Success Secret of the Rich and Famous: Insulate Yourself From Personal Responsibility

From the blog Mercy Not Sacrifice, I learned about a list wealth guru Dave Ramsey had posted of 20 Things Rich People Do that Poor People Do Not. His source for the stats is something called The Rich Institute, which makes the stats fairly dubious to begin with. The list sets out to prove that rich people are in charge of their destinies and are rich due to their superior choices. The list has received a lot of commentary elsewhere. In some cases the items on the list presumably are meant to imply cause and effect. For example, Ramsey says the rich eat less junk food. I think we are to assume that this is a moral decision and that choosing not to eat junk food makes people wealthier rather than assuming rich people having the budget to buy healthier foods and poor people have the budget for junk food.

Then there is this utterly meaningless list item: “74% of wealthy teach good daily success habits to their children vs. 1% of poor.” What is a “good daily success habit”?

No one has done a better job summing up this kind of nonsense than G.K. Chesterton writing a century ago.  His essay The Fallacy of Success says:

There has appeared in our time a particular class of books and articles which I sincerely and solemnly think may be called the silliest ever known among men… On every bookstall, in every magazine, you may find works telling people how to succeed. They are books showing men how to succeed in everything; they are written by men who cannot even succeed in writing books. To begin with, of course, there is no such thing as Success. Or, if you like to put it so, there is nothing that is not successful. That a thing is successful merely means that it is; a millionaire is successful in being a millionaire and a donkey in being a donkey. Any live man has succeeded in living; any dead man may have succeeded in committing suicide. But, passing over the bad logic and bad philosophy in the phrase, we may take it, as these writers do, in the ordinary sense of success in obtaining money or worldly position. These writers profess to tell the ordinary man how he may succeed in his trade or speculation–how, if he is a builder, he may succeed as a builder; how, if he is a stockbroker, he may succeed as a stockbroker… I really think that the people who buy these books (if any people do buy them) have a moral, if not a legal, right to ask for their money back. Nobody would dare to publish a book about electricity which literally told one nothing about electricity; no one would dare publish an article on botany which showed that the writer did not know which end of a plant grew in the earth. Yet our modern world is full of books about Success and successful people which literally contain no kind of idea, and scarcely and kind of verbal sense.

…You may want a book about jumping; you may want a book about whist; you may want a book about cheating at whist. But you cannot want a book about Success. Especially you cannot want a book about Success such as those which you can now find scattered by the hundred about the book-market. You may want to jump or to play cards; but you do not want to read wandering statements to the effect that jumping is jumping, or that games are won by winners. If these writers, for instance, said anything about success in jumping it would be something like this: “The jumper must have a clear aim before him. He must desire definitely to jump higher than the other men who are in for the same competition. He must let no feeble feelings of mercy (sneaked from the sickening Little Englanders and Pro-Boers) prevent him from trying to do his best. He must remember that a competition in jumping is distinctly competitive, and that, as Darwin has gloriously demonstrated, THE WEAKEST GO TO THE WALL.”

What Chesterton makes perfectly clear is that it is useless to talk about the abstraction of “success.” What a person needs to succeed is specific instruction on the information he lacks to get by in a particular context. There is no “success” devoid of context.  Let’s say you were to take a rich kid and plop her alone into a poor neighborhood. Let’s say you were to put her in a struggling inner-city school and leave her to her own devices to get along. How would you expect her to do? Let’s say you were to put her on a small farm and tell her to go tend to the animals. How would she do? What if you were to ask her to work on an assembly line? My guess is that she would not enjoy great success. Why? She was not taught the “daily success habits” to thrive in those environments.

I do believe these statistics:

84% of wealthy believe good habits create opportunity luck vs. 4% of poor.

76% of wealthy believe bad habits create detrimental luck vs. 9% of poor.

That is to say, I do not have faith in any of these numbers, but I am quite certain that the rich are apt to attribute their good fortune to their own habits and other’s misfortune to their bad habits. In fact, the whole article is an exercise in exactly that. Just because this is their belief does not mean it is true. Nor does it mean that believing it caused them to be rich, it is much more likely that being fortunate you’re more inclined to think you get what you deserve, because you deserve good things and you have them.

The Mercy Not Sacrifice article in which I originally read about Dave Ramsey’s list was titled “Another Item for Dave Ramsey’s List of What Rich People Do That Poor People Don’t.” Morgan Guyton wrote “…I found a 21st item to put on Dave’s list. Apparently it’s a growing trend for really rich people to buy expensive artwork, and, instead of hanging it up in their homes, store it in giant, tax-free warehouses in places like Luxembourg to use as investment currency instead of stocks or bonds. These warehouses are called freeports. They are often located next to airports, so that super-rich people can fly around to look at each other’s artwork.”

I found this fascinating in light of the controversy surrounding the potential sale of the artwork at the Detroit Institute of Art in the city’s bankruptcy reorganization.

I would like to do my part and add a 22nd item to the list of things that rich people do that poor people don’t.

22. Rich people insulate themselves from personal responsibility for their failings.

In December 2012, after Robert Kiyosaki, author of the mega-best selling Rich Dad, Poor Dad filed for bankruptcy protection following an expensive legal judgment against him, another wealth and leadership guru Jeremy McCommons wrote an article on his blog to make sense of it.  Kiyosaki had not failed, McCommons argued, in fact, his bankruptcy simply proved his method works.

Upon analyzing the situation with the Rich Dad Poor Dad’s bankruptcy, I realized that Robert Kiyosaki himself did not file bankruptcy and in fact his businesses are still running strong… Suddenly I was reminded of some basic yet important information that is taught by Rich Dad Poor Dad.

  • Use corporate structures to protect yourself and your assets. If your corporation fails or is sewed [sic] you are limited to the exposure of only those assets held by the corporation.

  • Never put all your eggs in one basket. Form separate corporate entities for each brand of your business or group of real estate holdings.

  • Always pay yourself first. It is important to get the cash out of your business when possible. If you pay yourself from the corporation those assets are no longer at risk in the event that the corporation runs into trouble.

Upon analyzing the situation with the Rich Dad Poor Dad’s Bankruptcy, I realized that Robert Kiyosaki himself did not file bankruptcy and in fact his businesses are still running strong. What filed bankruptcy was a corporate entity within the Rich Dad Poor Dad umbrella.  Suddenly I was reminded of some basic yet important information that is taught by Rich Dad Poor Dad.

  • Use corporate structures to protect yourself and your assets.  If your corporation fails or is sewed you are limited to the exposure of only those assets held by the corporation.
  • Never put all your eggs in one basket.  Form separate corporate entities for each branch of your business or group of real estate holdings.
  • Always pay yourself first. It is important to get the cash out of your business when possible. If you pay yourself from the corporation those assets are no longer at risk in the event that the corporation runs into trouble.

– See more at: http://jeremymccommons.com/business/rich-dad-poor-dad-files-bankruptcy/#sthash.UZ2YPN2D.dpuf

Upon analyzing the situation with the Rich Dad Poor Dad’s Bankruptcy, I realized that Robert Kiyosaki himself did not file bankruptcy and in fact his businesses are still running strong. What filed bankruptcy was a corporate entity within the Rich Dad Poor Dad umbrella.  Suddenly I was reminded of some basic yet important information that is taught by Rich Dad Poor Dad.

  • Use corporate structures to protect yourself and your assets.  If your corporation fails or is sewed you are limited to the exposure of only those assets held by the corporation.
  • Never put all your eggs in one basket.  Form separate corporate entities for each branch of your business or group of real estate holdings.
  • Always pay yourself first. It is important to get the cash out of your business when possible. If you pay yourself from the corporation those assets are no longer at risk in the event that the corporation runs into trouble.

– See more at: http://jeremymccommons.com/business/rich-dad-poor-dad-files-bankruptcy/#sthash.UZ2YPN2D.dpuf

Consider this quote:

“A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy…A person you control… yet cannot be held accountable for its actions. Imagine the possibilities!”

This is not a criticism– it is an advertising pitch for Wyoming Corporate Services. Reuters reports that the company “serves as a little Cayman Islands in the Great Plains.

For the rich, profits and losses are just business. It is not personal. When you launch a business and it utterly fails, or if there is a judgment against you for some kind of wrong doing, you just kill off the business entity, keep the money, and start again.

It is not only the poor, but the middle class, who are adversely affected by a pesky sense of moral responsibility.

An article in the Wake Forest Law Review by Brent T. White of the University of Arizona “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis” finds  that “Despite reports that homeowners are increasingly ‘walking away’ from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences…Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.”

Perhaps if the less wealthy want to put some success habits into practice they should walk away from their underwater mortgages. White believes so. He concludes: “…it is time to put to rest the assumption that a borrower who exercises the option to default is somehow immoral or irresponsible. To the contrary, walking away may be the most financially responsible choice i it allows one to meet one’s unsecured credit obligations or provide for the future economic stability of one’s family… The current housing bust should be viewed for what it is: a market failure and a failure to regulate not a moral failure on the part of American homeowners.”

Well, I was reading through my dad’s Economist magazine last night and I found a 21st item to put on Dave’s list. Apparently it’s a growing trend for really rich people to buy expensive artwork, and, instead of hanging it up in their homes, store it in giant, tax-free warehouses in places like Luxembourg to use as investment currency instead of stocks or bonds.

These warehouses are called freeports. They are often located next to airports, so that super-rich people can fly around to look at each other’s artwork.

– See more at: http://morganguyton.us/2013/11/27/another-item-for-dave-ramseys-list-of-what-rich-people-do-that-poor-people-dont-do/#sthash.Gp9K615H.dpuf

Well, I was reading through my dad’s Economist magazine last night and I found a 21st item to put on Dave’s list. Apparently it’s a growing trend for really rich people to buy expensive artwork, and, instead of hanging it up in their homes, store it in giant, tax-free warehouses in places like Luxembourg to use as investment currency instead of stocks or bonds.

These warehouses are called freeports. They are often located next to airports, so that super-rich people can fly around to look at each other’s artwork.

– See more at: http://morganguyton.us/2013/11/27/another-item-for-dave-ramseys-list-of-what-rich-people-do-that-poor-people-dont-do/#sthash.Gp9K615H.dpuf

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