PDF Summary:How to Get Rich, by Felix Dennis

Just about everyone dreams of wealth, but why do so few people turn that dream into reality? Self-made millionaire Felix Dennis wrote How to Get Rich to teach you the mindset and the skills you need to start a business and build a fortune, and to explain why so many fail at doing so.

In this guide, we’ll start with Dennis’s warnings about how difficult it really is to get rich and what you might lose in the pursuit of wealth. From there, we’ll discuss how to start and run your own business. Finally, we’ll examine Dennis’s advice about how to live a healthy, happy, and satisfying life with your newfound riches.

Our commentary will compare and contrast Dennis’s ideas with those from other business guides such as Purple Cow and Start With Why. We’ll also discuss which of Dennis’s principles are backed by scientific evidence and which are currently not. Finally, we’ll provide some actionables to help you start your journey to wealth.

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Unlike those from more affluent backgrounds, aspiring entrepreneurs from low-income families typically lack personal savings or family wealth to draw upon for initial funding. This problem is compounded by their social networks, which are often composed of other low-income individuals who can’t provide any significant financial support or investments.

As a result, entrepreneurs from low-income backgrounds may be forced to do exactly what Dennis warns against: take out predatory loans with exorbitant interest rates or accept money from venture capitalists who might try to meddle in their company. This is just one example of how people and families get trapped in the cycle of poverty—because they don’t already have wealth, they have a much harder time creating opportunities to earn wealth.

Spending Resources Wisely

Getting the resources to start your business may be the most difficult hurdle, but it’s not the only one. Dennis also says that inexperienced entrepreneurs often handle those resources poorly, leading to financial losses and failed companies.

One often-fatal mistake that Dennis discusses is being overoptimistic about your business’s cash flow. He stresses the critical importance of earning profits right from the start. Don’t operate at a loss and assume that you’ll be able to make up for the expenses later.

Dennis explains that poor cash flow management can cause you to lose your company. This is because you’ll have to borrow more and more money to stay afloat. Then, if you’re not able to pay off those debts, your lenders could seize control of your business. That exact process has relegated countless founders to minority investors or salaried employees of the companies they started.

The second mistake that Dennis discusses is also related to money: unwise spending. Entrepreneurs—particularly inexperienced ones—are often tempted to keep pouring resources into a failed project, thinking that they can still rescue it and turn a profit. However, any money you spend on an endeavor that’s already doomed could be used more productively elsewhere.

Tip: Keep Your Options Open

Dennis urges entrepreneurs to spend wisely and to accept when they’ve made a bad investment rather than trying to recoup their losses with further investments. However, it can be hard to know which investments will be profitable and which will be wasteful. Therefore, instead of trying to predict whether a particular investment will be worth it, it can be more effective to rely on flexibility.

In Antifragile, risk analyst Nassim Nicholas Taleb advocates keeping as many options as possible open for as long as possible. This strategy is rooted in the idea that maintaining flexibility maximizes potential gains while minimizing losses. By having multiple options available, you can choose the most beneficial path and avoid costly mistakes. This approach allows you to adapt in the face of uncertainty and changing circumstances.

In the business world, Taleb's principle often translates to conserving capital until absolutely necessary. By holding onto resources, you can maintain the flexibility to respond to new opportunities or unforeseen challenges. However, once you invest money in a specific project, you close off other potential avenues for that money.

Therefore, before devoting more money or other resources to a project, ask yourself two questions to determine if it’s the best use of your resources:

1. Do I really need to invest these resources right now?

2. What other options would I be rejecting by making this investment?

Part 2: Getting Rich

Now that you’ve got the right mindset and the groundwork for a new business, let’s discuss how you can use that business to get rich.

Dennis reiterates the importance of staying focused on the primary goal of getting rich and cautions against becoming overly attached to any particular industry or business. Instead, be ready to recognize and seize opportunities when they arise, regardless of whether they relate to your area of expertise.

Remember: Your mission isn’t to make one specific business successful, it’s to become wealthy however you can.

(Shortform note: Numerous case studies support Dennis’s suggestion to stay alert and ready to pursue any new opportunity. In Built to Last, researcher and business consultant Jim Collins studies 18 companies that have enjoyed great success over a long period. Of those 18 companies, only three started out knowing which specific product or service they were going to sell. The remaining 15 tried out many different ideas before they found their winning strategies, just like Dennis encourages you to do with your own business. For example, Sony—now a giant in the gaming industry—started out by selling electric rice cookers. That product, and many more, flopped before Sony found its first great success by developing new models of tape recorders.)

However, Dennis adds that whatever you’re doing, you should make sure to do it well. A good reputation in your chosen field attracts talented workers and makes investors more likely to work with you; a bad reputation will do the opposite. Therefore, striving to be the best in your industry should be a point of pride as well as a source of financial gain for you.

(Shortform note: Quality is important, but not everyone agrees that striving to be the best is a good use of your time and energy. In Purple Cow, Seth Godin writes that offering a remarkable product or service is much more effective than just offering a good one. His reasoning is that every industry is already flooded with “good” companies selling “good” products. To stand out, you need to come up with something unusual that will get people talking about your business. For example, IKEA didn’t become successful because it offers the best quality furniture, but rather because its flat-pack boxes revolutionized furniture storage and transport. This reduced the company’s overhead costs, allowing it to sell products much more cheaply than its competitors.)

Along with those overarching principles of flexibility and excellence, Dennis focuses on two crucial skills that you’ll need in order to get rich: negotiation and delegation.

Skill #1: Negotiation

Dennis discusses the art of negotiation and how it can make or break your chance at wealth. This is because negotiating well can get you a lot of money if you’re selling something, or the means to greatly boost your profits if you’re buying a new product or service. Conversely, negotiating badly could lead to spending more than your business can afford, or accepting deals for much less money than you should be asking for.

The author says that most people are poor negotiators, and that most likely includes you. He therefore suggests that, prior to even beginning negotiations, you set firm limits on what you’re willing to accept or pay during this deal. Your opponent will try to sway you, but stick to those limits no matter what they say. Doing so will ensure that you aren’t giving up more than you can afford and that you’re not accepting a bad offer just for the sake of closing a deal.

(Shortform note: One way to ensure that you negotiate well and don’t accept a bad deal is to first determine your best-case scenario without those negotiations. In Getting to Yes, negotiation experts Roger Fisher and William Ury call this your Best Alternative to a Negotiated Agreement (BATNA). They point out that the entire point of a negotiation is to reach a better outcome than you could achieve on your own. Therefore, there’s no point in accepting a deal unless it’s better than your BATNA—if the other side can’t or won’t meet that benchmark, it’s time to walk away.)

Tip: Find and Exploit Your Opponent’s Needs

Dennis says each side’s respective weaknesses are the critical factors in most negotiations. Whoever is able to find and exploit the other side’s weakness will get the better end of the deal. Therefore, before entering any negotiation, it’s crucial to research your opponent and create your plan of attack—hiring professional advisers to help with your preparation is often invaluable.

To illustrate this idea, imagine you own a business that needs a steady supply of a particular product (say, straws for a restaurant), and you’ve entered negotiations with a supplier who sells what you need. if you learn that the supplier is struggling due to an up-and-coming competitor pushing into their market, they’ll be desperate to get you as a customer. You can exploit that weakness to get the supplies you need at a lower price, and Dennis strongly encourages you to do just that.

However, this principle can also work against you. Therefore, if possible, identify your own weaknesses and hide them from the other party.

Continuing the previous example, suppose there’s only one supplier who sells the specific type of straws you need. This puts you in a very weak position: You need what this supplier sells, and there’s nowhere else for you to get it. If the supplier discovers those weaknesses, they could charge practically anything they want for their product and you’d have no choice but to pay it. To hide this weakness, you might bluff by pretending that you’re not especially interested in those particular straws and that you’re prepared to use a different product if you can get it at a better price.

The Three Kinds of Information

Dennis suggests preparing for negotiations by focusing your efforts on finding your opponent’s needs and weaknesses, a particular type of information. In Never Split the Difference, former FBI hostage negotiator Chris Voss says that every negotiation relies on three types of information:

1. Known knowns. This is any information that you already know, such as who the other party is and what each of you is hoping to get out of the negotiations. Voss warns that, while they’re important, known knowns can cause you to focus too much on what you think you know and miss new information you could leverage. For instance, if you already know what your opponent wants from you, you might overlook a different need that you could exploit.

2. Known unknowns. This is information that you know exists, but you don’t have it. For example, if the other party is trying to sell something, you know there must be a minimum amount they’ll accept for it, but you don’t know what it is. In fact, your entire purpose in this hypothetical negotiation is to come as close as possible to finding that minimum amount.

3. Unknown unknowns. This is information that you don’t have and don’t even know that it exists. This is the most difficult information to find, but Voss says that it’s also the most important kind of information. The unknown unknowns will most likely include your opponent’s needs and weaknesses, which you can leverage during negotiations as Dennis urges you to do. Some tactics for finding this information include analyzing your opponent’s nonverbal cues for signs of weakness and building rapport to encourage them to drop their guard.

Skill #2: Delegation

The second entrepreneurial skill Dennis discusses is delegation. The more effectively you delegate tasks, the more efficiently your business will run. Therefore, this is a crucial skill for anyone seeking to become wealthy.

Dennis stresses that proper delegation means identifying talented individuals and providing them with opportunities to use their talents. For instance, if you notice that one of your employees is particularly skilled at bookkeeping, you might promote them to store manager so they can use those skills to keep track of the store’s orders, sales, and profits.

In fact, Dennis writes that many entrepreneurs only stay minimally involved in their companies long-term. He recommends getting your business to a point where your managers can handle daily operations without you, but also establishing clear guidelines for which decisions need your personal approval. This mostly-hands-off approach will allow you to ensure the success of your business and pursue other opportunities at the same time.

(Shortform note: Dennis’s suggestions closely mirror how former Netflix CEO Reed Hastings describes his approach to leadership. In No Rules Rules, Hastings writes that the best way to run a business is to hire the best people you can get (at any cost), then empower them to make decisions about how to do their jobs most effectively. Where Hastings differs is in his suggestion that you maintain an active role through constant feedback at all levels of the company. This doesn’t just mean you giving feedback to your employees, but also getting feedback from them. In fact, under Hastings’s model, an employee on their first day would be welcome—even encouraged—to give honest, candid feedback to the company’s owner without fear of reprisal.)

Part 3: Living the Rich Lifestyle

Up until now we’ve been discussing how to become rich. For this final section, we’ll explore how to live well after you’ve accomplished that goal. Dennis offers advice about how to maintain your health, wealth, and happiness.

In this section we’ll explore Dennis’s suggestions about how to manage your relationships after becoming rich and how to move past the urge to overindulge yourself. Finally, we’ll discuss why Dennis believes that retirement isn’t for everyone, and most entrepreneurs are better off continuing to pursue new business opportunities.

Managing Your Relationships

Dennis says that, once you’ve achieved your goal and become rich, you’ll need to carefully manage your relationships in order to stay close to your genuine friends while avoiding people who are only trying to get something from you.

First of all, the author stresses the significance of maintaining your oldest friendships. Anyone who was friends with you before you got rich—and who stuck with you through the demanding process of becoming rich—will be an invaluable source of support as you navigate your newly wealthy lifestyle.

Furthermore, old friends are often the only ones who will provide you with honest feedback and advice. Those who have only known you as a rich person are likely to either be intimidated by you, or try to ingratiate themselves with you; either way, they’ll only tell you what they think you want to hear.

(Shortform note: We previously discussed how dedicating yourself to getting rich could harm your relationships with your family, particularly your children. Dennis suggests staying in touch with old friends, but doesn’t offer any advice on strengthening or repairing those familial relationships. Psychologists say that empathy is the most important factor in reconnecting with children after they’ve grown up. Rebuilding a relationship requires listening, calmly but seriously considering what the other person says, and owning up to one’s own shortcomings as a parent; becoming defensive or controlling will all but ensure that you never repair the relationship.)

Dennis adds that you’ll probably find yourself with a lot of new “friends” who are hoping you’ll share your wealth with them. Therefore, Dennis suggests limiting people’s access to you so you don’t get overwhelmed by their demands on your time and money. He also urges you to hire personal security for yourself and your family members—this is a necessary expense, because there are dangerous people in the world who might try to get your money by threatening you or your loved ones.

(Shortform note: It can be hard to know whether someone is being genuinely friendly or just trying to use you—or worse, to hurt you. Therefore, when dealing with other people, your intuition is often your best guide. This is because a “gut feeling” comes from you subconsciously noticing warning signs that your rational mind hasn’t processed. For instance, if you feel like a friend or romantic partner is taking advantage of you, there’s a good chance that they really are. Similarly, in The Gift of Fear, security specialist Gavin de Becker writes that you should always trust your instincts when they tell you a person or situation is dangerous; your survival instincts were honed by millions of years of evolution, and they’re much sharper than many modern people give them credit for.)

Gifting Money to Others

Naturally, you’ll need to protect your wealth from strangers and scammers, but what about your loved ones?

Dennis says that you absolutely should give money to friends and family members—not just for their benefit, but for your own as well. Although it might sound crass, regularly giving money to friends and family is a great way to maintain your relationships with them. He also emphasizes that these should be gifts, not loans; don’t burden your loved ones with any obligation to pay you back, or you may harm your relationships instead of strengthening them.

(Shortform note: The question of whether it’s better to gift money or lend it largely comes down to culture. Dennis says that it’s better to gift money because expecting the other person to pay you back will put added strain on your relationship. However, in Thou Shall Prosper, Orthodox Jewish rabbi Daniel Lapin says the opposite: Traditional Jewish culture views loans as a better form of charity than gifts. This is because giving money away implies that the recipient is a beggar, whereas lending money (with the expectation of being paid back) gives the recipient the help they need while also allowing them to keep their dignity.)

Dennis adds that regularly giving money away will motivate you to keep creating more wealth, rather than becoming preoccupied with defending the wealth you already have. This will help prevent you from becoming isolated and paranoid (an issue we discussed in the introduction) and will also ensure that you’ve always got interesting projects to keep you busy.

(Shortform note: Gifting money to others won’t just create motivation for you to keep working— acts of generosity also directly increase your happiness. Research indicates that spending money on others can result in higher levels of happiness compared to spending it on yourself. This is because acts of generosity trigger the release of "feel good" chemicals in the brain like dopamine, serotonin, and oxytocin. Also, although we’re discussing money here, note that generosity goes beyond monetary gifts—it also includes acts like community service and simply showing kindness to others.)

Quickly Moving Through the Self-indulgence Phase

Dennis gives a warning about the initial phase of wealth, noting that many newly rich people go through a period of excessive spending. This initial overspending phase may be inevitable; it's hard to resist indulging your whims when, for perhaps the first time, you have the money to do so. For instance, it’s common for professional athletes to make enormous salaries then spend their money as quickly as they earn it and go broke shortly after retirement.

This period can also endanger your health if you spend that money on drugs and partying, which are also all-too-common pitfalls for the newly rich.

(Shortform note: It’s common for newly rich people to spend too much money on self-indulgence, but it may not be inevitable like Dennis claims. One business consultant argues that wealth doesn’t cause extreme spending and overconsumption, it merely makes such things possible. In other words, people don’t become wasteful and self-indulgent because of money. Money simply creates more options; how wealthy people spend their money comes down to their personal values and decisions.)

Dennis says it’s important to get through this period as quickly as possible. Use your newfound wealth to spoil yourself for a little while, but recognize when those indulgences aren’t making you happy anymore, and then refocus on maintaining your wealth and health.

One effective way to move past this phase of mindless self-indulgence is to find a passion other than making money. This is because, once you’ve become rich, continuing to make money is likely to be very easy for you (and therefore boring). A creative outlet or a new hobby will give you something to occupy yourself besides shopping and partying, thereby avoiding boredom and the self-destructive behaviors that may come with it.

Other Strategies for Finding Satisfaction

Dennis suggests finding a new passion to challenge yourself and stay busy. However, discovering something you love enough for that suggestion to work is often easier said than done. Therefore, it would be helpful to have some strategies that don’t depend on finding a new calling right when you need one.

Some simpler ways to find satisfaction—without the need for wasteful spending or self-destructive habits—include:

Practicing gratitude. Instead of thinking about what you’d like to buy next, take some time to remember and appreciate what you already have. Examples might include your health, your family and friends, your job, your home, and your accomplishments.

Enjoying simple things. You can find contentment and tranquility without having to spend money or a great deal of effort. Instead of always chasing after big, showy possessions and accomplishments, remember the pleasure of simply taking a walk or watching your favorite TV show.

Tip: Keep Looking for Opportunities

Once you become wealthy enough, it’s easy to stop working and simply live off of passive income. However, Dennis suggests that you avoid retiring and instead keep looking for interesting new ventures to pursue. He explains that most entrepreneurs find retirement unfulfilling—without work to occupy them, they become bored and lose their sense of purpose in life. You’re likely to find this is true for you as well.

Instead of retiring, many rich people become “professional entrepreneurs,” repeatedly founding new companies, growing those businesses until they’re profitable, then selling them. When they start losing their passion for one of their businesses, they sell it and focus on a new project. This is an effective way to keep growing your wealth and simultaneously make sure you stay happy and fulfilled throughout your life.

Counterpoint: Pursue Life Success Instead of Professional Success

As Dennis says, many retirees report feeling unhappy and unfulfilled. In particular, many people struggle to find a sense of purpose after leaving their jobs. However, continuing to work for the rest of your life isn’t the only way to avoid that problem—in fact, many people retire because they’re not able to work anymore, so they have no choice but to find fulfillment elsewhere.

In From Strength to Strength, social scientist and happiness researcher Arthur C. Brooks offers an alternative viewpoint: Happiness in the later stages of life doesn’t come from professional success, but rather from life success. He defines life success as living a balanced life of happiness and love.

Brooks also offers three strategies for finding happiness and fulfillment outside of work:

1. Focus on your “eulogy values.” These are the characteristics that people will talk about at your funeral. It’s not likely that people will talk about how many hours you worked or how much money you made—rather, they’ll remember things like your loyalty, generosity, or warmth. Therefore, Brooks recommends that you regularly look for ways to live by whichever values you hope to be remembered by.

2. Stop competing and start connecting. Whether you’re an employee or an entrepreneur, professional success comes from outcompeting your rivals; conversely, Brooks says that life success comes from connecting and cooperating with others. The mutual love and support of healthy relationships will be crucial to your overall well-being and happiness, especially as you get older.

3. Find something to believe in. Recall that loss of purpose is one of the biggest challenges people face in retirement. It stands to reason, then, that finding a new purpose is an effective way to overcome that challenge. Brooks suggests finding something larger than yourself to believe in, whether it’s based on religion, philosophy, or something else. Doing so will take your attention away from yourself and your problems and shift your focus to how you can keep contributing to the world even after your professional career is over.