Easy Come, Easy Go

When wealth comes too easily or too quickly, it has a built-in self-destruct mechanism.

At best, the new wealth simply vanishes as quickly as it came. At worst, it blows up, leaving deep, lasting scars.

The opposite happens when we face up to the challenges of adversity and hard times. We’re driven to develop the tools and the skills to overcome them. We truly earn the wealth and prosperity that ensues. The good times are real and self-sustaining. They don’t self-destruct.

As I write to you this morning, four examples spring to mind — two from history, one from my own family, and one from the American economy today …

1. Spain and Britain

Hernando Cortez conquered the Aztecs. Francisco Pizzaro conquered the Incas. Two advanced civilizations practically fell into Spain’s lap.

Within a few decades, the Spanish crown was awash with riches beyond its wildest dreams. They took over the operations of existing Aztec and Inca gold and silver mines. They removed and replaced the leadership of the Aztec and Inca political and social hierarchies. They inherited massive, ready-made, labor forces. Then they looted and squandered that wealth like no empire before or after.

Defeat of the Spanish Armada in 1588.

In contrast, for the British in the Americas, wealth didn’t come nearly as easily. Their colonies had to be built from the ground up, taking more time, more capital, and more ingenuity.

As it turned out, though, the ultimate value of Britain’s hard efforts was far greater than the instant value of Spain’s grandiose riches.

Britain vanquished Spain’s armada. Britain leaped ahead of Spain with its industrial revolution. And Britain left Spain in the dust as a world power.

Relative misfortune was transformed into a self-sustainable fortune.

2. Brazil and Japan

For half my youth, I lived in two different regions of Brazil — the state of Goias in the center of the country and the state of São Paulo in the south. And for many years since, I have lived in — or studied — Japan.

When I started on my doctorate at Columbia, my area specialty was Brazil — its people, history, and economy. When I finished, my area specialty was Japan.

I know both countries and cultures intimately. But despite that knowledge, it’s still difficult to fathom and explain the one difference between these two countries that is obvious even to the most uninformed:

Japan is largely devoid of natural resources, with very limited arable land — and with a history of violent civil wars, natural calamities, and turmoil.

Brazil has been blessed with some of the richest iron ore and minerals in the world, fertile lands vaster than those of the United States, a history of relative peace, and virtually no threat of natural disaster.

Yet, in the 20th Century, Japan overcame its adversities and emerged as an economic powerhouse. Brazil, mired in inflation and indebtedness, did not.

The reasons are complex, but the same fundamental principle I just told you about is evident in this example as well:

Brazil’s many flirtations with wealth and prosperity came quickly and easily. But in retrospect, they were mostly cycles of boom and bust:

Their great rubber boom and bust of the 1920s … their great construction boom and bust when the new capital Brasilia was built virtually overnight, unleashing the worst hyperinflation in the country’s history … the rise of the military dictatorship in 1964 and its fall in 1984 … plus worse.

Brazil’s economic booms were great while they lasted, but they almost always came with built-in time bombs; and as each bomb exploded, it left a trail of underdevelopment, confusion, and misery in its wake.

In Japan, natural adversity had precisely the opposite consequence of Brazil’s natural wealth. Indeed, that struggle itself was the country’s greatest single asset.

Even after a long series of cultural transformations that were introduced from the outside world — first Confucianism, then Buddhism and later modern capitalism — Japan’s cultural core endured.

Bushidō, the way of the warrior, became the code of the long-term career professionals who took over Japan’s government when the Tokugawa family, the last samurai rulers, finally caved in to modern development.

Bushidō was also the underlying philosophy of the Japanese sararÄ«man — salaried businessmen who helped transform Japan into a high-tech, industrial economy.

Japan’s past can best be summarized in two words — sacrifice and discipline. Brazil’s can best be summarized in four: easy come, easy go.

Only in recent years, have we begun to see some reversals in those patterns — Japan seeking the easy way out of crisis with massive money printing, Brazil making some of the needed sacrifices for real growth.

3. Talent From Disability

Soon after our son Anthony was born, in September 1981, a dear friend of the family gave us a gift that would forever change his life — and ours.

It was a kit. Nothing elaborate or expensive — just a set of sample flash cards plus a guidebook entitled “How to Teach Your Baby to Read.”

At first, I was skeptical. I was no fan of parents who push hard on their young children to learn Beethoven when they’re two or the Britannica when they’re three.

But the guide intrigued me, and I was relieved to see that the author recommended no pressure on the child. No humiliating tests. No reprimands for non-performance. All the learning was a low-key game, and the game itself was the reward for good behavior.

So I studied the method carefully, even enhanced it a bit in my own way.

By the time Anthony was past two years old, we had a nice little routine going. Every evening, after we put him to bed, I would create a new customized, home-made book for him to read. The next morning, as soon as he woke up, he’d climb out of his crib, pop into my lap, and avidly devour his “book of the day.”

You see most children’s books have large colorful illustrations with small words printed on the same page. That doesn’t work.

The type face is too small for their eyes to focus on. And their attention to the words is continually distracted by the pictures. They soon get the message that the little words in the book are just for the grown-ups that read to them, while the only thing they are supposed to pay attention to is the pictures.

My books were different. With a thick, red, felt-tip pen, I neatly printed giant words in lower case letters on one page, and then pasted in a corresponding snapshot or picture onto the next page. First the words. Then the illustrations. Never both at the same time.

He gravitated to reading like a fish to water. His words and books were his “best friends” and he loved them.

So while most other kids were getting the kind of instant gratification that only TV could provide, Anthony could usually be found surrounded by a pile of books, oblivious to the TV.

It wasn’t until a couple of years later that we finally began to suspect one of the reasons reading was so important to our son: He seemed to be hard of hearing.

The pediatrician scoffed at the notion, saying: “If Anthony really had a hearing problem, his speech would be slurred and nasal. But his speech is normal. So his hearing must be normal.”

We let the subject drop for a while. But one afternoon, when I picked up Anthony from his kindergarten class, his teacher wagged a finger at me, saying: “Anthony is not a good listener. Please teach him to listen better.”

That’s when we took him straight to an audiologist, and we were shocked by the results: His hearing impairment was not “mild” or “moderate” as we had thought it might be. He had a 50% loss, in both ears.

We stood there, staring at the test results in a state of disbelief. The audiologist, who had been chatting with Anthony, also seemed surprised. He asked us if Anthony had been undergoing intensive speech therapy from an early age. We shook our heads.

Apparently, Anthony had fooled us all by compensating for his deficiency in hearing through his proficiency in reading.

Most of us learn to speak first and read later. But Anthony was often doing the opposite: First he’d learn new words from his reading. Then he’d figure out how to pronounce them. And in the process, he somehow managed to figure out phonetic rules, which, in turn, helped him fill in the gaps in his auditory learning.

Fortunately, back when Anthony was a baby, our friends had not given him an ordinary toy. Instead, they had given us all a powerful tool. And with that tool, plus a lot of effort, he overcame his disability and developed a valuable talent.

The audiologist finally fitted Anthony with some relatively powerful hearings aids. Plus, we bought him a closed caption decoder box for the TV. Anthony said TV was “boring,” and we had no problem with that. Unfortunately, he also decided school was “boring,” and that WAS a problem.

Historically, Palm Beach County, despite its wealth, ranked near the bottom of the national ladder in educational standards, even behind many poorer areas in the United States. Some private schools were a bit better, but not by a significant margin.

This alarmed us. We had heard too many stories about bright kids getting into serious trouble at schools with low standards, and we certainly didn’t want that to happen to our son. We started researching other school districts — Fairfax County, Virginia; Upper Montclair, New Jersey and others near the top of the national charts.

“How in the heck can we move, though?” I asked. “What about Weiss Research? What about all our staff that work on the Weiss newsletters and the Weiss Ratings? And what about their families? Can we expect all of them to move to Virginia or New Jersey, too?”

A few days later, we came up with a better solution. “Why don’t we start our own school right here, with a gifted curriculum?” we asked.

A few months later, we founded The Weiss School — with one classroom, one teacher and eight students, including Anthony.

Today we’re in our 24th year with over 30 teachers and 250 students. The school outgrew the one-third of the Weiss building that we had allotted to it in 1994. So Weiss Research moved out.

The chain reaction of events in our life — the same one that began with that simple gift from a friend 30 years ago — continues today.

But we still follow the same basic principles: We avoid providing one-time, instant gratification. We seek to give our students — and our customers — the tools they need to create their own sustainable success for years come.

Gaylord Palms Resort, site of Money Show 1/29 – 2/1

That’s why, at the Money Show (to be held January 29th to February 1st at the Gaylord Palms Resort in Orlando), I will announce two more tools to empower investors. (For your free registration, go here.)

4. The U.S. Recovery on a Platter

I wish our leaders would apply the same principles to our economy.

Unfortunately, they’re doing precisely the opposite:

Instead of giving Americans what they need for a sustainable recovery, they’ve been handing out funny money and instant riches on a platter.

Instead of giving us the tools to build a sustainable recovery, they’re giving us an endless series of quick fixes. It seems easy, and for a while, it works. But as history has clearly shown us, it’s not that simple.

Remember: Debt is not wealth. It is merely one of those self-destruct mechanisms that typically comes along with premature, forced recoveries.

Ditto for Fed funny money. It helps create the illusion of wealth in the near term. But ultimately, it will self destruct.

Good luck and God bless!

Martin