Parable of The Pipeline
1801, Valley in central Italy
Once upon a time long, long ago, two ambitious young cousins named Pablo and Bruno lived side by side in a small Italian village.
The young men were best buddies.
And big dreamers.
They would talk endlessly about how some day, some way, they would become the richest men in the village. They were both bright and hard working. All they needed was an opportunity.
One day that opportunity arrived. The village decided to hire two men to carry water from a nearby river to a cistern in the town square. The job went to Pablo and Bruno.
Each man grabbed (took) two buckets and headed to the river. By the end of the day, they had filled the town cistern to the brim (edge). The village elder pay them one penny for each bucket of water.
‘This is our dream come true!” shouted Bruno. “I can’t believe our good fortune.”
But Pablo wasn’t so sure.
His back ached and his hands were blistered from carrying the heavy buckets. He dreaded (feared) getting up and going to work the next morning. He vowed to think of a better way of getting the water from the river to the village.
Pablo, the Pipeline Man
“Bruno, I have a plan,” Pablo said the next morning as they grabbed their buckets and headed for the river. “Instead of lugging (carrying) buckets back and forth for pennies a day, let’s build a pipeline from the river to the village.”
Bruno stopped dead in this tracks.
“A pipeline! Whoever heard of such a thing?” Bruno shouted. “We got a great job, Pablo. I can carry 100 buckets a day. At a penny a bucket, that’s a dollar a day! I’m rich! By the end of the week, I can buy a new pair of shoes. By the end of the month, a cow. By the end of six months, I can build a new hut. We have the best job in town. We have week ends off and two weeks’ paid vacation every year. We’re set for life! Get out of here with your pipeline.”
But Pablo was not easily discouraged. He patiently explained the pipeline plan to this best friend. Pablo would work part of the day carrying buckets and then part of the day and weekends building his pipeline. He knew it would be hard work digging the ditch in the rocky soil. Because he was paid by the bucket, he knew his income would drop at first. He also new it would take a year, possibly two, before his pipeline would start to pay big dividends. But Pablo believed in his dream, and he went to work.
Bruno and the rest of the villagers began to mocking Pablo, calling him “Pablo the Pipeline Man.” Bruno, who was earning almost twice as much money as Pablo, flaunted his new purchases. He bought a donkey outfitted with a new leather saddle, which he kept parked outside his new two-story hut. He bought flashy (appealing) clothes and fancy (extravagant) meals at the inn. The villagers called him Mr. Bruno, and they cheered when the bought rounds at the tavern and laughed loudly at his jokes.
Small Actions Equal big results
While Bruno lay in his hammock on evenings and weekends, Pablo kept digging his pipeline. The fist months Pablo didn’t have much to show for his efforts. The work was hard – even harder that Bruno’s because Pablo was working evenings and weekends, too.
But Pablo kept reminding himself that tomorrow’s dreams are built on today’s sacrifices. Day by day he dug, an inch at a time.
“Inch by inch it’s a cinch,” he chanted to himself as he swung his pickax into the rocky soil. Inches turned into one hoot… then 10 feet… then 20…100…
“Short term pain equals long-term gain,” he reminded himself as he stumbled into his humble hut exhausted from another day’s work. He measured his success by setting and meeting his daily goals, knowing that, over time, the results would far exceed his efforts.
“Keep your eyes on the prize,” he repeated over and over as the drifted off to sleep accompanied by the sounds of laughter from the village tavern.
“Keep your eyes on the prize…”
The Tables Are Turned
Days turned into months. One day Pablo realized his pipeline was halfway finished, which meant he only had to walk half as far to fill up his buckets! Pablo used the extra time to work on his pipeline. The completion date was advancing faster and faster.
During his rest breaks, Pablo watched his old friend Bruno lug buckets. Bruno’s shoulders were more stooped that ever. He was hunched in pain, his steps slowed by the daily grind. Bruno was angry and sullen, resenting the fact that he was doomed to carry buckers, day in and day out, for the rest of his life.
He began spending less time in his hammock and more time in the tavern. When the tavern’s patrons saw Bruno coming, they’d whisper “here comes Bruno the Bucket Man,” and they’d giggle when the town drunk mimicked Bruno’s stooped posture and shuffling gait. Bruno didn’t buy rounds or tell jokes anymore, preferring to sit alone in a dark corner surrounded by empty bottles.
Finally, Pablo’s big day arrived – the pipeline was complete! The villagers crowed around as the water gushed from the pipeline into the village cistern! Now that the village had a steady supply of fresh water, people from the surroundings countryside moved into the village, and it grew and prospered.
Once the pipeline was complete, Pablo didn’t have to carry buckets anymore. The water flowed whether he worked or not. It flowed while he ate. It flowed while he slept. If flowed on the weekends while he played. The more the water flowed into the village, the more the money flowed into Pablo’s pockets!
Pablo the Pipeline Man became known as Pablo the Miracle Maker. Politicians lauded him for his vision and begged him to run for mayor. But Pablo understood that what he had accomplished wasn’t a miracle. It was merely the fist stage of a big, big dream. You see, Pablo had plans that reached far beyond his village.
Pablo planned to build pipelines all over the world!
Recruiting His Friend to Help
The pipeline drove Bruno the Bucket Man out of business, and it pained Pablo to see his old friend begging for free drinks in the tavern. So, Pablo arranged a meeting with Bruno.
“Bruno, I’ve come here to ask you for your help.”
Bruno straightened his stooped shoulders, and his dark yes narrowed to a squint. “Don’t mock me,” Bruno hissed.
“I haven’t come here to gloat,” said Pablo, “I’ve come here to offer you a great business opportunity. It took me more than two years before my first pipeline was complete. But I’ve learned a lot during those two years! I know what tools to use. Where to dig. How to lay the pipe. I kept notes as I went along, and I’ve developed a system that will allow me to build another pipeline… and another…and another.
“I could build a pipeline a year by myself. But that would not be the best use of my time. What I plan to do is to teach you and others how to build a pipeline… and then have you teach others…and have each of them teach others.. until there is a pipeline to every village in the region…then a pipeline in every village in the country… an eventually, a pipeline to every village in the world!
“Just think.” Pablo continued, “we could make a small percentage of every gallon of water that goes through those pipelines, the more money water that flows through the pipelines, the more money that will flow into our pockets. The pipeline I built isn’t the end of a dream. It’s only the beginning!’
Bruno finally say the Big Picture. He smiled and extended his callused hand to his old friend. The shook hands…and then hugged like long-lost friends.
Pipeline Dreams in a Bucket-Carrying World
Years passed. Pablo and Bruno had long since retired. Their worldwide pipeline business was still pumping millions of dollars a year into their bank accounts. Sometimes on their trips through the countryside, Pablo and Bruno would pass young men carrying buckets.
The childhood friends would pull over and tell the young men their story and offer to help them to build their own pipeline. A few would listen and jump at the opportunity to start a pipeline business. But sadly, most bucket carriers would hastily dismiss the notion of a pipeline. Pablo and Bruno heard the same excused over and over.
“I don’t have the time.”
“My friend told me he knew a friend of a friend who tried to build a pipeline and failed.”
“Only the ones who get in early make money on pipelines.”
“I’ve carried buckets all my life. I’ll stick with what I Know.’
I know some people who lost money in a pipeline scam. Not me.”
It made Pablo and Bruno sad that so many people lacked vision.
But both men resigned themselves to the fact that they lived in a bucket-carrying world…and that only a small percentage of people dared to dream pipeline dreams
PART I. We Live in a Bucket-Carrying World
Who Are You – a bucket Carrier? Or a Pipeline Builder?
“Bruno, I have a plan,” Pablo said the next morning as they grabbed their buckets and headed for the river. “Instead of lugging (carrying) buckets back and forth for pennies a day, let’s build a pipeline from the river to the village.”
Bruno stopped dead in this tracks.
“A pipeline! Whoever heard of such a thing?” Bruno shouted (From the Parable of the Pipeline)
Who are you?… A bucket carrier? Or a pipeline builder?
Do you get paid only when you show up and do the work, like Bruno the Bucket Carrier?
Or do you do the work once and then get paid over and over again, like Pablo the Pipeline Builder?
If you’re like most people, you’re working the bucket-carrying plan. I call it the “Time-for-Money Trap.” You know the drill:
One hour work equals one hour pay.
One month’s work equals one month’s pay.
One year’s work equals one year’s pay.
The problem with bucket carrying is that the money stops when the bucket carrying stops. Which means that the concept if a “secure job” or a “dream job” is an illusion. The inherent danger of carrying buckets is that the income is temporary instead of ongoing.
If Bruno woke up one morning with a stiff back and couldn’t get out of bed, how much money would he earn that day? Zero!
No work, no money!
The same goes for any bucket-carrying job. Once the bucket carriers have used up their sick days and vacation days, if they can’t continue to carry buckets, they won’t continue to get a paycheck. Period.
Dentist Can’t Carry Buckets Anymore
Here’s a real-life example. My previous dentist was the best dentist I’ve ever had. She was a complete professional – a great chair-side-manner. Great personality. Great technician –every visit was virtually pain free. Plus, she loved what she did, and she set her own hours (her office was open only three days a week so she could spend four-day weekends with her family).
She pulled down more that $ 100,000 a year working three days a week in a job she loved. This was a bucket-carrier’s dream job if there ever was one.
One problem. Before the age of 40, she developed arthritis in her hands and couldn’t work anymore. Today she teaches at local university earning one-third of the income the earned as a dentist. Through no fault of her own, her dream job disappeared.
Now do you see why I say there’s no such a thing as a secure bucket-carrying job? Can you see how vulnerable bucket carriers are?
The problem with the Time-for-Money Trap is that if you can’t trade the time, you don’t get the money!
Pablo the Pipeline Man recognized the limitations of bucket carrying early on – and he set out the create a system whereby he could continue to get paid whether he put in more time or not.
Pablo understood that there’s no security in bucket carrying. He understood that a pipeline is your lifeline.
What Would Happen to You if you Couldn’t Put the Time?
What about you – what would you do if your income stopped tomorrow?
What would happen if you got laid off?
What would happen if you got sick or disabled and couldn’t carry those buckets anymore?
What if a medical emergency ate up your savings?
What if your nest egg evaporated overnight?
If your income stopped tomorrow, how long could you pay the mortgage?…make your car payments?…or pay for your kid’s schooling?
Six months? Three months? Three weeks?!!!
If disaster strikes, do you have a lifeline that would protect you and your family? Or are you gambling that buckets carrying will continue uninterrupted for as long as you need the income?
Whether you push a broom,,, push paper…or push a profession …, you’re still trading one unit of time for one unit of money.
Where’s the security in that?
Pipeline Pay While You Play
As Pablo said, “There must be a better way!”
Fortunately, there is.
It’s called a pipeline – ongoing residual income – income that keeps coming in whether you put in the time or not. The only way to build true security is to do what Pablo did – build a pipeline while you’re still carrying buckets!
Pipelines are lifelines because they enable people to escape the Time-for-Money Trap. When you build a pipeline, you do the work once, but you get paid over and over again.
Pipelines are open 24/7/365. Which means pipelines can pay you while you sleep. Or while you play. Or while you’re retired. Or while you’re sick and disabled and can’t work. Or during emergencies.
That’s the power of residual income.
That’s why I say your pipelines are your lifelines!
We Live in a Bucket- Carrying World
. “We got a great job, Pablo. I can carry 100 buckets a day. At a penny a bucket, that’s a dollar a day! I’m rich! By the end of the week, I can buy a new pair of shoes. By the end of the month, a cow. By the end of six months, I can build a new hut. We have the best job in town. We have week ends off and two weeks’ paid vacation every year. We’re set for life! Get out of here with your pipeline.” (From the Parable of the Pipeline)
A doctor driving his four-year-old daughter to daycare left his stethoscope on the car seat. The daughter reached over and started to play with it.
“My daughter wants to follow in my footsteps,” the doctor thought to himself. “This is the proudest moment of my life.”
The child arranged the stethoscope around her neck and held the sensor in front of her like a microphone.
“Welcome to McDonald’s. May I take your order?”
This cute story illustrates why we gravitate the bucket-carrying jobs – it’s called “monkey see, monkey do.” The little girl had been to McDonald’s so often that she mistook the stethoscope for a headset and copycatted the way the employees talked to customers.
Like the little girl, most people mistake bucket carrying for pipeline building. We observe that 99% of the people carry buckets. So naturally assume that bucket carrying is the only way to get what we want in life.
That’s why Bruno had such a tough time understanding the power of pipelines – Pablo was the first pipeline builder Bruno ever knew! Bruno rejected pipelines because they were different. To Bruno, pipelines were unproven. To Bruno, pipelines were radical and risky.
The vast majority of people think like Bruno. We grow up surrounded by broke bucket carriers, so we figure that’s the way of the world. It reminds me of the bumper sticker I say recently:
100,000 lemmings can’t be wrong!
People think the same about bucket carrying – 100 million bucket carriers can’t be wrong! Well, yes, they can.
Buying into Bucket Carrying
Let’s face it – there are a lot more bucket carriers in this world than there are pipeline builders.
Because bucket carrying is the model that our parents followed and the one they taught us to follow. The bucket-carrying model tell you that in a bucket-carrying world , here’s what you have to do to get ahead:
Go to school and learn how to carry buckets. Work really hard. Earn the right to carry bigger buckets. Resign from Bucket Company A to work for Bucket Company B, which lets you carry even bigger buckets. Work longer hours so you can carry more buckets. Work longer hours so you can carry more buckets. Put the kids through bucket-carrying college. Change careers from carrying metal buckets… to carrying plastic buckets… to carrying digital buckets. Dream of the day you can retire from bucket carrying. Until then, carry those buckets. Carry those buckets…
What do all those bucket carriers earn for their efforts?
According to Parade magazine’s annual “What People Earn” survey, the average worker in USA earns $28,500 a year. Subtract almost 20% for taxes, and that leaves $ 22,500 to live on.
Let’s face it – $ 22,500 take-home pay isn’t enough money to cover the basic needs for a family of four. Which means the vast majority of people are desperate for more money!
Buckets on Parade
So what do bucket carriers to do when they need more money? Because they have a bucket-carrying mentality, they come up with a bucket-carrying solution. – if you need more money, you’ve got to carry more buckets!
“I’ll get a second job carrying buckets in the evenings and weekends,” Daddy Bucket Carrier says.
“I can go back to the bucket-carrying job I had before the kids were born,” says Mommy Bucket Carrier.
“The kids can get bucket-carrying jobs after school and in the summer.” The bucket-carrying parents announce.
And that’s what they do. The result?
Today, North Americans work the longest hours in the world, even more than the work-obsessed Japanese. Is the earn-more-money-by-carrying-more-buckets plan working?
In a word, “NO!”
Here are the cold, hard facts:
– Consumer debt is at a record high. Household debt in the U.S. has more that quadrupled in the last 17 year. The average household today has 95cents of debt for every dollar of disposable income.
– The proportion of women working to support their families more that doubled over the past 20 years, from 19% in 1980 to 46% today.
– More and more people are taking second and third mortgages on their single biggest asses – their home- to pay bills.
– Personal bankruptcies have increased every year to 1.4 million in the year 2000 – even though the economy is booming!
Hello-o-o-o! What’s wrong with this picture?
The Fallacy of Carrying Bigger Buckets
Bucket carriers reason that bigger buckets mean bigger paychecks. So bucket carriers tell themselves that everything would be okay if they could just get a job carrying bigger buckets.
Bucket carriers are forever wondering how much other bucket carriers earn. The U.S. bureau of Labor Statistics keeps track of the hourly wages of hundred of different occupations. How does your hourly wage compare to other jobs?
Assuming most people get paid for 40 hours a week ( even though they probably work at least 50 hours a week… or more!) and get two weeks paid vacation each year, here’s the annual income for five occupations:
- Cook $ 13,083
- Retail Salesperson 18,870
- Mail carrier 34,091
- Lawyer 75,099
- Physician 102,024
Now, if you were a cook… or a retail salesperson… or a mail carrier, you might look at the annual income of a lawyer or physician and think, “Wow, if I made that kind of money every year, I’d be financially free! No more lying awake at night worrying about paying the bills!”
True, the physician’s bucket is a lot bigger that a cook’s bucket – about 10 times bigger! But that doesn’t mean the physician is financially independent. He’s just as dependent a\on his bucket carrying job as the cook or the mail carrier.
Why? Simple – professionals make more than average worker. But they spend more! Truth is, the doctors or lawyers making six figures a year are spending most of their income to support their lavish lifestyles.
People envy doctors and lawyers and accountants because they get to carry big buckets. True, the physician’s bucket may be 10 times bigger that the cook’s. But the physician spends 10 times more, so they both end up in the same predicament – living paycheck to paycheck!
Buckets Eventually Dry Up
Thomas J. Stanley and William D. Danko, authors of the bestseller “The Millionaire Next Door”, observed that carrying big buckets is not the same as creating wealth. The authors came to this realization by surveying people who lived in upscale neighborhoods, assuming that people who drove expensive cars and lived in expensive homes were wealthy.
OOPS! – wrong assumption! Stanley and Danko came to this startling conclusion about wealth creation:
“Moat people have it all wrong about wealth in America (Meaning USA …note is mine). Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is that you accumulate, not what you spend.
How do you become wealthy? Here, too, most people have it wrong. It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes. Wealth is more the result of a lifestyle of hard work, perseverance, planning, and , most of all, self-discipline.”
In other words, buckets, no matter how big they are, will eventually dry up. Pipelines, on the other hand, are self-sustaining. But pipelines require sacrifice. Pipelines don’t build themselves. Your have to take time and make effort to build them.
A Bigger Bucket Won’t Solve the Problem
Everybody would love to increase the size of their bucket. No one’s going to turn down an annual raise of a better jog with more pay. If bucket carrying is your only source of income, then I say carry the biggest bucket you can. That’s only common sense.
But the fact remains that carrying buckets is never going to make you financially free. Carrying buckets will never make your family safe and secure – no matter how big your buckets!
Because as long as you carry buckets, you have to show up and do the work in order to get paid. The day you stop carrying buckets, that’s the day the money stops coming in ! (Underlined is mine)
Many a bucket carrier has gone from the “millionaire next door” to the “bankrupt guy next door” because he neglected to build pipelines while he was carrying buckets. When his bucket dried up, so did his lifestyle.
“Pipelines are your lifelines,” my father used to say.
Are you beginning to see why?
PART II. Your Pipelies are your Lifelines
The Power of the Pipeline
“But Pablo was not easily discouraged. He patiently explained the pipeline plan to this best friend. Pablo would work part of the day carrying buckets and then part of the day and weekends building his pipeline. He knew it would be hard work digging the ditch in the rocky soil. Because he was paid by the bucket, he knew his income would drop at first. He also new it would take a year, possibly two, before his pipeline would start to pay big dividends. But Pablo believed in his dream, and he went to work.”(From the Parable of the Pipeline)
This is the tale of two polar opposites – a big-time baseball player and a small town elementary school teacher.
They couldn’t be more different – one was a young man and one was an elderly woman. One was paid millions a year and the other never earned more than $10,000. One lived his life in the spotlight. The other lived her life in a small town in Massachusetts .
But these were only small differences compared to the personal and financial choices each made. You see, one of the people you’re going to read about built pipelines and retired a multimillionaire. The other stayed a bucket carrier and, as I write this, is teetering on the brink of bankruptcy.
The stories are about two very different people, but that’s not what’s important. What’s important is the choices they made and the lessons you can learn from those choices. After you hear these two tales, it should be crystal clear why building pipelines is the only way to create true security and true financial freedom.
The Ballad of the Ball Player
Let’s begin with the tale of the famous baseball player. Over the years, this talented athlete has made some bad choices, both personally and financially.
His personal choices have led to a broken marriage, alcohol abuse, and drug addiction. That’s bad enough. But his financial choices have been just as bad, for he’s also broke. I’m sure you’ve heard of this athlete. He’s been in the spotlight for almost 20 years now.
His name is Darryl Strawberry. His story is a cautionary tale for what you should NOT do in order to achieve financial freedom.
Darryl Strawberry has been playing professional baseball for almost half his life. The 38-year-old outfielder broke into the major leagues when he was still a teenager and was immediately hailed as the “next Ted Williams.”
Strawberry has made a fortune during his career – somewhere between $2 and $5 million a year. And that’s just from playing baseball. Add another couple of million a year from endorsements, personal appearances, speeches, and autograph signings, and he’s earned $50 to $100 million before his 40th birthday.
Strawberries Don’t Field Forever
A guy making that kind of money has to be set for life, right?
According to a local newspaper report, “Strawberry has no income or savings to support his current wife, Charisse, and their three children…”
$100 million and not a thing to show for it.
He spend it.
Expensive houses. Expensive cars. Expensive lawyers to defend his run-ins with the law. Expensive divorce. Expensive drug and alcohol rehabilitation clinics.
As I write this, Strawberry has been suspended from playing baseball. Which means he has no income coming in. The only thing still coming in are the bills. And they come in day after day, months after month, as steady as the rain in a monsoon.
How to become the Millionaire Next Door
The second tale has much different ending. It’s the tale of a small town teacher named Margaret O’Donnell, and it proves that you don’t have to carry big buckets in order to build big pipelines.
Ms. O’Donnell taught school for more that 50 years. When she retired in her 70’s, she was making around $8,500 a year. When she died at age 100, she left almost $2 million to 10 different charities, including her church, schools she attended and a boy scout troop.
How could a woman earning less than $10,000 a year accumulate a small fortune? Simple. She built a long-term investment pipeline by making regular monthly investments in quality stocks and allowing them to compound over the time.
“Margaret enjoyed stocks,” said her broker, Bob Wolanske. “The first time I met her, she threw three papers on my desk and said, “What should I do with these dogs?,” referring to some stocks that weren’t doing well.”
Over the next 20 years, Margaret’s portfolio bloomed to include a collection of blue chip stocks, tax-exempt bonds, and utility stocks that she held until her death. She rarely touched any of her investments, enabling her retirement pipeline to grow year after year after year.
Small Sacrifices, Big Results
Now, in case you’re thinking that Margaret was one of those penny-pinching spinsters who clipped coupons and saved used tea bags, you’d be wrong. She ate out often with friends. Drove a late-model Buick. And frequently flew to Europe to enjoy long vacations.
She didn’t deny herself the pleasures of life. But she also showed discipline and restraint in her spending. And she saved and invested each and every month, even in retirement.
You see, Margaret was the classic example of long-term pipeline builder. She started saving and investing in her early 20s. And she continued right up until her death at age 100 (as you’ll learn in the coming chapters, pipelines grow bigger and bigger over time).
Like Pablo, pipeline builders may not have much to show for their efforts during the first few days or even years. But consistent, disciplined efforts over time can transform small contributions into huge dividends.
Pipelines Keep Pumping After Buckets Run Dry
Now do you understand what I mean when I talk about the power of the pipeline? Darryl Strawberry has carried a huge bucket for years. And what does he have to show for it today? Nothing but boxes of cancelled checks!
Strawberry has had 20 years to build pipelines. If the dad taken just 10% of his earnings and put the money to work by building an investment pipeline in the stock market, he could’ve had a lifeline worth between $20 million and $ 100 million by now.
But he didn’t.
Strawberry assumed his big bucket would never dry up. Wrong assumption. Buckets don’t automatically replenish themselves, no matter how big they are. That’s because the bucket carrier has to lug the bucket to get it refilled.
When he stops lugging – either through retirement… or illness… or injury… or burnout – the bucket starts drying up.
Pipelines, on the other hand, keep pumping profits long after buckets run dry. That rule holds true for big bucket carriers, just as it does for small bucket carriers. As I said, it’s not the size of the bucket that counts. People with big buckets tend to be big spenders. The key to financial freedom is to adopt a pipeline building mentality – and then to put your pipeline plan into action!
The Smaller the Bucket, the Bigger the Need for a Pipeline
Earning a lot of money doesn’t guarantees financial independence. Only pipelines can do that. If you don’t adopt a pipeline strategy, your bucket will eventually dry up!
I tell you the story of Darryl Strawberry to exaggerate a point – namely, if a bucket as big of Darryl Strawberry’s can dry up, what about your?
Think about it. Strawberry lived from paycheck to paycheck.
What about you?
Strawberry acted as if his bucket-carrying days would never end.
What about you?
Strawberry foolishly spent money and wasted time when he could have been using it wisely to build a lifeline.
What about you?
Sure, Strawberry made some bad choices that cost him a lot of money. But his worst financial choice was his failure to build pipelines. That’s unforgivable! What was he thinking?
Margaret O’Donnell, on the other hand, had the wisdom to build pipelines while she was still carrying buckets. When her bucket-carrying days came to an end, her pipelines kept pumping and the cash kept flowing.
It’s Your Turn to Choose
Now I ask you, which financial situation would you rather be in – Darryl Strawberry’s? or Margaret O’Donnell’s? If the answer is Margaret O’Donnell, then you need to start building your pipelines right away!
Pipelines are lifelines because they’re self-sustaining. They may need priming form time to time. And repairs. Perhaps even rebuilding. But pipelines can keep pumping profits year after year.
Both Darryl Strawberry and Margaret O’Donnell had a choice. Darryl Strawberry chose buckets. Margaret O’Donnell chose pipelines.
They made their choices.
Now it’s your turn to choose.
Leverage: The Power Behind the Pipeline
Once the pipeline was complete, Pablo didn’t have to carry buckets anymore. The water flowed whether he worked or not. It flowed while he ate. It flowed while he slept. If flowed on the weekends while he played. The more the water flowed into the village, the more the money flowed into Pablo’s pockets! (From the Parable of the Pipeline)
Leverage is an awesome concept – a civilization-alerting concept.
Let me explain.
In 1440, a young German entrepreneur named Johannes Gutenberg converted a wine press into the world’s first commercial printing press. He printed 180 copies of the Gutenberg Bible and sold them all within few days.
Gutenberg’s printing press was an immediate success. Within decades, printing presses had sprung up all over Europe . By the mid-1600s there were eight million printed books circulating in Europe, which was ten times the number of books that had been produced during the previous thousand year combined!
Books by Bucket Carriers vs. Publishing by Pipeline Builders
The Gutenberg press shattered the books-by-bucket-carriers paradigm. Prior to Gutenberg, book were hand copied by scribes and monks. On hand-written book could take years to produce and were so expensive that only royalty could afford them.
Gutenberg changed all that. With the printing press, the printer set the movable type once…and then could easily produce thousands of exact copies. The printing press leveraged the printer’s time and money, thereby dramatically increasing productivity.
In the books-by-bucket-carriers model, there’s a one-to-one ration between efforts and results. One hour’s effort produces one hour’s result. If it took one scribe one day to hand copy one page, then it would have taken him 100 days to turn out 100 pages.
Enter the printing press –the pipeline-building mode. Let’s say it took a 16th century printer one day to set the type for one page, so that by the end of the day, he would have produced just one printer’s proof copy.
But look what happened in day two: The printer came into work and pressed 100 copies! In other words, a printer could produce in two days what it would have taken the scribe 100 days to produce. That’s the power of leverage!
In the pipeline-building model, the ration between effort and result is no longer 1:1. When we use leverage, the effort remains the same, but the result can be 100 times grater… 1,000 times greater…or even million of times greater!
Two Kinds of Leverage: Time and Money
The root word for leverage – lever- comes from an old French word meaning “to make lighter,” which is an apt description of the power of leverage. By employing a lever, a big load can be made so light that a child could easily move it.
When we apply the principle of leverage to time and money, the same thing happens – the results are compounded.
For example, in the case of leveraging time, on hour’s effort can result in 100 hours of production. One week’s work can result in one year’s production.
In the case of leveraging money, each dollar invested over time can compound until it grows to many times the initial investment.
Classic Examples of Leverage
The printing press is an example of how people can leverage their time, money, and efforts. Leverage shatters the equation of one unit of time for one unit of money. Leverage allows people to work smarter, not harder, and it’s the power behind every pipeline.
Leveraging Time: hiring employees is a classic example of how people can leverage their time. Let’s say you want to open a restaurant. It would be impossible for you to act as the host…waiter…chef…dishwasher…and bookkeeper and still run a profitable business. You can only be in one place at a time, so you hire people to perform certain tasks.
If you pay your 10-person staff an average of $ 10 per hour, you’re paying out $ 100 an hour in wages. If your restaurant takes an average of 1,000 per hour in revenue, the difference after expenses goes into your pocket.
Leveraging Money: A classic example of leveraging money is investing in the stock market. No doubt you’ve heard of Warren Buffett. He’s a living legend on Wall Street and the second or third richest man in the world. He built his fortune the old-fashioned way – he leveraged other people’s money and made himself and his investors rich in the process.
How rich? Check this out. If you had invested $ 10,000 in Buffett’s Berkshire Hathaway stock back in 1965 and left it there to grow year after year, by 1998 your investment would have been worth – hang on to your hat – $ 51 million! Wow! How would you like to own that pipeline?!!
Thirty-five years ago, one share of Berkshire Hathaway stock cost only $ 19. By the end of 1998, that single share was worth about $ 70,000. Which means that you could have leveraged a $ 300 investment in 1965 into $ 1 million today! Unbelievable!
Pipeline Are Worth Building
Now do you understand the power of leverage? Berkshire Hathaway stock is living proof that with leverage, the results are disproportionate to the effort.!
Think about it – how much effort would it have taken to accumulate $300 back in 1965? Two or three days’ work… maybe a week’s work at the most. Just imagine – once the $ 300 was invested, you wouldn’t have to do any more work because your pipeline was already built. The only other work you’d have to do is check the stock prices in the newspaper every now and then.
Ask yourself – wouldn’t it be great if you could turn $300 into $1 million without having to lift a finger?
Can you see how the wise use of leverage can multiply a little money or a little time a thousand times over?
Doesn’t it make sense to find a mechanism whereby you could leverage $1 into $100?… or one hour into 100 hours?
Wouldn’t it be great to do the work once and let leverage do the rest!
Folks, if you’d like to enjoy the benefits of leverage, then you need to do what pipeline builders such as Pablo and Warren Buffett did – find a mechanism to leverage your time and money today…and enjoy a big reward tomorrow!
Money Leverage: The Palm Beach Pipeline
Legend has it that one of the ancient emperors of China fell in love with a new game called “chess”. The emperor decided to reward the game’s creator. He summoned the inventor to the royal palace and announced to the court that the inventor would be granted one wish.
“I am honored, Your Highness,” the inventor muttered humbly. “My whish is that you grant me one grain of rice.”
“Just one grain of rice?” the startled emperor asked.
“Well, just one grain for the first square of the chessboard,” the inventor said. “Then doubling to tow grains for the second square… four grains for the third square…and so on until the single grain has been doubled for the entire chess board. That is my simple wish.”
The emperor was well pleased. “I have been given such a wonderful game at such a cheap price,” he thought himself. “My ancestors have smiled upon me today.”
“It is done!” the emperor cried. “Bring out the chess board and let everyone here witness our agreement.”
The court gathered around the chess board. A kitchen servant produced a one pound bag of rice and handed it to the inventor, who smiled as he opened the bag.
“I suggest you return to the kitchen for a larger bag,” the inventor said to the servant. The court laughed loudly, mistaking his comment for sarcasm. Then the inventor began placing the grains of rice on the board, doubling the number of grains as he went: 1, 2, 4, 8, 16, 64,128.
The onlookers laughed and nudged each other as the first row of eight squares was filled…1, 2, 4, 8, 16, 64, 128 grains of rice. But the giggles soon gave way to gasps by the middle of the second row, for small piles of rice soon doubled to small big bags of rice…which doubled to medium-sized bags of rice…which doubled to big bags of rice.
256,512, 1K,2K, 4K,8K,16K,32K…
By the end of the second row, the emperor knew he had made a huge mistake. The grains owed to the inventor totaled 32,768 – and there were 48 squares remaining!
The emperor stopped the game and called in the land’s wisest mathematicians. They tossed the beads of their abacuses and made hasty markings on the slate boards. After much fussing, the mathematicians reached an unanimous conclusion:
A grain of rice doubled for every square on the 64-square chess board would calculate to 18 million trillion grains of rice – a quantity equal to all the rice in the world multiplied by 10!
The emperor halted the demonstration and made the inventor an offer he couldn’t refuse – if the emperor were released from his word, the inventor would receive a country estate with hundreds of acres of fertile rice fields. The inventor gladly accepted. Everyone toasted the inventor and congratulated him on his wisdom and cleverness. And he happily retired to his estate, enjoying many, many years in splendid comfort.
The Doubling Concept: Eight Wonder of the World
The story of the emperor and the inventor teaches us the power of the doubling concept. This concept has been around since the fist bank paid the first wealthy merchant interest on a deposit, so it’s time-tested and proven.
The inventor and the emperor’s mathematicians may have been the first people to recognize the power of the duplication, but they certainly weren’t the last. Centuries later another famous mathematician named Albert Einstein recognized the awesome power of duplication, or “compounding,” as it’s sometimes referred to, calling it “the eight wonder of the world.”
The doubling concept has become such a cornerstone of wealth creation that I call it “the Palm Beach Pipeline,” named after the ritzy city in Florida where hundreds of the world’s richest heirs own sprawling estates overlooking the Atlantic Ocean .
The rich people in Palm Beach don’t have to work for money. They make money work for them! How? They invest large amounts of inherited money in pipelines that churn out huge profits year in an year out, whether the investors work or not.
Palm Beach Pipelines are fueled by the doubling concept, which means the lucky heirs can enjoy fabulous lifestyle…while they get richer in the process! That’s what I call having your cake and eating it, too.
The Rule of 72: The Rule of the Rich
To better understand how rich people get richer, let’s take a look at “the Rule of 72,” a mind-boggling wealth-building concept that the world’s top investment brokers teach their rich clients. The Rule of 72 is a simple formula for calculating how many years it would take for an investor to double. Here’s the way it works.
Doubling Concept or Rule of 72
- Determine the annual interest rate on your investment
- Divide the interest rate into 72
- The result is the number of years it takes for your investment to double
For example, let’s say an heiress invest $100,000 in a stock that pays an annual return of 10% per year(sic). Here’s the Rule of 72 in action:
- Step 1: $100,000 original investment
- Step 2: 10 % annual return
- Step 3: 72 divided by 10 = 7.2 years
- Payoff: $100,000 would become $200,000 in 7.2 years
If the heiress didn’t spend the profits or her principle, the original investment of $100,000 would double to $200,000 in 7.2 years…to $400,000 in 14.4 years…to $800,000 in 21.6 years…in 1.6 million in 28.8 years…and so and on. As you can see, the longer the money is allowed to compound, the bigger the size of the pipeline.
By leveraging the power of compounding, people who inherit million-dollar fortunes can live like royalty and still leave an even bigger fortune for their children!
The magic of compounding is the reason that thousands of heirs named Kennedy…DuPont…Firestone…Ford…Rockefeller…and Getty can continue to live a life of luxury without their fortunes drying up. In effect, their bucket never runs dry because the pipeline keeps pumping year after year, for decades, or in the case of the Rothschild heirs in Europe , for more than two centuries!
Kids and Money
Fortunately, pipelines built by leveraging money aren’t reserved just for rich people. Average people can take advantage of the doubling concept, too, as we learned from the story about Margaret O’Donnell, a low-paid-school teacher who amassed several million dollars by leveraging her money in the stock market.
So, how do average people leverage their money to create a long-term pipeline?
The best to answer that is to tell you about a powerful little book called Kids and Money by Michael J. Searls. Actually, the book could be titled People and Money, because the principles outlined by Searls apply to young and old alike.
Searls, a former power broker an Wall Street and father of four, recommended a simple system to teach kids to manage their money more responsibly.
He suggests that parents get three plastic jars and label jar one “Spend & give,” jar two “save,” and jar three “invest.” When parents give their children their allowance for the week, they divide the money equally into the three jars.
The “spend and give” jar is for immediate spending – bubble gum, baseball cards, etc. It’s also money to be used for tithing and charity.
The “save” jar is for spending on bigger ticket items, such a new CD or video game.
The “invest” jar differs from the first two in that it’s not for spending. Ever. Searles call this jar “…the most important component, because if we don’t have something to put away for a rainy day, the threat of debt will always hover above our heads,”
Adults who are serious about building long-term investment pipelines need to start managing their money according to a three-jar system. But instead of putting their money into jars, they should put it into bank and brokerage accounts.
Pay Yourself First!
The key to leveraging your money like rich people do is to “pay yourself fist” by making regular monthly contributions into investment accounts – and leaving the money to compound!
The best way to fund your investment pipeline is to take some money out of your income bucket each month and deposit it into your pipelines.
How Average People Become Millionaires
Too bad we weren’t able to choose rich parents – then we wouldn’t have to worry about “forced savings plans” and automatic payroll deductions.
But the truth is, the vast majority of millionaires in this country ( USA , mine) didn’t inherit their fortunes. Statistics show that four out of five millionaires never inherited more that $10,000. But what they did do was copy the investment strategies of the Rockefellers and the Kennedys. In a word, self-made millionaires leveraged their money to build their own Palm Beach Pipelines!
How? By using the “three jar system” – instead of spending every dime they make, they put aside a big chunk of their income in the “invest” jar, and let it compound year after year.
Typically, millionaires save 15% to 20% of their gross income and invest it wisely in asset-building pipelines, such as stocks, bonds, closely-held business, rental property, commercial real state, pension funds, and the like.
That’s why most millionaires don’t hit the million-dollar mark until they’re in their 50s or 60s – it can take decades before compounding really kicks into high gear. Ten thousand dollars at 10% doubles to $20,000 after seven years…but in 50 years it will double seven times, which calculates to almost $1.3 million!
Power of Compounding
- Year 1 $10,000
- Year 7 20 K
- Year 14 40 K
- Year 21 80 K
- Year 28 160 K
- Year 35 320 K
- Year 42 640 K
- Year 49 1.3 M
If You Don’t Have the Money, What Do You Have to Leverage?
Wouldn’t it be great to be a millionaire?
You can, you know. And you don’t have to win the lottery to do it.
The Millionaire’s Club used to be a very exclusive club. You had to be born into the right family. Go to the right schools.
That’s not the case anymore. Today, average people can join the Millionaire’s Club, too. It’s open to anyone with the discipline to invest a regular portion of their income and let it compound over time.
But let’s face it – not everyone has the patience to spend 40 or 50 years building their retirement pipeline. And not everyone has the money to build a Palm Beach Pipeline overnight.
Wouldn’t it be great if there were a 5-year pipeline plan whereby average people could create ongoing residual income without having to invest a small fortune?
Well, there is a 5-year pipeline plan available. Best of all, you don’t need lots of money to build this pipeline. Because instead of leveraging your money…you leverage your time!
Time Leverage: The People’s Pipeline
“While Bruno lay in his hammock on evenings and weekends, Pablo kept digging his pipeline. The fist months Pablo didn’t have much to show for his efforts. The work was hard – even harder that Bruno’s because Pablo was working evenings and weekends, too.
But Pablo kept reminding himself that tomorrow’s dreams are built on today’s sacrifices. Day by day he dug, an inch at a time. .”(From the Parable of the Pipeline)
There’s an old Appalachian expression that sums up the difference between money leverage and time leverage. It goes like this:
There are two ways to get the top of a giant oak tree. You can sit on an acorn and wait. Or you can climb it.
When people leverage their money over decades, they’re choosing to sit on an acorn and wait. I call this the “50-Year Pipeline Plan.” This is what compounding is all about – waiting patiently while your money doubles again and again over the years.
There’s no question that the 50-Year Pipeline Plan works. Remember how Margaret O’Donnell’s pipeline transformed her from a underpaid teacher to a multi-millionaire?!!!
Like Margaret O’Donnell, I’m also a big believer in building long-term pipelines. Over the years, I’ve leveraged a portion of my income to build “Palm Beach Pipelines” in everything from pension funds…to stock market accounts…to IRAs…to real estate. It’s called diversification. It’s called building lifelines.
But I’m also a big believer in climbing oak trees!
I call climbing oak trees the “5-Year Pipeline Plan.” It accomplishes the same goal as the 50-Year Pipeline Plan – financial independence and security. But only takes 10% of the time!
That’s why I’ve spent time, money, and effort in building several fat-growing business. Instead of having to wait 50 years to get to the top of the tree, I can build a business that gets me in two to five years.
Time Levels the Playing Fields
The beauty of time leverage is that we’ve all been given the same amount of time. Which means time levels the playing fields between rich people and average income earners. Whether you’re Donald Trump…or Donald the dump truck driver… everyone has been given the same amount of time each day.
That’s why I call time leverage the “People’s Pipeline.” Time is available in equal amounts to everyone, whether they’re reach or poor…man or woman…black or white…college educated or high school dropout…young or old. You can’t say that about money, now can you?
Think of it this way. Wouldn’t it be great if you and everyone else could start every single day with $1,440 in your personal bank account? The money would be yours and yours alone and no one could tell you what to do with it. You could spend it…invest it…brow it…burn it…give it away…leverage it…or waste it, knowing that the next morning, you’d wake up with another $1,440 in your account. If everyone could start off every day with $1,4440, it would be a better, more fair world, wouldn’t it?
But as we’re well aware, that’s not the case. When it comes to money, life isn’t fair. Some people are born with a silver spoon in their mouths. Some with a plastic spoon. Some with nothing but their own thumb. Fair? Maybe not. But as the song says, “That’s Life.”
We don’t all start every day with $1,440 in our bank account –that’s for sure. As for time – that’s a different matter. We DO all start every day with 1,440 minutes in our time account. (24 hours a day times 60 minutes an hour).
Since we all get the same amount of time, the difference between people who live paycheck to paycheck and people who are financially free is how they use their daily allotment of 1,440 minutes!
You’ve Got More Time Than You Think
Some people put off building their pipelines because “tight now is a bad time for me.” Guess what – right now is a bad time for everybody! We’re all stressed. We’re all busy. We’re all putting out fires and dealing with unexpected emergencies. There’s a word for these bad times.
It’s called life!
Some people waste their lives waiting for the “perfect time” to do x,y,or z. Well, they’ll die waiting because there’s no such a thing as a perfect time. If someone told you he’d give you $1 million if you’d sit in a corner and knit for two hours, wouldn’t you?
It wouldn’t matter if your son broke his arm on the playground or your car wouldn’t start after work. Rather that forfeit $1 million, you’d find the time to knit for two hours, perfect time or no perfect time. Humorist Art Buchwald put it this way: “Whether it’s the best of the times or the worst of times, it’s the only time we got.”
Sadly, most people take time for granted, especially small amounts of time. We’ve been conditioned to measure time in days and weeks and years, instead of minutes and hours. We work 9 to 5, Monday through Friday. We plan our lives according to a monthly calendar. We celebrate our birthday and anniversaries once a year.
But the amazing thing about time is how a few minutes here and there every day can add up to huge chunks on time! For example, did you know how much total time the average persons spend eating during their lifetimes? Would you guess a year? Two years? The answer is six years! Isn’t that amazing? Here are some other short daily tasks that add up to huge blocks of time:
6 years eating
5 years waiting in line
4 years cleaning house
3 years preparing meals
2 years trying to return phone calls
1 year searching for misplaced items
8 months opening junk mail
6 months sitting at red lights
By my tally, that’s close to 22 years out of your lifetime! Which goes to prove that 15 minutes here…half an hour there…two hours there…can add up to huge blocks of time!
A Few Hours Can Turn into a Few Months
Just think for a moment what we could accomplish in our lives if we used a couple hours each evening and on the weekends to do something purposeful, like building a pipeline. If you set aside two hours each workday – let’s say one in the morning before work and one in the evening – and three more hours on both Saturday and Sunday, you could add 16 hours of productive time a week to your schedule!
Sixteen hours a week over 50 weeks a year comes to 800 extra hours a year…which calculates to 100 eight-hour days…or three months and 10 days of extra eight-hour workdays each year! And all you had to do was set aside a couple of hours a day to get three extra months of productive time each year. Amazing isn’t it?
Time is Money
Now, I’m going to let you in on a little secret – using free time productively is one of the keys to why successful people have more, do more, and get more in life! Do you think Bill Gates comes home at 5:00 PM every day and watches seven hours TV like the average American male does?
I don’t think so…
A recent article in the Wall Street Journal states that the top 10% of earners in North America work an average of 52 hours a week, whereas those in the bottom 10% of earnings work only 45 hours a week.
Not only do the top 10%-ers work longer – they work smarter! In other words, they don’t trade their time for dollars. You won’t walk into a convenience store and see Michael Jordan behind the counter selling customers lottery tickets and quarts of beer. Successful people in every line of work value their time, and they seek every opportunity to leverage their time!
Waste Not, Want Not
People often ask me why they should take the time and effort to build pipelines when things are going so well right at the moment. They tell me they deserve to relax after a hard day at the office. They reward themselves by leaning back in the La-Z-Boy recliner and watching TV until bedtime.
“Life is good,” they tell me. “Got a good job. Got a few bucks in the bank. Kids are doing well in school. No need to rock the boat.”
That’s when I tell them that there’s no better time to build your pipeline than when things are going great. Why? Because when the tide turns, it may be too late!
Then I tell then this old joke: a man was on the 30th floor of a fancy hotel overlooking Central Park in Manhattan . He pulled back the shades and threw open the window to enjoy the view. As he leaned out the window, he was startled to see a man falling past his room.
“How you doing?” he asked the falling man.
“Fine – so far,” came the reply.
The point is that there are lots of bucket carriers in this world who are doing fine – so far. But they can’t stay en a free-fall forever. As long as people trade time for dollars, there’s no safety net in their lives. Why? Because when they can’t put in the time due to illness… or injury…or layoffs, their paychecks will stops.
For bucket carriers, no paycheck means no security!
The Fable of the Ant and the Grasshopper
As I write this, consumer confidence in high. Unemployment is low. Incomes are rising. Home sales are at record highs. Car sales are booming. Lots of people are fine –so far.
But we can’t fall into the trap of mistaking “so far” for “forever”. Everybody knows that life goes in cycles. So does the economy. Right now the business cycle is nearing its zenith. Your personal life cycle may be at an all-time high, too.
But what goes up, must come down. And when people start coming down, some of them ae going to crash into some hard realities: Layoffs. Career changes. Credit card debt. Medical emergencies, Nursing home care for elderly parents.
Smart people understand that the best time to feather their nest is while business is booming. Smart people erect safety nets before a recession starts, not during! That’s why I tell people that today is the best time to build their pipelines, not when economy hits the skids.
It’s like the fable of the ant and the grasshopper. The ant was a pipeline builder. He spent part of his summer days storing away grain for the coming winter. He enjoyed the summer, too. But he had the wisdom to spend some of his time building his pipeline.
The grasshopper on the other hand, was a bucket carrier. He spent all of his money as soon as he got it and wasted all of his time playing in the sunshine. He ignored the coming winter. When the cold winter came, he had no pipeline in place. And he starved to death.
Pay Me Now…Or Pay Me Later!
Do you remember the famous advertising slogan, “Pay me now…or pay me later?” The same goes for building pipelines. You can “pay a little now” by investing some of your time and money to build your pipeline today…or you can “pay a lot later” by struggling to survive on a small Social Security check when you’re in your 60s and 70s.
Just think – if your pipelines are in place, instead of having to pay later…you’ll get paid later!
What a concept!
Time Leverage: The People’s Pipeline
Remember –time levels the playing field!
We all DO NOT have the same amount of money to leverage.
But we DO have the same amount of time!
By leveraging some of your leisure time wisely, you can built a pipeline that will continue to pay for years
We’re lucky to be living in an age when virtually anyone can leverage their time to build pipelines. That hasn’t always been the case.
At the turn of the 20th century, only the very rich had the luxury of leveraging their time. In 1890, the vast majority of people worked 10 hours a day as laborers. They were too busy trying to stay alive to think about leverage.
But today more people have more free time than ever before in history. And time is the great equalizer! Time enables the little guy to get 48 hours a day while poor people get 12. They both get equal amounts of time -24 hours a day, 7 days a week, 365 days a year.
The greatest Time-Leverage Tool in History
Today pipelines are no longer the province of the rich. Anyone with a little time…and a lot of drive… can leverage their time to build a “people’s pipeline” in two to five years that will flow for years –or even decades!
In fact, we have right at our fingertips the grates time-leveraging tool in the history of the world! This time-leveraging tool has created more millionaires in less time that any other single invention in history.
I call this amazing tool the “e-pipeline,” and is the ultimate tool for time leverage. You probably know the e-pipeline by a different name –a name that is clashed across newspaper headlines and TV screens 24 hours a day.