Advice to My Grandchildren Follow-Up


Monday, February 23, 2004


The last issue of The Success Margin, "An Open
Letter to My Grandchildren," apparently struck a
deep chord in the minds and hearts of many readers.

There was a huge and favorable response. Plus,
requests to reproduce the article from subscribers
all over the world.  This included friends and
clients, my own children, and grandchildren.

The most common comments were along these
lines: "Thanks for your inspiring thoughts;"
"I'm going to give a copy to my children
and grandchildren;" "Couldn't have said it better
myself;" "Loved it;" and "I wish I had this
information earlier myself."

There were also very interesting questions to
which I devote this issue. (In case you are a new
subscriber, you can get the previous issue by

Question:  You refer to Ayn Rand as your favorite
author.  What are the three most important things
you learned from her?  And which of her books do
you recommend?

TN:  Ayn Rand truly helped me deal with life more
effectively than any author I've ever read.  A few
key highlights:

1. The true role of the entrepreneur in society.
And why they are the "undiscovered heroes."

2. The crucial difference between positive and
negative selfishness.

3. That I was not alone in my desire for individual
freedom in my own life.

I suggest you begin reading "Atlas Shrugged" and
"The Fountainhead" first.  Undoubtedly you will
then want to read the rest of Ayn Rand's writings.

Question:  Why do you favor majoring in History,
Philosophy and Psychology rather than business

TN:  I believe these subjects help provide a well-
rounded education. They help you understand how
people really tick.  They also teach one how to
be a better thinker and writer--a must for anyone,
especially an entrepreneur.

Business subjects as they are taught in most
universities tend to be based on theory, not
real-world experiences, and because of their
impracticality, not useful.

Question:  Other than your own business, what
do you consider the best investment? And the

TN:  The best investment can be one of two
possible things. The first is well-located
income-producing real estate, such as a house
or apartment.  You can produce a consistent
return on your investment of 10% or more.

The other super investment is shares in a
solid, well-managed company.

The very worst investment anyone can make is
a car, especially a new one. The value of your
new car investment drops by 20-30% or more as
soon as you drive it home. The value of the car
can often be less than what is owed if it's bought
on credit. Cars help keep many people living
paycheck to paycheck all their working lives.

I've recommended my "Mercedes Strategy" to
seminar attendees for years and have seen
remarkable and gratifying results for my readers. 

Here is how the "Mercedes Strategy" works.

-- Look for a previously owned Mercedes, 5-10
years old. Logic: A Mercedes car is seldom
neglected, abused by its original owner, who
tends to be a conservative older person. Such
a car in good condition can easily last for 250,000
miles or more. Look for mileage under 100,000
miles. You can check dealer lots and newspaper
ads as good sources of leads.

-- Ask for the service records and permission to
bring a good mechanic to inspect the cars you've
found. Of course, agree upon what the inspection
will cost you before proceeding. Only if the
mechanic finds the car mechanically sound
should you proceed.

-- Negotiate a price.  Make an offer.  That's it.

Recently a seminar attendee and friend, Christian
Boucke from Germany, met us at our hotel in
Holland for lunch. He picked us up in a beautiful
white Mercedes sedan, which looked and rode
like a new automobile.

Christian bought the car the past year after
attending one of my seminars in Bonn.  The price--
just $3,000! And he paid cash so he had no car
payments, for the first time in his life.  His
friends and clients also loved this prestigious
car. They assumed it was new. He is delighted
with this lovely automobile.

Middle class people tend to buy the most new cars.
Compare the "Mercedes Strategy" with buying a
new car of any brand every couple of years. 

The result:  You become a slave to car payments of
perhaps $200 to $450 per month, most of which is
interest.  Worst of all, it's a declining asset
all the while.

Buying new cars makes banks and finance companies
rich.  And tends to keep the middle class person

Most new car companies, including Ford and Chrysler,
actually lose money on the cars themselves. 
Meanwhile, they make a fortune in their finance
companies. Financing you is a very profitable

Once fully understood, is this losing strategy
what you really want?  You definitely can replace
the philosophy of the loser to that of the true
winners. A car is one of the best places to start

The poor and the middle class spend their entire
lives buying liabilities they erroneously think are
assets.  One thing is certain. You cannot continue
the practice of putting your money in poor
investments if one day you want to become wealthy.

Question:  How much money in the bank and
investments do you think a person should have
to be considered rich?

TN:  Everyone has a different level of expenses.
You need an amount that earns enough in passive
income--which includes dividends, interest,
rentals and royalties--to maintain your living
standard without the necessity of working.

Working then becomes a choice, enabling you to
spend your time doing nothing at all.  Or doing all
the things you love regardless of the income

Question:  I have always considered buying a home
that I live in a good investment.  Indeed, nearly
every extra penny I earn goes into my house.
What do you think Ted?

TN:  I define an investment as an asset which pays
you a rate of return worth the risk. A home
investment usually does not meet this standard. 

I believe you need a dose of tough love. Buying a
home in most cases keeps the great middle class
forever broke.

However, to be fair, a house can be a decent
investment in some instances.  For example, if
you buy a home for $100,000 with a $20,000 down
payment and sell it for $200,000 five years later.
But, of course, this result is not certain.  And
many experts feel home prices in most of the U.S.,
Europe and Asia are so overpriced they are in a
house "bubble."  There is at least a 50/50 chance
the market will crash.

But even in an ideal scenario, during those five
years you own the house before you sell, if you
don't make payments on the home, who then owns
the house? The bank does, not you.  Correct?

Even if you make house payments and don't pay
real estate taxes, who then owns the home? The
state, not you.  Correct?

To compound the problem even more, what do most
people do when they get a raise?

They buy a bigger house with an even bigger
mortgage.  And they are still living paycheck
to paycheck. And this vicious cycle continues
forever. The home buyer stays in debt permanently.
The only real winners again are the banks and
finance companies.

The real killer of wealth for the average person
is debt. A financially literate person should take
the necessary steps to get out of debt as soon as

John Cummuta, one of my seminar attendees, offers
the best program I've seen on getting out of debt.
It's published by Nightingale-Conant and is called
"Transforming Debt Into Wealth."

The rich have a completely different philosophy
about buying houses, especially when they are
getting started. They don't buy single-family houses.
Instead, they invest in a duplex or triplex residence.
They live in part of their building. They collect
enough rent to meet and often exceed their mortgage
payment. So they live rent and mortgage free.

Their investment in a home produces income rather
than expense.  Such a strategy meets the definition
of investing.

Instead of working and trading time for money, your
home investment is working to provide income for you.

But most people today are in a precarious shape
financially. They are getting deeper and deeper
in debt. They place even bigger mortgages on their
houses to buy the things they want.

Indeed, during the past 12 months, the savings rate
of Americans at 2.4% was at the lowest point since
the Great Depression.

However, personal bankruptcies were also at an
all-time high. But the real bankruptcy is not just
financial. It's when consumers buy into the wrong

Politicians, including President Bush and Alan
Greenspan, are urging U.S. consumers to spend,
spend, spend to make themselves and America
rich.  This message is so erroneous and outrageous
it borders on being criminal.  They do or should
know better.

In your heart of hearts, does living on credit
seem like a path to great wealth to you? I can
assure you, no one in history has ever gotten rich
this way.  And never will.

There is only one certain path to wealth.  You will
get rich by making and supplying goods and services
that other people want to buy.

The old virtues--saving money...hard work...
discipline...good marketing--that's what it takes.
And this will always be. Yesterday, today and

Question: What's the very best way to make
BIG money?

TN:  Without a doubt, it's in a business of your own. 
It's the only way in the world you can actually
"manufacture" money.

There is no other way. You can start a small
business with an idea, little or even zero capital,
and in a short time be earning hundreds of thousands,
even millions, of dollars each year.

Question:  What's the very best investment you can

TN:  Yourself. Real-world education.  Books, tapes
and seminars can supply you with knowledge no
one can take away. You can become a master in any
subject you choose within three years just by reading
one hour per day.  And a world expert in five years.

But, you've got to think and act on our own. Most
Americans and Europeans are becoming non-readers.
Instead, many sit passively watching an average of
25 1/2 hours of TV each week.  I'm not disparaging
TV.  It can be a great educational medium, too. 
But you must select programs carefully or you
waste the biggest and most valuable asset we all
have equally--time.

Clearly, it's far better to spend your time reading
and listening to the best minds in the world in books
and tapes by people who really "walk the talk."

Plus, you don't have the time in your life to make
all the mistakes and acquire all the knowledge you
can gain from all those who are willing to share
theirs with you.

Question:  You recommend learning how to sell
as key to small business success.  But why is the
word "sales" so negative in many people's minds?

TN:  Lots of reasons.  First, many high-pressure
"boiler room" types give the profession a bad name. 
Plus, lots of films depict characters who are the
worst examples of salespeople.

The reality is this. The most successful people
I've known, including many multi-millionaires,
are almost 100% just the opposite of the above

Sales and marketing superstars are usually great
listeners, warm, humble, and down-to-earth.  They
learn how to communicate intelligently in a "no
pressure" manner.  They understand that if any
buyer is pressured and regrets their purchase,
they will not ever become a loyal, lifelong

Loyal, long-term repeat customers is
where the real money is.

Super salespeople are also scrupulously honest,
for they know their reputation is their biggest

Don't listen to those who disparage salespeople.
Instead, learn how to sell like an ace.  You'll
live like a king.

As you begin to achieve your entrepreneurial
goals with the right philosophy, your long-term
success is inevitable. But please understand
what approach to improvement can give your life
the most excitement, meaning and fun.

The relentless pursuit of excellence.

Your correspondent,

Ted Nicholas

Nicholas Direct, Inc.
P.O. Box 877
Indian Rocks Beach, FL 33785

P.S. "The secret to success, in life and in
     business, is to work hard at the margin.
     Relentlessly.  It's as powerful as compound
     interest, the eighth wonder of the world.
     Those little marginal extra efforts will
     inevitably grow into something big."
                             --Bill Bonner

     Little things mean a lot.

     "God is in the details".

Copyright 2004 Nicholas Direct, Inc.