The Formula for Wealth: A Review


Title: The Formula for Wealth: My Thoughts on Wealth, Entrepreneurship and Leadership
Author: Femi Pedro
Publisher: Author House, London, 04/28/2020
Printer: Lightning Source UK Ltd
No of Pages: 96 (excluding the preliminary pages)
Forward: Fola Adeola
Reviewer: Ayo Arowolo
Price: Not stated

When Eni B (Eniola Bello), our managing director at THISDAY, hinted that Otunba Femi Pedro would want me to review his book, I was curious. I did a bit of conjecture; could it be a book detailing his journey from the banking world to the political arena? I concluded that if my guess turned out accurate, I would not be the best person for the job. Even though my first and second degrees were in political science, I’ve not worked a day as a political scientist. Mind you, I’ve worked over three decades post-graduation, but mainly as a financial journalist.

A phone call from the author a few days later resolved the puzzle. The brief was straightforward: Mr Pedro wanted me to review his recently published book where he detailed his thoughts on wealth creation, entrepreneurship and leadership. I felt relieved because wealth happens to be a terrain I am familiar with. In the past 10 years, I’ve been working on a side project of interviewing wealthy people in Nigeria and few outside; asking them to share with me their journey to the top and lessons learnt on the way. I have done over 40 of such interviews. I reckoned immediately that Mr Pedro’s book would provide yet another perspective on how to create wealth; valuable insights from a successful man.

Over the years, through practice, I have created a simple formula for reviewing any book. The process involves asking three basic questions and rating the content of the book on how well they answer each of the questions.

Here are the three signpost questions: One, what did the author set out to achieve with the book; his reason for putting it together? Two, how well did the author address that reason in the final publication? Does the book sufficiently and comprehensively address the declared purpose of writing it? Finally, is the author qualified to handle the subject? In other words, has he personally experienced what he is trying to pass across to his reader or is it just another theoretical postulation?

So let us get the business done quickly.

Signpost Question 1: What message did the author set out to pass across to the reader?

Interestingly, the author clearly articulated his reason for pushing out the book right from the onset. Through the diverse and inspiring stories, he shares in the book, the author’s key message is to demonstrate that wealth creation follows universally applicable principles and process, and anybody willing to apply himself to those well-articulated principles can build wealth with no respect for geographical, racial, religious, cultural and gender barriers. In his words: ‘I hope the knowledge gained from reading this book will encourage you to believe that your situation is not hopeless. And I hope this book will inspire you to act to change it.’

Does the book sufficiently and comprehensively address the declared purpose of writing it?

First, the simple style of presentation employed by the author is commendable as it makes the book’s content easily accessible to anyone with a basic knowledge of the English language. Complementing this is the fact that the author uses storytelling (plenty of stories) to explain the key principles of wealth creation.

Hitting off quickly from the start, in chapter one, the author weaves his first set of wealth creation principles around the well-known story of Nnamdi Ezeigbo, the founder of SLOT, who decided to part ways at the start of his entrepreneurship journey with friends who wanted to lure him into the ‘broadway’ to wealth – always laced with the vices of instant gratification; cheating customers, and charted his way through the ‘narrow path’: with admirable virtues such as integrity and resilience.

Ezeigbo’s story demonstrates the fact that building a successful business requires a large dose of resilience and tenacity, a set of virtues, which when lacking, make many people on an entrepreneurial journey quit even before starting. Apart from those learned virtues, the author also shares how the subject of his story advanced in a quest for knowledge by enrolling for an MBA; acquiring knowledge instead of accumulating cars.

Here is the author’s definition of success: “You do not have to be a billionaire or even a millionaire to be considered successful. The simple criterion is that you own investments in businesses, assets, and other wealth instruments) and your net worth generates enough income that can sustain you for a long time without having to work for money. In other words, your money works for you. With this, you can afford the basic needs of life without having to struggle again. He believes this goal is within the reach of millions of Nigerians if they applied the principles in this book.

According to Mr Pedro, wealth creation is a matter of choice and commitment. To become wealthy, you must believe you can do it and you must take the action necessary to achieve your goal.

Wealth Means Freedom

The author, in chapter 2, submits that wealth has very little to do with the accumulation of expensive material things. He states: ‘The true measure of wealth is your net worth measured by the total value of wealth instruments (stocks, real estate, private shares, private ownership of a business, rare gems, rare artworks; and anything of value that can be traded in the open market anywhere in the world) you own. Wealth instruments have a more enduring value than money. A person is wealthy if their ownership of those instruments generates enough income to provide financial security (ability to take care of the basic needs of life without stress; financial independence). Being wealthy also means having enough to guarantee your financial security and much more to pay for luxuries such as vacations, gadgets and expensive cars, without having to work for them. Absolute financial freedom, he states, is being financially independent and being able to set up a foundation, give to charity and social and political causes. It means you can afford to do anything you want, anytime you want to do it, meaning you can afford to make a monumental difference in the life of others and even change the course of history for life.

The true face of poverty

In chapter 3 the author presents fascinating encounters he had with four individuals with different realities who thought they had found paths that would lead them out of poverty (John: smart, hardworking but poor; Henry: brilliant doctor with zero business acumen; Bala: underemployed and angry banker and Chief Aluko: astute politician and failed entrepreneur) when they were working against the principles of wealth creation without knowing it. The interesting observation was that all of them were his customers when he was working in a top position in the banking industry. He saw what those individuals could not see in the process of interacting with them and he was able to rescue three of them and put them back on the track to the wealth zone.

The story of Henry fascinates. He appeared to have business acumen; bought a house, converted part to a hospital and the other to a residence. He used the house as collateral for a bank loan. Unknown to him, his accountant got creative with the account he presented to the bank and the bubble burst when he started defaulting in payment barely three months after accessing the loan. It was in the process of taking possession of the house that the author decided to go deeper with him. He found out what Henry was doing wrong, corrected him and put him on mentoring sessions during which he advised Henry to sell the house (assisted by the bank) pay off the loans and go to the Lagos Business School to beef up his business skills. There was a happy ending. The business was rescued… so were the cases of the other two individuals except for Chief Aluko, whose case had become irredeemable.

I want to suggest that the author who also had similar experiences while he was trying to build his wealth initially found his bearing through heart-to-heart mentoring sessions with many young men and by also learning at the feet of the masters. The lesson he is passing across is that talent, education, a great job and even good salary and even exposure do not by themselves guarantee financial security if you do not understand the principles of wealth creation.

The Money Illusion

One thing that is endearing about the author’s approach in this book is his use of real-life stories to illustrate wealth principles. In this chapter, he used the stories of four of his former staff (John, Remi, Dapo and Mike) to illustrate the lessons that professionalism, hard work, education and even productivity at work do not guarantee that you would be able to build wealth. The four friends were top hands at First Atlantic Bank, where he was the CEO with mouth-watering pay packages that ran into several millions of naira per annum.

While John, Remi and Mike lived it up, piling up expensive luxuries after expensive luxuries, sent their children to the best schools abroad, joined many expensive clubs, Dapo chose a different path. He was conservative in his expenses, saving and investing more. A question he perpetually asked was: what happens if the bubble burst?

Indeed, the bubble of the Nigeria banking industry did burst when Professor Charles Soludo’s tsunami swept off 65 out of the 89 banks, including First Atlantic Bank, which ultimately lost its banking license after unsuccessful mergers. Predictably, the four friends lost their jobs. Only Dapo was prepared. The others suffered different degrees of misfortunes from which they never recovered.

The lesson: Money is an illusion. It is liquid. It comes and goes and it is unprotected. The foundational principles of wealth creation require strict a step-by-step process through which you become more knowledgeable, more appreciative and more exposed about growing and sustaining wealth.

The steps:

1. Self-education: Formal education will make you a living while self-education will make you a fortune.

2. Hire a reputable wealth manager with track records of successful wealth management to handle your money.

3. Good retirement planning.

The Rules of Wealth

I believe this is the icing on the cake where the author lays out methodically,in chapter 5, what could be described as the formula for wealth. The author believes wealth creation is essentially a product of habits. According to him those who achieve great wealth do certain things differently from others. Some of the habits of the wealthy people he listed include:

1) Positive mindset: He believes that many people who say they are trying to build wealth have been programmed to fail through their beliefs some of which he identified:
• Money is the root of evil
• Rich people are greedy
• Money does not grow on trees

2) Dreams and determination: According to him one important habit trait of wealthy people is their commitment and determination to be wealthy. The statement by B.C Forbes, founder of Forbes, summarizes the author’s point: “The men who have done big things are those who were not afraid to attempt big things and who were not afraid to risk failure to gain success. He says successful entrepreneurs are creative thinkers. He used the story of Otunba Subomi Balogun to illustrate the habit of determination. He noted that Otunba Balogun saw the opportunity offered by the Nigeria indigenization decree of 1978 to start an investment bank amidst very tough challenges. The author who was also an executive assistant to the flamboyant banker said he learnt the culture of excellence, elegance and good communication from him. He also used the example of Aliko Dangote who has perfected the arts of thriving under unfavourable circumstances.

3) Character and Integrity: According to the author, most people who have built wealth are people of integrity and strong characters who place a premium on transparency, trustworthiness, reliability and faithfulness. He used the sterling example of Guaranty Trust Bank where he was also a top executive, who chose not to bribe anyone or give commission to third parties.

4) Personal and Financial Discipline: Self-discipline is a major distinction between people who succeed in life and those who don’t.

5) Keeping Right Company: One good way to build wealth is to associate with those who build their wealth legitimately. Those who work with the wise shall be wise and a companion of fools would be destroyed.

6) Passion: He believes that true wealth flows from discovering your passion and building a business around it, echoing a suggestion which was once credited to Warrant Buffet, the legendary investor: “I will give you two pieces of advice: invest as much in yourself as you can; then follow your passion.

7) Find A Mentor: According to the author, mentorship is crucial to wealth creation. A mentor is someone who sees more talent and ability within you than you see in yourself. Mentors shorten the journey to the top. I believe this is why the author has not only surrounded himself with great mentors but he has also chosen to mentor others.

8) Develop the Culture of Saving: George Clarson rightly suggests that wealth, like trees, grows from the practice of setting aside a part of your current earnings for future use.

9) Turn Your Idea into Valuable Business: Having discovered your passion, the next thing is to develop a business around it. The ability to turn your passion into a big idea and then build a successful business around it is what separates the wealthy from those who merely want to be rich
10) Find Your Path: He believes many paths lead to wealth creation and those who would be wealthy should carefully choose the ones that fit their temperaments.

Here are the diets:

• Build a business enterprise
• Invest in assets and real estate
• Do a combination of entrepreneurship and investing
• Pursue a career while you invest in assets, equities and other wealth instruments.

11) Bonus Rule: According to the author, here is a critical step in the journey to building wealth: Before starting your own business, the author counsels that you should serve under someone you admire what he or she is doing.

The Fundamentals of Entrepreneurship

In his chapter on entrepreneurship (chapter 6), the author suggests that Nigeria is a country blessed with rich stories of audacious but successful entrepreneurs, despite stories of entrepreneurial failures that we hear now. To a large extent, it seems that stories of these entrepreneurial failures are more than the successes, with a lack of information being the biggest problem.

To further buttress this, a survey of 500 entrepreneurs was conducted across the country and a whopping 85 per cent of people were struggling in their business because of several factors including the common infrastructural problems and high-interest rates. But despite these problems, 15 per cent of the entrepreneurs surveyed are still successful entrepreneurs.

Many of the struggling businesses surveyed showed a lack of basic business skills, low level of technology adoption, substandard products and services, financial mismanagement and others. The 15 per cent non-struggling businesses have some things working for them such as a well-written and strictly followed business plan, a motivated team amongst other things.

These things include personal attributes like courage, creativity, determination, passion, integrity, reliability, patience, responsibility. They are all character traits we should not overlook when running a business or when finding teammates to partner with for your business.

Two of the most important things in running a business are creativity and innovation. They are two salient points that should not be compromised in running businesses. Organizations like Apple, Uber, Konga, Netflix, YouTube, GTBank, are entrepreneurial businesses that proved creativity and innovation should not be compromised in business, and entrepreneurs in Nigeria need to learn from them.

Many just want to jump ahead into starting a business without giving thoughts to an already laid out business plan. A business plan is like a map to give direction to the business, without this a business would veer off track. This is one of the most crucial steps startups miss. Plans to be included in a business plan are financial plans, sales and marketing plans, plans for the workforce and a thorough investment plan.

Money Earns Money

I must admit that I was a bit surprised by the level of disclosures made by the author in this chapter on investment. For instance the author provides a detailed story of how a friend introduced him in 1989 to the two principal promoters of Guaranty Trust Bank, Fola Adeola and Tayo Aderinokun, who were looking for other investors to back them up in their bid to set up the bank. The author was asked to contribute N200, 000 ($45,000 at that time) at N1 per share, an amount he confessed was more than five times his annual salary. Scrapping every penny he could get from anywhere the author was eventually able to contribute the required investment before the deadline. By 1996, the bank was publicly quoted with the opening share price of N8 – eight times the value when he invested six years earlier. In his words: ‘Within six years, my investment had yielded returns beyond my wildest imagination. My investment made me a multimillionaire. In the intervening years, I built my house and other investment globally which was financed by income generated from my investment.

According to him as with successful entrepreneurship investing requires passion, commitment, real patience, and of course, funds. The author also shares how he teamed up with other people to buy over former Ikoyi Hotels at a steep price of $13.8m in 2001. The hotel was rebuilt and launched under the brand name, Southern Sun, Ikoyi, and managed by the Southern Sun Group of South Africa. Those changes propelled the value of the investment about 100 times more than the value invested, years later. In his words: “Years later, the proceeds of a single round of equity sale were a hundred times more valuable than my initial investment.”

For those who want to know how the author transited from the banking hall to the government house and the politics associated with that transition should pay attention to this chapter, which also offers few lessons in leadership.

Linking wealth status to Covid-19, the author, in chapter 9, suggests that the real test of a person’s financial security comes at the onset of a global pandemic or an economic crisis. His postulation is that if you fall apart during a crisis, it means you are not wealthy in the real sense of it. The author believes that a wealth-building journey that incorporates all the principles he has shared in the book can withstand any economic crisis.

Signpost question 3: Has the author personally experienced what he sets out to teach.

Without doubt, The Wealth Formula is a personal testimonial of how the author moves from the bottom of the ladder as an ordinary employee climbing up to be a successful entrepreneur, a wealthy and inspiring business and political leader.

More than that, the author believes that what qualifies him to write the book: “is the broad knowledge I have gained while serving both in the public and in the private sectors for more than four decades. Also, I have had extensive and close relationships with some of the wealthiest people in the world and I have also observed their lifestyles. I have also read countless books on wealth creation and learned valuable lessons that I have practised in my own life. I have drawn on this to develop the blueprint.”

The books that have shaped him:

• The Richest Man in Babylon
• More Important than Money
• Rich Dad, Poor Dad
• Cashflow Quadrant
• Ramit Sethi’s I Will Teach You to be rich
• Steve Marriot’s The Young Entrepreneur’s guide to starting and running a business,
• T.Harv Eker’s Secrets of the Millionaire Mind
• Andreas Pira’s Homeless to Billionaire

So it is not in doubt the author has lived what he is preaching.

Overall impression

Overall, The Formula for Wealth is a practical book on wealth acquisition that clearly outlines the process of gaining access to the club of the wealthy.

In a way, it can be asserted that whoever buys a copy of this book for whatever price is picking two books for the price of one. The forward written by Fola Adeola, a successful entrepreneur, inspiring business leader and mentor, adds great value to the book.

According to Adeola, “The journey to wealth is a well-known mystery that can be discovered both deliberately and accidentally. Wealth is sort after by many, but only a few find true wealth in their lifetime. It is perceived to be elusive but the path to it is well worn.”

One can hardly agree less with Adeola that considering the gem of wisdom contained in the book, the author compares well with Robert Kiyosaki, Dave Ramsey, George Clarson, and our own Nimi Akinkugbe.

Without removing anything from the value of the book, it should be pointed out that there is no such thing as a formula for wealth if considered along the scientific line of being able to produce a predictable outcome when you combine numbers in a certain prescribed manner. Ultimately, building wealth is a journey in experiments. And good enough, the author has provided a menu of ingredients that if carefully combined can lead to successful experiments. The formula for wealth is a must for anyone who genuinely wants to build wealth in legitimate ways without cutting corners and without following the broad ways as many prefer; schools school translate the content make it part of their curricula; it is a book that should occupy a top position on the shelf of any individual who wants to build wealth that lasts.

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