- D. Definition
- E. Elimination
- A. Automation
- L. Liberation
This is a Summary of Tim Ferris’ 4 Hour Work Week Book
Before you can attempt to become part of the NR, you need to understand what the rules and objectives of this new game are. In practice, this means you need to replace the conventional self-defeating assumptions with concepts which are aligned with the overall NR lifestyle design.
“People don’t want to be millionaires – they want to experience what they believe only millions can buy. Ski chalets, butlers and exotic travel often enter the picture. $1,000,000 in the bank isn’t the fantasy. The fantasy is the lifestyle of complete freedom it supposedly allows. The question is then, ‘How can one achieve the millionaire lifestyle of complete freedom without first having $1,000,000’?.
– Timothy Ferriss
The New Rich think differently from Deferred Lifers. If you aspire to join the ranks of the NR, you’ll need to be prepared to abandon your old assumptions about work and career and strike out in a different direction. To be more specific about these differences:
|Deferred Lifers||New Rich|
|To work for yourself.||To have others work for you.|
|To work when you want to.||To put in minimum effort for maximum results.|
|To retire early and then do nothing.||To have regular breaks where you do what you love.|
|To buy anything you want.||To do all the things you want to do and be what you want.|
|To be the boss.||To own your business.|
|To make lots of money.||To have as much money as you need to chase your dreams.|
|To have more.||To have more quality and less clutter in your life.|
|To get a big pay off through an IPO or some other means.||To think big and focus on getting a big payday everyday, not at some time in the future.|
|To have freedom from doing what you dislike.||To have the freedom and resolve to pursue your dreams rather than working for the sake of working. Not only do you want to eliminate the bad but you also want to experience the best the world has to offer.|
The 10 basic rules of pursuing a NR lifestyle are:
- Think of retirement as a worst-case scenario – and not the goal of your entire career. By all means plan for your retirement as a fall-back position but plan on living life to the full in the meantime. Take advantage of 401(k)s and IRA for tax purposes rather than as the sum total of your financial preparation for retirement.
- Remember interest and energy are cyclical – so you should break periods of intense commercial activity with “mini-retirements” where you go off and recharge your batteries. Work only when you’ll be most effective, not when you’re jaded and washed out.
- It’s not lazy to do less work – if you’re focusing on doing the most productive things. Find workable ways to spend less time in the office but actually achieve more. Focus more effort on being productive and less on being busy.
- The timing is never right to quit your job and start working for yourself – so plunge into it now rather than waiting until the planets are aligned. Replace “someday” with “today”.
- It’s always much more fun to ask for forgiveness rather than asking for permission – so plunge into things with enthusiasm. Get good at being a troublemaker but be prepared to say sorry if you really screw things up.
- Find ways to emphasize your strengths – rather than trying to fix your weaknesses. Focus on using your best tools wisely rather than attempting to repair what doesn’t work.
- Remember it’s possible to have too much of a good thing –so plan on using your free time wisely rather than sitting around and doing nothing. Do what you want to do as opposed to doing what you feel obligated to do.
- Remember money alone is rarely the solution – so never use it as a scapegoat. Instead of saying “I’d do that if I had more money”, create a life of enjoyment right now. Pursuing more and more money just for the sake of having more becomes a pointless illusion at some stage. Live the life you want.
- Learn how to differentiate between “absolute” and “relative” income – and focus on making more money for each hour you choose to work. Absolute income is the number of dollars involved. Relative income combines how much you earn with how long it takes you to earn that money. As long as you have enough absolute income to cover your expenses, always think in terms of increasing your relative income. The only wayto achieve that is to make more for each hour you choose to work rather than working more hours.
- Take advantage of “positive stress” or eustress – the kind of stress which acts as a stimulus for worthwhile growth. While negative stress can be destructive and cause health problems, positive stress to realize your dreams can be helpful and beneficial. Since you won’t make progress without it, the more eustress you create, the better. One way to do this is to focus on emulating role models who epitomize what you’re trying to achieve yourself.
These rules challenge the status quo and help the NR define problems in different ways from the thinking everyone else uses. More than anything else, the NR crave excitement. The idea of doing the same thing day-after-day and year-after-year is pure boredom. Instead, the NR are intent on doing the kinds of things reasonable people dismiss as being unrealistically hard. The NR know that doing something bold and completely unrealistic is often easier than settling for the reasonable goals everyone else has.
To become part of the NR, it’s essential you learn how to apply timelines to your dreams and then to get to work doing the things today which will lead to your dreams being actualized. A good way to do that is by planning in this way:
Note that when using this kind of dream achievement outline, it’s helpful to think of your income and expenses from a monthly cash flow perspective – dollars in and dollars out. Most things cost less than you might otherwise expect when they are financed on commercial payment plans or through installments. Sure, you’ll pay some interest, but paying $2,953 a month to drive a Ferrari sounds much more manageable than having to come up with $200,000 to purchase it outright.
Kill the idea of managing your time better. That’s for those who are satisfied with a deferred life. Instead, you need to increase your per-hour results at least ten-fold so you can achieve more in two-hourdays than you ever did in your prior 12-hour workdays.
To achieve this, you need to:
- Cultivate selective ignorance.
- Have a low-information diet.
- Learn how to completely ignore the unimportant.
Find workable ways to eliminate more and you end up with the first component of a NR lifestyle: time.
At some point in your adult life, you will probably come to the realization that working every hour from 9-5 isn’t actually the goal you should be striving for. It’s simply a structure most people tend to use, regardless of whether it’s necessary or not. In fact, if you sit down and really analyze where your best results are coming from, you will find two laws are usually in play:
- Pareto’s Law: 80% of your outputs will result from 20% of your inputs.
- Parkinson’s Law: A task will swell in importance and complexity in relation to the time allotted for its completion.
With these two laws in mind, you should forget completely the concept of time management. You really don’t need to try and fit more activities into your average work day. Instead, it’s time to get serious about becoming more effective (doing what moves you closer to your goals) rather than more efficient (performing your assigned tasks as quickly as possible).
To increase your personal effectiveness:
This is actually a good example of selective or perhaps elective ignorance as a way to become more effective. When you identify clearly your most important activities and create deadlines, you force yourself to focus. If you don’t do this:
- Minor tasks will swell to consume all your available time.
- You will mistake activity for productivity.
- You’ll end up jumping from one interruption to the next without getting anything done.
- You’ll end up feeling like you’re being run by your business instead of the other way around.
- You’ll end up wasting time either through the force of habit or by imitating what you see others doing.
To supplement your attempts to identify critical tasks and get them done as fast as possible, there are three things you can and should do:
- Cultivate some selective ignorance – feel good about the fact you don’t fill your mind with trivial and worthless information. Deliberately ignore anything which is irrelevant, unimportant or unactionable on your part. Live by the creed: “Less is more”. If you completely ignore any piece of information which is time-consuming, negative, irrelevant to your goals or outside your area of professional competence, just imagine how much time you’ll save.
- Go on a low-information diet – which means:
- No reading newspapers.
- No surfing the Internet for news.
- No television except one hour pleasure viewing per day.
- No reading books except for a bit of fiction before bed.
While this may sound a bit draconian, the objective is to show you that all that time spent staying up with news and current affairs is really productive time down the drain. Instead of wasting time following the media, you should speak with your spouse, do things with your children and focus on your goals. You can stay up with what’s happening in the world by asking your colleagues about what’s new or by glancing at the headlines when you pass a newspaper vending machine. After you’ve been on a low information diet for a few weeks, you’ll be amazed at how much time you previously wasted without ever giving it a second thought.
- Learn how to completely ignore the unimportant –by following a few very simple guidelines:
- Ignore any and all time wasters – and become a deliberate ignoramus. If something can be ignored with no negative consequences, do so enthusiastically. Check your e-mail no more than twice a day and delete as much as possible. Have two office phone numbers, one for standard calls which automatically go to voicemail and the other number which is given out selectively to those who will have urgent needs. When you return calls, get to the point immediately and move on. Respond to voicemails by e-mail if you can. The same with meetings. If at all possible, ask to be excused and promise you’ll talk with a colleague to catch up on what was covered. If that doesn’t work, define in advance a time when the meeting will end. Don’t let people drop by your office to chat.
- Always batch your time consumers which you have to do – because it will usually take the same amount of time to do a number of similar tasks. By batching, you share preparation time or execution time out over a larger number of tasks, creating better efficiencies.
- Empower your colleagues – to do anything which keeps your customers happy without feeling the need to check with you. For example, you might establish a policy which says for any problems which cost less than $100 to fix, they should go ahead and do whatever it takes to fix that without checking with you. That way,you have outsourced a large proportion of your e-mail and phone calls. Even better, doing this sends the signal you trust your colleagues to use their own good judgement. This indication of trust allows these people to prove they have what it takes to excel. You end up with a win-win situation where customers are better served and your coworkers are happier.
If you can generate a decent lifestyle cashflow on autopilot rather than putting in the personal hours, then you can do more of what you want. The key components to master here are:
- Geographic arbitrage – be able to run your business from anywhere.
- Learn how to outsource the majority of your work day assignments.
- Learn and then apply the rules of nondecision.
Establish good cashflows which don’t require your hands-oninvolvement and you have in place the second NR lifestyle component: income.
If you genuinely aspire to design your own NR lifestyle, you’ll need a steady source of income. The conventional approach to this challenge is to find a good job that pays well, even if it requires working more hours than you would like. The NR don’t think that way at all. Instead, they try and build a revenue generating system which is completely automated – which can generate income without any hands-on involvement.
To achieve an automated income, there are really only four things you need to do:
To take each of these points in turn:
1. Learn how to use virtual personal assistants
If you apply Pareto’s Law to your own personal life, you’ll probably realize you spend an awful lot of time fiddling around with things which have little or no added value. Instead of blindly accepting the status quo, you should consider hiring a top-notch personal assistant who will take care of at least some of these activities for you. The best way to achieve this in practice is to hire a virtual assistant who works on demand.
The value of this is relatively straightforward to calculate:
- If you earn $50,000 a year, your time is worth $25/hour. (50 weeks of work each year working 9-5).
- If you can hire a top-notch assistant at $30/hour for 8-hours and his or her work saves you from having to work day a week, then all it is actually costing you is $40. Would you be prepared to pay $40 a week to have a three-day weekend every week of the year? If you can hire a virtual personal assistant for less than $30 a hour, the equation becomes even better.
Through the Internet, it is now feasible and practical for you to build an army of assistants who can take care of all the stuff you need to get done. The more assistants you get working for you, the more efficient your life will become and the more time you will have to focus on bigger and better things.
Some good places to look for virtual personal assistants:
- U.S. and Canada – expect to pay $20+ / hour
- International – you’ll pay anything from $4+ /hour
To learn how to make best use of these virtual assistants:
- Start small even as you think big – perhaps by getting a virtual assistant (VA) to do whatever has been sitting on your to-do list for the longest time. Once you get some experience under your belt, you can then start handing more and more jobs off to your VA.
- Keep asking yourself: “Could a VA do this?” – and you’ll be surprised how many tasks you could get done quicker if you outsource them to someone else. Good VAs can schedule interviews, do Web-based research, create legal documents, carry out routine Web site maintenance, do proofreading and editing, prepare voicemail transcriptions – and much more. The possibilities are endless.
- Look at your pain points – and consider whether you can avoid frustration, pain or boredom by hiring a VA to do what you don’t like doing anyway.
- Always make sure you define the task in enough detail –so your VA will be crystal clear about what you’re trying to achieve. If you don’t do this right at the outset, all that will happen is a lot of wheel spinning. Make it easy for your VA to succeed and hopefully surprise you.
- Make sure you eliminate unnecessary tasks before you delegate them – because its pointless to get a VA to do something which is a complete waste of time. That’s just a drain on cash flow you don’t need.
- You’ll generally be better off hiring a VA firm rather than an individual VA – so there is a pool of talent you can use rather than needing to find a new VA every time you get a different task. If you’re working on confidential projects, you’ll need to get your VA to sign a nondisclosure agreement, or else change the names of the companies in correspondence to maintain confidentiality.
- Always get your VA to outline his or her plan of attack for doing what you ask – and set a time limit on how long the VA should spend. Otherwise things can get disjointed and complicated. It’s generally best to give your VA one task at a time, pay for that and then move on to the next. That way you avoid any nasty surprises such as having your VA send you a bill for 70 or 80 hours work.
- Have reasonable expectations – don’t expect your VA to perform miracles on your behalf but at the same time have your VA do something worthwhile. Try to identify the top five work tasks which consume the majority of your time and consider having a VA do them for you. Just for a bit of fun, also look at five personal tasks which soak up your free time and see if you can get a VA to do those for you as well.
2. Find a viable and profitale niche product
Once you know how to use a VA efficiently, the next step in setting up an automated system to generate cash without requiring your time is to find a good niche product. To do that:
- Pick a niche market which you can affordably reach – and then look for a product those people will likely buy. It’s much easier to fill demand than it is to try and create demand. Define your customers, figure out what gives them pain and then look for a product they will be willing to buy.
- Brainstorm a few different product ideas – something you can describe in one sentence or less. The mass market is for products priced between $50 and $200 so try and hit that price point if you can. Keep your product simple – you should be able to explain it on a Web site without any problems. Your options will generally be to:
- Resell something – purchase at wholesale, sell at retail.
- License something – if you have the capital.
- Create something of your own design from scratch.
Note that if you are from a service industry background, you may be inclined to offer a service. That’s fine, but it does set limits on how much you can sell. A superior approach is to embed your know-how into a tangible product which can then be replicated and sold in large numbers, thus automating your income.
3. Test market to prove commercial viability
Now you need to micro-test your product to see whether people will actually buy before you invest in manufacturing or inventory. The best way to do this:
- Look at your best competitor – and create a more compelling offer than they have at present. Put your offer onto a very basic one-to three-page Web site. Figure out exactly what you need to do to differentiate yourself and then go out and do precisely that.
- Test actual customer response to your offer – so you can have confidence the market exists. There are several waysto do this intelligently:
- Run a 48-hour eBay auction for your item and see how high the bidding goes. If you don’t actually have a product to ship, cancel the auction at the last minute.
- Set up a simple Google Adwords campaign to drive people to your Web site. Set a daily budget limit of $50 and run the campaign for at least two days minimum and up to five days maximum.
- Tally your results – and drop any obvious losers. If you have established the demand is there, you can then proceed to an automated rollout of your product by setting up a small Yahoo store for about $99 per month plus a small transaction fee. Usesomeonelikewww.paypal.comso youcanacceptcredit cards online. You will also need to continue using Google Adwords or Overture to do further pay-per-clickadvertising to continue to drive more traffic to your product Web site. You can also experiment with some other print ads to see what works and what does not.
A good model of this basic three-step approach is www.pxmethod.com.This provides a template whichis a simple and effective model which can be copied and adapted to your own product.
4. Apply MBA – Management By Absence
Remember your goal right from the outset has been to create a business which can run itself and make money whileyou do something else. To achieve this, you need to have some kind of business architecture in place which effectively removes the need for you to have any hands-on involvement. You want to be the absentee CEO who also happens to own the business.
The key to management by absence is to have processes in place which will allow everything to happen without your involvement. To achieve this in practice:
- Outsource every step of your business model – to specialist companies who can scale up their involvement as your level of sales increases. There are lots of end-to-end fulfillment companies to choose from. Visit www.mfsanet.org to find someone or talk to your local printer who will know who is active in this commercial field.
- Allow the different groups of outsourcers to communicate among themselves – and solve problems without your being in the loop. At first, you might give them written permission to solve only the least inexpensive problems without any need to consult you but as you become more confident with how they work, you will naturally drop any limits and get them to solve every problem that crops up.
There are also a few other things you can do to reduce your growingbusiness’s service overheads and keep it working well:
- Keep things simple by offering just one or two purchase options – “basic” and “premium” for example.
- Don’t offer multiple shipping options. Offer one fast method for everyone and charge a premium for it.
- Don’t offer overnight shipping – that will generate a host of panicky customers and anxious phone calls.
- Don’t offer phone orders. Direct everyone to your Web site for online ordering. If it’s good enough for Amazon.com, it should be good enough for you.
- Don’t offer international shipments – they are always a hassle you can do without.
- Instead of having to deal with problem customers, make it difficult for them to do business with you. There are lots of subtle ways to achieve this:
- Do not accept paymentby Western Union or money orders.
- Require a tax ID number from wholesale resellers.
- Refuse to offer lower pricing for bulk orders.
- Instead of offering a free product to capture a visitor’s contact details, offer them a very low priced starter product. That will weed out those who will never buy anything from you later on and save you time and money.
- Offer win-lose guarantees – something that completely removes the risk for the consumer. Your guarantee might be along the lines of: “110% guaranteed – it doesn’t work, not only will we completely refund your purchase investment but we will also add another 10% to the refund check.”
Liberation means being mobile and able to run your business from anywhere in the world. Once you master this, you can then explore the world at will and become much more globally inclined. The key liberation components are:
- Escape the boss mentality and break any bonds which confine you to a single location.
- Learn how to take multiple mini-retirements rather than one at the end of your career.
- Find something meaningful to devote your life to.
Become skilled at liberation and you have the third and final component of the NR lifestyle: mobility.
The three components of a NR lifestyle are time, income and mobility. Once you’ve established an independent source of income or two, it’s then natural to decide to liberate yourself from the 9 -5 grind and proactively explore everything the world has to offer. This is where the NR creed comes to the fore. While everyone else keep their noses to the grindstone building their careers in the hopes of having a prosperous and happy retirement, you give yourself permission to start enjoying the journey sooner rather than later.
Liberation of this kind involves three distinct phases:
To take each of these phases in turn:
1. Disappear and escape your boss
You can’t have a NR lifestyle while you work for a boss who demands you’re there in the office 9 -5 every day. If your new source of automated income is sufficiently established, you may well feel comfortable quitting your job now and plunging into your new lifestyle. If that is too big a step for now, perhaps you could set a goal of staying awayfrom the office two days a week without losing your job. Here’s how you can pull that off:
- Start by talking with your boss about what kind of training programs would increase your value to your firm. Propose that you attend a four-week training course paid by the company and do just that. This will increase the company’s sense of loss if you were to quit altogether.
- After you’ve finished the course, call in sick on a Tuesday and Wednesday. Then work at home on those two days and keep an audit trail of what you have accomplished. Develop a bullet list which summarizes those benefits.
- Casually mention to your boss that you were surprised how much you accomplished while working at home. Propose that you try doing so again for two days a week for the next two weeks. Mention this can be vetoed by the boss at any time. Then go to work and make sure your business productivity shows an improvement as you work at home.
- Set a follow-up meeting with your boss where you compare the results of what you achieved when working at home and what you normally get done in the office. Propose that you work at home four days each week on a trial basis to see whether these increases can be maintained. Mention your boss has the absolute right to change the arrangement at any time if he or she is unhappy with any aspect.
- Keeponhavingfollow-upmeetingswhereyourproductivityis looked at closely by your boss. Propose making your work at home arrangement more permanent.
By building a solid business case for what you’re suggesting based on enhanced output, your boss really has no reason to refuse. If, however, he or she does refuse, then you’ll probably have to take the plunge and resign. If this becomes necessary, you’ll have some obvious concerns:
- “Isn’t this a little too permanent?” Actually, if you’re good at what you do, you can always find similar work somewhere else in the future.
- “How will I pay the bills?” If you’ve established some automated streams of income before you quit, this won’t be a problem. If you haven’t, eliminate all your discretionary expenses and get busy making some cash in other ways. There are always options.
- “What about my health insurance and retirement accounts?” Find your own medical and dental coverage with anyone you like. It will only cost you $300 to $500 a month. You can transfer your 401(k) to someone like Fidelity Investments in 30-minutes or less.
- “Quitting will ruin my resume!” In what way? Having a one-or two-year break on your resume where you traveled the world and experienced new things is a positive not a negative if you choose to reenter the workforce at some point in the future.
The point is tens of thousands of people leave their jobs every day and the world doesn’t end. If you’re forced to join their ranks at some stage, you’ll still have many options based on your marketable skills and experience. Changing jobs is not as difficult as it might appear. You might actually end up doing quite well out of it. If you need some help here, use the resources at www.iworkwithfools.com or www.i-resign.com.
2. Start taking ongoing mini-retirements
Why wait until you retire for good to find out whether you like it or not? Instead of taking vacations, start taking some mini-retirements where you head off overseas for extended periods and experience different life styles. In effect what you’re doing is taking your usual 20-30 year retirement period and redistributing it throughout your working career instead of saving it all for the end.
The advantages of mini-retirements:
- You can relax staying in one place for months at a time rather than spending all your time in airplanes or at airports.
- You will experience different lifestyles as opposed to viewing life from the windows of a hotel.
- Living abroad for extended periods is often cheaper than your normal monthly living expenses, especially when you consider all of the things you won’t have to pay for – memberships, subscriptions, rent, insurance, dining out, etc.
- The currency exchange rate often works in your favor.
One other big advantage of going on months long mini-retirements is this is a great opportunity to declutter your own personal and professional life. The fact you’ll be putting your personal possessions into storage you have to pay for while you’re away causes you to evaluate seriously whether each item is really necessary. You’ll get rid of loads of things that you have just accumulated by accident.
To prepare for a months long mini-retirement adventure:
- About three months before you leave, eliminate. Go through your belongings and financial commitments. Decide which 20% of your belongings you use 80% of the time and sell the rest. You can alwaysrepurchase things you find you can’t live without, including cars and homes. Clean up all your financial affairs and simplify.
- Two months out from your trip, automate everything. Set up payment by credit card for all the expenses you will keep paying while away. Arrange automatic debits from your bank accounts to pay your credit card bills. Give someone you trust a signed power of attorney they can exercise when instructed to do so by you.
- One month out, start getting your mail forwarded to a friend who you pay a small fee to open each piece of mail and e-mail you a brief description once a week. Get your remote access software working allowing you to log on to your computers without any glitches. Ensure all deposits from your businesses are being banked automatically.
- Two weeks out, scan all your credit cards, identification and health insurance details into a computer you and your friends or family can access. Set up a voice-over-IP phone number (using Skype or similar service) which forward calls to your GSM-compatible cell phone which you have checked will work in the country you’re going to. That will allow people to call a local phone number and talk with you wherever you are in the world. Downgrade your normal cell phone to the cheapest plan and set up a message that tells callers you’re currently overseas on business and they can contact you by e-mail at ______@____.com if they have an urgent matter to discuss. Also mention you won’t be checking your voicemail while overseas.
- One week out, move all your belongings to the storage facility and stay with a family member or friend. Check all of your arrangements are working smoothly without any intervention on your part.
- Two days out put your cars into storage. Disconnect the battery, put the vehicles on jack stands and change your auto insurance to theft coverage only. Check everything is in order and make any last-minute adjustments. By this stage, all of your life should be running on remote control so you really should have a few days to sit back and do nothing much at all. This period does, however, provide reassurance everything will go smoothly without your hands-on involvement while you are away.
By working through all of the issues involved well in advance, you and your family members can now head off for a mini-retirement adventure with peace of mind. By all means be smart when you get wherever you’re going and purchase health coverage and whatever else you should have in place, but most of all enjoy the experience.
3. Find something meaningful to do
Sooner or later, when you’ve built a life around a 4-hour workweek, you’ll have some vague sense of guilt you just can’t put your finger on. It might arise from the fact you now have enough money and enough time to do whatever you want while everyone else around you is still in the 9-5 rut. Or you may find you have so much idle time it feels like you’re running out of interesting things to do and you feel a little isolated.
If this happens to you:
- First of all, relax – because this is a good problem to have when compared to the challenges lots of other people face each day.
- Find something new to learn – the local language or culture where you are, how to play a local sport, or anything else which is readily available.
- Find some meaningful way to serve and help others – either by finding a cause you relate to and volunteering some of your time or make some anonymous donations to the service organization of your choice.
- Take the opportunity to revisit and reset your dreamlines – look at what you have accomplished thus far in life and figure out where you want to head from here.
- Learn to forget whatever you cannot define or act upon– and focus on the things you can influence rather than abstract philosophical distractions.