Category Archives: MONEY

The Weekly Billionaire Case Study: Sarah Blakely

I told my youngest daughter this morning that I am trying to write a quick article about a different Billionaire each week.  This week I was planning to write about either Warren Buffet or Sarah Blakely.  I asked my daughter to choose between these two for me, and since she is familiar with the ‘Spanx’ brand, she chose Sarah Blakely.

My daughter is 14 and she is familiar with the Spanx brand. I have not really heard of Spanx before this year, or if I have, never thought much of it. That is until one evening when my girlfriend and I were pondering applying for a patent on a goofy sock idea we had (that’s another story). While searching for information about patents I stumbled upon the story of the creation of Spanx and it’s founder, Sarah Blakely.

Here are some things that strike me about the meteoric rise of Ms. Blakely and the Spanx brand:

  • Ms. Blakely scored low on the LSAT. Boy can I relate!
  • She went to work for Danka selling fax machines door-to-door.  This sounds like a brutal job to me, but I’m sure this experience provided the spark and sales skills she needed to start her own successful enterprise.
  • To build a prototype of her idea, she went to hosiery manufacturers in North Carolina.  She promptly discovered that the female undergarments industry was dominated by men who never actually tried the garments out they were making (at least none that would admit to doing so).  She stumbled upon a complete lack of female influence in the production of undergarments for women!
  • Her Dad taught her it was OK to fail, and apparently even encouraged it.  Robert Kiyosaki (‘Rich Dad, Poor Dad’ author) is constantly harping on the Public Education System for not allowing kids to feel comfortable with failure.  Many people who are afraid of failure may never try to do something hard or new, and thus may never realize big success.
  • Ms. Blakely worked full-time at Danka while she was working on Spanx business and only quit in 2000 when Opra featured her product on the Opra Show.
  • In the ideation of the ‘Spanx’ Brand name, she wanted to create a name that had a hard K sound in it, like successful brand names Coca-Cola and Kodak.
  • Spanx first year revenue was $4 million.  Second year revenue was $10 million.  Then she signed a contract with QVC and sold 8,000 units in the first six minutes of operation!

Forbes estimates Ms. Blakely’s net worth at $1.08 Billion today.

The Weekly Billionaire Case Study: John Schnatter

“All you’ve got to do in life is find something you love and are good at.”

John Schnatter is the founder of Papa John’s Pizza.  I was skimming my latest edition of Bloomberg Businessweek (edition June 11, 2017), and started reading my favorite section in the magazine: ‘How Did I Get Here?’  I was immediately interested to learn that Schnatter grew up in Jeffersonville, a small town in southern Indiana.  My family, on my Dad’s side, is from New Albany, IN, which is right next door to Jeffersonville (or ‘Jeff’ as my Grandmother used to call it) – both towns are immediately across the the Ohio River from Louisville, KY.

According to Forbes, Schnatter is the grandson of German immigrants who came to the U.S. in 1867.  His grandfather and father were entrepreneurs.  His grandfather owned three successful businesses, while his father started 20 business that all faltered.  Schnatter started working to earn money by cutting grass at 8 years old, and started painting gutters at 12 (starting to work for an income early is generally a sign of financial success later in  life).

Jeffersonville, IN is a pretty small town.  Not much appears to be happening there, at least the last time I was there, 5-6 years ago.  In fact, one of Schnatter’s Life Lessons is: “If your business can be successful in Columbus, Louisville, or Evansville, you’ve probably got something you can franchise.”  Presumably, he chooses these cities because of their relative size and the amount of business taking place in, and around, them.

So, Schnatter graduated from Ball State University in 1983 or 1984 with a degree in Business.  Nothing remarkable there.  But before he graduated from college, he may have discovered a secret to his future successes.  While working as a dishwasher and pizza cook at Rocky’s Sub Pub from 1977-78, he discovered that he hated washing dishes!  He also discovered that if he made the pizzas right, the plates would come back empty, but if he didn’t, they’d come back half-eaten.  The lesson being, make really good pizza and you have to do less work!

After graduating from college, Schnatter helped out at his Dad’s bar, called ‘Mick’s Lounge II’, in Jeffersonville.  His Dad’s bar had accumulated about $64k in debt so Schnatter sold his Camaro to cover the near-terms costs of the bar.  According to Forbes, he settled the Bar’s debts in about 4 months.

He started making pizzas out of a broom closet in the bar and immediately went from making $300 a week, to $1500, then $3000 and then on to grossing over $100,000 a year in 14 months!  The first Papa John’s was built next to his Dad’s Bar.

With the help of Schnatter’s brother, Chuck, a lawyer, they were able to sell 100 franchised restaurants between 1986 and 1991.  Schnatter says he put his brother, Chuck, through college and law school, and in return he received free legal services.  This ultimately resulted in Papa John’s having their franchise agreements created by the top law firm in Kentucky.  This was probably another key ingredient in the franchise success of Papa John’s, I would guess.

“In 1991 I didn’t have $2,000 to go on vacation. In 1994 the company was worth $200 million.”

Papa John’s filed for IPO and went public in 1993 with 232 franchised stores.  The company is listed on the NASDAQ as ‘PZZA’.  In 2016, they did $1.7 billion in sales worldwide.  So, roughly 10 years after graduating from Ball State with a degree in Business Administration, Schnatter finds himself at the helm of a publicly traded pizza company that would soon be doing almost $2 billion in top-line business each year!

“What gets measured gets done, and what gets rewarded gets repeated.”

According to a January 26, 2017 video posted on Business Insider:

  • Peyton Manning owns 30 Papa John’s franchises in Denver, CO.
  • Jerry Jones own 89 Papa John’s franchises in Dallas, Ft. Worth, Waco and Austin.
  • Jerome Bettis owns 4 Papa John’s franchises in the Pittsburgh area.
  • Jamal Mashburn owns 57 Papa John’s franchises across the U.S.

Forbes reports that Papa John’s currently has a market cap of $3.2 Billion, yet it has only captured about 1/10th of the Pizza Market currently dominated by Pizza Hut and Dominoes.

John Schnatter’s net worth is currently reported to be around $1 Billion.

The Weekly Billionaire Case Study: David Geffen

“We are each a figment of our own imagination.”

I’ve decided to choose one Billionaire I’m interested in each week and to write a bit about them in order that I might learn something about how they attained their financial wealth and success.  Of interest this week is the media magnate, David Geffen.

According to Wikipedia, Mr. Geffen was born in New York to Jewish Immigrant Parents.  His Mom apparently owned a clothing store in New York. His parent immigrated to the U.S. during the Great Depression. He was born into a tough environment with tough financial characteristics: Jewish Immigrant parents, New York City, Great Depression – oy vey. His mother called him ‘King David’; she told him, ‘you have golden hands, you can do anything you want’.  Parents can and do make a difference.  My Mom always told me I could do anything I put my mind to, so we at least have that in common…

A college drop-out (college apparently has nothing to do with financial success, kids), Mr. Geffen lied about having a college degree just to land a job in the mail room at a talent agency, William Morris Agency (WMA). Landing this mail room job was a significant hack. Because he worked in the mail room, he was able to intercept, and modify, a letter from UCLA to WMA stating that he had not attended college at UCLA.

While working in the mail room at WMA, Mr. Geffen became friends with another college drop-out, Elliot Rabinowitz, who partnered with him in later ventures. Note to self, never underestimate the talent of people working with you, even if they are in the mail room.

Geffen soon dropped out of WMA to form his own Talent Management Company where he managed Laura Nyro primarily at first, and then became a talent manager for musicians like Crosby, Stills and Nash. It was his discovery of Jackson Browne that instigated his creation of Asylum Records.

He later sold Asylum Records after purportedly tiring of supporting the personal and professional lives of the artists he represented. He then was asked to become instrumental in merging Asylum Records with Elektra.

He fell in love with Cher and lived with her for 18 months (and he was gay)!  At the same time, he had the top three selling record albums.  Talk about crushing it!

“Start with what you know.  You never know where it will take you.”

He then went on to form Geffen Records, signing big names such as Dianna Ross, Elton John and John Lennon.  He sold Geffen records.

He went on to form the film production company, Dream Works, making hit after hit with Director Steven Spielberg and Producer Jeffrey Katzenberg (movie hits like Beetlejuice, Little Shop of Horrors, Shrek, Risky Business and Saving Private Ryan).

Mr. Geffen now has a net worth around $7.6 Billion.

For a more in depth look into the life and career of David Geffen, I highly recommend the movie, ‘Inventing David Geffen’, which you can download on iTunes.

I Command You To Grow!!

Society grows great when old men plant trees whose shade they know they shall never sit in.

I love synchronicity – the Jungian idea that events are “meaningful coincidences” if they occur with no causal relationship yet seem to be meaningfully related. This Spring, I started reading Mike Michalowicz’s book ‘The Pumpkin Plan’. The central idea of his book is that business people should be more inclined to trim away customers to focus solely on their best customers in order to grow them, and their company, to the biggest size possible. Mike likens this business focus on the best customers to a farmer who tries to trim away all pumpkins on a vine to a select one or two in order to grow the biggest pumpkins possible. This Rhode Island farmer’s pumpkin grew to 2,261.5 pounds!! What?!?

Speaking of books, I currently have two books for sale on Amazon if you’re interested: ‘The Lean Startup’ and ‘Sprint’.

Growing is what Spring is all about. For some reason, this Spring in particular has had me focusing inordinately on growth: growing my own vegetables, growing my income, growing my net worth, growing my muscles, growing my cardiovascular strength, growing my family bonds, helping my employer grow. Every day I think about GROWTH. How can I grow more? How can I get bigger? How can I 10x my life??!?! I’m done shrinking!!! I look at the earth – not the World as a whole, but dirt – and biological organisms and how life literally springs forth from it every Spring. No matter what man does to the planet, seemingly, life still springs forth every year. The life force is so strong on earth. Life wants to grow! Life must grow! It can’t be stopped. That’s what this planet does – springs forth life and growth – and humans are no different.

My girlfriend and I started a garden in our back yard a few weeks ago. It was back-breaking work. We got covered in dirt and mud. It rained as we worked. Our backs and hands hurt. I could barely stand upright the next day. It felt awesome. We now have spinach, beans, herbs, bee-balm, tomatoes, potatoes and cucumbers growing. We also have planters of grape vines, black berries and blue berries growing. Despite our lack of farming skills and knowledge, the earth continues to spring forth life. The energy to give life, emerge and grow is unstoppable and everywhere. It’s awesome to think that we humans are products of this energy.

We didn’t stop at a garden in the back yard though. I bought some land down in Southern Virginia this Spring so I could grow even more life! My family and I were down there last weekend (West of the Richmond area) planting Apple, Plum, Cherry and Oak Trees.  We also seeded Sun Flowers, Wild Flowers, and some other seeds.  If we let the land sit for long enough without intervention, trees and weeds of all sorts would eventually take over the land. I am trying to impose my own growth plan and will on the land instead by determining what life I say will grow there.  Why must we grow Fruit and White Oak trees and Sun Flowers, JC? Because I said so, that’s why.  I command it to grow!!

Also in the last few weeks, I discovered this guy, CT Fletcher, and how he uses the phrase, ‘I command you to grow!’, to grow his muscles as he lifts weights. He commands his muscles to grow! Why? Because he said so! It’s his ‘Magnificent Obsession’! This is genius! CT has learned to envision the change he wants to affect in his life, and to impose his will over it to make it so. Can I do that too? Can you?

My new mantra when I look at my Bank Account, my Gardens, my Trees, my Relationships, AND my muscles is: ‘I command you to grow!’ Why JC? Because I said so, that’s why!

Apple Developer Program: Room For Improvement

I’ve wanted to learn to make iOS Apps for some time, so I finally bit the bullet and bought a Mac Mini, downloaded Xcode, and started programming. I’m getting to the point where I want to deploy and test my app on my own iPhone (rather than run in a simulator), but in order to do that, you have to join the Apple Developer Program so you can appropriately sign and deploy your App to real iPhone and iPad hardware. And boy, what a pain joining this program is!

I should qualify this statement…I’ve joined the Apple Developer Program before as an individual. Everything went through ok then, but i never got around to actually building an App. This time, however, I decided to F.O.C.U.S – Follow One Course Until Success – and to actually build an App this time. And this time, I decided to join the Apple Developer Program as a Corporate Entity; you know, with designs of becoming a Billion Dollar Unicorn. Apple gets funny with Corporate Developer Registrations, seemingly. They require that you have a DUNS Number. Ok, whatever. I’m used to bureaucracy. I went and got me a DUNS Number. But for some reason, it took weeks (in reality, months) to associate a DUNS number with my Company in Apple land. Dun and Bradstreet told me to wait a few weeks, after updating some key email and phone number information, before trying to enroll in the Apple Developer Program again. So I waited…and waited…and I’m still waiting…

After waiting entirely too long, I tried to enroll again. This time, Apple complained that my credit card was being rejected. Really? Ok, so I tried another credit card. Rejected again. Really???? I logged in to both credit card accounts. Sure enough, successful charges from Apple on both for $99, but for some reason, Apple would still not let me enroll in their program:

What would Steve Jobs do?

At this point, I am quite flustrated. Of course I will press on, because I am committed to this project and to learning iOS development. But I never had this much problem getting an Android App out into the Google Play Store…I expect much more of Apple.  This process should have been absolutely thoughtless and painless.  But it’s a good reminder of how difficult and tenuous it is to build a company on top of another company’s technology.

EDIT (2/16/2017): I called Apple today and was unable to resolve the technical problem behind registering online, so I registered for the Developer Program over the phone this afternoon.  Part of my urgency in getting this registration done was because I wanted a shot at attending WWDC2017 this year.  Registration for WWDC2017 is by random selection to members of the Developer Program in good standing as of 2/16/2017 at 0530am PST.  I registered online the evening of 2/15/2017, but it failed due to technical problems with the Apple website (my credit cards are fine).  So I’m hoping I can still figure out a way to get in good standing for possible selection to WWDC2017.

Interest Rates And ‘Stacking Benjamins’

A lender contacted me last weekend about refinancing my home.  It seems interest rates have fallen roughly half a point since I first acquired the liability I call home.  But half a point isn’t quite enough for me to go through the pain of refinancing a mortgage, so I told the lender I’d sit tight for a while.  In response, the lender tried to educate me about impending interest rate hikes in December and that I’d be throwing lots of ‘Benjamins’ away if I failed to take advantage of this opportunity.  Ultimately, I think I’ll wait to refinance until a little while later, and here’s my rationale for doing so…

I’m not an economist.  I am simply a middle-aged guy doing his level best to save and prepare for a retirement…of sorts…sometime in the fairly distant future.  And I struggle to understand the intricacies of macroeconomics much less how to save for my own retirement at the microeconomics level.  The differences between microeconomics and macroeconomics seem closely akin to the differences between physics and quantum physics, except in reverse.  Ok, what?  Like, I am trying to understand how the decisions made by ‘Big Whigs’ at the macroeconomic level affect how well I can manage the money I am personally in charge of (microeconomics).  I am pretty sure macroeconomic decisions impact me directly, like in the case of my home refinance opportunity, but how exactly those decisions impact me and even how and why those decisions are made are not quite so clear.  So I am very interested in the ‘big picture’ and how Federal Reserve decisions, with regard to interest rates, impact my life, your life, and our present and future.

Today, the Federal Open Market Committee (FOMC), chaired by Janet Yellen, met to discuss the possibility of rising interest rates before year’s end.   The FOMC seem to say roughly the same nebulous things at each meeting, which makes me wonder about what is truly driving their decisions.  I don’t think the Federal Reserve cares much about people with microeconomic concerns (i.e., concerns such as paying for milk and gas each month much less the mortgage).  Why would they?  They are not elected officials of the people of the United States.  So here’s how I think interest rates are going to play out…

Take a look at the following chart of interest rates in the US since interest rate data have been collected:

Federal Interest RatesThe chart shows, as Grant Cardone has so eloquently pointed out to his listeners, a significant trend…to ZERO!!  In fact, interest rates have pretty nearly done bottomed-out already.  So maybe we get another tiny bump on interest rates in December, but past that, I think we are headed into negative interest rate territory.  I agree with Grant Cardone’s analysis that there is no way interest rates can go up.

I believe the key to understanding the Federal Reserve’s guidance on interest rates is driven not by the strength of the US Economy and Inflation, but instead by the National Debt.  Whoever holds cash benefits the most from rising interest rates.  Right now, many countries hold alot of cash, in the form of notes or I.O.U’s, sold by the United States to pay for things like Wars, seeking-out Weapons of Mass Destruction in Iraq, and then Reconstruction and keeping the Government open for business.  The result is a mountainous debt (thanks to former President Bush (Republican) and current President Obama (Democrat)).  If interest rates do go up, these foreign note holders get more and more leverage as their notes become more valuable.  Simple math says you stand to collect more money if someone is willing to pay you 5% for the dollars you hold over 1%, for example, when your note becomes due.  If interest rates go down, cash and I.O.U’s become less and less valuable.  In fact, if interest rates go down enough, say into negative territory, people and entities holding cash may have to pay someone else for the privilege of holding cash.  Think about that!  The bank could conceivably charge you money to keep your cash in their bank!  You know, kind of like 401k programs do now…sort of.

So, rates may go up some in December, although I’m not sure why they would.  If the real drivers of Federal Interest Rate Policy is the minimization of National Debt obligations, then interest rates cannot go up until the US National Debt is greatly reduced.  Therefore, I think the FOMC is going to lower interest rates even more, and I think they may even go into negative territory soon.  The upside of interest rates going negative is that you might get paid to have a mortgage?!?!

I think there is still some time to consider mortgage refinancing.