The wisdom of what not to do
The famous investor Charlie Munger once said, “A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.” I think this quote, much like an elevator operator, speaks to me on many different levels. 😀
Often deciding what not to do is just as important as deciding what to do. If investing in profitable companies such as Cineplex, and Mondelez is how I’m generating profits each year, then not buying lousy investments is how I’m able to hold onto my gains. A strong combination of financial offense and defense is the best recipe. 🙂 A few years ago a marketer I met at a real estate seminar suggested I should invest in distressed houses in Detroit. His pitch was interesting, but I ultimately refused the offer because it was outside of my comfort level. 😐 I’ve saved a lot of money by knowing to simply not partake in something I don’t understand.
Too many teenagers in the world are still picking up the costly habit of smoking. Buying a pack of cigarettes every day can cost more than $5,000 a year. There’s also the immense cost to one’s health. According to the Centers for Disease Control, smoking costs the United States $300 billion a year in medical care and lost productivity.
Too many high school graduates rush off into college without considering all their options. Sometimes it’s better to postpone university. It’s okay to not do what all our friends are doing. Sometimes we need to take some time off to discover what we really want to do with our lives.
Too many people rush into marriage without really thinking it through. This leads to a higher chance of separation later on. 🙁 If the goal is to end up in a happy, stable relationship then being single is miles ahead of being in an unhappy marriage. Single people are already free to meet others and develop compatible, long lasting relationships. But incompatible couples who are in dysfunctional marriages have to first divorce and reconcile any baggage they may have before they’re finally ready to date again.
In 2006, Yahoo offered $1 billion to buy Facebook. Many of Facebook executives and investors liked the deal and wanted to sell the company. But the 22 year old founder and CEO, Mark Zuckerberg, decided to not sell his company. In the following year, Microsoft offered them another deal that valued Facebook at $15 billion! Once again, the deal was rejected. Apparently that was the correct decision for Facebook because it went on to become a publicly traded company and is worth $264 billion today!
Peer pressure and social norms can be very persuasive. Sometimes that can be helpful, but we have to know where to draw the line and not be a pushover. Whether it’s financial, career, or relationship related, we can save ourselves a lot of trouble simply by knowing what not to do. 🙂
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Random Useless Fact:
The baguette is considered to be a symbol of French culture.
READ ALL THE WAY TO THE END
Business lesson number one! The MOST important one.
One day Darren got so frustrated that he went to his co-worker and said “I’ll give you $100 if you let me have sex with you.” The girl looked at him and then said, “NO!”
Darren said, “I’ll be real fast. I’ll throw the money on the floor, you bend down and I’ll finish by the time you’ve picked it up.” She thought for a moment and said that she would consult with her boyfriend.
So she called him and explained the situation. Her boy friend says, “Ask him for $200 and pick up the money really fast. He won’t even be able to get his pants down. Then give me a call.”
She agrees and accepts the proposal
Over half an hour goes by and the boyfriend is still waiting for his girlfriend’s call.
Finally, after 45 minutes the boyfriend calls and asks, “What happened?” Still breathing hard, she managed to reply, “The bastard had all quarters!”
Management lesson:
Always consider a business proposition in its entirety before agreeing to it and possibly getting screwed.
Lol, I was not expecting the twist at the end.
Investing decisions based on emotions and pressure never have worked out for me. For example, buying more of my company stock (even after the regular stock purchase plan) because my colleagues (even those at the top of the company) were doing it did not work out. The company was not one I would normally buy based on the fundamentals and it didn’t perform well. I learned to listen to my own analysis and not get caught up in the hype.
It’s hard to be not biased in that kind of situation. Sometimes the best course of action is just to diversify away from what you’re closest to. It took him awhile, but Bill Gates slowly reduced his Microsoft shares over time. He only has 4% of it now. Most of his assets is in a private firm that invests in a bunch of other things outside of technology.
Thanks Liquid for your thoughtful post. Want to suggest for future articles on ideas how couples can grow and protect wealth together. I think this would particularly appeal with your audience who have followed for years as they are getting older, tying the knot, and starting families of their own. Presuming you are single thus far, many of your articles are very helpful and educational; however, often told from a single person’s perspective – at least an individual with sole discretion on what to buy, what to sell, and what opportunities to go for. Research has shown that savers are attracted to spenders and vice versa. So how can a couple reconcile this difference and ensure that the wealth they built together during singlehood can continue to expand as a merged couple, and @ the same time minimize the debt incurred while single… Also, once you have amassed your financial target, would it be difficult for people like yourself to meet a genuine wholesome other half? My experience with people who have “made it” financially speaking (as in meeting their financial goals of buying a home mortgage free, or reached financial independence, sold a successful business, etc…), are not the… Read more »
Viven… I think you point out a very good point… As many folks are becoming financially fit so to speak on their own and being single…. I think it does have a way to tend to shift your thoughts about your standards in a partner in the future.. Why spend several years working towards that goal to later marry someone with a boat load of debt who didn’t plan very well..
Marrying young forces people to grow into that or just get divorced… Creating your independence has it’s own challenges as I have feelings that with my financial status if and when I do get married I won’t have to work any longer because I won’t need to.. but my partner on the other hand will still be working away another 20 years.. It kind of seems like a weird situation…
cheers!
Misery, and love!, acquaints a man with strange bedfellows. ?
Great suggestion, Vivien. I think that’s a topic many visitors would enjoy reading about. I’m afraid it’s not something I have a lot of experience in, though. I can always find someone who’s in a financially stable relationship to guest post about their experiences. 🙂 Let me know if you’d like to contribute. Based on some initial thoughts, I think it would be prudent to live with someone for awhile before deciding whether or not to marry them. If two people can’t agree on money and neither of them are willing to change, then it’s probably not meant to be. I think sharing financial information is important as well. Being upfront about poor habits or personal debts is better than misleading a partner. Intentions can speak louder than actions. I’m not sure if it’s more difficult for someone who’s got their finances all figured out to meet someone. I wonder if any scholars have done research papers on these topics lol. Hey Tim, I’ve thought about that before too. The way I see it once a couple becomes married their incomes and assets become mingled together. Let’s say I plan to retire at age 35 with $30,000 a year of… Read more »
Thanks for the reply Liquid. I also really enjoyed listening to the Podcast. You’re real! Ok, confirmed! haha, are you starting to recognize your commentors too now? I look forward to hearing you speak in person someday!
I totally agree with what Charlie Munger said, “A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.” If I would the CEO of Facebook, I would definitely do the same as what Mark did.
I’m not sure if I would’ve held out like that. It certainly takes a certain kind of personality to turn down $15 billion lol.
An article about you in CBC: http://www.cbc.ca/news/business/low-interest-rates-prompt-savers-to-borrow-to-invest-1.3172662
Congrats man!!!
Haha. Nice find, bro.
I may be in the minority here, but FB value at $264 billion is absurd. No one in their right mind would think that price earnings of almost a 100 is attached to reality. That P/E ratio roughly implies a 50% growth rate. Gordon Geko help anyone who thinks Facebook can grow consistently at 50% for years to come.
On a different not, nice spot on CBC Business – will be interesting to hear what the traffic boost from that is like.
As actual finance professional/blogger/author Ben Carlson @AWealthofCommonSense terms it, Negative Knowledge.
And almost everyone has a ‘winners bias’ mentality — we choose to study only the victors, but it’s just as valuable to study the how and why of failure (e.g. VHS vs Betamax).
Agreed re Facebook. It is not worth $264 billion, it is PRICED at $264 billion. Worth and price are often two very diffent points, especially in public markets.
Nice lines in the CBC, Kev. Planning your own follow-up article on the same topic?
http://www.cbc.ca/news/business/low-interest-rates-prompt-savers-to-borrow-to-invest-1.3172662
If you are in the minority then I’m in it too. That’s the reason I don’t have $FB today. I’ve always wanted to won a piece of the social media giant, but ever since its IPO I just can’t justify the stock price premium lol.
Nice find, Anon. 🙂 Negative Knowledge. I like that term better. Yup. Facebook has a ridiculous valuation.
“Nowadays people know the price of everything and the value of nothing.” ~ Oscar Wilde
p.s. — my wife was just in France…they have bread laws: bread has to be baked fresh 3-4 times a day, baguettes are price controlled ~€2 or less, etc. It’s serious business!
Haha. Interesting bit of trivia about the supply management of bread in France. THAT should’ve been my random useless fact. 🙂