Book: 20221205 to 20230317, "The Wealth Elite" by Zitelmann, Rainer

20221207 - Introduction 1

Academic analysis of the wealth elites? Interesting but hard.

Part A Review of Existing Research, Research Questions and Methodology 6
20221208 - 1 Review of Academic Wealth Research 8

It's dangerous to let other people know that you are wealthy. Even scholars dislike the riches. Luckily people's attitude changed a lot in the past 50 years, so we know more and more about those billionaires.

"Think and grow rich" is not completely wrong. If your identity(top priority) is "getting rich", and do everything for this goal, you are much more likely to make good money. However, is this really the best choice of our lives? Is there any survival bias?

20221208 - 2 Defining the Wealth Elite 24
2.1 Who are the economic elite?

What is elite? I agree that we should it into three groups.

1. Based on reputation and status. Such as top professionals.

2. Based on money. Such as billionaires.

3. Based on power. Such as high level government officials, CEOs.

20221209 - 2.2 The role of habitus for advancing into the economic elite

This self-assurance, which includes a playful attitude to established rules and codes, constitutes "the central difference between those who belong and those who would only like to belong." p32

Is this what we called "elegant" and "take it easy"? It's critical personality for executives of major companies!

Executives and entrepreneurs are completely different. If you are not born in upper class family, it's almost impossible to become an executive of a big company (for example, Steve Jobs and Elon Musk. It would be much easier to build your own company to get super rich.

For entrepreneurs, does that mean that it's better to choose the people from middle class to run your company?

MBA helps a lot, but doctor degree doesn't help us to be come entrepreneur. To be an executive, doctor degree is important.

20221216 - 3 Review of Entrepreneurship Research 37
20221216 - 3.1 Somhart, Schumpeter, and Kirsner on the role of the entrepreneur

Entrepreneurs can figure out near term goals, which make them get closer to their ultimate goal. They don't just accept orders.

20221217 - 3.2 American and German research on entrepreneurial personality traits and goal-setting

The clearest correlation, as revealed by the meta-analyses, is between entrepreneurial success and the expression of self-efficacy. p47

It's not just about confidence. Entrepreneurs enjoy challenges. They don't quit easily, and happy to struggle to solve the problems. This is also similar to other first-class professionals. As a software developer, I am self-efficacy, but only in software development field.

20221217 - 3.2.A Questions and methodological challenges

What factors should we pay attention to? Different stages may require different personality traits.

a. What push entrepreneurs choose to be self-employed?

b. What help a small company survive and grow?

c. What help a large company from collapsing?

Billionaires need to pass these three stages.

20221217 - 3.2.B Attitudes to risk and risk perception

"To become an entrepreneur is risky but doing business in a risky way might be dangerous." p49

Well said.

Moderate risk taking brings us three types of benefit.

a. The benefit associated with the risk, if we have correct perception of the world.

b. When under pressure, we are more likely to keep learning and thinking.

So we will be smarter.

c. We will get precious experience.

That helps us to win in the next similar situation.

The key is that we should not take too much risk which may lead to bankruptcy. This is also about "the black swans".

20221218 - 3.2.C Self-efficacy

People's belief in their capabilities influence the level of goals they set for themselves. p53

This is both part of natural personality and the result of training.

How to get strong self-efficacy? I think, don't panic, risk control, learning and practice.

20221218 - 3.2.D Action orientation after failure

Jesus says, "Ask and it will be given to you" ( https://www.gotquestions.org/ask-seek-knock.html )

Is this survival bias? Never give up could be waste of time and resource. How do we know whether we should give up? Maybe, some people don't give up, and they are on the right direction because they are lucky?

Change doesn't mean give up. Just need to do something else which is also meaningful.

20221218 - 3.2.E The importance of setting goals and planning (goal-setting theory)

More challenging and more specific goals lead to better results than easy and vaguely formulated goals. p54

What are bad goals? Make one million dollar per year; live independently; do my best; etc.

What are good goals? Become a computer expert or a doctor.(however this is too low)

Once the goal is set up, we make all choices for it. Which major in university? What subjects do we choose? What books do we read? What activities do we attend? Whom we want to make friends with? How do we spend our spare time? etc.

20221218 - 3.2.F Nonconformism, agreeableness, and assertiveness

Nonconformism? The correct one is good, or else it's bad. Especially if it's on critical decisions.

The hard part is, how to make right decisions against tradition(other people's opinions) at critical point of time?

20221219 - 3.2.G Typology and models for successful entrepreneurs

I don't think that typology and models are important to be a successful entrepreneur. In the worst case, the entrepreneur model could be another Elizabeth Holmes.

However, it's fun to realize those important personality traits shared by entrepreneurs.

20221220 - 3.2.H Motivations for entrepreneurship and their correlation with success

What are the major motivations? Is this worth doing research?

Money. Freedom. Challenge. Etc. I guess there is no major one.

20221220 - 3.2.I Key influences during childhood and adolescence

Agree. Childhood and adolescence have huge influences to our career path. Especially parents and mentors.

Or else, even if study hard and with high IQ, it's more likely to become some professionals, such artists, athletes, lawyers, engineers, doctors, etc.

20221231 - 4 Questions Raised by Behavioural Economics and Learning Theories 70

Correct rules of thumb(intuition) actually filtered noises. Most of information are noise, which distracted us from important valuable information.

How to get correct rules of thumb? It' the result of big data training based on right data, which reflect the real world. It's the result of right perception of the world.

4.1 The role of gut decisions' and intuition

Why do people sometimes rely on intuition? Because they don't have other choice. They don't have the time and other resources to obtain all detailed relevant information, or the information doesn't exist.

So CEOs and judges, financial analysers, etc. have to use rules of thumb.

Why some people's intuition is correct in most of cases? Luck, and better understanding of the world.

4.2 Optimism and over-optimism

Most of the entrepreneurs are poor or went bankruptcy. Some of them are optimism, and some are over-optimism. I think it's about whether they are right perception of the world.

Elon Musk created SpaceX and Tesla almost at the same time. It's crazy over-optimism to other people, but not to him.

4.3 Risk perception and risk assessment

Again, who can get the right or better perception of the world?

The one who insist the first principle can avoid the damage from heuristics, but  it's very difficult. Most of people cannot make it. However, most of the teams can do it, but they have excellent team members, and those members make up each other's shortcomings.

20230104 - 4.4 Nonconformism

It's bad to start new business when the market is hot. Why? There are much more noise and misleading information. All resources including HR is more expensive.

"Organizations that move against the consensus and enter tainted categories after bankruptcies are especially likely to remain in the long-term.......Yet organizations that are funded in these booms do not benefit as a result." p84

How can we recognize them from thousands of similar companies? I don't believe there is a way to do that.

Do you want to follow the mainstream and join others? How much do you respect other people's opinion? Entrepreneurs don't want to do that.

20230107 - 4.5 Explicit and implicit learning - informal learning

Popperian entrepreneurs avoid: p88

- Introducing ad hoc solutions or hypotheses (eg. substantial decline in market growth dismissed as normal seasonal fluctuation);

- Always adopting a sceptical attitude to the reliability of the experiment or experimenter (e.g. market research firm).

It's critical to admit that we might be wrong.

The ability for implicit learning differs significantly from person to person. p90

This is more likely based on the difference of our gene. Some people can learn new language much quicker. Is it related to attention? Is it possible to train ourselves to increase this ability?

He defines 'tacit knowing' as a synonym for intuitive skill. p91

Tacit knowledge is the result of big data training. It's our subconscious. Driving car, swimming, riding bicycle, etc. all belong to 'tacit knowledge'.

How can we learn it? It's like learning a new language or a new music instrument.

This is why we cannot learn much from book summary. That cannot let our subconscious absorb knowledge.

Why do we need so much practice to master some skill? We need to remember it in our subconscious!

This is called implicit learning. It could belong to informal learning.

I believe that implicit learning is the way for entrepreneurs to gain their skill.

20230107 - 4.6 Financial success and formal education

I think formal education itself is not that important, but it shows the capabilities of a person. So, the relationship between financial success and formal education is correlation, not causation.

20230117 - 5 Existing Attempts to Explain Success: What Role Does Chance Play? 99

20230117 - 5.1 The role of happenstance

Luck is one of the important factors. But pure luck is far from enough to bring in success. For example, lottery winners normally would lose their fortune in a few years. Skill is much more important.

It's like individual share vs SP500 index. Individual share may beat SP500 growth in a period of time. But for much longer time period, such as 50 or even 200 years, SP500 index always win.

20230117 - 5.2 Luck as an unconscious defence against envy

Very smart way to wave off envy: "It's God's will."

20230117 - 5.3 Using luck and coincidence to explain success

People need narratives to explain things. If they can't find a convincing reason, they make one up. I think that's where the "luck" factor come from.

How important is luck? I think it's similar to IQ? If IQ is higher than some threshold level, then it's not important anymore. Some people are really not lucky. If they were born in Afghanistan, or if their parents are drug addict, or if they were born with serious gene disease, etc. For most of people born in middle class family in developed countries, their luck is good enough.

Then it's tacit knowledge decides their success rate as entrepreneur.

20230118 - 6 Dispositional Personality Traits: The Big Five and Beyond 110

Personality surely contribute to the success of entrepreneurs, and it's also the result of both gene and big data training(past experience)

20230119 - 7 Methodology 116
20230119 - 7.1 The limits of quantitative methods in academic wealth research

Agree. Qualitative method is the only choice.

20230119 - 7.2 Definition and composition of the target interviewee group

The super rich in Germany and USA are quite different. Maybe they are more similar to the people in Australia.

Real Estate is good investment, but "buy and hold" is not the best strategy. Adding value is critical.

20230119 - 7.3 Reasons for selecting the guided interview method

Difficult compromise between reality and goal.

20230120 - 7.4 Issues of social desirability bias in interviews with elites

Consciously or subconsciously, super rich don't want to tell other people their true thoughts, even under anonymous context. There is no way to solve the problem completely, but since we aware of the problem, we can mitigate it. Anyway, take the responses with a grain of salt.

20230120 - 7.5 Methods of transcription

I think analysis based on computer is a better choice. Or else, noises bring us more harm than benefit.

20230120 - 7.6 Nature of the hypotheses

Hypotheses with open mind? I like this idea.

Without hypotheses, our perception is messy information without pattern.

We just need to be ready to change our thoughts when evidences popped up.

Part B Interviews with 45 Ultra-High-Net-Worth Individuals 140
20230128 - 8 Structure and Topics of the Interviews 142

If similar research happens in USA, I guess the results would be quite different.

This reminds me of the book "The Score Takes Care of Itself" by Bill Walsh. How much the pattern we get from this type of research correlated with the UHNWIs' performance? Is there any survival bias?

20230129 - 9 Formative Years 145

20230129 - 9.1 Social background

In general, rich family helps a lot.

20230129 - 9.2 Early influences and career plans

If some mentors(parents, relatives, teachers, neighbours, etc.) are entrepreneurs, that help a lot. They don't have to help with specific guides, the existence of them showed a goal and model, which is enough.

20230129 - 9.3 Relationships with parents

No pattern here.

People are more affected by their peers/friends, instead of their parents.

20230130 - 9.4 School and university

No pattern here. Terrible teenagers could turn into charming young man later on.

Peers and friends have huge impact to our lives.

Most of those entrepreneurs can get Bachler+ degree. They choose not to get it, because there was something more important.

20230130 - 9.5 Sports

It doesn't need to be team sport.

In business, most of time we struggle alone. Even if we work in a team.

Sports is not waste of time, and it needs our full attention. That means,  we can learn a lot from it, and get good habits.

Sports, chess, music instruments, painting, etc. All these activities let people be able of concentrating on something for long time. Maybe that's real benefit we can get.

Meditation and reading should be same.

20230130 - 9.6 Early entrepreneurship

What all of these activities have in common is that the interviewees did not work for an hourly wage in their youths; rather their earnings depended n their sales skills or organizational talents. p191

No doubt this is the critical factor. If we work for hourly wage, soon we let our subconscious take in charge. That means our brain stop growing rapidly in a few months or a few years. In that case, we need to keep changing our work content to grow.

20230206 - 10 Motivations for Self-Employment 194

20230206 - 10.1 The 'misfits': "I could never have worked as an employee"

20230206 - 10.2 "Things move too slowly for me in such companies"

20230206 - 10.3 "I never thought about working somewhere as an employee"

These entrepreneurs are not just smart. Most of them have very good environment, and surely they don't want to just stay as CEO or chairman of the board. They like challenges, and they hate comfort zone.

Normal people enjoy comfort zone. Is that one of the major difference?

These entrepreneurs work hard. But that's mainly because they enjoy it.

20230208 - 11 Wealth as a Goal in Life? 216

20230208 - 11.1 "If it's written down, it can be verified"

20230208 - 11.2 "It just happened"

Writing down a goal is not critical. We do that to remind us from letting our attention to wander away.

Is this a bit like meditation? If we can focus on the current moment for long time, instead of letting subconscious control our daily activities, then we don't need to practice meditation? JAR(joy, achievement and regret) journal does the same thing.

20230208 - 20230109 - 12 What Does Money Mean to You? 232

Different wealthy people have quite different opinion about money, but even billionaires are afraid of going into poverty. It's the nightmare of everyone, more or less, I think.

I think they should allocate some percentage of their asset at passive Index Fund. Then, possibly they and their offspring could live in luxury style forever.

How important is fortune to me? It's not the motor to my life, I am sure about that. Time is supposed to be far more important, if I have enough money.

Freedom and independence is no doubt the number one factor which motivate people to get rich.

20230213 - 13 The Importance of Sales Skills 243

20230213 - 13.1 "No matter what we do, we are always selling"

This could be the most important skill entrepreneurs need. Surely it needs a lot of practice.

Most of the jobs, especially those hourly pay jobs, don't give us chances to practice our sale skills.

20230213 - 13.2 "No really doesn't mean no"

And many people, probably a majority, wouldn't be able to deal with that and the "no" would be the end of the matter. p253

Psychological skill is critical. "No" is everywhere for everyone. It comes not only from other people, but also from different situations. For example, we may feel that we don't have time to do something, but if we insist, we almost certainly can find some time slot to do it.

In daily work, we also get "no" from colleagues or clients. We can either learn from it, or turn it around.

20230214 - 13.3 Successful selling with empathy, didactics, expert knowledge, and networking

In my experience every person you are dealing with has a point, a button, that you need to push in order to close the deal. And you have to work out what that button is. You can't do that by talking a lot; you have to listen a lot. p257

Is this similar to PUA? No, it's at higher level. It's attention + wisdom.

Good salesman do something other salesman don't do. So, creativity and expert knowledge are critical.

The only place you can't acquire customers is at home. It doesn't matter what you do, the main thing is that you do something relevant. p260

Can we acquire customers through Internet? Highly unlikely. We can learn and prepare for sales at home, but the sales happen outside.

It's eye-opening regarding how to expand relationship network.

20230214 - 14 Optimism and Self-Efficacy 265

20230214 - 14.1 "As a result of your own abilities, you are always able to identify solutions"

Where does this self-efficacy come from?

20230214 - 14.2 "I never complain about problems, I look for solutions"

Stock Investment is different from running business. There is no self-efficacy in it. It's not under our control.

This is the reason that Warren Buffett doesn't do passive investment. However, for most of people, passive index fund is the best choice.

20230214 - 14.3 "He's drunk on his own success"

Self-efficacy means confidence. Overconfidence surely brings in trouble.

One way to solve this problem is through noise reduction. A better way is following the first principle, such as prepare as much as possible before making important decision.

What's the first principle in stock market? The black swans and antifragile, maybe.

20230215 - 15 Risk Propensity 278

20230215 - 15.1 The risk scale

The risk scale is not important. I don't believe it impact the result much.

20230215 - 15.2 The illusion of control: "I'm in the driver's seat"

The difference between owning stock of my own company and other company, is whether with skin in the game. Most of the professional managers don't have skin in the game, so we should not trust them.

Risks come from three facts: over-concentration of asset; illiquidity; leverage. I should never take leverage.

20230215 - 15.3 "I certainly think about things more than I used to"

I think it's not all about age. When there is not much asset, it's easy to start over.

So, the more asset we have, the less risk we should take.

Ideally, we should always take bar-bell mode.("Antifragile")

20230225 - 16 Decision-Making: Gut Feeling or Analysis? 296

20230225 - 16.1 "Gut feeling means that you just don't feel certain"

This reminds me of the book "Noise" and "Talk to strangers". Gut feeling is not really reliable.

Maybe, in the future, AI can give us a hand.

20230225 - 16.2 "You can't ask an auditor to analyse someone's character"

There are a lot of stuff that we cannot measure through numbers. If there is no way to analyse it rationally, then we have to rely on gut feeling.

How much do they learn from books?

20230226 - 16.3 The role of analysis

Why so many entrepreneurs trust their gut feelings? I think it's mainly because of "survival bias".

Gut feeling is not that important. When our gut tells us something, we should try our best to figure out where the gut feelings come from.

20230227 - 17 The Big Five: Conscientiousness, Extroversion, Openness to Experience, Agreeableness and Neuroticism 324

Nothing surprise here. Most of the entrepreneurs are extroverts.

I doubt other people have same impression of them regarding Agreeableness and Neuroticism.

20230227 - 18 Antagonism and Agreeableness 329

20230227 - 18.1 Necessary corrections to the Big Five test

Why are there this kind of problems in the Big Five test?

20230228 - 18.2 The agreeable interviewees

Agreeable or not, it's about how we express our opinion. The critical part is not how we say it, but what do we do.

20230228 - 18.3 The conflict-oriented interviewees

Everyone need to compete and cooperate with other people. Which way should we choose?

Extreme competition could lead to extreme cooperation. (This is what Elon Musk does.)

For normal people, we need to move toward the correct direction. Which style helps more, then we should choose that style.

20230314 - 19 Nonconformism: "Swimming Against the Stream" 341

20230314 - 19.1 "I have made it my absolute mission to think differently from everyone else"

I am in type B. There is no pleasure in thinking differently from others.

However, all entrepreneurs stick to what they believe. They don't change their mind by pressure from others.

20230314 - 19.2 "The pickings are slim in the mainstream"

It's not about whether they follow the mainstream. It's about how they make decisions.

Survival bias again. No matter how we choose, we made the right choices.

20230315 - 20 Dealing with Crises and Setbacks 356

20230315 - 20.1 "I am hectic on the outside, but totally relaxed on the inside"

The right attitude is the first step.

If we panic, then we cannot handle the crises rationally.

20230315 - 20.2 "Don't pass the buck"

If we blame other people or external environment, then we cannot improve ourselves.

20230316 - 20.3 "You'll see this through, with your integrity intact"

This is the key to get support from other people when facing crises.

How about the bankruptcy of SVB? The CEO shared the situation honestly with their investors. However, those investors are also competitors. They ate SVB up.

20230316 - 20.4 "Looking back on it, what happened was always for the best"

This is partly survival bias.

We can learn a lot from failures, which help us to analyse things more objectively, to think harder and deeper. That surely lead us to better results.

20230316 - 20.5 "On the day after your exams, everything is forgotten"

Crises are part of our lives. They are part of the game.

Our psychology makes us only remember peak point and ending.

20230318 - 21 Conclusion 381

20230318 - 21.1 Summary

UHNWIs are special. They are good at grabbing opportunities.

Like what M. J. DeMarco said in "Unscripted", everyone will get some gold balls from time to time.

For most of people, if they don't take too much risk, they will get wealth eventually. But not be as quick as these UHNWIs.

20230318 - 21.2 Limitations of the study and recommendations for future research

This study is far from complete.

As the author said, there were many gaps, such survival biases, and the differences between millionaires and billionaires, but differences between senior executives and entrepreneurs.

But everyone can learn a lot of this book. For example, most of people need more sales skill, and no one should stay in their comfort zone.