Tim Ferriss on the Power of Personal Entrepreneurship

I write a lot about saving money. Like many of you, I've found frugality an excellent way to widen the gap between what I earn and what I spend. Frugality helped me get out of debt, increase my monthly cash flow, and ultimately begin to build savings. Thrift is a key component to personal finance.

But to be successful, to build wealth, you must also increase your income. You might do this by changing careers, or by obtaining for a promotion, or by asking for a raise. You might invest in real estate. Or you might start your own business.

I recently interviewed Timothy Ferris, author of The 4-Hour Workweek. I've already shared parts of our conversation:

In this final excerpt, Ferriss and I briefly discuss the power of entrepreneurship. Entrepreneurial skills are valuable whether you own your own business or you have a traditional job. At Soul Shelter, Tim Clark recently provided an overview of entrepreneurship. “I'm a firm believer that our fortunes in life are closely bound to entrepreneurship skills, whether we're self-employed or choose to work for someone else,” Clark writes. “Studying entrepreneurship means examining the many ways one can earn a living.”

Here then is the final part of my conversation with Tim Ferris:

J.D.
My father was a serial entrepreneur. When I was a boy, he was always starting businesses. As a result, I have the entrepreneurship bug, as do both of my brothers. In many ways, Get Rich Slowly is a testament to his entrepreneurial spirit. I view it as a business. It seems to me that you are very much about entrepreneurship. Did entrepreneurship run in your family?

Tim
My father has been in various types of construction and development, and also real estate — buying, selling, investing. He's been an entrepreneur for as long as I can remember, in that respect. He's always owned his own business. My mother, on the other hand, has worked for Suffolk County, which is part of Long Island, in health services doing physical therapy for geriatrics for the last thirty years.

I feel like I've seen the best and worst of both of those worlds — the highly institutionalized employment and then self-employment. There's certainly dangers and benefits to both, and I think I've had a pretty good [chance] to see both up close and personal. But entrepreneurship in the sense of starting businesses really wasn't something that was recommended to me.

Part of what sparked my interest was Donald Trump's The Art of the Deal. I think most of his books are a waste of time, but that book is extremely good. It's all about the art of the deal and negotiating and so forth. There's a lot of really good material, especially the dissection of his schedule. He basically walks through a typical day. Very, very interesting stuff.

When I was doing my undergrad and working in the library for $8 an hour — with no air conditioning and no ventilation in the middle of late spring — I really began to question just how scalable that approach was, even if it were $20, $30, $40, $50 an hour.

I was dyslexic at a young age, and developed coping mechanisms. I ended up being able to read extremely quickly, and to prepare for tests in some unique ways. I had friends saying, “Dude, when do you study?” There was a lot of classroom reading, and I did it, but very few people ever saw me spending more than a half hour on any given day, whereas a lot of students are spending three or four hours.

After a few people asked me this, I put together a seminar. I did the first seminar with guarantees and so forth. I had very low expectations for it, but I ended up walking out three hours later with $20 bills and checks spilling out of my pockets. When I ran the numbers, I realized that this was definitely a better model, but it was still not scalable because I had to be there teaching the seminars. I became very bored of it. After that, I started fantasizing about the different formats that a scalable business could take.

There's a book by Entrepreneur Press called The Young Millionaires. It's a really good book. Some of the business models are outdated now, but it basically has two to three page profiles of dozens of late twenty-something and thirty-something millionaires. It really inspired me to brainstorm different options.

J.D.
So how do you come up with money-making ideas — or “muses” — that can supply supplemental income and be easy to maintain and sustainable in the four-hour workweek lifestyle? It seems to me there's no one right answer. It depends on the individual. The Young Millionaires book sounds like it might be a sort of cookbook, or an idea factory.

Tim
[I recently had the chance to ask Warren Buffet a question about investing.] If I had asked, “How should I invest my money?” I wouldn't have received [a good answer]. I had to be very specific: “no dependents, thirtysoemthing, I can cover my expenses with other income or savings, etc.” There were a lot of qualifiers. Just like when somebody asks “How should I invest my money?”, there's no way you can answer that in a meaningful way. The same is true with muses.

But in general, I would say studying case studies that you'll find like mine, or The Young Millionaires would be another example, and then reading books like eBoys. I see my book as a valuable starting point so that you don't focus on the wrong types of businesses, but it requires an analysis of your risk tolerance.

J.D.
Do you have any recommendations for people who aren't entrepreneurial, who don't have the ability or the interest in creating “muses”? These people might prefer to save and invest instead, but are still interested in the four-hour workweek lifestyle. They're interested in lifestyle design.

Tim
I think one of the misconceptions with the book is that you have to use everything in the book. It's really designed to be more of a menu of options for people to pick and choose from. I may go to a restaurant that I love, but I may hate half of their dishes. The fact of the matter is there's no requirement to use “muses” whatsoever to apply the principles in the book. They're principle-based and not tactical.

The rules in the book are really for increasing output and optimizing results regardless of whether you're in someone else's office or your own. That also applies to stocks. If you study The Intelligent Investor, you'll find that the principles and concepts and the rational deconstruction of things that are made complex — because the croupiers and other people can make money by making it complex — it reads very similarly to The 4-Hour Workweek.

By focusing within an organization on using the proper metrics to measure your own performance, improving those metrics, doing 80-20 analysis, then you can increase your value within the company, and document it in such a way that you can then have more leverage to do things like take mini-retirements or work remotely one or two days a week or have a four-day work week (which many people have done) or simply to eliminate work on the evenings and weekends.

Then [one can] apply the same rational framework to investment. They're completely applicable and adaptable to someone who has no interest whatsoever in starting a business. I'd say that the vast majority of the people who have used the book work within organizations.

Timothy Ferriss, nominated as one of Fast Company's “Most Innovative Business People of 2007,” is author of the #1 New York Times, Wall Street Journal, and BusinessWeek bestseller, The 4-Hour Workweek.

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Shanel Yang
Shanel Yang
12 years ago

Another famous, creative dyslexic! It’s amazing how some of our greatest out-of-the-box thinkers in history “suffered” from this condition. Kudos to Tim; and, thanks, J.D., for this great series of posts!

r k
r k
12 years ago

I have a question: If everybody starts saving money and being frugal and starts to stick to needs(and ignores wants); what’s going to happen to all the new businesses? Who is going to buy all the things that the entrepreneurs(serial or otherwise) are willing to sell? Isn’t a large part of economic growth driven by ‘wants’ rather then ‘needs’? If everybody saves money and works hard and lives frugally, wouldn’t the demand for goods come down, thus making it more difficult to actually run a business that sells something or provides a service? If thrift catches on as the key… Read more »

elena
elena
12 years ago

Rk- You’re just asking the question to provoke, yes? And I welcome it. Why do you think that becoming more entrepenurial would eliminate economies of scale or world trade? Entrepenurial types move us forward finding new solutions and products. Microsoft started in a garage, Starbucks, Walmart and McDonald’s all started with a single storefront. I didn’t need any of their products initially, but I am an consumer at all of these national companies because they offer what I need on occasion. An idea grew into a product line that became a business. Economies of scale came after. Thrifty, frugal people… Read more »

Artdogs
Artdogs
12 years ago

@rk: You rock!!!! Thank you, thank you, thank you.

People in America today LOVE to gripe about mass producers – that’s very “in” right now — but very, very, very few people can afford the idealistic type of locally sourced, all-organic stuff that makes their consciences feel good.

Most people lack a basic understanding of macro- and micro-economics. That’s where a lot of the griping and whining today stems from…..

Alison Wiley
Alison Wiley
12 years ago

Great topic . . . it really takes a combination of good earning and good money management (frugality). I was an entrepeneur throughout the 90’s, but unlike the eBoys, did not make a lot of money because I was focusing on artistic, handmade products. I now earn a good living in a ‘normal’ job in which I still get to be highly innovative (which had been my goal all along :). Something little discussed is how much it can COST us to EARN high amounts of money, i.e. the expensive goods and services the stress and hard work make us… Read more »

A
A
12 years ago

I’m going to weigh in on this one… “There are whole networks of people who are impacted when a large group of people begin to save money and not buy vegetables from the supermarket.” True and there are large groups affected when people lose their jobs in the US because it can be done cheaper (and possibly better) elsewhere. If corporations are allowed to save money to improve their health as an organization and their balance sheets, why can’t an individual? In many ways a household functions as a corporation too. Except in the example you give of people shifting… Read more »

B Smith @ Wealth and Wisdom
B Smith @ Wealth and Wisdom
12 years ago

Wow, a post on being an entrepreneur turns into a “discussion” on global economics! JD-Thanks for setting up the interview with Tim. It is interesting to hear things from his fresh perspective. I like how he looks at a business and it’s ability to “scale.” This is something often forgotten by entrepreneurs. They wind up building themselves a job when the goal should be to maximize your income and minimize the effort. @RK-Just because people become more frugal doesn’t mean the economy will tank. As good as JD’s blog is I don’t see him crashing the stock market! We are… Read more »

AJC @ 7million7years
AJC @ 7million7years
12 years ago

“But to be successful, to build wealth, you must also increase your income.”

Here’s the thing: if you earn $1,000 a week and save 15% of it, then that is $150 a week working for you.

If you double that savings rate to 30%, then that is $300 a week working for you.

But, if you then double your income and save 50% of the increase as well, that is $800 a week working for you …

… sounds like the “Frugal Entrepreneur” rulez!

Becca
Becca
12 years ago

The dude might have a good idea or two, but on the whole he strikes me as a somewhat skanky scam artist. It doesn’t reflect well on GRS that you chose to highlight someone with his ethical track record.

Aaron Pinkston
Aaron Pinkston
12 years ago

Thanks JD for reminding us (again) that a lot entrepreneurs do not sit around thinking about “the killer app” until it hits them. Rather, they solve their own problems first and then apply it to others. Tim was really developing ways to cope with his dyslexia, and he found a way to scale that solution to other people.

As for Tim’s character flaws – I think everyone of us has flaws if you look hard enough. Eat the fish and spit out the bones, I say.

Chad @ Sentient Money
Chad @ Sentient Money
12 years ago

Ferris is one of the least skanky of the “gurus.” He seems to legitimately try to put real information in front of you. He never hides the fact he plans on making money.

He also has never claimed to have “THE” answer, but possible answers. He demonstrates this in the post by stating that his book is more of a menu.

Comparing Ferris to Kiyosaki…Ferris is Mother Teresa.

Robert
Robert
12 years ago

I really loved this article. He’s a really interesting guy. I have a blog devoted to the 4HWW and the jet set lifestyle. You may find this of interest. Let me know what you think. My URL is http://www.travelhip.tv/robsblog

Sasha
Sasha
12 years ago

R K: Your problem is you stereotype a certain group of people as all having the same beliefs. Yes, international trade is good in meeting comparative advantages. However, in the current system, most of this good is gobbled up by the largest corporations. This is neither good nor bad, it is just the way it is, but if you spend $1,000 on a new laptop, it is unlikely that more than $5 of that, and probably less, actually goes into the pockets of poor laborers in China. Don’t be fooled. Doesn’t mean you shouldn’t buy the laptop..but if you had… Read more »

rk
rk
12 years ago

Sasha, I eat a lot of processed food(I put it in a microwave to kill off all the goodness and then eat the ‘dead’ food devoid of any life force). And I can’t say that the pharmaceutical industry did not make a substantial profit from me. Yes I have cable TV( and a lot of channels, in living color) and internet connection to boot. Thanks for your good wishes. I wish the same for you too. However I cannot agree to your other views. For example: >> gets down to free market capitalism vs. corporatism – I’m all for capitalism,… Read more »

rk
rk
12 years ago

Sasha,
oh and I am gaining weight(due to all the processed food), so much that my friends advised me to put blinkers on my trousers, so that I don’t run over people or pets. But that’s just me. I mean with all the extra weight its hard to focus on the keyboard. I break a few keyboards every month.

Its amazing you have so much insight into my life. Its almost like you live next door. Maybe we should meet sometime:-)

Ben
Ben
12 years ago

Seems like a lot of people are not actually responding to your article. For myself, although these comments are interesting, I will comment on the article itself. Tim Ferris has some really great ideas. I have his book and have applied some of the principles. Although I don’t have a business, the idea that all businesses and individuals can run on particular principles in order to maximize profit and minimize effort is mind boggling. I’ve been able to, following his principles, save up to 70% of my monthly income without starving and still have money enough to do the things… Read more »

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