How do you train your mind to accept the possibility of other possibilities?
The same way you work on learning any other subject. Let's look at a familiar experience: learning to ride a bicycle:
1. begin at the beginning: have a bicycle to ride
2. learn how it works: the gears, brakes, and steering
3. start small: ride 5 yards or meters without injury
4. master it: control your bicycle and your balance
5. go to the next level: ride further or faster
These are so basic that sometimes we forget that what we have accomplished in our lives goes through these stages.
Let's apply them to learn the art of the possible, keeping in mind our purpose: to uncover hidden opportunities which free up cash already flowing through our hands.
1. Begin at the beginning
We all have built-in assumptions about the world. In the art of the possible, we question everything (even what we know to be true) by asking a simple question when we want to get something:
How many ways can I get this?
We may be asking how we can get a laptop computer. By asking the question, we challenge our minds to come up with creative solutions. Sometimes the solutions involves only cash; other times, it involves offering something else of value in exchange for what we want, such as another item or our services. Sometimes we'll combine cash, other goods, and services.
What we do is to challenge ourselves to come up with solutions. What we do not do is to ask ourselves if it's possible. This is important in those cases where we first think it's unlikely we can get what we want. We assume it is possible in some way. And we keep an open mind to possible solutions.
A note of caution: sometimes, especially when we brainstorm for solutions, our ideas seem so wild as first that we may be tempted to eliminate them immediately. This is especially true if our ideas require another person to agree to do something and we think it's unlikely they will agree. Resist the temptation to eliminate your wild ideas immediately. Often, we can find a solution in a variation of the wild idea and we certainly do not know what the other person will say until we ask them.
Let's look at ways you can get your laptop computer. You can think in terms of: who you get it from, where, its condition, what you're getting (hard drive, memory, screen size, DVD-CD drives, floppy drives, etc.), and who pays for it.
The computer: who, where, what, when:
Who to get it from: computer retailer, distributor, wholesaler, manufacturer, auction company, private owner (individual or business: family, friend, acquaintance, associate, colleague, or complete stranger)
Where to find it: in your local area, online locally, nationally, or internationally
What you're getting: the computer itself, the components
What condition: new, used: like-new, slightly, beat up, partly or totally not working
When: at a special day and time, during a local auction or sales event
The payment: how and when
How to pay: either you or someone else pays: cash, check, credit card, wire transfer, electronic funds transfer, loan (from store, family, friend, your business, the company you work for, etc.), promise to perform certain duties later
When to pay: in full, in deposits over time
The delivery: how, when, where
How to get it: you or someone else picks it up, have it delivered to your home, office, or elsewhere
When to get it: after completing your purchase agreement, after completing installment payments, or before making any payments
Each of the possibilities in these categories (who, where, what, how to pay, when to pay) can be combined as a solution. One obvious possibility is: computer retailer - in your city - by credit card - picking it up at their store - today before they close at 6pm. Another obvious one is: computer retailer - online - by credit card - shipped to your office - in 15 days.
The less apparent possibility might be: from a company selling used office equipment that it buys from financially distressed companies - in a distant city - by paying with cash and a client's check (for services you provided, made payable to the seller) - delivered to a friend's hotel while traveling to that city - then brought to your house - when she returns next month on the 5th.
As you can see, the more you separate yourself from each of the steps involved, especially payment, location, and delivery, the more creative solutions you can develop.
If you have ever read about financing in real estate, then you may recognize what we're doing: we're separating all the elements in the transactions, expanding the possibilities for each, and then recombining them into new solutions.
Real estate is interesting in that every aspect is negotiable: purchase price, forms and timing of payments, what's included in the sale besides real estate, when you take legal title to the property, when you take possession of the property, who pays for the related transaction costs, what happens if there's a glitch to paying for the property or delivering ownership to the property.
For example, let's look at how a buyer structures a simple real estate transaction when he buys your property.
You have a small apartment building that has gone up in market value and want to sell it. Your sale price includes the kitchen appliances and all furnishings, equipment, and supplies in the recreational areas. You find a foreign man, who agrees to pay for it on behalf of his children's trust for 3% more than your asking price if you allow him 30 days more than the average 45 days to complete the transaction. You agree.
The buyer (the children's trust) has the man pay for the property by the following:
5% initial deposit as a check now
10% second deposit as a check in 15 days, when he gets cash from the sale of stock in his private business.
25% cash from a loan he gets from a business partner at a rate below bank mortgage rates
55% through a 3-year "agreement of sale" loan from you at a rate below bank mortgage rates
5% credit for property taxes, tenant rents, security deposits, electrical and plumbing work that the building needs, and the buyer's transaction costs such as document and escrow fees and title insurance
The man has the children's trust agree to use the property's rent to pay you for the loan you gave the man. The trust also allows the man to use any extra rent to pay back the loan he got from his business partner.
Used (built 50 years ago). Needs some plumbing and electrical work (which the buyer negotiated as a credit).
Ownership of the property:
When the deal closes, the man doesn't get legal ownership, since the property will be owned by his children's trust. But the trust doesn't get legal ownership, either. Not yet. It gets a form of ownership known as equitable title, which gives it the property rents, expenses, and responsibilities for its maintenance. This is because the man's loan with you gives the trust legal title once he pays off the loan in 3 years.
Delivery of the property:
When the deal closes, the trust doesn't take possession of its property: the existing tenants have possession. The trust will get possession when his tenants move out. Until then, it can inspect its property, but not arbitrarily enter any of the units of the tenants.
In short, the trust bought property paid for by another person, who in turn paid you with cash from his bank account, stock sales, and loans from you and a business partner, and with various transaction credits. The trust doesn't get legal ownership for 3 years (because of your loan to the man), nor does it get immediate possession (because the tenants possess it).
Of course, how you get your laptop computer does not need to be this complex. But now you are beginning to understand how each part of a transaction can be taken apart and reassembled with other parts.
Later in this book, in What is Money?, we look at what money is and other ways to pay for things you want in order to free up the cash that does flow through your hands every day.
So, the beginning point in the art of the possible is asking an innocent question, How many ways can I get this? You now know there can be many ways.
2. Learn how it works:
You've probably read that ideas are like seeds. Once you plant your seeds, you need to tend to them in order to help them grow into strong, self-sustaining plants or trees. Water, air, nutritious soil, pulling out the competing weeds, and giving them the time to grow are usually the answers with seeds and young plants.
It's similar with ideas, except you'll help your ideas grow by learning more about the idea and giving your learning time to grow. Let's say you want more wealth. In the previous section, you asked the question "How many ways can I get this?" and you have decided your best solution is to invest in growth stock mutual funds. You'll need to learn about public companies, how stocks are priced by the market, how mutual fund shares are priced, which stocks the mutual funds buy, how to evaluate prices, how to evaluate the fund's expenses, the role of investor psychology, how you can profit from the fear-based decisions of others, and a number of other elements. By learning about stocks and mutual funds, you'll tend to avoid euphoria-buying at the very top (2000 dot-com bubble market) and then panic-selling at the very bottom.
Learning about your ideas is just like tending to your planted seeds. The more you learn in order to nurture your idea, the greater the possibilities that you'll be able to see your idea as reality. The less you learn, the lower the possibilities that your seed will make it to the self-sustaining level of a plant or tree.
Having learned more about your ideas, you can increase your success by letting your ideas the time to develop, just like a seedling needs time to absorb water, soil nutrients, light, and air. A simple yet powerful way to do this, one used by creative people throughout the ages, is to sleep on it or let it rest. There are two reasons to do so. First, and most powerfully, you give your subconscious mind the opportunity to bring together all the information you gathered, and let it see possibilities that aren't readily apparent to you. Second, by taking your focus off the ideas for a while, you give your mind the room and freedom to come up with solutions, just like a good executive might delegate some responsibility to his or her staff and let them develop the solution, rather than micro-manage the process.
So, in the art of the possible, you begin by finding a number of creative ideas, and then enhance your ideas or solutions by learning more about it and by sleeping on it.
3. Start small:
You have invested your time learning about growth stocks and growth stock mutual funds, how the market works, and found some quality funds. Your next step is to invest your money. You can wait five years until you have saved a decent pile of money, or you can begin with a plan this week investing $100 each month.
If you wait five years until you have a pile of cash, you lose the opportunity to get five years of valuable experience that you do get through your $100-a-month investment program. With only $100 a month, you won't be able to take advantage of every opportunity. (If it's any consolation, even the billionaire can't take advantage of every opportunity.) In fact, you will need to be selective in what opportunities you do pursue. After you begin, you may eventually learn that your best investments are in those industries you know a lot about (such as a medical doctor investing in stocks of medical equipment, hospital, or pharmaceutical companies) and you can do better than the growth stock mutual funds. Or that you don't even enjoy investing in stocks. At least, you didn't wait five years to find out.
By starting now, and starting small, you gain the knowledge through your experience, by actually doing the investing. As you learn from your successes - and more likely your errors - you can step up to larger investment transactions, involving that pile of money.
The important factor is that you learn far more through your experiences than if you learned only by reading about it. And the added benefit of your experiences is that you gain confidence to continue your learning.
The two work hand in hand: learning about what you are doing, then trying it out. You learn each time you try and can go back to learn more, and try again with more knowledge. This ascending cycle works wonderfully in your favor.
4. Master it:
Having started your investment program, you will have continued to learn about what works for you and what does not work.
You continue by refining what works for you, what does not, and to expand your knowledge so that you know more. Perhaps you find that your focus on the medical equipment industry is really paying off in profitable investments. By continuing to focus your attention on this industry, you will become rather expert in which companies have the best prospects for success, and which stocks will likely perform the best.
Since the stock market is so large - with trillions of dollars represented by stock in thousands of companies in hundreds of industries, and so many different ways to invest in them, from the stocks themselves to thousands of mutual funds - your focused experience and learning help you gain mastery.
By focusing on continuing your learning and experience, you learn to get on your bicycle, pedal, balance, steer, and eventually ride hands-free without thinking about it. This frees you to enjoy the scenery as you ride, or to learn more skilled riding techniques.
5. Go to the next level:
Having mastered the easy, you now can start again by adding the next level.
The next level in stock investing for you might be to go to the $1,000-a-month level. It's at this next level that you get to apply what you already know, while gaining more knowledge through new experiences.
Or the next level may be to form your own personal investment corporation and invest in stocks through your corporation in order to take advantage of tax benefits available to corporations and not to individuals, such as dividend exclusions and deductibility of your investment education expenses. This will mean learning about corporations, how they conduct business, and how the tax authorities treat dividends, capital gains, and business expenses.
Eventually, the top level for you may be to invest very large amounts by becoming a portfolio manager at a mutual fund company, or by acting as a manager for your own growing investment portfolio.