Do You Have to Take Risks to Get Rich? (Here’s the Truth)

April 12, 2023

Is taking risks a necessity in order to build wealth? In this highlight, Brian and Bo discuss what it takes to build wealth.


For more of a deep dive on how to build wealth, check out this full show called, “How Millionaires Build Wealth! (With Dave Ramsey).”


So, we’ve talked about folks that are born into it, which maybe you can’t control a ton. We’ve talked about another one, which are the virtuosos who were born talented. Maybe you can’t really control that a whole lot as well. This third one you can control; however, it’s still in our world a very small segment of the population. Not everyone can succeed at this, while everyone may have the opportunity for it. And we’ve just dubbed this the risk taker. Oh yeah, this is the buck wild way. This is where you’re like, “I’m gonna be a cowboy. I’m gonna figure out a way to take my risk tolerance and will myself into a success by just doing crazy stuff.” And we put examples. This is your entrepreneurs. These are the people that are very comfortable with leveraged debt, you know, who go out there real estate development moves into it. This is the explorer. It’s not uncommon that we talk about, you know, when we all look and when you have people who pick on the billionaires, how did people get to be billionaires? Billionaires are the explorers. These are the people that go discover something, they create something that we all didn’t know we needed. This is your Steve Jobs, this is your Bezos, your Disney, your Musk. These people actually created wealth by creating something we didn’t even know we needed. But none of this is what I call easiest.

Boaz already shared 10; this is a small, small sliver of the people who are wealthy. And I think what’s interesting about these risk takers is they see the world differently. They view it differently than the rest of the population. I think it was Steve Jobs who had this quote: “Everything around you that you call life was made up by people that were no smarter than you.” I think he really had this idea of, “I can do anything. I can build anything. I can accomplish anything because I look around at all the things that have happened and recognize I can be this. I can be just as much a part of that as anyone else. And so can you.” And then, of course, Brian, this one is one of your favorites. Walt Disney said, “Hey, it’s kind of fun to do the impossible.” These risk takers, these folks who are willing to go out on a limb, are willing to do what other people are not willing to do. And what can happen is they can have outcomes that may not quite be available to other folks because they’re willing to do those things.

Well, I want to give the cautionary tell; we always love to talk about the risk takers because they have the phoenix-type stories where they just this rocket ride to success. But you know that there’s some survival bias in this. There is a much more gory path of carnage of the people who tried to go this path of risk and it actually failed on them. So we want to create some tips and tricks for the money got take for maximization if you are going to go this buck wild path. And here’s what we came up with. Definitely, if you’re going to do anything like an entrepreneur-type activity or take risk, you want to measure twice, cut once, endeavor and make sure that you’re not just stepping out on passion and excitement that you actually have a plan and a system for success. I think when you look at the success of small businesses, it’s something like the vast majority fail within the first year, and then the number that make it to five years is an even smaller percentage of small businesses, and often it is because of a lack of preparation. It’s people not recognizing that there’s work that has to go into the business before you actually hang the shingle and go out and launch yourself. Because it’s hard, there is risk involved, and there are going to be unknown unknowns. I think so often, especially in the world in which we live today, social media and TikTok and Instagram has made us all think, ‘Oh no, you need to go seize the day, carpe diem, go be the best version of yourself.’ And while, yes, we want you to do those things, it’s not something you wake up today and decide you’re going to do. It’s something that you woke up a year ago and began putting actions into motion to be able to work towards that goal.

Even if you have the talent, you have the passion, and you even have the good business structure or setup, you still likely need three years of liquidity absolutely and money to get you through that. Don’t just assume that you’re so good and so passionate that it’s going to work. You need to actually have a plan, and you need to have liquidity because I think a lot of people reach failure from just that lack of the step. If they would have just maybe worked in their boring job for a year or two, built up that extra cash, the bridge to success, I think you would see that instead of the scary stat of how many businesses fell or how many risky endeavors, you’d have a much higher percentage of success. I love what you said, Brian. You said you need to have a plan in place, and when we think about entrepreneurial endeavors or even risk-taking endeavors, not even starting a business, but if you’re thinking about a real estate investment or you’re thinking about creating something, you’re thinking about an idea, you need to have a plan in place. But it does not need to be a singular, solo-focused plan.

You need to have a three-dimensional plan, a plan that you’re able to look at through what we call the 3D glasses. Yeah, make sure you put on your 3D glasses, just like if you’re going to start a business. I know I went through this exercise when we’ve done commercial real estate, which was lever debt. We did this exercise because here’s what it means when we say do a 3D plan. By putting on your 3D glasses, I want you first, let’s go ahead and daydream. Go ahead and put the dream of, ‘Oh my goodness, we are going to be rich.’ Because that’s good, that’s fun, that’s energizing, that’s motivating to have a plan with all the things lining up, and you getting green lights and having success. But then I want you to also do step two, which is a down to earth plan. This is what you think will happen, highest probability outcome. This is what you not necessarily, you’d still probably be rich down the road, but this is going to take a while, there’s going to be some obstacles, but this is the down-to-earth plan. And then, of course, do not skip the third one of the 3D glasses. This is when, ‘Oh my goodness, how was I such a knucklehead that I did this? It’s gone. Everything that could go wrong has gone wrong.’ It’s better if you approach this on the planning side than the reality side because it could be catastrophic if you’re adjusting to this plan for the first time as you approach it in life.

It’s much better if you create a plan that addresses all three of these situations. A little bit of planning can be so valuable because risky investments become reasonable when your pockets are deep enough to weather any storm that runs your way. It’s not uncommon; it’s why we see, I’m going to use this as an example, and it’s a bit of a trending example presently, but if the average everyday Joe decided they wanted to go buy a social media platform, they might not be able to weather that. That might be too risky or too dangerous of an endeavor. However, if a billionaire who already has deep pockets says, “Hey, I want to go take this risk. I want to go pursue this opportunity,” they likely will be able to weather that storm because they’re deep enough. To thine own self be true and recognize when you go out and take this risk, are you getting too far out ahead of your skis, or is it a calculated risk that is okay for you to take in your current financial situation, so that it won’t derail all the other pieces of your financial life? Well, I think when we got into commercial real estate, a very wise individual that we know, he was a former landlord of ours. When we were talking to him to get some guidance, he said, “Boys, I hope you got enough money to weather the storms that come your way,” because that’s what anybody who knows anything about lever debt and real estate is, that you can have volatility in periods where you drag in that U-shaped recovery for years, and you just need to make sure you have enough resources to cover that darkness. It’s the same thing with the business. I told you when I started my first company, I built up a cash reserve to carry me, a plan to carry me for three years, because I knew it was going to take a while to replace the income I left behind. Do not skip the step of making sure that you have the liquidity, that you’ve actually built deep enough pockets to give you the opportunity to actually succeed, because if you go into this, you don’t have those resources, you might be disappointed. Because just like oxygen is so important for us to breathe, your liquidity, your cash, is going to be very important to your success of whatever crazy buck wild endeavor you’re going after.

Check out our show called, “Millionaires Share Their Secrets to Financial Success! (2022 Edition).” We break down our annual wealth survey in this episode and more!



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