THE PRODUCT OF EOR
What happens when “weakened children” become adults? They typically lack initiative. More often than not, they are economic underachieves but have a high propensity to spend. That’s why they need economic subsidies to maintain the standard of living they enjoyed in their parents’ home. We will say it again:
The more dollars adult children receive, the fewer dollars they accumulate, while those who are given fewer dollars accumulate more.
This is a statistically proven relationship. Yet many parents still think that their wealth can automatically transform their children into economically productive adults. They are wrong. Discipline and initiative can’t be purchased like automobiles or clothing off a rack.
A recent case study will help illustrate our point. A wealthy couple was determined to give their daughter, Ms. BPF, every advantage. So when Ms. BPF expressed some interest in starting a business, they responded in typical fashion. They created what they thought would be the ideal environment. First, they wanted her to be debt free. So they put up all the money for their daughter to start her business. Ms. BPF put up nothing of her own. She never even applied for a commercial loan.
Second, the parents felt a strong need to provide her with substantial economic outpatient care. They felt this would enhance their daughter’s chance of succeeding among the ranks of America’s entrepreneurs. Ms. BPF’s parents believed their adult daughter would benefit from living at home. This way Ms. BPF could put all her energy and resources into her business. She would live with her parents rent free. She would not have to allocate any time to shopping for groceries, cleaning the house, or even making her bed. This ultimate form of subsidy goes beyond economic outpatient care—call it economic inpatient care.
Is a rent-free environment ideal for a young entrepreneur? We don’t think so. Nor is the gift of a business. The most successful business owners are the ones who put much of their own resources behind their ventures. Many succeed because they have to succeed. It’s their money, their product, their reputation. They have no safety net. They have no one else to rely upon for their success or failure.
Third, the parents of Ms. BPF added yet another element to the equation.
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What if their daughter did not have to worry initially about generating profits from her venture? They believed that reducing this burden would enhance their daughter’s probability for success. Ms. BPF became yet another member of the subsidized cluster. Her parents give her approximately $60,000 in cash and equivalents each year.
What is the result of having created this “ideal” environment? Today Ms. BPF is in her late thirties. She still lives at home. She has no commercial-related debts. Her folks financed her business and continue to do so. Last year her business earned her nearly $50,000. Her parents continue to give her $60,000 every year. They still feel that Ms. BPF will become truly independent sometime in the future. We are not as optimistic as her parents in this regard.
Most successful entrepreneurs are not like Ms. BPF. How many entrepreneurs who are still in the start-up phase of their venture would do what Ms. BPF has recently done in one year?
◆ Purchased a $45,000 automobile without shopping or negotiating the price or conditions
◆ Paid $5,000 for a watch, $2,000 for a suit, and $600 for a pair of shoes ¢ Paid more than $20,000 for clothing in general
◆ Paid more than $7,000 for interest on credit card balances and revolving retail credit
◆ Paid more than $10,000 for dues/fees at area country clubs
The answer is very few. Ms. BPF’s business is not really a success. It is heavily subsidized directly and indirectly via other people’s money. Actually, Ms. BPF has been short-changed by her parents. She may never know if she could make it on her own. The “ideal” conditions they provided for their daughter were an incentive for her to spend heavily on consumer goods. All the while she gave her business stepchild treatment.
Who do you think has more fears and worries—Ms. BPF or the typical unsubsidized affluent business owner? Logic might suggest that Ms. BPF should have no worries at all, since she receives intensive economic care (IEC) from her parents. In fact, she has many more fears than do affluent men and women who receive no subsidies whatsoever.
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Typical affluent business owners have only three major concerns (see Table 3-4 in Chapter 3). All of these are related to the federal government. They fear policies and regulations that are unfavorable to business owners and the affluent population in general.
What does Ms. BPF fear? She told us that she had twelve major fears. How is it possible that a person who is almost completely insulated from financial risk has four times more fears than the typical affluent business owner? Because these affluent business owners have overcome most of their fears. They have inoculated themselves from many fears by becoming completely self-sufficient. And it was the very struggle to become economically self-sufficient that helped these business owners overcome them.
What are some of Ms. BPF’s major fears and concerns? Remember, these are fears that are not paramount among the self-sustaining affluent population. Ms. BPF has substantial fear of the following:
◆ Her parents’ estate being heavily taxed
◆ Experiencing a significant reduction in her standard of living
◆ Her business failing
◆ Not being wealthy enough to retire in comfort
◆ Being accused by her brothers and sisters of receiving more than her fair share of financial gifts and inheritance from their parents
Who is more confident, more content, more able to deal with adversity? It’s not the Ms. BPFs of America. It’s those who have been brought up by parents who rewarded independent thought and behavior. It’s those who don’t concern themselves with other people’s money, who are more concerned about succeeding than about how much is in someone else’s estate. Also, if one lives below one’s means, one doesn’t have to be concerned with the possibility of being forced to reduce one’s standard of living. The parents of Ms. BPF have failed to obtain their objective. Their goal was to have a daughter who would “never have to worry.” But the method they used yielded just the opposite result. People often attempt to shelter their children from the economic realities of life. But such shelters often produce adults who are in constant fear of tomorrow.
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