wealth

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

“The Poor”

An interesting thing happened a couple of years ago when my book Broke is Beautiful came out.  The book, about living a good life even if you don’t have money, generated a number of angry comments from people who said I was making light of being broke, that I didn’t know what it was like to really be broke.

At the time I was rolling pennies to buy ramen noodles, or hoping I could come up with enough change for a box of generic pop tarts at the dollar store.  I was turning down social invitations because I didn’t have enough gasoline to get there and back.  I had one pair of jeans with a hole in the knee and I wore them every day because I didn’t have money for another pair.  I skipped meals because I had nothing to eat.  I was broke.  In fact, I was officially poor.  If you were to take all of the people whose incomes fell below the poverty line that year, I was toward the low end of that!

I guess I didn’t sound like it to the people who left angry comments.  I had a book out, so I must be doing OK.  Poor people do not produce things, they don’t publish books, they are not articulate, educated, capable.  They don’t drop references to Shakespeare.  (Any writers out there will back me up on this: given the rather complex system of advances, royalties and so on, it is absolutely possible to have out a book that is getting some attention and to still not have enough to eat.)

Anyway, I couldn’t be a real poor person.  I am from the suburbs.  I have a college education.  I am white.  (According to a 2000 CBS News poll, only 18% of Americans know that most poor people are white.)

At least, I assume these were some of the things that convinced people I couldn’t know their pain.

As a “starving artist” I have lived below the poverty line many years.  The artist’s income goes up and down and I have better years and worse years.  Over all, there have been more of the not-so-much-money years than the flush ones.

This is one of the important things to bear in mind when thinking about “the poor.”  The poor are not those other guys.  They are not a social class.  They are not the same people from one year to another.  The poor, that is people who fall below the poverty line, are a diverse group of people who are in a particular situation.  There is a long post on the blog Your Life is a Gospel that shows all of the statistics.  Even though there may be a similar number of people in the category of “poor” each year, they are not the same individuals from year to year.  People lose jobs, have down turns in their small businesses, suffer medical problems and they fall below the line.  The next year their situation improves but someone else’s worsens.  For most people being poor is not who they are.  It is what is happening to them.

Still most people when they are in this situation do not claim the mantle of “poor.”  The poor are other people.  The poor are the ones who were born that way and stay that way.   The poor have to be other people, of course, because they are not like us.  They are lazy, less capable, they are the ones we help with our charity.  This mentality often keeps people from seeking the help they need lest they have to admit being “poor” and a “charity case.”

“I am a middle class person, I just happen to be having a rough time now.”

One of the things that I discovered while working on Broke is Beautiful is that people who have college educations are more likely than others to build up debts they can’t get on top of and to be hounded by creditors.  They don’t talk about it, and they feel great shame in their isolation.  Being hounded by creditors is supposed to happen to those other people– the poor ones. It becomes a cycle, they try to avoid anything that might harm their stellar credit.  They get loans to keep up appearances until they are so far under everything falls apart.

The idea that we are all part of the great “middle class” fudges a lot of real differences.  It means there is supposedly no difference between the guy on the factory floor and the guy in the management office.  Both are “middle class” people.  So what type of policies benefit the “middle class?”  The one that gives a better wage to the laborer or the one that keeps more of a profit for management? 

The sense that the poor are other people– a class of people who are different from us– affects how we think of the social safety net.  Various studies have found that the more ethnically homogenous a nation is, the more amenable people tend to be to social programs that benefit everyone.  They are more likely to think of the people who would benefit as being “like them.”  Whereas in countries with sizable ethnic minorities, people are more likely to think of social programs as helping “others”– those poor people.  (The stereotypical African-American welfare mother.)

I came across an article recently on the site Everyday Feminism that made the same argument that I did in Broke is BeautifulIt is time for the broke to come out of the closet.

Being honest about our needs is the only way we can stand up for ourselves.  It is important to let the world know that, indeed, the face of “poverty” includes educated, competent, creative people.  It includes hard working people.  It includes the risk takers who try to launch businesses, but fail.  It is not only the rich who are “risk takers,” and it is not only the wealthy who can claim to have among them the “best and brightest.”

“It’s particularly important that poor people who have some aspect of privilege – be it racial, gender, sexual, educational or otherwise – realize that their silence is a form of complicity that reinforces the lies about the poor used to justify the denial of their dignity,” wrote Jeff Nall in Everyday Feminism.  “The time has come for poor people to stop letting other people speak for, and about, them; to stop letting others define who they are.”

I recommend all the articles that you can find via the links in this article, but I will leave you with a quote of a more theological bent from Henri Nouwen:

“When we are not afraid to confess our own poverty, we will be able to be with other people in theirs… Just as we are inclined to ignore our own poverty, we are inclined to ignore others’. We prefer not to see people who are destitute, we do not like to look at people who are deformed or disabled, we avoid talking about people’s pains and sorrows, we stay away from brokenness, helplessness, and neediness. By this avoidance we might lose touch with the people through whom God is manifested to us. But when we have discovered God in our own poverty, we will lose our fear of the poor and go to them to meet God.”