Grow Your Portfolio with a Growth Mindset
I first read Carole Dweck's Mindset: The New Psychology of Success about 5 years ago from the perspective of a tertiary educator. It was not until I re-read this amazing book about one month ago that realized the fantastic applications to the world of real estate investing.
Dweck is an esteemed psychologist who studies focus on answering a simple question: 'Why are some people successful while others are not?' After extensive research, she found something very interesting. Let's begin with a few questions. (Answer them honestly).
1. How do you react to difficult challenges or obstacles that get in your way?
2. How do you feel about making effort?
3. How do you respond to criticism?
4. How do you respond when other people are successful?
Your answers to these questions reveal a great deal about your mindset.
Dweck argues that there are two distinct mindsets that a person can embrace. The FIXED MINDSET and the GROWTH MINDSET. They are marked as follows:
What do you think? How do your answers compare to the outline above? What side do you currently fall on? If you are leaning towards a fixed mindset, do not fret. Dweck's work proves that with effort ANYONE can have growth mindset and use that mindset to drive their success!
Let us explore the way these ideas can help us be more successful real estate investors.
Every investor knows that being consistently successful is no cake-walk. After all, if it was easy everyone would do it. It takes commitment and the ability to tackle challenges head-on. If you are like us (Iron Oak Holdings) you will face numerous challenges while investing. You may lack appropriate contacts, cash for down payments, free time, knowledge about investing, and more. A fixed mindset would face these challenges and say 'This is too much. Why bother? I'm just not meant to be a real estate investor." A growth mindset takes the opposite approach and might say:
No contacts- "That's ok. I'll make them. Let me reach out to people. I like speaking to new people anyway."
No cash- "Fine. How can I get cash? Can I change my spending habits to save more? Maybe I can establish partnerships with people who do have cash? What is this thing I have heard of called creative financing?"
No time- "I'll make time. This is important to me so, I'm going to make investing a priority in my life."
No knowledge- "There is so much information out there. I'm going to learn about the things I don't know. I'll buy books, listen to pod-casts, watch webinars, and learn from investing mentors!"
In addition to the numerous challenges we face as investors, we also have obstacles that constantly pop-up and get in our way. It happens! Deals fall through, you get terrible bad tenants, you evaluate a property incorrectly and end up losing money. Every great investor has stories about obstacles and set-backs that they have faced in their careers.
With a growth mindset you can take these set-back for what they truly are: changes to learn. If you give up when things get in your way, you will NEVER find success.
This concept was particularly interesting to read about in Dweck's book. The idea that some people see effort as meaningless while other know that effort leads to results. Investing in real estate can be exhausting. You might have to look at 100 properties before a deal jumps out at you. You might need to make 10 offers before one is accepted. You might have to work with 20 real estate professional before you find your go-to team member.
The growth minded investor will see this effort as 'worth it'. They know that analyzing thousands of properties will sharpen their skills and allow them to recognize deals quickly. They know the research on a community will make them an expert on the area. They the value of their efforts, are encouraged by progress, do not become disheartened by hard-work.
Personally, I feel that this is the hardest growth mindset behavior to practice. I believe that it is human nature to dislike negative feedback. Of course nobody enjoys receiving criticism but, as Dweck explains, it is not how you feel it is how you respond. What do you do when you are rejected by a seller, a lender, or a potential partner? What if you get critical feedback about your communication or management style?
With a growth mindset you can see this criticism as an opportunity to examine your behavior, processes, or approach. You can learn from negative feedback and allow it to push you forward rather than bring you down. Hilary Clinton said it well when she stated, “Take criticism seriously, but not personally. If there is truth or merit in the criticism, try to learn from it. Otherwise, let it roll right off you.”
Success of Others It has always perplexed me when I see people who resent the success of others. We all know those people (peers, friends, family, or co-workers) who feel threatened when others are achieving great things. What a waist of energy!
The fact is, in real estate, there is enough to go around for everyone. On top of that, the real estate community loves to share and connect. There are so many people doing amazing things who you can connect to, learn from, and grow with. A growth minded investor will not only take lessons from success stories of others, they will celebrate that success and take inspiration. They will always think "If they can do it, so can I!"
The Power of Yet
In addition to these key markers, Dweck discusses the incredible power of YET in her book. The example stems from a school that she studied that did not give failing grades. Rather, when a students did not meet a passing standard for a subject, they received an 'Y'- as in 'not passing YET.' I apply this concept to real estate as follows:
I can't afford it >>> I can't afford it YET
I don't know how to do that >>> I don't know how to do that YET
I don't have any useful contacts there >>> I don't have any useful contact there YET
You get the idea. This practice reminds me that approaching investing with a growth mindset will allow me to stay encouraged and motivated to succeed!
(The phrase of YET aligns very nicely with the idea of HOW presented by Robert Kiyosaki in his book series; Rich Dad, Poor Dad. Kiyosaki's idea is to transform "I can't afford it." >>> "How can I afford it?" I think is is safe to say that he practices a growth mindset!)
In conclusion, read the book and remember if you change your mindset- you can change your world!
"Becoming is better than being". – Carol Dweck
Dweck, Carol S. (2008) Mindset: The New Psychology of Success, New York