Why You Must be a “C” Student
Retirement, bureaucrats, and the next big financial crisis
Last week, I mentioned John Bogle, an entrepreneur, true capitalist, and the founder of one of the world’s largest mutual fund companies.
In his book, The Battle for the Soul of Capitalism, Bogle expressed concerns about the retirement system as a whole. He takes aim at CEOs of investment firms and believes retirement is going to be the next big financial crisis in this country. That’s a big deal, especially with so many people relying on distant retirement accounts to provide for their future security.
Bogle, an insider in the mutual fund industry, is disturbed by the greed he sees in his industry. He says:
When I came into this business there were relatively small, privately held companies, and these companies were run
by investment professionals.
Today, that has changed in every single respect. These are giant companies. They are not privately held anymore. They are owned by giant financial conglomerates, whether it’s Deutsche Bank, Marsh & McLennan, or Sun Life of Canada. Basically, the largest portion of mutual fund assets are run by financial conglomerates, and they are in the business to earn a return on their capital in the business—and not a return on your capital.
Bogle points out that in mutual funds, you, as the investor, put up 100% of the money and take 100% of the risk. The mutual fund company puts up no money, takes no risk, and yet keeps 80% of the returns. The investor gets back 20% of the gains (if there are even gains).
Warren Buffett agrees
Warren Buffett is regarded as one of the greatest investors of our time. He is a capitalist. He is an entrepreneur. He is not a managerial capitalist. (Managerial capitalists are not entrepreneurs. They did not start the business. They do not own the business. As managerial capitalists, they have responsibilities, but take no personal financial risks).
This is what Warren Buffett has to say about these corporate money managers, managerial capitalists, most of whom are “A“ students from great schools.
He says: “Full-time professionals in other fields, let’s say dentists, bring a lot to the layman. But in the aggregate, people get nothing for their money from professional money managers.”
If this is true, it might be stated another way: Those who choose not to become financially educated or play an active role in their investments and, instead, turn their money over to professional money managers, are abdicating responsibility for their financial future—and, if Buffett is on target, getting little value for it. How great is the risk of turning your money over to a “professional” who brings little value to the undertaking of making your money work for you?
Bureaucrats: “B” students
The vast majority of students who graduate from our schools are “B” students. They’re taught, by and large, by “A” students, some of the brightest students who continue their education to become teachers. What becomes of those “B” students as they choose their path in life? It’s my opinion that they become bureaucrats.
The problem with bureaucrat?
Decades ago, Rich Dad said, “The problem with the world is that it’s now run by bureaucrats.” He defined a bureaucrat as those in a position of authority—such as a CEO, president, sales manager, or government official—but who take no personal financial risks. Explaining further, he said, “A bureaucrat can lose a lot of money, but they do not lose any of their own money. They get paid, whether they do a good job or not.”
When you look at the bureaucrats who run the country, especially our political leaders, I think you’ll find that most are attorneys. Federal Reserve Bank Chairman, Ben Bernanke, is a former college professor. He is also an “A” student who became a “B” student (a bureaucrat) and the most powerful banker in the world. And we wonder why we are in a financial crisis.
Rich dad said, “A true capitalist, an entrepreneur, knows how to take a dollar and turn it into a hundred dollars. Give a bureaucrat a dollar, and they’ll spend a hundred.”
And we wonder why we have a global financial crisis.
Become a “C” student
Today, millions of people are relying on “B” students, bureaucrats taught by “A” students, from their financial well being. The problem is that they don’t have your well being in mind. They have theirs.
How do you combat this? By becoming a “C” student—a capitalist. Whether by investing or starting a business, you have to take control of your money and your retirement, not trust it in the hands of those who don’t have your best interests in mind.
Today, I encourage you to start learning how to make your own money work for you—not others.
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