I began playing golf when I was only eight years old. My father taught me the game and was VERY patient with me as a beginner. As is true of most youngsters, I did not always hit my drives particularly straight. So, when in the rough or behind trees, I would try to rationalize taking a risky shot that would propel me well down the fairway toward the hole. He would smile and say “Don, take your medicine now. Chip the ball out safely in to the fairway and then have a clear shot at the green.” I did not always listen at first but it was a great lesson to learn in both golf and life.
Last year, I received an email and then had an extended phone call from a broadcaster who is now (sadly) a former broadcaster. I always admired his energy and his ethics. He told me that his two radio stations were in dire straits and he was struggling to make loan payments. Then, he told me something that really stuck with me. “I have hung on here for nine years. About 18 months in, I knew that this mini-station group was a losing proposition. Five years ago, someone out of the blue offered me a price for the properties that would have allowed me to pay off all my debts plus pocket a few hundred thousand. I turned him down saying that I would turn the business around soon. Clearly, I was wrong but what I did really wrong was not recognize that if you are going to fail and all of us will at one time or another, you need to fail QUICKLY and then move on to something else.”
The idea of failing often but quickly is a trait that is prevalent among some very successful entrepreneurs and large companies as well. As skilled as many companies are with new business development, the savvy players all know that most new products fail. Angel investors and venture capitalists know going in that most of the projects or entities that they bankroll for budding entrepreneurs will go bust. Big companies have strong balance sheet strength and can shrug off the failure of a new product pretty quickly. And, they course correct a great deal as they rollout a new venture if things are not going well. They also are pretty fearless about pulling the plug when they clearly have a loser on their hands.
Smaller players such as the aspiring broadcaster discussed above cannot absorb losses so they get in even deeper instead of “taking their medicine.” Yet today some entrepreneurs have fully embraced the fail but fail quickly approach to business development. Of course, they do some do diligence before a launch. Yet, they do not invest so much time and money in to it, that they lose everything if it implodes as most things do. People who go all in and fail are often psychologically scarred by a big loss and are afraid to try anything again. This paralysis has to kill lots of spectacular ideas.
One entrepreneur told me that she has to have significant interest and passion before pulling the trigger on a venture. She always lines up some amount of O.P.M. (Other People’s Money) prior to launch. Some are angels who have worked with her before and both made and lost money. She says that way if she fails it is before things get too complicated and she can make a quick exit and return a portion of her capital to her backers. They appreciate that very much and are often open to her new ideas of which there are many.
The same person says that failure keeps her humble. Even the most successful ventures have marketing or advertising tests that do not work or flanker products that bomb. She recognizes that she is only human and that the marketplace is unforgiving but generally correct. She even said that failure makes her stronger (I wonder if she has read Nietzsche?). Admittedly, she is far more resilient that almost all of us but her spirit is amazing. She plans on failing a lot in the future but recognizing that failure really equals experience.
Finally, a controversial young billionaire, Mark Zuckerberg, testified before Congress last week. He did not do very well according to most media pundits. One quote of his made several years ago rings very true with me. It is: “The biggest risk is not taking any risk. In a world that is changing very quickly, the only strategy that is guaranteed to fail is not taking risks.”
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Monday, October 28, 2019
Thursday, October 17, 2019
The Importance of Saying No
Most of us do not like saying no to people. It is natural to want people to like or accept you, so it is not unusual for us to allow ourselves to get involved in situations that could have been avoided by simply saying no. This can have significant, even profound effects, on your business if you are an an entrepreneur and on your career at a large enterprise not to mention your personal life.
Very early on in my career, a much older broadcaster gave me some very valuable advice. He said, “when you agree to do something, you are obligated to do it well. If it means staying until midnight or cancelling weekend plans, you must do that to honor your commitment. If you know that your plate is full, do not volunteer and say no if you have to, if you are asked directly.” It turned out to be a very important policy for many that I know.
I have met a few entrepreneurs who started out doing pretty well after a few years. They were superstars in terms of service but then the wheels came off and fairly quickly. How? They could not say no to people. Some smaller customers took up huge amounts of their time and would grind them for lower prices. They did not draw a line in the sand and they let these pests take them away from larger, more profitable customers who also had significant potential. Others wanted to do joint promotions which would benefit the other guy 80% and my friends 20% even though my contacts were putting up as much as 60% of the money in to the test. As one of these business owners told me, “I failed because I failed to mind my own store. I have learned how to say no politely and tell people clearly what I can and cannot do. Over the years, I have lost very little business saying no and been freed up to do new things or taking care of my important customers.“
The concept of FOMO comes into play here especially in the deal business. A very old acquaintance told me about the pitfalls of FOMO (Fear of Missing Out). He is allowing me to quote him almost verbatim—“Some 50 years ago, I was out on the golf course with three prominent men in my community. One was an attorney, another a prominent car dealer, and the third was a fair sized player in local real estate. The real estate investor began to talk up a local deal that he was cooking up in town. By the 18th hole, the others had signed on to the deal. Over a drink in the clubhouse, all eyes were on me. Well, do you want a piece of this deal? We can cut you in for only $10,000. Don, that does not sound like much today but I was only 32 years old. A $10,000 commitment was a great deal to me. So, I said yes and we all shook on it. The papers arrived a few days later and I barely looked at them, signed them and dropped off my check to the developer. My young wife was furious. I lectured her and told her this was my chance to get in with the movers and shakers in our community. Well, you know what happened. The deal went sour. The other guys shrugged and the lawyer told me that most deals do not work out so we all needed to simply move on to the next one. It was a great life lesson. As you know, I retrenched and got involved in many partnerships and equity investments. I learned to do very careful due diligence and to say no most of the time no matter how good the track record of the lead partner(s) in the deal. Saying no has saved me and made me.”
Saying no can also save your personal life. If you are drowning at work, the best approach is to tell someone tactfully that you cannot take on the new assignment as you would not be able to do it well. There is a delicate balance involved here. If you always say no to superiors, you put your future in jeopardy. Yet, we are all allowed a life away from work and leisure and family life provide rewards and great balance.
Perhaps the best comment on this subject that I have ever heard came from (you guessed it) Warren Buffett. Speaking to a crowded group of MBA candidates a few year ago, the great man said, “The difference between successful people and really successful people is that really successful people say no to almost everything.
Buffett and his partner, Charlie Munger, at Berkshire Hathaway allegedly look at dozens of deals and Warren reads and breaks down the financials in hundreds of annual reports each year. Yet, they only make a few moves each year and sometimes do almost nothing in terms of new commitments. Maybe the third wealthiest American is trying to tell us something.
If you would like to respond to Don Cole directly, you may email him at doncolemedia@gmail.com or leave a message on the blog.
Very early on in my career, a much older broadcaster gave me some very valuable advice. He said, “when you agree to do something, you are obligated to do it well. If it means staying until midnight or cancelling weekend plans, you must do that to honor your commitment. If you know that your plate is full, do not volunteer and say no if you have to, if you are asked directly.” It turned out to be a very important policy for many that I know.
I have met a few entrepreneurs who started out doing pretty well after a few years. They were superstars in terms of service but then the wheels came off and fairly quickly. How? They could not say no to people. Some smaller customers took up huge amounts of their time and would grind them for lower prices. They did not draw a line in the sand and they let these pests take them away from larger, more profitable customers who also had significant potential. Others wanted to do joint promotions which would benefit the other guy 80% and my friends 20% even though my contacts were putting up as much as 60% of the money in to the test. As one of these business owners told me, “I failed because I failed to mind my own store. I have learned how to say no politely and tell people clearly what I can and cannot do. Over the years, I have lost very little business saying no and been freed up to do new things or taking care of my important customers.“
The concept of FOMO comes into play here especially in the deal business. A very old acquaintance told me about the pitfalls of FOMO (Fear of Missing Out). He is allowing me to quote him almost verbatim—“Some 50 years ago, I was out on the golf course with three prominent men in my community. One was an attorney, another a prominent car dealer, and the third was a fair sized player in local real estate. The real estate investor began to talk up a local deal that he was cooking up in town. By the 18th hole, the others had signed on to the deal. Over a drink in the clubhouse, all eyes were on me. Well, do you want a piece of this deal? We can cut you in for only $10,000. Don, that does not sound like much today but I was only 32 years old. A $10,000 commitment was a great deal to me. So, I said yes and we all shook on it. The papers arrived a few days later and I barely looked at them, signed them and dropped off my check to the developer. My young wife was furious. I lectured her and told her this was my chance to get in with the movers and shakers in our community. Well, you know what happened. The deal went sour. The other guys shrugged and the lawyer told me that most deals do not work out so we all needed to simply move on to the next one. It was a great life lesson. As you know, I retrenched and got involved in many partnerships and equity investments. I learned to do very careful due diligence and to say no most of the time no matter how good the track record of the lead partner(s) in the deal. Saying no has saved me and made me.”
Saying no can also save your personal life. If you are drowning at work, the best approach is to tell someone tactfully that you cannot take on the new assignment as you would not be able to do it well. There is a delicate balance involved here. If you always say no to superiors, you put your future in jeopardy. Yet, we are all allowed a life away from work and leisure and family life provide rewards and great balance.
Perhaps the best comment on this subject that I have ever heard came from (you guessed it) Warren Buffett. Speaking to a crowded group of MBA candidates a few year ago, the great man said, “The difference between successful people and really successful people is that really successful people say no to almost everything.
Buffett and his partner, Charlie Munger, at Berkshire Hathaway allegedly look at dozens of deals and Warren reads and breaks down the financials in hundreds of annual reports each year. Yet, they only make a few moves each year and sometimes do almost nothing in terms of new commitments. Maybe the third wealthiest American is trying to tell us something.
If you would like to respond to Don Cole directly, you may email him at doncolemedia@gmail.com or leave a message on the blog.
Monday, October 7, 2019
Stretched Out Car Loans Will Bite Us
Last week, on October 1st, The Wall Street Journal published an excellent and much needed article on the US automobile market. It was entitled, "The Seven-Year Auto Loan: America's Middle Class Can't Afford Its Cars."
When most of our readers were younger, the standard automobile loan was three years. Not so any longer! The length of the auto loan's term has been creeping up to the point that Experian PLC, quoted in the Journal piece, now says that roughly a third of the of auto loans for new vehicles are LONGER than six years. Ten years ago, it was less than 10%.
The Journal went on to say that "Car loans that are increasingly stretched out are a pronounced sign that some American middle class buyers can't afford a middle-class lifestyle."
Another important bellwether is that many buyers of a new vehicle have not paid off their existing car. So, they do a wrap around loan that covers both cars and these are usually six years plus. Today, the average car loan is $31,119 and over 30% are rolling over the debt on the old vehicle as well.
One thing mentioned in the piece really alarmed me. Car loans are being bundled in to bonds. So what, you might ask? Well, these are really very similar products to the Collateralized Debt Obligations (CDO's) that got us in to so much trouble in 2007-2009. You may recall that CDO's or Asset Backed Securities packaged up mortgages of varying quality and sold them to the public and institutions. When the housing market faltered, some weak mortgages pulled down the CDO if too many people defaulted and creditors could not be paid.
Think about this for a moment in terms of the auto market. You do not HAVE to have a house. More than a third of Americans are renters. Yet, unless you live in New York, Washington, DC and a handful of other places, you usually need a car to get to work.
Unemployment is at a 50 year low. At some point in a year or two a recession will finally hit us again. When it does, unemployment will rise and some people will be in a real bind. They will not be able to make vehicle payments and the car will be repossessed. Additionally, how do you interview for a new job or start one without an automobile? These individuals will be caught in a vicious Catch-22.
Even if the recession is mild and it likely will be quite mild compared the Great Recession of 2008-2009, several million people will lose their cars, jobs, and others will be even deeper underwater when they need to buy a new one.
The media is not covering this well. I applaud The Wall Street Journal for featuring this topic. The comments about the possible ripple effects of these long term loans and "car bonds" are mine alone.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Tuesday, October 1, 2019
Update on the 1%
Yesterday, I was walking along a corridor and overheard a conversation that stunned me. Two young adults were talking. One was lamenting that the job offer that he received that morning was for only $33,000. His friend shot back and said, "well, you are in the top 1%." The complainer responded with a vulgarity but the friend said--"No, I am correct. If you make over $32,400 you are in the GLOBAL top 1% of earners". I do not know the well informed young man but I assure you that he is correct. Hearing that, I though it was time to give an update on the top 1% here in the United States.
Very recently, using IRS data, 24/7 Wall Street published updated projections on America's top 1%. Of particular interest to me, was the information that they provided by state.
Here are top and bottom five states in terms of income to make the floor of the 1% in that locality:
Rank State Minimum Income to Reach 1% Average Income of 1%
1 Connecticut $663,009 $2,178,625
2 Massachusetts 584,022 1,812,907
3 New Jersey 570, 745 1,509,794
4 New York 555,569 2,058, 789
5 California 526,427 1,690,208
46 Kentucky 288,860 752,547
47 Arkansas 268,412 992,874
48 Mississippi 265,138 648,830
49 West Virginia 259,702 533,534
50 New Mexico 256,208 643,395
Surprised? Probably not all that much by the state rankings. The issue to some would be the spread between what it take to make the 1% vs. the average household income among the 1% in that particular state. Number one, Connecticut, has hedge fund managers and other financial titans who pull the average up sharply. New York, at #4, also has many ultra high income households that pull the average up higher than #2 and #3, Massachusetts and New Jersey.
A key takeaway to me is that lumping all the 1% together is a big demographic mistake. If you barely made the cut in New Mexico at $260,000 and moved to Manhattan or San Francisco, you would be solidly middle class but not considered rich as you were at your original home. So, as is true of the real estate world, the 1% varies widely depending on location, location, location!
Tied in to the above statistics, I was able to pull income data from the Social Security Administration. Here is how some key numbers shake out:
Group Average Income % of National Income
.1% $2,757,000 5.2
1.0% 718,766 13.4
5.0% 229,810 28.0
10.0% 118,400 39.1%
Please remember that this is INCOME, not net worth. There are young billionaires in tech whose companies may not pay dividends yet who have relatively low incomes but vast wealth. Also, older citizens may control significant wealth but have stocks that pay low dividends and shield them from higher income taxes. When they do sell off assets, it is at tax-friendly capital gains rates.
As I have written before in MR, there has always been income inequality in countries that have free markets. Lately, with the recent run-up in equity prices, the skew to the top tier is getting more exaggerated.
By the way, the global top 1% control approximately half of the world's wealth (net worth). Count your blessings. Compared to the other 7.3 billion people on earth, most of us are doing pretty well.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.
Very recently, using IRS data, 24/7 Wall Street published updated projections on America's top 1%. Of particular interest to me, was the information that they provided by state.
Here are top and bottom five states in terms of income to make the floor of the 1% in that locality:
Rank State Minimum Income to Reach 1% Average Income of 1%
1 Connecticut $663,009 $2,178,625
2 Massachusetts 584,022 1,812,907
3 New Jersey 570, 745 1,509,794
4 New York 555,569 2,058, 789
5 California 526,427 1,690,208
46 Kentucky 288,860 752,547
47 Arkansas 268,412 992,874
48 Mississippi 265,138 648,830
49 West Virginia 259,702 533,534
50 New Mexico 256,208 643,395
Surprised? Probably not all that much by the state rankings. The issue to some would be the spread between what it take to make the 1% vs. the average household income among the 1% in that particular state. Number one, Connecticut, has hedge fund managers and other financial titans who pull the average up sharply. New York, at #4, also has many ultra high income households that pull the average up higher than #2 and #3, Massachusetts and New Jersey.
A key takeaway to me is that lumping all the 1% together is a big demographic mistake. If you barely made the cut in New Mexico at $260,000 and moved to Manhattan or San Francisco, you would be solidly middle class but not considered rich as you were at your original home. So, as is true of the real estate world, the 1% varies widely depending on location, location, location!
Tied in to the above statistics, I was able to pull income data from the Social Security Administration. Here is how some key numbers shake out:
Group Average Income % of National Income
.1% $2,757,000 5.2
1.0% 718,766 13.4
5.0% 229,810 28.0
10.0% 118,400 39.1%
Please remember that this is INCOME, not net worth. There are young billionaires in tech whose companies may not pay dividends yet who have relatively low incomes but vast wealth. Also, older citizens may control significant wealth but have stocks that pay low dividends and shield them from higher income taxes. When they do sell off assets, it is at tax-friendly capital gains rates.
As I have written before in MR, there has always been income inequality in countries that have free markets. Lately, with the recent run-up in equity prices, the skew to the top tier is getting more exaggerated.
By the way, the global top 1% control approximately half of the world's wealth (net worth). Count your blessings. Compared to the other 7.3 billion people on earth, most of us are doing pretty well.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.
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