The New MyRA – From the Department of Bad Retirement Ideas

The federal government – following an idea proposed during Obama’s January 2014 State of the Union address – will role out a new simplified IRA plan later this year, designed as a starter retirement account, known by the catchy name MyRA.

MYRA

Geared to lower- and middle-income earners, the accounts will have the following features:

1. Automatic deduction of contributions from payroll (that’s a good thing).

2. Same income limits, contribution limits and tax treatment as the Roth IRA – post-tax contribution, $5,500 total per year, $129,000 income per individual (that’s fine).

3. A maximum size of $15,000 total before investors need to roll it over to a private IRA (that seems arbitrary).

4. A single investment option, in a variable-rate “G Fund,” that matches the Thrift Savings Plan Government Securities Investment Fund. (that’s a terrible idea).

Why that’s a terrible idea

I understand the federal government designed the MyRA to solve a set of identified problems, explained in this White House Press Office blog post.

First, one half of all Americans have zero retirement savings.

Second, half of all full-time workers have no access to an employer-sponsored retirement plan (like a 401K or 403b), and that number climbs to 75% for part-time workers.

Third, lots of people who had retirement accounts invested in public markets lost money in the last financial crisis.

These are all admirable problems to tackle, although the existing IRA accounts are already available to anyone not covered by an employer’s plan.

Will the MyRA actually force small business owners to enroll employees?

The most interesting innovation appears to be the automatic enrollment by employers and automatic deduction of employee paychecks feature of MyRAs, although I can already hear the cries of “Nanny State” and “Government Don’t Tell Me How To Run My Small Business Or How To Save Money.”

Obama_money
Not one of his best ideas

I cannot tell from the White House memo how coercive the MyRA enrollment will be. Does every small business have to enroll their employees if they don’t offer a retirement account? I just can’t believe the current Congress would pass anything that resembles coercion against small businesses. So my guess is that this MyRA becomes an optional program, and this most innovative part of the MyRA program disappears.

What remains after Congress eliminates automatic enrollment, however, is a disservice to lower- and middle- income employees.

Without automatic enrollment, the MyRA seems to address the first two problems – zero savings and zero employer-sponsored retirement plans – by creating an account with tremendously similar features as the existing Roth IRA plans, but with one terrible feature.

The terrible feature

Your only option is to invest in US government debt.

The interest rate will vary over time according to prevailing interest rates, but, by design, this will be most secure dollar-denominated investment available, and therefore the lowest yielding.

The current 1 year rate offered by the “G Fund” is 1.89%. After inflation, the return on your money in a MyRA is close to zero.

Although the G Fund rate – and therefore your expected return – will go up or down with changing interest rates over time, the way the income yield on US government debt works is that it will only ever barely exceed the rate of inflation over time, almost by definition, as a result of market forces.

The fact that your income will be available upon retirement ‘tax-free’ like a Roth IRA is close to meaningless, since there will be hardly any income to enjoy, tax-free.

This is unacceptable as a product for retirement savings, and unacceptable to market as a vehicle for lower- and middle-income employees, who badly need the benefit of higher compound returns, even more than other retirees.

The memo describing the MyRA boasts that MyRA investors may rest assured that they cannot lose their principal. They can be confident that their retirement savings will not be subject to the kind of volatility that we’ve seen in recent years.

What the memo does not spell out, but that make the MyRA troubling, are the following key ideas about retirement investing:

1. Over longer time horizons – say between 5 years (70% of the time) to 15 years (95% of the time) to 20 years (99.5% of the time) – stocks win.  The volatility of the stock market ceases to be a risk when compared to investing in bonds. This is because despite the volatility of stocks in the short run, stocks always offer a superior return in the long run. Retirement savings – the most long-run investing that individuals  do – must skew toward higher-risk, higher-return products like stocks, and away from bonds [For more on this idea, see this post on “100% equities for the long run.”]

2. The long-run risk of investing in bonds in a retirement account is the terrible loss of purchasing power due to inflation, as well as the missed opportunity of long-term wealth accumulation from higher-risk, higher return investments.

In sum, if the MyRA only lets investors earn the “G Fund” rate of return, it’s totally unsuited for anybody’s retirement account.

An even more cynical view

Now let’s apply a paranoid Wall Street skeptic’s eye for a moment.

I do not believe the Obama administration has an evil master plan here.

They are not proposing to automatically deduct a portion of salaries from poorly paid, unsophisticated folks with no other retirement money and thereby extract the limited savings of the country’s underclass to fund the nation’s debt, at a good-for-the-government-but-bad-for-the-poor long-term interest rate. I don’t believe that comes from a Dr. Evil plot deep inside the Treasury Department.

On the other hand, that would be the actual result of this MyRA plan.

One man’s investment is another man’s debt

What is obvious to Wall Street folks but less obvious to Main Street folks is that the bonds we buy for investment are the borrowing mechanism of the companies and governments who issue bonds.  My bond investment = the (company/government) bond issuer’s borrowing.

When I earn a 3% return on a Coca Cola bond over ten years, that just means Coca Cola borrowed money from me at a 3% interest rate for ten years. When you buy a municipal water company bond at 4%, that just means the municipal water company took out a loan at 4% from lenders.

When the US Government offers a 1.89% “G Fund” return to lower-income workers in a MyRA, that also means the US Government borrows money from its lower-income workers at 1.89%. Which, while not intended as such, creates an evil result.

Dr_Evil_one_Million_dollars
I will offer you 1.89% on your One. Million. Dollars.

While it’s not an evil plot, it is a terrible plan.

To encourage lower-income (and presumably less-sophisticated) workers to earn a paltry 1.89% return on their longest-term investment is unconscionable retirement planning for the nation’s poorest, that just happens to, simultaneously, fund US government debt at a cheap interest rate.

 

Please see related posts on the IRA account investing:

The Humble IRA

IRAs don’t matter to high income people

A rebuttal: The curious case of Mitt Romney

The magical Roth IRA and inter-generational wealth transfer

The 2012 IRA Contribution Infographic

The DIY Movement and the IRA

Angel Investing and the IRA

 

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A Fascinating Executive Compensation Story – Yahoo!

henrique_de_castro_lucky
Do you feel lucky?

Every once in a while – ok, every couple of weeks – we get hit in the head with a new example of how “executive compensation” and “executive performance” have close to zero correlation in practice. The key to this disconnect is typically “incentive pay” through company stock or stock options.

This week’s story about Yahoo’s fired COO Henrique de Castro’s compensation is a nice one.

Henrique de Castro joined Melissa Mayer’s team in October 2012, before being fired by Mayer 15 months later, as she explained in this memo. Meanwhile, Castro departed with a $58 million severance package due to a surge in Yahoo’s stock price, which itself is the happy coincidence of a surge in valuation over those 15 months for Alibaba, a Chinese e-commerce company, partly owned by Yahoo.

Yahoo reportedly missed revenue and profit targets during de Castro’s tenure, and he received none of his projected annual bonus $540,000 bonus for 2013. We know how his board and colleagues thought he performed last year – which is to say poorly – because the rest of the top Yahoo management team received more than 80% of their bonus targets, making him a clear outlier at the company.

When you’re executive severance pay gets tied to your company’s stock price, however, and furthermore your company luckily owns a big stake in a hot Chinese internet company despite poor operating performance over that time, who cares about actual performance?

When he joined Yahoo, De Castro originally negotiated, or was offered, a potential $36 million equity compensation package.  Yahoo stock surged more than 2.5 times between his hiring and firing, for which de Castro probably deserves little credit.

Bottom line: Poor personal performance, poor company performance, generous hiring package, lucky Chinese internet company stake, $58 million severance. 

I don’t know. I don’t want to begrudge a guy his lucky fortune, but it seems like the shareholders of Yahoo should not be pleased. The larger point is that this type of disconnect between performance and compensations happens all the time, and shareholders should be displeased. And the culprit in this story is generous equity-based awards, every time.

Yahoo_compensation
Yahoo performance

I’m not really advocating government regulation of executive compensation as, theoretically, this kind of horrific pay-for-performance is self-correcting: Management teams and boards that cut these types of compensation deals should be brutally punished by the market (via a company’s stock price for example) and in the court of public opinion.

On the other hand, we know from enough experience at this point that this self-correcting mechanism does not really work. Compensation consultants who set the standard for recruitment and compensation packages too often have an incentive to keep the numbers high.  They get hired by boards populated by executives who all benefit from this generous equity overpayment scheme. Until we have real shareholder-revolt power (and we don’t yet) my theory of a self-correcting market mechanism is more theory than practice.

It’s complicated.

Other negative-correlation horror-shows of executive compensation and executive pay

De Castro isn’t the worst example of all time for the negative correlation between executive performance and compensation.

That title originally went to Merrill Lynch’s Stanley O’Neal, who wrote down $8 billion in shareholder value from owning toxic CDOs shortly before leaving Merrill with a $161 million equity-based severance payment in 2007.

The reigning champion would be Kenneth Lewis, who took a perfectly healthy Bank of America in 2007 and purchased the giant black hole of value known as Countrywide Mortgage for $4 Billion, a transaction which ultimately cost shareholders an estimated $40 Billion in liabilities, possibly the worst financial deal of all time.

For his next trick, Lewis purchased Merrill Lynch (along with its heaping pile of CDO toxic waste accumulated under O’Neal’s watch) for $50 Billion in 2008, only to quickly write down $20 Billion from Merrill’s balance sheet in the next quarter, requiring a special $20 Billion US Treasury infusion to keep the purchase from entirely sinking Bank of America, previously the country’s healthiest large bank.

After his years of compensation in the $20 million range, Lewis’ departing gift was a $53 million pension from Bank of America. In March 2014, he was banned from management of public company for 3 years and ordered to pay a $10 million fine, as a result of a lawsuit brought by the New York Attorney General.

Ken_lewis_destroyed_value
Heck of a job, Kenny

I’m rendered breathless writing all of that.  Heck of a job, Kenny.

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Mike Bloomberg: More Bucks for Less Bangs

I try to approach contentious political issues with an open mind, willing to be swayed by new evidence, or at least willing to acknowledge that the other side has some valid points. Surely my ideological opponent has logical thoughts, given their starting principles, right?

Mike_Bloomberg_gun_control
My hero this morning

I have no monopoly on good ideas, I remind myself, and the other side usually isn’t crazy. At the same time, people who I largely agree with, I also remind myself, deserve a skeptical look every once in a while. I think it’s a good idea to disagree with my ideological allies on a regular basis, because I’m a contrarian and it helps to sharpen my ideas.

I hope this makes me not wishy-washy but, rather, nuanced. I want to be a complex thinker. Most things in the world are not black and white.

And then there is the issue of guns in America.

Stricter gun control, for me, is what a hero of mine calls a PMC – a Position of Moral Clarity. When it comes to gun control, I’m not interested in your nuance, your different starting principles. Don’t tell me about your 2nd Amendment Rights.

Paul_Farmer_PMCs
Paul Farmer: He has PMCs

James Madison and Thomas Jefferson did not contemplate automatic weapons and ammo that could be picked up at a traveling gun show with a gym-membership ID card. Our right to “A Well-Regulated Militia” is a far cry from the angry 19-year old with an anti-social personality disorder, irregular access to mental health care, and an addiction to playing Call of Duty.

Fuck that.  Kids are slaughtered in schools. Soldiers are shot on their own home bases. Office workers are cut down in their own workplaces. Cops are fired on regularly by people who should never be armed in the first place. Every week.

In other countries in the world – so-called ‘developed’ or so-called ‘developing,’ it doesn’t matter – their weekly violent episodes do not involve automatic weapons. Their mentally ill citizen hurt others with their fists, or possibly, a knife. The result in other countries is hospitalization and trauma, but not mass terror and death, like we have in this country. Every. week.

When I think about the gun control issue, I get so angry I start spitting, because it all seems so intractable. The only other time I wrote about this – in the wake of the Sandy Hook killings of elementary school children and their teachers in December 2012 – I noted that gun control advocates have absolutely zero chance of making an impact while they get out-spent by the NRA 100 to 1.  The Brady Campaign to Prevent Gun Violence spent $20,000 in federal lobbying in 2012, compared to the NRA’s $2.2 million, according to opensecrets.org.

But today’s rant is not just another angry and sad one, because the finance side of this story just got better.

The New York Times reports today that Mike Bloomberg will dedicate $50 million of his fortune to seeding gun control advocacy organizations. Bloomberg will specifically target grass-roots organizations on the MADD model – groups founded and energized by pissed-off moms. One of these groups sprung up recently in my city, and this seems to me a great beginning. Bloomberg’s pledge is certainly not going to win the war against the gun lobby, but if the moms groups can get a running start, we’ve got a start at least.

So, I’m fired up this morning about the power of money to do good, especially Bloomberg’s money. He’s my hero today.

Two other inspirational quotes that fit my mood.

winston_churchill
Some people have a way with words

As another angry man once said: “Now, this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

And then there’s my favorite mom-power clip of Maggie Gyllenhaal at 2:20 to 2:27 – this gets me fired up every time:

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Book Review: Words and Money by Andre Schiffrin


Somewhere on my Top 5 thematic topics on Bankers Anonymous is a hard-core media critique – which I refer to in kinda-joking-kinda-not joking shorthand as the “Financial Infotainment Industrial Complex.”

When I read the Wall Street Journal or listen to financial news on the radio I find myself talking back – usually although not always silently – to the journalists, complaining about the coverage.  The more I know about the financial topic, the more I complain.

My complaints tend toward several common themes:

  1. The coverage relies on a specific anecdote, or a journalist reporting that ‘some people feel that’, without any big-picture or data-rich context around that anecdote or that ‘some people feel’ story.
  2. The expert opinions come from people with a vested (financial) interest.  On Wall Street this is known as ‘talking your book,’ in which a trader consistently offers a view of the world to others that most supports his trading position. I am never surprised to learn that someone in the insurance industry, for example, can speak eloquently about the benefits of an insurance product.
  3. Negative stories about financial and economic news dominate positive stories 10 to 1, leaving the unsophisticated individual investor constantly battered by (mostly) unwarranted fears that in a purely rational sense should have zero affect on their personal financial attitudes and actions.
  4. The topic du jour usually has absolutely zero relevance to a rational individual investor as well as to the vast majority of institutional investors.  Gold! Bitcoin! Twitter IPO! Herbalife!
  5. Simplistic, moralistic, cartoonish coverage by journalists of different roles in the economy.  (Banker = Greedy.  Home loan borrower = victim and moral paragon.  Small Business = Plucky.  Big Business = Soulless.)

Typically I complain silently to myself, shake a metaphorical fist at the newspaper or radio, and then I occasionally vent my frustrations by typing out a Bankers Anonymous post blasting the Financial Infotainment Industrial Complex. That can sometimes calm my nerves.

I have not tended to dwell on the profit-motive of media companies themselves and the swiftly-shifting economics of media companies.

I usually do not get upset about the profit-seeking of media companies because

a) I’m a red-blooded American capitalist (Amurica! Heck Yeah!) so I don’t want to begrudge any designated for-profit company’s attempt at wealth creation; and

b) I don’t know any better

I usually do not get upset about the swiftly shifting economics of media companies because

a) I don’t get a paycheck from any media companies, and

b) I have an optimistic (possibly simplistic) view that what we are in the process of losing in traditional print and analog forms we are more than gaining through the newly unleashed forces of digital media.

André Schiffrin, the author of Words and Money, has spent a lifetime firmly in the traditional print media camp as a publisher (Pantheon Books), founder of a publisher (New Press), and author. He is also a Frenchman in America. And he is deeply concerned about these latter problems that I haven’t considered much – the for-profit model that appears to be serving us badly, and the shifting economics of the media business.  His book has given me food for thought.

A few of his bigger ideas, which I’m still mulling over, deserve attention.

How much profit is appropriate for book publishers?

I learned from Schiffrin that up until the last decade or two, the publishing industry worldwide generally contented itself with a very modest profit margin, on the order of 2-3% profit per year. Picture here the independent gentleman publisher, concerned with the ideas as much as the business. With the recent consolidation of global media conglomerates, however, stodgy book publishing became the low-profit step-child of higher-growth, higher-profit media ventures like television, cable, and newspapers.

Media executives and media investors – seeking to maximize their own opportunities – shoe-horned low-profit book publishing into the demands of higher-profit companies.  The result, according to Schiffrin, is a highly risk-averse publishing climate, in which independent publishers wither and die, and only blockbuster authors and titles get promoted.

In addition, as Schiffrin describes it, book-publishing houses got the Bain Capital treatment: buy the company, add a ton of debt financing, fire the expensive and experienced talent, extract maximum financial value – and then sell.  In the widget-production business, we can (sort-of) objectively admire this move to greater efficiency, but in the book-publishing business, even a capitalist like me can see that the world of ideas is hollowed out and made poorer by this kind of profit-first approach.

At a Barnes and Noble big box store you can see that the offerings reflect the priorities of for-profit book publishing, rather than the priorities of a thoughtful reader. Schiffrin cites numerous statistics from the US and Europe about the increasingly endangered species known as the independent bookstore.

Is book publishing and book selling different from widget-making?

In the context of ideas and culture, I’d say yes.

I don’t have enough knowledge of that world to have any solutions, but Schiffrin makes a compelling case about the problem.

Schiffrin’s solutions come from Europe, in which a combination of governmental and non-governmental (University, or non-profit) institutions fill in the gaps and keep independent book publishing alive, essentially through non-market subsidies.

Movies as an important cultural media, deserving of protection

This seems strange to say, but I never consider the movie industry as a serious part of the cultural ecosystem of my country, but I realized from this book that my American bias has blinded me somewhat. I always think of Hollywood as a purely profit-driven mega-business, so I forget that movies meaningfully contribute to the culture.

I mean, Transformers and X-men, right? I never give it much thought.

Schiffrin, who hails from the European context, does give it a lot of thought. He cites the Norwegian film industry, French Cinema, or the Korean film industry as successful examples of government-subsidized media with a big contribution to make to the cultural milieu.

Why don’t I think of movies a serious cultural contributor? Schiffrin’s book has helped me see now that it’s because independent movies are nearly impossible to find in this country.  Independent movie theaters are even rarer than independent bookstores, and movie chains simply will not leave money on the table to show limited-audience or challenging films.

Unless you’re a serious movie nerd living in Cambridge, MA you can’t find independent films in the US.

Did you know Norwegian theatres are 90% municipally owned, and that allows them to maintain a substantial outlet for Norwegian films?

I know some clever reader will point out that all sort of independent films from the US could probably be downloaded if I looked into it.

Two problems with that response:

  1. I’m not a movie nerd, so I would not know where to start.
  2. Watching a movie in a theater is not the same as streaming it on my laptop.
  3. I would prefer a shared cultural experience, brought about by an independent theater owner with a vision, rather than me engaging in a deep-dive into a singular, unshared project.

I wonder what our world would be like if independent film production and screening actually happened in the US.

Changing economics and functions of digital media

I am less concerned about this than Schiffrin, again possibly because of my ignorance. He suggests a variety of non-market subsidies for journalism, such as foundation support or government support for the cost of producing news. Like most of Schiffrin’s ideas, I have a hard time imagining that catching on broadly, at least in the US context.

I am reminded of Warren Buffet’s prediction a few years ago that newspaper ownership would become appropriate only for philanthropists, seeking out a combination of prestige and good will, but certainly not profits. Even as newspapers have struggled to remain profitable, Buffett himself acquired many newspapers last year as investment propositions, not philanthropy.

Meanwhile, digital news aggregation sites such as Drudge Report, Gawker, Huffington Post and Business Insider offer a new model for news consumption, if not for producing original journalism, as previously understood.
I’ve enjoyed Henry Blodget’s periodic updates on The New York Times’ struggle –to adapt to the changes underway in the shift from print to digital. As a proxy for the business challenges, as well as the cultural shifts at stake, the Times both explains and illustrates the debate for me

Schiffrin’s Words and Money does not explain everything that’s wrong with book publishing, the soullessness of Hollywood, or the impending death of journalism.  His outlook is possibly too distrusting of profit-seeking by media companies, and possibly too hopeful for the meliorating influence of government subsidies for my taste.

On the other hand, when we wonder why independent bookstores die, newspapers slash reporting budgets, and big-budget movies provide as much food for thought as a marshmallow – he’s got a point. The completely free market in these areas leads to some grim results.  Follow the money.

words_and_money

 

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Book Review: Think and Grow Rich by Napoleon Hill

EDITOR’S NOTE: I wrote the below review in 2014, after reading the book because it makes many Top 10 lists of favorite or best business books of all time. I still stand by my review, BUT was fascinated to read a long piece of research in December 2016 on Napoleon Hill’s life career. Hill was, it turns out, a complete con artist. Passing bad checks, setting up fake charities and pocketing the money, engaging in securities fraud and fake stock issuances, marrying five times and leaving each of his wives and children in the lurch, and running from the law throughout his life. It’s a fascinating account, and changes the context of this book. In all likelihood, he completely invented the “Andrew Carnegie personally asked me to research this” justification in his book. He made up his connections to famous people, including Presidents Wilson and Roosevelt. He serially lied and cheated his way through life. In that light, the purported ‘effectiveness’ of his advice is a complete fabrication of his imagination. But hey, who am I to say what works?]

Can you simultaneously find something personally un-appealing, yet respect its effectiveness, when considered on its own terms?  Of course you can. For example that’s my summary view of Miley Cyrus’ amazing career so far.

 I did not enjoy reading Napoleon’s Hill’s Think and Grow Rich – indeed some parts are pretty darn annoying – but I’m intrigued that wholeheartedly embracing the book could help you grow rich.  I’ll explain why I didn’t like it, but if some eager-to-get-rich kid asked me for a short-list of book recommendations for that purpose, I’d include this one.

 I’m not alone in thinking this one deserves to be ranked at the top of the genre-.  I’m making my way through the most highly recommended personal finance books of all time; Think and Grow Rich cracks the Top 10 of most lists.

 Napoleon Hill wrote his motivational book in the 1930s, after interviewing hundreds of successful men of business that he met under the imprimatur of Andrew Carnegie.[1] Written in the depths of the Depression, and published in its final period (1937), the book proved a popular tonic to what must have been the gloomy national mood regarding wealth and opportunity.

 Think and Grow Rich launched both the self-help and the get-rich book genres and Hill became a pioneer of the motivational-speaker-circuit.  Hill’s book is credited as the intellectual predecessor to self-help gurus such as Dale Carnegie (How to Win Friends and Influence People) and Tony Robbins (Awaken the Giant Within) as well as get-wealthy gurus such as Dave Ramsey (The Total Money Makeover), and Robert Kiyosaki (Rich Dad, Poor Dad).

 The self-help-and-get-rich progeny of Think and Grow Rich might be reason enough for me to trash this book, as I have a severe allergic reaction to finance gurus.[2] I could not stand reading Secrets of the Millionaire Mind by T. Harv Eker for example, as, stylistically, his book oozes snake-oil, alongside some reasonable ideas.

 What else did I not like?

 A lack of doubt

 Unlike 21st Century probabilistic thinkers – Nate Silver is my paragon here – Hill does not admit any doubt in his thought process.

In fact, his “Think and Grow Rich” method requires the suspension of disbelief. He writes in the first chapter that if you doubt his wisdom, his wisdom cannot work for you.

 A friend of mine, who recently attended a Tony Robbins “Business Mastery” seminar, told me that this faith component forms a key starting point for Robbins’ classes as well.

“Look,” Robbins explained at the outset of his weekend seminar, “You can decide this is all bullshit.  And maybe it is, and maybe it isn’t. But for it to work for you at all, you have to suspend disbelief and embrace this. Otherwise you should just go home now.”  My friend stayed, and found Robbins utterly compelling.

(I probably would have walked out then. In a related news item, I skipped Catholic mass this past weekend.)

 While I find Robbins’ moxy impressive, intellectually I rebel.  I remember a lesson from my academic advisor in college about thought-systems that cannot be criticized from within, such as Marxism or Freudianism, without the critic immediately facing intellectual exile from the system – as a member of the bourgeoisie in the former example, or utterly repressed, in the latter.

 If you can’t question it, how do you test its reliability?  Intellectually, I’m more of a test-your-assumptions kind of guy.

 Questionable science

 Hill – like his self-help progeny – combines utter certainty in his methods with an early 20th-Century “scientific” style. His style reminds me – and not in a good way – of a more confident age in which “science” and “progress” promised to unlock human motivation, imagination, and self-confidence.

 Here’s a sample of Hill’s prose, in which he references his ‘research.’

 “From my research, I have concluded that the subconscious mind is the connecting link between the finite mind of man and infinite intelligence. It is the intermediary through which you may draw upon the forces of infinite intelligence. Only the subconscious mind contains the process by which mental impulses (thoughts) are modified and changed into the spiritual (energy) equivalent. It alone is the medium through which prayer (desire) may be transmitted to the source capable of answering prayer (infinite intelligence).”

 I mean, read that over again.  What can we do with this? This falls somewhere between “certain” science and mystical gobbledygook.

 As you can see from that sample, the problem is not just his early 20th Century mode of thought, but also his clunky writing. This gets tedious after a while.

 But can this book help you get rich?

 Tony Robbins would say that question is far more important than my distaste for pseudo science, unearned certitude, and semi-mystical psychological jargon.

 Getting rich is not easy. To go from not-wealthy to wealthy does not happen by accident.  Most of us find the process mysterious, the road uncertain, even our own personal agency in the process unknown.

Can we make it happen ourselves? Or is it all mostly luck?

If Hill has a method that helps, who am I to carp?

 Here’s why I suspect Hill’s book can help.

 His step by step approach, which I’ll outline below, seems to set the right mental conditions for an individual dedicated to pursuing wealth. And if you adopt the attitudes and activities that he warns against, achieving wealth is probably impossible.

 He presupposes no particular level of education, or any special leg up in the world for his readers.

Interestingly, for his particular moment in time – and our own moment in time for that matter – Hill sees no structural barriers to wealth creation. 

He admits to no insurmountable economic conditions, no vast inequality gaps, no barriers of gender, race, and class standing in the way of an individual getting ahead in the world.

While his disregard of barriers seems naïve – many people do have a much easier starting point and journey than others – the mental attitude of “no barriers” probably is the right one. Even though these barriers exist, a modern Napoleon Hill would probably urge his readers to reset their mental compass and ignore the barriers.

Said another way, few people who self-conceive as victims of a rigged game have the right starting mind-set for pursuing wealth, the way Hill recommends doing it.

 It’s all in the mind

 Interestingly, Hill specifically declines to spell out in his book what the ‘Secret’ of getting wealthy is, claiming that readers need to open their mind to an unstated, read-between-the-lines message woven throughout his chapters and anecdotes. He claims that readers should, upon finishing his book or upon re-reading it, experience a flash of intuition that will guide them in their journey to great riches.  Maybe I’m too prosaic for hidden secrets, but I found his lessons not hidden secrets at all.  They are, in fact, easy to summarize, for your benefit.

 Hill’s steps to wealth – or any other difficult-to-achieve success.

 1.      Mastery over your own mind is a key – no, the key – to success. Fears, doubts, procrastination, negativity, defeatism – all of these must be conquered.

2.      If you want to get wealthy – or achieve other difficult-to-achieve non-monetary goals – you need to set extremely specific goals: How much money you will obtain down to the precise dollar amount, by what precise date, and through what process.  Write it all down, say it out loud, commit it to memory, and post it in a place where you can see it every day.

3.      Decide, very specifically, what you are willing to sacrifice in order to achieve your goal – since nothing in life comes for free.

4.      Repeat out loud to yourself the goal from step #2 as a mantra, upon waking up in the morning, and upon going to sleep at night, and then probably in the middle of the day as well, until you lather yourself into a white-hot obsessed state of mind, focused intensely on your goal.

5.      Seek out and attract a team of experts who know more than you, or have complementary skills to you. Hill calls this team your personal ‘Master Mind,’ – a kind of board of directors willing to work with you toward your set goal. Figure out a way to compensate your Master Mind team, as nobody works for very long without some benefit.

6.      Acquire, by your own efforts and the inputs of your Master Mind team, the specialized knowledge you’ll need to succeed.

7.      When failure and setbacks thwart you – and they will – understand that failure is just an intermediate step toward ultimate achievement of your goal.

8.      Commit to a continuous program of clearheaded self-analysis and self-improvement. To lead your team most effectively you will need to adopt and embody traits that make you deserving to lead.

 I may be doubtful about some of Hill’s style, but I don’t doubt that these instructions – more fully explained in the book’s few hundred pages – would help anyone on their road to either riches, or some other large ambition.

 Can anyone get wealthy just reading Think and Grow Rich? Well, the book sold 60 million copies and something tells me that not everyone has made it. On the other hand, not everyone has committed as fully – without any lingering doubts – as Hill urges.  Including me.

 But I wrote down my own mantra. I posted it on my bulletin board. I’m saying it out loud to myself. I’m working on it.

Please see related book reviews

 Nate Silver’s The Signal and the Noise

 T. Harv Eker’s Secrets of the Millionaire Mind

 

think-and-grow-rich-napoleon-hill


[1] There’s no evidence whatsoever he interviewed any women.

[2] I spontaneously break out in hives around my chest, neck, thigh and back area if I walk too close to that section of the bookstore.

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