How I Beat the Odds in the Markets and in Life

How I Beat the Odds in the Markets and in Life

Life Lesson Number One: you’ve got to be in it to win it and if you don’t bet, you can’t win. This is the simplest lesson, and yet I have seen so many smart, talented people say they want something but don’t do a damn thing about it. They don’t find themselves in the winner’s circle because they never got in the game. 

Why? Fear.

 I want to help more people overcome their fear so they can have a better life than what they know now. I also want my grandchildren and their generation to see that many more things are possible if you make the right bets—not only in your money life but in your love life too. Bets are just the choices we make. There is so much we don’t control in life or markets, but we do control our choices. 

Your dreams are more important than your limitations. You can’t do anything about your DNA or your family background. But you can choose goals and dreams—and then pursue them. 

In my case, my dreams were more powerful than my limitations. And my limitations were unbelievably severe. Now, of course, there were, and are, many people much worse off than I ever was, but I faced substantial hurdles. I was born to a lower-middle-class family, had a major learning disability, did poorly in school, and was nearly blind (completely blind in one eye and half-blind in the other). I was not handsome. I was not athletic. Today, I am a self-made multimillionaire. How did I do it? I made a bet on myself and won. You can absolutely do this too.

The First Thing You Do

You can’t claim it if you can’t name it. This is cliché of course, but for me, it was literally true. When I was seven years old and an adult asked me and a bunch of my friends what we wanted to be when we grew up, my friends gave the expected answers: a teacher, a doctor, a fireman. When my turn came, I said, “I want to be rich like my uncle.” I didn’t even have a definition of what rich meant but the words just came out of my mouth. (It wouldn’t be until many years later that I’d find a satisfactory definition in a book called Rich Dad, Poor Dad. The author said that if you could live off your savings for two or three years, you were rich.) At that young age, I only saw what people above me had. My parents and I lived in a three-room apartment. My cousin lived in a big house, so he was rich. I wanted that. Want is a very powerful thing. It drove me hard.

Fifteen years later, when I was finishing college, I was asked the same question and I answered it in the same way. I wanted to be rich. To me, money was spelled with an F. That was the thing I wanted, the thing I could imagine tasting: freedom. And that’s why I’ve done all I’ve done: because I wanted the freedom to do whatever I wanted to do. But I also wanted protection from failure. I couldn’t do so many things that others could do, so I needed to be rich to make up for my shortcomings.

When I look back on my friends and the people I grew up with, I see that most of us weren’t that much different from one another. And yet, most of them did not do well financially and have all kinds of regret. I ask myself, was I that much better than them? I don’t think so—not at all. I believe my success came from the fact that I set a goal and had a strong enough steel will to pursue it. I can’t emphasize enough how important it is that you establish meaningful goals. If you don’t know what you really want, every tough choice that comes along can be overwhelming.

This is not to say that I didn’t have fears like everyone else. I did. When I was only about twenty-seven years old, I made my first serious money. You’d think my chief emotion would have been joy or pride, but in fact, this first success brought enormous fear. I was fearful of losing the money, and I was fearful of the power and responsibility that came with it.

My Approach to Life and Investing

Life is neither technical nor requires pages of charts. Becoming wealthy and successful isn’t simply about being right all the time. It’s about how much you win when you are right as well as how much you lose when you are wrong. You see a lot of small-minded people make a big deal of winning. But if you don’t win enough, then you didn’t truly win anything except the ability to brag at cocktail parties to people who don’t know.

Remember, in life, time, rather than money, is the most important currency, and we all have only a finite amount of time (at least until they figure out life extension!). You can win money, lose money, and earn it back again. But time is something that you can never get back so making good decisions with the odds on your side is the best way we can give ourselves more time or said another way—freedom.

Now, many people don’t like my way of thinking with odds because there is no hero or drama. There are no three acts. No hero’s journey. No great story. But what if I told you that I get up in the morning, look at some numbers and ask myself what is the simplest way for me to get what I want? Then I spend twenty minutes making trades and I am free to go about my day.

Getting what you want, I realized, is about learning how to make smart bets – keyword smart. And making smart bets is about understanding basic probabilities. If I was going to get rich, I had to learn to trade in a way that would make a lot of money when I was right, and not lose too much when I was wrong. That’s why my thinking, my system is based on controlling my risk to the downside so that I never lose all of my chips. In fact, I decide how much I can afford to lose and arrange my approach so that I never lose more than that. In other words, you can’t lose your shirt if you don’t bet your shirt. I will remind you, again and again, to never risk more than you can afford to lose. Why? You’re not trading markets, you’re trading money. And it’s your money. Only you control how much of your limited supply of money you are willing to lose. When you adopt this principle, you find it easier to get in the game. You remove the fear! I get goosebumps writing that cause it’s still so important to success, but still not understood by most.

The ideas and stories that I share in my new book, The Rule, can help you figure out who you really are, and how to create the best odds of making the salary you want and having the career and life you want. In life, you can’t often change the world when you make a decision, but you can make better choices. Those choices can and will make a better life for you and the people you care about. That’s what I want to help you do.

My aspiration is to make an understanding of my journey one hundred percent financial jargon-free. Yes, I use some basic financial terms you can easily look up on Investopedia. And colorful stories are my bread and butter, but I tell stories to show how the facts and trends work, I don’t use them to mislead.

As I share my experiences you will see how my early failures forced me to adjust to failure. More importantly, all major fortunes are built on a lot of small losses which pave the way to big wins and success.

When I deliver talks to university students, I often discuss the seven questions they should ask themselves:

  • Who are you?
  • What is your goal?
  • What game do you want to play?
  • Where are you playing the game?
  • What is your time and opportunity horizon?
  • What’s the worst possible thing that can happen?
  • What will happen if you get what you want?

My book is called The Rule because one of my chief goals is to share how the same trading philosophy I used to achieve success with money can also be effective in other aspects of life—from love and marriage to career decisions to how you cross the street. I hope my words inspire you to consider the odds that underlie all of those major decisions in your life – the ones you might not be thinking critically enough about right now. Because I am a trend follower, I ask you to look carefully at the trends and numbers you are following in your life. No one can know the future, but what are the numbers telling you?

Adapted from an excerpt of The Rule: How I Beat the Odds in the Markets and in Life—And How You Can Too. Copyright © 2019 by Larry Hite. Published by McGraw-Hill Education.

Beat the Odds

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