A Mental Exercise: What I’d Do If I Lost Everything
I started thinking about people who lose everything, or what Charlie Munger calls returning “to Go”, as in the Monopoly board.
Once you are rich, your primary motivation shouldn’t be to get richer, it should be to avoid wipeout risk, or returning to go. But as a training exercise, I decided to contemplate what I would do if I woke up tomorrow and the last ten years had been a dream. What would my first course of action be to rebuild until I got my financial affairs in order?
It occurred to me that I only need five things, which could be purchased for less than $10,000 in startup costs. I’d need a 27″ iMac with a lot of memory, a copy of Adobe Creative Suite Master Collection, a high quality color printer, an incredibly faster Internet and ethernet connection, and a trading platform from a major broker so that I could begin making investments from the cash I generated from my online operations. I’d focus on building some sort of retail site that let me tap into vendor capital and earn at least 50% to 80% gross margins – a real sub-specialty that no one else had thought of and in which there was little competition.
My guess is it would take 24 to 36 months to get to the point where the company could put me in a decent house, with a good car and a few thousand dollars a month in spending money without using any debt. If Aaron were working with me, in that same time period, I could probably get our combined household income up to at least $100,000 if we did all of the grunt work ourselves. That would be a big enough base, if we were staying in a tiny apartment or something, to put money to work. Before long, we’d be collecting rent and dividends. I’d force us both to go get jobs so that 100% of the company’s money could be investment capital. That would let us put away $40,000 to $50,000 per year after taxes for me to compound. From there, I could start thinking about doing something seriously, but I’d do it without a lot of pressure. I’d do it in secret so no one knew I was building something. It would be stealth wealth in the truest sense of the word.
The thing is – the most valuable asset I have is the knowledge that exists in my head. You could give these same tools to someone else and they wouldn’t do much good. The tools are only as useful as the craftsman utilizing them.