The Coronavirus and Making Friends With Your Devil 

A friend of mine, an economist and investment analyst, sent me a note saying that he is “expecting” the coronavirus pandemic to lead to absolute disaster, both in terms of public health and the economy. He may be right. He may be wrong. So I didn’t think it would help him if I countered his expectations with evidence to the contrary. What good would that do? It wouldn’t change his mind about his expectations. It would only change his view about my perspicacity.

So I sent him an abbreviated version of the following – an essay I’ve written a dozen times in response to a dozen different scenarios in the past 20 years. 

The Prologue 

Whenever I realize that I’m worried about something that might happen in the future,  I use a 4-step technique that I call “Making Friends With Your Devil.” I started working on it about 30 years ago, and have refined it and strengthened it along the way.

Before I explain how I use it now, I’ll give you an idea of how I developed it.

Sometimes K and I would plan something – something as simple as going to the zoo on the weekend or as complicated as taking a European vacation. When we were young and single, such plans were rarely thwarted. But when we had kids, thwarting was less the exception than the rule.

When it happened, I would get angry. I would feel miserable. I was not pleasant to be around. K was almost never like that. She seemed to take disappointment with a grain of salt. She would shrug it off and move on. I was jealous of that and determined to learn how to do it.

For insight into why I was getting so upset and a clue about how I could deal with these inevitable letdowns with more equanimity, I looked into two schools of philosophy: Stoicism (not Zeno or Epictetus but Marcus Aurelius and Seneca) and Zen (secondary sources).

I won’t quote any of that stuff here. You know it as well as I. But I will say that I found it helpful.

I was getting upset, I decided, because I had a strong habit of attaching myself emotionally to every decision I made about what I was going to do. And the solution was to detach myself from that emotional attachment the minute I made any decision about the future.

If, for example, K and I made plans to go to the beach on Sunday, I would – the moment we agreed that we would do it –  imagine waking up on Sunday to find that it was rainy and cold. I would imagine myself saying, “Okay, let’s go to a movie instead.” And then I would allow myself to be a little bit attached to that secondary plan. I would imagine myself enjoying a movie.

It worked. It virtually eliminated all emotional disappointment when things didn’t happen as I had planned. Sometimes, in fact, I was almost happy about it, because I had already imagined enjoying Plan B.

This little trick served me well over the years when dealing with minor disappointments. And eventually, I was able to springboard from it to dealing with larger issues – preparing myself for the worst sorts of disappointments in every area of my life.

Now, for example, whenever I make a major business or financial investment, I do all the normal calculations of possible outcomes, from best to worst. But I resist the urge to dwell on the best, which, I have learned, almost never materializes. Instead, I focus on the worst-case scenario.

When it comes to investing, the worst-case scenario will usually be losing every penny. So I imagine myself losing my entire investment. And I either get comfortable with that, or I hold onto my money.

The Four Easy-to-Hard Steps 

Okay, that was the history of the technique. Now, here’s how to do it…

 Step One: Imagine all the possibilities – from best to worst. Once you’ve identified a worst-case scenario, imagine the details, the specific problems you could be facing. In the case of the current pandemic, the problems might range from running out of toilet paper (minor problem) to running short of food (big problem) to defending your property (bigger problem) to (worst possible problem) someone you love contracting the virus and dying from it.

Step Two: Imagine the actions you would take. Decide how you would deal with each one of these potential problems. (Don’t spend a moment thinking about what you might have done leading up to where you are now. Focus on the future.) Imagine the specific decisions you would make and the specific actions you would take.

Step Three: Imagine how you would feel. For the less-severe problems, it should be easy to imagine yourself acting calmly but with purpose, intelligently but with compassion. But with the serious problems, this will be more difficult. In the case of the coronavirus pandemic, the hardest thing to imagine would be how you would feel if a loved one contracted the virus and died from it.

Step Four: Make friends with your devil. This is the most difficult step (until you get used to doing it). It’s part Stoicism, part exposure therapy. Allow yourself to experience the worst-case scenario by imagining that it has already happened. It will provoke angst, anger, and great sadness. But imagine yourself getting through it. Imagine yourself accepting this outcome and accepting it. Acceptance lessens the anger and the grief. Imagine those bad feelings diminishing. You are searching for a sense of peace – and that is what you will find.

If this sounds preachy, please forgive me. Preaching is what I do.

And before you accuse me of hypocrisy, I will say what I always say when so accused: Were it not for hypocrisy, I’d have no good advice to give at all.

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LA Story and More on the Challenge of Charity 

One was refusing to eat. The other was smearing yogurt on her face. The toast was burning. And Baxter, the 160-pound mutt, was humping my leg.

Of all the childrearing experiences we’ve been reliving on this trip to LA, getting the grandkids off to preschool in the morning has been the most traumatic.

By the time the twins finished breakfast, most of the food was on the table. We had an hour left before they had to be in school. They hadn’t yet bathed or dressed. And they were still hungry. What to do?

Welcome, yet again, to my morning slog, where I work out problems, big and small, including those I’m having with the 28 books on my to-finish-before-I-die list.

On Monday, I shared the first part of an essay I’ve been working on for one of those books – The Challenge of Charity. Here’s the second part.

The Challenge of Charity: A Good Reason to Say No 

I not only had a philosophical objection to giving my friend the $50,000 he asked for, I had a pragmatic reason.

The money he was asking for was intended to cover a years’ worth of expenses for his non-profit – the cost of hiring mentors and providing various services to the ex-convicts the program was helping.

Giving him the money would not have fixed the problem. At best, it would have pushed it off for another year.

I asked him if he was looking to build an endowment for his program. He said he hadn’t thought about it.

“But you don’t want to have to go to the trouble of raising 50 grand every year,” I said. “You don’t want that kind of stress, do you? And what about when you die?”

He shrugged his shoulders.

The Endowment Decision 

When I got into the charity business, I told him, I was funding projects the way he was about to fund his, covering expenses a year at a time. I did that without thinking much about it because I was in my 50s and death was an insubstantial theoretical. I was earning good money and enjoying my work. Contributing a portion of my earnings every year was easy. A no-brainer.

But when I hit 65, I had to face the fact that I would not live forever. More importantly, that before I died, I would probably be making changes that were likely to drastically reduce or end my income from working.

It was then that I realized I needed to establish an endowment. I needed to start an account that would be owned by our family foundation, but legally segregated and dedicated to funding the yearly expenses of the charities we were supporting.

I have a similar view of the businesses I’m in involved in. When it’s  a business that I like (and I’m proud of), I get sentimentally attached to it. I want to see it grow and prosper. I want to do what I can to ensure that it will be around.

It’s not easy to do this with a business. You have to work to ensure that it is “anti-fragile.” This means populating its leaders with quality people – growers and tenders that have the same aspirations as you. It’s also a good idea to segregate some of the yearly profits into a war chest that can take the business through hard times. In my mind, that war chest is like an endowment for a charity. It needs to be large enough to cover significant unexpected expenses. It also needs to be protected from people in the future that could spend it unwisely.

Why Endowments Make Sense 

“If,” I told my friend, “instead of raising money to cover the budget every year, you were able to build an endowment large enough to support yearly expenses from dividend distributions… then once the endowment were fully funded, you wouldn’t have to worry about yearly fundraising. You would know that your program would continue in perpetuity, even after you are gone.”

“Wouldn’t it be nice,” he said.

So I explained what I had learned about endowments. The first and most important point is about how much you need to pay for the program you are running.

For example, FunLimon (our family’s community development center in Nicaragua) has an annual budget of about $150,000 a year. That number will go up as we add a few more buildings and programs that we are currently implementing. I’m guessing the final budget will be about $200,000 in today’s dollars.

How much do you need to fund $200,000 in annual expenses?

Well, it’s not $2 million (as I naively thought, for a happy moment, when the idea of an endowment first came to mind). Two hundred grand is 10% of $2 million, and the stock market has a long-term history of yielding ROIs of 10%. But the stock market is volatile. And taking out anywhere near 10% would be disastrous. The conservative number is somewhere between 3% and 5%.

I decided on 4%. And 4%, as you know, is a 25th of 100. That means the endowment must be 25 times larger than the $200,000 yearly budget. It has to be at least $5 million. To be safe, I set the target at $6 million.

“The good news,” I told my friend, “is that your budget is only $50,000. That means you only have to raise $1.25 million to fund your endowment.”
He didn’t react. Perhaps he was shocked.

Why Endowments Are Attractive to Big Money 

So I kept the (by this time one-sided) conversation going.

“But here’s something I have learned about raising money for charitable programs,” I said. “Sophisticated businesspeople and investors understand the value of financial war chests. They are much more inclined to contribute mega-bucks to endowments than to covering yearly expenses.

“This is also true for large non-profits that allocate money for smaller programs,” I said. “They are more likely to write million-dollar checks for the endowments of worthy programs than for transactional programs, however worthy they may be.

“There are billions of dollars out there right now in funds looking for charitable investments. If you could put your energy into getting some of them to help you fund your $1.25 million endowment, I can’t imagine you wouldn’t be able to have it fully funded in just a few years.”

We talked about how he could do that, how he could identify possible donors and present them with the right kind of pitches, proposals that would fit into their stated purposes. Writing such proposals is not rocket science. And I pointed out that there are lots of books and reports and experts out there that could teach him how to do it.

The takeaway – for me, at least – is that if you want your for-profit business or non-profit charity to survive you, you need to figure out how to (gradually) create a financial war chest that is at least 25 times your yearly nut.

Problem solved. So now, back to the kitchen table… 

I don’t know how I thought of it, but I remembered an interview with Marie Kondo, the adorable author of The Life-Changing Magic of Tidying Up and star of “Tidying Up With Marie Kondo” on Netflix. The interviewer asked Kondo how she had time to do everything she was doing and take care of a house and two small kids.

Kondo said that she had taught her kids to do their own chores. The interviewer was skeptical. These were three-year-olds (like our twins). But Kondo said that they actually liked cleaning up. They even sorted their own clothes, folded them, and filed them neatly, Maria-Kondo-like, in their wardrobes.

So I brought a spray bottle of window cleaner and a roll of paper towels over to the table and challenged the twins to clean it up themselves. One was reluctant. The other took the bait. Two minutes later, the other one wanted in. Five minutes after that, the table was squeaky clean.

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Big Dogs and Big Asks 

Walking down Ambrose Avenue with Baxter at my side, I spotted another dog walker coming up the street towards us.

This was my first time walking Baxter since he was a puppy. I didn’t know what to expect, so I cinched up the lead.

Baxter is big and strong – so strong that when he jumps up on people, he often knocks them down. When the doorbell rings, he barks like a mad dog. He’s got a deep, ferocious bark. It’s scary.

But on our walk so far, he evinced none of these traits. His mood was pacific. His gait, like mine, more than an amble but less than a stride. And for an untrained animal, he accepted the lead very well.

Still, I didn’t know how he would respond to this approaching dog. If he lunged at it, would I be able to hold him back?

Welcome, again, to my morning slog, where I work out problems I’m having with all kinds of things, especially the 28 books on my to-finish-before-I-die list.

Today, I’ve been working on a book I started in (maybe) 2008 called The Challenge of Charity. It’s meant to be a series of essays about the very real “challenges” of charitable giving.

 I’m not sure if the following essay will make its way into the book. Any feedback you can provide will be appreciated.

The Challenge of Charity: Why I Don’t Give (Much) to Big Charities 

He’s a good friend of mine. His project – helping recently released convicts return to the “real” world – seemed, on the face of it, a worthy cause.

He launched the program with a friend, a wealthy woman who funded it. But that funding was discontinued after a year. He wanted to know if we (our family foundation) would take it on.

As I’ll explain in a minute, I don’t contribute to large charities. But when friends are involved, I give a token amount, usually $500 to $1000, as a gesture of support.

In fact, I had donated amounts like that to this friend once or twice before, so I was thinking he was looking for a donation in the same range.

He wasn’t. He was asking us to fund the program’s entire yearly budget. “How much was that?” I wanted to know. It was $50,000.

Fifty grand a year is a big ask.

“Isn’t your program part of a larger foundation?” I asked.

It was. A 50-year-old organization with a budget of more than $30 million a year.

“Fifty thou is a tiny percentage of that. Why don’t you ask them to fund you?”

“We asked, but they declined.”

“They turned you down?”

“They did, but they really like us.”

I suggested that they might be bluffing. “What if you said if they didn’t fork up the cash you’d have to close down the program?”

“We tried that. They said they would be sorry to see us go.”

Something was awry.

What was going on?

Here was a seemingly good program run by an intelligent person with a passion for it – and he was asking the foundation for only one-sixth of 1% of their $30 million budget.

To me, the denial meant one of two things: Either they didn’t believe in the program but were too dishonest to say so. Or there were dirty politics involved.

I asked my friend lots of questions about the foundation. He had very few answers. “That’s the frustrating thing,” he explained. “They aren’t forthcoming with that sort of information.”

This is one reason I don’t believe in donating significant amounts of money to large, public non-profits.  Their internal logic is not visible to outsiders (notwithstanding the reports they are legally required to file).

Another, more important, reason is that I cannot control what they do with my money.

These may seem like bad reasons. I don’t think they are. Let me provide an analogy.

If you have read anything I’ve written about wealth building, you know that I have two sacrosanct rules for directly investing in individual businesses:

* Do not invest in a business that you know little or nothing about.

* Do not invest in a business over which you have no control.

Breaking the first rule will often (almost always) result in disappointment. Something will happen – something I didn’t expect because of my ignorance – that will cause the business to underperform or fail completely.

Breaking the second rule will mean that even if I anticipate a practice or policy that could hurt the business or see an opportunity for growth, I can only suggest it. I won’t have the authority to make sure it is pursued or even taken seriously.

Following these two rules has saved me millions by keeping me from putting serious money into dozens of exciting business ideas that have been pitched to me over the years.

Because non-profits operate very much like a business, I’ve found that the same two rules work with them. I want to know how the charity works from the inside out before I consider “investing” in it. And I want to have some control over what they do with my money.

I do that because of a fundamental belief I have about giving people money: More often than not, it is a bad idea. The benefit it gives in terms of financial relief is more than offset by the damage it does in terms of entitlement, dependency, and other unintended consequences.

These are not theoretical deductions drawn from things I’ve read. They are conclusions I’ve come to after dozens (if not hundreds) of personal experiences with charitable giving.

So as much as I wanted to please my friend, I wasn’t going to give him a big yes to his big ask. I could have told him what I just told you, but I was afraid he would see that as disingenuous. He might think it was an excuse I was coming up with because I was either critical of his program or just plain cheap. I needed to shift the conversation. I needed to take another tack.

To be continued with my next slog. 

Meanwhile, back to Baxter…

As it turned out, Baxter didn’t flinch. The other dog, a cocker spaniel, started barking furiously and charging at him. But Baxter acted like, “You are too small for me to even acknowledge.”

On the way home, there were other similar “attacks” – all by smaller dogs. It seems to me that smaller dogs are generally more aggressive than larger ones.

Is that true? And if it is, is it also true of humans?

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Shaun, my Uber driver this morning, grew up in Atlanta. He had a smooth, caramel-colored complexion and a voice to go with it. He was young and instantly likeable. What made him likable? I’m trying to figure that out.

He was a talker. I don’t normally warm to talkative drivers because I like to spend my commuting time working. But Shaun talked because he was curious. He asked questions, all kinds of questions. And he asked as if he were really interested in my opinion.

He told me how he ended up in LA (on a whim), how he was working two jobs (to save money to start a career). Then he asked me all sorts of questions about what kind of career I would recommend.

I was charmed by his total lack of bravado (which I would have expected from a man of his young age) and his trust in me.

When we arrived at my destination, I wanted to keep talking. Heck, I wanted to adopt him. I gave him my card. I have a good feeling about him. Maybe one day he’ll give me a shout, ask me a question about his career. Maybe one day I’ll be able to help him.

Achieve More in Your Career – Faster and Easier – With a Mentor, Part 2 

It was 1983 – the first “Financial Newsletter Publishers’ Roundtable,” and I was representing a small but up-and-coming publisher based in South Florida.

During the last several hours of the otherwise convivial meeting, the discussion turned towards the “immorality” of selling subscriptions for $49 a year. People were upset. Some were livid. And their ire was directed towards me.

It was confusing. Embarrassing. I felt like I was being ambushed.

What I didn’t know going into the meeting was that the $49 that we were charging for our newsletters was half that of what everyone else was charging. They felt that we were trying to break into their market by discounting our prices. They were right. But I didn’t expect them to care.

After the meeting ended, I was in front of the hotel, about to get into a taxi to take me to the airport, when one of the attendees came up behind me and asked if he could share the ride. I agreed, mentally preparing myself for a lecture. None came. He talked about the weather and the meal we had for dinner the previous night. Finally, I had to interrupt him and ask him why, considering the way I had been attacked in the meeting, he would want to ride with me.

“Oh, that,” he said. “Don’t worry about that. It’s just politics. There is business and there is politics. Politics is bullshit. We are going to move to the $49 price next month. You guys have done a great job with it. People gripe in public, but in private we don’t pay attention to any of that.”

I can still remember the feeling I had. I couldn’t believe that he had been excoriating me a half-hour earlier, and now he was saying he was going to follow our lead. It was a watershed moment for me. I knew I was learning something important, something I would never forget.

There are hundreds of other brief conversations I’ve had with friends and colleagues and strangers that gave me new insights and ideas about my businesses or my role in business – each one a lesson that had immeasurable value to me as I moved forward with my career.

In Part 1 of this essay, I talked about traditional mentorships – where an experienced businessperson works closely with a younger person for a long period of time.

Today, I want to talk about this other type of mentorship – the conversation you have with a speaker at a conference or an author at a book signing or a guest at a wedding… or any other chance encounter.

For lack of a better term, let’s call these experiences – solitary and removed as they may be – transactional mentorships.

Chance Encounters Can Change Your Life 

Is it possible to accelerate your progress in your career by increasing the number of such experiences?

I think it is. Moreover, I think it’s possible to develop a “bullpen” of smart, powerful, and influential players in your industry that you can call on not just once but whenever you need help.

I’m talking about people that would normally be unapproachable.

It can happen. I’ve seen it happen. It’s happened to me. But it can also go badly wrong. To develop your own A-Team of supporters, you have to do more than collect phone numbers. You have to spend some time to figure out a good reason why each one might want to help you. In other words, you have to make the relationships fair. You have to figure out a quid for the quo.

The Quid Pro Quo in a Transactional Mentorship

As I explained in Part 1, “Traditional mentorships work because the benefits of the relationship are shared. The mentee advances his/her career by following the good advice of the mentor, and the mentor shares in the increased value of the business as the mentee contributes to it. At the same time, the mentor has the satisfaction of helping someone else succeed, while the mentee has the comfort and support of someone with power and privilege.”

A transactional mentorship is a different kettle of fish. Since there is no common business interest between mentor and mentee, there’s no natural quid pro quo either.

But you can create one.

At a business conference, industry event, book signing, and so on, experts come expecting to answer questions. “Paying” for the answer you get is as easy as prefacing your question with a compliment – telling the expert something specific that you liked about his book or his speech or his business. Although doing something so obvious may seem cheesy to you, it won’t come across as cheesy if you say it with sincerity.

You can make the same sort of ego payment on paper or in email: one specific and sincere compliment followed by one specific and sincere question.

Note: When I say make the compliment specific, I mean specific to that particular person, to his particular career, or to a particular accomplishment of his.

And when I say make the question specific, this is important. The compliment will let him know that you admire him. But it is the question that is the quid for the quo, because it gives him the pleasure of solving your problem or otherwise giving you his advice.

As someone who has played the role of transactional mentor countless times, I can attest to the fairness of the deal. I’m always flattered to be asked and happy to answer questions, because it makes me feel good. The transaction is balanced. It’s a win-win.

Making the Most of a Transactional Mentorship 

Having a brief interaction with an expert in your field can be extremely valuable. Even better is to convert it into something more.

How is that done? That’s the million-dollar question. And there is no single answer. We are talking about building a longer-term, balanced relationship when the obvious factors – knowledge, access, influence, and wealth – are all on one side. And it’s going to be different for every potential mentor on your list.

This is what I recommend…

You begin with that first contact. It could be a chance in-person encounter… or it could be a quick email that you send to your prospect. You say something specific that is complimentary. And you ask a specific question. (If you’re doing this by email, you can expect to get an answer 20% to 50% of the time.)

Follow up with a personal thank-you note. Make it a handwritten note. Thank your prospect graciously, but don’t go on too long. Insert your business card. It will probably be tossed, but it will be glanced at. And that will increase the chance that he will remember your name.

After you’ve had a chance to implement his suggestion, write to thank him again and to announce the good news – that it has had some positive effect on your life/career. Keep this note brief, as well. And specific.

A month or two later, contact the prospect again. This time, you can do it via email – and this time, he is almost certain to remember who you are.

The purpose of this contact is to remind him of the great help he has already been to you… and ask for a quick personal meeting to talk about your career. In his office, if possible – or, if he’s located out of your local area, via a 15-minute phone call.

If he agrees, and you get along, you’ve got yourself an “occasional” mentor. An important person in your field who would be willing to take your call or respond to your email whenever you have a question.

How great would that be?

What to Expect From This Relationship

Keep in mind: This is not a traditional mentorship where there is a financial quid pro quo in place. With occasional mentorships, there is natural imbalance. The mentor’s reward will always be something he or she can do without, so it’s going to be difficult to maintain equilibrium. There will always be a tendency towards entropy. It will be the rare occasional relationship that continues for years.

Compensate for the fragility of the relationship by having not one but a half-dozen or a dozen people on your occasional mentor list.

Be polite. Be complimentary. Be specific. And be thankful. Make it a habit and your career will take off.

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“It can be no dishonor to learn from others when they speak good sense.”– Sophocles

Achieve More in Your Career – Faster and Easier – With a Mentor, Part 1 

It can take a decade or more to become the successful person you want to be. But you can shorten your learning curve – even drastically curtail it – by getting advice and support from people that have more experience than you.

The results of a study commissioned by the Elliot Leadership Institute at Johnson & Wales University are typical. Researchers surveyed senior executives and middle managers in the foodservice and hospitality industry. What they discovered was that a vast majority of those who had been mentored felt that the experience had helped them build all kinds of leadership skills. Skills such as decision-making, strategic thinking, planning, coaching, and effectively managing others.

All the research surveys and articles I’ve read on business mentorship make the same point: It works.

Of course, there are different types of mentor/mentee relationships.

There is a traditional relationship, where a senior person sort of adopts a younger person and gives him/her advice and support for an extended period of time. And there is a kind of temporary or transactional relationship, where a knowledgeable person answers questions or gives advice to someone he/she doesn’t know on a one-time basis.

Most studies on mentoring are focused on traditional relationships. And these, as I said, work very well. But temporary mentoring can be worthwhile, too.

I’ve had three major mentors in my career from whom I learned a great deal. But I’ve also had dozens of equally important one-time interactions with experienced entrepreneurs and investment experts.

I’m going to talk about the two types of mentorships in two parts. Today, I’ll talk about traditional mentorships – and in part 2 of this essay, I’ll tackle transactional mentorships.

What I Learned From Leo 

From Leo, my first post-college boss (and eventual partner), I learned the importance of persistence and determination. I learned that I could sometimes accomplish goals and objectives that seemed unattainable merely by being doggedly indefatigable.

I will never forget, for example, the trauma and the triumph of the Honda.

We had a little company car, a Honda, for random errands in the city. One day, the engine seized. The mechanic explained that if you don’t put oil in the engine for a month after the indicator light has gone on, this is to be expected.

Leo didn’t see it that way.

He had me call Honda Motors every single day. My job was to convince them that it was their responsibility to pay for replacing the engine. It didn’t seem to bother him that I thought it was futile. He kept assuring me that I would succeed. “You are a winner, Mark,” he’d almost shout at me. “You can make this happen!”

Well, I’ll be damned if (after what might have been six months of calling Honda) I didn’t end up at the top – with a senior executive that probably took the call only to find out what kind of nut I was.

He listened politely and then calmly explained what I already knew. I think he thought that getting a “no” from him would be the reward I had been looking for and I would stop harassing them. In fact, were it not for Leo, he would have been right. I was a 20-something new-hire in a tiny company talking to a VP of Honda.

But there was Leo.

So I told the VP the truth: that I was flattered and grateful for his attention, but I was employed by a maniac who literally could not take no for an answer… which is why I needed him to give me the number of his boss so I could call him the following day.

He was flabbergasted (and told me so) – but he gave the okay for Honda to pay for the new engine.

My takeaway from this was not that I should try to get things I don’t deserve by being endlessly annoying. Thanks to Leo, the experience of forcing myself to make those phone calls – believing they were futile and then finally succeeding – gave me core confidence about my ability to persist that I don’t believe I would have had, even today.

What I Learned From JSN 

From JSN, my second major mentor, I witnessed another version of what determination can do, but I learned other lessons from him, too – lessons about what a business must do to survive and prosper.

The first lesson JSN taught me – by firing a woman who at that time was running his business – is that the rules that work for big corporations don’t always apply to new ventures.

This woman had held a senior position in one of the largest publishing companies in the world. That’s why JSN hired her. He would raise the money for the business newsletters we were publishing. She would do everything else.

She was good at getting our newsletters written and out the door, and she was great at making sure everything was done right and documented. But she didn’t know anything about how to market products when you don’t have a multimillion-dollar budget. She was spending money on good-looking ads, but the money JSN was bringing in was flowing out with negative ROIs.

The day after JSN fired her, he brought me into his office and told me that he was going to rely on me to help him grow the business. I felt totally unprepared. I had been hired a month earlier as an executive editor.

“Why me?”

“Because you are the only person she didn’t like,” he explained. “She wanted you gone because she felt you were a threat to her. The moment she recommended firing you, I knew I was going to fire her.”

Then he said, “Okay. Now lets you and me talk about starting this business.”

“Starting?” I said. “I thought we were already in business.”

“No,” he said. “A business isn’t started until the first profitable sale is made.”

Through trial and error, we figured out how to do that. Eleven years later, when we sold the company, sales had climbed over $100 million.

What I Learned From BB 

From BB, a client/partner, I learned, relatively late in my career, many additional business secrets – one of which has been very, very valuable.

It was a lesson in management.

JSN was very much an alpha dog and he managed his business-like one. When I came to work with BB, I unconsciously brought a bit of that alpha dog with me.

I had been brought in to run the business, and the way to do that, I believed, was to figure out what to do and then make sure everyone did it. It took me less than a week to realize that BB had no interest in having his business run that way.

His way was to hire smart young people, find desks for them to sit at, and tell them to do whatever they wanted to do. At the time, he was the sole producer and earner for the company – and he did it very well, bringing in millions every year. So his laissez-faire management style wasn’t as crazy as it seemed.

I was tempted to try the my-way-or-the-highway style I had perfected with JSN, but I did my best to imitate what BB did, knowing that I would still be far more “directive” than he would ever be.

I soon discovered that there are many invisible benefits to managing your business (really, your employees) his way. The most obvious and immediate is that it’s much easier. You don’t have to solve every problem and design every strategy. You can “shirk off” (BB’s words) some of those responsibilities to others.

Another benefit of laissez-faire management (that I didn’t fully understand until years later) is that it tends to weed out weaker players and advance stronger ones. Because decisions are constantly pushed downward, people at the bottom get more experience than they would in a typical hierarchy. Laggards fall behind and eventually disappear. Superstars emerge.

Yet another big and unexpected benefit is greater diversity. I don’t mean racial/ethnic/gender diversity. (The invisible benefits of that kind of diversity are mostly negative.) In giving employees more freedom to make decisions and take on jobs and make suggestions, you naturally create a business with more – and more diverse – ideas. Not just about protocols and procedures but also about the key elements of entrepreneurial growth. How to sell potential customers more and better versions of what they want.

Thanks to BB’s example, I have had the rare experience of watching a company grow its revenues by a factor of more than a thousand. I am absolutely sure that it could not have happened if I had tried to grow the business any other way.

What You Can Learn From Your Mentor 

Traditional mentorships work because the benefits of the relationship are shared. The mentee advances his/her career by following the good advice of the mentor, and the mentor shares in the increased value of the business as the mentee contributes to it. At the same time, the mentor has the satisfaction of helping someone else succeed, while the mentee has the comfort and support of someone with power and privilege.

The benefits are so many and so obvious that you would think every employee would make it a priority to find a mentor. In fact, most never do. They plod along at their jobs, trying to move forward. But they don’t really know what to do and what not to do because they are in new territory and they refuse to ask for advice from someone that’s been there before.

That’s dumb, but I understand it. I have a hard time asking for help. (I can’t even ask for directions when I’m lost.) But I managed to acquire three great business mentors in my life, and I think I did it because I had a realistic view of my role in the relationship.

Until Leo saw that I was willing to make those hundreds of phone calls, he had no reason to believe that I could be anything more than an assistant for him. But when I achieved the crazy goal he set for me, he began to treat me differently. He saw me as a young man that could help him grow his business. He began to treat me as a mentee.

Something similar happened with JSN. He recognized my potential early on. But until I showed him that I was committed to helping him achieve his goals for the business, he didn’t fully trust me. Less than a year after I earned his trust, I was a minor partner. He told me he was going to make me a millionaire. Several years later, I was.

If you’re at the beginning or even the middle of your career, a traditional mentorship can definitely accelerate your progress. But don’t expect to get all the benefits without giving something in return. Reciprocity is the foundation of every healthy relationship. It’s true of mentorships too.

Your mentor is investing his time in you in the expectation that, as you become a more valuable employee, you will do whatever you can to repay him. In most cases, that will happen by your good work, by making his job easier and/or more profitable. But sometimes you will be able to repay him by helping him out if and when you pass him by.

In Part 2 of this essay, I’ll be talking about transactional mentorships with powerful businesspeople – and how you can benefit from their wisdom, contacts, and benevolence.

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“We desire gold not for its true value but for the glittering illusion of value it gives.” – Michael Masterson

Poop Patrol and the Illusions of Getting Rich 

It was a daunting challenge: two two piles of poop in the backyard but only one plastic poop bag. “There must be a way,” I thought. “Tens of thousands of dog owners all over the world must face this problem every day. I can figure it out.”

And I did.

Here’s the strategy: Pick up the smaller pile, but don’t invert it inside the bag. Carry it over to the other pile and place it on top. Now prod the edges of the larger mound into a tightly packed unit. Then pick that up using the usual technique: gather, invert, and tie.

Depositing the remains in the garbage, I felt proud. Besides getting my brain to defog so early in the morning, I’d done the environment a good deed by using one less plastic bag.

And then I got to thinking: How long does it take for plastic bags like these to decompose? In the larger ecological scheme, wouldn’t it be greener to let the shit lie?

Welcome to my morning slog, where I work out problems that I’m having with all kinds of things, including the 28 books on my to-finish-before-I-die list.

Today, I’m working on a chapter of Principles of Wealth. The book, as the title suggests, is an attempt to identify not the secrets that one needs to understand in order to make an individual business work, but the general principles that apply to all entrepreneurial businesses.

The principle I’ve been struggling with has to do with the imagined benefits of wealth. Here’s what I’ve written so far…

Principles of Wealth #37: The purported benefits of great wealth – financial security, choices, and prestige – are more valued in their absence than when they are present.

  1. Financial Security

The first goal I had when I began making an above-average income was to pay off my mortgage and own my house, free and clear. Without having to worry about mortgage payments, covering my other expenses would be a piece of cake. And boy, would that feel good!

The logic was correct, but the good feeling was short-lived. Less than a year after I paid off the mortgage, my wife and I had moved into a bigger house.

My income had more than doubled, so I didn’t think the new mortgage would be a problem. What I didn’t anticipate was all the additional costs that come with living in a larger house in a “better” community.

The furniture that went so well in the previous house didn’t “fit” in the new one. The new furniture, the kind that “fit,” was five times as expensive.

To keep up with our richer neighbors, we traded in our Hondas for a BMW and a Range Rover. But the extra thousands they cost were just a small part of our fast-ballooning “necessary” expenses. Our kids “had to” go to private schools. The cost of our vacations quintupled, as did the cost of dinners at restaurants. Home repairs, utilities, cable bills, and haircuts – you name it. Everything shot up!

Our family’s “lifestyle burn rate” had tripled. And although my income had gone up even more than that, I no longer felt financially secure. On the contrary, I began to worry about money almost every day.

Numerous studies have shown that once people have enough money to take care of the basic bills, their feelings of financial security do not increase as their income (or net worth) rises. In many cases, such as mine, financial anxiety becomes a way of life.

It took me years to get beyond that. It didn’t come from getting richer. It came from doing something I could have done years earlier –  two simple ways to achieve financial security: Spend less than you make. And make your savings grow.

  1. Choices 

Next to financial security, the next most commonly claimed benefit of wealth is choices – the options you have in terms of living your life.

When people say “choices,” they’re talking about the kind of decisions I made when my income ballooned. They are talking about choosing to living in a large house versus a trailer, buying a Rolex versus a Timex, and flying first-class versus coach.

Yes, getting richer gives you more options such as these. But the psychological benefits of them are, like financial security, illusory and short-lived.

The BMW feels so much better than the Honda for about a month. Then it’s simply transportation. When you are stuck in traffic or get a speeding ticket, driving a more expensive car doesn’t feel any better.

I actually figured this out – and then forgot about it – almost 20 years before I “opted” for that bigger house. In the mid 1970s, K and I were living in a humble three-room house without indoor plumbing in N’djamena, Chad.

I was sitting in our front porch watching the rain spill off the roof and onto our little garden when I had this thought: “One day, you will live in a big, fancy house back in the States. But you will never live in a house that can give you more pleasure than this one.”

That was true. And it’s been true of just about everything I’ve spent money on ever since.

  1. Prestige 

There is a third belief about acquiring wealth that is almost never reported in studies. That is the idea that as you get richer people will like you more.

This does not come up in surveys and questionnaires because nobody wants to admit to this base and embarrassing ambition. We have been told many times that money can’t buy love. But when you grow up without money, as I did, you don’t believe it.

In grammar school, my hand-me-down clothes and the dilapidated house we lived in embarrassed me. At least once a week, I had vivid dreams of being rich. In those dreams, I arrived at the schoolyard in a white limousine. As the chauffer opened the door, my schoolmates stared in awe at my white tuxedo and top hat.

Of course, that’s not how it works. When the day arrived that I really was “richer” than my friends and neighbors, I didn’t feel the love. In many cases, I felt suspicion, jealousy, and resentment.

Now I wonder why that surprised me. There were very few people I liked or admired that were richer than I was. The exceptions were always people that had other qualities – like kindness and humility and generosity. Characteristics that are equally available to anyone and everyone.

Hmmm. I’ll do a little more work on this, but I think it’s a good start. So now, back to the problem of the plastic poop bags…

I did a little research, and here’s what I found. As I suspected, when plastic poop bags go into a landfill, they do not biodegrade and the poop doesn’t oxidize. That’s because the bags are airtight. You need oxygen for decomposition to happen. Oxidation is how everything in nature, even Homo sapiens, returns to Mother Earth.

There is a partial solution. Use poop bags made from natural substances, such as paper or, even better, plant-based sources. The plant-based products are more expensive than plastic, but they will biodegrade.

Okay. I can do that.

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A sneak peek at a chapter from the upcoming new and revised edition of Ready, Fire, Aim… 

Understanding the Optimum Selling Strategy

Why It Is Critical for Your Start-Up Business 

In launching a business, the entrepreneur’s first and most important job – among all the many tasks associated with starting a business – is to make the first sale.

You can do everything else. You can rent space, rent furniture, print business cards, and get every sort of certification you will ever need. But until that first sale is made, you have only been spending money and time. You haven’t started a business at all.

And that means that of all the dozens of jobs you must attend to, the job of selling is supreme.

You may not be a natural salesperson. You may not even be interested in selling. Your expertise may be in product development or management or customer service or accounting. But unless you figure out how to bring in that first customer, your business will never get off the ground.

Selling, in other words, is not optional for the Stage One entrepreneur. It’s essential.

And if selling is essential, learning to sell (i.e., developing the knowledge and skills to sell your company’s main product) is an obligation, not a choice.

Introducing: The Optimum Selling Strategy 

I believe that for every business at any given time there is one best way to acquire new customers. And by “best way,” I mean the way that meets the company’s greatest current needs. For a Stage One business, generating positive cash flow is usually – or should be – the greatest need. Therefore, Stage One entrepreneur should be focused on that: how to acquire customers in a way that creates positive cash flow.

By positive cash flow, I mean getting more cash from each sale than you put into getting it. This is not easy. It is easy to acquire customers if you are willing to lose money by acquiring them. But unless your plan is to build a big customer base by losing millions of dollars (a popular idea today, but a very bad one for the average entrepreneur), you have to create a marketing and sales program that brings in more money each month than it spends.

This doesn’t mean that the initial sale itself needs to be profitable. In many businesses, customer acquisition turns profitable only after the second or third sale. But that just means that part of your job is not only to create that first sale but to create a second and third sale to the same customer in as short a time span as possible.

Most entrepreneurs never stop to think about cash flow or long-term profits when they are starting out. They are so excited about their product that they imagine it selling itself. And even experienced intrapreneurs – divisional marketing executives or CEOs – often pay scant attention to selling strategies when they launch new products. They mistakenly assume that one way of selling is just about as good as another.

Nothing could be further from the truth. How you sell your product – the specific decisions you make about presenting and pricing and talking about it – has a huge impact on whether you will be successful.

The product is important but almost never sells itself. To launch the product successfully and take your new business (or product line) from zero to a million dollars (and beyond), you have to discover what I call your optimum selling strategy (OSS). This chapter and the next are devoted to teaching you how to do that.

Discovering the OSS for your product will put your business on the right track. It will make everything that happens afterward easier. Problems will be easier to solve. Obstacles will be easier to overcome. Objectives will be easier to reach. And your business will grow quickly,

You will have a fundamental understanding of the most important secret of your business: how to bring in a steady stream of new customers at an affordable cost. This will allow you to lead your employees with confidence as the business grows, and to help them fix problems if and when they arise.

Change, of course, is a daily fact in business, and markets and marketing are constantly evolving. So the OSS you use to launch your business may not be the one you’ll need later. But in figuring out the OSS for the first time, you will have learned something that won’t likely change over time: the core buying patterns of your core customers.

Before long, you will intuitively understand your core buyer. You will understand where she is, what she wants, what she’s willing to pay for it, and how to speak to her so she will hear you.

The OSS will turn you into a Stage One sales and marketing expert, becoming your secret litmus test to measure new ideas and make wise decisions. This will help you avoid unnecessary sales and marketing mistakes. And that will allow you to focus on the programs and strategies that are likely to work, leveraging otherwise wasted time and money into building your business exponentially faster.

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“I have been up against tough competition all my life. I wouldn’t know how to get along without it.” – Walt Disney

What is the biggest challenge facing internet marketers today? 

This is one of the questions I was asked at a recent Internet Marketing Mastermind.

Many of the attendees were concerned about what they viewed as regulatory “overreach” by social media platforms. Media like Google and Facebook are becoming ever more restrictive in terms of the advertising they will allow, and that is making it very difficult for small companies with limited budgets to get noticed and make sales.

And they are not wrong to be concerned. When you aren’t a brand-name business, you usually have to create aggressive, “noisy” advertising campaigns to attract the attention your business needs. But when the major media won’t let you be “loud and proud” about your products, what can you do?

One thing many marketers do is to try to sneak non-compliant copy through the gatekeepers, but this strategy is doomed to fail. Others try to make do by placing ads on secondary and tertiary media and by affiliate marketing and even direct mail. These are all better than nothing, but they don’t add up to enough coverage to grow a business of any size.

Everything that is posted on the internet is subject to scrutiny, and that will not change.

So there is only one sure way to solve the overreach problem, and that is to submit to it. Instead of trying to figure out how to squeeze or sneak their old-direct-mail style “promos” on the internet, they need to learn how to produce campaigns that are honest, authentic, and transparent.

Another thing they must do, and this is equally important, is learn how to create video ads, both short- and long-form, that are high quality, entertaining, and persuasive.

The days of selling millions of dollars’ worth of products with cheesy infomercial-quality ads are fading fast. Thousands – no, millions – of small and large companies are learning how to tell persuasive stories through video advertising. Which means that the buying public is quickly becoming accustomed to higher quality ads. Marketers that cannot or will not get up to speed in terms of the entire video production process (script writing, story boarding, staging, lighting, sound, music, acting, directing, post production, etc.) will soon be left behind.

I’ve been making this case to my clients for at least five or six years. At first, none of them had any interest in trying it. They must have thought I had lost my mind. Then about three years ago, I saw a few feeble attempts. In the last year, I’ve seen a few more. But compared to the average level of video advertising I see commonly on the internet, most of my clients are way behind.

My clients went into the internet enthusiastically when it opened up at the turn of the century. And they benefited immensely from it, using most of the same sort of copy and marketing tactics that they used for decades in selling their products and services through the mail. They were – we were – outliers then. But the internet is no longer a market for outliers. In the coming years, the gold will go to those with the intelligence and creativity to produce advertising that is competitive with the likes of 60 Minutes and Coca Cola.

Let me give you an example – perhaps not the best example, since this is an ad for PragerU, a conservative non-profit. It doesn’t attempt to close the sale. But it does demonstrate that PragerU has decided that they want their ads to look like they were made in Hollywood… and create a Hollywood level of excitement in their prospective viewers.

Click here to see what PragerU is doing.

This is the future of direct marketing. For the present, some will continue to have some success with outdated, low-quality, high-noise ads. But as the months go by, those types of ads will begin to lose their ability to compete with higher quality ads. I hope my clients can get up to speed before it’s too late.

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 “The ultimate purpose of economics, of course, is to understand and promote the enhancement of well-being.”– Ben Bernanke

 What You Should Know About Argentina 

Argentines are sophisticated people. They have always seemed more like Europeans to me than South Americans.

Actually, I can’t pretend to know much about South America. I’ve only spent lengths of time in Uruguay, Brazil, and Colombia. And come to think of it, Uruguayans and Brazilians seem pretty sophisticated too.

But I have spent a lot of time in Argentina. And I like the country. I am a partner in several businesses there, and I’ve bought and sold property with some success. Investing in real estate in Argentina is relatively easy because of the country’s incredible economic swings. Real estate prices rise and fall dramatically. So for an outsider who can pick and choose his timing, it’s not difficult to sit it out when prices are high and buy in when they get cheap.

When I’m in Argentina – a country with such a refined culture – I can’t help but feel bad for the people. In terms of what matters in building wealth – hard work, saving, and learning – they are equal if not superior to Americans.  But because of systemic problems connected to politics, power, and corruption, it’s tough for business builders and entrepreneurs to get any serious traction.

And as anyone that has even a rudimentary understanding of macroeconomics knows, when entrepreneurs can’t grow businesses, nothing else can grow either.

This was true of the Soviet Union. It was true for China until they freed up the private business sector. It was and is true of Cuba. And Venezuela. And Nicaragua. And many more countries that were once prosperous but then laid low by governments that confiscated property, socialized industry, and massively redistributed income.

And that is what happened to Argentina.

In a recent essay, Bill Bonner provided an excellent quick history lesson in the insidious and unintended effects.

“In 1853,” he explained, “the Argentines agreed on a constitution, largely based on the US model. There were the familiar legislative, executive, and judicial branches. There are elected representatives. There are checks and balances. And the president’s office is in a special house, called the Casa Rosada– rose-colored, not white.

“The system worked plausibly well for the first 100 years. By 1914, the Argentines were richer than the French. The expression ‘as rich as an Argentine’ was not followed by laughter, but envy.

“Then, in the 1940s, Juan Perón figured out how to play the urban mob by promising the people more stuff. Over the next decade, he nationalized key industries, began aggressive spending programs, and redistributed wealth on a grand scale.

“Output declined. Inflation increased. It kept increasing until 1980, when prices rose at a rate of 1,000%.

“The inflation (as well as other things, presumably) soured the whole society. Corruption increased. And politics became more of a grotesque entertainment.”

Bill then explained how politics works today in Argentina…

* One political party makes “extravagant and unrealistic promises… gets elected…  [and makes] a mess of the economy.”

* Upset about rising inflation and falling productivity, the populace votes a moderate or conservative into power.

* “The new group tries to correct the errors and oddities of the first group. But this return to reality is shocking and painful to most people.”

* After a few years, the people, frustrated that things haven’t improved as quickly as they had hoped, “re-elect the bamboozlers.”

* “Gradually, it becomes harder and harder to get ahead honestly.” Thieves become rich by making deals with corrupt politicians. Eventually, the first tier of the economy is run by packs of political and private scoundrels.

* And then, in a desperate effort to ward off eventual economic collapse, the government creates fake money. Those on the top benefit from it. The working class suffers.

“It’s great down here,” Bill’s friend in Argentina recently told him. “As long as you have dollars.”

The degradation of Argentina’s money is happening fast. The inflation rate is 55%. A dollar would bring you 30 pesos a year ago. Now, it’s worth 60.

Could this happen to the US if Bernie gets elected? You decide.

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“It’s much easier to fool yourself than to fool others.”– Michael Masterson

 A Quick Little Marketing Lesson: The Problem with “Listening” to Your Customers

“Don’t make assumptions about what your customers really want,” a marketing expert wrote in an industry magazine. “Just call them up or send them a survey. Conduct focus groups. Ask them what they want!”

On the face of it, this advice makes a lot of sense. But if you take it literally, you will likely end up making some very foolish marketing decisions.

Why? Because when asked what they “want,” most people will tell you what they think they want. Or they might say what they think will impress you. Rarely will they tell you what they will actually buy.

I’ve made this point many times. In Ready, Fire, Aim, I argued that customer surveys and focus groups are usually less than helpful for this reason. The truth is, if you give your customers exactly what they say they want, you’ll often end up losing sales… and you won’t know why.

Here is why…

Broadly speaking, there are two kinds of information you can get by asking your customers questions:

  1. demographic information, like age and gender and so on
  2. information about the kind of products and services they want from you

The demographic information is only marginally useful to direct marketers. They already have much more useful information – historical response data – that often supersedes or contradicts demographic assumptions.

And the information you get from your customers about the products and services they want can be misleading. Yes, they’ll tell you what they want or like. But it will be what they want to believe they want or like. Not what they really do.

When it comes to understanding your customers’ buying habits, there is only one way to do it. You have to present different products and offers to them. Then you see which ones get better results. That is the only way to know for sure.

The marketing expert I mentioned above used an analogy to make her point. She said that business is like marriage. If you really want to know what your prospect/spouse is thinking, the solution is simple. “Just ask her.”

Yeah, right.

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