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 visiting

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 subjects?

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 worst?

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’vefound. 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 beautifulwhite 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 prestigiouscar. They assumed it was new. He is delightedwith 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 broke.

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 business.

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 continuethe 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 produced.

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 possible.

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 philosophyabout 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 philosophy.

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 shouldknow 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 tomorrow.

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 make?

TN: Yourself. Real-world education. Books, tapes and seminars can supply you with knowledge noone 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 stereotypes.

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 customer.

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 sset.

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 entrepreneurialgoals 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 727-596-4966 E-mail:

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”.