Thomas Stanley

Billionaire's Big Donation Receives Small Press Coverage

Thu, 23 Feb 2012 00:00:00 -0600

News stories and editorials which define the rich as "evil" greatly outnumber those which tell the other side of the story. Even those newspaper stories that do mention the good deeds done by the rich are rarely on the front page. As an example, consider the following newspaper [print version] headline:

As a Disease-Fighting Fund Struggles, Bill Gates Donates $750 Million

Somehow the way this headline is written separates the magnanimous and extraordinarily generous character of Bill Gates from the millions of third world recipients of this generosity. His gift is much more than funding a fund. Ultimately his donations will help save millions who would otherwise contract diseases such as tuberculosis and malaria.

In a show of faith in the faltering Global Fund to Fight AIDS, Tuberculosis and Malaria, Bill Gates donated $750 million to the fund on Thursday.

How much news coverage does a $750 million donation receive? According to my calculations, a full print page in The New York Times is approximately 220 square inches. The amount of space devoted to the Bill Gates story was 25.5 square inches or less than 1/8 of a page. Further the article was positioned not on the front page, but at the very bottom of page A-4.

Just how generous must one be in order to generate any type of positive press about the rich in America? Think of it this way. Those 25.5 square inches cost the equivalent of $29.4 million per square inch of coverage in this story. Yet many of the 99 percenters received front page coverage for merely holding up signs and occupying parks.

Be Careful When Analyzing the Numbers

Tue, 21 Feb 2012 00:00:00 -0600

A bookstore once asked five Atlanta based authors to participate in a Saturday morning book fair. As I entered the bookstore, I noted that one of the other authors was also a radio talk show host, Neal Boortz. I understand that his morning show is one of the most popular nationwide. He looked at me and said, "Dodge Ram pickup truck, lowest price per pound." Mr. Boortz was referring to the material found in Appendix 2 in my book, The Millionaire Next Door. It contained the rankings of new motor vehicles in terms of the retail price per pound of weight. I was shocked that Mr. Boortz had acknowledged this information. To date, he is the only person who ever spoke about or even referred to this material. I have no idea if any of this information was a part of one of his programs. In order to be a top radio show host, one must constantly come up with interpretations and insights about interesting facts overlooked by others. In fact, this sounds like a prescription for success in general

When I handed the original manuscript of The Millionaire Next Door to my editor, it was 477 pages long. She chopped out about 40% of the material. "Space is limited," she said. As a compromise, some of the edits were relegated to the appendices. But who reads the appendices? Obviously not everyone. One of the most frequent questions I am asked is: what types of businesses do the millionaires next door own? My answer: please see Appendix 3 of The Millionaire Next Door.

However, it is not enough just to glance at the lists and numbers given "in the back." It is important to interpret what these data imply. For example, if price per pound was the only criteria that millionaires used to buy motor vehicles, one might expect that they would all be driving Dodge Ram trucks. Even among the most frugal millionaires, however, this is not the case. And in regard to the types of businesses owned by the millionaire next door types, one must avoid jumping to the conclusion that merely opening one of the businesses found in Appendix 3 will transform him/her into a millionaire. Most millionaire busines owners had some prior business experience. And most of those had previous experience within their chosen/related industry.

On the job training may be too little too late when venturing into such businesses as mentioned in Appendix 3: auctioneer/appraiser, bovine semen distributor, baseball caps/hats manufacturer, commercial laundry, cotton gin operator, diesel engine rebuilder/distributor, executive transportation/bodyguard service, heat transfer equipment [radiator manufacturer], and mobile home park owner!

Encourage Leadership; Reap Success

Thu, 16 Feb 2012 00:00:00 -0600

Ron Chernow's book, Washington: A Life, has been well received by most critics. In an interview published in The Wall Street Journal, Mr. Chernow said of President Washington:

You don't have to be the brightest or the most original mind on the block . . . but what Washington's life shows is the clarity of vision, the tenacity of purpose and character, and how much can be accomplished in life if you keep your sights on your ultimate goals.

In The Millionaire Mind, I cite the work of two scholars in the field of intelligence and human performance. Fred Fiedler and Thomas Link concluded:

Cognitive ability tests [standardized intelligence tests] have been notoriously poor predictors of leadership performance . . . . Relations between intelligence and leadership and managerial performance . . . accounting for less than 10% of the variance . . . . Even these low correlations are likely to be overestimates of the true relationship . . . . Leader intelligence under certain conditions correlates negatively with performance.

It is unfortunate that counselors rarely tell students that 90% of the variation in leadership is not explained by standardized intelligence measures. How many kids gave up on themselves early in life because they did poorly in school or ranked low on the SAT totem pole? Perhaps they should have been told:

You still have a chance. You may have to work harder, but you may also have the ability to lead other people.

One of the most interesting millionaires that I ever interviewed never excelled in school or on any standardized test. During high school, his parents in frustration asked for a consultation with a seasoned guidance counselor. He told them, "Don't worry about your son; he is a natural born leader. What he has cannot be measured." The counselor was correct in his assessment of the young man who today is an extraordinarily successful adult.

George Washington like most successful people took responsibility for being a leader at an early age. It is important to encourage young people to look for opportunities to lead and not follow.

Discipline: A Nutrient of Success

Tue, 14 Feb 2012 00:00:00 -0600

Nearly all [95%] of the top 1% of wealth holders in America reported that "being well disciplined was very important/important" in explaining their socioeconomic success. As I stated in The Millionaire Mind,

A disciplined person sets his or her sights on a lofty target, then figures out productive ways to reach the target. Disciplined people are not easily sidetracked. . . . They could live in a French bakery and not gain weight or they could encounter hundreds of economic opportunities and then select one or two that are best suited to their strengths and the market's needs.

Brian Grazer, a "powerhouse" Hollywood producer [The DaVinci Code, Apollo 13, "24"], is the living embodiment of a disciplined person. The WSJ.Magazine recently detailed Mr. Grazer's daily activities. After reviewing his agenda, I got the impression that he was a combination of the millionaire next door with the attributes of the millionaire mind.

Why is he successful? He, like most of those profiled in The Millionaire Next Door [64.8%] is self employed. Self employed people have nearly 5 times the median net worth of those who work for others. I have often mentioned in my books that economically self employed people are extremely well disciplined. They have a daily routine that maximizes output for every moment of work. They write their own job description. Eighty-one percent said that the job they designed "allowed full use of my abilities/aptitudes."

Successful people and those on their way never find it ego deflating to ask questions and gain knowledge from people who are leaders in their field. During his entire workday Mr. Grazer is constantly speaking to key informants who are authorities in their own field.

He has created a system of outsourcing learning, arranging meetings with intellectuals in which they download their wares into his brain as one might schedule a massage or a haircut.

According to the article, Mr. Grazer awakes at 6:30 am every day. The decamillionaires I surveyed wake up at 6:37 am [median]. His diet is simple yet nutritious. From the published photographs, it appears that he has little or no body fat. It's rare that I have found a millionaire who is noticeably overweight. Nearly 1 in 3 [32%] decamillionaires are patrons of Wal-Mart. And apparently Mr. Grazer is among them! The article mentions "$1.99 cost of his Dr. Dean Edell reading glasses which he buys at a Wal-Mart . . . ."

Studying Wealth-Building: Your Input Requested

Mon, 13 Feb 2012 00:00:00 -0600

Thank you to those of you who have already signed up for the AMI Research Panel. We are preparing to send out our first survey in the upcoming weeks. If you have friends or family members who are fans of The Millionaire Next Door or might be interested in participating, please encourage them to sign up! We are interested in the opinions and responses from a wide range of individuals.

If you haven't signed up but would like to, please sign up now. For each survey you complete, you may enter to win a $100 gift certificate. The results of our research will help provide insights into the characteristics and behaviors that impact building wealth. Once you sign up, you may receive periodic invitations to participate in our surveys. Your responses will be confidential, and we do not share contact information with any 3rd parties.

Please click here to sign up. We look forward to your participation.

A Good Reputation is More Valuable than Gold

Thu, 09 Feb 2012 00:00:00 -0600

Dion DiMucci has been a constant fixture in the rock and roll colony of great artists since the 1950s. Now, even at the age of 72, his music is in high demand. An interview with "Dion" was recently published in The Wall Street Journal. No one would argue that he has musical talent. But he also possesses a philosophy that is common among most successful people. He was asked if he felt any bitterness towards those music executives who exploited his talent.

I didn't get hurt as bad as a lot of people. With "Runaround Sue" and "The Wanderer" I reaped next to nothing in terms of cash. . . . Record companies. . . they didn't pay you right. But they gave me something that meant I didn't have to walk around destroying myself with anger. They gave me a career. . . . I was blessed. I'm 72 now, still singing and recording. The life I've had, the people I've known, the woman I love [married 48 years], the music I've made, the faith that fulfills me - it's all a grace and a gift.

Keith Richards shared similar insights about how to deal with being economically ripped off. In his autobiography, Life, he mentioned that one of his trusted advisors/mentors ended up with the economic rights to the Rolling Stones' signature song, Satisfaction. But he, like Dion, was motivated much more by the love he had for his vocation and the honor of having his name (along with Mick Jagger) as the author of this and countless other songs.

Productive people do not allow the loss of money to impede their path to success. As Richards said many times, "It was never about the money." It was about the pride and joy associated with being the best in his field. Perhaps Shakespeare said it best,

Who steals my purse steals trash; 'tis something, nothing; 'Twas mine, 'tis his, and has been slave to thousands; But he that filches from me my good name Robs me of that which not enriches him, And makes me poor indeed.

$1Mill Income Producers: 5.5% Receive Trust/Estate $$

Tue, 07 Feb 2012 00:00:00 -0600

It has come to my attention that there are quite a few reporters and columnists who read my blogs in search of data and ideas for their future endeavors. And I take that as a compliment. Of course not all of these people agree with my revelations! But, as best I can, I just objectively count the numbers from my national surveys of the affluent, data from the IRS, the US Census, etc. It has never been my intent to supply political ammunition to one side or the other. For some people it may be easy to focus on the numbers that fit their agenda and ignore others.

Perhaps if I was anti-rich or at least anti-high income [$1M+], I would not want to reveal that only a small percentage of these high income households receive any income from trusts or estates [T/E]. Only 5.5% receive any income from T/E or gifts for that matter. Of course, the converse is that 94.5% of high income households do not receive any T/E income. Also, of the total household income generated by those in the $1M+ category, only 1.3% of it is accounted for by T/E. The large majority of the people in this high income bracket did it the old fashioned way, "they earned it."

It is true that this group makes up only about two tenths of one percent of all US households. But it generates nearly 10% of all income, and, depending upon the economic conditions for a particular year, it pays somewhere between 1 in 4 to 1 in 5 of all income tax dollars sent to Washington.

What precipitated this discussion today? Within a flurry of anti-rich comments in the media, one in particular is revealing.

The notion that the really high earners are earning it has become very questionable (see The New York Times).

In an earlier blog I estimated that "as many as 62.9% of high income generators are in fact owners/managers of their own businesses". They are extremely productive both in terms of earning and in paying taxes. Only a minority of the high income producers in this country are employed by public corporations and/or Wall Street including hedge fund organizations.

Elect Men and Women of Integrity

Thu, 02 Feb 2012 00:00:00 -0600

The current political environment is filled with statements containing half truths, exaggerations, and down right lies. In light of this it may be worthwhile to go back and reflect upon the number one factor that underlies success according to my survey of America's most economically productive people: integrity. According to Webster's, integrity implies an incorruptible soundness of moral character, especially as displayed in fulfilling trusts. Interestingly it uses the following example: "elect men of integrity."

As I stated in The Millionaire Mind,

Most economically successful people don't believe that integrity, or lack of it, can be averaged into one overall grade point average. . . . . . . integrity is a different part of life's curriculum. It's a pass/fail course. If you lack integrity, most millionaires will tell you that you will not and should not graduate to economic success.

Nearly all self made millionaires in one way or another are leaders. If you want to succeed as a leader, you must have integrity. Integrity is important beyond the economic arena. It's a critical building block, a foundation stone for effective leadership in general. An excellent example of this relates to one of America's great military leaders, George C. Marshall, who "shaped World War II more than any other American in uniform." See J.W. Jordan's book review of Marshall and His Generals by Stephen R. Taaffe.

Marshall, in essence, was America's CEO in charge of its military efforts in WWII. Among his many tasks was to select the generals who headed up each and every theatre of operation.

. . . Marshall's record for picking winners was remarkable. . . . . . . all met Marshall's strict criteria: [#1 was] integrity. . . .

Notable were such names as MacArthur, Eisenhower, Stilwell, and Patton. Marshall believed in what Patton often said: "wars may be fought with weapons but they are won by men." Those selected by Marshall were only men with integrity and other important attributes such as "initiative, a sense of duty, a can do attitude, aggressiveness and drive."

As chief of staff, Marshall was all about objective criteria in selecting talent. Patronage, politics and related rhetoric had no place in winning a world war. As he once stated: "the man has to have it or he doesn't stay and we will listen to no excuses of any kind."

Our currernt political leaders and those vying for political office might benefit from studying Marshall's #1 criterion for leadership.

To My Readers: Your Input is Requested

Wed, 01 Feb 2012 00:00:00 -0600

From studying the affluent market for over 30 years I have learned how individuals who seem quite ordinary become the millionaires next door. This research has focused primarily on those who are very productive in transforming their incomes into wealth. In turn, I have tried to highlight the lifestyles, habits and background of this population through my seven books and this website.

As a continuation of this quest, Dr. Sarah Fallaw and I recently conducted a reader survey to find out what questions you might have for the millionaire next door. Many of you indicated that you would like to understand more about the characteristics, such as personality and interests, which can lead to wealth building over time. One of you asked: Can an introverted person, with no desire to be in sales, or to start a business, become wealthy? Others were interested in the kinds of experiences that those who accumulate wealth had in high school and college.

Our survey also asked for topics that you would like discussed in upcoming publications. One such topic mentioned was what experiences you as a parent could provide your children with to enhance their probability of becoming financially independent as an adult. As a result of your input, we have developed the Affluent Market Research Panel which will focus on the psychology of wealth building and further examine the habits of the wealthy. I would like to invite you to participate in these ongoing research efforts. Your input will be very important in formulating a foundation for the next generation of study areas.

Sign Up!

Drive Rich or Be Rich

Tue, 31 Jan 2012 00:00:00 -0600

Ranger X. Rich was profiled in an earlier blog. I met him "as we hiked out of the large parking lot adjacent to the wilderness area." He was in the process of ticketing those who had not paid to park in the lot [under the honor system]. He believes in the "rich first system" when distributing tickets. He seeks out prestige makes of motor vehicles to ticket first because he thinks that rich people don't pay taxes, they don't pay to park. And Ranger Rich believes that rich people drive prestige makes of cars. But, as I pointed out in the blog and in Stop Acting Rich,

The median price paid by millionaires for their most recent acquisition was only $31,367. The typical price paid by decamillionaires was $41,997. . . . many millionaires drive so-called common, nonprestige makes of cars; . . . .

But what if Ranger Rich is like many people who define rich in terms of income instead of net worth? Certainly many drivers feel the need to display their socioeconomic achievements by acquiring prestige makes of motor vehicles. They may think that those who are successful in generating high incomes drive luxury brands. And correspondingly drivers of more common makes have dull normal income credentials. But the hard data suggest that the level of prestige of a car and the income of its driver are not anywhere near being perfect correlates. In fact, many drivers of luxury makes have neither the levels of income nor net worth which would qualify them as high economic achievers.

Along these lines, Joann Muller, writing for Forbes.com, poses "what the rich people really drive." She defines rich people in terms of income, not net worth.

. . . the richest people were the most likely to buy luxury brands [39% for people with household income above $250,000 vs. 8% for those people who earn less than $100,000 a year].

. . .61% of people who earn $250,000 or more aren't buying luxury brands at all.

Her analysis indicates that those households with high incomes are more likely to drive luxury cars. But just because someone is driving a luxury brand it does not necessarily mean that the driver has a high income or a high net worth, for that matter.

I estimate that there are 2.5 million households or nearly 2.2% of the total that have annual realized incomes of $250,000 or more. Using Ms. Muller's estimates that 39% of "the rich" buy luxury brands, one can estimate the number who do so, approximately 975,000. Ah, but this population is much smaller than those households who drive prestige makes but have annual incomes under $100,000. About 30 million households have annual incomes in the $50,000 to under $100,000 bracket alone. Translated: 8% of 30 million = 2.4 million who are buying luxury cars but are not in the so-called "rich" category. This population is nearly 2.5 times the size of the high income/luxury vehicle buyer.

Could it be that it is the pseudo affluent, the aspirationals, who are keeping the manufacturers of prestige makes of motor vehicles in business?

Wall Streeter Donates 25 X More $$ than He Spends

Wed, 25 Jan 2012 00:00:00 -0600

Leon G. Cooperman is a member of the Forbes 400, a self made billionaire and philanthropist. He is also the CEO of a successful Wall Street investment firm. As such, he could be a poster child for the 99 percenters who claim that Mr. Cooperman and his ilk are "too successful." But these people do not appreciate the contributions to our economy and our society of such successful business owners.

Mr. Cooperman recently wrote an open letter to President Obama in which he admonished the President for stimulating the concept of socioeconomic divide.

. . . I can justifiably hold you accountable for . . . setting the tenor of this rancorous debate now roiling us that smacks of . . . 'class warfare'. . . . the devisive, polarizing tone of your rhetoric is cleaving a widening gulf . . . between the downtrodden and those best positioned to help them. It is a gulf . . . frightened with dangerous historical precedents. To frame the debate as one of rich-and-entitled versus poor-and-dispossessed is to both miss the point and further inflame an already incendiary environment.

In his letter, Mr. Cooperman outlined his background:

While I have been richly rewarded by a life of hard work. . . I was not to the manor born. My father was a plumber. . . in the South Bronx after he and my mother emigrated from Poland. I was the first member of my family to earn a college degree [from a public institution].

Later when he finished his master's degree in business from Columbia, he:

had no money in the bank, a negative net worth, a . . . student loan to repay, and a six month old child. . . his mother, my wife, . . . to support.

Mr. Cooperman's background closely parallels that of most economically successful Americans today. In an earlier blog, it was mentioned that:

I have consistently found that at least 80% of America's millionaires are self made.

From my national sample of 944 millionaires

I found that about 1 in 4 [24%] reported that their fathers were blue collar workers [the largest occupational category to produce millionaires]. Only 47% of their fathers and 40% of their mothers attended college. About 42% of millionaires had a net worth of $0 or less when they began working full time.

Often the good deeds of the wealthy are buried in the back pages of the press or not covered at all. As Mr. Cooperman mentioned in his letter:

As a result of my good fortune, I have been able to give away to those less blessed far more than I have spent on myself and my family over a lifetime [twenty-five times more according to The New York Times] , and last year I subscribed to Warren Buffett's Giving Pledge to ensure that my money, properly stewarded, continues to do some good after I'm gone.

Our Economic Future on Wheels

Tue, 24 Jan 2012 00:00:00 -0600

Will our economy improve? I believe it will; it has been improving for about the last two years. I know this because I have a special crystal ball that reveals the future! Actually, part of the crystal ball is in print form: the weekly editions of Automotive News. I am particularly interested in the production and sales figures for manufacturers of motor vehicles. Fundamental to the health of our economy is the health and well-being of our automobile industry. According to Automotive News, in 2007 approximately 16.2 million light vehicles [cars, SUVs, minivans, pick-up trucks] were sold in the United States. But in 2009 only 10.4 million vehicles were sold. At that point, I had wondered if sales and corresponding production would continue to decline. However I began noticing that automobile manufacturers were slowly but surely increasing production. And this increase continues today.

In the January 9, 2012 edition of Automotive News, it was noted that several manufacturing plants, including those owned by Chrysler, Ford, GM, Hyundai, and Kia, are scheduled for plant overtime for their workers. And in the January 2, 2012 edition, the headline read "Forecasters: 5% bump in Q1 output:"

North American light-vehicle production will rise 5 percent during the first quarter of 2012. . . .

This is good news, especially coupled with the fact that 12.8 million vehicles were sold in 2011. Nearly 10 million were produced in North America. The difference (more than 1.5M) between last year's domestic production and that of 2009 translates into the added derived demand of more than 6 million tires, wheel bearings, rims plus a whole lot of gallons of paint!

I also judge the health of the automobile industry by contrasting the proportion of new vehicles which are sold to retail customers versus those which are sold via fleet sales to car rental companies. When the proportion of retail sales is increasing compared to fleet sales, I suspect that our economy is also improving. This seems to be the trend right now.

How do the ups and downs of the automobile industry affect the millionaire next door? You may recall that 36.6% of the millionaires surveyed for The Millionaire Next Door were classified as "used vehicle prone." But because of the dramatic decline in new car sales, especially back in 2009, the inventory of late model used cars for sale is at an all time low as a proportion of the total vehicles on the road. Due to this acute shortage, the price of used cars has actually increased over the last year. Looking at this objectively, some used vehicle prone buyers may find it more economical to purchase a new car as opposed to a late model used vehicle.

Wealth Tax Today, Confiscation Tomorrow?

Tue, 17 Jan 2012 00:00:00 -0600

Proposals for a tax on wealth frighten me. Take for example a recent editorial "The Conservative Case for a Wealth Tax" by Ronald McKinnon in The Wall Street Journal. Mr. McKinnon first argues that increasing the income tax rate of high earners would be for various reasons ineffective in raising federal revenue. He claims that "income inequality . . . [a] justifiable concern for tens of millions of Americans. Reforming the income tax system is commonly seen as a principle way to reduce inequality."

His solution is "a modest levy on overall wealth of the very rich would allow lower incentive distorting income tax rates for them and everyone else."

Let's look at Mr. McKinnon's definition of the wealthy:

. . .wealthy people live much more off returns from their asset holdings. . . taxed at a lower rate than wage income. They may receive imputed rental income from multiple homes and automobiles, art collections or yachts, which the federal income tax misses altogether.

Time out! Just what multiple home segment, art collectors, yacht owners is Mr. McKinnon talking about? Most millionaires don't own an Italian villa, let alone a second home. From my national sample of 944 millionaires, as profiled in Stop Acting Rich, "in fact 64% . . . never owned a vacation home, beach bungalow, or mountain cabin. Not even a lean-to or tree hut in the woods." And most millionaires don't own art collections. In fact, according to the IRS analysis of the 2007 706 estate tax returns, only 9% of the decedants with an estate of $2M or more owned art that had any market value. Also, in my research, I found that seventy percent of millionaires have never owned a boat or yacht, not even a raft. Among decamillionaires, 66% never owned a boat of any type.

And if you want to put a wealth tax on their cars forget about the $300,000 Ferrari. The most recent vehicle purchased by a millionaire cost just over $31,000 [median]; for a decamillionaire, $41,997.

Mr. McKinnon claims that this new federal wealth tax in addition to the federal income tax would provide a "fairer tax system." It is certainly not a fairer tax system in terms of rewarding those people who are best at transforming income into wealth.

The wealth tax . . . would require households list all their domestic and foreign assets on, say, December 31 in the relative tax year. . . . a large exemption of $3 million that effectively excludes more than 95% of the population, a moderate flat tax - say 3% on wealth so defined - could be imposed.

Given this scenario, a household worth $5M would be required to pay 3% of the $2M ($60,000) that exceeds it $5M level of wealth.

Mr. McKinnon claims that another advantage of his system "is that it would hit old wealth along with new wealth." The only problem with the "old wealth" concept is that there just isn't enough it. One of the great myths about the wealthy in America is the inherited theme. More than 80% of millionaires are self made. Plus according to the IRS, only about 2% of the more than 2.2 million seniors who die each year leave this earth with an estate of $2M or more. And I find that more than one-half of those who inherited their wealth are high economic achievers on their own.

One of the most common forms of building wealth is by investing in income producing real estate. In The Millionaire Next Door, I cited a national study conducted by a scholar at the Treasury Department which confirms this. Especially interesting were the findings related to the millionaire next door archtype whose net worth consisted mainly of equity in a closely held business [in this case exceeding 65% of the total]. For those who own real estate businesses the average total income realized from all assets and all salary, wages, and income combined was only 2.99% [approximately 3%]. What if the owner of a real estate investment company had a personal net worth of $5M, almost all in real estate? His expected annual realized income from all sources would be just 3% of his net worth or just $150,000. He would then be required to pay a 3% wealth tax on the $2M not exempted, $60,000. This would reduce his income to $90,000 before he pays his income tax. People like our real estate millionaire might find it less desirable to build wealth past the $3M threshold or at all.

There is something inherently unfair about the proposed wealth tax. Most people who are wealthy saved and invested; they lived below their means. The frugal lifestyle is the hallmark of the millionaire next door. Contrast him with someone who lives a high consumption lifestyle. Because he has lived high on the hog he will now be rewarded. His high income will now be taxed at a reduced rate, also proposed by Mr. McKinnon in the editorial. But at the same time the Abe Lincoln story of the real estate investor grows dim. He is going to be taxed more heavily because he built wealth and established financial independence.

A wealth tax is not something new. It's promise of equality has failed miserably throughout recorded history. More often than not it became a way to confiscate wealth from those who earned it. The final step in having a totalitarian government is the confiscation of wealth. The first step is to conduct a census of wealth regarding every household in the country. Imagine the potential power given to those who have access to such a list. That's why I'm frightened. Such a list could be leaked (not a remote possibility). Those revealed, especially those who live well below their means, may likely encounter hatred and even worse from their neighbors.

The right of citizens to privacy is a sacred one in America. For this reason alone, the govenment should not be allowed to require it citizens to submit an annual balance sheet/wealth statement. If you are wealthy, it's soon enough when your heirs have to submit your estate's tax returns after you have moved on.

Dr. King: A Leader of Leaders Revisited

Mon, 16 Jan 2012 00:00:00 -0600

You are contemplating pursuing a graduate degree. Several weeks after you take the Graduate Record Exam (GRE), your scores arrive in the mail. How do you rank? You discover that your verbal aptitude score is in the third quarter, or below average range. Naturally you are disappointed.

If this was your score, would you still think about going to graduate school? What if you showed your score to a team of guidance counselors or career advisors? They might advise you that you aren't graduate school material. Some might even be bold enough to tell you that you should lower your sights, which is a nice way of saying: You will never amount to much.

How many counselors would be likely to say to you:

Young man, you have extraordinary leadership qualities, great vision. Someday you will change the social conscience of America. You will have more to do with social and political changes in America than anyone since FDR.

I wager that you'll say zero, because most advisors judge your future on the basis of standardized test scores. It's unfortunate that test scores, which take only one day to complete, fulfill their speculations about the next thirty or forty years of your career. If you believe them, you will spend the rest of your life thinking and acting like someone with low potential.

Can you imagine if Dr. Martin Luther King Jr. had spent his life thinking and acting this way? The GRE score described above belonged to Martin Luther King Jr. (Ethan Bonner, "Colleges Look for Answers to Racial Gaps in Testing," The New York Times), but he never allowed naysayers to stand in his way. He understood the true meaning of achievement.

There must be a balance. Certainly we all want our children to excel in school, but at the same time we must encourage them to do more, to take leadership roles in school. Encourage them to participate in extracurricular and team-oriented activities. If we do this, we can expect to have a greater number of outstanding leaders.

Portions of this blog were extracted from my book, The Millionaire Mind.

Engineering Economic Productivity

Tue, 10 Jan 2012 00:00:00 -0600

Today far too many college graduates are unable to find job. To make matters worse, some of these same people borrowed heavily to fund their college educations. Some have over $100,000 in outstanding student loans. It is easy to blame the American economy for these ills, but it is the individual who possibly selected a pricey university and a college major where supply greatly exceeds demand in the labor market

However, recent engineering graduates are among the least likely to have trouble finding a job. Most engineering majors had multiple job offers before they even completed their course work. And how is it that so many of them graduated without debt? One of the reasons is that engineering majors often take 5 to 6 years to complete their degree because they are involved in co-op and intern programs along the way. As a result, they are well-paid and often their tuition is fully or partially covered by their employer. Plus they gain valuable work experience.

In Stop Acting Rich, I mentioned that:

The frugal nature of wealthy engineers is certainly reflected in their demonstrated superior ability to generate wealth from income. Overall, engineers produced about 22 percent more wealth per dollar of realized income than did millionaires in general.

They have a higher than average propensity than others in their income/age cohort to accumulate wealth. They are less likely to favor expensive status denoting products and brands than others.

Among those engineers who are significantly more productive in transforming income into wealth are mining engineers, geological engineers, safety engineers, marine engineers, chemical engineers, aerospace engineers, petroleum engineers, etc. Recently, USA Today reported the results of several studies of the projected lifetime earnings of 171 college majors. Among those with the highest earnings over a 40 year career path were petroleum engineer majors, marine engineers and mining and mineral engineers. But the article also suggested that several of the majors with the highest average annual earnings are among the least popular majors, "suggesting that there is a real demand in these areas."