The Wealth Elite summary

The Wealth Elite

Book: The Wealth Elite by Rainer Zitelmann

The typical $10M entrepreneur is a gritty high-achiever, contrarian, optimist, skilled at opportunity finding, sales, decisions, and problem-solving.

This is the only book I know that did a study – with scientific rigor – of the personality and background of wealthy people. This book is the author’s PhD thesis. It’s miles away from cheesy books like “7 habits of successful people”. It helped me refine which personality traits I wanted to develop. And also clarified which ones I would never be able to compete with, and therefore, what to look for in my business partners to complete me.

Main ideas:

Their personality

They are contrarians

  • They were misfits, difficult employees, unwilling to submit to authority.
  • They love freedom and independence.
  • They look for business domains with less competition.

They believe they are 100% responsible of their fate

  • It’s called “internal locus of control”

They seek achievement

  • They love competition, like in sport or music.
  • They like dominance and look for recognition.
  • They like having a powerful position in society.
  • They love the path more than the result. Money is a by-product for them.

They are driven by goals

  • They find a niche with high profit and low competition.
  • Their goals are the foundation of their motivation.
  • They create motivation by contrasting their desired future with their current reality.
  • They set (1) specific and (2) challenging, but (3) achievable goals.
  • They are particularly focused.

They are confident in their ability to reach their goals

  • It’s called “self-efficacy”.
  • They believe their skills are slightly above the goal actual difficulty.
  • It motivates them to start.
  • This confidence was built on meaningful achievements, modeling the right people, and encouragement from relatives.
  • They are optimists with an “I can do it” attitude.
  • They have a tendency to underestimate risks
  • They are insensitive to critics.
  • They are ready to fight to defend their position.

They persevere in face of adversity

  • It’s key to achieving goals.
  • They are resilient, they fight back if they fail.
  • They have low levels of neuroticism, which gives them high mental stability.
  • They stay positive.

Their social skills

They are good at selling

  • They are relatively extraverted and open to new experiences.
  • They use their expert knowledge and pedagogic skills.
  • They actively network.
  • They have good empathy. They understand what the client is thinking and feeling, to adjust their approach accordingly. They know their client’s fears and objections before they vocalize them.

They can be tough if necessary, but prefer harmony when it’s possible.

  • They are ready to have unpleasant talks if necessary, like saying no to a bad customer or firing an employee.
  • They are not afraid of conflict.
  • They are direct and don’t sugarcoat.
  • But they are not aggressive nor tyrannic either.
  • They prefer to have harmony if possible but are ready for conflict if necessary.
  • They become less confrontational with age.

Their modus operandi

They create their own luck

  • They are actively searching for opportunities and are better at identifying them.
  • They look for low competition opportunities.
  • Their relative extraversion and openness to new experiences are as useful as in sales here.

They follow the principles of effectuation

  • They start with what they have.
  • They bet only what they can lose.
  • They pick partners on competence and excitement about the goal.
  • They focus on what they can control.
  • When life gives them lemons, they sell lemonade.

Their decisions and problem-solving skills

They are creative problems solvers

  • They have an above-average ability and willingness to learn.
  • They learn and solve problems by trial and mistake.
  • They enjoy the creative process of problem-solving.

They decide on guts for human matters and data for the rest

  • They decide on gut and rules of thumb for things that can’t be reduced to a number (humans, feelings, trust, real estate location) and on which they have a long experience. This gives them speed, optimism, and an edge in uncertain contexts. But it’s biased, requires years of experience to be efficient, can’t be taught, and might lead to over-optimism.
  • They decide analytically and dive into details for everything that can be reduced to numbers. This second decision mode is less biased, can be taught to scale their company, but it’s slower and tends to foster pessimism.
  • They compensate their optimism and pessimism with a complementary business partner.
  • Optimism can also be compensated by trying to imagine how a plan can fail, and pessimism can be compensated by listening to gut feelings.
  • Their subjective degree of conviction is determined by the coherence of the narrative that has been constructed, and not by the quality or quantity of objective information that supports it. This is a classic human bias, but they otherwise wouldn’t take risks without a moderate level of foolishness.
  • Billionaires entrepreneurs are more afraid of missing an opportunity than losing on a failure.

They deal with problems with time off and writing

  • Time off helps recognize potential misleading assumptions in the way in which the problem has been formulated. Sports, yoga, and breathing techniques help.
  • If they can’t sleep, they get up and write what they have in mind to structure their thinking. Worst-case scenarios, to-do lists. It helps solve the problem and then find peace to be able to sleep.

They have a contrarian and competitive background

They had entrepreneurs in their family and did competitive sports

  • They grew up in middle-class with an entrepreneur in their relatives (typically their father).
  • They were inspired by the lifestyle of this entrepreneur.
  • They were young rebels against parents and teachers, by also leaders (ex: scout) and innovators (ex: invent stuff).
  • Individual competitive sports taught them discipline, determination, and competition. It taught them “more training, better results”.
  • IQ helps up to 130, but not above. Social intelligence is far more important.
  • Academic degrees matter less at higher wealth levels.

They are different from corporate elites

  • Corporate elites are selected by their peers, whereas entrepreneurs by the market.
  • Corporates need intimate knowledge of required codes of dress and etiquette, whereas entrepreneurs need intimate knowledge of their customers.
  • Corporates have a broad education, whereas entrepreneurs require only narrow field expertise.
  • Corporates need a relatively entrepreneurial attitude, including an optimistic outlook on life, whereas entrepreneurs need it to a way higher level.
  • Corporates need supreme self-assurance in appearance and manner, while entrepreneurs have the freedom to do something else if they feel uncomfortable.