Winning the lottery is the ultimate dream of most people who plod along in their jobs and get excited when the Powerball lottery hits $200 million.  Like them, I used to buy lottery tickets in a pool with my co-workers, dreaming of the day that I could leave work and utter that famous Johnny Paycheck line “take this job and shove it.”  However, I stopped shelling out the dollars after my Uncle Bill, the real estate tycoon, advised me that I shouldn’t do it because “buying lottery tickets is for poor people.”  He didn’t elaborate, but I interpreted his comment to mean that instead of relying on an impossible windfall, I needed to work for my money.  Upon further reflection, I puzzled over why so many of my colleagues, who are well-paid, educated professionals, play the lottery.  All of these people have a roof over their heads and plenty of food.  There’s nothing so dire in their lives that it requires $100 million to fix.

What is the appeal of the lottery?  To pay off those college loans?  How about a cushion for unexpected medical expenses?  Hardly not.  When was the last time you saw a lottery winner on TV say “I’m going to put aside the cash for my retirement or unexpected health care costs or my grandchildren’s college tuition fund.”  It’s usually more like ”I’m getting a Hummer and she’s getting a Mercedes, and then we’re going to buy mansions for our 12 grandchildren.”  Lottery winners are like kids in a candy store and the candy is FREE.  The problem is that you end up eating way too much candy.  The lottery winner usually overspends on yachts, jets, homes, leacherous relatives and friends, and winds up even more broke (or broken) than before he or she won (Bankrate.com’s Unlucky lottery winners who lost their money).  Being independently wealthy when winning the lottery doesn’t seem to help.  Look at Jack Whittaker, a West Virginia businessman who was the winner of what was then the biggest Powerball jackpot in history.  Whittaker, already wealthy, took home $113 million in a lump sum payment in 2002, but since then has been plagued with personal problems arising from that lottery win, including the death of his granddaughter, numerous lawsuits, and marital difficulties.

Not all windfalls are bad karma.  Depending on the source of the windfall, you might spend it differently.  Look at the bonus you receive from work.  Would you spend it in the same manner as lottery winnings?  Because that bonus is your hard-earned cash, you might not burn through it as quickly.  Instead of putting a down payment on a gold-plated hummer, you might fund your IRA, pay off some credit card debt, and splurge by going out for a nice dinner.

So, before you go out and buy 50 lottery tickets, think about why you’re buying these tickets.  Is it because you want to become the classic overconsumer that many lottery winners have become?  Do you want to run from greedy relatives and friends who want a piece of the lottery pie?  Or was taking a match and burning up the cash instead not an option?  What I’m doing now is taking that money and investing it in an S&P index fund.  That investment may not reach $100 million by the time I’m 65, but it’ll be worth more than some shredded lottery tickets.

Do you fritter your time away?  Do you complain that with full-time work, kids, household chores, and the jillion other things on your to do list, you have no time to pursue your real dream, like starting that dot-com or writing the great American novel?  I used to complain a lot about the lack of time, until I realized that successful people find the time to achieve their goals.  I recently read a magazine article profiling the best-selling author David Baldacci.  Before he became a famous novelist, Baldacci was a trial attorney working long hours at a D.C. law firm.  However, at the same time, Baldacci was also penning his first novel, Absolute Power.  Baldacci would spend time writing from 10:00 p.m. to 2:00 a.m. after a full day at the office.  I find Baldacci’s commitment to his writing incredible, given the grueling hours that he had to put in at the office.  This unwavering focus on writing paid off, when a publishing house snapped up Baldacci’s first novel, while he was still working his day job.

Baldacci is just one example of successful people that don’t let a perceived lack of time get in their way.  But believe it or not, most people don’t take advantage of the 24 hours that they and everyone else on this earth have.  A relative of mine set me straight one day when I was complaining about the lack of time to do this, do that etc.  He said to me, ”how much time do you waste watching TV?”  I had to admit, plenty of time.  I also looked around at other people I know who want to accomplish this and do that, but also whine about ”no time!”  These are the same people talking about what happened on American Idol last night and how many DVDs from Netflix they were able to cram into one month.

So, to ditch the complaining and start making progress on my goals, I’ve decided to compose a short list of my resolutions to make better use of my time.

• Limit junk TV watching to three hours a week.  What I mean by junk is programming that has no newsworthy content and is pure entertainment.  I’ll probably use this allotment for times where I’ve come home from work and my brain is so fried that I really cannot work on anything else.
•  Limit Internet surfing to 30 minutes a day.  This does not include research that I am doing for this blog and for my start-up business.
• Stop procrastinating on less-than-desirable tasks and just DO IT.  I’ve found that sometimes I spend so much time justifying my procrastination that I could have used that time to finish the task! 
• Set specific deadlines for accomplishing your goals.  While “straddling” - keeping your day job while starting up your business - affords you a safety net, the downside of keeping a regular job while you are starting up your business is that there is no sense of urgency to get things done.

 I’m going to apply these resolutions to my life and see how far I get by the end of this month.  Do you have any suggestions to add to this list?

In a recent CNBC special, “Warren Buffett, the Billionaire Next Door: Going Global,” hosted by Becky Quick, Buffet explains his simple philosophy when deciding to acquire companies for Berkshire Hathaway Inc.:  he likes companies with “durable competitive advantage.”  These companies possess enormous competitive strength that will endure over decades.  Some of the companies in Berksire’s stable are Benjamin Moore Paints (founded in 1883), Fruit of the Loom (founded over 150 years ago), and See’s Candies (founded in 1921). 

In one of the interview segments, Buffet points to a picture of the Berkshire Hathaway textile mills, the company that he bought in the 1960s and now the namesake of his investment company.  Buffet recalled that the Berkshire textile mils had great workers, working equipment, and produced cloth and linings for clothing, an essential need.  The critical problem with the Berkshire textile factory?  No competitive durable advantage, which doomed the textile factory.  Buffet explained that industries like textiles, which have high labor costs and turn out a basic commodity product, don’t have competitive durable advantage.  When is the last time you bought an article of clothing that wasn’t made outside the United States?

Buffet summed it up by saying that you always should be looking for the “chinks in the armor” of a company, i.e., something that will make the company vulnerable in the next 10 to 20 years, such as high labor costs.  Buffet says that after World War II, the Berkshire textile business was as profitable as today’s pharmaceutical companies, but because it lacked a competitive advantage, the company is no longer in business.  Buffet’s philosophy is stunningly simple.  However, for today’s average investor, picking and holding a stock of a company that is a good solid business, but unglamorous, is surprisingly more difficult than falling for the stock du jour, whether it be tech, financials, or home builders.  Has anyone come close to emulating Buffet? 

One of my New Year’s resolutions is to get rid of the clutter in my home office.  Going through a pile of old papers today, I came across an article from the March 28, 2004, edition of Parade Magazine “Getting Yourself Back on Track,” by Dianne Hales.  The article discusses breaking the self-defeating behaviors that underachievers engage in, such as procrastinating, missing deadlines, and other habits that undermine our chances for success.  This kind of behavior, not surprisingly, is extremely common, as one out of four adults routinely engage in this kind of behavior.  Hales notes that underachievers feel that they have little control over their circumstances, so they may not be as motivated as high achievers to take action to improve their lives.  Instead of tackling a difficult task, they curl up in ball, make excuses, and seek comfort in some form.  In her article, Hales provides a quiz to see whether we are sabotaging ourselves:

-Do you procrastinate and constantly put things off?

-Do you miss deadlines?

-Do you hold back rather than engage fully in your life?

-Do you try to get by with the least possible amount of effort?

-Do you quit things just as you begin to succeed at them?

-Are you stuck in what you thought would be a temporary situation?

-Do you blame others or bad luck when you don’t succeed?

It’s a simple quiz, but can reveal a lot about your behavioral tendencies.  I know that in the past year, I have been guilty of procrastinating on tasks such as reorganizing my home office and seeking additional funding for my start-up.  Both are very different things to accomplish, but critical to my future success.  So, as you make your list of 2008 resolutions, keep in mind that the very human tendency to put off tackling difficult goals may be the very obstacle we need to move past in order to move forward. 

Every new year, a lot of us reflect on the successes and drawbacks of the past year and what our resolutions for the upcoming year will be.  For my list, I like to include both short-term and long-term goals.  The short-term goals are easily achievable within the span of one year and ensure that I will accomplish something.  For example, a short-term goal might be to cut living expenses by 10 percent, to save another three months of expenses in the emergency fund, or to increase net worth by 15 percent.  The long-term goals are more of a work-in-progress, such as starting and growing your own business.  Being an entrepreneur is a years-long process, of which I am at the initial stage.  Coming up with viable business ideas that you are passionate about may take the entire year or more.  Now I am not saying that one should procrastinate over these long-term goals.  But as long as you are working actively and deliberately towards your goal, you should not feel frustrated when January 1, 2009, rolls around, and you feel that you haven’t gotten as close as you have towards achieving what you wanted.  You are already ahead of the game.   

I borrowed “The Magic of Thinking Big” by David J. Schwartz, Ph.D (1959, 1965, Prentice Hall) from the library a couple of weeks ago.   Once I started reading it, I could not put it down.  Although the book contains some dated references (Edward R. Murrow, anyone?) due to the fact it came out over 40 years ago, it otherwise reads as though it was published now.  This says a lot about the content of this book - a motivational tool for anyone trying to make the most of herself and achieve personal success.  A couple of the more compelling chapters in the book include:

-Cure Yourself of Excusitis, The Failure Disease.  In this chapter, Schwartz describes how certain people suffer from “Excusitis,” claiming that such things as health, intelligence, luck, and age prevent them from taking action and achieving success.  Schwartz goes through each of these excuse categories, with anecdotes about real people, to show how these excuses are really smoke screens in people’s own heads that hold them back.  Schwartz notes that people at the top of their respective fields have superior attitudes and the drive to succeed.  Reading this chapter, I thought of at least a dozen friends and acquaintances who have the disease ”Excusitis.”  These people talk frequently about wanting to be their own boss, make more money, lose weight, get a girlfriend, etc., but they have a thousand and one excuses for not making the leap to achieve.  One friend claims that he wants to become a real estate investor, but says that he has no time to do any research or locate properties.  I know for a fact that this friend watches movies on DVD nonstop when he is not working at his regular 9-5 job.

 -Get the Action Habit.  In this chapter, Schwartz discusses how people who take action on their ideas achieve are far more successful than the passive people that talk a good game about their ideas but never implement them.  Schwartz points out one very insightful characteristic about passive people - that many of them postpone doing things because they want to wait until conditions are perfect to act.  Usually what happens is that the”perfect time” never comes or some other event occurs that makes the opportunity too late to act upon for these passivisits.  Schwartz profiles one person, Mr. C.D., a civil servant at the Customs Service who had become dissatisfied with the regular hours, confining work, low pay, and little opportunity for advancement.  Mr. C.D. realized he could use his customs expertise to start an importing business, but 10 years after he came up with the idea, was still working at the Customs Service.  According to Mr. C.D., he had to postpone his plans because of a new baby, recession, little capital, trade restrictions, etc.  As Schwartz points out in his book, there will never be a perfect time to act on an idea, and people like Mr. C.D. have to expect that obstacles and difficulties will happen with any venture.  Again, I can tick off a list of acquaintances who have never acted on their desires and wishes because they suffer from “analysis paralysis,”  analyzing an idea to death until they convince themselves that they shouldn’t act.  One friend is a yoga instructor who wants to start a yoga studio, but has yet to take any action, 15 years after she began dreaming about the idea. 

There are numerous other chapters that I will not summarize here, but suffice it to say that the book as a whole is not only sharp and insightful in its content, but also an entertaining read.  Schwartz peppers the book with anecdotes about his own experiences to prove his principles.  With the start of 2008 approaching, this might be a good source of new year resolutions.

I was reading Emotional Intelligence, Bantam Dell Publ., 1995, by Daniel Goleman, a groundbreaking book about psychology and business, published a little over a decade ago.  One of the book’s chapters was particularly interesting.  It discussed an experiment involving marshmallows and four year old children.  The experiment was like this:  the children were given the option of having one marshmallow immediately, or waiting 20 minutes for two marshmallows.  Of course some children grabbed one marshmallow right away while other children waited patiently for 20 minutes to score the two marshmallows.  The researchers tracked these children down years later and discovered that the kids who had resisted temptation were superior students in school, more socially outgoing, and better-equipped to deal with life’s frustrations than the kids who wanted the instant gratification of one marshmallow.  Although the children in this experiment were only four years old, the author concluded that this ability to control impulses can be learned.  So, even if you aren’t sure, like me, that you would have waited an interminable 20 minutes for that second marshmallow, have faith that now, in your adulthood as a budding entrepreneur, you see the light.  Delaying gratification and resisting temptation is one of the core tenets of building a business.  As you toil to cultivate your business like a wilting flower that constantly needs more soil, (expensive) plant food, and endless amounts of water, you have to keep the endgoal in mind.  I live in an area where yuppies roam free, monster-sized SUVs abound, and Nordstroms is only a five minute drive away, but I’ve resisted the desire to upgrade my home, car, and wardrobe, to pursue the dream of building a business.  Admittedly, it can be very difficult to resist impulse, as I eyed the new leather furniture and remodeled party room at my friend’s holiday party last night.  But I bring myself out of green-eyed envy mode, and back to the endgoal, building capital and my business.  The second marshmallow, I think, is going to taste pretty good.

A recent article in the New York Times, “The Many Errors in Thinking About Mistakes,” by Alina Tugend, Nov. 24, 2007, explored a topic that we can all relate to - the fear of making mistakes.  Tugend said “[w]e grow up with a mixed message: making mistakes is a necessary learning tool, but we should avoid them.”  She described a behavioral experiment put on by Carol Dweck, a professor at Stanford, where kids were randomly praised as smart or for their efforts.  Astonishingly, when given the choice of an easy or difficult task, most of the kids that were lauded for their smarts chose the easy one, while the kids praised for their efforts went with the challenging task.  The overall conclusion of the article: that our desire and associated behaviors in trying be mistake-free has robbed us of something greater, learning from experience and our mistakes.

 This article really struck a personal cord with me.  A friend of mine who is a lawyer constantly complains about the risk-averse nature of her profession.  She is a free-spirit by heart, but according to her, is surrounded by colleagues who took the “safe” path through life, going from college to law school, then a large law firm, or government/public interest work.  My friend laments that this structured path of academia and work leads to a culture where minor mistakes are ridiculed, leading attorneys to cover up or blame others.  My friend’s experience may be an overgeneralization of the legal profession as a whole, but it does highlight a stark difference in the legal verses business professions.  In business, trying new things is almost expected, and as long as you don’t lose the business or a large sack of cash, you move on to the next plan with few repercussions.  Ironically, if you don’t try new things and dare to make mistakes as an entrepreneur, you may risk the biggest thing of all, failing to move anywhere at all.  Although my friend enjoys some prestige and a moticum of financial security in her legal position, I would not trade my dreams to build a business for a risk-averse, staid, strict environment where mistakes are not tolerated.  As the NY Times article pointed out, people who shun mistake-making give up the ultimate - the opportunity to grow and learn. 

If you walk through your local bookstore’s business section, you’ll see a dizzying cornucopia of books dishing financial advice.  Many of them extoll the virtures of saving for retirement, maxing out the 401k, walking past the Starbucks, instead of into it, downsizing the house, cutting up credit cards, lowering your tax bill, etc.  You see the same faces on TV, on the web, radio, and in print everywhere.  However, I already max out the 401k, live frugally, save prudently, and have no debt other than the mortgage.  As I get into more sophisticated financial transactions, listening to cookie cutter advice designed for the masses, I realize, is not necessarily in my best interests. 

 This moment of truth came to light when I was talking to a friend about real estate investing.  A relative had made a substantial profit in the sale of a commercial property and paid 15% long term capital gain tax on the profit.  My friend said that he should have waited to sell until he could find a comparable property for a 1031 exchange.  I said, why not just sell, and report the gain.  After all, the long term capital gain tax is only 15%.  It’s better to book the gain now at the low tax rate, rather than waiting to find another deal, that may not be as desirable, and put off a gain that may be taxed at a higher rate in the future.  Moreover, with the real estate marke on wobbly legs now, the same buyer may not be around in the future.

 My friend insisted that the 1031 exchange was the way to go because of the tax savings, quoting several recent financial books that he had read about this tax savings strategy.  But I couldn’t help thinking that he was missing the larger picture here.  In my view, taking the profit is better (less 15%) than finding a deal just to do the exchange.  I have worked at length with this relative on other real estate deals, and usually it is sifting through many rocks to find that diamond.  My friend is so focused on the “tax savings” that he is missing the dynamics of profit, loss, and making money.  No one likes to pay taxes, but if it is necessary to unlock a nice large gain that can be spread out among other properties as down payments, especially at a tax rate of 15%, I’ll take that any day.  Sure enough, the relative deployed the capital into several other deals, magnifying his leverage and profits! 

One of the greatest challenges that budding entrepreneurs face is finding the time to work on their business ideas.  If you have a full time job and a difficult commute, getting through the day can seem like a marathon.  When you get home from work, you’ve crossed one finish line, but, AFTER you’ve made dinner, gone through the mail, and washed the dishes, you settle down to start another race, a 5k, – whether it is writing a book, formulating a business plan, filling orders, building a website, etc.  I was struggling with the time crunch.  My commute roundtrip totals two hours.  Tack on a nine hour workday, and my brain is fried.  The last thing I want to do at night when I get home is start working again.  But, working on my ideas is when I can be totally creative, without supervisors, status reports, email updates, yah!  So look at this time as your rejuvenation, your rebirth…even for just 30 minutes.  It will give you the fuel to get through the work day marathon and start that 5k again tomorrow night.