Larry Brauner

A Brief Historical Note

I’m old enough to remember when the norm in the America was to work 40 years for a corporation and retire at age 65 with Social Security benefits and a company pension. I grew up with such an expectation.

Technology and economics reshaped the workplace during the last part of the 20th century, and nowadays people will necessarily change jobs a number of times during their careers and receive little or no employer help along the way meeting their long term financial objectives.

Employment relationships are severed with little reluctance by either party. Employees have become a commodity. Both job security and employee loyalty are very much relics of the past.

It is certainly difficult to assert that business is risky but that jobs are risk free, especially during troubled financial times like these. People in all sectors of the economy are losing their jobs, and unemployment will get much worse before it gets any better.

Robert Kiyosaki Revisited

Robert Kiyosaki, author of Rich Dad, Poor Dad and Cashflow Quadrant, compares four different ways to generate income:

  1. Job - You work for an employer. You earn income by selling your limited time. You’re overtaxed by the government. You may however acquire valuable skills and receive access to affordable health insurance.
  2. Self-Employment - You own your job and must work very hard. You receive tax breaks but still earn your income by selling your limited time. You pay in full for your health insurance. You have some autonomy but must nevertheless satisfy your clients’ demands.
  3. Business - You own a system, and you leverage other people’s time and various resources at your disposal such as the Internet. You work hard, but you essentially earn your income by selling other people’s time. Since you’re not selling your limited time, your income potential is unlimited. Many types of business are very risky, but there are others that are not very risky at all. Businesses have many tax advantages.
  4. Investing - You own assets that are called investments. You earn income from these investments. Knowledgeable investors use insurance such as stock options to manage and eliminate the risk of investing. They also achieve the most favorable tax treatment for their income.

Where Theory and Practice Intersect

It doesn’t take a rocket scientist to understand that business and investing income are much superior to job and self-employment income — all other things being equal — and having a business and investing mindset is a wonderful personal asset.

Yet there’s a catch.

Most people are not in a position initially to rely either on business or investing to provide the income that they need for life’s basics. Some people may not have the wherewithal now or ever to make a business or investing work for them.

Jobs or self-employment provide immediate income for food, clothing and shelter. In that sense they can be a good thing.

If you have a job and the right mindset, you can use the base of income afforded by your job as a springboard to future business and investing. You’ll seek ways to develop new business, and you’ll use part of your paycheck and business proceeds to buy income producing assets.

Your progress might be slow at first, but it will accelerate over time as your results are compounded.

My Change of Heart

I used to put down jobs saying that J.O.B. stood for “just over broke”. While there’s much truth in that, I believe today that I was stuck in all-or-nothing thinking.

So don’t you think job or business. Think job and business, or whatever makes sense.

Your comments and input are invited.

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Larry BraunerAccording to Wikipedia, the 80/20 Rule or Pareto principle “states that, for many events, 80% of the effects come from 20% of the causes”.

The 80 and the 20 are not exact. The 80/20 Rule is what’s commonly known as a rule of thumb.

The 80 20 Rule is an abstract concept, but it’s important to understand it, so let me provide you with some concrete examples that I believe will help.

The 80/20 Rule and You

Approximately 80% of all income is paid to 20% of all people.

The highest paid people earn substantially more than the lowest paid ones. This is a phenomenon of which nearly all of us are acutely aware, and it often seems unfair.

However, 80% of all productivity comes from the efforts of 20% of all people. These 20% of people are the ones who:

  • have a good measure of internal motivation
  • have a high level of personal productivity
  • consistently invest in personal development
  • commit to their goals and focus their efforts
  • leverage their money and their time

Needless to say 80% of all people follow the 20% of all people who lead them.

While 80% of people spend their disposable income on what Robert Kiyosaki points to as worthless items which they think are assets, the 20% live frugally and spend as much as possible on income producing investments that pay them over and over again.

While 80% of people trade their time for money, the 20% use their time to develop businesses that leverage the time of the 80% employees — and also outsource and sub-contract to other businesses in order to gain even more leverage.

The 80% of people tend to take it easy or look for get rich schemes and shortcuts to success. They follow the path of least resistance, and they settle for much less than they really want.

Are you in the 80% or the 20%?

If you’re in the 80%, ask yourself what shift in thinking could transform you into one of the 20%.

The 80/20 Rule and Other People

If you’re in the 20%, then you need to apply the 80-20 Rule to the people around you:

  • 80% of your work is done by 20% or your workers. Spend 80% of your time developing your most productive workers.
  • So too in a direct or networking sales business: 80% of your results will come from 20% of your team. Spend 80% of your time developing your most productive team members.
  • 80% of your business comes from 20% of your clients or customers. Your time should be spent conducting business with your best clients. There are some business experts who would go as far as firing the 80% of unprofitable clients. That may not always be feasible. In many industries such as health care or telecom firing costly customers could result in a public relations nightmare.

The 80/20 Rule and Social Marketing

Here are some Internet and social media applications of the 80-20 principle:

  • 80% of all blogging is done by 20% of all bloggers
  • 80% of all blog comments are made by 20% of all blog readers
  • 80% of all online social networking is done by 20% of all online networkers
  • 80% of all networkers flock to 20% of all social networking sites
  • 80% of all traffic goes to 20% of all websites
  • 80% of all spam is generated by 20% of all spammers

You can add to the list when you comment on this post — assuming of course that you’re one of the 20% of all readers. :)

You Can’t Know Everything

Expertise is a valuable asset when it comes to personal branding. As an expert you can teach and mentor others and differentiate yourself from your competition.

To become a top expert in any field requires years of dedication. You still won’t know everything there is to know.

You can generally acquire more knowledge than 80% of all people with 20% of the effort it takes to become a top expert. This feat often takes much less than a year. To overtake and pass the remaining 20% of all people might take many years or even a lifetime.

I like to call this particular aspect of the Pareto principle The Law of Diminishing Returns. Beyond a certain point each successive increment of result will require more effort than the previous increment. It becomes harder and harder to justify additional time investments.

In this era of specialization you can read a few books on a subject and know more about a subject than nearly everybody else. That’s the kind of expertise I’m recommending — coupled of course with some practical hands-on experience.

Invest your time to acquire knowledge that your prospective clients or customers will appreciate.

When I was a teen I worked and struggled obsessively to become a top chess player, and I succeeded.

Nowadays I prefer to grasp multiple subjects and to seek synergies among them: many types of data analysis, search engine optimization, marketing, social networking, blogging, etc.

My broad base of knowledge — fused with solid logic, trusted intuition and other abilities and skills — fuels my overall critical thinking outside the box strategy.

You Can’t Do Everything

Like it or not we can’t follow up on every idea or opportunity that presents itself. The Law of Diminishing Returns guarantees that. Therefore we must make value judgments and set priorities every day.

Fortunately the 80/20 Rule is on our side.

80% of all benefit accrues to us by accomplishing 20% of everything on our plate. Each day we ought to focus on a half dozen high priority agenda items that will move our businesses and our lives forward.

If only we did that consistently each and every day our lives would be filled with accomplishments and satisfaction.

Nobody however is perfect. We all have bad days. Yet, the 20% group prioritizes and moves forward with much greater focus and consistency than the 80% group.

Please don’t underestimate the power of the 80/20 Rule and the enormous potential of a modest 20 percent.

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