J. Paul Getty's Rules to Wealth

Written By Brian Hicks

Posted May 22, 2014

I’ve been busy this week planning a family trip to the New England coast this summer. While I’m not quite sure exactly where we’re headed, I do know what dog-eared book I’ll be pulling out of my battered beach bag when we get there.

J. Paul Getty’s How to Be Rich is a fantastic book that we all need to read at least once a year. My first time through it, I knew I had a winner in my hands upon seeing the first chapter entitled, “How I Made My First Billion.”

Mr. Getty’s life story alone is inspiring, but what makes it special is his blunt and personal advice.

He was fortunate to have had oil and common sense running through his veins in equal proportions. His father was a successful lawyer who moved west to become a wildcatter during the rough-and-tumble Oklahoma oil boom.

J. Paul grew up around the business, doing the tough and gritty work at the wellhead before striking out on his own.

With no capital at all, the first deal for this independent wildcatter gave him a 15% share of the profits. Then his father grubstaked him, taking 70% of the profits, while the Oxford-educated son worked right next to the roustabouts, his battered car serving as his office.

By the age of 24, he became a millionaire. His next move was to explore for oil in California, where his exploits expanded into property and stocks.

What makes this book so special is that it is not just about how to get rich — it’s about how to live a full and rich life. In Getty’s view, the key is to be a non-conformist, to be independent and willing to challenge conventional wisdom.

The Getty story pulsates with action, ambition, and accomplishment. Here is my take on his life lessons and how they can be applied to become a more successful person, investor, and businessman.

1. Be stealthy

There is no need to broadcast your plans to the world. Getty won his first oil property in a competitive bid for only $500 by using a bank as his proxy, thereby scaring away independent competitors.

2. Separate fact from opinion

Getty always dug deep for facts and always challenged “expert” opinions. He was one of the few wildcatters that studied and used geological surveys to help him make smart investment decisions.

3. Be independent and contrarian

Getty disdained conventional wisdom and lifestyles. He relished in being an independent wildcatter, working with the boys at the wellhead, and outwitting the big boys. It is hard to imagine him sitting in a cubicle — or any office for that matter. Where did he sign his contracts? On the hood of his battered old Chevy pickup.

4. Look abroad for opportunities, and learn from mistakes

Getty was way ahead of his time in seeing great growth opportunities in international markets. Half a dozen times in his book, he encourages the reader to look beyond America’s borders.

I also like that Getty doesn’t pass the buck — he admits his blunders. One beauty was when he passed on a bargain-basement opportunity to gain a foothold in the oil-rich Middle East in the 1930s, only to pay $12 million for a Saudi concession in 1946 (still a great move).

5. Be patient, and capture hidden quality values

Getty was a master of discovering and taking advantage of great stock values in depressed and unappreciated markets.

Much of his great fortune can be traced back to the 1930s, when he scooped up resource stocks and properties at bargain prices. A crisis is not a red flag; it’s an invitation to make a killing.

He chose his targets carefully and had the courage of conviction to jump in when others were scared to death. He put it this way:

“The big profits go to the intelligent, careful and patient investor, not to the restless and overeager speculator… The seasoned investor buys stocks when they are low, holds them for the long-pull rise and takes in between dips and slumps in his stride.”

What Would Getty Do Right Now?

My guess is that he would be taking advantage of the pullback in emerging markets.

Take a hard look at Russia and beaten down European stocks, as well as out-of-favor commodities such as copper, silver, and gold.

Thinking and acting like Getty could make a significant difference in your investment performance. Put his timeless book at the top of your summer reading list today.

Until next time,

Carl Delfeld for Wealth Daily

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