Randomized Evidence

Archive for November, 2011

Parable of Pipeline:Ultimate way to accumulate wealth

Before starting this topic I would like to give credit to the Original Author Burke Hedges who wrote the book called ” Parable of Pipeline”. This video explains exact story of Pablo and Bruno which changed their life.

Let me explain this story in short.
Suppose that all the wells that supplied a village dried up. So the Mayor of that village called together a town meeting to discuss how to get water from a fresh water source that was 2 miles away and put it back into the well that supplied the village. For every gallon of water that was put into the well, that person made a dollar. Now here’s the catch. It doesn’t matter how the water gets there, just as long as it does.

Since everyone knows they will get paid a certain amount of money for every gallon of water they supply to the well, they start carrying buckets. They trade their Time for dollars doing manual labor.


The illustration below is an example of what the people pipeline builders do.They are researching and learning they start to build pipelines that connect from the fresh water source to the village well. By the way, this doesn’t happen overnight. Let me ask you a question. When your pipeline is only half way finished, how much water is flowing to the village? None right; so how much money are you making? None. Often times while pipeline builders is building their pipeline they are getting laughed at because they aren’t making any money. They are still building their pipeline but once that pipeline is connecting the well to the fresh water supply, the pipeline builders now has a system that does the work for them (the pipeline is the system). Now all they have to do is maintain the pipes here and there and every time someone turns on their faucet to get water, That person is generating Passive Income. Now they have time to do what they want and even the know-how that if they choose, can build more pipelines. So what does this mean?

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It’s not about the money

It's not about the money

“People  want to make money. However, it is not money they are really after. It is the things that money can buy and the freedom of time to do what they really want. While someone may think this is an insignificant difference,it is actually the reason so many people never become wealthy.” Bob Proctor

” Expenses rise to meet income” Parkinson’s Law of Money

This video will explain you how?

What does this law signify?
The mind lures us into this behavior pattern by telling us that the more we want, the more we’ll get, and the more we get, the happier we’ll be. The truth is that the more we want now, the more we’ll want in the future. Human beings are creatures of habit. The more we behave in a certain way today, the more we’ll behave that way in the future. So if we water the seeds of desire now, we won’t magically just wake up at some point and say, “ I suddenly have fewer desires.” In reality, the amount we water the seeds of desire today will dictate how much larger and thirstier the plants of desire will be tomorrow.

So what’s the freedom of time and how to create it? For that purpose I will simplify the things a little bit. There is a concept called “E S B I” explained in the figure followed with explanation by the Author himself i.e. Robert Kiyosaki

Where you want to be in one of those four quadrants?

This concept is explained by Robert Kiyosaki in one of his books <a href=” where he elaborates this concept

So is creating time freedom or  creating wealth is easy?
There will be many obstacles on your journey to wealth, the only real obstacle is what you believe, think, and feel about money. Most of us were brought up with the concept “Seeing is Believing” which is a skeptical and negative view of life. We hear it our whole lives until it becomes a daily routine of our thought process without our even realizing it. People with wealthy mindset understand that this concept is exactly backward – you must believe in what you can achieve before you will see it happening in your real life.They know that “Believing is Seeing.” The only thing that separates a billionaire from you is a wealthy mindset and the cornerstone of that mindset is belief.

The wealthy people understand that wealth is an ongoing process. It is not a destination you arrive at one day and then stop. It is not at all accomplished overnight – although it can occur in a short period of time.

“If you gain wealth before you have gained a wealthy mindset then you are in danger of losing that wealth forever.”Bob Proctor

We have all heard of those that win the lottery or jackpots only to be  penniless a few years later. Since they were never taught to think wealthy, they have very meager chance of achieving wealth that lasts long and eventually they lose what money they have.

Kessel  Brent in his book ” It’s not about the money” writes that

Kessel Brent

“The predominant message in our culture is that it’s all about the money—that more money or a different set of financial circumstances will bring us the freedom to stop worrying and just enjoy life. But many people remain stuck in the same financial predicament, even though they’ve tried everything they know to get ahead. No matter what your balance sheet looks like, you probably already suspect that there has to be a way to make the lasting, profound changes in your financial life that you crave, or you wouldn’t have picked up this book.
One reason most people aren’t happy with their financial lives is that the ways we have traditionally been taught to deal with money simply don’t work. We are told to spend less, to save more, to think positive thoughts that will create the abundance we want, or to find the perfect career. We set goals, create budgets, put all the right insurance in place, write updated wills and estate plans, and invest in a certain way. Though important, these actions aren’t enough. The reason? They approach money from the outside in, rather than from the inside out.

Whether we hoard, splurge, or give it all away, we perpetually repeat ineffective behavior patterns with money because we are accustomed to specific states of being where money is concerned. We are used to a particular level of anxiety or calm, craving or avoidance,scarcity or abundance. And no matter what changes occur in our outer circumstances, the unconscious mind, if it remains unexamined, untrained,and unconnected to our spirit, will recreate those old, familiar circumstances in our financial life.



So what’s the lesson of this? Creating wealth by building an asset is the only way to achieve time and money freedom both because it’s not about the money.

Happy Independence Day

Rajat Gupta : Innocent Scapegoat

" The Scapegoat Exemplified"

There is a proverb in English Language “Power corrupts and absolute power corrupts absolutely”. You have freedom to replace “power” word with “money”.

Rajat Gupta was prominent figure not only in India but also in International Market. Before Indra Nooyi became CEO of PepsiCo or Vikram Pandit took control of Citigroup there was Rajat Gupta, the original “global Indian” who was the first to head a major Western business i.e. one of the top 4 management consultancy firms like “ McKinsey”
He was born in Kolkata to a Montessori school teacher mother and a journalist father. He lost his parents at the age of 18. His education took him from IIT, Delhi, then ITC to Harvard Business School in Boston. He graduated at the top 5% of his Harvard class and landed the much sought after consulting job at McKinsey & Company. Gupta served as corporate chairman, board director or strategic advisor to a variety of large and notable organizations corporations including Goldman Sachs, Procter and Gamble and American Airlines, and non-profits including The Gates Foundation, The Global Fund and the International Chamber of Commerce. Rajat Gupta is the co-founder of four different organizations: the Indian School of Business (ISB) which is one of the best B-Schools not only in India but in the world also.

He is kind of epitome for me, a person from a relatively humble background, out of sheer hard work and merit, could really rise to the top of the ladder.
People who know him say Gupta has personal warmth and a knack for connecting with people, taking an interest in their careers and families. Not a back-slapper or a joker, Gupta likes small groups and tends to steer conversation towards topics in which he takes a professional or philanthropic interest.

Last year, Rajat K Gupta delivered a commencement speech at the Hyderabad-based Indian School of Business that he helped start. ”Try to make other people successful,” said Gupta, one of the world’s most prominent Indian-born business executives. ”If you work on making other people successful, they will in turn make you successful beyond your dreams.”
And guess what, he lived up to his words. He tried to make other people successful, illegally.

So what went wrong exactly?

He was envious of the wealth that his peers were amassing. His envy could have affected the choices he made — orienting his post-McKinsey career around making money, handing over large chunks of his money to Mr. Rajaratnam and, at least according to prosecutors, going to great lengths to groom favor with Mr. Rajaratnam.

Stuck between scylla and charybdis

Such envy extends well beyond people accused of committing crimes. The inequality among the rich is a major force pushing many graduates of the country’s top colleges to Wall Street and drawing middle-aged professionals from other lines of work to finance.
So why there is debate on whether this is crime is committed out of pure greed or oversight and why the corporate india is defending Rajat Gupta?
Let’s analyze the situation “Rajat Gupta was a mistake at McKinsey. He goes out as a child and steals a lollipop from the nearby store but doesn’t suck on it so there is no criminal intent is established. It’s only his sheer stupidity and vacancy of intellect that allowed him to do this. This is bullshit.” ” Actually he was managing partner at McKinsey , so one think he didn’t lack was intellect. What he really lacked was credibility and he betrayed the trust of many people.Consultants are so important in the society, business leaders and investors rely upon them and when a person is entrusted with the fiduciary duty, when he is selling information for private profit in public or private standing is a heinous crime. No one is doubting his intellect but what people are doubting is his intent,when that doubt is cast over someone who is trusted.”

His lawyer is still defending him saying all the charges are baseless. Rajat Gupta was awaiting an arraignment on one count of conspiracy to commit securities fraud and five counts of securities fraud. The charges carry a potential penalty of 105 years in prison.

So it all boils down to greed for money which is root cause of all evil. Before ending this article, let me share one story with you which opened my mind to think about it.
The Edgewater Beach Hotel
In 1923, at the Edgewater Beach Hotel in Chicago, eight of the world’s wealthiest financiers met. These eight men controlled more money than the United States’ government at that time. They included:
The president of the largest independent steel company;
The president of the largest gas company;
The greatest wheat speculator;
The president of the New York Stock Exchange;
A member of the President’s cabinet;
The greatest “bear” on Wall Street;
The head of the world’s greatest monopoly;
The president of the Bank of International Settlement.
Certainly, one would have to admit, that a group of the world’s most successful men was gathered in that place; at least, men who had found the secret of “earning money.”
Now let’s see where these men were twenty-five years later:
The president of the largest independent steel company, Charles Schwab, lived on borrowed
money for five years before he died bankrupt.
The president of North America’s largest gas company, Howard Hopson, went insane.
The greatest wheat speculator, Arthur Cutton, died abroad, insolvent.
The president of the New York Stock Exchange, Richard Whitny, was sent to Sing Sing Penitentiary.
A member of the President’s cabinet, Albert Fall, was pardoned from prison so he could die at home.
The greatest “bear” on Wall Street, Jesse Livermore, died a suicide.
The head of the greatest monopoly, Ivar Krueger, killed himself.
The president of the Bank of International Settlement, Leon Fraser, also died a suicide.
Each of these men learned well the art of earning money, but it would seem that not one of them had ever learned how to live the “rich life”, which was their birthright.

It is stories like this one that have caused many well meaning, but ignorant people to say, “See, I told you it is not good to have a lot of money, it’s bad,” or, “It just goes to show you that rich people really aren’t happy;” but of course, that is just not true. For although these eight men would appear to have “slid off the track,” there are many wealthy people who are very happy, and who do a tremendous amount of good with their money; they live healthy, well-balanced lives.

Excerpts from famous book “Think and Grow Rich” by Napoleon Hill

Money or power is a tool which in itself is not good or bad but how you use it makes it good or bad.

Do What You Love and You’ll Never Work Again

Don't take advice from broke people

There are two exactly opposite mindsets about this concept. One says it’s the most stupid, counterproductive, outdated and cliched advice to give it to anyone and other says this is the only thing you should follow to get most out of your life.

So let me analyze both of those mindsets

Starting with negative mindset first:

It’s wonderful pursuit to strive for the things you enjoy the most. In fact you should actually die for it. It suggests that you have to make living in what you love to do but this is the trap the people fall into because something you love becomes work it changes the way in which you interact with it.

Don't fall for the trap

When you do what you love, sometimes you have to set your personal interests aside.

It’s grave to suggest that work can be anything other than work. Doing what you love can certainly make it a quite worthwhile experience but you’ll also experience a new side of that activity, and it won’t be comfortable always. You’ll have to face the ineluctable truth that there’s no fooling yourself. Work isn’t the same as play, no matter how similar they might appear on the surface.

Do I sound cynical? Perhaps a little. But too many people sit around convinced that if only they could turn their obsessive compulsion into a full-time job, they’d finally be happy. I encourage you to take a profound look at the things you love and what work means to you. There might be an intersection of the two, but don’t force it.

Now take a look at positive mindset

If you want to stop working today, find a way to make a living doing something you love.

Have you ever been on a trek where you hike up and down mountains all day and sleep on the moist ground? Many people may find your trek worse than spending Holiday in the office, but if you enjoy the outdoors, it is not work at all. It’s fun.

When you enjoy what you are doing, it is not work in the conventional sense of the word. Typically, work is defined as doing something you dislike, not always, at a time when you would rather be doing something else.

Find out what you enjoy in life, and figure out how to make a living out of it. It is a herculean task and a worthy one.

This is the video of Steve Jobs’ 2005 Stanford Commencement Speech

In this video, Jobs narrates his story and his passion to do what he loved.

Let me share his parting note with you:

“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary”

There is an inclination, as old as mankind, to search out alternative ways to the easy life. Instead of finding other ways to ease your life, do the work with dedication, passion. There is no shame in being a complete moron.

Two cows were standing in a meadow looking across the highway to a feedstock where huge vans drove, constantly throwing the fodder in front of the cattle.

“Wow, what a life,” said one cow. “I’d like to get myself into that easy life.”

“I don’t know,” said the other cow. “I’m kind of satisfied here. Don’t know what could happen there.”

“I’m climbing the fence and joining the herd,” the first cow said, and proceeded to trot to the greener pastures in the feedstock.

About the time she reached the feedstock a bull wagon pulled up to the pen and herded the cattle, her included, into the truck for shipment to the meat packing plant.

Grass is always greener on the other side

The moral of this story is probably straightforward. Why desert what you have for something that appears better or easier? And, if you want to become the jump ship, be sure to gather all the facts about your destination before you commit yourself.

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