Archive for the ‘Business Profiles’ Category
Buffett and Goldman Team Up to Help Small Business
Posted by: Todd Metheny in Business Profiles, Economics on November 19th, 2009
Seriously, though, I just want to help you out.
I hear and see a lot of conspiracy theories out there about Goldman Sachs. More than any other investment banks or companies, I think GS might be the most scrutinized, talked about, and hated organization this side of the New York Yankees. In a distractionary move disguised as benevolence (j/k), Goldman is teaming up with Warren Buffett to fund loans for small business owners. The two are teaming up to provide $500 million for small business owners – both as access to capital and to further education.
I firmly believe that these are the kind of actions that will actually be effective in stimulating the economy. Businesses and business people require support, which means they’ll spend more money on supplies, raw materials, attorneys and accountants. Aside from the possible jobs that the businesses directly create, they indirectly create jobs by creating demand for all of these ancillary services.
I think Buffett is on the right track here. This is a market solution of sorts. They’re calling this a “philanthropic” effort. I’m not sure what the terms attached to the capital or the educational funding are – but they sound like they’re pretty nice based on that word, philanthropic.
This appears to be part of an effort for Goldman to clean up their image post-bailout. Wall Street’s extravagant salaries in tough times are exactly endearing to the general public. They’re already being criticized for offering too little. Having their name in the headlines with Buffett (who’s officially their largest shareholder) can only help them. His squeaky clean brand is just the sort of thing Goldman needs. Initiatives that help this country out of a tight spot, like this one, is icing on the cake. Thanks for reading.
The Zen of Scott Boras
Posted by: Todd Metheny in Business Profiles, Economics, Entrepreneurship on November 12th, 2009
Make it $300 million and you've got yourself a deal.
For as long as I can remember, in any setting, big businesses have been viewed as the bad guys and the workers have been viewed as the good guys. I think this started with Karl Marx’s theory that a profit can only be made by a business owner by exploiting the worker. Marx’s theory, now dismissed by economists, was that the value of a product was set by each person’s work in making it, and that the owner of the business added no value to anything. Thus, the only way a profit could be made was if you exploited your workers (paid them less than the value of their efforts). Obviously, this ignores the value added by the risk undertaken by the business owner. The business person had to invest his time, money and resources into making the product, and should be rewarded if it ends up making money.
Interestingly, you never hear anyone say that they feel like professional athletes are being exploited. Even Karl Marx would have found this ludicrous (I think). These are people that make (on the low end) hundreds of thousands of dollars every year. Top players in their respective sports now make tens of millions of dollars every year. So it’s hard to say they’re being exploited, when the President of the United States makes a paltry $400,000, the Chief Justice of the U.S. Supreme Court makes $217,400 (John Roberts reportedly made over a million dollars practicing law the year before he become a US Supreme Court Justice), and your very capable family physician only makes $150,000 (and he’s handing over part of that to malpractice insurers, because you’ll sue him if he makes a mistake).
That being the case, you have to assume that if the Yankees can afford to pay Alex Rodriguez $30 million per year, that the people that own the team are making a little money of their own, right? I don’t know. I honestly don’t know this for sure. I do know that I hear owners complain about how high the salaries are, but they couldn’t keep escalating if the money wasn’t coming from somewhere right.
If you follow baseball, you may have heard of an agent named Scott Boras. Boras is associated with everything that’s wrong with baseball and the world. He consistently gets players top dollar. He got this year’s number one overall draft choice over $15 million. He got the Yankees first basemen $180 million over 8 years. He’s innovative and sneaky. He sometimes uses the rules to his advantage, once famously using a technicality to have two of his clients declared free agents outside the draft, and allowing them to sign for a lot more money than they otherwise would have. He might be the best at what he does.
What makes Scott Boras especially interesting is that almost every baseball fan you meet hates his guts. His responsibility to his clients is to get them the best deal he can. He’s good at getting them very good deals. And people hate him for it, because it usually means that the top talent goes to the teams with the most money to spend. But people don’t hate the players for taking the largest deal (which is simply logical to do, all other factors being equal – you can’t play baseball forever).
People don’t hate the owners. After all, they’re in the same boat we are. They’re poor and lonely and just want to win games, but greedy super agents like Scott Boras are ruining the game, right? Right?
It’s unique, that the employees and their agents are viewed as greedy for taking top dollar. The owners escape being viewed as Wal-Mart. The owners would not pay so much that they no longer made money. They are running businesses, and you can’t stay in business losing money every year. I don’t have a point, other than this: lay off poor (he’s rich), defenseless (actually, he’s very capable of defending himself) Scott Boras. I actually just think this is pretty interesting. Thanks for reading.
The One About Prognosticators
Posted by: Todd Metheny in Business Profiles, Economics, Value Investing on September 15th, 2009
I'd the chance of rain tomorrow is 1000%. You can quote me on that.
There’s a great story in the intro of Common Stocks and Uncommon Profits by Philip Fisher. The intro is written by the author’s son, Kenneth Fisher, another famous investment manager and author. Ken was at conference with his father, and a contest was announced at dinner the first night they were there. Each person was asked to write down what the market would do the next day. The winner would receive a color television, and would be announced the next day at lunch, just after the market closed (CA time). Both men acknowledged that this was a silly exercise. In Ken’s own words:
“Most folks, it turned out, did what I did – wrote down some small number, like down or up 5.57 points. I did that assuming that the market was unlikely to do anything particularly spectacular because most days it doesn’t. Now in those days, the Dow was at about 900, so 5 points was neither huge nor tiny. That night, back at the hotel room, I asked Father what he put down; and he said, “Up 30 points,” which would be more than 3%. I asked why. He said he had no idea what the market would do; and if you knew him, you knew that he never had a view of what the market would do on a given day. But he said that if he put down a number like I did and won, people would think he was just lucky – that winning at 5.57 meant beating out the guy that put down 5.5 or the other guy at 6.0. It would all be transparently seen as sheer luck. But if he won saying “Up 30 points,” people would think he knew something and was not just lucky. If he lost, which was probable and he expected to, no one would know what number he had written down and it would cost him nothing. Sure enough, the next day, the Dow was up 26 points, and father won by 10 points.
When it was announced at lunch that Phil Fisher had won and how high his number was, there were discernable “Ooh” and “Ahhh” sounds all over the few hundred person crowd. There was, of course, the news of the day, which attempted to explain the move; and for the rest of the conference, Father readily explained to people a rationale for why he had figured out all that news in advance, which was pure fiction, and why the market had done what it did, again pure fiction and nothing but false showmanship. But I listened pretty carefully, and everyone he told all that to swallowed it hook, line and sinker.”
I think of that story when I see all the headlines touting that doomsday is near, or predictions that the Dow is going to hit 50,000 by such and such date. There’s clearly an incentive to make such predictions. No one puts your name in the news or publishes a quote that says something to the effect of, things are so-so now and will continue to be so-so in the future, though they might improve or deteriorate just a little bit. If you predict that the world will end in 8 days – that’s an exciting news story.
Plus, if your predictions turn out to be wrong, there’s no penalty. You already had your 15 minutes of fame. They aren’t going to write many articles proclaiming, “Todd Metheny was wrong 5 months ago,” for a couple reasons – I could turn out to be right sometime in the future, and because that’s not news. It’s the next prediction that makes the news. People don’t care who was wrong. People like Peter Schiff and Nouriel Roubini have gained notoriety for their doomsday predictions. Both of those fellows know a lot more about economics than I do, but give me the tempered view. In my experience, the worst case scenarios have often been wrong – from Thomas Malthus‘ prediction that we’d run out of food before 1900 to Chicken Little’s insistence that the sky was falling. There are too many variables involved to be right for any reason other than luck. Malthus was wrong because he ignored the possibility of technological advances and overlooked man’s ability to innovate and survive. Do yourself and a favor and be an optimist. If the worst is coming, it’s not going to matter. People that listened to people predicting the worst for the longest term took their money out of the stock markets, only to see a historic rise. Lately, many of those same people have plowed their money back in at much higher prices, because markets have “stabilized.” If you want to watch someone, watch Warren Buffett. Watch Seth Klarman. Compare Peter Schiff’s returns in his fund to Seth Klarman’s over the last 5 or 10 years (hint: Klarman is killing him). You can have all the PhDs in the world, and it doesn’t mean you’re going to be better at assessing market risk than Buffett or Klarman. Remember that when you hear the prognosticators prognosticating;) Thanks for reading.
Long Term Optimists from a Time Not Unlike This One
Posted by: Todd Metheny in Business Profiles, Value Investing on August 26th, 2009
I found this gem on Youtube. The image quality isn’t spectacular, but it’s definitely worth your time. I especially enjoyed the analogies and thoughts from Sir John Templeton. Templeton died last year. If you don’t know who he is, take a minute and read his wikipedia page. He was known for being not only a great investor, but a great philanthropist. In the interview, he seemed to be a little more fun than Lynch. He seemed sort of folksy, kind of like this guy.
Peter Lynch is one of the most successful mutual fund managers of all time (He took Magellan from about $14 million in assets to $18 billion over the course of 22 years). He’s also well known for writing the books One Up on Wall Street and Beating the Street, both excellent books that I’ve read and recommend. Lynch is famous for his maxim to “buy what you know.” Don’t buy companies if you don’t understand what they make or do and don’t buy a company if you don’t understand how they can be successful going forward. He’s had some big winners in retail, for instance, and he talks in his books about how he would go to the mall just to see where people were going. If something seemed like a hot spot, he would investigate how cheap or expensive the stock was and go from there. When I first started investing, Lynch’s books were actually two of the books that really spoke to me and appealed to me.
The advice they give in the video applies to any era. Both of their approaches were somewhat different, but both were grounded in common sense and relied on patience and the right temperament. A couple of highlights:
Earnings are the key. A company will rise if their earnings rise. Markets aren’t efficient all the time, but if a stock is undervalued, eventually that value will be realized by the market. Sir John Templeton states in the video that he tends to hold stocks for 5 years or more, because it often takes that long to realize that value. You or I may not have the same convictions in our stock picks as Sir Templeton;)
Anyway, if you’re at work and can’t watch the video, I hope you’ll come back to it when you get a chance. Thanks for reading.
Warren Buffett Speaks
Posted by: Todd Metheny in Business Profiles, Value Investing on August 20th, 2009
Buffett enjoying a Peanut Buster Parfait.
Warren Buffett has another op-ed in the NY Times. This one is titled The Greenback Effect. It’s a well written piece and I encourage you all to read it. It’s worth your time. The basic point of the article is that although the stimulus was initially necessary, the US needs to make its spending more sustainable or the dollar is going to suffer. Completely logical, and it’s nothing that people are saying in coffee shops all over the country. Buffett saying it doesn’t make it any more true – but it makes it more likely that people who can do something about it will listen (case in point). Plus, it’s fun to see a NY Time article with his name on it. I’m not sure there’s anyone they could get to write for them whose opinions I’d be more interested in (though he isn’t the only big name that’s been writing opinion pieces for them lately).
Seeing this piece brought to mind the piece that Buffett wrote in the NY Times last October, urging us to buy American in the midst of an economy that was flailing. Anytime you hear Buffett say anything about the direction of markets, he’ll tell you that he can’t predict the short term gyrations of the market. He doesn’t think anyone else can, either (who am I to disagree?). He doesn’t try to predict the short term direction of markets in this piece, either.
The piece was, in part, simply an attempt to calm people’s fears. In The Intelligent Investor, Benjamin Graham personifies the market as being a moody fellow – swinging from extreme euphoria (Greenspan might call it irrational exuberance) to extreme depression. Buffett’s article was an attempt to keep that depression in perspective. I think the other reason for the article was honest, sincere long term optimism in America. Part of the reason for Buffett’s optimism comes from his personality. It’s part of what makes him such a patient investor.
Clearly, Buffett’s vote of confidence was directed at toward the long term direction of the markets. I thought it might be fun (and hopefully useful in some way) to look at what the markets have done since his article. Hint: things got much worse before they got better.
First, the overall performance. The S&P 500 closed at 996.46. The piece ran on October 16th. On October 15th, the S&P sat at 907.84. Since Buffett’s prediction ran, the market is +9.76%. Of course, things got worse before they got better. On March 9th, 2009, the market closed at 676.53. If you had invested your money on that day, you’d be +47.29%. Buffett’s call wasn’t an attempt to time the market. He was simply saying what he always says, when there’s blood on the streets, that’s usually the time to invest. Overall, we’re still in the short term. When Warren says you should Buy American, he just means that eventually (10, 15, 20 years) down the road, you’ll be glad you put your money to work.
I’m not advocating anything, here, just thought I would toss out some numbers in retrospect. I have no idea what the markets will do going forward. If you’ve been investing during this downturn, you’re probably in the black. Buffett’s famous saying – be greedy when others are fearful and fearful when others are greedy has proven (again!) to be very true. On March 9th, people were pretty fearful. Hopefully you were buying hand over fist. Thanks for reading.
Warren Buffett’s Successor
Posted by: Todd Metheny in Business Profiles on August 12th, 2009
I’m a big fan of Warren Buffett. In May, my wife and I made the trip to Omaha for the Berkshire Hathaway shareholder’s meeting. We did a lot of fun things at the meeting, but the highlight, by far is having the opportunity to see (and hear) Buffett speak in person.
Predictably, there were questions about succession. Warren Buffett is 78 years old. He’s inching closer to the date actuarial tables say a white male should die. As far as I know, he’s doing fine today – but who knows what the future holds? I’m not sure there’s another CEO of another company who is as important to the success of their company. Apple shareholders seem to disagree. Apple stock goes down anytime there’s bad news about how Steve Jobs is doing. Apple has a very specific culture and way of doing things. If you think everything in production was Jobs idea, you’re wrong. He created the culture that generated and executed those ideas, but he’s not an endless fountain of R&D. Buffett, on the other hand, actually personally chooses almost all of the investments for Berkshire Hathaway. Who should worry more?
Of course, when Buffett dies, Berkshire will still own everything that it owns. It’s only the future of the investments of Berkshire that will be affected. The video above looks at a couple of possible candidates to succeed Buffett.
One of those candidates is David Sokol. Sokol is the former CEO of one of Berkshire’s subsidiaries, MidAmerica Energy, and was recently tapped to be the new CEO of NetJet, another subsidiary. In the video above, they jump back and forth between Sokol and Buffett talking about the deal to acquire Constellation Energy. Evidently it was Sokol’s idea. The deal fell through, but Berkshire still ended up making a bundle based on a clause that kicked in if Constellation backed out (which they did). That had to have earned him lots of points with the big boss. The fact that Sokol is from Omaha is icing on the cake.
The other candidate they talk about is Byron Trott, an investment banker that used to be with Goldman Sachs. Trott has since gone out on his own. Buffett has been quoted as saying that Trott is one of the few investment bankers that is worth the cost. Trott was reportedly the one that brought the Goldman deal to Buffett. In the video, Trott said that he drafted the deal with Buffett in mind, knowing that he would be interested. As a side note, a good friend of my uncle’s is a good friend of Byron Trott’s (he was both in his wedding and offered a top position at Trott’s new firm).
Interestingly, the video doesn’t mention Ajit Jain. In Buffett’s 2008 shareholder letter (and in previous letters), Buffett spoke very highly of Jain, saying, “Ajit came to Berkshire in 1986. Very quickly, I realized that we had acquired an extraordinary talent. So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home. Of course, I knew the answer before writing. There isn’t anyone like Ajit.” Ajit is currently the head of several of Berkshire’s reinsurance businesses. Because insurance is the largest business at Berkshire, having a person with Ajit’s experience at the helm would make a lot of sense.
The other person you hear mentioned from time to time is Geico CEO Tony Nicely. The hot candidate right now, by all accounts, appears to be Sokol. The Bloomberg video mentions that one of the things Buffett really likes about Sokol is his humility. That’s funny, because that’s what I really like about Buffett (Maybe I’ll choose Buffett as my successor for writing this blog;)) Whoever he chooses, it will be an interesting and newsworthy event. I personally hope we get many more years of Buffett’s wisdom. If you have a few minutes, watch the video above. You can listen to what Bill Gates thinks of Buffett and Berkshire. It’s the only board Gates is on, other than Microsoft’s, so I think that’s actually pretty neat, too. Thanks for reading.
Who Would You Invest In?
Posted by: Todd Metheny in Business Profiles, Careers, Value Investing on August 5th, 2009
I’m always impressed with Buffett. I’ve actually had the pleasure of seeing him speak in person. He’s an excellent public speaker. He loves the crowd and usually makes an excellent, logical point with some sort of folksy common sense sort of approach.
If you’re at work and can’t view the video above, it basically goes like this. Buffett asks a crowd of MBA students to assume hypothetically that they can receive 10% of the income of one of their classmates for the rest of that classmate’s career. He asks how they would choose. Buffett points out that it’s unlikely that you would give them an IQ test (research has shown that it has very little to do with monetary success – read Outliers). It’s unlikely that you’d just pick the person with the best grades.
He goes on to say that you’d probably consider a list of subjective qualitative factors when making your decision. His point ends up being that most of those subjective factors that you would use to make your decision are things that are within your control. If you wanted to be an honest person, for example, that’s something you could control. If you wanted to be humble, or hard working, or respectful of other people – those are all things you can choose to be. You can be like the people you admire for the most part, because most of the things you admire aren’t their skills or talents – it’s who they are.
I think asking who you would invest could be useful in other ways as well. If you’re an entrepreneur or a manager (or anyone that hires people or builds teams), for instance, you should ask yourself this question. More than anything, it’s just something thought provoking. My wife, Rachel, and I play a game where we ask ourselves what we would hire our friends to do. If we had a company that did ‘x,’ which of our friends would we hire? Who would do well? Who could we trust? Who would represent us in a way that we were proud of? It’s something we’ve talked about enough that we pretty much know what the other person’s answers are.
If I asked myself who I would invest in, though, that’s harder. If you can only pick one person, you want to maximize your investment. In Buffett’s scenario, he ends by saying that hopefully the answer will end up being that you’d like to invest in yourself, because you own 100% of yourself. Just for fun, though, pretend like you can’t choose yourself. Who would you invest in that you work with? If you’re in school, who would you invest in that’s in your degree program? (Also fun to think about is who you would go short on) Who would you invest in out of your friends? Is there anyone that you’d choose over yourself? If so, what do they have that you don’t have? How can you get it? It’s a question that makes you think. Buffett’s point is that you can do the necessary things to be successful if you want to. Good luck and thanks for reading.
Rule the World, Become Rich, Retire Early
Posted by: Todd Metheny in Business Profiles, Entrepreneurship, Interviews, Real Estate on August 4th, 2009
Katie's Kingdom
For a while now, I’ve wanted to start making interviews a regular part of this blog. I think it will help me to keep delivering quality content to people. Instead of the blog being limited to my ideas for posts and things I can research or come up with to write about, interviews will allow me to share more different ideas and viewpoints on the blog. Plus, I get to ask people in depth questions about how to do things without seeming ridiculously nosey. I’m excited about it.
This is my first interview. It’s with Katie Lewis. I have known Katie for about 9 years, and she’s a person who has been predictably successful. To know her is to love her. She’s witty, charming and great with people. My wife and I sometimes talk about who of our friends we would feel comfortable hiring for this or that. I’m confident I couldn’t afford her, but I would hire Katie for any sales job in a heart beat.
Katie is currently an associate financial representative and works under one of the most successful financial planners in the country. At the tender age of 26, she’s already had several career stops, starting out in a real estate sales position, then building a title company from the ground up, staying with it until the time of sale before settling in her current career. She’s on track to retire before she’s 40. Katie and her husband Jared also recently had their first child, a son they named Ben. But enough build up, I’ll let you read about her in her own words:
Q: Why don’t you start by telling me a little about your educational background.
A: I went to Duchesne High School in St. Charles. I enjoyed my high school days, but a person is either a high school person or a college person. I was definitely a college person! I learned a lot in high school, but it didn’t exactly expose me to a lot of diversity… so I wanted the big college experience (with in-state tuition, of course). I looked at all the state schools and some out of state programs just for kicks. At the time I was going into computer science/mathematics, so University of Missouri-Rolla had some appeal, but MU stole the show. I loved the large campus and town. And now, because I moved to KC after graduation, I get the honor of defending my Tigers every day to all these Jayhawks and Cornhuskers. I started MU in 2000 and after one semester I realized that computer science was the most boring thing I had ever encountered. It was NOT for me. I changed to math, then psychology, then sociology, interdisciplinary studies, and finally business. Obviously I was a little lost because there was no major called “rule the world, become rich, retire early.” I graduated with honors in 2004 from the business school with an emphasis in Marketing and 2 minors (German and Sociology).
Q: What was your first job out of school?
A: In October of my senior year I was offered a job with Pulte Holmes in Kansas City. I was from St. Louis, so KC seemed like the anti-christ. The Royals suck, the Chiefs fans were scary, and how could one live in a city with a sub-par zoo?? All my friends were vying for positions as buyers or marketing for major companies. Those jobs never “wowed” me. Anyway, after much debate I accepted the job with Pulte. It was a commission job in a new city where i knew no one and I was scared. It turned out the be one of the best decisions I’ve ever made. The company is great, I worked with 15 people exactly like me and now those people are my closest friends. KC turned out to be better than “anti-christ” and I’ve been here for the past 5 years. I sold new homes for 2.5 years, working every weekend without fail. I made great money and it made things possible for my husband and me that we never dreamed of at such a young age. What I learned from Pulte: the big corporation is great to work for in terms of stability and consistency, but don’t kid yourself… they are still a corporation and they don’t care about you. don’t give up your family time/holidays, etc., because at the end of the day they don’t care and you can’t get that time back. It all changes in the blink of an eye – your VP gets let go. A new VP comes in. They might hate you or your style. You are starting from scratch again. Or your division gets work from the corporate office of major changes. Those changes aren’t negotiable.
Q: How did you end up running your own title company? Did you start it from scratch? If so, how did you get customers and compete with more established businesses? Did you create a tangible business plan?
A: After Pulte, I was ready to get my weekends back and I didn’t want to work for a large company any more. I received financial backing and lots of guidance from a gentleman in StL. He owned 15+ companies and was interested in opening a new one in KC. Opening a title company is quite simple if you already have an underwriter in line, which he did. All the title searching was done thru the StL location, so I just needed an office in KC. There is a lot of money to be made in the title business because you can close so many deals in a day! It’s definitely a sales role though. You have to sell yourself first to get in the door of the mortgage company. Then you have to sell your company’s ability to do it faster and better than the competition… at a lower price of course. Then you have to actually get the deal, work up the closing documents (by coodinated efforts of the title company, mortgage broker, lender, and possibly the other party involved if it’s a purchase and not a refinance). Lastly, you have to sell yourself at the closing table. The borrower needs to trust you that you’re telling them all they need to know when staring at a stack of 80 pages of paper. I would normally have to make them like me, then explain their loan, sometimes resell their loan and tell them why it was a good loan/rate for their situation, and then make them happy before they walked out. A mortgage broker can call any title company they want. The only way to keep that broker calling you (and telling others how great you are) is to be PERFECT. I had to be quick, accurate, and sell their deal at the table if the borrower started getting nervous. Please don’t take that the wront way – borrowers are very likely to “panic” at the closing table. It’s a lot of paperwork, money and words they don’t understand. It’s scary!! It was my job to make them feel ok with their own decision.
Q: What does a title company do?
A: Title companies research the property to determine if there are any liens, owed taxes, etc. Also the coordinate the proration of homeowners association dues, homeowners insurance, property taxes, escrows from the lender, etd. Also they coordinate the transfer of funds between parties. You have to use a title company as a third party that is neutral. We don’t know the client or the lender so it’s just business.
Q: What is an underwriter?
A: Basically an underwriter backs the title company’s search. When you and Rachel bought your property in StL someone did a search to make sure they owner actually owned it and determined what liens/rights were held to that property. If they missed a lien, then the underwriter (like Old Republic – the largest) would pay to have this resolved, whether in court or otherwise with title insurance. Without an underwriter, title companies are just saying “looks good to us”. The underwriter guarantees it or backs it. your title is only as solid as the underwriting.
Q: What were the terms involved between you and the financial backer?
A: I had to get enough business to make it profitable in under 2 months or he would pull his name and his support. I had to get my notary and my E&O but the rest I could run thru his other businesses. It was very advantageous for him to stay involved because title companies make a lot of cash quickly if you have the client base.
Q: What equipment, software, knowledge, etc. is necessary to start and run a title company? How did you acquire those things?
A: I rented office space in the great business park in overland park, ks. All you need to run a title company is a computer, a fax, and a FedEx account. As I mentioned, I became a notary and had an E&O that is required for all notaries. The software needed to work up a HUD can be purchased from several different companies that specialize in this. That was easy too!
Q: How long did you own/run the business?
A: I ran the company for 6 months before someone came along and wanted to buy the client base. They approached the gentleman in StL and they negotiated the deal. He sold the name of the company as well so it was a very quiet “transition” that the clients never really saw.
Q: Did you have employees? Did you have an accountant?
A: No employees, just me working a LOT of hours. I ran my own payroll and the business money was sent to an accountant in St. Louis.
Q: Why did you decide to sell the business?
A: We were approached to sell the KC piece of the business by a company out of Colorado. They offered just a lump sum of $ and that was that. The thought was that I would just find a new client base, build it up for another 6 months and sell again since that worked so well, but I was not on board. I was done selling for a while.
Q: How did it happen?
A: The company from CO contacted us as well as 3 other title companies in KC and made a very premature offer. After several very long conversations they decided to go with our title company because we were already operating off of the StL main office so it would not be hard to transition to operating off of their CO main office. Also, my overhead was so low (just me) and my margins were quite high. Very appealing to them 
Q: Did a lawyer or accountant assist you with any part of the sale?
A: All parts of the sale had a lawyer involved.
Q: What are you doing now? How did get from owning to title company to the job you’re doing now? Do you miss being self-employed? Do you think you’ll ever be self-employed again?
A: Now I work at Northwestern Mutual for one of the top reps in the country (#5 this year – woo hoo!). I actually found this job thru the man who rented the office next to me at the business park in Overland Park, KS. My role now is quite different, mostly office work and lots of phone interaction with clients. I have been here 2 years already and love it. My boss is my employer, not actually Northwestern Mutual so he and I work hand-in-hand. It’s a big corporation but I work for one individual and he is sort of “self-employed”. I now am licensed in insurance and investments and we have a special niche market – we focus on tax efficient ways to build wealth. The client base is mainly lawyers, doctors, business owners, etc. I don’t miss being self employed because this job gives me lots of freedom and my boss empowers me so I don’t feel micro mananged. If you are interested in titles or “climbing the ladder” this is not the job for you. That doesn’t impress me anymore – all I care about is the pay check and job satisfaction.
Q: What do you attribute your success to?
A: That’s a hard one!! I would say that I’m very fortunate to have a great work ethic and I love talking to people so it makes it easy to put myself out there. I’m surprised how many people are afraid of rejection or even just picking up a phone to call a client. One of my largest flaws is that I love to please people. That makes me a wonderful employee and business partner, but sometimes I take on a bit more than I should to remain sane If it isn’t slightly uncomfortable you aren’t pushing yourself enough, right!?!
Q: What are you reading? Fiction or non-fiction? Do you have a favorite book?
A: I am reading Baby Proof (book about a couple who gets married with the intention of never wanting children and then the husband changes his mind) and the first Twilight book (I can’t stand hearing about something all the time and not knowing what all the fuss is about). I don’t have a favorite book – I’m a new reader. I never made reading a priority until a few years ago so I have a lot of catching up to do.. My husband is a book addict so he’s always handing me some boring history thing to read. No thanks. It’s funny to say, but I think everyone should put their flaws out on display in order to make them work on them. I’m a slow reader since I have not done a lot of reading (but i memorize every word I read) and I’m a terrible swimmer I grab a book and jump in the pool all the time, but that doesn’t make me good at either just yet!!
Q: Will Ben be an only child?
A: Nope, we want 3 or 4 and then plan on either adopting or foster parenting.
Q: Has gender been a significant factor in your career? How?
A: I have always worked in predominantly male fields – I think I do well in these enviroments because I’m rather unemotional. I do not cry easily, I sometimes talk harshly or pointedly to people when I think they are being intellectually challenged so I do not get offended if someone talks pointedly at me. I like the investment world and for whatever reason that is a male field. I think you have to have a certain “super man” complex to be in a commission business and men seem to have that more than women. Women think things through too much and are too calculating to work in a commission based world where you never know if you’ll eat again.
Q: Soccer or baseball? Europe or the beach? New York or LA? Seinfeld or South Park?
A: Soccer. Europe. Jamaica. Seinfeld. Steak. Ice cream. Rum and Coke. St. Louis Cardinals.
Q: Where do you see yourself in 10 years?
A: Funny you should ask, I am actually set to retire in 10 years. My husband will be a principal or superintendent by then and I have my retirement plan in line. We joke that I will be Jared’s secretary and secretly run the school with him as the “face” of the operation. In all honesty, I don’t know what I will do. I like being behind the scenes and not selling but I love to work so I’ll never settle down. I have a list called “me” of all the things I will do when I have time so I’ll work on that as well. I will probably get my masters because I can’t stand the idea of Jared having more education than me. Ultimately, I would like our mailbox to read “The Doctors Lewis”. Also, after our kids are gone, we will move back to Columbia and be professors at Mizzou.
Q: What advice would you give to someone interested in starting or acquiring a business?
A: I would say you need to be ready to work your ass off and really assess yourself. Can you handle being rejected over and over and over again? It’s important that you are resiliant and focused.
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Conscious Capitalism
Posted by: Todd Metheny in Business Profiles, Economics on August 3rd, 2009
When I was in law school, my Business Organizations professor, a really nice and smart fellow named Tony Luppino, handed out an interview with Milton Friedman in which he stated that the only social responsibility that a company has is to increase profits. The argument goes something like this, if you are elected to the Board of Directors of a company, your stated purpose is to make money for the people that voted for you. The people who elected you didn’t vote for you so you could use the company to pursue your vision of a better world, the shareholders elected you so you could make decisions in line with the fiduciary duty you have to them. Your duty is to the company, not to the rest of the world.
If you’re elected to the board of directors of a cigarette company, for example, you should be focused on selling more cigarettes rather than reducing their prevalence and their propensity to make people addicted to something that eventually makes them sick and shortens their life span.
There’s a movement away from Friedman’s viewpoint. Many companies are showing that sometimes what’s best for the world, in the long run, may also be best for business. Companies like Google (GOOG) (the one that stands out the most to me), Microsoft (MSFT), Whole Foods (WFMI), Berkshire Hathaway (BRK-B). Henry Ford was once famously sued by his shareholders for pursuing what was his vision: that every American be able to own their own automobile. He was focused on making cars more affordable rather than doing what some shareholders believed he should have been doing, which was maximizing shareholder value.
Google stands out because of their motto, “don’t be evil,” and for their drive to make things better. To make knowledge more available. They recently held a contest for someone to make the world a better place. And they were willing to invest up to $10 million in the idea. It was venture capital. They weren’t running it as a charity – they were running a business. They were going to make money off of the idea, if possible. I think that’s reasonable. You can make the world better and make money at the same time. It’s possible, and it’s what a lot of companies are shooting for.
On the other side of the coin, there’s the Bill and Melinda Gates Foundation, which is an effort to make the world a better place with no possibility of making money. The Foundation has a directive to spend all of its money in the next 50 years, so they’re shooting to make an immediate impact. They could have set up the Foundation so it only paid out the required 5% distribution to remain a charitable foundation, and it would have lived on well beyond them. They would have been historically very famous if they had chosen to dole out their money this way. They didn’t. They don’t take money from other people, either (with the exception of Warren Buffett – whom they accepted about $30 billion from). If you want to help the Foundation, they’ll tell you that you should donate to their causes, not to them. The money in the Foundation came from Bill Gates‘ company, and he turned it around and used it in his attempt to reduce poverty and improve education.
The movement toward business that gives back is an important one, but the lines aren’t clearly drawn. My brother-in-law is starting a company that he believes will make the world a better place. The tough part comes in when his shareholders, like Henry Ford’s, accuse his board of not putting shareholders first. Not everyone has the same plan of making the world a better place that business visionaries do. What happens when shareholders challenge the companies plan. Worse yet, what does a company do when faced with the possibility that it won’t be profitable? Does it stick to its goal of making the world a better place? What comes first? How do you balance the two things? Friedman’s view keeps this clear cut and simple. People know their roles and can make logical decisions according to those roles. In some ways it’s hard to disagree with that. The new way is harder, but it also has the potential to be better. Companies that care about the world (like my brother-in-law’s!) have power. It’s a form of technology, really. The same way products keep innovating to make them more efficient and useful, companies seem to be at the next stage of their innovation. They can be about making money and doing good at the same time. What do you think? Do you agree or disagree with Friedman’s take in the clip above? Don’t be evil and thanks for reading.
Peer to Peer Lending with Prosper
Posted by: Todd Metheny in Business Profiles, Value Investing on July 28th, 2009
I don't know...do you think these gents are good for it?
Since I recently wrote a couple of posts about Lending Club, I thought I would look at Prosper, one of the other big players in the Peer to Peer Lending space. Prosper is built on the same concept as Lending Club. People who need money borrow it from regular people instead of banks. People who have extra money can invest it in loans to the people that need money, and in return can get a better rate of return than they could have gotten from their bank.
Prosper and Lending Club won’t be the last internet players to enter this space. They’ll be the pioneers that are paving the way with a short lived, small competitive advantage based on longevity and name recognition. Once the kinks are worked out, the market is going to be flooded with these types of sites, assuming that it’s a success. I predict it will be. It makes sense to me, and it’s the type of movement that people like to be a part of.
I had unanswered questions and unanswered emails from Lending Club, so before I wrote this post I emailed Prosper to ask a few questions that were raised by a commenter named Patrick on my Lending Club post. Patrick’s questions were concerning Missouri’s approved status as a state. I’m pretty sure all 50 states will eventually be approved in both cases. So far, Prosper has 17 approved states, and their goal is to be approved in 25 states by September (according to their email).
Like Lending Club, they’ve been approved by Federal Regulators and now have to go through the process of becoming approved with the appropriate regulatory bodies in each state. This process takes a considerable amount of time in some cases, but I assume that both companies are working on it. I’m a little sour towards Lending Club because I emailed Rob from their company after he left a comment on my blog and got no response. When I emailed Prosper asking for the same info, I got a same day response. Here’s a blog post on what Prosper is doing as far as the regulatory process goes.
Prosper is a little different as far as the system of setting interest rates goes. You can actually place a bid based on what interest rate you are willing to lend at, and so are others, and interest rates are moved in that way, through an auction process. Lenders compete for the loan and by doing so, bid down the interest rate on the loan.
I think we can only expect Peer to Peer Lending to get bigger. I don’t have a recommendation as to investing with Lending Club or Prosper. They’re both fine options. Lending Club boasts of slightly higher average returns (9.61%) than Prosper’s (just over 7%, in A and B loans), but Prosper’s auction system appears to be a little better one for borrowers, and therefore maybe that’s where all the most credit worthy borrowers will end up. I don’t know. I think it’s a good place to have a little of your money. More than anything else, whether they make money or not, I love ideas. I especially love ideas that aren’t pursued in the name of money, but because they make sense. Sometimes those ideas end up making people money, anyway. If you have experiences with Prosper, or an opinion as to why one would be better than another, I’d love to hear about it by email or in the comments. Thanks for reading.
