I think the biggest roadblock to wealth is a person's own mind, and way of thinking. The most common emotions that get in the way are fear and apathy. Here are some common reasons that prevent people from investing or making more money:
some examples of fear:
1. I don't have much. I don't want to lose it.
2. That's too risky.
3. I'll invest once I make more money.
4. I remember the last time I took a chance.
5. I have a wife and kids, I can't afford to be wrong.
some examples of apathy:
1. I make enough and I can live well with what I make, I don't need to make more.
2. I'm too busy with my job, I don't have time for investing outside of work.
3. I'll never figure out this investment stuff, it's too complicated.
4. I'll invest when I see a good opportunity that comes along.
5. Oh, I never even thought about investing or ways to make more money.
6. The game is rigged. Nobody can make money unless you're on the inside.
I purposefully picked some examples that totally make sense to me. I definitely fall into the fear camp, but I can totally understand the apathy camp too.
Now that I'm making active investments outside of work (other than stocks + mutual funds), I've reflected on why I didn't do it earlier. I think it's because my frame of mind has changed.
From reflection, I can remember a lot of opportunities that I passed up in the past, because of fear or apathy:
1. In '99 I was given a pre-IPO offer with a big options package by the founder of what is one of the largest communications semiconductor companies now (worth over $20B before this recent market collapse). I had just been through a start-up experience, so turned down the offer because I thought I was too burned out to do another one even though I was 100% sure they would hit it big (I ended up working just as hard at the job I didn't leave). Can you imagine winning the lottery twice in your life?
2. I did a major remodel of my house several years ago. Contractors were getting rich by buying run-down old houses in nice neighborhoods for $600K, tearing them down, rebuilding them with $400-500K investment, and then reselling for $1.2M - $1.5M. I used a decent, honest builder for my remodelling job, and we discussed doing such a project, but from pure laziness I never followed up on it. All he needed was more capital.
3. In my past dating experiences, I met a lady in 2003 who had been working for 5 yrs at the city planning commission or city building dept (can't remember which), who was responsible for managing construction projects all over the Bay Area. She was well connected with many contractors, and was intimately familiar with Bay Area neighborhoods. We did joke that we'd make good business partners, she knew exactly what needed to be done for a successful condo conversion and the best locations for doing such a conversion, but was too young to have built up the working capital yet (I think owning a new Mercedes AMG didn't help). I passed on a 3rd date, and passed on the project when she got engaged 2 months later.
4. My co-workers and I made fun of another co-worker who flipped a million dollar mansion in less than 2 mos last year. In the Bay Area, you have to enter a lottery system to gain the right to buy a new house, and it's been this way for desirable properties since 1991. Well, this guy won the lottery, bought a house for $1.2M, then re-entered the lottery again and won again a month later, bought the second house for $1.2M, and then sold the first house 2 months later for $1.5M. All in the space of 3 months. We laughed at him, but who can't use an extra $300K in 3 months for doing no work? Winning the housing lottery was just like winning a real lottery, except the odds are more like 2:1 or 3:1 rather than 18,000,000:1.
5. I have a childhood friend whom I've known for over 30 years. We went to the same grade school, high school, and university. He built his company into one of the largest architectural firms in Silicon Valley. Definitely a guy I could have invested with on real estate projects, but in our 30+ yr friendship, we've never discussed money.
6. In 2000, my girlfriend at the time and I went to visit her La Jolla condo where she used to live. She had forgotten to bring her key so we had to call a locksmith. During the 30 mins we spent with him, he described how he had been buying up condos and renting them out, and was up to 6 properties already (highly leveraged). After he left, I remember that we were shocked by the risk he was taking, the time period was post stock market crash when everyone was expecting overinflated real estate to go down with the stock market. Well, I can imagine where that locksmith is sitting now. Those condos went from $150K to over $400-500K in 6 short years. Looking back now, I don't think there was much risk involved as long as he had a fixed mortgage and was cash flow positive on the rentals (good luck finding a cash flow positive rental property in CA now). We looked around at new housing developments, but never got serious about buying one.
7. I've come across lots of business opportunities to do some kind of trade in China. The latest I heard was from a friend in China who has a Saudi ex-classmate. This ex-classmate is looking to import air conditioners into Saudi Arabia from China that pass Saudi certification standards. Again, they just need a little research and a little capital to get going. In the past, I could have been part of deals on recycling used car tires, high fidelity speaker components, etc. But always too lazy or busy to look into it further.
8. Just last month I saw an ad for buying a hotel room/condo at the W-hotel in Las Vegas. Out of curiosity, I called to ask pricing and their plans for renting out the room when you're not using it. They gave me their sales pitch, pricing was at $550K and they'd be raising it in a week. I passed because they didn't have the rental policy fully ironed out yet. Well a week later, they really did raise the price to $600K. As ridiculously overpriced and overheated as Las Vegas real estate is, you can still flip condos and make $50K in a week, LOL. (Update on 9/2/2006: these condos are now going for $650K)
All these examples are just to show that you may think you don't have many opportunities, but as long as you are in the right frame of mind, you can spot opportunities all around you. What would you have done if you came across these opportunities?