The Butler Project

More from my interview with a millionaire, MR.

On Tuesday we posted an excerpts from my interview with MR, a furniture store owner in Salt Lake City. As I re-read the transcript of my conversation with him yesterday, I realized MR had a lot more to say about wealth creation. Here is the second installment; it focuses almost entirely on MR’s investing philosophy.

I’ll say at the outset that his specific approach may not work for everyone, but everyone would be better off if we applied the underlying principles. Look for ways you could apply his approach to your particular situation as you read.

During the conversation risk and investing came up several times. Although MR doesn’t seek out risk, he was still willing to take calculated risks under the right conditions:

MR: I take risks, and they’re all very calculated…I’ve [even] developed real estate along the way.

Mark: What kind of real estate have you done?

MR: I’ve done some retail subdivisions. We bought…600 acres…and did a development up there when everyone said we couldn’t. We put one together and sold it out in a couple weeks, and made a couple million dollars on that deal.

And that was scary, actually, because it was out of my control. You’re at the whim of city councils and county councils. And that was a closed county. They didn’t like development. But I was just very tenacious and stayed after it - took me two years of meetings to get it done, but once we got it done and built we sold it out quickly. There was a huge demand.

[I found this story about real estate investing especially interesting because MR always talks about maintaining control of your money and your investments, so I'm sure it was nerve-wracking for him to have to rely on these elected officials in a small county.

The interesting part is that since he felt that he couldn't completely control the outcome of the investment, he did everything in his power to influence the outcome by going to "two years of meetings to get it done." What a great lesson in investing.]

Mark: You’ve told me that all the wealthy people you know did it “a brick at a time”. How has that been true in your life?

MR: [We got completely out of debt] and then we saved like bandits, and invested in businesses. I didn’t make any…I’ve never made a dime in the stock market. I don’t do equities because I can’t control them. To me, it’s gambling; I’m lousy at it. I do what I can control. I do a deal every day at the store, we do deals every day and we make money on every deal, and it compounds. It’s not rocket science. It’s really not.

I don’t let anybody handle my money. No brokers, no advisers. For me, that’s all a shot in the dark, and I don’t understand it. And I’m horrible at trying to guess where to put my dough.

Mark: What is the one piece of financial advice you’d give? [Yes, I know I published part of the answer to this question on Tuesday. Here's the rest of it.]

MR: Don’t do anything that you don’t understand, that keeps you up at night. And personally, don’t give your money to other people to handle. Do it yourself.

I personally don’t go after equities. I don’t do anything like that, but I do go after solid things I can control, solid investments. I buy land free and clear. I know it’s pretty much a done deal when I develop it. I sell it or I know the market’s there.

[Think back to the real estate development he did. Interesting that he paid cash for the land? It was just one more way he minimized his risk.]

MR: Take every dime you have and get out of debt, and then go look at what’s out there. Because there’s a ton of opportunity anywhere you look; there are ways to make money.

Mark: So you sleep pretty well at night.

MR: Yeah, you’re exactly right. I know exactly what my return is on money that’s not in the business, because it’s all in fixed instruments, and you know when you’re getting a small return on a whole lot of money, at least you know what that return is and it’s okay. You know, you can live.

So I’m not trying to make millions in the market. I’m just trying to preserve, at my stage (I’m 55), just preserve what I have and enjoy life. But yeah, we don’t borrow money. Not business, not anything. In retail if the market turns, generally, and people stop buying, if you’re [buying] your goods with a bank, you’ve got more problems than just your mortgage or just the lease on the buildings.

Mark: You obviously have no interest in the market.

MR: Yeah, it’s scary for me. And I’ve got some great friends that are brokers that are multi-millionaires that seem to understand it, but I sleep better at night. I really do.

You know for me to fail now my bank would have to collapse and take my money with it. Other than that, there’s no exposure anywhere. Which is a great feeling, when you’ve still got two kids at home. You’re not trying to build a kingdom anymore; you’re just trying to enjoy your life.

What are the lessons learned from MR’s experience? Many of you will say “I can’t pay cash for land,” or “I can’t afford to keep all my money out of the stock market. It’s the only vehicle available to me.”

All of that may be true. And I’m not a stock-market hater. Neither is MR. His only point is that he’s not going to put his money into the market when he doesn’t have the skill or experience to make his money work for him there.

The principles that stick with me from this conversation are:

1. Accountability: YOU are responsible for your wealth. Don’t blame the market or your broker, or the administrator of your 401k if your nest egg isn’t growing as fast as you think it should be. Take ownership of your financial future.

2. Control: If you can’t directly control the outcome of your investments, do everything you can to influence the result by educating yourself and making decisions that absolutely minimize your exposure, while still positioning you for a reasonable return on your money.

What did you get from these interviews? We’d love to hear your comments on the insights from MR!