Brooke Allen

In the Best Interest

© 2009 Brooke Allen
brooke@brookeallen.com www.BrookeAllen.com
Originally published in International Family Magazine
Republished in Folks Magazine on 10/17/09.

In 1981, I decided to create my own consulting company. It occurred to me that I must learn more about selling if I was to find clients and flourish. For this I took a short sales training class over a weekend. On my next vacation, I visited my grandparents in Cornwall, where we had the following conversation over lunch:

“Grandma, do you remember when my sister and I spent the summer here in 1966?”

“I sure do. That was a great time, wasn’t it?”

“It was.”

I paused for a moment. I wasn’t sure how to begin, “Well, I’ve taken a class on selling. Thinking back on that summer, I believe you were using sales techniques on us.”

“How so?”

“After dinner, you would say something like, ‘Do you want to clean up before dessert or afterwards?’ That is called the alternative choice close.”

She winked at me. “That’s true. Go on.”

“Then there was the time you made a list of all the reasons I should learn horseback riding even though I didn’t want to. Then you gave me the paper and asked me to list the reasons I should not. I couldn’t think of anything.”

She smiled, “That’s called the Benjamin Franklin close.”

“You would say things like, ‘After we go to the art museum, we’ll go for ice cream.’”

“Closing on a minor point.” She even knew the names of these techniques.

“We could never play you off against granddad like we could with our parents. In fact, it seemed to work the other way around. You might say something like, ‘If you promise to clean the table, wash the dishes, and put your clothes away, I’ll then go see if Granddad might take us out for dessert. But we only get this one chance to ask. Is it a deal?’”

She chuckled. “In my day we called that the MacAdoo close. I think it was named after someone called MacAdoo. Car salesmen use it all the time.”

I was stunned. She knew all these things I had just learned a few weeks earlier.

“That summer in 1966 was kind of weird. Ruth and I enjoyed doing chores for you that we hated to do at home. You seemed so appreciative.”

“We enjoyed your company so much and we did appreciate the help.”

“But grandma, you never worked as a saleswoman, did you?”

She laughed. “Well, there was the time that a builder gave us a house. First, he agreed to let us live in his model home. Then, since I helped him sell most of the other houses in the development, he gave us the house as a reward.”

She continued, “When your dad and his brother were very young we came to know Dale Carnegie. I learned a lot from him so I thought I’d apply his techniques to raising our children. They worked.”

What an amazing confession. “Don’t you think you were being manipulative?”

Her answer: “Not at all.” She paused. It seemed that she wanted to phrase her answer just so.

To persuade another of something is not manipulative if you are doing it in their best interests and not just your own.

Rejection

208641140_a9a7f6da5b_b © 2009 Brooke Allen
brooke@brookeallen.com www.BrookeAllen.com
Originally published as Borders in International Family Magazine
Republished in Folks Magazine on 9/12/09.

Dennis and I had never been to Canada.

So, in February of 1971 we decided to hitchhike from Terre Haute, Indiana to Toronto by way of Detroit. A kindly gentleman in a pick-up truck offered to take us over the bridge to Windsor, on the Canadian side of the border.

He said, “If you are dodging the draft, don’t tell me, but I’m willing to try to get you across.”

At the border, the guards asked him who we were. “Just friends.”

We would have made it had our backpacks not been spotted in the bed of the pick-up. The three of us were interrogated in separate rooms. It was clear our driver knew nothing about us. “I’m sorry, but we are going to deny you admission to Canada. You must return to Detroit.” The official sounded quite official.

I felt like I’d been punched in the stomach. Then I felt guilty; I had just been treated as if I were a criminal. On top of this, I felt tremendous rejection.

Dennis seemed quite cheerful. “Great.” He said, “Would you write me a letter?”

“What?”

“I just want you to write me a letter rejecting me from Canada.”

“We’ve never done that before. I don’t even know what you are asking for.”

“Well,” He paused, “Since Junior High, I’ve been writing short stories and submitting them to literary magazines. I have not yet had a story accepted, but I have quite a collection of rejection letters from some of the world’s finest publications. However, this is the first time I’ve ever been rejected from an entire country. Would you write me a letter?”

The fellow laughed. “Why not?”

“Great. I’ll tell you what to say.”

——————————-

Dear Mr. ##########

Thank you so much for your submission to Canada. Unfortunately your offering does not meet our needs at this time.

We wish you the best in your endeavours.

Regards,

Canada

P. S. God Save the Queen

————————————

That night we managed to hitch to Oberlin, Ohio and spend the night in a house full of young co-eds. That was fun.

The next day we attempted to enter Canada for a second time, from Buffalo. The border guard spotted us immediately. A telex had been sent from Windsor describing two whackos.

As he pulled us out of the car, the guard said, “I suppose you’ll want another rejection letter.”

If you are going to go far, you’ll need to deal with lots of rejection. Start a collection.

TV Fatality

An old trashed TV with a smashed screen isolated on a white background. © 2009 Brooke Allen
brooke@brookeallen.com www.BrookeAllen.com
Originally published in International Family Magazine

In 1960, when I was eight years old, my parents bought a television. It was a black and white console model and it cost my dad about a month’s take-home pay.

It changed my life.

I could now entertain myself without friends, family, books or using my imagination. I could pretty much have fun without doing anything.

It started slowly but by the end of the decade that box had taken over our family. We would even watch television while eating dinner.[1]

In September of 1970 I went off to college in Indiana. For nine months I did not watch one second of television.

While flying home I practiced the first words I would say to my parents, “I have lived the greater part of a year without television. I will stay the summer in your house because I don’t have enough money to stay somewhere else, but I warn you that I refuse to watch television with you. There are so many more important things to say and do.” After my time away, I had so much I wanted to discuss with my folks, and the thought of competing with Laugh In, Ed Sullivan and the Million Dollar Movie both scared and sickened me.

“Dad, there is something I must say to you.”

“Sure, son. But first, are you still into ham radio?”

“Yes.” There was an amateur radio club at my college and I’d remained active.

“Do you still keep a junk box?”

“Yes.” A junk box is a large chest in which electronics enthusiasts place old equipment from which they hope to someday cannibalize parts. In the ninth grade I had taken apart a discarded television and rewired it as my first short-wave transmitter. Using Morse code, I’d been able to contact people in every state and dozens of countries with that “homebrew” transmitter.

“I’m glad,” he said. “The television is in the barn.”

It was in pretty good shape except that there was a bullet hole through the picture tube.

My family had figured out the same thing I had. One evening, after dinner, my dad gathered my mom and my sister around the TV and he shot it.

Usually, the best way to end an addiction is cold turkey.

[1] Warning: Extremely dangerous — do not try this at home.

Can You Afford It?

Worried business woman sitting behind the desk with empty wallet © 2009 Brooke Allen
brooke@brookeallen.com www.BrookeAllen.com
Originally published in International Family Magazine

It is important not to buy stuff you cannot afford.

I attended a presentation by a professor who talked about how, as a child, his Dad drove their cars into the ground even though their less successful neighbors purchased new ones every few years. His father said they could not afford new cars. The young man did not understand – they had enough money. His Dad said, “people afford what they want.” His father wanted him to go to college and that meant he could not afford new cars. His dad’s statement led to a career – Lowell Catlett is now Dean of the Agricultural Economics Department at New Mexico State University.

There is an infinite amount of stuff out there and even the wealthiest person cannot afford it all. To lust after things you cannot afford will make you unhappy. To buy stuff you cannot afford will make you broke.

There are different levels of how well you can afford what you want:

Level 0 – There is no way you can buy what you want.

Level 1 – Someone will lend you the money to buy what you want.

Level 2 – Your cash flow from what you are currently doing is sufficient to buy what you want.

Level 3 – The cash flow from the next best thing you could be doing is sufficient to buy what you want.

Level 4 – The interest on your savings is sufficient to buy what you want.

When I was a college student in 1970, nobody in their right mind should have lent me any money, and given that bankers then were in their right minds, they didn’t. Today, there is a huge industry devoted to getting people hooked on living at Level 1. These people think you should care about your Credit Rating, which is a mathematical score lenders use to determine if you can stay at Level 1 long enough to repay them. If you can’t cover your debts, you will discover that you have dropped to Level 0, even for things you have already bought, like a house or a car.

My parents started at Level 2, and they suggested that I want to be at Level 2 as well. They gave me $500 to start me out. My college lent me $1,000, but living at Level 1 was so scary that I paid that money back on my second installment. I’ve stayed at Level 2, or above, the rest of my life. Living at Level 2 used to be called “living within your means” before marketers convinced people that the ability to borrow money was a “means.”

A friend sends his son to private school. He makes enough money to do this without borrowing. I asked him if he would consider leaving his current job for another that pays less. He said he could not because then he could not afford the school. So, he can afford what he wants at Level 2, but he cannot afford it at Level 3 since he cannot afford to lose his job.

There are two ways to advance from Level 2 to Level 3. 1) Lower what you want enough so that if you lose your current job you can still afford what you want with the next best job available to you, 2) Advance to a higher paying job without increasing your wants.

Living at Level 3 allows you to accumulate wealth. This comes from saving the difference between the money you are receiving and what you are spending. At this point, you will view Credit Ratings in a different light – from the point of view of a lender.

You might even accumulate enough wealth so that you can live your life entirely from the money generated by your wealth. Then, you will be free to do anything you want as long as you do not start wanting things you cannot afford at Level 4. People who get to Level 4 live well in retirement.

Charlie Munger, Warren Buffett’s partner, was asked how he became so successful.[1] He spent his money to meet his needs, not his desires. He also worked very hard on increasing the value of his second best option (known to economists as “opportunity cost”). Charlie was 60 years old, and a multi-millionaire, before he bought his first new car. He lived at Level 4 before deciding that a new car smell was worth wanting.

Many of us have been living at Level 1 far too long, and are now in the process of dropping to Level 0. This is sad, particularly at a time when the second best option is also declining, in many cases to zero (unemployment).

There is a bright side.

We will learn how little we really need.

We will learn how much we need each other.

Before you want a thing, determine how much you really need it.

Then determine how well you can afford it.

[1] For this and more wisdom from Charlie Munger, see: http://www.tilsonfunds.com/Whitney%20Tilson%27s%20notes%20from%20the%202007%20Wesco%20annual%20meeting-5-9-07.pdf

Your Education is Your Most Valuable Asset, not Your Schooling

My mother was born in West Virginia and that made her an American citizen by birth. Her father was a naturalized German-American, and her mother was a native Italian. Her parents decided to raise her in Florence, Italy.

When it became clear that the Fascists were going down a path of no return, my mother and her father decided they had to get out of Italy. They flew to Lisbon on the last airplane to leave Rome before the airport was shut, and they crossed the Atlantic on the last passenger ship before German U-Boats began sinking them. They arrived in New York with little more than their clothes. My grandmother stayed behind in Florence, and she never saw her husband again.

A few days before I left for college, my father told me, “Your education is your most valuable asset.” I was seventeen, and I thought everything my father said was stupid, so I challenged him, “How can that be?”

He said, “Because your education is the only thing they can’t take from you at the border.”

You see, besides her clothes, my mother brought something else with her when she arrived in New York. She was fluent in Italian, French, German, Spanish, and English. She was good enough at math and science to enter university as a Physics major.

She was educated – and the Fascists could not take that away.

Your Education is Your Most Valuable Asset.

Trade or Profession

I have just returned from the annual meeting of the Chicago Quantitative Alliance (www.cqa.org) where one speaker made a convincing case that the brokerage and banking systems are bankrupt and another made the case that so is the Federal Government.

The world is going to hell, and we don’t even have a hand basket.[1]

At the lunch break I asked the fellow sitting next to me what advice he had for my children in college.

He said, “Drop out of college and learn a trade; they can always go to college later.”

That reminded me of a joke. A lawyer has a leaky faucet. He calls the plumber who fixes the faucet and presents a bill for $100.25.

The lawyer is livid, “How do you justify such an expense?”

“Twenty-five cents for the washer and $100 an hour for my time – one hour minimum.”

The lawyer says, “I’m a lawyer and even I don’t get $100 an hour.”

The plumber says, “That’s funny – when I was a lawyer, I didn’t get $100 an hour either.”

The joke reminded me of the advice my father passed on from his dad, “Develop both a trade and a profession.” Even as he rose through the ranks of management at United Press International, granddad maintained his skill as one of the world’s top telegraphers.

In 1990 we moved to Japan to advance my career as a securities trader, but in 1993 I was laid off and returned to the United States to find the nation in a recession. There was a dearth jobs that offered career prospects. Luckily, throughout my rise in management, I’d kept up my skills as a Pretty Good Programmer and quickly found that there was plenty of work for those who were willing to trade an honest day’s work for an honest day’s pay.

Don’t trade a chance at a trade for a profession – get both.

[1] For those of you who have not heard the expression, “Going to hell in a hand basket,” now you have.

Sincerity

When my grandparents lived in Bogotá, Grandma became bored.

My grandfather told her that she could spend $1,000 (which was a fair bit of money in the Depression) on a hobby, but it would have to pay for itself.

She decided to become a painter.

She would have to sell her paintings to buy more art supplies if she was to continue to paint after the original money ran out.

This meant that she would have to become good enough that people would buy her paintings.

Eventually she made so much money she couldn’t spend it all on art supplies so she started buying real estate.

Some artists become attached to their work and hate to sell it.

Grandma Anne was the opposite. She said,

Everyone will compliment your work, but when they write a check, you know they are sincere.

Why? Why not?

Someone said, “Mardi Gras starts today.” Six of us shared a table for dinner at the small engineering college in Indiana.

I said, “Let’s go?”

Four people said, “Why?”

Roger said, “Why not?” Roger, who had grown up in Indiana, had only once ventured outside the state for a weekend in Chicago.

That snowy February evening our friends dropped the two of us on Interstate 70. All we had was $20 and our thumbs. Our friends gave us a phone number. “Call when you’ve had enough of this silliness and we’ll come and get you.”

The next day we called, “You can come and get us if you want.”

“Where are you?”

“New Orleans.”

That day my life changed.

“Why don’t we take a trip around the world next week?”

“Why not?”

“Why go to graduate school?”

“Why not?”

“Why get married?”

“Why not?”

“Why change careers without notice?”

“Why not?”

“Why have children?”

“Why not?”

“Why move your family to Japan for a few years?”

“Why not?”

“Why are you writing this?”

“Why not?”

My world opened up on that freezing day in 1971 when I changed how I react to opportunity.

Live not by “Why?” but by “Why not?”

Money

My father told me two things about money that had a profound effect on my life. They were:

“Money should buy freedom, not chains.”

and,

“It is easier to make money doing what makes you happy than to buy happiness with the money you are paid for doing what makes you miserable.”

Even though I can remember my father’s explanations, at the time (age 17) I thought he was off his rocker.

He explained that if you had a certain amount of money, and then someone gave you more money, you should have more options open to you.

This seemed self-evident, but I didn’t buy the part about chains.

Imagine someone who always wanted to be a school teacher who, in order to make more money, became a principal, then moved to the private sector as a salesman, manager, and finally a senior vice-president earning ten times his potential salary as a school teacher.

Since our hypothetical teacher had given up teaching for more money, you would expect that finally, as a highly paid executive, she (or he) should have plenty of money to finally fulfill an ambition of being a teacher without the money worries that plague most teachers.

But for nearly all, such a person sees their options dwindle rather than expand. They measure their success in how much money they make and the prestige that comes with position. From Senior Vice President, they only want to become President.

Worse yet, this person often borrows against an expectation of a rosier future and finds themselves a slave to home payments, credit card debt, private school bills, college tuition, and the economic cycle.

I recently had lunch with a friend who has started a financial consulting firm. His distinguishing feature is that he will tell his clients the truth rather than what they want to hear.

He said, “Ninety-percent of Americans live beyond their means — no matter what their means.” He gave an example of a client in mid-life who was worth $15 million from which he earns $650,000 a year. However, he spends $1.2 million a year and he wants my friend to find him a safe investment to support his lifestyle. This is a mathematical impossibility. My friend could calculate how quickly the client will find himself on welfare.

I wonder how much misery must this client need to overcome when $650,000 a year doesn’t do the trick.

I like to end these pieces with succinct words of wisdom. I can do no better than to repeat what my dad said to me during my Senior year in High School, just before he gave up a career in the business world to return to sculpture full-time.

Money should buy freedom, not chains.

It is easier to make money doing what makes you happy than to buy happiness with the money you are paid for doing what makes you miserable.

When Pigs Fly

pigs-g23722c8cb_1920

In 1977, American Airlines offered me a job in Manhattan in their Operations Research group and I took it.

One of our projects was to build a mathematical model to determine how much we should overbook each flight so as to maximize profit. You could generate happy clients when there isn’t enough room in coach by bumping them up to first class. But if you throw them off the plane entirely you might lose them forever.

On the other hand, since a full-fare customer could use their ticket on any airline at any time without penalty, if you kept a seat open for everyone who said they would fly with you then your planes would fly half-empty. It was an economic necessity to overbook, and every airline did it, but I was not about to tell my friends about this part of my job. Nobody really thought an airline should promise something and then not deliver. Nobody. Including me.

Fifteen years later, we found ourselves living in Tokyo and planning a visit to relatives in England. I made a reservation on Japan Airlines but, after we realized that the flight landed at a very inconvenient time, we made a second booking on British Airways.

Upon return, as we walked through the door to our home in Tokyo, the phone was ringing.

“Hello, is this Mister Allen?”

“Speaking.”

“Are you OK?”

“I’m fine.”

“And your family; is everyone all right?”

“Sure. Who is this?”

“This is Japan Airlines. A week ago you had a reservation on our flight from Tokyo bound for London’s Heathrow airport. You didn’t show up. We held the plane for 15 minutes and you still didn’t come so we took off without you. We can make up fifteen minutes in the air but eventually we had to go because it would be inconsiderate of our other passengers to wait any longer. We just want to make sure you are all well.”

“We’re fine. We flew on British Airways instead.”

“You flew on British Airways?”

“That’s right. We had full-fare tickets and they are good on any airline.”

“That’s true. But you didn’t tell us.”

“We don’t need to tell you. We can use our tickets on any airline at any time.”

“That’s true too. But, by not telling us, you were being inconsiderate.

Just because you are a customer does not make you always right.

——————

Airsickness bag design from Rubber Cheese Limited (www.rubbercheese.com ). View other Barf Bag Contest entrants at: www.designforchunks.com