J. Paul Getty was one of the richest men who ever lived. In this week’s column, contributor Mark Ford reviews some of Getty’s top lessons for business owners and entrepreneurs.
51 years later, How to Be Rich is still right
By Mark Ford
“Contrary to popular modern belief, it is still quite possible for the successful individual to make his million – and more.”
J. Paul Getty wrote these words in 1965 in his book How to Be Rich. I first read it more than 10 years ago and liked it very much. I read it again recently and was equally inspired. It’s a quick and easy read (it was written as a series of essays for Playboy magazine), but it’s loaded with practical advice for anyone who wants to build wealth: business owners, professionals – even superstar employees.
Getty was a very rich man. I’ve heard it said that in today’s dollars, his wealth was greater than Bill Gates’ and Warren Buffett’s combined.
Getty made his fortune by buying oil businesses at bargain prices just after the Great Depression. A small portion of the book is devoted to telling this story. The rest of it presents Getty’s thesis: that the best way to become rich is to own or work for a growing business and that business growth is dependent on following a dozen or so common-sense strategies.
“Although there are no sure-fire formulas for achieving success in business,” Getty says, “there are some fundamental rules to the game, which, if followed, tip the odds of success very much in the business man’s favor.”
Those rules include:
- The best way to make a fortune is to own your own business.
- The central aim of every business is to produce more and better goods (or more and better services) to more people at a lower cost.
- A sense of thrift is essential for success in business.
- Legitimate opportunities for expansion should not beoverlooked.
- The business owner must run his own business. He cannot expect employees to run it for him.
- The business owner must be constantly alert for new ways to improve his products and services and increase his production and sales.
- Nothing builds confidence and volume faster than a reputation for standing behind one’s product.
Another chapter talks about real estate. Getty was a big believer in real estate as a secondary investment. He made millions that way. It also talks about investing in fine art. In the course of his business life, Getty acquired one of the greatest private collections of art in his time. He left much of that collection to various museums, including what became the Getty Museum in Malibu, California.
In discussing employee compensation, Getty’s ideas belied his reputation for being a penny pincher. He was a believer in paying his employees well – as well as or better than the competition. He also believed in treating his key employees as partners by giving them incentive-based bonuses and, in some cases, shares of profits. (More than a few of his key employees became rich as a result.)
As the author of The Reluctant Entrepreneur, I was delighted to note that Getty disputed the notion that entrepreneurs should “think big and take big chances.” His success, he says, came from “thinking small” (i.e., paying attention to details) and avoiding risk at every juncture.
How to Be Rich also has a chapter devoted to passive investing. Most people don’t realise it, but Getty’s record as a buyer of stocks was stellar. What was his strategy? To buy great companies with distinct competitive advantages when their shares are cheap. (As we also noted here.)
Getty wrote How to Be Rich when I was about 15 years old. America was a very different country then than it is now, so you might wonder: Do those same rules apply today?
If you are at all familiar with my thoughts on wealth building, you know my answer. Let’s review just a few of the rules to see if they hold up:
- “The best way to make a fortune is to own your own business.” I made that observation in Automatic Wealth and in a half-dozen books since, including Ready, Fire, Aim, The Reluctant Entrepreneur, and, most recently, The Big Book of Wealth Creation.
- “The central aim of every business is to produce more and better goods (or more and better services) to more people at a lower cost.” That should be the aim, but too many young entrepreneurs today believe their purpose is to create something that they can sell to a larger company for billions of dollars. Still, this is the best way to build a lasting relationship with customers.
- “A sense of thrift is essential for success in business.” I haven’t written much on this. Perhaps because I don’t have a natural “sense” for thrift. Unlike some business people I know, I don’t enjoy quibbling over nickels and dimes. But I do know that thrift in business is important. If you neglect the cost side of your business, your profits will eventually disappear.
- “Legitimate opportunities for expansion should not be overlooked.” Legitimate is the key word. I take it to mean “realistic” – that expansion and/or acquisition is good for business only if the chances for success are very good. My rule on this, which I’ve explained in Ready, Fire, Aim, is to enter arenas only “one step removed.” In other words, expand only into areas about which you are already at least 80 percent knowledgeable.
- “The business owner must run his own business. He cannot expect employees to run it for him.” I’ve made this point many times. When a business gets big, the owner will be tempted to do the “easy work” of making speeches, attending functions, and writing inspirational memos to employees. But if you spend too much time doing that, you will lose the knowledge and skills you once had to do the “hard work” – developing marketable products and selling them.
- “The business owner must be constantly alert for new ways to improve his products and services and increase his production and sales.” Again, this is something I’ve covered in many essays and all my books on business building. The strategy I recommend is “incremental augmentation.” It’s the opposite of “if it ain’t broke, don’t fix it.” It’s based on the belief that if you aren’t always improving your product, a competitor will eventually create something better. This was always true, but in today’s electronic, information-based economy, it is essential.
- “Nothing builds confidence and volume faster than a reputation for standing behind one’s product.” Again, this is critically true today. Unless you have a virtual monopoly like the cable companies, you can’t get away with treating your customers badly.
So, the answer is yes: The wealth-building ideas in How to Be Richare as true today as they were in 1965. And they seem to be as true for big companies, like Getty Oil, as they are for smaller, entrepreneurial companies.