The Gorilla in the Room
For over a decade now tens of thousands of people have come to me for guidance on wealth, goal-setting, motivation, and other self-help matters. I have a filing cabinet full of testimonials as evidence of this. I’ve reached out to these students through courses, books, manuals, DVDs, and face-to-face in seminars in a genuine effort to help people. And I’ve observed a constant behavior in my students that’s always intrigued me…
When I explain certain truths about the world, the system, ‘the Man’, the mind of the masses, and the rigged game, I’m not met with astonishment as much as anger and upset. Long time readers know that I’m bad at sugar-coating things, but even so, the things I’ve taught shouldn’t cause such upset.
While watching Ridley Scott’s film, ‘Prometheus, I was reminded that when we go looking for answers, we don’t always like what we find.
You’ll especially see this in our Hidden Secret to Internet Wealth course that I strongly recommend. The main purpose of this course is to jolt you out of the box, as well as make you money, and I warn people in advance that it contains disturbing content. The newsletter I write each week attempts the same. So it’s hardly surprising that I get a few nasty emails from time to time, and I’m going to answer some of those head-on shortly.
A little exercise first, perhaps. I’d like you to try to imagine what follows very clearly:
You walk into your bedroom right now. You open the bedroom door and there’s a big, fat gorilla sitting on your bed looking at you.
What would you do?
If you’re like most people, the blood would drain from your face, you’d turn back, and you’d slam the door shut in a cold sweat. Why? Okay, there was fear from the possibility of getting killed, but this wasn’t the primary cause of your reaction…
The scientific answer is because your mental model of what it means to walk into your bedroom does not involve gorillas sitting on your bed. The terror you felt as you slammed the door was from the conflict in your brain between what you thought you knew to be true, and what appears to be a new truth. That mental model just got smashed. Your brain has developed these mental models since when you were born as a survival mechanism, so you know your environment.
Therefore, your mental model is based entirely on perception, how you perceive things to be, not necessarily how they ARE.
Good writers of horror stories know that the best way to scare their audience isn’t with blood and guts, but rather showing you images that conflict with your mental model of the world, thus terrifying you at a deep psychological level. Should humans ever encounter extra-terrestrial life, a government report states that the individuals selected to make contact would need to be specially psychologically trained because an alien life form would almost certainly conflict with our mental model of life (for example, the extra-terrestrial might be an intelligent crystal.) I think that the horrific events of 9/11 were mostly terrifying for people because none of us had a mental model of airliners being deliberately flown into skyscrapers. The innocents dying didn’t frighten people, it made them sad. The images are what caused deep, psychological terror. How would it have been if you’d only heard about it on the radio?
The last time we talked, it seems I somewhat challenged the mental model most people have about money. So let’s dive right in and let me answer some of these questions and comments:
“Mark, what nonsense about your home being a liability, not an asset. I asked my accountant and he said you don’t know what you’re talking about.”
And I wouldn’t expect any other answer from your accountant. Accountants are trained professionals who provide data, among other things, and they are following the academic model they learned at school.
When any accountant hears the words ‘assets’ and ‘liabilities’, they think of a balance sheet, which is a statement of your NET WORTH. It’s not rocket science- here’s where your accountant would (rightly) list your home on your balance sheet:
Home Mortgage (if applicable).
But that’s not what I was talking about, was it? I was specifically using the INCOME definition of assets and liabilities, and I stated that on this basis, at any given time, an asset puts money IN your pocket, and a liability takes money OUT of your pocket.
You see, your balance sheet is a purely academic statement as far as I’m concerned because it doesn’t represent daily life. Your balance sheet says what your net worth would be if you liquidated everything. If you’re liquidating everything you own, something has gone terribly wrong. It’s a worst-case scenario, useful for that scenario, and definitely something to have in mind. But if you focus more on the INCOME definition of assets and liabilities, your balance sheet will take care of itself.
The other document your accountant prepares is a ‘profit and loss’. This is a measure of your income against expenses. So now let’s see where your esteemed accountant puts your home in your profit and loss statement:
Etc. etc. etc.
Hmmm, your home’s not looking so hot anymore, is it?
Your profit and loss, your statement of INCOME regarding assets and liabilities, is REAL, DAILY LIFE. This is the measure of if you eat tonight. If you don’t get a grip on this statement you’ll be heading for that liquidation of assets we just spoke about, and you can then use that balance sheet that your accountant is pointing out for the worst case scenario.
If you bought an investment property and took a monthly loss (because you paid too much for it), and you were just praying that prices would rise forever and investing only for capital gain and not INCOME, you abused your profit and loss statement and were only thinking of your balance sheet. And that didn’t turn out too well for folks, did it? That’s why so many fledgling property ‘investors’ got burned. When the numbers do make sense, these same people don’t want to know about property…
“And how can a business not be an asset, Mark?”
Again, you’re taking me out of context. What I said was that if your ultimate goal is to gain financial freedom that means that you don’t have to work if you don’t want to. You’d have enough passive income to live on.
A business that you have to work in every day contradicts this goal. I personally wouldn’t consider that an asset until it was systemized, and even then, it would have to stay competitive. A business can go up in smoke overnight. Just ask ex-Enron employees.
Can property go up in smoke? Not if you’re insured!
Can a tenant not pay the rent? Absolutely. Can an employer make you redundant? Absolutely. Can someone sue your business out of existence? Absolutely. Will I find a new tenant quicker than you find a new job or build a new business? Absolutely.
A business often has no assets. It’s more of an income-generator that could end abruptly and/or enslave you if not done right. IMPORTANT: I am in no way discouraging you from starting a business. QUITE THE OPPOSITE. A business is how you’ll fund your property purchases primarily. The debate here is about assets.
“Mark, and you say that your car’s an asset. Again, my accountant says this is nonsense.”
Again, you’re taking me out of context. What I said was, I quote, that a car is, strictly speaking, a liability from an income point of view (even though your accountant puts your car on the balance sheet as an ASSET!).
But then I gave you a possible exception to this rule: when a car might be considered an ‘unquantifiable asset’. This is beyond accounting, we’re now talking about the world we live in, we’re talking about people, perceptions, and reality. Not how we want the world to be, but how it IS.
The exception to the rule that I offered was that your appearance (of which your car is a major part) projects a certain statement about you to the outside world. Most people have a MENTAL MODEL of how certain people look, and we call this ‘stereotyping’. If the image you project of yourself, whether accurate or not, results in accrual of wealth, you might be able to mentally offset the cost of your nice car.
Let me restate something:
I am not saying the world is right. I’m saying how the WORLD (particularly America) actually IS.
This won’t apply to everyone. If you’re just running a business at home, drive a moped and wear underpants for all I care. But it doesn’t apply to me currently in every situation. A regional bank manager just bought me lunch regarding me buying foreclosures before they even hit the MLS. Yesterday I was invited to an angel investor presentation for a business that would soon go public (where the REAL money is made in the stock market). The list goes on. Would I have been taken seriously had I shown up in a piece of junk? Probably not is my guess. If I turned up to speak at one of my wealth-building seminars in anything other than a nice car, I’d be seriously worried about the students running away- why would they listen to someone who doesn’t walk the talk?!
You never know when opportunity will present itself. If you project an image of a successful person, you are more inclined to become a new opportunity magnet, and you’re more inclined to be taken seriously. You’re entitled to your opinion, it’s a free country. But please understand:
PERCEPTION IS REALITY.
Consider the following axioms:
On first contact people make their minds up about you within the first 10 seconds.
People judge books by their covers.
It’s not what you know, but who you know.
You can get in touch with anyone using the six degrees of separation principle.
America is a relatively superficial culture.
If you’re in denial of these basic truths, I’m sorry, but you’re suffering from a convenient but chronic detachment from reality.
If you look like a slob people believe you’re a slob. Men are more attracted to pretty girls. Women assume all pretty girls are bimbos. On and on it goes, and it’s all perceptions that more often than not are plain wrong.
Again: I don’t think this is right, I think it’s downright stupid. But it’s the WAY THE WORLD IS. And if you want to get to your goals, you must hunt in this confused jungle however you need to, and there are certainly occasions when it’s best NOT to look like you’re wealthy and successful. And perhaps a good lesson here is to ensure that YOU never a judge a book by its cover.
Now let’s go back to you standing outside the door of the bedroom with the gorilla on the bed. You’re feeling braver now you’ve got over the shock of this conflict with your mental model. You open a crack in the door and peak inside…
On closer inspection, it seems that the gorilla was a stuffed animal, just sitting there, lifeless. You breathe a sigh of relief and start wondering how the heck it got there. “Honey, did you just buy a stuffed gorilla?!” New problem, different feelings.
BUT, and this is important, your earlier terror was very real, even though the gorilla was not. Your perception was faulty; it was in conflict with the truth. But your reaction was the same because it was based on that perception.
But now you’re calm. And this is how I’ve often found it goes with students when I deliver disturbing and inconvenient truths. At first they want to kill me. Next, they’re my best friend, once they see that the gorilla in their bedroom was there, but that they didn’t have to be frightened of it. By examining the matter closely, unemotionally, they were able to see that the inconvenient truth doesn’t have to be a problem…. as long as we use it to our advantage, not be in denial about it. I’ll refer to Gordon Ramsay’s ‘Kitchen Nightmares’ once more for ongoing examples of this.
It’s all a game, a game that you have to play if you want to win it.
But like monopoly, it’s just a game. Truly real life, important life, is about what we take to the grave with us. You can’t take assets with you.