Book Review: The 10X Rule by Grant Cardone

I must admit, I struggle to read books. It is so easy to get distracted with other things such as YouTube. Don’t get me wrong, there is plenty of valuable content in video format, but there is something special about reading which engages the brain in a different way. After hearing over and over that successful people read books I realized it is something I must do, there is just no way around it. Writing a short review of a book that I have read is a good chance to reflect on what I have learned.

The 10X Rule

The 10X Rule is a good introduction to the philosophy of Grant Cardone. He argues that people should set 10 times bigger goals, and then take 10 times more actions to achieve them. While the basic concept is easy to understand, the book goes in-depth, explaining why it makes sense and how it can be used to improve the life of a success-oriented individual. The basic premise is that generally people do not dare to dream big, and if they do, they do not dare to take large enough actions to make those dreams come true. I think a lot of this aversion to making big actions is due to peer pressure and wanting to “fit in”. The book makes the argument for the opposite, that obscurity is really the largest issue companies and products face, and the goal should be to stand out.

Success as Ethical Issue

One interesting argument the book makes is that aspiring to be successful is an ethical issue. That is, it is unethical if a person does not try to achieve their full potential, or intentionally achieves less than they are capable of. I had never considered success as an ethical issue before reading this, but it is a very powerful idea. If a person is capable of making a positive contribution to the planet, however way he does it, then it could be argued that the community is worse off when it does not receive the full contribution that the person is capable of giving. This is another way of coming to the conclusion that we should always try to do our best and strive to make a positive contribution to the planet we live on.


Another idea from the book is that a person aspiring to be successful must learn to take responsibility for everything. One activity that most people spend considerable time on is to blame others for their condition instead of taking responsibility for their own life and making an attempt to improve it. But blaming others does not move the ball forward when it comes to improving your life, instead it is a mindset of surrender. By giving other people and entities the blame for your condition has the side-effect of implicitly also giving those external entities the power to improve your life by surrendering your own responsibility. I know, as I have been living in this victim-mindset most of my life. Mr. Cardone argues in the book that we should in fact go the other way, and take responsibility for everything, even things that are not really our fault. This thinking establishes a positive mindset where a person feels in charge of their life and destiny.

Fear and Uncomfort

Human beings have a tendency to want to be comfortable and our subconscious mind seems to direct us towards that, almost automatically. Experiencing fear is one of the most unpleasant feelings we can have. The problem is that it is not possible to move to the next level in our lives by staying where it is comfortable. Comfort implies that we are dealing with familiar people, living in familiar surroundings, and performing work that has become routine. To improve our lives in a meaningful way, we must be willing to be uncomfortable. Grant argues that fear and uncomfort should in fact be taken as indications that we are on right path. They should be embraced, not avoided, because conquering fear and uncomfort allows us to grow and reach the next level. Whenever I think of fear I always remember the great quote, “There is nothing to fear but fear itself.”.

Commit First – Figure Out Later

For me personally, the most important thing I learned from the book was the idea of committing to something first, and only then figuring out how to make it happen. Initially this feels counter-intuitive because at least my brain attempts to figure if something is possible, or how to do it, before committing to an idea. But I have observed something really interesting regarding this. When I try to think of ways to do something before committing to it, my brain tends to work against me, and come up with reasons why not to do it. I tend to think of problems, not solutions. But as soon as I have committed to something, my brain automatically starts to find solutions on how to make it happen. Now the question is not if, but how. This is extremely fascinating to me and I have to stay this understanding has helped me greatly.


I think this is a good book and I highly recommend it to anyone who is interesting in improving their life and expanding their thinking. Have you ever caught yourself wondering whether you deserve to be successful? If the answer is yes, you should read this book, as it gives you permission to be successful. In fact it goes further and states that success is your duty, obligation and responsibility.

Three Decisions of a Business

There are three main decisions that any business entity must make. These apply whether we are talking about a single enterpreneur or the largest corporations on the planet. Most other business considerations usually fall under one of the three main ones. The purpose of a business entity is to create value for their shareholders and these three decisions determine whether value is created or destroyed. The situation is a little different for non-profit organizations, but not much. Just like for-profit business entities, they face the same optimization problem of how to use their resources as efficiently as possible.

Investment Decision

The investment decision determines how the resources of the entity should be allocated in order to generate the highest return on investment. Hiring a new person, expanding to a new location or creating a new product are all examples of investment decisions. A business entity has a hurdle rate which represents the minimum return on investment that it must earn for the investment to make sense. This hurdle rate is often same as the cost of capital for the business. This makes a lot of sense, because if the cost of funding the investment is higher than the return it generates, the investment will not be profitable.

Shareholder value is created when a business entity makes investments that generate higher return than their cost of capital. Conversely value is destroyed if the business makes investments that generate lower return than their cost of capital. It is important to realize that investments should not be made just because they have a positive return, but only when that return exceeds the hurdle rate.

Financing Decision

The financing decision determines how the operations of the business should be financed. There are basically only two ways to finance a business: the shareholders can use their own money (equity) or the business can borrow money (debt). The decision whether to use equity or debt, and to what proportion, is based largely on the cost of each type of capital. These are known as cost of equity and cost of debt which together make up the cost of capital for the business.

Shareholder value is maximized when the business has optimal capital structure which minimizes the cost of capital for the business. Value is destroyed when the business is not financed efficiently. This could happen for example if inexpensive debt is available but it is not utilized.

Dividend Decision

The dividend decision determines how much of the profits that the business earns should be distributed back to its shareholders. Many companies also buy back their own shares, but that is just another way to return capital back to the shareholders. The decision to pay dividends should be based on what kind of investment opportunities the company has compared to what kind of other investment opportunities the shareholders would have if the dividends were paid out. Generally new companies should not pay dividends when they are in a phase of strong growth, while mature companies that are not growing much anymore should begin to return capital to shareholders.

If a business has investments available that generate high return, paying dividends would likely destroy shareholder value because they are unable to use that capital as efficiently elsewhere. However, if the business cannot find investments with adequate return, it is in the interests of the shareholders that the profits are paid out so that they can be invested in other companies where that capital can be employed more efficiently. Yes, there is such a thing as having too much money and when that occurs it is said the business is overcapitalized.


Some of this information may seem obvious, but I find it is still helpful to put it into words with proper definitions and really think about it. I suspect this is something many small business owners understand subconciously, but do not necessarily think about conciously. Every business owner should have at least some figures for their cost of equity, cost of debt and hurdle rate, even if they are rough estimates. I would suggest that the investment decision is by far the most important for small business owners and that is where they should spend most of their time. That is what makes or breaks a business.

To sum things up, a successful business is one that:

  1. Makes investments that exceed its cost of capital by a good margin.
  2. Has access to financing and uses debt and equity in correct proportion.
  3. Pays dividends only when no suitable investments are available, but does not hoard cash either.

To close this post, I have to acknowledge Aswath Damodaran as a big contributor to my understanding of corporate finance. He has a lot of free content available on his website and YouTube, so if you wish to learn more, check him out.

My Investing Philosophy

Since money and investing will be one of the main themes of my blog, I think it is natural to start off with a quick introduction into my investing philosophy. If I had to sum up my investing philosophy in once sentence, it would be get rich for sure. I have tried various things over the years, but one consistent lesson has been that the get rich quick methods do not work very well. So here is a brief introduction into my thoughts regarding investing for passive income.

Investing vs Speculation

Before we get started, I have to present some definitions that I use. My definition of investing means buying an income-generating asset, while my definition of speculation means buying an asset that does not provide income. These two asset types have a very clear and important distinction. An income-producing asset provides a stream of cashflow while I hold it (and that cashflow should be steady and predictable). As long as that income stream does not stop, fluctuations in the market price of the asset are not critical, assuming that eventually the market price reaches the purchase price. Meanwhile I collect the income and I really like the concept of being paid to wait. However, if an asset does not provide income, the only way for the investment to be profitable is for someone else to pay more for it at a later date. In this case the success of my investment rests much more in the hands of other investors and this feels inherently more risky to me. The less my success is dependent on others, the better I feel.

Considering these points, I think only income-producing assets are consistent with the get rich for sure strategy. I am not saying speculating is wrong, only that it should be recognized for what it is. I have some speculative assets as well, but I do think that speculative assets should not be included in the core portfolio of a starting investor.

Income-Producing Assets

Now that I have narrowed my choices to only assets that produce income, it is time to consider possible candidates which meet that criteria. Here are some examples.

Real Estate

If one is interested in putting in some amount of work, I think real estate has some characteristics that make it objectively the best asset class when measured by risk-adjusted returns. It is particularly attractive because banks are generally willing to lend money relatively easily when the real estate asset is used as collateral for the loan. Utilizing this high degree of leverage often produces good returns on invested capital. The downside of real estate is that it cannot be called passive investment until you have enough scale to hire someone else to manage the property. Another downside is that even with leverage, it requires fairly large amount of capital to get started, considering one should own multiple apartments to diversify risk. Third downside to consider is that apartments are not very liquid and can take a long time to sell.

Dividend-paying Stocks

Dividend-paying stocks of publicly listed companies are what I have chosen as my primary investment vehicle. While I expect my total return to be lower compared to real estate (at least if measured by income alone), there are some great benefits to stocks that make up for it. First of all, it is a truly passive investment that requires no active involvement. The time I save (compared to real estate) can be used for other income-generating activities such as work. The second obvious benefit is the superior liquidity provided by stocks, allowing me to buy and sell whenever I want to. And thirdly, I can perform these transactions from anywhere on the planet, as long as I have access to internet and a computer. This level of freedom wins the case for stocks in my situation.


The problem I have had with bonds is that I have not found them particularly interesting. They are like the boring version of stocks. But they have an important distinction. Buying a bond generally means you are entering into a contractual agreement to receive payments from the issuer of that bond. If you are holding common stock however, the company can cut or even terminate the dividend payments at any time if the management decides to do so. What makes bonds boring is that you do not get to participate in any gains when the company is doing well or when it is being acquired by another company.

Farmland, Forest

Land as an investment is definitely an interesting area, and one that I will hopefully explore further in some future blog post. From what I have studied so far, it appears that farmland is good if you can work it yourself (and be efficient at it), but if you are merely buying land to rent it, the return on investment is fairly low. The main income from owning forest is to sell the trees, but the problem is that trees take extremely long time to grow. Who can afford to wait 20 years for trees to grow? Not me. One positive about farmland or forest is that they will hold their value fairly well in a recession.

Individual Stocks vs Funds

The myth most often perpetuated by the financial services industry is that average investors should just buy an index fund, and not invest in individual stocks. While this is a complex issue, I tend to disagree. The underlying message here is that the average investor is too dumb to manage their own money, so they should let some “expert” in Wall Street to manage it for them. If a person is motivated to learn, there is nothing particularly difficult or complex about stocks or finance. The confidence one gets from successfully managing their own money is also a substantial benefit to consider.

Another problem with an index fund is that the stock market as a whole can get overvalued during a bull market. As I write this, in December of 2017, the market looks very overvalued to me. This condition of overvaluation can last for many years. If the investments are made during this kind of period, the expected returns for the following years will be low, or even negative. Another option is to just wait, but that requires a lot of discipline and is not a very exciting approach. The good news is that there will always be fairly priced individual stocks, even in a bull market. This is one of the main reasons why I invest in individual stocks.

Picking Stocks

Now that I have established why I am a stock picker, what stocks am I selecting for my portfolio? To answer that question, I must begin by considering what kind of stocks are consistent for the get rich for sure theme. The most likely stocks with long term staying power are the highest quality companies which lead their own sectors. Warren Buffett has said that he would rather pay a little more to own a great company, than to buy an average company cheaply. I fully agree with him here. Of course these highest quality companies tend to trade at a premium vs their peers, but that is the price one must pay for quality. It just doesn’t make sense for me to buy average companies when I can buy the best ones. When buying an asset, I also try to consider it from the viewpoint of other investors who would be potential buyers in the future in case I want to sell. I want to own assets that other investors want to own, because that is what determines their price in the market.

Dividend Yields

Since I am investing in income-generating assets, the dividend yield is one of the most important metrics for me. In the current market environment, I look for stocks with a dividend yield of 3.5% to 4%. I think this represents a sweet spot where the starting yield is substantial enough, but the company still has some growth potential also. I almost never invest in a stock with a dividend yield below 3%. I know many advocates of Dividend Growth Investing say that the starting yield doesn’t matter, only dividend growth does. They are willing to buy a stock with a yield of 1.5% as long as it is expected to grow, but the math just doesn’t add up for me.

Number of Holdings

I think a good number of stocks in a mature portfolio is 20. This amount provides very good diversification with each holding representing roughly 5% of the total portfolio. Since additional diversification results in diminishing returns, adding more stocks for that purpose is not required. Initially when starting out, I think 5 stocks is a good number to aim for, then build your portfolio to 10, and eventually to 20. The reason why you do not want too many stocks in the beginning is to minimize transaction costs, which can be significant if you are not careful. I will be writing another blog post about how and why to minimize transaction costs later on.

Buying in Increments

One of the most important ingredients for the success of my investing strategy has been entering into positions in increments. I usually start a position by buying just 1/4 of the total amount I intend to own. Then I hope the price keeps going lower so that I can build my position with even cheaper shares. I think this is the part that is the hardest to do for beginning investors, to have conviction to double down on a position that keeps going lower, and then buy even more at an even lower price. This kind of conviction can only be built with experience. Of course the key here is to identify why the price is going lower, and whether it is a temporary problem or something that threatens the existence of the company. Often the best time to buy is when the general opinion among investors reaches the point of maximum pessimism and that’s also where the bottom in price is often found.


My conservative expectation for return on investment is 8% annually, with 4% coming from dividends and the other 4% coming from capital appreciation. I think this figure is in line with what stocks have returned in the past as well. I realize this strategy may lose to an index during strong bull market years, but it should beat the index during bear markets. Of course my most important measure is that the passive income provided by the portfolio keeps growing every year.


My investment philosophy is extremely rewarding psychologically. Instead of chasing quick profits and trying to invest in the newest hot IPO or trending stocks, it is a solid portfolio that is grinding consistently higher and producing ever growing stream of dividend payments. And since I am only investing in the highest quality of companies, any drop in the price of their shares is usually a positive event, allowing me to purchase more shares at a discount. Additionally, this type of portfolio requires very minimal amount of maintenance and tracking, leaving time for other interests. While I usually like to check my portfolio daily, I would do just fine checking it once a week, or even once a month.