a three-day seminar on how to buy real
estate for nothing down. I spent $385 and that course has made me at least $2
million, if not more. But more importantly, it bought me life. I don't have to
work for the rest of my life because of that one course. I go to at least two
such courses every year.
I love audio tapes. The reason: I can rewind quickly. I was listening to a
tape by Peter Lynch, and he said something I completely disagreed with. Instead
of becoming arrogant and critical, I simply pushed "rewind" and I listened to
that five-minute stretch of tape at least twenty times. Possibly more. But
suddenly, by keeping my mind open, I understood why he said what he said. It was
like magic. I felt like I had a window into the mind of one of the greatest
investors of our time. I gained tremendous depth and insight into the vast
resources of his education and experience.
The net result: I still have the old way I used to think, and I have
Peter's way of looking at the same problem or situation. I have two thoughts
instead of one. One more way to analyze a problem or trend, and that is
priceless. Today, I often say, "How would Peter Lynch do this, or Donald Trump
or Warren Buffett or George Soros?" The only way I can access their vast mental
power is to be humble enough to read or listen to what they have to say.
Arrogant or critical people are often people with low self-esteem who are afraid
of taking risks. You see, if you learn something new, you are then required to
make mistakes in order to fully understand what you have learned.
If you have read this far, arrogance is not one of your problems. Arrogant
people rarely read or buy tapes. Why should they? They are the center of the
universe.


who controls the past controls the future, who controls the present controls the past.
There are so many "intelligent" people who argue or defend when a new idea
clashes with the way they think. In this case, their so-called "intelligence"
combined with "arrogance" equals "ignorance". Each of us knows people who are
highly educated, or believe they are smart, but their balance sheet paints a
different picture. A truly intelligent person welcomes new ideas, for new ideas
can add to the synergy of other accumulated ideas. Listening is more important
than talking. If that was not true, God would not have given us two ears and
only one mouth. Too many people think with their mouth instead of listening to
absorb new ideas and possibilities. They argue instead of asking questions.
I take a long view on my wealth. I do not subscribe to the "Get rich
quick" mentality most lottery players or casino gamblers have. I may go in and
out of stocks, but I am long on education. If you want to fly an airplane, I
advise taking lessons first. I am always shocked at people who buy stocks or
real estate, but never invest in their greatest asset, their mind. Just because
you bought a house or two does not make you an expert at real estate.


3. CHOOSE FRIENDS CAREFULLY: The power of association. First of all, I do
not choose my friends by their financial statements. I have friends who have
actually taken the vow of poverty as well as friends who earn millions every
year. The point is I learn from all of them, and I consciously make the effort
to learn from them.
Now I will admit that there are people I have actually sought out because
they had money. But I was not after their money; I was seeking their knowledge.
In some cases, these people who had money have become dear friends, but not all.
But there is one distinction that I would like to point out. I've noticed
that my friends with money talk about money. And I do not mean brag. They're
interested in the subject. So I learn from them, and they learn from me. My
friends, whom I know are in dire straits financially, do not like talking about
money, business or investing. They often think it rude or unintellectual. So I
also learn from my friends who struggle financially. I find out what not to do.
I have several friends who have generated over a billion dollars in their
short lifetimes. The three of them report the same phenomenon: Their friends who
have no money have never come to them to ask them how they did it. But they do
come asking for one of two things, or both: 1. a loan, or 2. a job.


A WARNING: Don't listen to poor or frightened people. I have such friends,
and I love them dearly, but they are the "Chicken Littles" of life. When it
comes to money, especially investments, "The sky is always falling." They can


who controls the past controls the future, who controls the present controls the past.
always tell you why something won't work. The problem is, people listen to them,
but people who blindly accept doom-and-gloom information are also "Chicken
Littles." As that old saying goes, "Chickens of a feather agree together."
If you watch CNBC, which is a goldmine of investment information, they
often have a panel of so-called "experts." One expert will say the market is
going to crash, and the other will say it's going to boom. If you're smart, you
listen to both. Keep your mind open because both have valid points.
Unfortunately, most poor people listen to "Chicken Little."
I have had more close friends try to talk me out of a deal or an
investment. A few years ago, a friend told me he was excited because he found a
6 percent certificate of deposit. I told him I earn 16 percent from the state
government. The next day he sent me an article about why my investment was
dangerous. I have received 16 percent for years now, and he still receives 6
percent.
I would say that one of the hardest things about wealth building is to be
true to yourself and be willing to not go along with the crowd. For in the
market, it is usually the crowd that shows up late and is slaughtered. If a
great deal is on the front page, it's too late in most instances. Look for a
new deal. As we used to say as surfers: "There is always another wave." People
who hurry and catch a wave late usually are the ones who wipe out.
Smart investors don't time markets. If they miss a wave, they search


for the next one and get themselves in position. Why this is hard for most
investors is because buying what is not popular is frightening to them. Timid
investors are like sheep going along with the crowd. Or their greed gets them in
when wise investors have already taken their profits and moved on. Wise
investors buy an investment when it's not popular. They know their profits are
made when they buy, not when they sell. They wait patiently. As I said, they do
not time the market. Just like a surfer, they get in position for the next big
swell.
It's all "insider trading." There are forms of insider trading that are
illegal, and there are forms of insider trading that are legal. But either way,
it's insider trading. The only distinction is how far away from the inside are
you? The reason you want to have rich friends who are close to the inside is
because that is where the money is made. It's made on information. You want to
hear about the next boom, get in and get out before the next bust. I'm not
saying do it illegally, but the sooner you know, the better your chances are for


who controls the past controls the future, who controls the present controls the past.
profits with minimal risk. That is what friends are for. And that is financial
intelligence.


4. MASTER A FORMULA AND THEN LEARN A NEW ONE: The power of learning
quickly. In order to make bread, every baker follows a recipe, even if it's only
held in their head. The same is true for making money. That's why money is often
called "dough."
Most of us have heard the saying "You are what you eat." I have a
different slant on the same saying. I say, "You become what you study." In other
words, be careful what you study and learn, because your mind is so powerful
that you become what you put in your head. For example, if you study cooking,
you then tend to cook. You become a cook. If you don't want to be a cook anymore,
then you need to study something else. Let's say, a schoolteacher. After
studying teaching, you often become a teacher. And so on. Choose what you study
carefully.
When it comes to money, the masses generally have one basic formula they
learned in school. And that is, work for money. The formula I see that is
predominant in the world is that every day millions of people get up and go to
work, earn money, pay bills, balance checkbooks, buy some mutual funds and go
back to work. That is the basic formula, or recipe.
If you're tired of what you're doing, or you're not making enough, it's
simply a case of changing the formula via which you make money.
Years ago, when I was 26,1 took a weekend class called "How to Buy Real
Estate Foreclosures." I learned a formula. The next trick was to have the
discipline to actually put into action what I had learned. That is where most
people stop. For three years, while working for Xerox, I spent my spare time
learning to master the art of buying foreclosures. I've made several million
dollars using that formula, but today, it's too slow and too many other people
are doing it.
So after I mastered that formula, I went in search of other formulas. For
many of the classes, I did not use the information I learned directly, 'i| but I
always learned something new.
I have attended classes designed for only derivative traders, also a class
for commodity option traders and a class for Chaologists. I was way out of my
league, being in a room full of people with doctorates in nuclear physics and
space science. Yet, I learned a lot that made my stock and real estate investing
more meaningful and lucrative. Most junior colleges and community colleges have


who controls the past controls the future, who controls the present controls the past.
classes on financial planning and buying of traditional investments. They are
great places to start.
So I always search for a faster formula. That is why, on a fairly regular
basis, I make more in a day than many people will make in their lifetime.
Another side note. In today's fast-changing world, it's not so much what
you know anymore that counts, because often what you know is old. It is how
fast you learn. That skill is priceless. It's priceless in finding faster
formulas-recipes, if you will, for making dough. Working hard for money is an
old formula born in the day of cave men.


5. PAY YOURSELF FIRST: The power of self-discipline. If you cannot get
control of yourself, do not try to get rich. You might first want to join the
Marine Corps or some religious order so you can get control of yourself. It
makes no sense to invest, make money and blow it. It is the lack of self-
discipline that causes most lottery winners to go broke soon after winning
millions. It is the lack of self-discipline that causes people who get a raise
to immediately go out and buy a new car or take a cruise.
It is difficult to say which of the ten steps is the most important. But
of all the steps, this step is probably the most difficult to master if it is
not already a part of your makeup. I would venture to say that it is the lack of
personal self-discipline that is the No. 1 delineating factor between the rich,
the poor and the middle class.
Simply put, people who have low self-esteem and low tolerance for
financial pressure can never, and I mean never, be rich. As I have said, a
lesson learned from my rich dad was that "the world will push you around." The
world pushes people around not because other people are bullies, but because the
individual lacks internal control and discipline. People who lack internal
fortitude often become victims of those who have self-discipline.
In the entrepreneur classes I teach, I constantly remind people to not
focus on their product, service or widget, but to focus on developing management
skills. The three most important management skills necessary to start your own
business are:



1.
2.



Management of cash flow.
Management of people.

3. Management of personal time.



who controls the past controls the future, who controls the present controls the past.
I would say, the skills to manage these three apply to anything, not just
entrepreneurs. The three matter in the way you live your life as an individual,
or as part of a family, a business, a charitable organization, a city or a
nation.
Each of these skills is enhanced by the mastery of self discipline. I do
not take the saying "pay yourself first" lightly.
The Richest Man in Babylon, by George Classen, is where the statement "pay
yourself first" comes from. Millions of copies have been sold. But while
millions of people freely repeat that powerful statement, few follow the advice.
As I said, financial literacy allows one to read numbers, and numbers tell the
story. By looking at a person's income statement and balance sheet, I can
readily see if people who spout the words "pay yourself first" actually practice
what they preach.
A picture is worth a thousand words. So let's again compare the financial
statements of people who pay themselves first against someone who doesn't.


People who pay themselves first


+------------------------+
Job--------------->|Income |----

^
|

|------------------------- |
| Expense | |

\ +------------------------+ |
\ +--------------------------------------<
----\-----|------------------------+
| Assets | Liabilities |

| |
|_________|____________|

|



Someone who pays everyone else first- Often there is nothing left


+------------------------+
Job--------------->|Income |
|-------------------------
| Expense | ----> Nothing left!
+------------------------+
-----------------------------------+
| Assets | Liabilities |



who controls the past controls the future, who controls the present controls the past.

| |
|_________|____________|

|



Study the diagrams and notice if you can pick up some distinctions. Again,
it has to do with understanding cash flow, which tells the story. Most people
look at the numbers and miss the story. If you can truly begin to understand the
power of cash flow, you will soon realize what is wrong with the picture on the
next page, or why 90 percent of most people work hard all their lives and need
government support like Social Security when they are no longer able to work.
Do you see it? The diagram above reflects the actions of an individual who
chooses to pay himself first. Each month, they allocate money to their asset
column before they pay their monthly expenses. Although millions of people have
read Classen's book and understand the words "pay yourself first," in reality
they pay themselves last.
Now I can hear the howls from those of you who sincerely believe in paying
your bills first. And I can hear all the "responsible" people who pay their
bills on time. I am not saying be irresponsible and not pay your bills. All I am
saying is do what the book says, which is "pay yourself first." And the diagram
above is the correct accounting picture of that action. Not the one that follows.
My wife and I have had many bookkeepers and accountants and bankers who
have had a major problem with this way of looking at "pay yourself first." The
reason is that these financial professionals actually do what the masses do,
which is pay themselves last. They pay everyone else first.
There have been months in my life, when for whatever reason, cash flow was
far less than my bills. I still paid myself first. My accountant and bookkeeper
screamed in panic. "They're going to come after you. The IRS is going to put
you in jail." "You're going to ruin your credit rating." "They'll cut off the
electricity." I still paid myself first.
"Why?" you ask. Because that's what the story The Richest Man In Babylon
was all about. The power of self-discipline and the power of internal fortitude.
"Guts," in less elegant terms. As my rich dad taught me the first month I worked
for him, most people allow the world to push them around. A bill collector calls
and you "pay or else." So you pay and not pay yourself. A sales clerk says, "Oh,
just put it on your charge card." Your real estate agent tells you to "go ahead-
the government allows you a tax deduction on your home." That is what the book
is really about. Having the guts to go against the tide and get rich. You may
not be weak, but when it comes to money, many people get wimpy.



who controls the past controls the future, who controls the present controls the past.
I am not saying be irresponsible. The reason I don't have high credit card
debt, and doodad debt, is because I want to pay myself first. The reason I
minimize my income is because I don't want to pay it to the government. That is
why, for those of you who have watched the video The Secrets of the Rich, my
income comes from my asset column, through a Nevada corporation. If I work for
money, the government takes it.
Although I pay my bills last, I am financially astute enough to not get
into a tough financial situation. I don't like consumer debt. I actually have
liabilities that are higher than 99 percent of the population, but I don't pay
for them; other people pay for my liabilities. They're called tenants. So rule
No. 1 in paying yourself first is don't get into debt in the first place.
Although I pay my bills last, I set it up to have only small unimportant bills,
that I will have to pay.
Secondly, when I occasionally come up short, I still pay myself first. I
let the creditors and even the government scream. I like it when they get tough.
Why? Because those guys do me a favor. They inspire me to i go out and create
more money. So I pay myself first, invest the money, and let the creditors yell.
I generally pay them right away anyway. My wife and I have excellent credit. We
just don't cave into the pressure and spend our savings or liquidate stocks to
pay for consumer debt. That is not too financially intelligent.
So the answer is:


1. Don't get into large debt positions that you have to pay for. Keep
your expenses low. Build up assets first. Then, buy the big house or nice car.
Being stuck in the rat race is not intelligent.
2. When you come up short, let the pressure build and don't dip into your
savings or investments. Use the pressure to inspire your financial genius to
come up with new ways of making more money and then pay your bills. You will
have increased your ability to make more money as well as your financial
intelligence. ; : So many times I have gotten into financial hot water, and used
my brain to create more income, while staunchly defending the assets in my asset
column. My bookkeeper has screamed and dived for cover, but I was like a good
trooper defending the fort, Fort Assets.
Poor people have poor habits. A common bad habit is innocently called
"Dipping into savings." The rich know that savings are only used to create more
money, not to pay bills.
I know that sounds tough, but as I said, if you're not tough inside, the
world will always push you around anyway.


who controls the past controls the future, who controls the present controls the past.
If you do not like financial pressure, then find a formula that works for
you. A good one is to cut expenses, put your money in the bank, pay more than
your fair share of income tax, buy safe mutual funds and take the vow of the
average. But this violates the "pay yourself first" rule.
The rule does not encourage self-sacrifice or financial abstinence. It
doesn't mean pay yourself first and starve. Life was meant to be enjoyed. If you
call on your financial genius, you can have all the goodies of life, get rich
and pay bills, without sacrificing the good life. And that is financial
intelligence.


6. PAY YOUR BROKERS WELL: The power of good advice. I often see people
posting a sign in front of their house that says, "For Sale by Owner." Or I see
on TV today many people claiming to be "Discount Brokers."
My rich dad taught me to take the opposite tack. He believed in paying
professionals well, and I have adopted that policy also. Today, I have expensive
attorneys, accountants, real estate brokers and stockbrokers. Why? Because if,
and I do mean if, the people are professionals, their services should make you
money. And the more money they make, the more money I make.
We live in the Information Age. Information is priceless. A good broker
should provide you with information as well as take the time to educate you. I
have several brokers who are willing to do that for me. Some taught me when I
had little or no money, and I am still with them today.
What I pay a broker is tiny in comparison with what kind of money I can
make because of the information they provide. I love it when my real estate
broker or stockbroker makes a lot of money. Because it usually means I made a
lot of money.
A good broker saves me time in addition to making me money-as when I
bought the piece of vacant land for $9,000 and sold it immediately for over
$25,000, so I could buy my Porsche quicker.
A broker is your eyes and ears to the market. They're there every day so I
do not have to be. I'd rather play golf.
Also, people who sell their house on their own must not value their time
much. Why would I want to save a few bucks when I could use that time to make
more money or spend it with those I love? What I find funny is that so many poor
and middle class people insist on tipping restaurant help 15 to 20 percent even
for bad service and complain about paying a broker 3 to 7 percent. They enjoy
tipping people in the


who controls the past controls the future, who controls the present controls the past.
expense column and stiffing people in the asset column. That is not
financially intelligent.
All brokers are not created equal. Unfortunately, most brokers are only
salespeople. I would say the real estate salespeople are the worst.
They sell, but they themselves own little or no real estate. There is a
tremendous difference between a broker who sells houses and a broker who sells
investments. And that is true for stock, bond, mutual fund and insurance brokers
who call themselves financial planners. As in the fairy tale, you kiss a lot of
frogs to find one prince. Just remember the old saying, "Never ask an
encyclopedia salesperson if you need an encyclopedia."
When I interview any paid professional, I first find out how much property
or stocks they personally own and what percentage they pay in taxes. And that
applies to my tax attorney as well as my accountant. I have an accountant who
minds her own business. Her profession is accounting, but her business is real
estate. I used to have an accountant that was a small business accountant, but
he had no real estate. I switched because we did not love the same business.
Find a broker who has your best interests at heart. Many brokers will .';
spend the time educating you, and they could be the best asset you find. Just be
fair, and most of them will be fair to you. If all you can think about is
cutting their commissions, then why should they want to be around you? It's just
simple logic.
As I said earlier, one of the management skills is the management of
people. Many people only manage people they feel smarter than and they have
power over, such as subordinates in a work situation. Many middle managers
remain middle managers, failing to get promoted because they know how to work
with people below them, but not with people above them. The real skill is to
manage and pay well the people who are smarter than you in some technical area.
That is why companies have a board of directors. You should have one, too. And
that is financial intelligence.


7. BE AN "INDIAN GIVER": This is the power of getting something for
nothing. When the first white settlers came to America, they were taken aback by
a cultural practice some American Indians had. For example, if a settler was
cold, the Indian would give the person a blanket. Mistaking it for a gift, the
settler was often offended when the Indian asked for it back.
The Indians also got upset when they realized the settlers did not want to
give it back. That is where the term "Indian giver" came from. A simple cultural
misunderstanding.


who controls the past controls the future, who controls the present controls the past.
In the world of the "asset column," being an Indian giver is vital to
wealth. The sophisticated investor's first question is, "How fast do I get my
money back?" They also want to know what they get for free, also called a piece
of the action. That is why the ROI, or return of and on investment, is so
important.
For example, I found a small condominium, a few blocks from where I live,
that was in foreclosure. The bank wanted $60,000, and I submitted a bid for
$50,000, which they took, simply because, along with my bid, was a cashier's
check for $50,000. They realized I was serious. Most investors would say, aren't
you tying up a lot of cash? Would it not be better to get a loan on it? The
answer is, not in this case. My investment company uses this as a vacation
rental in the winter months, when the "snowbirds" come to Arizona, and rent it
for $2,500 a month for four months out of the year. For rental during the off-
season, it rents for only $1,000 a month. I had my money back in about three
years. Now I own this asset, which pumps money out for me, month in and month
out.
The same is done with stocks. Frequently, my broker will call me and
recommend I move a sizable amount of money into the stock of a company that he
feels is just about to make a move that will add value to the stock, like
announcing a new product. I will move my money in for a week to a month while
the stock moves up. Then, I pull my initial dollar amount out, and stop worrying
about the fluctuations of the market, because my initial money is back and ready
to work on another asset. So my money goes in, and then it comes out, and I own
an asset that was technically free.
True, I have lost money on many occasions. But I only play with money I
can afford to lose. I would say, on an average ten investments, I hit home runs
on two or three, while five or six do nothing, and I lose on two or three. But I
limit my losses to only the money I have in at that time.
For people who hate risk, they put their money in the bank. And in the
long run, savings are better than no savings. But it takes a long time to get
your money back and, in most instances, you don't get anything for free with it.
They used to hand out toasters, but they rarely do that these days.
On every one of my investments, there must be an upside, something for
free. A condominium, a mini-storage, a piece of free land, a house, stock shares,
office building. And there must be limited risk, or a low-risk idea. There are
books devoted entirely to this subject that I will not get into here. Ray Kroc,
of McDonald's fame, sold hamburger franchises, not because he loved hamburgers,
but because he wanted the real estate ; under the franchise for free.


who controls the past controls the future, who controls the present controls the past.
So wise investors must look at more than ROI; it's the assets you get for
free once you get your money back. That is financial intelligence. :


8. ASSETS BUY LUXURIES: The power of focus. A friend's child has been
developing a nasty habit of burning a hole in his pocket. Just 16, he naturally
wanted his own car. The excuse, "All his friends' parents gave their kids cars."
The child wanted to go into|
his savings and use it for a down payment. That was when his father called
me. "Do you think I should let him do it, or should I just do as other parents
do and just buy him a car?"
To which I answered. "It might relieve the pressure in the short term,
but what have you taught him in the long term? Can you use this desire to own a
car and inspire your son to learn something?" Suddenly the lights went on, and
he hurried home.
Two months later I ran into my friend again. "Does your son have his new
car?" I asked.
"No, he doesn't. But I went and handed him $3,000 for the car. I told him
to use my money instead of his college money." "Well, that's generous of you," I
said.
"Not really. The money came with a hitch. I took your advice of using his
strong desire to buy a car and use that energy so he could learn something."
"So what was the hitch?" I asked.
"Well, first we broke out your game again, CASHFLOW. We played it and had
a long discussion about the wise use of money. I then gave him a subscription
to the Wall Street Journal, and a few books on the stock market."
"Then what?" I asked. "What was the catch?"
"I told him the $3,000 was his, but he could not directly buy a car with
it. He could use it to buy and sell stocks, find his own stockbroker, and once
he had made $6,000 with the $3,000, the money would be his for the car, and the
$3,000 would go into his college fund."
"And what are the results?" I asked.
"Well, he got lucky early in his trading, but lost all he gained a few
days later. Then, he really got interested. Today, I would say he is down $2,000,
but his interest is up. He has read all the books I bought him and he's gone to
the library to get more. He reads the Wall Street Journal voraciously, watching
for indicators, and he watches CNBC instead of MTV. He's got only $1,000 left,
but his interest and learning are sky high. He knows that if he loses that money,


who controls the past controls the future, who controls the present controls the past.
he walks for two more years. But he does not seem to care. He even seems
uninterested in getting a car because he's found a game that is more fun."
"What happens if he loses all the money?" I asked.
"We'll cross that bridge when we get to it. I'd rather have him lose
everything now rather than wait till he's our age to risk losing everything. And
besides, that is the best $3,000 I've ever spent on his education. What he is
learning will serve him for life, and he seems to have gained a new respect for
the power of money. I think he's stopped the burning of holes in his pockets."
As I said in the section "Pay Yourself First," if a person cannot master
the power of self-discipline, it is best not to try to get rich. For while the
process of developing cash flow from an asset column in theory is easy, it is
the mental fortitude of directing money that is hard. Due to external
temptations, it is much easier in today's consumer world to simply blow it out
the expense column. Because of weak mental fortitude, that money flows into the
paths of least resistance. That is the cause of poverty and financial struggle.
I gave this numerical example of financial intelligence, in this case the
ability to direct money to make more money.
If we gave 100 people $10,000 at the start of the year, I gave my opinion
that at the end of the year:
80 would have nothing left. In fact, many would have created I greater
debt by making a down payment on a new car, refrigerator, TV, VCR or a holiday.
16 would have increased that $10,000 by 5 percent to 10 percent. 4 would have
increased it to $20,000 or into the millions.
We go to school to learn a profession so we can work for money. It is my
opinion that it is also important to learn how to have money work for you.
I love my luxuries as much as anyone else. The difference is, some people
buy their luxuries on credit. It's the keep-up-with-the-Joneses trap. When I
wanted to buy a Porsche, the easy road would have been to call my banker and get
a loan. Instead of choosing to focus in the liability column, I chose to focus
in the asset column.
As a habit, I used my desire to consume to inspire and motivate my
financial genius to invest.
Too often today, we focus to borrowing money to get the things we want
instead of focusing on creating money. One is easier in the short term, but
harder in the long term. It's a bad habit that we as individuals and as a nation
have gotten into. Remember, the easy road often becomes hard, and the hard road
often becomes easy.


who controls the past controls the future, who controls the present controls the past.
The earlier you can train yourself and those you love to be masters of
money, the better. Money is a powerful force. Unfortunately, people use the
power of money against them. If your financial intelligence is low, money will
run all over you. It will be smarter than you. If money is smarter than you,
you will work for it all your life.
To be the master of money, you need to be smarter than it. Then money will
do as it is told. It will obey you. Instead of being a slave to it, you will be
the master of it. That is financial intelligence.


9. THE NEED FOR HEROES: The power of myth. When I was a kid, I greatly
admired Willie Mays, Hank Aaron, Yogi Berra. They were my heroes. As a kid
playing Little League, I wanted to be just like them. I treasured their baseball
cards. I wanted to know everything about them. I knew the stats, the RBI, the
ERAs, their batting averages, how much they got paid, and how they came up 1
from the minors. I wanted to know everything because I wanted to be just like
them.
Every time, as a 9 or 10 year-old kid, when I stepped up to bat or played
first base or catcher, I wasn't me. I was Yogi or Hank. It's one of the most
powerful ways we learn that we often lose as adults. We lose our heroes. We lose
our naivete.
Today, I watch young kids playing basketball near my home. On the court
they're not little Johnny; they're Michael Jordan, Sir Charles or Clyde.
Copying or emulating heroes is true power learning. And that is why when someone
like O.J. Simpson falls from grace, there is such a huge outcry.
There is more than just a courtroom trial. It is the loss of a hero.
Someone people grew up with, looked up to, and wanted to be like. Suddenly we
need to rid ourselves of that person.
I have new heroes as I grow older. I have golf heroes such as Peter
Jacobsen, Fred Couples and Tiger Woods. I copy their swings and do my best to
read everything I can about them. I also have heroes such as Donald Trump,
Warren Buffett, Peter Lynch, George Soros and Jim Rogers. In my older years, I
know their stats just like I knew the ERAs and RBI of my baseball heroes. I
follow what Warren Buffett invests in, and read anything I can about his point
of view on the market. I read Peter Lynch's book to understand how he chooses
stocks. And I read about Donald Trump, trying to find out how he negotiates and
puts deals together.
Just as I was not me when I was up to bat, when I'm in the market or I'm
negotiating a deal, I am subconsciously acting with the bravado of Trump. Or


who controls the past controls the future, who controls the present controls the past.
when analyzing a trend, I look at it as though Peter Lynch were doing it. By
having heroes, we tap into a tremendous source of raw genius.
But heroes do more than simply inspire us. Heroes make things look easy.
It's the making it look easy that convinces us to want to be just like them. "If
they can do it, so can I."
When it comes to investing, too many people make it sound hard. Instead
find heroes who make it look easy.


10. TEACH AND YOU SHALL RECEIVE: The power of giving. Both of my dads
were teachers. My rich dad taught me a lesson I have carried all my life, and
that was the necessity of being charitable or giving. My educated dad gave a lot
by the way of time and knowledge, but almost never gave away money. As I said,
he usually said that he would give when he had some extra money. Of course,
there was rarely any extra.
My rich dad gave money as well as education. He believed firmly in tithing.
"If you want something, you first need to give," he would always say. When he
was short of money, he simply gave money to his church or to his favorite
charity.
If I could leave one single idea with you, it is that idea. Whenever you
feel "short" or in "need" of something, give what you want first and it will
come back in buckets. That is true for money, a smile, love, friendship. I know
it is often the last thing a person may want to do, but; it has always worked
for me. I just trust that the principle of reciprocity it is true, and I give
what I want. I want money, so I give money, and it comes back in multiples. I
want sales, so I help someone else sell something, and sales come to me. I want
contacts and I help someone else get contacts, and like magic, contacts come to
me. I heard a saying years ago that went, "God does not need to receive, but
humans need to give."
My rich dad would often say, "Poor people are more greedy than rich
people." He would explain that if a person was rich, that person was providing
something that other people wanted. In my life, over all these ; years,
whenever I have felt needy or short of money or short of help, I simply went out
or found in my heart what I wanted, and decided to give it first. And when I
gave, it always came back.
It reminds me of the story of the guy sitting with firewood in his arms on
a cold freezing night, and he is yelling at the pot-bellied stove, "When you
give me some heat, then I'll put some wood in." And when it comes to money, love,
happiness, sales and contacts, all one needs to remember is first to give what


who controls the past controls the future, who controls the present controls the past.
you want and it will come back in droves. ? Often just the process of thinking
of what I want, and how could I give what I want to someone else, breaks free a
torrent of bounty. Whenever I feel that people aren't smiling at me, I simply
begin smiling and saying hello, and like magic, there are suddenly more smiling
people around me. It is true that your world is only a mirror of you.
So that's why I say, "Teach and you shall receive." I have found that the
more I sincerely teach those who want to learn, the more I learn. If you want to
learn about money, teach it to someone else. A torrent of new ideas and finer
distinctions will come in.
There are times when I have given and nothing has come back or what I have
received is not what I wanted. But upon closer inspection and soul searching, I
was often giving to receive in those instances, instead of giving to give.
My dad taught teachers, and he became a master teacher. My rich dad
always taught young people his way of doing business. In retrospect, it was
their generosity with what they knew that made them smarter. There are powers in
this world that are much smarter than we are. You can get there on your own, but
it's easier with the help of the powers that be. All you need to be is generous
with what you have, and the powers will be generous with you.



10. CHAPTER TEN
Still Want More? Here are Some To Do's


Many people may not be satisfied with my ten steps. They see them more as
philosophies than actions. I think understanding the philosophy is just as
important as the action. There are many people who want to do, instead of think,
and then there are people who think but do not do. I would say that I am both. I
love new ideas and I love action.
So for those who want "to dos" on how to get started, I will share with
you some of the things I do, in abbreviated form.


• Stop doing what you're doing. In other words, take a break and assess
what is working and what is not working. The definition of insanity is doing the
same thing and expecting a different result. Stop doing what is not working and
look for something new to do.


• Look for new ideas. For new investing ideas, I go to bookstores and look
for books on different and unique subjects. I call them formulas. I buy how-to


who controls the past controls the future, who controls the present controls the past.
books on a formula I know nothing about. For example, it was in the bookstore
that I found the book The 16 Percent Solution, by Joel Moskowitz. I bought the
book and read it.


TAKE ACTION! The next Thursday, I did exactly as the book said. Step by
step. I have also done that with finding real estate bargains in attorneys'
offices and in banks. Most people do not take action, or they let someone talk
them out of whatever new formula they are studying. My neighbor told me why 16
percent would not work. I did not listen to him because he's never done it.


• Find someone who has done what you want to do. Take them to lunch. Ask
them for tips, for little tricks of the trade. As for 16 percent tax lien
certificates, I went to the county tax office and found the government employee
who worked in the office. I found out that she, too, invested in the tax liens.
Immediately, she was invited to lunch. She was thrilled to tell me everything
she knew and how to do it. After lunch, she spent all afternoon showing me
everything. By the next day, I found two great properties with her help and have
been accruing interest at 16 percent ever since. It took a day to read the book,
a day to take action, an hour for lunch, and a day to acquire two great deals.


• Take classes and buy tapes. I search the newspapers for new and
interesting classes. Many are for free or a small fee. I also attend and pay for
expensive seminars on what I want to learn. I am wealthy and free from needing a
job simply because of the courses I took. I have friends who did not take those
classes who told me I was wasting my money, and yet they're still at the same
job.


• Make lots of offers. When I want a piece of real estate, I look at many
properties and generally write an offer. If you don't know what the "right
offer" is, neither do I. That is 'the job of the real estate agent. They make
the offers. I do as little work as possible.
A friend wanted me to show her how to buy apartment houses. So one
Saturday she, her agent and I went and looked at six apartment houses. Four
were dogs, but two were good. I said to write offers on all six, offering half
of what the owners asked for. She and the agent nearly had heart attacks. They
thought it would be rude, that I might offend the sellers, but I really don't
think the agent wanted to work that hard. So they did nothing and went on
looking for a better deal.


who controls the past controls the future, who controls the present controls the past.
No offers were ever made, and that person is still looking for the "right"
deal at the right price. Well, you don't know what the right price is until you
have a second party who wants to deal. Most sellers ask too much. It is rare
that a seller will actually ask a price that is less than something is worth.
Moral of the story: Make offers. People who are not investors have no idea
what it feels like to be trying to sell something. I have had a piece of real
estate that I wanted to sell for months. I would have welcomed anything. I would
not care how low the price. They could have offered me ten pigs and I would have
been happy. Not at the offer, but just because someone was interested. I would
have countered, maybe for a pig farm in exchange. But that's how the game works.
The game of buying and selling is fun. Keep that in mind. It's fun and only a
game. Make offers. Someone might say "yes."
And I always make offers with escape clauses. In real estate, I make an
offer with the words "subject to approval of business partner." I never specify
who the business partner is. Most people do not know my partner is my cat. If
they accept the offer, and I don't want the deal, I call my home and speak to my
cat. I make this absurd statement to illustrate how absurdly easy and simple the
game is. So many people make things too difficult and take them too seriously.
Finding a good deal, the right business, the right people, the right
investors, or whatever is just like dating. You must go to the market and talk
to a lot of people, make a lot of offers, counteroffers, negotiate, reject and
accept. I know single people who sit at home and wait for the phone to ring, but
unless you're Cindy Crawford or Tom Cruise, I think you'd best go to the market,
even if it's only the supermarket. Search, offer, reject, negotiate and accept
are all parts of the process of almost everything in life.


• Jog, walk or drive a certain area once a month for ten minutes. I have
found some of my best real estate investments while jogging. I will jog a
certain neighborhood for a year. What I look for is change. For there to be
profit in a deal, there must be two elements: a bargain and change. There are
lots of bargains, but it's change that turns a bargain into a profitable
opportunity. So when I jog, I jog a neighborhood I might like to invest in. It
is the repetition that causes me to notice slight differences. I notice real
estate signs that are up for a long time. That means the seller might be more
agreeable to deal. I watch for moving trucks, going in or out. I stop and talk
to the drivers. I talk to the postal carriers. It's amazing how much information
they acquire about an area.


who controls the past controls the future, who controls the present controls the past.
I find a bad area, especially an area that the news has scared everyone
away from. I drive it for sometimes a year waiting for signs of something
changing for the better. I talk to retailers, especially new ones, and find out
why they're moving in. It takes only a few minutes a month, and I do it while
doing something else, like exercising, or going
to and from the store.


• As for stocks, I like Peter Lynch's book Beating the Street for his
formula for selecting stocks that grow in value. I have found that the
principles of finding value are the same regardless if it's real estate, stocks,
mutual funds, new companies, a new pet, a new home, a new spouse, or a bargain
on laundry detergent. The process is always the same. You need to know what
you're looking for and then go look for it!


• Why consumers will always be poor. When the supermarket has a sale on,
say, toilet paper, the consumer runs in and stocks up. When the stock market has
a sale, most often called a crash or correction, the consumer runs away from it.
When the supermarket raises its prices, the consumer shops elsewhere. When the
stock market raises its prices, the consumer starts buying.


• Look in the right places. A neighbor bought a condominium for $100,000.
I bought the identical condo next door to his for $50,000. He told me he's
waiting for the price to go up. I told him that his profit is made when you buy,
not when you sell. He shopped with a real estate broker who owns no property of
her own. I shopped at the foreclosure department of a bank. I paid $500 for a
class on how to do this. My neighbor thought that the $500 for a real estate
investment class was too expensive. He said he could not afford it, and he
couldn't afford the time. So he waits for the price to go up.


• I look for people who want to buy first, then I look for someone who
wants to sell. A friend was looking for a certain piece of land. He had the
money and did not have the time. I found a large piece of land larger than what
my friend wanted to buy, tied it up with an option, called my friend and he
wanted a piece of it. So I sold the piece to him and then bought the land. I
kept the remaining land as mine for free. Moral of the story: Buy the pie and
cut it in pieces. Most people look for what they can afford, so they look too
small. They buy only a piece of the pie, so they end up paying more for less.


who controls the past controls the future, who controls the present controls the past.
Small thinkers don't get the big breaks. If you want to get richer, think bigger
first.
Retailers love giving volume discounts, simply because most business
people love big spenders. So even if you're small, you can always think big.
When my company was in the market for computers, I called several friends and
asked them if they were ready to buy also. We then went to different dealers and
negotiated a great deal because we wanted to buy so many. I have done the same
with stocks. Small people remain small because they think small; act alone, or
don't act all.


• Learn from history. All the big companies on the stock exchange started
out as small companies. Colonel Sanders did not get rich until after he lost
everything in his 60s. Bill Gates was one of the richest men in the world
before he was 30.


• Action always beats inaction.
These are just a few of the things I have done and continue to do to
recognize opportunities. The important words being "done" and "do". As repeated
many times throughout the book, you must take action before you can receive the
financial rewards. Act now!



EPILOGUE

How To Pay for a Child's College Education for $7000


As the book draws to a close and approaches publication, I would like to
share a final thought with you. The main reason I wrote this book was to share
insights into how increased financial intelligence can be used to solve many of
life's common problems. Without financial training, we all too often use the
standard formulas to get through life, such as to work hard, save, borrow and
pay excessive taxes. Today we need better information.
I use the following story as a final example of a financial problem that
confronts many young families today. How do you afford a good education for your
children and provide for your own retirement? It is an example of using
financial intelligence instead of hard work to achieve the same goal.
A friend of mine was griping one day about how hard it was to save money
for his four children's college education. He was putting $300 away in a mutual


who controls the past controls the future, who controls the present controls the past.
fund each month and had so far accumulated about $12,000. He estimated he
needed $400,000 to get four children through college. He had 12 years to save
for it, since his oldest child was then 6 years of age.
The year was 1991, and the real estate market in Phoenix was terrible.
People were giving houses away. I suggested to my classmate that he buy a house
with some of the money in his mutual fund. The idea intrigued him and we began
to discuss the possibility. His primary concern was that he did not have the
credit with the bank to buy another house, since he was so over-extended. I
assured him that there were other ways to finance a property other than through
the bank.
We looked for a house for two weeks, a house that would fit all the
criteria we were looking for. There were a lot to choose from, so the shopping
was kind of fun. Finally, we found a 3 bedroom 2 bath home in a prime
neighborhood. The owner had been downsized and needed to sell that day because
he and his family were moving to California where another job waited.
He wanted $102,000, but we offered only $79,000. He took it immediately.
The home had on it what is called a non-qualifying loan, which means even a bum
without a job could buy it without a banker's approval. The owner owed $72,000
so all my friend had to come up with was $7,000, the difference in price between
what was owed and what it sold for. As soon as the owner moved, my friend put
the house up for rent. After all expenses were paid, including the mortgage, he
put about $125 in his pocket each month.
His plan was to keep the house for 12 years and let the mortgage get paid
down faster, by applying the extra $125 to the principle each month. We figured
that in 12 years, a large portion of the mortgage would be paid off and he could
possibly be clearing $800 a month by the time his first child went to college.
He could also sell the house if it had appreciated in value.
In 1994, the real estate market suddenly changed in Phoenix and he was
offered $156,000 for the same house by the tenant who lived in it and loved it.
Again, he asked me what I thought, and I naturally said sell, on a 1031 tax-
deferred exchange.
Suddenly, he had nearly $80,000 to operate with. I called another friend
in Austin, Texas who then moved this tax deferred money into a mini-storage
facility. Within three months, he began receiving checks for a little less than
a $1,000 a month in income which he then poured back into the college mutual
fund that was now building much faster. In 1996, the mini-warehouse sold and he
received a check for nearly $330,000 as proceeds from the sale which was again
rolled into a new project that would now throw off over $3,000 a month in income,


who controls the past controls the future, who controls the present controls the past.
again, going into the college mutual fund. He is now very confident that his
goal of $400,000 will be met easily, and it only took $7,000 to start and a
little financial intelligence. His children will be able to afford the education
that they want and he will then use the underlying asset, wrapped in his C
Corporation, to pay for his retirement. As a result of this successful
investment strategy he will be able to retire early.
Thank you for reading this book. I hope it has provided some insights into
utilizing the power of money to work for you. Today, we need greater financial
intelligence to simply survive. The idea that it takes money to make money is
the thinking of financially unsophisticated people. It does not mean that
they're not intelligent. They have simply not learned the science of making
money.
Money is only an idea. If you want more money simply change your thinking.
Every self-made person started small with an idea, then turned it into something
big. The same applies with investing. It takes only a few dollars to start and
grow it into something big. I meet so many people who spend their lives chasing
the big deal, or trying to mass a lot of money to get into a big deal, but to me
that is foolish. Too often I have seen unsophisticated investors put their large
nest egg into one deal and lose most of it rapidly. They may have been good
workers but they were not good investors.
Education and wisdom about money are important. Start early. Buy a book.
Go to a seminar. Practice. Start small. I turned $5,000 cash into a $1 million
dollar asset producing $5,000 a month cash flow in less than six years. But I
started learning as a kid. I encourage you to learn because it's not that hard.
In fact, it's kind of easy once you get the hang of it.
I think I have made my message clear. It's what is in your head that
determines what is in your hands. Money is only an idea. There is a great book
called Think and Grow Rich. The title is not Work Hard and Grow Rich. Learn to
have money work hard for you and your life will be easier and happier. Today,
don't play it safe, play it smart.


Take Action!


Many of you were given two great gifts: your mind and your time. It is up
to you to do what you please with both. With each dollar bill that enters your
hand, you and only you have the power to determine your destiny. Spend it
foolishly, you choose to be poor. Spend it on liabilities, you join the middle
class. Invest it in your mind and learn how to acquire assets and you will be


who controls the past controls the future, who controls the present controls the past.
choosing wealth as your goal and your future. The choice is yours and only yours.
Every day with every dollar, you decide to be rich, poor or middle class.
Choose to share this knowledge with your children, and you choose to
prepare them for the world that awaits. No one else will.
You and your children's future will be determined by choices you make
today, not tomorrow.
We wish you great wealth and much happiness with this fabulous gift called
life.


Robert Kiyosaki, Sharon Lechter




About the Authors-Robert T. Kiyosaki

"The main reason people struggle financially is because they spent years
in school but learned nothing about money. The result is, people learn to work
for money... but never learn to have money work for them." says Robert.
Born and raised in Hawaii, Robert is fourth-generation Japanese American.
He comes from a prominent family of educators. His father was the head of
education for the State of Hawaii. "After high school, Robert was educated in
New York and upon graduation, he joined the U. S. Marine Corps and went to
Vietnam as an officer and a helicopter gunship pilot.
Returning from the war, Robert's business career began. In 1977 he founded
a company that brought to the market the first nylon and Velcro "surfer" wallets,
which grew into a multi-million dollar worldwide product. He and his products
were featured in Runner's World, Gentleman's Quarterly, Success Magazine,
Newsweek, and even Playboy.
Leaving the business world, he co-founded in 1985, an international
education company that operated in seven countries, teaching business and
investing to tens of thousands of graduates.
Retiring at age 47, Robert does what he enjoys most... investing.
Concerned about the growing gap between the haves and have nots, Robert created
the board game CASHFLOW, which teaches the game of money, here before only known
by the rich.
Although Robert's business is real estate and developing small cap
companies, his true love and passion is teaching. He has shared the speaking
stage with such greats as Og Mandino, Zig Ziglar, and Anthony Robbins. Robert


who controls the past controls the future, who controls the present controls the past.
Kiyosaki's message is clear. "Take responsibility for your finances or take
orders all your life. You're either a master of money or a slave to it." Robert
holds classes that last from 1 hour to 3 days teaching people about the secrets
of the rich. Although his subjects run from investing for high returns and low
risk; to teaching your children to be rich; to starting companies and selling
them; he has one solid earth shaking message. And that message is, Awaken The
Financial Genius that lies within you. Your genius is waiting to come out.
This is what world famous speaker and author Anthony Robbins says about
Robert's work.


"Robert Kiyosaki's work in education is powerful, profound, and life
changing. I salute his efforts and recommend him highly."
During this time of great economic change, Robert's message is priceless.



About the Authors-Sharon L. Lechter

Wife and mother of three, CPA, consultant to the toy and publishing
industries and business owner, Sharon Lechter has dedicated her professional
efforts to the field of education.
She graduated with honors from Florida State University with a degree in
accounting. She joined the ranks of what was then one of the big eight
accounting firms, and went on to become the CFO of a turnaround company in the
computer industry, tax director for a national insurance company and founder and
Associate Publisher of the first regional woman's magazine in Wisconsin, all
while maintaining her professional credentials as a CPA.
Her focus quickly changed to education as she watched her own three
children grow. It was a struggle to get them to read. They would rather watch TV.
So she was delighted to join forces with the inventor of the first
electronic "talking book" and help expand the electronic book industry to a
multi-million dollar international market. Today, she remains a pioneer in
developing new technologies to bring the book back into
children's lives.
As her own children grew, she was keenly involved in their education. She
became a vocal activist in the areas of mathematics, computers, reading and
writing education.
"Our current educational system has not been able to keep pace with the
global and technological changes in the world today. We must teach our young


who controls the past controls the future, who controls the present controls the past.
people the skills, both scholastic and financial, that they will need not only
to survive, but to flourish, in the world they face."
As co-author of Rich Dad Poor Dad and the CASHFLOW Quadrant she now
focuses her efforts in helping to create educational tools for anyone interested
in bettering their own financial education.