How to Become Wealthy

Video Transcript

"Hello, my name is Mark Griffith, and this is going to be a short explanation of how to become wealthy. As you can imagine, there are several problems with this. First, you have to decide what you mean by wealthy. And this may sound like I'm playing word games, but this can mean different things for different people. For example, would you like to live comfortably and do no work, or would you like to work very hard--as a lot of rich people do--and have enormous amounts of money. For each of your plans, there has to be a strategy, and you have to accept that the more money you're likely to make, the bigger the risk's going to be. What you'd like me to say now, of course, is in order to become wealthy, you need to do A, and then B, and then C. But, of course, you already know enough about life, to know that it's not like that. And why isn't it like that? The reason it's not like that is that, first of all, it's a dynamic situation. Lots of people are doing thing. So if I say something like this week you should buy silver on Tuesday, and you should sell silver on Friday, lots of other people--thousands of other people--will react to what I just said, and immediately make it untrue. Lots of people will buy silver on Monday, for example, and they might sell it again on the Wednesday, long before the Friday. So, what everybody believes, and what everybody does affects everybody else. And, therefore, if there was a single plan for getting rich--or for become wealthy, it immediately wouldn't work--not just because other people would do it, but because some other people would do the opposite, some people would do the same thing, some people would do it earlier, some people would do it later, and the game changes as it goes along. Each of the players changes the rules. So, unfortunately, you have to do the hard thing. You have to work out what you want--whether you want lots of pleasure, lots of money, lots of both. You have to work out how much risk you're willing to assume. And then you have to do something usually a little bit original, and that can be writing a pop song that nobody's written before. It can be coming up with an invention nobody's come up with before, or it can mean just doing something in finance no one has come up with before. Michael Milken, for example, before he ran into trouble in the 1980s and got put in prison, became wealthy, originally, with a clever and honest idea, in the 70s, when he studied what are now called junk bonds. He studied bonds, traded by small companies which had very, very low credit ratings. So that meant that the bonds were very, very cheap, because nobody wanted to hold them, and Milken thought perhaps there's a clever way I can put hundreds of bonds together so that the risk from this one cancels out the risk from that one. The risk one from this one cancels out the risk from that one. And so, he did something fairly original, he did lots of hard work, did lots of research, and ended up being able to make a lot of money by buying something that everybody else thought should be cheap. And Milken showed how it could be expensive. And it sounds childishly simple, but what you have to do is buy cheap, and sell expensive. And there are a hundred different ways to do that, although it sounds very, very obvious. Or, in trading terminology, if you're buying and selling everyday, you have to run your profits and cut your losses. And these things sound like the easiest things in the world, but they involve a certain amount of discipline, and they also involve you understanding things a little bit more deeply, or a little bit more cleverly than anyone's done before. And that's the hard part."