Tuesday, July 13, 2010

Lessons from The Richest Man on Earth

Cornelius Vanderbilt

In the 19th century, Cornelius Vanderbilt was the richest man in America, perhaps the richest man on earth. He was born in poverty, which was not  unusual since very few families had much more than a bed, a roof over their heads and a meager diet. But, in a way that may have been a blessing or a curse,he was also born into a family that believed each person had to work hard and make their own way. 

At fifteen, he started a ferry service, rowing people and goods on Long Island Sound. His father agreed to rent him the boat--there were no gifts from father to son! His mother was so  hard-headed, she later foreclosed a mortgage on her own daughter, repossessing the house when the daughter became a widow and could no longer make the payments.

Here are three key lessons from Vanderbilt's life:

1. The distinction between Ambition and DESIRE. 
Vanderbilt distrusted ambition and ambitious people, while he valued and nurtured a powerful sense of DESIRE. While ambition has positive aspects, it also has a dark side. Ambition has an element of wanting to Be or Become something or someone other than who we are. Ambitious people are looking to "move up." They want to be noticed, become influential or wealthy or famous. Ambition often contains a willingness to "win" regardless of the consequences.

Vanderbilt achieved and won much--dominating both the steamship and railroad industries. And yet he always denied that he was ambitious. He did not want to BE anything or anyone other that who he was.

Instead he fostered and valued DESIRE. He felt ambition was born of weakness, while desire came from strength and he valued that. He had goals that were crystal clear. He understood the values of patience, good strategy, smart tactics and effectiveness. He was relentless in pursuit of the things he DESIRED, but he kept them in perspective. Getting another railroad might make him richer, but it would not make him better, smarter, wiser or happier. He understood this key distinction.

2. He was fundamentally conservative.
Late in life he was asked about the basic flaw in most business people and the frequent failures and bankruptcies that resulted. His response was, "I'll tell you what's the matter...people undertake to do about four times as much business as they can legitimately (handle).... When I have some money I buy railroad stock or something else, but I don't buy them on credit. I pay for what I get."

In the 19th century, stock panics and depressions were common, and he blamed them on over-reaching, or as Alan Greenspan famously described it, on "over exuberance." Vanderbilt hated this. He knew how to bide his time, save for what he wanted, accumulate stock or other assets and then use them for strategic benefit. In this sense, he reminds me of Warren Buffet more than the "day traders" who speculate on margin, hoping to strike it rich. Like Buffet, he built enormous wealth over a lifetime. He took risks with his own money, and he usually won these conservative, well-thought-out gambles.

3. He knew how to see and seize opportunity.
Vanderbilt rarely sought or grasped for the "next big hing." But, when an opportunity presented itself, he took instant action. He new how to recognize an opportunity, and when he saw one, he had cash readily available and took immediate action. He bought assets when they were on sale, then waited for time and the market to make him rich.

Today, we live in troubled economic times. Home prices are down. The stocks of great companies are on sale, depressed by general market conditions. In these chaotic markets, millions of people are laying the foundation and planting the seeds that will grow into tomorrow's great fortunes. So should you.

Avoid the lure of great ambition. Instead nurture specific, actionable desires. Be conservative. Hoard cash. Avoid credit. Be ready. And, when you see an asset that is under-priced or in trouble, if it meets your criteria, take immediate action! Invest! Learn to see and seize opportunity when it knocks. 

Courtesy : www.philiphumbert.com

No comments:

Post a Comment