Monday, February 7, 2011

How to find a real Diamond

“Being single-minded and determined is great,” I said, “but you can become fixated on the wrong thing. So be determined to be creative— single-mindedly open to every opportunity.”

I went on to explain that the key to making more money is to capitalize on more opportunities. Old-world thinkers miss a lot of opportunities because they start off from the assumption that opportunity is scarce. No wonder they can’t “see” it. Creative, new world thinkers keep their minds open a bit longer, deferring judgment, expecting to find opportunity, and are not surprised when they do. I had prepared another demonstration to teach them more about the art of recognizing hidden opportunity.
“Mary, would you come up here for a second?” I requested.

I seated her at a small table. Before her lay a royal blue jeweler’s felt pad with two sparkling stones in the center of it.
Using a pair of long silver jeweler’s tweezers, I moved one of the shining stones.
“This is a half-carat cubic zirconium—nothing more than a piece of glass polished and faceted to look exactly like a diamond. It’s worth less than five dollars. The stone beside it is a genuine half-carat diamond worth fifteen hundred dollars.”
I took a small, round magnifying glass—jewelers call it a loupe—out of my pocket and placed it on the blue pad next to the tweezers. “Mary, I told you that you were going to learn how to spot opportunities. Here’s the first one. Pick the real diamond and you can keep it. Choose wrong and you get nothing … or I’ll pay you a dollar to pass up this opportunity altogether. But before you make up your mind,” I added quickly, “I need to make one small adjustment.”
I then produced a small box containing forty-nine other cubic zirconiums and dumped the stones onto the blue velvet pad, mixing all of them together. I watched the reactions of those in the room out of the corner of my eye. The Challenge participants gasped. Even members of the film crew, who were supposed to be professionally detached, were
The Challenge 66
shocked, assuming that the diamond was now lost in the glittering confusion.
Mary hesitated. I savored her indecision. This was exactly the reaction I’d hoped for. “How much time do I get?” she asked.
“One minute,” I said. “Which will it be? The dollar bill or the chance to find the diamond?”
“I want the diamond.”
“You could end up with nothing. How much would I have to pay you to not take the risk? Twenty dollars?”
“Nope. I still want to go for the diamond.”
“You’re getting warmer,” she said, softening.
“So you can be bought off, can you?”
Steve joined in the discussion. “It’s like Bob Barker and ‘The Price Is Right,’ Mary. You can either have a thousand dollars or what’s behind door number three.”
We all laughed.
“Isn’t life like that?” I asked. “Don’t a lot of people go for the sure thing, working at jobs they hate? They get bought off—some for twenty thousand dollars a year, others for fifty thousand. Just like you, Mary. You couldn’t be bought off for twenty, but when I got to fifty, I hit your greed button. Some employees will put up with anything for a price: frustration, boredom, anger, humiliation. Why do they do it? Security! But experience has already taught you that job security is just an illusion. OK, Mary, which is it? Fifty dollars or a chance at the diamond?”
“I guess I’ll take my chances.”
“OK. Your minute just started.”
Mary fumbled for the loupe and tweezers and began poking around in the pile of stones.
“What are you looking for, Mary?”
“The brilliance of a real diamond,” she mumbled, determined not to lose her concentration. I slipped a glance at Steve. He was on the edge of his seat. Fifteen hundred dollars would just about pay the past-due hospital bills for his three-month-old son. Besides, he knew something I didn’t: Mary had grown up working in her father’s modest jewelry store.
Everybody cheered her on. “Come on, Mary. You can do it. Think positive, Mary.”
Philip’s eyes never strayed from the shining pile of stones. A weekago he had been collecting aluminum cans for grocery money. A lot can happen in a week.
With two seconds to go, Mary isolated one of the shiny stones at the side with the tweezers and looked up at me hopefully.
I examined the stone she had picked. “Nope. Sorry, Mary. Here, you can keep it.” I dropped the stone into her outstretched palm.
Then I asked, “Why did you pass up the fifty dollars? It was a fifty-to-one gamble.”
“Yes, but I could have had the diamond. I thought you were encouraging us to take risks.”
She had a good point. I had encouraged her to be wary of security and more comfortable with risk. But some risks are unacceptable. Many beginning business people overlook this. Freedom is so important to them that they’ll run any risk to obtain it. Like opening up a restaurant without any prior knowledge or experience. Safer to take the family nest egg to Las Vegas and blow it on one spin of the roulette wheel. Without knowledge and a workable plan, you are gambling, with little or no chance of success. Smart investors don’t gamble. They make sure the odds are stacked in their favor. Then they play. They might still lose, but the risk is significantly reduced.
How do you reduce the risk of failure? You need a system.
“Mary,” I said, “let me show you my system for finding the diamond every time. First, turn all of the stones face down with the points sticking up, so that they all look alike. That way the small differences will stand out like sore thumbs.”
I bent over the blue velvet, scanning the seemingly identical stones. In only a few seconds I picked out the diamond. I explained that the real diamond had a flaw that was visible to the naked eye. The fancy jeweler’s tools I provided weren’t necessary. Quite often, fancy tools— computers and calculators—just get in the way of plain common sense and a simple system. It was now Mary’s turn again.
“You try it, Mary.”
I dropped the genuine diamond next to three fakes and mixed them up. She arranged the four stones as I showed her and examined them carefully. “This one has a spot in it.”
“That’s called an inclusion,” I said. “It’s just a speck of carbon. An imperfection. In other words, it has a problem. The cubic zirconiums are perfect. No imperfections. No problems. That’s why they aren’t worth asmuch. Isn’t that completely backward from the way the world thinks? Most folks never expect to find any value in a problem. This is such an important point that I refer to it as a wealth secret.”

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