The Billionaire Next Door

The 1999 edition of Forbes ', richest 400 people states on the cover, “The Billionaire Next Door. ” That issue has an article titled “A Century of Wealth” and a subtitle that reads, “Where does great wealth come from?” Years ago, oil and steel were the foundations of many American fortunes. Today, it's more a matter of how many eyeballs you command.

According to the article: “If you want to talk about super-rich, you have to set your sights higher : to billionaires, who are being minted faster than ever, using ever more ephemeral products to make their money. It took Rockefeller 25 years of finding, drilling and distributing oil to make his first billion. Last year, Garry Winnick joined the billionaires' club just 18 months after putting his money into Global Crossing, a company that intends to, but has yet to, develop a global fiber optic telecommunications network. ”

So how long does it take to become super-rich these days? The answer is “not long. ” That reality becomes even more apparent for someone like me, a member of the Baby Boomer generation, when I look at the ages of the new billionaires. For example, billionaire Jerry Yang was born in 1968—a year before I finished

college—and David Filo, his partner , was born in 1966—a year after I entered college. Together, they founded Yahoo! and are now worth over $3 billion each and climbing. At the same time these young people are super-rich, I meet individuals who are wondering if they will have enough money in their retirement plans when they retire in ten years. Talk about a gap between the haves and future have-nots.

In 1999, all I hear and read about are IPOs. There is definitely a mania. As someone who is often asked to invest in other people's businesses, I often hear sales pitches like this: “Invest in my company, and in two years we'll be going public.” The other day, a budding future billionaire CEO called me and asked for an opportunity to show me his business plan and offer me the opportunity to invest in his future Internet company. After the presentation, he nodded slowly with a sly cockiness as he said, “And of course you know what will happen to the price of your shares after the IPO.” I felt like I was talking to a new car salesman who had just informed me that the car I wanted was the last one of its kind and he was doing me a special favor by letting me have it for the list price.

The IPO mania, also called the “new issues” mania, is back on. Just a little while ago, even Martha Stewart took her company public and became a billionaire. She became a billionaire because she teaches civilized and common-sense social graces to the masses, people who feel the need to be more civilized and more gracious. I think her service is valuable, but I wonder about the billion dollars of value. Yet if you follow the Forbes 400 definition (wealth is dictated by how many eyeballs you command) , Martha Stewart qualifies to be a billionaire. She definitely commands many eyeballs.

My concern about all these new tech stock IPOs and internet IPOs is that the 90/10 rule of money is still in control. Too many of these new start ups are started by individuals with very little business experience. I predict that when we look back upon this time in history, we will find that 90% of the new IPOs will have failed and only 10% have survived. Statistics for small business show that in 5 years, 9 out of 10 small businesses have failed. If this statistic holds true for these new IPOs, this mania could put us into the next recession and possible depression. Why? Because millions of average investors will be depressed. Not only will millions lose their investment money, the ripple effect could spread to them not being able to afford their new homes, cars, boats, and planes. This could take down the rest of the economy. There was a joke going around Wall Street after the 1987 crash that went like this. “What is the difference between a seagull and a stock broker ?” Answer : “The seagull can still leave a deposit on a BMW.”

I first began working on an IPO back in 1978 in Hawaii. Rich dad wanted me to learn the process of building a company to sell to the public while I was building my nylon and Velcro wallet company. He said, “I've never taken a company public, but I have invested in several businesses that have gone public. I'd like you to learn the process from the gentleman I invest with. ” The person he introduced me to was Mark, a man similar to my partner Peter. The difference was that Mark was a venture capitalist, or VC, as they say in the trade. I am a Vietnam veteran, so the letters have a different initial meaning to me.

Small businesses came to Mark when they needed venture capital, or money to expand their businesses. Since I needed lots of money to expand, rich dad encouraged me to meet with him and learn from his point of view. It was not a pleasant meeting. Mark was far tougher than my rich dad. He looked at my business plan and my actual financial statements , and listened for about 23

seconds to my glorious plans for the future. Then he began to tear me apart. He told me why I was an idiot, a fool, and completely out of my league. He told me that I should never have quit my daytime job and that I was lucky my rich dad was his client. Otherwise, he would never have wasted any time on someone as incompetent as me. He then told me how much he thought my business was worth, how much money he could raise for it, his terms and conditions for the money, and that he would become my new partner with a controlling interest in the company. As I said, the term VC had a very familiar ring to it.

In the business of IPOs, investment bankers, and VCs, there is a sheet of paper known as the “term sheet.” It is similar to the sheet of paper that real estate agents call the listing agreement. Simply, a term sheet states the terms and conditions of the sale of your business, just as a listing agreement states the terms and conditions for the sale of your house.

Just as in listing agreements with real estate, a term sheet is different for different people. In real estate, if you're selling just one little house in a bad neighborhood and you want a high price, the terms on the listing agreement will be tough and inflexible. However, if you are a real estate developer with thousands of homes to sell, and the houses are nice, easy to sell, and priced low , the real estate agent is more likely to soften his or her terms in order to get your business. The same is true in the world of the VC. The more successful you are, the better terms you get and vice-versa.

Well, after looking at Mark's term sheet, I felt his terms were too severe. I definitely did not want to give him 52% of my company to end up working for him in the company I started. Those were his terms. I am not blaming Mark and, in retrospect, maybe I should have taken those terms . Given what I know today, and how little I knew back then, if I had been in Mark's position, I would have offered the same terms. I think the only reason he offered me anything was out of respect for my rich dad. I was a new businessperson, and I was successfully incompetent. I say successfully incompetent because I had a growing company but I was not able to manage its growth.

Although Mark was tough, I liked him and he seemed to like me. We agreed to meet regularly, and he agreed to give me free advice as I grew . His advice might have been free but it was always tough. He eventually began to trust me more as my knowledge and understanding of business grew . I even worked with him briefly on an oil company he was bringing to the public market. It was similar to the oil company I am working on today. Working with him on that oil company in 1978, I got my first taste of the excitement that comes from working on an IPO .

During one of my lunches with him, he said something about the IPO business that I never forgot. He said, “The new issues and IPO market is just like any other business. The market is always looking for the flavor of the month. ”

Mark was saying that, at certain times, the stock market favors certain businesses more than others. He went on to say, “If you want to become very rich, part of your strategy as a business owner is to be building the company the market wants, before the market wants it.”

Mark went on to explain that history makes famous the pioneer who has the business that is the flavor of the month. He said that inventions such as television created new millionaires just as oil and cars made billionaires at the start of this century. Mark's concept of the progression of wealth is in line with that seen in this abbreviated list from Forbes magazine:

9. 1980—Ron Perelman made his fortune as a Wall Street deal maker—$3.8 billion

I did not work with Mark after 1978. As he predicted, my business success had begun to sour and I had massive internal problems in my company. I therefore had to put all my attention into my business rather than spend time trying to take someone else's business public. However, I never forgot his lesson on businesses being the flavor of the month. As I plod along continuing to gain my fundamental business experience, I often wonder what the next business flavor of the month will be.

In 1985, I stopped by the Marine Base at Camp Pendelton, California, where I had been stationed in 1971 just before going to Vietnam. My friend and fellow pilot, James Treadwell was now the commanding officer of the squadron on the base. Kim and I were shown around the squadron where Jim and I had been new pilots 14 years earlier. Walking on to the flight line, Jim showed Kim an aircraft that looked like the ones he and I flew in Vietnam. Opening up the cockpit, he said, “You and I are now obsolete. We are not able to fly these aircraft.”

He said that because the instruments and controls were now fully electronic and video oriented. Jim continued, saying, “These new pilots grew up in video arcades. You and I grew up on pinball machines and pool tables. Our brains are not the same as theirs. That is why they fly and I sit behind a desk. I am obsolete as a pilot.”

I remember that day clearly because I too felt obsolete then. I felt old and out of date at age 37. I remember thinking that my own dad was obsolete by age 50 and here I was obsolete by age 37. On that day, I fully realized how fast things were changing. I also realized that if I did not change myself as rapidly, I would be left further and further behind.

Today, I work with Peter, continuing my education in the IPO and VC business. I am making paper money because I am acquiring paper assets. However, the most important thing I am gaining is experience in capital markets. Even though I work on oil, gas, and precious-metal companies —industries that were the flavor of the month 20 to 30 years ago—my mind continues to race ahead and wonder what the next frontier in business will become. I wonder what the next flavor of the month will be and if I will be part of that next explosion of wealth. Who knows? I am 52 today; Colonel Sanders was 66 when he started. My goal is still to become a billionaire in my lifetime. Maybe I'll get there and maybe I won't, but I am working every day towards that goal. Becoming a billionaire is quite possible today—if you have the right plan. So I 'm not giving up, and I have no plans on becoming poor or becoming more obsolete. As rich dad said, “It's the first million that was the hardest.” If that is the case, then the first billion could be the second hardest task I take on.

For those of you who may have similar ambitions and aspirations, I offer the following guidelines on taking your company public. The information comes generously from my partner Peter, a person who has taken almost a hundred companies public.

Although there is a tremendous amount to learn, these guidelines will help you get started.

1. You need more money. This is one of the main reasons you take a company public. In this case, you might have an established profitable company and need capital to grow. You have already been to your banker and have raised some funds through private placements and your VC, but now you need really big money from an investment banker .

2. Your company—an Internet company, for example—is new, and you need massive amounts of money to gain market share. The market gives you the money, although your company is unprofitable today because the market is investing in your future earnings. 3. Many times, a company will use its own company stock to acquire other companies. It is what rich dad called “printing your own

4. You want to sell your company without giving up control. In a private company, the owner all too often gives up control or gains a new partner who wants to tell him how to run the business when raising capital. By getting the money from the public market, the owner gains cash by selling yet maintains control of the business. Most shareholders have very little power to influence the operations of the company they are invested in.

5. Estate reasons. Ford Motor Company went public because the family had many heirs but no liquidity. By selling a part of the company to the public, it raised the cash the family needed for the heirs. It is interesting how often a private company will use this strategy.

6. To get rich and have cash to invest elsewhere. Building a business is much like building an apartment house and selling it. When you are building a business for sale through a public offering, however, only a part of the asset is broken off; it is broken into millions of pieces and sold to millions of people. The builder may therefore still own most of the asset, may still maintain control, and may generate a lot of cash by selling it to millions of buyers (instead of just one buyer). Talk about good things coming in small packages.

There are restrictions that apply to the major shareholders and officers in a company issuing an IPO. While their holdings in the company may increase dramatically in value as a result of the IPO they are severely regulated when selling any of their shares. Their stock is usually called “restricted” which means they have agreed not to sell it for a pre-determined amount of time.

A shareholder wanting to “cash out” might be better served selling the company, or merging into another company with free-trading shares as opposed to using an IPO .

Peter offers these additional considerations to keep in mind before you go public:

1. Who on the team has run a business? There is a big difference between running a business and dreaming of a new product or a new business. Has the person handled payroll, employees, tax issues, legal issues, contracts, negotiations, product development, cash flow management, raising capital, etc. ?

You may notice that much of what Peter thinks is important is found on rich dad's B-I Triangle. Therefore, the core of the question is: Are you (or someone on the team) successful at managing the entire

Another point I brought up with Peter is that in my three years of working with him, I noticed that he always knows his goal for a company before he starts the company. He knows before he starts that his goal is to sell the company on the public market. He may not know how he is going to achieve his goal, but the goal is set. I mention this because so many business owners start a business without a concrete goal in mind for the end of the business. Many business owners start a business because they think the business is a good idea, but they have no plan on how to get out of the business. Fundamental to any good investor is an exit strategy. The same is true for an entrepreneur who is considering building a business. Before you build it, have a solid plan on how you're going to get out of it.

3. Does the prospective public company have a well-written and well-thought-through business plan? This plan should include descriptions of:

Peter states that investment bankers dislike CEOs and entrepreneurs who puff up their projections for future earnings. Peter also states that Bill Gates of Microsoft often understates its earning projections. That is an excellent strategy for keeping the price of the stock strong. When CEOs exaggerate and earnings expectations are not met, the price of their stock often falls and investors lose confidence in the company.

4. Who is the market, how big is the market, and how much growth is possible for the company's products into the market?

While there is a market for your products, there is another market for the shares in your business. At different times, certain types of companies are more attractive to stock buyers than other companies. As I write, technology and Internet companies are the flavors of the month.

When a person has a public company, it is often said that it is like having two companies instead of one. One company is for your regular customers, and one is for your investors.

5. Who is on your board of directors or advisory board? The market runs on confidence. If the company has a strong and respected board of directors or advisors, the market has more confidence in the future success of the business.

Peter advises, “If someone comes to you and says, ‘I'm going to take my company public, ' ask that person, ‘Who on your team has taken a company public and how many companies has he or she taken public?' If that person cannot answer that question, ask him or her to come back with the answer. Most never come back. ”

6. Does the company own something proprietary? A business should own or control something that another company does not. It could be a patent on a new product or drug, a lease of ground in an oil field, or a trademark such as Starbucks or McDonald's. Even people who are owners and respected experts in their field can be considered assets. Examples of people being assets are Martha Stewart, Steven Jobs when he started his new company (Apple Computer), and Steven Spielberg when he formed his new production company. People invested in these people because of their past success and future potential.

7. Does the company have a great story to tell? I am sure Christopher Columbus must have told a great story to his underwriters, the king and queen of Spain, before they raised the capital for him to sail off to the ends of the earth. A great story must interest, excite, and cause people to look into the future and dream a little. There should also be integrity behind the story, because our jails are filled with great storytellers who have no integrity.

important thing that Peter looks for . He says that the first and last thing he looks for in any business is the passion of the owner, the leaders, and the team. Peter says, “Without passion, the best business, the best plan, and the best people will not become successful.”

Here is an excerpt from Fortune magazine's article on the 40 richest people under 40:

The MBAs don't fit into the (Silicon) Valley scene. MBAs are traditionally risk-averse. The reason most people go to business school is to ensure getting a six-figure job after graduation. Valley veterans look at B-school people and don't see the fire in the belly they themselves had when they were romantic renegades. MBAs look at Silicon Valley and see something far different from what they were taught in business school. Michael Levine joined eBay after graduating from Berkeley's Haas School. The former investment banker does not speak with the same passion displayed by hardcore entrepreneurs. He also works shorter hours than most—60 per week instead of the customary 80. “I'd love it if in ten to 15 years I had $10 million to $15 million, well invested,” he told me. “But I'd like to have a life. I don't know . Maybe I'm not there yet. ”

Rich dad would say that he was definitely not there yet. Rich dad often cautioned me to be aware of the difference between successful corporate people and successful entrepreneurs. He would say, “There is a difference between a person who climbs the corporate ladder and someone who is building his own corporate ladder. The difference is in the view when you look up the ladder. One sees the big blue sky and the other sees—well, you know that saying: ‘If you're not the lead dog, the view is always the same.' ”

money blindly. He does not recommend this method of raising money. Both Peter and my rich dad have often said, “Don't give your children money. It keeps them weak and needy. Teach them how to raise money instead. ”

Rich dad took the issue of money one step further. As you may recall, he did not pay his son and me a salary for working for him. He said, “Paying people to do work is training them to think like employees. ” Instead, he trained us to look for business opportunities and to create a business out of that opportunity. You may recall the comic book story in Rich Dad Poor Dad. I continue to do the same thing today. I look around for opportunities to build a business, while others look for high-paying jobs.

Rich dad did not make being an employee wrong. He loved his employees. He was just training his son and me to think differently and to be aware of the differences between a business owner and other positions. He wanted us to have more choices as we grew older rather than fewer.

We created the educational board game CASHFLOW for Kids for parents who want to give their kids more financial choices and keep them from being trapped in debt as soon as they leave home. In addition, it was created for parents who may suspect that their children could be the next Bill Gates of Microsoft or the next Anita Roddick of the Body Shop. The game provides an early financial education on cash flow management that every entrepreneur needs. Most small businesses fail because of poor cash flow management. CASHFLOW for Kids will teach your children the skill of cash flow management before they leave home.

2. Angels. Angels are rich individuals who have a passion to help new entrepreneurs. Most major cities have angel groups that support budding new entrepreneurs financially as well as provide advice on how to become rich, young entrepreneurs.

Angels realize that a city with growing young businesses is a growing city. Thriving entrepreneurial spirit in a city will keep the city thriving as well. These angels provide a vital service for any city of any size. It is now possible with computers and the Internet for even the most remote towns to bring the entrepreneur's spirit to life.

Many young people leave small towns to look for great job opportunities in a bigger city. I think that this loss of smart young talent is caused by our schools teaching young people to look for jobs. If our young people were taught to create businesses, many small towns could continue to thrive because they could electronically hook into the rest of the world. Groups of private citizens operating as angel groups could do wonders to revitalize small towns everywhere.

When you look at what Bill Gates did for Seattle; what Michael Dell did for Austin, Texas; and what Alan Bond did for Freemantle, Western Australia, you can see the power of entrepreneurial spirit. Entrepreneurs and angels both play important roles in the vitality of a city.

3. Private investors. People who invest in private companies are called private investors. These accredited investors are hopefully more sophisticated than the average investor . They stand to gain—as well as lose—the most. Therefore, it is recommended to get both financial education and business experience before investing large sums of money into private companies.

4. Public investors. People who invest through publicly traded shares of public companies are called public investors. This is the mass market for securities . Because these investments are marketed to the masses, they generally come under great scrutiny from agencies such as the Securities and Exchange Commission (SEC) . Securities traded here are generally less risky than investments done privately. Yet, when it comes to investing, there is always risk. This may seem to contradict what I said earlier about having more control, and therefore less risk, as an insider. Please remember , however, that a private investor is not always in control. The SEC requires strict compliance with reporting and disclosure requirements to reduce the risk to a public investor who is definitely not in control of the investment.

As I was interviewing Peter on the main points of taking a company public, I asked him what he would recommend for a person who wanted to learn to raise substantial sums of capital. He said: “I recommend that a person become familiar with the following sources of funding if they want to take a company public,” he said. They are:

1. Private placement memorandums (PPMs ). These should be the start of your formal capital-raising activities. They are sort of a do-it-yourself way of raising money. A PPM is a way for you to dictate the terms you want, and hopefully the investor will be interested.

Peter strongly recommends that you begin this process by hiring a corporate attorney who specializes in securities. This is where your formal education begins if you are serious about starting small and getting big. It begins with paying for advice from the attorney and hopefully following that advice. If you do not like the advice, it is best to find a new attorney.

Most attorneys will give you a free consultation, or you can invite them to lunch. This type of professional advisor is vital to your team at the beginning and as you get bigger . I personally have learned the hard way by trying to do such things on my own to save a few dollars . Those few dollars saved have cost me fortunes in the long run.

2. Venture Capitalists (VCs). They, like my friend Mark, are in the business of providing capital. People usually go to VCs after they have exhausted personal funds, the money of family and friends, and their banker's money. Peter says, “VCs often cut a tough deal, yet if they are good, they will earn their money.”

A VC will often become a partner and help you get your company into shape to move to the next level of financing. In other words, just as a person may go to a gym and hire a personal trainer to get his or her body into shape and become more attractive, a VC may act as a personal trainer who gets your business into financial shape so that it will be attractive to other investors.

are ready to sell your company to the public market. Investment bankers often raise money for IPOs and for secondary offerings. A secondary offering is a public offering of shares of a company that has already raised capital through an initial offering to the public. When you look in financial papers such as The Wall Street Journal, many of the large ads are from investment bankers informing the market about offerings they have sponsored.

There is another type of funding called mezzanine financing, sometimes referred to as bridge funding. A company usually looks for this kind of funding when it is past its early stages of development but not quite ready for an IPO.

If you are ready to try your hand at raising capital for your business, you may want to start with a PPM. Peter recommends starting with this for these reasons:

1. You begin to interview and talk to corporate lawyers who specialize in this area. Interview several of them. Your education and knowledge will increase with each interview . Ask them about some of their failures as well as their successes.

2. You begin to learn about the different kinds of offerings you can make and how to structure them legally. In other words, not all offerings are equal. Different offerings are designed to fill different needs.

3. You begin to place a value on your business and develop the terms you want when you sell the business.

4. You begin formally talking to potential investors as well as get to practice the art and science of raising capital. First, you may need to overcome your fear of asking. Second, you may need to get over your fear of criticism. Third, you get to learn how to handle rejection or phone calls that are not returned.

Peter offers this advice: “I have seen individuals give the best presentation on their investment but fail to pick up the check at the end. The one thing an entrepreneur needs to do is learn how to pick up the check. If you cannot do that, then take along a partner who can.”

Peter also says the same thing my rich dad said: “If you want to be in this business, you must know how to sell. Selling is the most important skill you can learn and continue to improve. Raising capital is selling a different product to a different audience.”

People are not successful financially mainly because they cannot sell. They cannot sell because they lack self-confidence, they are afraid of rejection, and they cannot ask for the order. If you are serious about being an entrepreneur and need more sales and confidence development, I strongly recommend finding a network marketing company with a good training program, stick with it for at least five years, and learn to be a confident salesperson. A successful salesperson is not afraid of approaching people, not afraid of being criticized or rejected, and not afraid of asking for the check.

Even today, I continue to work on overcoming my fear of rejection, improving my ability to handle disappointment, and finding ways of improving my bouts with low self-esteem. I have noticed a direct correlation between my ability to handle those obstacles in my life and my wealth. In other words, if those obstacles appear overwhelming, my income goes down. If I overcome those obstacles, which is a constant process, my income goes up.

After you have gained some fundamental business experience and have achieved a degree of success—and you think you are ready to bring your business to market—you will need specialized advice. The advice and guidance I received from Peter, an investment banker, and Mark, a VC, has been priceless. That advice has created worlds of possibilities that did not exist for me before.

When you are ready, get Standard & Poor's Security Dealers, published by McGraw Hill. You can find it in most bookstores or your local library. This book lists security dealers by state. Get the book and find a person who would be willing to listen to your ideas and your business. Not all are willing to give free advice, but some are. Most are busy and do not have time for hand holding if you are not ready. I therefore suggest getting some real-life business experience and having success under your belt before finding one who would be willing to be part of your team.

Only one person can answer this question: you. With the right team, the right leader, and a bold and innovative new product, anything is possible. The technology is already in place, or about to be developed soon.

Right after I knew that achieving my goal of making my first $1 million was possible, I began thinking about setting the next goal. I knew I could go on to make $10 million doing things much the same way. However, $1 billion would require new skills and a whole new way of thinking. That is why I set the goal despite continuing to come up against much personal self-doubt. Once I had the nerve to set the goal, I began to learn how others had made it. If I had not set the goal, I would not have thought it a remote possibility, and I would not have come across books and articles about how so many people are achieving that goal.

Several years ago, when I was deeply in debt, I thought becoming a millionaire was impossible. Therefore, in retrospect, I do not think actually achieving the goal is as important as writing down the goal and then going for it. Once I committed to the goal, my mind seemed to find the ways my goal could be possible. If I had said the goal of becoming a millionaire was impossible, I believe it would have become a self-fulfilling prophecy.

After I set the goal to become a billionaire, I was plagued with self-doubt. However , my mind began to show me ways it was possible. As I focus on the goal, I continue to see how becoming a billionaire could be possible for me. I often repeat this saying to myself: “If you think you can, you can; if you think you can't, you can't. Either way you're right.” I don't know who the author is, but I thank that person for thinking it.

Once I set my goal to become a billionaire, I began to find reasons you can become a billionaire today more easily than ever before. They are:

1. With just a telephone line, the Internet is making a world of customers available to most of us.

2. The Internet is creating more business beyond the Internet. Just as Henry Ford created more business as a ripple effect of mass producing cars, the Internet will magnify its effect. The Internet makes it possible for 6 billion of us to each become a Henry Ford or Bill Gates.

3. In the past, the rich and the powerful controlled the media. With technological changes yet to come, the Internet is almost like each of us having the power of owning our own radio and television stations.

technology will make other areas of our lives better. Each new technological change will allow more people to develop more new and innovative products.

5. As more people become more prosperous, they will want to invest more and more money into new startup businesses, not only to help the new business but also to share in the profits. Today, it is hard for most people to grasp the reality that there are literally tens of billions of dollars looking for new innovative companies to invest in every year .

6. It does not have to be high tech to be a new product. Starbucks made a lot of people rich with just a cup of coffee, and McDonald's became the largest holder of real estate with just a hamburger and fries.

7. The key word is “ephemeral.” In my opinion, that word is one of the most important words for anyone who desires to become rich or super-rich. Webster's defines the word as meaning lasting only a day, or lasting only a short time.

One of my teachers , Dr. R. Buckminster Fuller , often used the word “ephemeralization.” I understood him to use the word in the context of “the ability to do so much more with so much less.” A more common term is the word “leverage, ” or the ability to do a lot with just a little. Dr . Fuller said that humans were able to provide more and more wealth for more and more people, while using less and less.

In other words, with all these new technological inventions—inventions that actually use very little raw material—each of us can now make a lot of money with very little time and effort.

On the flip side of ephemeral, the people who will make less and less in the future are those who use the most in raw materials and physically work the hardest in the process of earning their money. In other words, the financial future belongs to those who do the most with the least effort.

The answer is found in the word “ephemeral. ” To become a billionaire, I need to provide a lot for many, for very little. I need to find an area of business that today is fat, bloated, and inefficient, an area where people are dissatisfied with the current system and whose products need improving. The industry I have the most opportunity in is the biggest industry of all: education. If you take a moment and think about all the money that is spent on education and training, the dollar amount will stagger you. This goes beyond counting the money for public schools, colleges, etc. When you look at the amount of education that goes on in business, the military, homes, and professional seminars, the dollar amount is the biggest of all. Yet, education is the one industry that has remained the most mired in the past. Education as we know it is obsolete, expensive, and ready for change.

Earlier this year, a friend of mine, Dan Osborne, an international foreign exchange trader , sent me an article from The Economists' website. The following are excerpts from that article:

Michael Milken, the junk-bond king who once earned $500 million in a single year, is now building one of the world's biggest education companies, Knowledge Universe. Kohlberg, Kravis and Roberts, a buyout firm that strikes fear into managers the world over , also owns an education company called Kindercare. In Wall Street firms, analysts have taken to issuing breathless reports making such assertions as the education industry is undergoing a paradigm shift toward privatization and rationalization.

Why is everyone suddenly so excited? Because of the parallels they see between education and healthcare. Twenty-five years ago, healthcare was mostly stuck in the public and voluntary sectors. Today it is a multi-billion-dollar , largely private industry. A lot of rich people, not just Mr . Milken and Henry Kravis, but also Warren Buffett, Paul Allen, John Doerr, and Sam Zell, are all betting that education is moving in the same direction. Companies from a range of conventional industries are investing in the business, including Sun, Microsoft, Oracle, Apple, Sony, Harcourt General, and the Washington Post Group.

The U .S. government says that the country spends a total of $635 billion a year on education, more than it devotes to pensions or defense, and predicts that spending per pupil will rise by 40% over the next decade. Private companies currently have only 13% of the market, mostly in the area of training, and most of them are mom-and-pop companies, ripe for consolidation. International Data Corporation, a trends consultancy, reckons that this share will expand to 25% over the next two decades.

America's public schools are increasingly frustrating parents and falling behind international standards. America spends more of its GDP on education than most countries, yet it gets mediocre results. Children in Asia and Europe often trounce their American counterparts in standardized scholastic tests. More than 40% of American ten-year -olds cannot pass a basic reading test; as many as 42 million adults are

functionally illiterate. Part of the reason for this dismal performance is that close to half of the $6,500 spent on each child is eaten up by non-instructional services, mostly administration.

Now the barriers between public and private sectors are eroding, allowing entrepreneurs into the state system. The 1,128 (and growing) charter

schools are free to experiment with private management without losing public money.

Not surprisingly, there is plenty of opposition to creeping privatization. The teachers' unions have an impressive record of crushing the challenges to their power…

In 1996, my educational board game CASHFLOW was submitted to a group of instructors at a prominent university for their feedback. Their verbal reply was, “We do not play games in school, and we are not interested in teaching young people about money. They have more important subjects to learn.”

So there is a rule of thumb in business: “Don't go where you're not wanted. ” In other words, it is easier to make money where you and your products are wanted.

The good news is that more and more schools have been using our games as teaching products in their classrooms. However, the best news was that the public likes our products. Our board games are selling well to private individuals who want to improve their business and financial education.

We knew we had come full circle when in January 2000, Thunderbird, The American Graduate School of International Management, utilized Rich Dad Poor Dad, CASHFLOW Quadrant, and the CASHFLOW games in its curriculum for the Entrepreneurship Program. This very prestigious university is internationally recognized for its educational programs.

I see a great need in the area of money management, business, and investing—subjects that are not taught in school. I predict that in the next few years, there will be a major stock market crash, and the grim reality that many people will not have enough money to retire on and get old with will emerge. I suspect that there will be a tremendous outcry in about ten years for more relevant financial education. Recently, the federal government let the American people know that they should not count solely on Social Security or Medicare when they retire. Unfortunately, that word is too late for millions of people, especially since the school system has never taught them how to manage their money. Sharon, Kim, and I intend to provide that education—both with our current products as well as over the Internet—for a much lower cost than the current school system could deliver it.

Once we have those educational programs ready for delivery over the Internet, we will become a technology and Internet company rather than just the publishing company we are today. Once we can deliver our products in that ephemeral way, the value and multipliers on the value of our company will go up because we will be able to deliver a better product to our international market, more conveniently, and for much less money. In other words, we will be able to do more and more with less and less, which is the key to becoming very, very rich.

So will I ever become a billionaire? I don't know . I am continuing to go for the goal. How will I do it if I do it? I don't know that either. It has yet to be figured out. But I do know this: For years, I grumbled and complained that school never taught me anything about money, business, or becoming rich. I often wondered why they did not teach subjects I could use once I left school rather than teach subjects I knew I would never use. Then one day, someone said to me, “Quit your complaining and do something about it.” And today I am. I figured that if I was unhappy about not learning much about money, business, and becoming rich, other people probably had the same complaint.

In closing, Kim, Sharon, and I do not want to compete with the school system. The current school system is designed to teach people to be employees or professionals. We can sell our ephemeral products to those who want what we offer , which is education for people who want to be entrepreneurs and own businesses or invest in business, rather than work in someone else's business. That is our target market, and we see the Internet as the perfect system to reach it without going through the antiquated school system. That is our plan; only time will tell if the three of us will reach our goal.