How I Turned $1,000 into a Million Dollars in Real Estate ...

Casino games have odds. These odds are known. These odds do not change with the game. These odds are stacked - however slightly - in the casino's favour.

YOU, as an individual, might WIN, sometimes. BUT, of the total money spent over the course of an hour/day/week/month/year... the casino is the one who ends up with the most money.

NOTHING you do - play more and thus get experience, develop a system, keep track of and monitor past results, and so on - will change those odds.

IF there is a game where you can develop a set of skills and "beat the house" then the casino has a rule that says you are not allowed to use that skill. If you ignore their rule they ban you from playing. The casino wins in the end again.

There is an accepted truth that: four in five business will fail within five years - and - of those remaining businesses, four in five of them will fail over the next five years. In other words... over the course of ten years, only one in ten business will not fail.

Is this an accurate "truth"? How is this calculated? By the number of business that register and then the number that continue to pay their yearly registration fees?

If so, that is a misguided way to know whether a business failed. Maybe the business owner moved onto other things. Maybe they sold their business and the new owner decided to operate it under their own existing business name. Maybe the business owner forgot to re-register their business. Maybe the business never got started after it was registered because circumstances change. Maybe the business owner started a few businesses and decided to keep the most profitable and just shut the others down - even though they were profitable.

I look at all the businesses which advertise in my local newspaper. I don't see a 20% or even 10% per year drop off of existing businesses and new businesses jumping in. I see the same businesses advertising year after year after year.

I walk through my local shopping mall. I see some businesses come and go. But still nothing like the "failure" rate accepted as "truth." And besides... when the business goes I don't know if it is closing down for good or simply moving somewhere else. Some businesses do not put "moving to such and such" on their windows. While other businesses have "closing down" sales only to have "opening sales" a month later in the shop around the corner, or even the same shop!

The Direct Marketing Association is supposed to have claimed only one in one hundred thousand mailorder businesses survive/succeed. If true, are these "failures" included in the other "one in ten over ten years" claim? And what is meant by succeed?

All I'm saying is, the claimed failure rates don't really mean much without knowing how they are arrived at.

So how is business better than a casino?

First, you can win with the accepted failure rate. Just open ten businesses and one will survive - in theory.

Ben Suarez says one in seven mailorder products fail. And you might have to lose fourteen times before discovering your two successes. But when you do they will overshadow all the loses.

So even with odds of one to seven against you can still win. Eventually.

In the casino you can never come out in front eventually. Because nothing about the odds changes. And you can't do anything to change them. There is no "learning from past mistakes" with the casino.

For every business success you can show a casino/lottery success? Fine. How do those numbers rate when worked out on a per-capita basis?

For every ten million people who play the lotto, one wins. If the claimed business failure rate is applied to that ten million number then you will have one million successful and surviving businesses. One from lotto and one million from business.

Clearly, the random odds of succeeding are still with the business owner.

But business has changing odds. Things that mean times are good and times are bad - for the business - based on a myriad of reasons...

Weather - bad weather might keep people at home. Fewer people shopping means less sales.

Newspaper story - stories can cause people to want to buy certain items or to impose personal bans on certain items. Such as the boycott of French goods for the French government's recalcitrant ways over Iraq.

Wrong words in ads - using words like "collapse" in an ad shortly after 9/11 could have caused a decline in sales.

Changing market - sell lime green items and recent sales will have been good. But as the market's taste for color changes to pink, you will not sell as many of your lime green widgets. If you do nothing - and don't start making pink widgets - your business may suffer greatly.

Seasons - baseball season, hocket season, cricket season, etc. Interest increases when it's the "season" for that item. Halloween. Christmas. Easter. Fourth July. And so on.

Mood - people may go out more or stay home more depending on their mood. Feeling insecure caused more people to spend more time at home after 9/11. Video rentals increased. Live entertainment dropped off.

None of these things effect your ability to lose in the casino. But they do effect how profitable your business is. To stay profitable you need to be aware of as many of the things that influence your business as you can be, and make adjustments to your business accordingly.

The odds in business may change. But it is only truly dangerous if you do nothing about it.

As far as the stock market goes. Success, from my understanding of it, is more dependant on your investment approach.

Buy and sell (trading, day trading) is high risk and as about as guaranteed as placing bets at the casino. - Despite all the charting available.

Buy and hold is lower risk and requires analysis skills. Lack those skills and you might as well play a game at the casino.

Buy and hold index funds is also lower risk and doesn't require analysis skills. It also assumes the index will continue to rise as it has done previously.

If I had to choose between investing $5,000 in the stockmarket (even in an index fund) or using it to increase business, I would use it to increase business. What I then do with the increased profits is the topic of another discussion.

Thanks for your thought-provoking question(s).

Michael Ross


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