Mind Your Own Business

Mind Your Own Business

In 1974, Ray Kroc, the founder of McDonald’s, was asked to speak to the MBA class at the University of Texas at Austin. “What business am I in?” Ray asked. Everyone laughed. No one answered, so Ray asked the question again. “What business do you think I’m in?” The students laughed again, and finally one brave soul yelled out, “Ray, who in the world does not know that you’re in the hamburger business.” Ray chuckled. “That is what I thought you would say.” He paused and then quickly said, ’ladies and gentlemen, I’m not in the hamburger business. My business is real estate."

Here is Ray’s viewpoint. In their business plan, Ray knew that the primary business focus was to sell hamburger franchises, but what he never lost sight of was the location of each franchise. He knew that the real estate and its location was the most significant factor in the success of each franchise. Basically, the person that bought the franchise was also paying for, buying, the land under the franchise for Ray Kroc’s organization.

McDonald’s today is the largest single owner of real estate in the world, owning even more than the Catholic Church. Today, McDonald’s owns some of the most valuable intersections and street corners in America, as well as in other parts of the world.

Ray Kroc was clear on the difference between his profession and his business. His profession was always the same. He was a salesman. At one time he sold mixers for milkshakes, and soon thereafter he was selling hamburger franchises- But while his profession was selling hamburger franchises, his business was the accumulation of income-producing real estate.

Most people work for everyone else but themselves. They work first for the owners of the company, then for the government through taxes, and finally for the bank that owns their mortgage.

Here is one of the secrets of the rich. “Mind your own business”.

Financial struggle is often directly the result of people working all their life for someone else. Many people will have nothing at the end of their working days.

Here is how the income statement and balance sheet are related: Most people: Your Profession -> Your Income The Rich: Your Assets -> Your Income

There is a big difference between your profession and your business. Often I ask people, “What is your business?” And they will say, “Oh I’m a banker.” Then I ask them if they own the bank? And they usually respond. “No, I work there.”

In that instance, they have confused their profession with their business. Their profession may be a banker, but they still need their own business.

To become financially secure, a person needs to mind their own business. Your business revolves around your asset column, as opposed to your income column. The rich focus on their asset columns while everyone else focuses on their income statements.

That is why we hear so often: “I need a raise.” “If only I had a promotion.” “I am going to go back to school to get more training so I can get a better job.” “I am going to work overtime.” “Maybe I can get a second job.” “I’m quitting in two weeks. I found a job that pays more.”

In some circles, these are sensible ideas. Yet, if you listen to Ray Kroc, you are still not minding your own business. These ideas all still focus on the income column and will only help a person become more financially secure if the additional money is used to purchase income-generating assets.

Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities or personal effects that have no real value once you get them home. A new car loses nearly 25 percent of the price you pay for it the moment you drive it off the lot. It is not a true asset even if your banker lets you list it as one.

For most people, just as the last child leaves home, the parents realize they have not adequately prepared for retirement and they begin to scramble to put some money away. Then, their own parents become ill and they find themselves with new responsibilities.

So what kind of assets am I suggesting that you or your children acquire? In my world, real assets fall into several different categories:

1. Businesses that do not require my presence. I own them, but they are managed or run by other people. If I have to work there, it’s not a business. It becomes my job.
2. Stocks.
3. Bonds.
4. Mutual funds.
5. Income-generating real estate.
6. Notes (IOUs).
7. Royalties from intellectual property such as music, scripts, patents.
8. And anything else that has value, produces income or appreciates and has a ready market.

As a young boy, my educated dad encouraged me to find a safe job. My rich dad, on the other hand, encouraged me to begin acquiring assets that I loved. “If you don’t love it, you won’t take care of it.” I collect real estate simply because I love buildings and land. When problems arise, the problems are not so bad that it changes my love for real estate. For people who hate real estate, they shouldn’t buy it.

I love stocks of small companies, especially startups. The reason is that I am an entrepreneur, not a corporate person. In my early years, I worked in large organizations, such as Standard Oil of California, the U.S. Marine Corps, and Xerox Corp. I enjoyed my time with those organizations and have fond memories, but I know deep down I am not a company man. I like starting companies, not running them. So my stock buys are usually of small companies, and sometimes I even start the company and take it public. Fortunes are made in new-stock issues, and I love the game. Many people are afraid of small-cap companies and call them risky, and they are. But risk is always diminished if you love what the investment is, understand it and know the game. With small companies, my investment strategy is to be out of the stock in a year. My real estate strategy, on the other hand, is to start small and keep trading the properties up for bigger properties and, therefore, delaying paying taxes on the gain. This allows the value to increase dramatically. I generally hold real estate less than seven years.

For years, even though I had a traditional job, I did what my rich dad recommended. I kept my daytime job, but I still minded my own business. I was active in my asset column. I traded real estate and small stocks.

Rich dad always stressed the importance of financial literacy. The better I was at understanding the accounting and cash management, the better I would be at analyzing investments and eventually starting and building my own company.

I would not encourage anyone to start a company unless they really want to. Knowing what I know about running a company, I would not wish that task on anyone. There are times when people cannot find employment, where starting a company is a solution for them. The odds are against success: Nine out of 10 companies fail in five years. Of those that survive the first five years, nine out of every 10 of those eventually fail, as well. So only if you really have the desire to own your own company do I recommend it. Otherwise, keep your daytime job and mind your own business. When I say mind your own business, I mean to build and keep your asset column strong. Once a dollar goes into it, never let it come out. Think of it this way, once a dollar goes into your asset column, it becomes your employee. The best thing about money is that it works 24 hours a day and can work for generations. Keep your daytime job, be a great hard-working employee, but keep building that asset column.