Myth 4: You need to take big risks
Make the most of your failures, learning valuable lessons. But if you don't have deep pockets, risk-management may just be your most valuable tool.
NEW YORK (Money Magazine) -- When Viacom chief Sumner Redstone was trying to console investors after what looked like a career crushing acquisition - the pickup of Blockbuster in 1994 - he insisted, "Success isn't built on success; success is built on failure." He held on, and his big risk paid off.
And Ray Kroc was down to his last two good customers as a milkshake-mixer salesman; once he saw the operations of those customers, who happened to be two brothers named McDonald, his career turned golden.
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REALITY: The world offers plenty of options for those looking to live recklessly: Join a hedge fund, take up heliskiing, make plans with somebody you've just met in a sudoku chat room. But if you're out to make a big score, you'll want to control risk any way you can.
"If you know your skills, you can manage the parameters of the risk," says Kinnear. "Invest in what you know" served as the mantra of former Fidelity fund manager Peter Lynch.
And Warren Buffett has become the world's greatest investor by buying companies whose businesses he says he can understand.
They have avoided the wealth-draining trap, says Reynolds, of thinking that their expertise in one area is easily transferable to another.
Remember Trump Airlines? Probably not. "Successful people can forget how much they knew about a niche before they got rich in it," Reynolds notes. Redstone and Kroc, in fact, knew what they were getting into.
Now 28, Geoff Cook was 19 when he started EssayEdge, an online service that helped students with their college applications. "Editing seemed like a natural thing for me to do," he says. "I'm a good writer."
The cost of starting up: a whopping $600 to cover computer servers and bank fees. Five years later he sold the business (which had grown to include ResumeEdge) to Thomson Corp. for a figure of around $10 million. In early 2005 he left his well-paid post at Thomson to follow his $250,000 investment in MyYearbook, a social-networking start-up targeted toward high schoolers. His brother and sister, both teenagers, had come up with the idea.
Cook studied MySpace and Facebook, concluding that there was room for a niche player aimed squarely at teens.
Having raised $1.1 million earlier this year, he's hoping to add another $6 million in funding before 2006 is out.
"We've got what we need to compete, which is ideas for cool features," says Cook, who is based in New Hope, Pa. "This is either a $100 million idea or it's worthless. Either way, I know this isn't the only shot I'll have. It's just the shot I'm taking now."
Myth 5: You need a burning desire to get rich
It can't just be about the money. Following your passion and loving what you do will ultimately lead to a bigger bottom line.
NEW YORK (Money Magazine) -- "How much money is enough?" a reporter once asked John D. Rockefeller at a time when the oil tycoon was the richest man on earth. His quick reply? "Just a little bit more."
To be sure, there are plenty of rich people whose sole motivation throughout their working lives was to be rich. And everyone who works hard in business wants to make money.
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"Certainly people who get rich want to be financially rewarded and expect to be," says psychologist Goldbart, who co-directs the Money, Meaning and Choices Institute.
REALITY: But, Goldbart adds, there's more to it than that. "Money isn't the only value they see in what they are doing," he says. "These are people who love to build."
Adds Bill Dueease, co-founder of a lifecoaching service in Fort Myers, Fla: "Rich people didn't get there by chasing money. They got there by chasing their passion."
So when Vu "Bill" Nguyen talks about how much he loves making it, he's not referring to all those greenbacks he's got. "I always want to make a wonderful product that people love," says the 35- year-old Nguyen, who has been part of seven tech-oriented start-ups, three of which he founded. He launched his latest venture, La La Media, last year.
The Palo Alto company operates a Web site where users can swap music CDs for $1. His heftiest payday to date came in 2000, when a company he'd co-founded called Onebox, a service for consolidating voice and electronic messages, was acquired for roughly $850 million.
Nguyen earned more than $10 million on that deal. He's used that windfall to underwrite a collection of 10 cars; he's also splurged on hiring brand-name bands, such as Fountains of Wayne, for his private functions.
The rest? It goes into "bland muni bonds," he says. "I don't want any heartache from it." Leaving his investments in bonds lets him concentrate on his next endeavor. "I am maniacal about the product. I almost completely don't think about the other stuff."
That includes other people, he admits, and that character flaw has gotten him fired in the past. But he takes solace in the following: "I'm the living example of what your high school guidance counselor told you. Figure out what you love, and do that. It's an approach that has made me ridiculously lucky."
And rich too.
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Beverly Hills, Calif. 90210
Lesson 1: Create your own opportunities. The British expatriate who owns Mystery Pier Books, got his revelation on a movie set with Steven Spielberg. (more)
Westport, Conn. 06880
Lesson 2: Have a growth mind-set. Reichhelm and others have a knack for identifying things other people covet. (more)
Atherton, Calif. 94027
Lesson 2, Corollary 1: Never stop learning. Miletic left a safe, corporate path to get valuable leadership experience. (more)
Lake Forest, Ill. 60045
Lesson 2, Corollary 2: Calculate your risk. Leaving a comfortable corporate job to be a consultant wasn't as much of a gamble as it seems. (more)
American business lore is filled with tales of visionaries taking insane risks in pursuit of a distant dream – and then striking it rich. In fact, the rich look a lot like you. Money Magazine's Josh Hyatt debunks 5 myths to show you what really drives success. (more)
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