Leading Lambs to the Slaughter
Tuesday, December 16th, 2008
A Little Bit Greedy, a Little Bit Naive
Have you ever been to a real estate investing seminar, a real estate investors’ club, or a multi-level marketing meeting and realized you were surrounded by “lambs” that were about to be taken? The “lambs” I am describing are new investors that are a little bit greedy and a little bit naive. When presented with the prospect of wealth, common sense totally leaves them and greed takes over. The “wolves” are the coaches and coordinators of these programs that want you to sign up for their $500 classes or “one on one” coaching sessions. I attended one of these functions recently and was struck by how many lambs were willing to sign up for $500 classes with only a minimal knowledge of the school and hardly any knowledge about the instructor’s background.
The Alpha Male Wolf
The wolf, in this case, was the founder of this new club. The wolves in these groups are always easy to spot. They are well-dressed. They are charismatic. They shower unbelievable amounts of praise on the exceptional people that have attended their class or who they would like to have take their class. And finally, they are new to town.
The wolf can only operate so long in one area before they must move on to greener pastures. The reason is that after a while people realize that the promises of easy money have not materialized and they don’t come back for more coaching sessions. Inevitably, they run out of people that are willing to sign up and they have to find land with fresh meat.
A good way to tell if you are dealing with a legitimate mentor versus a wolf is how long they have been doing their current occupation in your area. If they just moved to this area; red flag. If they have been in your area for 5 or 10 years and have an independently verifiable reputation for integrity and honesty, you are probably dealing with someone that is worthwhile. However, always be skeptical of anyone that is telling you how smart you are after five minutes of talking to you. Especially, if they want to include you in their program for a fee.
Short-Timers
I don’t know what it is about real estate investing, but it attracts an incredible number of people into it for short periods of time. People get the bug for a few months and then quickly lose interest once they see the boring, unglamorous side of things. This is why the wolves have to move quickly to get people to sign up for expensive programs. They know the lambs will not be around for long. If someone is a great coach and truly has your interest at heart, they will be willing to forego payments until you become successful at real estate investing. After all, if they think you are so smart and their program is so great what do they have to lose. It’s easy to make money, isn’t it?
Another Buffett Quote
To end this post, I would like to quote Warren Buffett. “Rule #1 of investing is to not lose money. Rule #2 is don’t forget Rule #1.” If you are not sure if an investment approach makes sense, my advice is don’t invest in it.