The biggest difference between a self-made billionaire and a mere millionaire is more complex than net worth. It’s the billionaire’s rare mindset driven by an extraordinary love of work and superior work ethic versus the millionaire’s lone uber-goal of achieving a life of personal luxury, global entrepreneur Rafael Badziag tells ThinkAdvisor in an interview.
An expert in the psychology of entrepreneurship, he discusses several key principles shared by billionaires as well as specifics that five of the world’s most accomplished billionaires revealed to him in face-to-face interviews.
In his new book, “The Billion Dollar Secret: 20 Principles of Billionaire Wealth and Success” (Panoma Press- June 12, 2019), Badziag reports on what he learned from the 20 global self-made billionaires who sat down to chat.
They include Peter Hargreaves, founder and chair of Hargreaves Lansdown, the largest retail investment platform in the U.K., according to Badziag; Tim Draper, legendary venture capitalist; and Naveen Jain, a former Microsoft software engineer, who founded Intelius, among other big companies, and whose Moon Express is focused on private space exploration.
In the interviews, Badziag discovered several traits common to self-made billionaires’ approach to business, including: Billionaires are non-conformists; billionaires work not for the money but because they love their business or industry; billionaires’ notion of success means being willing to take risks — but smart ones.
Germany-based Badziag, 46, is an angel investor and popular TED speaker. He created Germany’s first online bike shop, then expanded into a variety of Internet-based businesses in several other countries.
ThinkAdvisor recently interviewed the entrepreneur, on the phone from Stuttgart. Reveals the author: “I’m not a billionaire. I’m a humble millionaire.”
Here are highlights of our interview:
THINKADVISOR: What’s one major difference in risk approach between a billionaire and a millionaire?
RAFAEL BADZIAG: Billionaires take risk with a limited downside and unlimited upside. They never bet the farm. Millionaires take risk but with a limited upside. They’re not really proficient at handling risk. So they’ll either take risk with limited upside, or they’ll bet the farm and lose everything.
What’s another big differentiator?
Billionaires [work exceptionally hard] not for the money but because they love the industry or their business itself. Millionaires generally earn money to spend money because they want to improve their private lives. They’re motivated by personal luxury.
That isn’t bad, is it?
But that motivation stops them at a certain level. You don’t see much improvement in your private life if you go from $25 million to $35 million. So you lose the motivation to grow.
What happens then?
The business usually suffers and stagnates. You may lose it because you stop developing and get beaten by your competition.
One really has to think big, then, to become a billionaire. Right?
Yes. Billionaires are willing to sacrifice years of their life, maybe their entire life, for something that may fail. The level of their commitment for decades is [off the charts].
But don’t they need to have exceptional talent in the first place?
Yes, though those qualities aren’t inborn. They’re developed during life through experiences, attitudes and habits. Also, along the way, billionaires identify their weak points and improve or develop them.
What’s another outstanding characteristic of billionaires?
They go their own way even when people tell them they’re wrong. Billionaires don’t conform and generally don’t care that much about what others think of them. They’re not out there for getting good publicity or being liked by many people. They have the approach that doing the right thing is much more important — even at the price of being unpopular or maybe losing a job.
Tell me about some of the billionaires you’ve interviewed. Start with Peter Hargreaves, whose financial services firm, Hargreaves Lansdown, with AUM of $120 billion, is the largest retail investment platform in the U.K., you write. He said a business has to make it easy for people to buy: in his case, moving money to investments that the firm offers.
Peter is a great salesperson. One of the keys to good sales is to make it as easy as possible for your customers. So investment customers on his platform can have their banking accounts on the same platform.
You write about Hargreaves’ frugality and how it’s helped him in business. Right after World War II, his father, who owned a small grocery in the U.K., watched every penny.
Peter’s company has never borrowed any money; never had any debt. Even privately, he has no debt. He’s one of the most economically living billionaires I know. He said he spends only a small percentage of the money he makes. When I interviewed him, he was driving a 7-year-old Toyota Prius. He flies economy class. He’s still wearing a pair of shoes he bought 10 years ago for about $35.
Business-wise, Hargreaves told you that he stops pursuing projects as soon as he sees that they’re not working out.
This relates to the dilemma of when to play and when to fold, so to speak. As soon as you realize your undertaking doesn’t have a chance, you need to end it, Peter says. This frees up financial resources and mental resources.
What about millionaires? Do they do the same thing?
Not necessarily. Millionaires often try for many years to make something successful even though it’s doomed to fail. It’s irrational to throw more money at something and spend more of your life on it if it doesn’t have the chance to succeed.
Next billionaire: Naveen Jain. Indian-born, he lives in Bellevue, Washington. He started out in the U.S. as a software engineer, soon hired by Microsoft. Then he founded several companies, including Intelius and InfoSpace, his first endeavor, which made him a billionaire [and from which he was forced out amidst litigation]. His Moon Express is working to bring about private space exploration.
When he said he would have a company for traveling to Mars, people said, “Are you crazy? This isn’t going to happen.” There were probably less than 5% who said, “Let’s find out how we’re going to get to Mars and join him on their mission.” Naveen has never been a conformist.
Working at Microsoft, he told Bill Gates that an early version of Windows would be “big, fat and slow.” His immediate boss was appalled that he said that, but Jain told him he was working for the company, not his manager. It turned out his assessment of Windows at the time was correct.
He wasn’t afraid of losing his job. He just wanted to say whether or not Windows would succeed as it was designed at that point.
Just so, Jain emphasized to you that, in order to build relationships, it’s critical to connect with people emotionally.
There are three levels of building a relationship, and only the highest level impacts the success of your business, he told me. The first is who you know; the second, who likes you; the third, who trusts you. You need a high level of trust to develop sustainable relationships.
Jain also noted: You need “good eyesight” to see opportunities in front of you and to act on them.
Yes. He said you don’t need to be a visionary. What you need as an entrepreneur is to be in the present and able to recognize opportunities and developments in the world — and therefore changes in business. Usually, people are too occupied with the past or future and don’t see opportunities in the present.
Another billionaire you interviewed is Tim Draper, Silicon Valley venture capitalist. He founded Draper Fisher Jurvetson and Draper Associates, and was founding investor of Hotmail, Skype and Tesla, among others. He’s a big Bitcoin enthusiast. What’s his philosophy about success and failure?
Success is continuing to be willing to fail. To be a self-made billionaire, you must be adventurous and bold because most of the time you’re wrong. If you want to achieve something of importance, even something extraordinary, and do things no one has done before, you must be willing to fail. As a venture capitalist, Tim is even more aggressive about taking risk, though people may ridicule or laugh at him.
Draper began investing when he was a child, didn’t he?
Yes. In fact, most billionaires started to invest at a very young age. Tim got a penny a minute for working in the garden. His father convinced him to invest that money. So at the age of 9, he bought a share of Mutual of Omaha stock and put some money in a bank account. After a year or two he saw that his money had multiplied. It got him excited about investing and later, about venture capital investing.
Canadian-born Jack Cowin lives Sydney, Australia, where he became a fast food pioneer. He owns the country’s largest restaurant franchiser, Competitive Foods. In the interview, he cautioned: Don’t be in “the personal exertion business.” Please explain.
If you’re a doctor, for instance, you’re generally paid for the time you spend with a patient. So your income is limited. To free yourself of that limitation, you need to get out of the personal exertion business by scaling your [practice]. Jack was once a physician. When someone asked him how as a doctor he became a billionaire, he replied: “First stop working as a doctor. Then try to figure out how to get out of the personal exertion business.”
Cowin also argued that if you don’t take risk, “you’re wasting your time.”
On the other hand, he said: Don’t bet your house. The No. 1 rule in business is: Don’t go broke. So take risk with a limited downside and as smart an upside as possible. He said to take many “swings” because the more swings you take, the higher the chance of your finally hitting the ball.
Chip Wilson, Canadian founder of Lululemon Athletica, the big sportswear retailer, advises to look at life from the perspective of one’s deathbed. But what good is that?
It’s to consider what you’ve achieved and what you wanted to achieve. What are the things you’ve missed in your life? Chip can’t stand the idea of going to his deathbed with any idea untried. He must know whether or not it’s viable.
He stressed the reality that life is short and to make the most of every day.
Right. If you live to be 80, that’s 40,000 days — and then you’re dead. So you have a limited time and should use that time to the best [advantage]. You should take chances. You should [take] all the opportunities you’re given in life. Don’t let any opportunities or your ideas go untried.
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