To achieve true wealth, you must avoid making the mistake that so many rich people have made throughout history, and this is the erroneous belief that their source of wealth is invincible, and can last forever. Every industry will have its ups and downs, and often, when one industry goes down, another industry will rise up at the same time, like a seesaw. To build stupendous long term wealth, you must be able to expand, and it is this growth that I call Exponential Expansion.
With this philosophy, as an investor, you will refuse to limit yourself to one industry. For example, if your fortune is made in electronics, you will expand beyond electronics. If your fortune is made in oil, then you will move beyond oil. Your goal is to spread your wealth in a manner that generates so much cash flow that you can continue reinvesting until you become mega wealthy, perhaps reaching the status of a billionaire. The problem with many new millionaires is that they become complacent, arrogant, and weak.
These people believe that their wealth will last forever, and because they are successful, they often overestimate their abilities. This is always a terrible mistake, because as the old saying goes, “overconfidence comes right before the fall.” Under no circumstances can you allow your riches to go to your head. Remember, while it may take a great deal of caution and skill in order to build a fortune, it takes ten times more skill and energy to keep it. As you build greater wealth, there will be more people around you that will wish to take it away.
It is up to you to make sure you keep what is rightfully yours. The best way to build lasting wealth is to spread your money out. Once you make the transition from a freelancer to an investor, and you successfully close your first deal, your goal is to continue doing more of the same in the future. Your goal should be to acquire stocks, bonds, real estate, gold, silver, and businesses. If you wish, once your wealth is large enough, you may even decide to become a capitalist who finances huge business plans. In this capacity, you would function as an Angel Investor or Venture Capitalist. To achieve true wealth, you must at all times avoid the arrogance and hubris that befalls so many successful business people. I once came into contact with a wealthy individual who owns his own restaurant in my city. He also invests in real estate and had a prominent night club.
I did a bit of business with this individual, and during our conversations, he revealed that he made a half million dollars within a year, which isn't bad for a small town businessman. However, I tested him to see if he could think beyond the small town in which his business was initially constructed. I asked him what he thought about the possibility of creating a franchise, or chain of restaurants around the country, and perhaps even the world. I told him that there was a market for the type of restaurants that he owned, that there were few competitors who existed within this niche.
Unfortunately, this businessman was a very arrogant individual. Like so many small business people, he allowed his small success to go to his head. He often displayed this arrogance during my dealings with him, refusing to return my calls and then standing me up when I was scheduled to meet with him. Though he was honest in terms of payment, his arrogance promptly led me to discontinue doing business with him. Before I discontinued dealing with him, he revealed several times during conversations that at least two out of his three businesses were struggling as a result of the recession.
This man is also a big spender. He owns two vehicles, one of which that cost him $70,000. Actually, saying that he “owns” this vehicle is a bit of misnomer, since he is making payment on it, which means he doesn't own it at all. His other vehicle costs approximately $30,000, so he has spent $100,000 on two vehicles, both of which will depreciate in value. For the price he paid for these two liabilities, who could have used the money to advertise his restaurant or night club, start another business, or expand his restaurant into a franchise.