Think And Grow Rich – Chapter 5: Specialized Knowledge

Continuing my analysis of Think and Grow Rich.

This is for Chapter 5, Specialized Knowledge.

(Go here to start from the beginning.)

Quote and Analysis

“KNOWLEDGE will not attract money, unless it is organized, and intelligently directed, through practical PLANS OF ACTION, to the DEFINITE END of accumulation of money.”

Knowledge is needed, but it’s not enough. We also have to create plans toward definite goals. And then we have to put those plans into action.

Also, he says “attract money”, not “earn money”, not “make money”, but “attract money”. The philosophy he’s laying out is about attracting money, not chasing it. Having riches come to you.

Quote and Analysis

“An educated man is one who has so developed the faculties of his mind that he may acquire anything he wants, or its equivalent, without violating the rights of others.”

We don’t have to take something from someone else to get what we want. We don’t have to violate the rights of others.

This is a philosophy of abundance, not scarcity.

This is a philosophy of cooperation, not competition.

If I use my specialized knowledge and imagination (the faculties of my mind) to show you how to get more out of what you already have, then you can freely give me some of the “more” and still have more than you originally had.

We both end up better off.

Quote and Analysis

“Now, will you kindly tell me, WHY I should clutter up my mind with general knowledge, for the purpose of being able to answer questions, when I have men around me who can supply any knowledge I require?”

Just made me think that Henry Ford had “the internet” almost 100 years before we all did. Push a button and have access to any knowledge he wanted. And yet, we’re still not all as rich as we want to be. Knowledge, general or specialized, is not enough.

Quote and Analysis

“Henry Ford had at his command all the specialized knowledge he needed to enable him to become one of the wealthiest men in America. It was not essential that he have this knowledge in his own mind.”

Here he points out that you need specialized knowledge to create your plans, but you don’t personally have to have all of the knowledge yourself.

You can team up with, or hire, other people who have the specialized knowledge that you need for your plans.

So if you don’t currently know something that you think you will need, first consider how you can get access to that knowledge without spending the time to learn it yourself.

This considerably reduces the amount of work and time you have to put in to get what you want.

To achieve your goal, it could well be that the only specialized knowledge you need to have yourself is how to put together and manage a group of people that have other forms of specialized knowledge that complement each other.

Quote and Analysis

“Successful men, in all callings, never stop acquiring specialized knowledge related to their major purpose, business, or profession. Those who are not successful usually make the mistake of believing that the knowledge acquiring period ends when one finishes school. The truth is that schooling does but little more than to put one in the way of learning how to acquire practical knowledge.”

Just a general reminder that school is about learning how to learn. And that learning is a continuous endeavor.

Quote and Analysis

“Anything acquired without effort, and without cost is generally unappreciated, often discredited…”

Interesting warnings here:

First, make sure to charge more for your services, so your customers will value them.

Second, try to appreciate things that you acquire without cost or effort. This whole philosophy is about getting what you want with little or no effort.

Quote and Analysis

“…the very finest sort of training on DECISION, PROMPTNESS, ACTION and THE HABIT OF FINISHING THAT WHICH ONE BEGINS.”

Here’s a list of some qualities he finds valuable.

There’s a whole chapter coming up on Decision.

The “habit of finishing that which one begins” has been mentioned before with success coming just one more step beyond where someone wanted to quit.

Quote and Analysis

“There is one weakness in people for which there is no remedy. It is the universal weakness of LACK OF AMBITION!”

Lack of Ambition is the same as a lack of Desire, or possibly the lack of Faith (self-confidence/belief) that you can attain your Desire.

Quote and Analysis

“We call it “getting into a rut,” which means that we accept our fate because we form the HABIT of daily routine, a habit that finally becomes so strong we cease to try to throw it off. And that is another reason why it pays to start one or two steps above the bottom. By so doing one forms the HABIT of looking around, of observing how others get ahead, of seeing OPPORTUNITY, and of embracing it without hesitation.”

The last chapter, Auto-Suggestion, was all about intentionally forming habits. Here he’s talking about accidentally forming habits that keep us stuck. Here again is that concept of intentionally choosing vs. neglecting to choose and having our habits set for us.

It’s interesting to note that it doesn’t matter if the habit was intentional or accidental, either way the habit can become so strong that we cease to try to throw it off. So you can establish habits that you want to have, and build them to be so strong that you couldn’t stop them even if you wanted to. Or more likely, you wouldn’t stop the habit even when something else gets in your way.

He’s also giving us a hint of one of the habits we should build, the habit of paying attention to other successful people. Observing how they get ahead.

And the habit of decisiveness, the mastery of procrastination, a later chapter, since he mentions “seeing OPPORTUNITY, and … embracing it without hesitation”.

Quote and Analysis

“Perhaps he was inspired by the great football coach to aim high, and NOT MISTAKE TEMPORARY DEFEAT FOR FAILURE, just as Andrew Carnegie, the great industrial leader, inspired his young business lieutenants to set high goals for themselves.”

Here’s a reminder about temporary defeat not being the same as failure.

Also, this entire philosophy comes from Andrew Carnegie, so it’s interesting to see that Carnegie further inspired his own young business lieutenants to set high goals.

First, that means we should be setting high goals. Not setting small goals that we already think we can get, but setting big goals, and then expand our Faith to come to believe that we can achieve these big goals. That the opportunity will present itself to achieve the goal, and our imagination will see it for what it is.

Second, and a little more subtly, Carnegie inspired his own people. He wasn’t threatening them. He wasn’t trying to keep them in the dark so they wouldn’t leave. He wasn’t keeping them beholden to him. He wanted them to grow and become more than they were. Which could very well mean that they eventually wouldn’t be working for him anymore. But he wasn’t afraid of that. He had a mindset of abundance, not scarcity, a mindset of giving, of cooperation, not competition.

Quote and Analysis

“For almost two years, he continued in a job not to his liking, and he would never have risen above that job if he had not done something about his dissatisfaction. He aimed, first, at the job of Assistant Sales Manager of his company, and got the job. That one step upward placed him high enough above the crowd to enable him to see still greater opportunity, also, it placed him where OPPORTUNITY COULD SEE HIM.”

He used his dissatisfaction to fuel his action, not to fuel his complaining or his self-pity. He looked for something to try, and he acted.

By changing where he was, he was able to see more opportunity. But until he had made the move and expended the energy to get to the higher position, he didn’t know what he would find there.

This is the idea of giving before getting.

He did something that made him more visible to opportunity. It didn’t mean that he would absolutely be noticed. But it made it more possible.

Quote and Analysis

“Halpin deserves credit for REFUSING TO COMPROMISE WITH LIFE BY ACCEPTING AND KEEPING A JOB HE DID NOT WANT, and that is one of the major points I am trying to emphasize through this entire philosophy-that we rise to high positions or remain at the bottom BECAUSE OF CONDITIONS WE CAN CONTROL IF WE DESIRE TO CONTROL THEM.

I am also trying to emphasize another point, namely, that both success and failure are largely the results of HABIT!”

Success and failure are the results of habit.

Among the habits of failure are inaction, lack of ambition/desire, compromising with life, and accepting what you are given.

Among the habits of success are the chapter titles of this book, and the opposites of the habits of failure: action, ambition, and not settling for what you are given.

These habits are in our control. We can establish ones that help us, or allow ones that don’t to plot the course of our lives.

Quote and Analysis

“I BELIEVE THAT CLOSE ASSOCIATION WITH ONE WHO REFUSES TO COMPROMISE WITH CIRCUMSTANCES HE DOES NOT LIKE, IS AN ASSET THAT CAN NEVER BE MEASURED IN TERMS OF MONEY.”

The habits of the people around us are going to affect us.

We pick up their ways of thinking.

We pick up their blind spots, and what they give attention to.

This is not only a suggestion to surround yourself with positive people who challenge you to grow and seek high goals (like Carnegie did for his people), but also to avoid people who do the opposite. Trim out the people who are negative, and would prefer to pull you down with them.

Quote and Analysis

“Ideas with much less merit have been the seedlings from which great fortunes have grown.

Woolworth’s Five and Ten Cent Store idea, for example, had far less merit, but it piled up a fortune for its creator.”

I’m not sure he intended it this way, but to me, this part means that the general idea itself is not all that important.

It’s the application of specialized knowledge to the idea, the making of plans, and the acting on those plans that make the idea a success.

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Small Investor, Big Profits

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About 10 years ago, I had a job interview at the University of Texas at Austin.

While I was sitting in the front office waiting for the interviewer, I could hear his secretary on the phone with her friend.

The conversation was about the friend’s multi-thousand dollar tax refund.

There was some kind of tax credit rolled out that year, and the friend was bragging to the secretary about how much money she got back.

Then the secretary said:

“Hmm, I haven’t filed my taxes in a few years. Maybe I should do it this year and see how much I can get…”

The Twilight Zone

I swear I looked around to check if I hadn’t somehow been transported to an alternate dimension.

This lady had gotten away with not filing her taxes for YEARS?!

It never occurred to me that was even possible.

Had I ever even considered it, I would have assumed that it could only be done by going completely off the grid, and living in an armed compound somewhere in the wilderness.

But here was a lady working for the University of Texas…practically a civil servant (might actually BE a civil servant now that I think about it).

She was being paid by check, or direct deposit.

Her employer was reporting her wages to the IRS.

And the IRS could clearly see that she hadn’t filed her taxes for the past 3 years or more.

And yet…nothing bad had happened to her.

She didn’t lose her job.

Her accounts weren’t frozen.

She wasn’t in jail.

And she wasn’t even being secretive about it!

Loopholes

How was this lady getting away with this?

How was she able to not file, and have no consequences?

The simple answer is that she unintentionally found and exploited a loophole.

By not filing, she found out that she was too small for the IRS to care.

The IRS had all the information to tell them that she wasn’t filing her taxes, and yet, they did nothing.

She just wasn’t worth their time.

Celebrating Small

This experience pointed out to me that being small is a huge advantage.

The smaller you are, the more loopholes you can fit through.

The more opportunities you have that are just “not worth their time”…where “they” are anyone that might try to stop you or get in your way, like competitors.

When you’re small, you can get away with things that bigger parties can’t.

You can sell items without charging sales tax.

You can sell services without getting the proper permits.

And you can consider high return investments that would be too small for larger investors.

Small Investor, Large Return

11 months ago, Dividendium’s Options Trading Service had me buy an option for $30 (1 contract at $0.30 per share).

Today, the Service told me to sell that option for $210.

A 600% return in 11 months.

Now, consider…could I have made that same 600% if I was a large investor?

Say I had $100 million to invest…would I have been able to take advantage of this same opportunity?

The Numbers

The current open interest on that option is only 544 contracts.

To purchase every single one of those contracts 11 months ago, it would have only cost $16,320. ($30 * 544)

And selling them all today at $210 each would have returned $114,240. ($210 * 544)

$98k ($114k – $16k) is the maximum amount this particular investment could have returned.

For someone with $100 million to invest, a $98k profit is more annoying than helpful.

They’re looking for investments where they can put $1 million or more to work at a time. And that STILL leaves them with 100 different investments to watch.

If they were investing $16k at a time, that would be more than 6000 investments to keep track of!

So even if an investment has the potential to generate a large percentage return, it might be too small overall for a large investor to take advantage of.

Enjoy Small

That means those large investors have to leave these great investments for us small investors to take advantage of.

This same effect happens with small companies as well.

A small company can grow at hundreds of percent per year. Whereas a large established company might have trouble eking out just a 4% growth per year.

Enjoy being small.

Take advantage of the great opportunities it affords you.

Epilogue

The picture above is from a house in my neighborhood.

The piece of art was created some time around Thanksgiving, and has since been stained burnt orange.

It is almost as tall as their house.

Oh, and by the way, I didn’t get that job…which turned out to be a great thing.