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So You Want To Get Rich

A few months after I became a full time private investor I had a nightmare, and I can still remember it in vivid detail. It goes something like this: I’m eating breakfast, and I turn on the TV. I watch ESPN (Sports) for 30 seconds, and I flip the

A few months after I became a full time private investor I had a nightmare, and I can still remember it in vivid detail. It goes something like this: I’m eating breakfast, and I turn on the TV. I watch ESPN (Sports) for 30 seconds, and I flip the channels until I land on CNBC. Joe Kernen is talking to Rebecca Quick when all of a sudden Joe puts his hand to his earpiece. Joe’s face turns to confusion, and as he faces the camera he says, “I’ve just been alerted that all microcap stocks will be delisted as of end of day yesterday. Regulatory bodies have decided that only smallcap companies and greater shall remain on public stock exchanges.” At this point I’m standing 10 inches from the TV in total shock. My mind starts to race from fear to anger and back to fear. What am I going to do? I’m now broke. What am I going to do for money? I have no skillset other than analyzing these little companies and now I can’t monetize it. I mean I do have an education. I went to college and also got my MBA, but I certainly don’t remember anything I learned. I don’t see how I could get a real job. Maybe I’ll be able to get a job in construction, masonry, paving or something. But I’m not particularly handy. I can’t fix anything; I can barely change a light bulb. This is awful. My mind is just racing, and then BAM! I wake up.

When I told my “soon to be wife” at the time about the nightmare she just laughed UNTIL I told her I would rather live on the street then work for anyone. Then she just stared at me. “Soon to be wives” don’t like hearing there is a chance they will be living on the street 🙂 but I was being truthful. Not only would it be very hard for me to work for anyone, but the microcap investing skillset is not very transferrable to an employee position. I’m sure many reading this feel the same way.

If you are a microcap investor isn’t it hard to explain to others what you do? They probably just label you a “finance” person. It’s funny, I often get asked questions about retirement accounts, ROTH IRA’s, 401K’s, Rollovers, mutual funds, etc from friends and relatives. I can’t help them, but there are plenty of financial advisors that do know the answers. They say, “What do you mean you don’t know? I thought you were in finance?” I tell them I know very little about finance, but if you want to know how to evaluate very small public companies, I’m your guy. When I see they are confused, I quickly move onto another topic like sports or something.

Microcap investing is specialized and it certainly can’t be taught in a classroom. After high school, I went to college and got a degree in Economics, and then went onto get an MBA. I use only a small fraction of the general knowledge I was taught during those years. 95%+ of what I apply everyday, I learned from experience (ie: making mistakes) and mentors. Similarly, you drop a newly printed Ivy League business school graduate into the microcap arena, and they would have no clue what to do.

If your goal is to beat the market, an MBA or a Ph.D. from a top business school will be of virtually no help. – Joel Greenblatt

“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” – Warren Buffett

Successful microcap investing is so much more than the ability to read financial statements. If it were that easy, everyone would be doing it. The smaller the company, the bigger the bet is on the jockey, the CEO and management. You have to know how to evaluate management teams. The human element often throws the “smart” guys/gals off their game. If it can’t be quantified they can’t analyze it. It takes years, ie: tens if not hundreds of meetings, to know how to evaluate management teams. Over time you can make very quick decisions and judgments based on your experiences.

“Investment skill consists not in knowing everything, but judicious neglect: making wise choices about what to overlook” – Guy Thomas

When I was Getting Started, I used to get frustrated because I thought I needed to know a lot about a lot of things. It took me a few years to realize, I just need to know a lot about a little and then apply it. When you look at some of the richest and most brilliant people in history, many had very little schooling, but they acquired very specialized knowledge. Most importantly they knew how to apply it to get rich. Thomas Edison had only 3 months of “schooling” during his entire life, and yet he held over 2000 patents and his inventions changed the world. Henry Ford had very little “schooling”, and he became one of the richest people in America. You do not need to be a genius. Never blame your lack of education for not being successful. In many instances the educational system only teaches us what is already known. Learn to educate yourself. Microcap investing is very specialized, and when you figure out how to apply it, it can unlock the doors to unlimited possibilities and wealth.

Here is a great excerpt from one of the greatest books ever written:

Think And Grow Rich By Napoleon Hill, written in 1937
Chapter 5: Specialized Knowledge

THERE are two kinds of knowledge. One is general, the other is specialized. General knowledge, no matter how great in quantity or variety it may be, is of but little use in the accumulation of money. The faculties of the great universities possess, in the aggregate, practically every form of general knowledge known to civilization. Most of the professors have but little or no money. They specialize on teaching knowledge, but they do not specialize on the organization, or the use of knowledge.

KNOWLEDGE will not attract money, unless it is organized, and intelligently directed, through practical PLANS OF ACTION, to the DEFINITE END of accumulation of money. Lack of understanding of this fact has been the source of confusion to millions of people who falsely believe that “knowledge is power.” It is nothing of the sort! Knowledge is only potential power. It becomes power only when, and if, it is organized into definite plans of action, and directed to a definite end.

This “missing link” in all systems of education known to civilization today, may be found in the failure of educational institutions to teach their students HOW TO ORGANIZE AND USE KNOWLEDGE AFTER THEY ACQUIRE IT.

Many people make the mistake of assuming that, because Henry Ford had but little “schooling,” he is not a man of “education.” Those who make this mistake do not know Henry Ford, nor do they understand the real meaning of the word “educate.” That word is derived from the Latin word “educo,” meaning to educe, to draw out, to DEVELOP FROM WITHIN.

An educated man is not, necessarily, one who has an abundance of general or specialized knowledge. An educated man is one who has so developed the faculties of his mind that he may acquire anything he wants, or its equivalent, without violating the rights of others. Henry Ford comes well within the meaning of this definition.

During the world war, a Chicago newspaper published certain editorials in which, among other statements, Henry Ford was called “an ignorant pacifist.” Mr. Ford objected to the statements, and brought suit against the paper for libeling him. When the suit was tried in the Courts, the attorneys for the paper pleaded justification, and placed Mr. Ford, himself, on the witness stand, for the purpose of proving to the jury that he was ignorant. The attorneys asked Mr. Ford a great variety of questions, all of them intended to prove, by his own evidence, that, while he might possess considerable specialized knowledge pertaining to the manufacture of automobiles, he was, in the main, ignorant.

Mr. Ford was plied with such questions as the following:

“Who was Benedict Arnold?” and “How many soldiers did the British send over to America to put down the Rebellion of 1776?” In answer to the last question, Mr. Ford replied, “I do not know the exact number of soldiers the British sent over, but I have heard that it was a considerably larger number than ever went back.”

Finally, Mr. Ford became tired of this line of questioning, and in reply to a particularly offensive question, he leaned over, pointed his finger at the lawyer who had asked the question, and said, “If I should really WANT to answer the foolish question you have just asked, or any of the other questions you have been asking me, let me remind you that I have a row of electric push-buttons on my desk, and by pushing the right button, I can summon to my aid men who can answer ANY question I desire to ask concerning the business to which I am devoting most of my efforts. Now, will you kindly tell me, WHY I should clutter up my mind with general knowledge, for the purpose of being able to answer questions, when I have men around me who can supply any knowledge I require?”

There certainly was good logic to that reply.

That answer floored the lawyer. Every person in the courtroom realized it was the answer, not of an ignorant man, but of a man of EDUCATION. Any man is educated who knows where to get knowledge when he needs it, and how to organize that knowledge into definite plans of action.

MicroCapClub is an exclusive forum for experienced microcap investors focused on microcap companies (sub $300m market cap) trading on United States and Canadian markets. MicroCapClub was created to be a platform for experienced microcap investors to share and discuss stock ideas. MicroCapClub’s mission is to foster the highest quality microcap investor Community, produce Educational content for investors, and promote better Leadership in the microcap arena. If you are a passionate microcap investor, Join Us.


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