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Mindset or luck: what makes people rich?

Mindset or luck: what makes people rich?
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First Published: Tue, Jul 14 2009. 10 55 PM IST

Updated: Tue, Jul 14 2009. 10 55 PM IST
A lottery. A rich ancestor. A winning stock. No, I don’t get any of these, so how do I get rich? If you’ve never had this thought then either you need the truth serum or you already work in the non-profit sector (wicked grin!).
The quest for gold is as old as we can remember, but do we know what makes it flow to some people and not to others?
In 2006, CNN Money tried to answer this timeless question by getting a reporter to ring doorbells in the richest areas of cities across the country and ask this question. Besides getting chased by dogs and almost getting flattened by sports utility vehicles, the reporter found three common characteristics in the people he met by knocking on their ebony doors.
One, the rich build their own luck. The article cites a study, now a book, called The Luck Factor, written by British professor Richard Wiseman, that makes the correlation between feeling lucky and being so. Wiseman identifies lucky people as those who generate their own good fortunes through four basic principles.
They are skilled at creating and noticing chance opportunities, make lucky decisions by listening to their intuition, create self-fulfilling prophecies via positive expectations, and adopt a resilient attitude that transforms bad luck into good.
To showcase the correlation of lucky people with success, and therefore wealth, Wiseman gets two sets of people, one who described themselves as lucky and another set that said they were not, to count the number of photographs in a newspaper.
The out-of-luck people spent a long time doing so. The lucky ones spent just a few seconds. That’s because on the second page the professor had put a message in a large font saying: “Stop counting; there are 43 photographs in this newspaper.”
The luckies, who are forever looking out for good luck, saw it right away. The other set, who believed that nothing good happened to them, totally missed it. Wiseman believes that the same rules work in real life as well.
The rich, then, do not consider the world as a place that this fixed. Rather reality is to be constructed according to what they believe. I know it sounds like the new-age self-help stuff. But is it all really that far-out, what if we find science nodding its educated head? I found an echo of this in a 2004 documentary called What the Bleep Do We Know!? that a friend passed on recently to me.
The film essentially talks of the convergence of quantum physics and spirituality. Told through a panel of speakers with some dramatizations, the viewer does not know till the end which of the speakers is a scientist and who is a spiritual motivator.
Both sets of speakers talk of a universe of unlimited possibilities, limited only by the individual himself. One speaks in the language of atoms, neutrons and waves of possibilities, the other talks of consciousness.
But both say the same thing: you can fix your own world and decide how rich or poor you are going to be.
Two, the rich have a growth mindset. A growth mindset, as defined by Stanford professor Carol Dweck, author of the book titled The Mindset, is one in which people believe that their “most basic abilities can be developed through dedication and hard work—brains and talent are just the starting point. This view creates a love of learning and a resilience that is essential for great accomplishment”.
The opposite type, the fixed mindset people, believe that “their basic qualities, such as their intelligence or talent, are simply fixed traits. They spend their time documenting their intelligence or talent instead of developing them. They also believe that talent alone creates success—without effort”.
The first set are successful and the second set are not. Wealth and money tend to ride pillion to success and accomplishment.
The third quality the rich have is the ability to take calculated risks. We are familiar with the all-or-nothing way of investing. That’s the typical Indian urban investor—she’s zero risk in fixed deposits till the market nears the peak, and then she runs to the highest level of risk and invests in initial public offerings that will have revenues 10 years from today, leave alone profits.
This is not taking a risk, this is gambling. No wonder that the middle-class investor does not seem to get rich, because he gambles and does not take a calculated risk. It is the latter that leads to wealth, the former leads to only angry letters to the Prime Minister complaining about rigged markets.
Charles Goodwin, in his book titled The Secrets Of Wealth Creation Revealed, says that the essential difference between these two is that of the element of freedom to make a decision. In a gamble you are allowing yourself to be the victim. In a calculated risk, you remain the master of your own destiny.
Essentially Western, do these rules work in India, or is it still a place that who you know is more important than what you know? What do you think?
Monika Halan is a certified financial planner and currently working as adviser, Pension Fund Regulatory and Development Authority. Your comments and personal finance queries are welcome at expenseaccount@livemint.com
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First Published: Tue, Jul 14 2009. 10 55 PM IST
More Topics: Expense Account | Monika Halan | Luck | Rich | Poor |