Paul Lem, a medical doctor, scientist and entrepreneur wrote an extraordinary book, "Master Life Faster: How To Be Happy, Healthy, Wealthy, Smart and Social" in 2008. I met Dr. Lem during a recent speaking tour for my own book in Ottawa, Ontario, where he gave me a copy of his book.
I confess to having a bias in favor of Dr. Lem's methodology. I am a proponent of evidence-based investing. Dr. Lem is a proponent of living an evidence-based life. He spent five years culling through thousands of studies. He selected 413 studies he determined were "the best science for living your best life."
Dr. Lem approaches living your best life the same way I approach investing and sales. Either there is credible, peer-reviewed evidence to support our views or there isn't. We both discount opinions and musings as unreliable.
I was initially drawn to the section of his book on investing. As a scientist with no preconceived bias, Dr. Lem reviewed the data on investing with the same rigorous scrutiny he gives to studies on bioscience. He had no ax to grind. I assume he would have recommended day trading or trying to "beat the market" if he found credible support for those activities.
Dr. Lem surveyed the research on investing, including data compiled by Morningstar, the Investment Company Institute, John Bogle, William Bernstein, Roger Ibbotson and Peng Chen.
Here's Dr. Lem's recommendation: Buy index funds. According to Dr. Lem, "Not only are they cheaper, but they also perform better. Wall Street's dirty little secret is that index funds beat the pants off almost all actively managed funds."
Dr. Lem sets forth a "simple plan for financial freedom." Here's a summary:
-- Try to save 10 to 20 percent of your income, preferably through an automatic deduction that is deposited in a separate account.
-- Pay off your debts as quickly as possible, starting with high interest rate debt-like credit cards.
-- Pay off your mortgage as quickly as you can by making extra payments when you are able to do so.
-- Maximize savings in tax-sheltered retirement plans like individual retirement accounts and 401(k) plans.
-- Invest using only low management-fee index funds or exchange-traded funds.
-- Buy and hold and "let the magic of compounding do its work."
Dr. Lem acknowledges that saving and investing is not a get-rich-quick scenario. He notes that most millionaires are either self-employed professionals or entrepreneurs. He concludes that saving and investing provide a sound foundation, "but entrepreneurship is the golden path to wealth."
If you are interested in plunging into the risky world of entrepreneurship, Dr. Lem has some sage advice for you. He observes an interesting anomaly: His research shows that although 71 percent of people say they would like to work for themselves, only 8 percent are self-employed. Apparently, it is easier to talk the talk than walk the walk.
The odds against success for entrepreneurs are daunting. Only 56 percent of new businesses make it to their fourth anniversary. Getting funding for your new venture is even more intimidating. Venture capitalists fund less than 1 percent of the business plans they review. If you are not put off by these odds, Dr. Lem offers this advice:
It is likely that you will be far more productive as an entrepreneur than you were as an employee. You will be motivated to work twice as hard, to focus more intensely and to push yourself to your limits. All of these factors contribute to the possibility of success.
-- Be prepared to fail many times before you succeed.
-- Reduce your risk by keeping your day job and starting your new venture as a side business.
-- Participate in networking activities. They will accelerate your chance of success.
-- Look for innovations that target new customers in new markets.
What I found fascinating about this book is that Dr. Lem puts material wealth in perspective. He understands that wealth without happiness is a Faustian bargain.
Dan Solin is the director of investor advocacy for the BAM ALLIANCE and a wealth advisor with Buckingham. He is a New York Times best-selling author of the Smartest series of books. His latest book, "The Smartest Sales Book You'll Ever Read," has just been published.
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