Joel McCrea, who was the classic Southern Californian, told an interviewer that he had become a rich man because he followed Will Rogers' advice: "Work Hard, Save Half of What You Make, and Live on the Other Half".

It is the only advice I ever offer anyone who "wants to start his own business". If the young person's response is anything other than "what do you mean by 'save'?", I know the rest of the conversation is going to be an utter waste of our time.

My definition of saving is hopelessly uneconomic by schoolie standards; it does not include investing in equipment or any other type of "capital" for the business. Only cash or securities the person is willing to own for at least a decade count as saving. And, still worse, the savings cannot be treated as operating reserves for the business.

For the speculator, none of these rules apply–nor should they. For the speculator the markets in which he/she trades represent opportunities–as Shane's post "when to look for what you are looking for" beautifully explains.

For the business owner the market is not an opportunity but a threat because you have absolutely no control. You are always all in and you can never fold your hand. This is why business owners in this most competitive of nations, the United States, have always so readily formed associations with their seeming competitors. The "market" is the enemy, not the guy down the street who is as much of a price taker as you are.

P.S. There are two reasons why you have to save Half. The first is that thrift is your job; figuring out how to satisfy the customers while spending less and less money is the only thing you can control. The second reason is that, contrary to all the Ron Chernow biographies, the titans of industry became almighty rich by not expanding when times were hard. They prospered by cutting costs and hoarding cash and waiting patiently for the market to destroy nearly everyone else.


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