I've heard about this book for years as it gets recommended often as required reading; especially for those who aspire to be financially independent and/or retired early (FIRE). I finally got around to getting my own copy and opened it up for the first time just this morning.I believe it was originally published in '96 or '97 give or take. In this version (Amazon Kindle), there is a Preface written by one of the authors dated 2010. In it, he refers to the recent recession (which as I recall had started improving dramatically by then) and how most millionaires-next-door (MND) weren't heavily affected by it. He went on to say that most MND's had only 20 to 30% of their assets in stocks.I found that kind of astounding considering I'd have never been able to step foot into this FIRE arena had I not invested heavily in stocks over the years.Draggon
He went on to say that most MND's had only 20 to 30% of their assets in stocks.</snip>I read the book 20 years ago, but I seem to remember that most of the millionaires Stanley found were small business owners. So it's not surprising that the value of their business would make up a good part of their net worth.intercst
Many years ago I read the book, too, and loved it. Already frugal and a PAW, I remember fist bumping and thinking, yep, that's what I'm doing.Still, as in all financial books, I had a lingering sense of unease that I was missing something. Nassim Taleb, author of the Incerto series, did a critique in one of his books. First, there is no mention of the people (or their frequency) who did all the same things and failed, so a survivorship bias. Also, he pointed out that doing the same things would have not worked for other time periods.Nevertheless, it still ranks as one of my top 10 books that led me to FIRE.RETim(still lovin' Hawaii!)
REtim writes, First, there is no mention of the people (or their frequency) who did all the same things and failed, so a survivorship bias. Also, he pointed out that doing the same things would have not worked for other time periods.</snip>Absolutely! About 50% of small businesses fail by their 5th year. And according to the DALBAR, the average US investor realized a 2.1% return during a 20-year period where the S&P500 delivered 7.8% per annum. Thus the advice to avoid picking stocks and financial advisors, and just buy a low-cost index fund.https://www.thestreet.com/story/11621555/1/average-investor-...intercst
What does FIRE mean?
Financial Independence/Retire Early
What's a PAW?
“What's a PAW?”Been a while since I read it, but iirc it’s Prodigous Accumulator of Wealth. As opposed to a UAW - Under Accumulator.
most of the millionaires Stanley found were small business ownersOne key fact that doesn't often get mentioned is that Stanley went looking for millionaires in upscale neighborhoods. That might skew the result more toward business owners and less toward wage slaves who invested well.MND was a key influence on my thinking about saving for retirement and accumulating wealth. Of course, I knew I would never become a millionaire because I did too many things wrong: I married someone dramatically less frugal than myself, I had no interest in starting a business, I got divorced. But I took heart in Stanley mentioning one case of a millionaire who got there by investing, never having earned more than $75K in his career. That sounded like something I might be able to do.Fast forward to now, and I don't know if I am a millionaire in 1993 dollars. But I have enough, and life is pretty good in retirement.
About 50% of small businesses fail by their 5th year. And for restaurants it's probably about 85% fail in the 1st year and 95% by the 2nd year.We see it over and over again here. Some locations have had 4 or 5 restaurants in the last 10 years. The standing thought here is when a new restaurant opens, we need to go soon...before they close up.
Or you could wait until a new place has been around for a year or two...mostly only going to places that have food and service good enough to last.And you'll be not as likely to get hooked on places that don't make it:)Mike
I heard this saying years ago about family businesses:The first generation puts blood, sweat, and tears into starting and building the business.The second generation enjoys the benefits of being part of the business and improves it.The third generation pisses it away.Lucky Dog, survivor of a family business :)
One key fact that doesn't often get mentioned is that Stanley went looking for millionaires in upscale neighborhoods. That might skew the result more toward business owners and less toward wage slaves who invested well.Actually, that's kind of one of the main points of the book. Just read the Introduction this morning (so it's still somewhat fresh on my mind), but he states pretty clearly that he started looking for wealthy interviewees in upscale neighborhoods naturally, but it quickly dawned on him that those that appear wealthy often aren't and that a significant number of MND's live in working-class neighborhoods.But he also mentions business owners in the Introduction as a prodigious source of his MND's. I just don't know many business owners (or MND's for that matter), so I have no idea if I did it wrong or not (according to what Stanley says in the rest of his book)... All I know for sure is that I did it, and I'm so glad I did.Draggon
The first generation puts blood, sweat, and tears into starting and building the business.The second generation enjoys the benefits of being part of the business and improves it.The third generation pisses it away.The Mars family seem to be doing OK. They're down to 4th and 5th generations now. There's often speculation that Buffett will make them an offer they can't refuse, nothing yet.
The trouble with generalizations is that there are exceptions to all of them. :)Mine is one of them....the cream of the crop. :)Lucky Dog
The third generation pisses it away.The Mars family seem to be doing OK. They're down to 4th and 5th generations now. There's often speculation that Buffett will make them an offer they can't refuse, nothing yet.Of course there are exceptions! "Fabbrica d'Armi Pietro Beretta", for example, was founded in 1526 to make arquebus barrels, and ever since has been run by the same family, father-to-son until a couple generations ago when both sons of the previous CEO were son-less and a son-in-law was adopted into the family (his sons now run the company). Five centuries is pretty extreme (maybe 15-20 generations?), but "more than 3 generation" isn't that rare.
...has been run by the same family, father-to-son...That alone can make a difference, because the wealth (and power?) stays focused. But if the wealth is divided up equally between five children, then later between 25 grand-children...it can dwindle quickly within several generations.And, father-to-son may also be a situation where the son has been brought up with that expectation, trained and familiar with handling the money and wielding the associated power. But if the money is divided up between "trust fund babies" that have never had such training...
".has been run by the same family, father-to-son.."Many businesses (and business models) don't run 100 years. The 'catalog store' had it's run from the late 1800s till the 1970s. Think Sears and Roebuck, Montgomery Wards, J.C. Whitneys and a hundred other publications. the magazines and papers had a good run. Every town had a newspaper, many cities had 3 or 4 or 5 competing newspapers....now, most have one Food stores? Hardware stores? Dry Goods? Clothing stores? Nearly all have had their run. Major food chains...A&P, Winn-Dixie, the one back in the Carolinas that grew - then burned out just as fast.... Now it's auto parts giants - Big food chains......the butcher shop, the fishmonger......the ice man...the milk man.....food brands....candy brands.....furniture stores! ....book stores!......Along came the 'malls'.....that hurt main street..... then they got clobbered by the internet........Some survive and do well like Hershey's.......others morph successfully.......Cities probably have a higher continuation of family business.....t
when both sons of the previous CEO were son-less and a son-in-law was adopted into the family (his sons now run the company). —-No daughters?
My mom had the same saying- “ shirt-sleeves to shirt sleeves in three generations “ so maybe something to it? I’m the opposite. My grandparents were poor uneducated alcoholics. My mom worked hard and made it to comfortable middle class sans any degree but high school. I took that and got a BS degree and did even better to professional upper middle class. My kids want Masters degrees. Upward mobility can also take several generations. Best friends dad was a bricklayer. She became an engineer. Her son is in medical school....
StockGoddess asks,when both sons of the previous CEO were son-less and a son-in-law was adopted into the family (his sons now run the company).—-No daughters? </snip>Probably depends on the industry.A college classmate of mine inherited the family construction business and it greatly expanded under his management.Alas, the Good Lord blessed him with three daughters -- none of whom have any interest in construction. Now he's trying to figure out how to sell the firm.intercst
"Now he's trying to figure out how to sell the firm.intercst "**************************************************It is possible that individual circumstances are notindicative of trends or general rules of life - butare just a function of individual circumstances.Howie52There is learning - there is nature - there are events -and there is the simple luck of the draw.But there are some folks who can convince others thatan ace is a low card - or a high card - or a smudge ofdirt on a blank slate.
when both sons of the previous CEO were son-less and a son-in-law was adopted into the family (his sons now run the company). —-No daughters?Apparently not. Not sure when exactly the various generational successions occurred, but it seems it was back when excluding women from executive roles in weapon manufacturing was socially acceptable.Not the same thing of course, but, let's not forget that women in the US military were allowed to be "in units that are tasked with direct combat" only since 2013; and all combat jobs opened to women only in 2016; so, military matters are an area where discrimination against women has long endured.In particular, according to Wikipedia, "Italy was the last country among NATO members to allow women to join the army" (and Beretta's headquarters and cultural roots are very much in Italy, though they do have factories elsewhere too).
Starting in 1949 Israel began conscripting ALL men and women over 18 who were healthy and Jewish. That means if you attack them there are 88 year old women who have been trained as snipers who can take you out. All adults are soldiers. While we’ve been sitting on our thumbs till just a few years ago saying you need a d——- to shoot people in battle. Geez are we stupid or what? Israel is probably the most dangerous country in the world, for its size, to attack.Wonder Woman Gal Gadot is ex Israeli military.
> Starting in 1949 Israel began conscripting ALL men and women over 18 who were healthy and Jewish. I don't know what was going on in 1949, but in 2019, 13% of those eligible for conscription take a religious exemption. That is over half of all exemptions. Almost all male.It is a relatively sore subject in many parts of Israel.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |