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CASHFLOW Technologies, Inc.
FAILURE RULES
Your Mindset NOT Your SkillsAre Holding You Back
Think back to the last time you failed.

(Yes, this requires you to admit to failure. Dont worry; this is just between
you and me.)

Maybe you started a business that didnt survive the first year. Maybe
your relationship with your children hit a rocky patch that you didnt know
how to navigate. Maybe you tried a new career field and found it much
more difficult than you imagined.

How did it make you feel? Yes, everyone is disappointed when confronted
with a lack of success. But what was your feeling in the next moment?

Did you say to yourself, I just dont have a mind for business or
were you inspired to attend more entrepreneurial workshops to educate
yourself?

Did you think, I am not a natural at parenting, or did you decide to try a
new tactic you hadnt before?

Did you say, I guess Im just no good at this new field; I should go back to
what I was doing, or did you seek out new mentors to help you find your
way?

Did you shrug and figure that you just dont have a talent for whatever
you were attempting, or did you see it as an opportunity for growth?

There are two basic mindsets that people have about their talents, their
abilities, and their smarts. One mindset leads to success. The other
leads to being stuck in the rat race, to stagnating in your life while others
succeed.

Your response to failure or to seemingly insurmountable obstacles will

tell you which dominates your thinking.

How to Choose Your Personal Success

There is power in what you believe about yourself. If you feel like youre
stuck, like youre not succeeding, then its time to examine just what your
mindset is.

THE FIXED MINDSET

Some people think that their strengths and weaknesses are set in stone.
I have a certain amount of talent, a certain amount of intelligence, but
thats it.

Maybe they were given an IQ test in school, and they think, This is my IQ
for life.

These folks are wary of challenges because they dont want to find out
theyre not as intelligent as they thought. They dont want to do anything
that will make them look dumb or incapable to others or to themselves.

If they do ever try something new and hit a roadblock they think, I guess
thats all the talent I have. Oh well. They figure if they really had the talent,
they wouldnt have run into the problem or had to work hard at it.

When they fail, they see it as proof that they just arent capable of
something. Its the end of the story.

For the other kind of mindset, however, failure might just be the beginning
of a new story.

THE GROWTH MINDSET

At the other end of the spectrum are those who see their innate talent or
abilities as simply the starting point. These are people who realize that
they can grow and develop themselves through hard work, instruction
from others or a well-thought-out strategy.

Not everyone is born a genius. I understand that we all start with different
advantages or disadvantages. But those with the growth mindset believe
that they can grow their abilities.
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Challenges dont scare them off. They see obstacles and failure as a
chance to learn from their mistakes, an opportunity to grow. Theyre
fearless in that way.

Its like the famous quote from Thomas Edison: I have not failed. Ive just
found 10,000 ways that wont work. Edison clearly viewed what others
might view as failure, as another step toward finding success.

For those with a growth mindset, success means stretching themselves

and acquiring new abilities. Theyre always growing and always learning.
They use difficulty to reach newer and higher levels of achievement. They
learn from their mistakes.

Its what we teach at The Rich Dad Company.

TWO DADS, TWO MINDSETS

My two dads exemplified the two different mindsets. Though my poor
dad was a well-educated man who continued to pursue academic
learning his whole life, he didnt stretch himself beyond what he saw as
his natural talents.

My poor dad stuck with the tried-and-true, following the career path that
was accepted, even as he struggled to pay the bills or retire comfortably.
If he failed at something, he dropped it and went back to what he knew. It
was definitely a situation of fixed mindset.

I was lucky enough to have another example of how to approach life. My

rich dad definitely was not afraid of failure. Not only was he not afraid of
it, he embraced it. Failure simply honed his approach to business and to
life. If something didnt work, it was a failure, not him.

My poor dad, on the other hand, saw both success and failure as a
reflection of who he was.

How do you define success? Is it validation that youre smart and

talented? Or is it the result of pushing yourself to grow?
Those with a growth mindset are lifelong learners. They know theres

How to Choose Your Personal Success

always room for improvement.

The non-learners, the ones with a fixed mindset, feel dumb when things
get difficult and they have to put forth effort. They think, If Im really
smart, I shouldnt have to work hard. Therefore, if Im working hard at
this, Im dumb at it and I dont want anyone to see me being dumb so I
wont try this anymore.

In a growth mindset, the reaction instead is, This hard stuff is when I
know my brain is making new connections and Im getting smarter. With
the right mindset, failure is the opposite of dumb. Failure allows you to
get smarter.

We all have a natural inclination that leans more toward one mindset
than another, but our mindsets are more learned than predetermined.
And the place where we start to learn these mindsets is most often
school.

DAMNING WITH NOT-SO-FAINT

PRAISE
Theres a bunch of research that shows how we compliment kids teaches
them to have either a fixed mindset or one of growth.

You might think its a good thing to tell children they are smart, but the
problem is that it helps instill a fixed mindset. The children might begin to
think consciously or not Im naturally this smart. This is who I am,
not through any effort of my own.

Saying someone is gifted implies they didnt have to work for it. Its just
something theyre blessed with, right?

Then they become afraid of challenges and making mistakes, because

either might expose them to everyone else as not being as smart as
people thought. They get so caught up in the label, they forget to learn.

This is exactly what school does and what a lot of parents and
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employers do, too. If you praise your employees by saying, Youre smart,
youre brilliant what youre really doing is telling them thats what you
care about and theyd better not make mistakes.

(In case you think telling someone theyre dumb would reverse this, thats
no good either. Using any of those smart/dumb labels is a bad idea.)

Instead, the better approach is to praise the process. Research has found
that when a teacher, parent or an employer praises peoples effort, their
strategies, their progress or even just their taking on challenges it
keeps them in a growth mindset. It encourages them to keep innovating,
stretching and learning.

Praising their intelligence will have the opposite effect, making them
afraid of stretching beyond their known talents for fear of failure.

FEAR OF FAILURE
If you feel stuck in your career, ask yourself why you didnt grab certain
opportunities or take risks that couldve changed your life. Most likely it
was because of a fear of failure.

Mistakes are a big topic with our coaching students. So many people
have a great fear of mistakes. We all hate to make mistakes, but if you
can find the lesson in them, theyre less scary and more productive.

The problem is that for those with a fixed mindset, mistakes measure
them. Mistakes show whether theyre smart or dumb, and because of
that theyre to be avoided at all costs even if that means being stuck in
the same-old, same-old.

For the fixed mindset, the belief is that if youre smart, things should
come easily to you; you shouldnt have to struggle with something. And if
you find yourself struggling, then youre just not good at it. And because
those with a fixed mindset dont think they can change, if a struggle
reveals theyre not good at something, that means theyll never be good
at it.
But heres one of the big secrets in life: Nothing thats important comes
5

How to Choose Your Personal Success

without struggle. One of the greatest snapshots nature gives us of

awesome change is the caterpillar becoming a butterfly. And it doesnt
happen without struggle, without the new butterfly fighting to escape the
cocoon. Its part of the process.

Without something to resist or push against, our bones and muscles

become weak. When astronauts spend time in space, the gravity is so
reduced that they dont have any resistance moving around and as
a result they lose muscle mass by the time they return to the Earths
surface.

Think about when you exercise at the gym and lift weights. Though it
might tire you out in the moment, after youve had time to recover from
the exertion youre stronger, not weaker. The struggle to lift the weights
was a challenge for your muscles, but the result was that your muscles
become more than they were before. The same is true for us in life as
we struggle against obstacles: If we have the right attitude, that struggle
makes us smarter, more experienced, stronger.

The famous saying is, That which does not kill you makes you stronger
not, That which does not kill you proves to everyone that youre a
failure.

You should always be struggling with something in some way; thats how
we grow.

But the problem is that those with a fixed mindset dont see struggle in
this positive light. They see struggle as evidence that theyre just not
good enough.

In school, this can manifest itself as students who wont try a new
subject or go out for the team for fear of failure. Not only does this make
them operate from a place of fear, it can mean cutting themselves off
from the possibility of discovering a new interest that changes not only
their lives but our world at large.

In the mid-1970s, Steve Jobs was a college dropout. He couldve decided,

Well, Im just not meant for learning. But he hung around college and
ended up auditing a calligraphy class. From that class, he learned

about serif and sans serif type, about varying the space between letters,
about writing as visual artistry.

Years later, when Jobs and his partners were designing the first
Macintosh computer, what he had learned in that calligraphy class led to
the computer having multiple and proportionally spaced fonts. And that
revolutionary computer led to the design aesthetic that is such a part of
Apple and so many peoples lives now.

If a student is afraid to stretch into a new subject area, it prevents the

kind of innovation that can change the world.

In the world of business, the fear of failure can play out in many ways,
including hiding your mistakes and competing rather than collaborating
with others. If the organization itself has a fixed mindset environment,
one where its all about who the genius is, it can lead to an atmosphere of
cutting corners, keeping secrets and putting a damper on innovation and
risk-taking because no one wants to appear less than perfect.

If that fixed mindset comes from the CEO himself, its bad news for
everyone. A CEO with that mindset is often only after his own glory, at the
expense of the growth of the company. He doesnt want people around
who criticize or threaten him, which is exactly the wrong way to approach
building a team. You should have people around you who challenge you.
You should have a team thats just as talented or even more talented
than you are.

In her book Mindset: The New Psychology of Success, Stanford

psychologist Carol Dweck recalls how she did a test with a group of
young kids in which she gave them an easy jigsaw puzzle. Later she went
back and said, OK, you have a choice: You can do the same puzzle again
or you can do a harder one.

The children with the fixed mindset chose to do the first puzzle again
because they knew they could do it and get the correct result. Some
wanted to do it two or three times rather than risk a more difficult new
one.

The kids with the growth mindset were surprised at the question,

How to Choose Your Personal Success

wondering why they would want to do the same puzzle over when they
could try a new one and see what happens.

Which group are you in? Do you stick with what you already, or do you
push yourself to try something new because who knows, that next puzzle
could turn out to be pretty amazing?

If you find yourself resembling the fixed mindset, its never too late to
change.

A NEW PATH
Its important to understand that we all can have fixed mindsets in certain
areas. The first step to switching to a growth mindset is to start noticing
the areas in which you have a fixed approach.

Take note of your reactions. If someone performs better than you, is your
response that you could learn something from that person, or that youre
just not as smart? When you make a mistake, do you get anxious, or do
you respond with, Huh, thats interesting that it didnt work. What should
I try differently to get a more successful result?

A fixed mindset tells you that you can never grow and change. It says, I
must always be right. I dont want to make mistakes because if I do, that
shows Im not as smart as I thought I was.

Compare that with the growth mindset, where a person is always

learning, always looking for new challenges. People with a growth mind-
set measures their success by how much theyre developing personally
and how much challenge theyre taking on.

Its OK if a new challenge makes your heart beat a little faster. Being
nervous about a new endeavor doesnt mean you have a fixed mindset;
being too afraid to ever try anything new does. Everyone wants to
succeed; its how you react to the bumps in the road that shows your
outlook and ultimately your chances at a bigger success.

The school system often reinforces students with fixed mindsets with
8

labels youre smart, youre artistic, youre math-minded. Thats one of
the reasons I turned to my rich dad for an education rather than depend
on the school. My rich dad showed me by example that to be successful
in business, you must always be willing to risk and always be willing to
learn.

I havent shied away from failure. Trust me, not all of my investments are
a success. But if I allowed those that didnt perform as well to scare me
away from the sometimes-risky process of acquiring assets and boldly
looking for opportunities, I wouldnt be where I am today. I wouldnt have
built the life of financial independence that I enjoy now.

The key is that I learned from my failures. I used them to drive me to new
heights, not scare me back into what Id done before.

We want to label everything as black and white: good or bad, smart or

dumb. But failure can be either it all depends on how you react to it.

But instead of being excited about what possibilities failure might open
up, our system tells us, Dont fail. Dont do it this way. Do it the way weve
always done it. And thats never going to lead to the kind of innovation
that changes lives.

The fixed mindset also makes you unpleasant to be around, because

youre so worried to let your mistakes show that you blame others, justify
your actions and get defensive, always having to keep proving to the
world how smart you are.

However, a growth mindset focuses on things that you can cultivate and
grow. Your talents, your intelligence, your personality none of it is set in
stone. All of it can improve through effort, and your potential is limitless.

Doesnt the latter option sound a whole lot more attractive?

So youve got to start by being honest with yourself. No one wants to

admit that theyre insecure about failure and shortcomings. Pay attention
to the situations in which you have the self-defeating, fixed mindset, the
areas in which youre fearful of failing. Use that awareness to retrain
yourself and your thinking.

9
Ask

How to Choose Your Personal Success

yourself, Whats the worst that could happen if I fail? Almost always, the
consequences arent as dire as you fear. Then ask yourself, Whats the
best that could happen? Stop focusing on the fear and instead train your
sights on the potential, on the exciting achievements that are possible
when you reach outside your comfort zone.

RETRAIN YOUR THOUGHTS

My poor dad never broke out of the traditional path in academia. He didnt
go into a field he didnt have multiple degrees in; he didnt do anything to
risk his state pension.

But he also never found financial independence or the kind of success

that would give him the life he wanted.

My rich dad was the opposite. He wasnt afraid of risk, and he wasnt
afraid of failure. He wasnt worried that something he did might offend
someone or make people think he wasnt smart. If he tried a business
venture and it failed, it didnt mark him as a failure. It was just a learning
experience that made him smarter and more able to find success the
next time.

The day I rejected my poor dads path and decided to take my lessons
from my rich dad was the day I began my path to success. It wasnt a
straight upward trajectory with zero setbacks. But the setbacks didnt
define me. I had learned from my rich dad to use those failures as a way
to sharpen my skills and hone my strategies.

For the person with a fixed mindset, you have to keep proving to yourself
(and to the world) how smart you are by not making mistakes and by
pretending that you already know everything.

With the growth mindset, mistakes just allow you to learn and grow.
Youre not afraid of failure because you know thats how you grow, thats
how you get better.

For the fixed mindset, youre as good as youre going to get at the start.
For the growth mindset, who you are now is just the starting point. Its
10

exciting because you dont know how far youll be able to grow.

My poor dad was an example of the fixed mindset. He wanted to play

it safe and encouraged me to do so by getting a good job with a
steady retirement after years of service. But retirement wasnt my goal
success was.

My rich dad showed me what it meant to have a growth mindset. He

showed me how to learn from situations where it seemed Id run into a
dead end. Unlike school, he showed me how thinking differently would be
more beneficial and would take me further.

Which mindset would best define the way youve lived your life?

If you welcome failure and challenges and mistakes, keep it up. Theres a
lifetime of growth ahead of you.

However, if you feel like youre stagnating but the thought of risk is
keeping you scared and rooted to where you are, then youre likely using
a fixed mindset. Start paying attention to your reaction to obstacles and
mistakes and youll start to identify the areas of your life where youre
applying fixed thinking.

Retrain your thoughts. Focus on the ultimate goal and view your failures
not as game enders but as game changers. Learn from your mistakes
and use that knowledge to help you escape the rat race.

Struggle isnt a sign that youre attempting something you shouldnt.

Struggle is an opportunity to grow your abilities and sharpen your smarts.

Do you think every musician is a prodigy the moment they put hand to
instrument? Do you think every athlete makes the shot from Day 1? Why
would you expect anything different from yourself?

It takes hard work and endless practice to become a world-class

musician, or athlete, or surgeon, or chef, or entrepreneur. It takes a
willingness to admit what you dont know, in order to become smarter.

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How to Choose Your Personal Success

If your reaction to admitting that you dont know something is

defensiveness or paralyzing fear, youre never going to grow.

A QUESTION OF TIME
Listen, theres no magic pill to success. Even with the most positive of
mindsets, its going to take work. But it is so much harder when you enter
the game assuming, Im talented up to this level and no further.

When babies are learning to walk, they never get it on the first try. They
wobble, they fall, they might cry but then they try again. Imagine if we
all gave up the first time we toppled over as toddlers. Wed have a world
full of helpless adults who could never get anywhere!

Thats exactly what happens in so many peoples lives. They try

something new, they wobble and they fall over and rather than see that
failure as just one step in the process, they give up. And as a result, they
dont get anywhere. They dont stretch themselves into a new path that
could take them to great places.

The average life expectancy for Americans is about 81 for women, 76 for
men. Thats a lot of years to not be growing and going anywhere if you
assume your abilities are frozen when you get out of school.

You might say that youre in your late 40s, your mid-50s, your 60s and its
too late for a major life change, too late to start as a newbie in a new field.
But you might still have a third or more of your life left! What if you went
into a movie and the screen went blank two-thirds of the way through.
Youd demand your money back! Theres a whole lot of story that can
happen in that final third of the movie. The same is true of your life.

If you tend toward the fixed mindset, it may take some practice to start
seeing your life through a new lens. But it is so worth the effort; wouldnt
you regret it more if you looked back in five or 10 years and saw the time
you wasted being fearful?

Maybe the time isnt quite right yet to jump into a new job. Maybe you
need to acquire some new skills first. So whats stopping you?
12

When you come home after a day of work, do you plop yourself in front
of the TV for the latest shows, or do you eagerly jump into learning about
your next challenge?

There are so many hours of the day that people can waste on things that
dont help them grow professionally, personally or health-wise. Imagine if
you harnessed the power of those extra hours to read or attend classes
or practice the thing you havent conquered yet.

Imagine if you harnessed the power of those extra hours five years ago.
Imagine where youd be today. Dont let that thought discourage you
though. Use it as motivation for the next five years.

Do something now that your future self will thank you for.

Be bold. Struggle wonderfully. Embrace your mistakes not as a sign that

youre a failure, but as an indicator that youre on the path to success.

Only with that growth mindset will you utilize the momentum that allows
you to break out of the rat race and enter a new level of success. Conquer
your fear and who knows what new heights you will discover.

13