Want to Become a Millionaire? Be an Entrepreneur…

I’m listening to The Millionaire Mind on CD during my mini-commute (I can’t, in good conscience, call it a commute when people I work with drive 2-3 times longer than I do). The Millionaire Mind is one of those books, much like Freakonomics, Good to Great, and The Millionaire Next Door (the prequel to the title at hand) that’s based almost solely on cold, hard data.

Thomas J. Stanley, a researcher who has studied the wealthy in the United States for almost as long as I’ve been alive, discovered some amazing trends in his data, which led to the conclusions he shared in The Millionaire Next Door. Things like:

  • 50% of millionaires have never spent more than $399 for a suit, $140 for a pair of shoes, or $235 for a wristwatch.
  • Most millionaires have never spent more than $31,900 on a motor vehicle.
  • Only a tiny fraction of millionaires inherited their wealth; most became wealthy in one generation.
  • Although self-employed people make up 20% of the workers in America, two-thirds of the millionaires are self-employed.

The gyst of his first book is that people who appear wealthy, the lawyer down the street with the $3,000 Armani suit, or the Physician driving the $100,000 sports car, are most often Under-Accumulators of Wealth, meaning they earn a lot but their net worth is small due to purchasing habits. Page after page of data supports his claims.

In The Millionaire Mind, Stanley takes it one step further and delves into the educational backgrounds of millionaires, how they invest, their family life, and on and on…

One of the key points is that becoming a millionaire is much more likely if you own your own business. What’s even more interesting is almost all of the millionaire entrepreneurs he surveyed run what he calls “dull-normal” businesses; they are welding contractors, auctioneers, rice farmers, pest controllers, coin and stamp dealers, and paving contractors.

This blows the lid off theories that you need to be a basketball star, stock market maven, or famous actor to become wealthy. In fact, since these occupations demand that you spend a large portion of your income to keep pace with your peers, they often results in people with seven or eight figure incomes winding up with a very small net worth. Look at MC Hammer or Michael Jackson – both made millions upon millions of dollars from their music careers and have experienced serious money troubles once the millions stopped rolling in.

Another key point Stanley makes is that you don’t have to be at the top of your class to become wealty. Of the millionaires surveyed, only 2% of them were in the top 1% of their college class. The average GPA is a modest 2.92 on a 4-point scale. Stanley’s theory is that wealth is generated much more by creative and practical (common sense) intelligence, rather than analytical intelligence (book smarts). Hard work and discipline also rate very high on the scale of needed attributes.

I can’t recommend these books enough for those interested in entertaining, yet sound theories on wealth and the wealthy.

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#1 Black on 04.17.06 at 8:41 am

Hi Rob, I have a friend who became a millionaire at 40. For twenty years he worked hard, saved every spare dollar, lived a frugal life and never spoke a bad word to his few bosses. Once he achieved his wealth he was so used to the life he was living for 20 years he didn’t know how to enjoy himself. Life’s a balance. Best regards, Black

#2 Rob on 04.18.06 at 1:38 am

I couldn’t agree with you more, Black. I’m the first guy to take time off, travel around the world (to Africa and Hawaii in the past 9 months), and spend every minute not working with my family and friends. I learned at a young age to enjoy life (“work hard, play hard”), and that’s a neat part of both of the two “Millionaire” books I mentioned above. Stanley talks a lot about how the millionaires in his books are well-adjusted people who enjoy their free time and aren’t misers who scrimp and save for every dime. This is the opposite of what most people would think.

#3 http:// on 04.20.06 at 5:03 am

Great Book! I enjoyed it when I read it (Also check out “The Millionaire Next Door”)

#4 Adnan Masood on 04.26.06 at 2:47 pm

Stanley has done an excellent job slicing and dicing all this data and providing us the resultant trends. Like you said, Entrepreneurship seems to be the way to go if you want to be a millionaire however, every one in five businesses are statistically doomed to fail and hence the catch-22. I think being a level 4 or 5 leader (See Jim Collins’s Good to Great ISBN: 0066620996) along with Entrepreneurship is one of the salient features that economically productive people possess. I highly recommend this book to everyone even if economical productivity is not their goal. The discipline, hard work, integrity and other traits defined in this book are valuable for being successful in all walks of life.