Preparing Your Kids for Financial Success
I love this answer from Quora; I don’t love how the question was about “being a billionaire,” but the advice in this response is gold.
I once had a venture capitalist (VC) tell me that I had come up with more legitimate billion-dollar concepts than anyone he’d ever known. I have friends who went from zero to billionaire status. So, I feel qualified to give you a straight answer. My answer will assume you want them to have the know-how, creativity and value systems to pull it off on their own. Plus, I raised my three sons this way.
Make them aware of the full range of life options. I told my sons of a remote beach in NW Australia where the climate is magnificent and you can pull lobsters out of the surf two at a time. Build a grass shack. Find a good woman. You’re set. At the other end, how did that guy build his love of crafting musical instruments into a $100M business? Take the mystery out of the steps it takes. The world abounds with opportunity to lead whatever life you want, but you have to demystify, demystify, demystify for them to be able to see what makes go businesses go.
Do NOT send them to public school NOR to the prep schools that are just our public schools on steroids. If you want conventional minds, get them a conventional education. Our oldest started working professionally at age 12. He skipped high school to work. He worked at a corporate branding company in SF Media Gulch. He did at least one project a year with an itinerant filmmaker. He traveled the Maya for several months assisting a woman writing a book, lived with Maya families and interviewed children in Spanish on their beliefs about different plants and animals and the Quiche (or Yucatec or Mam) name for them. He spent two winters in Luzern captaining a dive boat mapping wrecks in the lake. He shot a documentary film in Cuba. (This was not a rich dad buying opportunities for his sons—it was opportunities they earned.)
Teach a love of work. After you get rich you can coast some. Getting rich takes work. They will need to excel at physical work and have stamina. They will especially need to excel at mental work and be both flexible and tough.
Teach a love of people. The only way you get rich is by serving the real needs of others. You must have an affinity for others. My household was famous for all the people who came trooping through. People I met stranded at the airport. Japanese Homestay girls. Aux pairs. Local homeless guys dropping by for a shower and a meal. Chinese physicists and Eritrean guerillas had meals with us. Our sons’ friends were welcome at any time without prior arrangement. Make sure they understand that they are not above or below anyone else.
Teach generosity. Those who would receive much must be able to give much. My middle son (11 or so at the time) and I walked across Embarcadero from my office to look at SF Bay. There was one sole figure there, a man in his late 40s with one entire seam of his jeans ripped open. He was playing the spoons and playing them well. We got to chatting. He’d just been let out of San Quentin Prison that morning. I told him time to celebrate. We took him up to my office for a shower, out to buy some clothes and to dinner and gave him money for a room for the night. On the way home, I pointed out to my son that the money I gave the guy was nothing compared with the time we gave him. The only real wealth is the time you have, and whenever you have a chance to use your time well for others, do it and do it fully. Giving money without time can be a way of creating distance.
Teach the mental nexus. Here falls the shadow. Rational people do not become entrepreneurs. Like combat officers, one is constantly making critical decisions on partial information. One has to take steps without being able to see if there is support there. One must taste failure time and again and be inspired by it. One must be armed with a variety of rationalizations for continuing on despite doubt, buffeting, adverse opinion. Every successful new business gores someone’s ox, and those people react in nasty ways. The faces you see each day are now depending on you to make payroll. Pediatric oncologists must be mentally tough to deal with the suffering of others; entrepreneurs must be superhuman to deal with the tragedies they themselves can be the authors of. Trick is, you can’t teach that mental nexus if you have not lived it yourself. If you haven’t, then apprentice them to someone who has.
Lie, cheat and steal. I was shocked at my mother’s funeral when a brother flatly stated that he’d had a difficult time in life because he’d just assumed everyone was as wonderful as she was. The world is full of assholes and swindlers and your kids will need a radar for it, and they need to suffer the consequences so that they develop an arsenal of techniques for dealing with it. They need to be superb judges of character. You can’t teach good behavior by isolating them from bad behavior. There’s no satisfactory example here; let’s just say that April Fools was big in our house, and not just once a year.
Make them teen outcasts. Correlating highly with successful entrepreneurs is unfulfilled teen years. Basically, those who are dialed in by 18 stay comfortably dialed in. This is another reason to keep them out of high school. Another high correlation is Fs. Entrepreneurs are highly results-oriented and have little patience with those as process-oriented as teachers. I’ve talked with VCs who confessed to being a little disappointed if they don’t see an F or two on a possible CEO’s college transcript. I know I had ‘em.
Teach numeracy. Anyone who can’t do math in his head on the fly is going to have a difficult time being an entrepreneur and putting deals together. Schools don’t teach this; it’s a special, long-term effort.
No allowances. No “Joe” jobs. Nobody ever got rich working for a living. Trading your time for money is a loser’s game. An allowance just teaches a kid to lack resourcefulness—same for teen jobs. My wife and I played VC to our kids. They could ask for any amount of money they wanted but what’s the plan? what’s your purpose? what are alternatives? etc. etc. They learned to recognize opportunities and pitch them. [Add: If you are going to help them get job jobs, make it in sales—they won’t get far without the power to persuade, and it’s another thing they won’t learn in school.]
Get a grubstake. Fortunately, my kids went to school with the children of an immigrant couple who left the kids with relatives two straight summers while they went to live in a tent in Alaska and can salmon. They each cleared a wad of cash each summer, and after two years they had a grubstake with which to get into the start-up world. They found some scientists with a bright idea (one that everyone reading this is impacted by many times daily), started the company, got backing and they are billionaires. No grubstake. No billionaires. You can’t be a capitalist without capital and the willingness to put it all at risk.
Worthy. Finally, the most important thing is they must be worthy. No backing comes to those who lack abundant evident character. I have found the best way to fine-tune morality is to put it entirely on them. Each time a moral decision is called for, it’s “Search your heart, son. You have to build your life around what is important to you. The only way I can help you is to tell you how I screwed up sometimes. But the sooner you learn to get in touch with your own feelings of what is right and what is wrong, the better.” (But be sure to model right over wrong like crazy to them.)
There is only one path to getting wealthy: exploit opportunity. The whole purpose of what I’ve stated above is to equip your children with the tools to spot and build on an opportunity to add value to the world.
How will you know you’re on the right track? The vast majority of people you meet are inert. One in ten or twelve has scalar energy—they liven up the event. One in a thousand or so has vector energy—the ability to channel effort to a purpose and pull others in their wake. The only way a human being begins to become a vector force is to Find and Embrace His or Her Passion, and that can be a bit quirky. For example, our youngest has long been the butt of family jokes for his inability to tell a story. What did his passion turn out to be? Turns out his head was too crammed full of details for each story. Once he learned to animate, his stories were incredible!
You should be getting glimpses of that talent to pursue purpose with passion all along, but it doesn’t mature until adult years. It is such a rare thing that schools are not at all equipped to teach it. Even the best MBA programs teach you how to go to work for that guy rather than be that guy. So, if you can pull it off, you will not only have enriched your children, you will have enriched the world.