13 Steps to Bloody Good Wealth
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Wrong!
In this second book in the 13 Steps series, bestselling author Ashwin Sanghi and co-author Sunil Dalal explore how one can become wealthy even if one is not blessed with the proverbial silver spoon.
Taking a radically fresh view of wealth, they show that the journey to becoming wealthy is difficult, but not impossible. With some thought and work, wealth is well within anyone’s reach.
The steps presented in 13 Steps to Bloody Good Wealth are easily implemented and do not require anything more than your attention and belief.
Through fascinating examples, illuminating stories,personal experiences and common sense ideas, the authors tear away the halo and secrecy that surrounds wealth and how one can earn it. It has been shown that most high net worth individuals around the world have created rather than inherited wealth.
Read this little book to understand how you too can do it!
From the Publisher
A Conversation with Ashwin Sanghi
Q1. This is the second book in your 13 Steps Series. How did this book on wealth emerge?
A1. Ashwin Sanghi: After I wrote 13 Steps to Bloody Good Luck in 2014, I was inundated by readers’ emails, tweets, Facebook posts and letters telling me that the book had helped them navigate their lives and careers. But one particular email drew my attention more than the others. The sender was a student who wondered whether it was possible to provide “13 Step” solutions to most of life’s challenges. It got me thinking. A few days later I was chatting with my friend, Sunil Dalal. Sunil and I have known each other from our days at Cathedral & John Connon School and St Xavier’s College Mumbai. I have observed the discipline and perseverance with which he has worked towards building his family’s fortunes. I gently put forth the idea that he write a book outlining the 13 Steps to wealth creation. That’s how the idea was born.
Q2. You have co-authored the book with Sunil Dalal. Are you going to do more co-writing projects (like the crime thrillers you do with James Patterson)?
A2. Ashwin Sanghi: When I approached Sunil Dalal to write this book, Sunil asked, “Why me. I am neither a banker nor a Chartered Accountant. I have never managed a mutual fund or a venture capital company. I don’t even have an MBA in Finance!” And I answered, “Those are precisely the reasons why you should write this book,” I said to him. “Any fool can make something simple sound complicated. It takes talent to make something complex sound simple. That’s what you can do!” It took a little more cajoling before I could get Sunil’s acquiescence and he agreed to do it only after I consented to co-author the book with him. I’m glad that I persisted. Sunil has spent decades managing and growing wealth without being part of the banking and finance ecosystem. This makes him neutral to financial products and investment options. Who better to offer impartial advice? Most of the forthcoming titles in the 13 Steps Series will be co-written because many of the topics require domain expertise. I simply bring my storytelling skills to the mix.
Q3. The book devotes the first chapter to making one understand what wealth is. Why? Isn't wealth pretty straightforward?
A3. Ashwin Sanghi: In a survey conducted by UBS, Americans with assets of $1 million to $5 million were asked if they considered themselves wealthy. Only 28% of them said yes. Please remember that these are some of the richest people in the world. Why do they not consider themselves wealthy? So think about what being wealthy means to you. The ‘‘you’’ part is fundamental because no two persons will offer the same definition of wealth.
Q4. You speak of the importance of learning from billionaires. What is so compelling about these stories and why should we learn from them?
A4. Ashwin Sanghi: There is a popular HBO sitcom called Silicon Valley. In one of the episodes, a wealthy investor is plunged in gloom. He sprawls face down on a plush sofa inside his sprawling Palo Alto mansion and announces, dramatically, that his life is over. Why? Because his net worth has been reduced to $967,000,000. In other words, he’s no longer a billionaire. ‘I’m no longer a part of the three-comma club,’ he wails. The phrase stuck with me. What makes this three-comma club so exclusive? Well, it is true that there are only 2,325 US dollar billionaires in our world. Let me put this in perspective: for every three million people on earth, there is one billionaire. What makes billionaires so rare? Is there something we can learn from this breed, and apply it to our lives?
Q5. 13 Steps to Bloody Good Wealth focuses on the importance of planning one’s wealth objectives. Could you elaborate?
A5. Ashwin Sanghi: It’s tempting to think of wealth building as a fairy tale. But here’s the truth: Unlike Cinderella’s story, wealth does not arrive overnight. Most wealthy people (and you could be one of them) are years in the making. On average, an Indian billionaire has spent almost forty years getting there. And in order to spend that much time reaching a goal, you must have a plan. Think of your plan as an optimal GPS route taking you from one place to another. The route may require you to take a flyover when you leave home, but if an accident has clogged up the flyover, you may need to reroute through interior roads to reach your destination on time. Planning combined with flexibility is key.
Q6. The book dwells at length on the need to beat inflation. What is so critical about this?
A6. Ashwin Sanghi: Remember the joke about the man who called and ordered a large cheese pizza. The order clerk asked him whether he would like it cut into six or eight slices. ‘Eight,’ he replied, ‘I’m really hungry today.’ That explains the difference between real and nominal returns because nominal returns can often be an illusion once you factor inflation into the mix. When you beat inflation, your wealth grows automatically, regardless of rising prices. This is when you gain true freedom. If your savings are not growing at a rate that outpaces inflation, you may as well be lighting up your hard-earned cash instead of fireworks on Diwali day.
Q7. Both authors of this book seem to be impressed with the frugality of billionaires like Warren Buffet. What is it about frugality that attracts you?
A7. Ashwin Sanghi: You must gain control over your money or the lack of it will forever control you. It sounds old-fashioned, but honestly, being thrifty never went out of style. Frugality has been an important part of a many a billionaire’s success. Planning your current expenses is a part of investing in your future. When you take time out and make an expense plan, you’re doing your future self a favour and you will thank your past self for this. One needs to make a mental note of what the famous painter Pablo Picasso said. ‘I'd like to live as a poor man with lots of money.’
Q8. You also dwell on the need to build assets. Comment.
A8. Ashwin Sanghi: A real asset is anything that generates income now and has the potential to appreciate over time. Assets are anything that put money in your bank account. An easy way of separating assets from liabilities is to ask yourself this: ‘If I were to lose my job today, what will bring me money and what will cost me money?’ Living in a fancy apartment in a beautiful location will not bring you any income. However, buying such an apartment and leasing it out can generate a steady source of rising income. Similarly, will your television or car unless you use it for Uber or Ola earn you money? They will not. But a well-placed investment will. The truly wealthy collect real assets while the misguided pile up liabilities.
Q9. The concept of the financial trinity. What does that mean?
A9. Ashwin Sanghi: Hinduism has always worshipped trinities. The female trinity of Lakshmi-Saraswati-Kali as well as the male trinity of Brahma-Vishnu-Shiva. Christians revere the trinity of the Father, Son and Holy Ghost. In the world of finance too, there exists a holy trinity. The trinity of Risk, Return and Time. Ignore this trinity at your own peril.
Q10. Do you think that ordinary individuals are good at managing the risk that is associated with their investments?
A10. Ashwin Sanghi: Tragedies occur when people take risk without being aware that they are taking a risk. My philosophy is that investing smartly is more about knowing the risks than the returns. Make no mistake: It’s entirely your responsibility to figure out what kind of risk each investment entails, and whether you’re willing to take it on. No investment advisor will ever highlight all the risks to you transparently. Risk rarely announces itself. Rather, you have to dig around for it.
Q11. You almost seem to indicate that time is the greatest healer. Can time really be considered as this magical elixir?
A11. Ashwin Sanghi: American money-advisor, Dave Ramsey, says that ‘building wealth is a marathon, not a sprint.’ Historically, some of the worst short-term market losses have given way to substantial market recovery. Always remember that time in the market is much more important than timing the market. Frankly, no one can predict where the market is going. Ignore the headlines. Listen to Anthony Samuelson, a Nobel Prize winning economist who said, ‘Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.’
Q12. You are firmly in the asset allocation camp rather than the stock picking camp. Why?
A12. Ashwin Sanghi: In his 1973 bestseller, A Random Walk Down Wall Street, Burton Malkiel wrote that a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts. Subsequent studies by researchers have shown that the portfolios chosen by simulated dart-throwing monkeys have usually resulted in portfolios that often outperformed the market. Less-developed primates, it would seem, are better at picking stocks than humans. And it is precisely for this reason that you should spend more time on deciding asset allocation rather than stock picking.
Q13. Most people talk about portfolio diversification but few succeed in executing it perfectly. What do you authors recommend in the book?
A13. Ashwin Sanghi: Do you need to be Sachin Tendulkar to hit a cricket ball with a bat? Do you need to be Gordon Ramsey to make a simple cup of tea? Of course not. Similarly, you don’t need an MBA or a master’s degree in finance to start investing. An investment advisor once joked that there are primarily three different types of investors: The first lot is those who don’t know anything. They account for 10%. The second lot is those who know a little. They’re around 10%. And finally the third lot is those who don’t know that they don’t know anything. They are about 80%. So just think about what you ate for your meal yesterday. Most likely, it would have been a combination of carbohydrates (rice, roti), vitamins and minerals (green vegetables), and protein (daal, poultry, fish or meat). This is a balanced diet because each component plays a specific role for your body. Similarly, diversification is spreading your money amongst different kinds of investments so that if one loses money, the others make up for the loss. And in aggregate, in the long term they are all appreciating and beating inflation.
Q14. Your view on debt and leverage? Is there really something called ‘good debt’?
A14. Well, let’s look at it like this: taking on debt is the easiest way of raising capital. What you choose to do with the capital has the power to make the debt good or bad. It’s quite simple: Debt for mindless consumption, like buying an expensive gadget you want but don’t need: Bad! Debt raised for investing in property, business, or something that will generate long-term income, higher education, for instance: Good!
Q15.You end on a philosophical note. One that suggests that entrepreneurship is a way to accelerate the wealth accumulation process. Why?
A15. Ashwin Sanghi: Robert Kiyosaki, the bestselling author of Rich Dad, Poor Dad famously said, ‘The problem with having a job is that it gets in the way of getting rich.’ It is not impossible to become a crorepati while working a traditional job. But such wealth comes to a select few, that too after many years of work. Interestingly, a Barclays survey of global high net worth individuals showed that entrepreneurship has overtaken inheritance as the main source of wealth creation in the world. We’re living in the Information Age where it’s easier to start a business today than it has ever been before. And if that business involves something that you love to do, it’s pure win-win, isn’t it? The trick is to come up with a successful ‘side hustle’ or micro business that provides an alternate source of income.
Q16. What’s next in the 13 Steps series?
A16. Ashwin Sanghi: There are three titles that are being worked on as we speak. It is our aim to release 2-3 titles in the series every year. Our effort will be to demystify concepts that sound complicated for all segments of readers.
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