1. Know the Market Price
There are a ton of people who go out to yard sales, thrift stores, and estate sales and buy things for incredibly cheap prices, and turn around and sell it on eBay, Amazon, etc. When most people hear their story, they say things like,”Oh, they must be incredibly lucky! That kind of thing never happens to me!” First of all, this is a defeatist attitude. Second of all, the reason they can do this is because they know the value of something, and if they don’t, they know how to find it. Looking at the comps for past items sold isn’t that hard. If you don’t know the value of something you’re buying or giving away, then you shouldn’t be doing it.
So many people buy luxury goods for full price, when you could go to Poshmark/Ebay/Mercari and find a large amount of people selling it way below market value with the tags still on. In a way, I’m thankful for these people. Them not doing their research and me doing mine results in a fancy wardrobe for me. Quality, lasting goods for almost the same price of Forever 21? What could be better?
Know the market price of what you’re buying.
2. Be Prepared and Have a Plan
Society seems to confuse being prepared with luck these days.
“I got so lucky that there was a spare tire in my vehicle.”
“Lucky I backed up all my files on dropbox before I spilled coffee on my computer today.”
“William was lucky he had an extra shirt, otherwise this presentation would’ve gone terribly.”
That’s not luck, it’s called being prepared. The reason some people call it luck is because not being prepared seems to be the norm.
3. Know the Probability and Expected Value Of Events Occuring
We all know lotteries have a large negative expected value (though MIT students found a way around that, read here), but are there things with a positive expected value?
Sure. Let’s say you’re at a community Christmas party and there are a ton of companies that have donated things. If the expected value is a very large positive number, then you should buy an increased number of tickets.
Ie, at a Christmas party we went to there were two free roundtrip tickets for flights to Asia (separate prizes – $800 each), a GoPro ($350 each), a fancy laptop ($800), skydiving for 2 ($400) and a long list of other nice prizes (dinner for 2 at a ton of nice restaurants, tickets to lot of shows, etc). Considering there were around 75 people at this party and most people were buying one $5 ticket or none at all, it seemed a no brainer to me to buy a few more (We bought $40 worth of tickets). Our estimated odds of winning were 15 percent. Even if we didn’t win a big prize, we’d break even on a small prize. We ended up winning a GoPro ($350) and a dinner for two ($50+). The raffle money went to a charity (so tax deduction!) so it was for a good cause. Don’t like the prize? Donate it for a tax write off.
What happens if you lose? Well, you keep playing games with large positive expected values — mathematically you’re likely to come out ahead.
Probabiltiy is the odds that you’ll win the prize. Expected value = probability * prize value. If the expected value is a large positive number you want to start betting.
4. Have a one minute elevator pitch about yourself/business
Opportunity comes knocking a lot, but a lot of it is wasted. When people ask you what you do or to tell them a bit about yourself, be prepared with a spiel. You never know who they are and how you could help each other. Make it compelling, empathetic, and with something unusual.
Here’s a great article with how to craft your elevator pitch. Got it ready now?
5. Talk to People Outside of Your Comfort Zone
Stop staying in your private comfort zone and venture out to talk to other people. Try talking to those who are different from you. In my city there is Tea With Strangers or Greet, where you meet people who are curious about meeting other people. Almost every meeting I go to, I learn something new that enriches my life, whether it be how an industry works, free co-working spaces, or dirt cheap ways to get Broadway tickets. Everyone knows different things, and when you speak to a few new people a week, you get to compound your learning and glean all the gold nuggets of their wisdom.
Don’t believe me? I basically just described networking, but with people outside your industry. Scientists have proven that weak ties, which are people you only loosely know, are better at getting you job offers and new ideas than strong ties (people who you associate with on a daily basis).
Why is this? Your strong ties are most likely working in the same industry or college networking friend group. So the amount you learn from them would be less than someone from a weak tie, who is different from you. See, diversification is good, even in things that don’t have to do with investments!
So, get out there are talk to new people and learn something new.
6. Do the Research and Talk to People With Experience
In any market, there is mispricing or friction. You might not know how to see it, so talk to the people with expertise. Go on Google and read the first 4 pages of searches (not the first four searches, the first four pages). Then iterate through the process until you’re starting to learn nothing. Talk to people you know who have gone through a process. Keep asking questions. Do it well before you actually have to make a decision.
For example, what if you’re considering buy a house for $1M in a HCOL city?
Did you know you can be your own realtor and save 2 percent on the price of the apartment? $20k is a lot of money.
If you move $250k of assets to most big banks, they’ll put you in the private wealth department and give you a .25% discount on your mortgage. On 1M this is $50k in interest saved just for moving around some assets. Make sure the bank doesn’t charge management fees on self-direct accounts (they shouldn’t).
Have a good friend who is a lawyer? Get them to sign a bunch of documents that would normally cost $6k if the bank did it.
Did you check the rent vs. buy calculator to make sure this is the best ROI for your money?
Is putting a down payment less than 20 percent worth it (PMI costs)?
Talk to an expert.
7. Pretend Everything Can Be Free
The people who get a lot of cool free stuff are the people who believe you can get everything for free. Those people are the ones with extreme delayed gratification and DIY muscles. You just make do until fancy or crazy cheap stuff comes along. People give away stuff all the time for free just to get rid of it. Use the American society’s love for consumerism to your advantage. Those clothes you donate every year to the Salvation Army or Goodwill? Most of it ends up in Africa, where clothes sellers buy them for pennies on the dollar.
The fancy OXO kitchen series? Fancy lamps and lights? Fancy furniture? Check your consignment shop.
Need gym wear? Go to a conference or college job fair (when you’re in college). 3 years after college and I probably still have 20 or so shirts that I can wear to the gym.
Good websites for free stuff can be found below:
Stop paying for things and start waiting it out.
8. Physical Raffles/Prize Drawings
This one is just for fun. If you’re ever entering a physical drawing, you want to make your entry the biggest. Loosely crumple or fold your entry or business card like an accordion so it takes up more space. The person with the most space in the drawing bowl gets the highest probability of winning.
Do you guys have any tips for creating your own luck?