Fables of Fortune

by Richard Watts

  It is true many entrepreneurs who have made fortunes inventing products and ideas may have been geniuses in their fields. But a PhD in chemistry shouldn’t give a person license to provide counsel about child rearing, and a Grammy-winning voice doesn’t entitle the super-rich to offer counsel on global warming. But we listen, don’t we?

  Historically, the rich ruled over the masses. They governed, judged, and sentenced the population according to their rules. We are used to giving them authority and power. Their opinions and desires take precedence over our own … because we allow them to do so. As a result, most of the super-rich expect to get their way, and we rarely prove them wrong.

  The have nots are often reluctant to challenge the haves. We secretly want a sliver of their world and the prize of their friendship. Everyone puts on knee pads, kneels to the ground, and begins the process of canonizing the lucky person with the bucks.

  In order to persuade rich people to invite us into their world, we generally have to submit to their rules. Picture a chihuahua that comes face to face with a German shepherd. Immediately, the smaller dog rolls over and shows its neck to the larger dog, showing submission in order to avoid a fight. In my experience, the rich often require the same type of acknowledgment. Granted, some are more subtle. But each has developed a set of entry requirements. They won’t allow us in until they are satisfied we are willing to play the game their way.

  THE PETER PRINCIPLE

  Greg was the son of a mega auto dealer who employed about three hundred people. Greg never finished high school. He preferred partying, fast cars, and motocross. After being unable to sustain several different attempts at gainful employment, Greg turned to his father, Ralph, for career guidance. In very short order, father and son were able to conclude Greg did not have the skill, aptitude, or passion for a “regular” job. His dad was sixty-four years old, Greg was thirty-four. Ralph was proud of having built four successful, large auto dealerships. He was also very proud of his only son. After all, Greg had become a well-known amateur motocross rider. With the eight motorcycles Greg had wrecked, he had won four county amateur championships. Ralph secretly believed all along his son would come into the car business when he was ready.

  One afternoon, without much discussion, Ralph decided he would vacate his position as president; he would stop running all operations and allow Greg to step in and take the controls. Since Ralph was the sole shareholder, only one vote was required, and that vote was cast with confidence and pride. Presto! Greg was crowned and invited to take the throne. Ralph believed in trial by fire. But the fire and excitement he was feeling was his own, not Greg’s.

  Greg knew nothing about the car business. But he discovered one of the dealership’s eighteen mechanics, Jim, was skilled and experienced in working on motocross bikes. Grooming a personal mechanic for his hobby became Greg’s first order of business. Jim’s new first priority was to keep Greg’s bikes finely tuned and ready for use at any moment. The realization by the other mechanics that Jim no longer had to meet the hourly quota required of each of them immediately sent a chain reaction through the service department.

  Only six months into his new position, Greg recognized the dealership could run itself. Each of the departments—sales, parts, service, and finance—had a manager who was quite skilled at administrating his position on the organizational chart. Between Greg’s new passion for golf, to which he was introduced by another dealer’s son, and local motocross competitions, Greg’s weekday calendar was becoming full. What Greg didn’t recognize was that the heads of the four departments needed a boss also. There are inherent conflicts between departments. The boss needs to set policy and mediate difficult overlaps in operations. Tacit wars broke out between the departments at the dealership, fractionalizing the business into four separate hostile camps, with each blaming the other for what had become a steady loss in income for the dealership. No one dared complain to Greg. The employees hated him already. Surprisingly, when Ralph would appear each week to check on morale, no one had the gumption to tell him what was going on.

  The Peter Principle was in play. The Peter Principle occurs when a person in a chain of authority is elevated to a position just beyond his or her ability or level of knowledge. In this case, Greg was not only inexperienced; he was also absent much of the time. Each employee would smile and tell Ralph his son was slowly “getting a handle on the business.” Everyone was afraid except …

  THE KING HAS NO CLOTHES

  Charlie, the “lot boy,” was a middle-aged African American man with a family of six. The lot boy was in charge of washing the cars. Not only was the title “lot boy” demeaning, it also identified the person who received the least respect and wielded the least amount of power in the business. If the managers needed someone to run for a bag of hamburgers for lunch, Charlie jumped in a truck and sped from the parking lot to the nearest fast-food joint.

  Charlie kept six-hundred cars freshly washed and sparkling every day. He worked under the direction of the service manager’s assistant, who reported to the service manager, who reported to the service director, who reported to the general manager, who was supposed to report to Greg. The washing area was located at the rear of the ten-acre facility. Charlie moved the cars from the front line to the wash bays and back to the front storage lot twelve hours a day, seven days a week. At the time, this was the typical practice at most auto agencies.

  If you had asked Charlie who decided it was best to wash the cars in the wash bays in the rear of the dealership, he would have said he was following the direction of the assistant service manager. Then if you asked, “Why do you think he knows best, Charlie?” He would have responded, “He’s done this before and knows best.”

  Each employee in the chain of command followed the direction of his or her superior. If they had been asked the same question, they likely would have given the same basic answer: “My manager knows best.”

  Ralph was a humble man. He used to speak with everyone at the business; his employees loved and respected him greatly. One of his favorite things to ask each employee was, “How do you think your job should be done?”

  Ralph’s office had been in the rear of the facility, close to the wash bays. He greeted Charlie every morning. On one of his visits to the Honda dealership he asked Charlie, “How would you do your job if it were up to you?”

  Charlie cleverly responded, “I would wash the cars the way the assistant manager told me to wash them.”

  Ralph was not so easily appeased. “Charlie, I’m serious. If you were in charge of this job [which he actually was, whether he realized it or not], what could we do to improve the process?”

  Charlie lit up like a Christmas tree. He had little interaction with Greg and was anxious to contribute. He knew the business of washing cars. “Well,” Charlie said, “you realize moving six hundred cars from the front of the lot to the rear, three times a week, results in a lot of fender benders and scrapes? That costs you more than a little money, Mr. Ralph. And after we wash the cars, we have to let them dry awhile before we towel them off, which prevents us from bringing in the next half dozen cars. I like to target two hundred and fifty cars a day. We wash the whole inventory every two and a half days, just often enough to keep them from looking dusty again. Oh, and one more thing. We leave the cars running while they are being washed, which uses hundreds of gallons of gas every month.”

  “So what is the solution, Charlie?” Ralph kept pushing.

  Charlie hesitated for a few seconds—glancing around as if someone might be listening—and then he turned back to Ralph. In a whisper he said, “Don’t move the cars.” Then he pleaded, “But don’t tell the assistant service manager I said anything.”

  Within two weeks, Ralph assisted Greg in hiring the installation of underground plumbing in the front car lot with hose faucets every hundred feet. Charlie washed the cars right where they sat, saving thousands of dollars in gas and protecting the inventory.

  The following month, Ra
lph drove on the lot again and smiled at Charlie with approval and pride. “By the way, Charlie, are there any other ideas you have for improving the dealership?” Ralph asked, smiling.

  “Yes,” Charlie snapped without hesitation, “that son of yours ain’t worth a damn.”

  Ralph thought Charlie was kidding. “That bad, huh?” Ralph replied with a smile.

  “Worse than bad, Mr. Ralph. He’s hated by everybody on the lot, and he ain’t even ever around. Imagine what people would think if he ever showed up for work.”

  Although Ralph showed surprise and shock, he already knew this. Greg had been irresponsible in his teens. Why would being anointed president of operations change that? Ralph made one adjustment in the company’s organizational chart. Did he fire Greg? No, he hired a very experienced general manager at $250,000 a year and promised him an additional $50,000 bonus to accept the title Vice President of Dealership Operations.

  Greg’s golf handicap is now in the single digits, and last year he won the County High Desert Amateur Motocross trophy. Mechanic Jim makes up Greg’s one-man pit crew.

  In the presence of the super-rich, most of us act like Ralph’s employees. We often subjugate ourselves to someone else’s authority and process because we assume they “know best.” In doing so, we allow ourselves to fall victim to the Peter Principle, relinquishing our ideas and abilities for the sake of playing by someone else’s rules.

  INSTANT CREDIBILITY

  A nonprofit theater-arts organization was failing. They needed a quick infusion of cash in order to complete their season of performances and survive to plan and promote the next one. At an emergency board meeting, one of their wealthiest donors spoke up.

  In a dreamy voice, she described the grand performances she had attended in her childhood. “I remember walking in through huge, heavy glass doors. The first thing we did was to buy popcorn and drinks at a shiny, gold counter. Then we enjoyed the show. What an event!”

  She continued, “If only we offered a real event. People should feel welcomed the minute they walk in the door … I know what we’re missing! We need to build a beautiful, shiny, golden café and serve drinks and snacks before and after each performance. I’ll chair the project and donate $500,000 to get it started.”

  Just like that, the deal was sealed. The people in the room shifted uneasily in their chairs, looked at one another, and began to offer their congratulations. “Genius!” “We’ll double our sales.” “This will really set us apart!”

  Even though the wealthy donor had no business or fund-raising experience, the theater director and board of directors bowed to her dollars and acquiesced to her plan. Within three months, her architect had designed a grand lobby makeover, complete with a handmade Venetian-glass bar. Two contractors, six months, and $1.6 million later, the theater reopened their doors. No one came. The organization folded within the year.

  This donor’s money bought her instant credibility … and ultimately, great embarrassment. We’ve spoken about the incident several times, and she feels the responsibility and the failure keenly. It’s not much fun to go from savior to scapegoat.

  I’D RATHER BE RICH

  Wouldn’t you like to be rich—to live the lifestyle and be given the authority? Of course you would. You’ve said so many times: “If I just had money, people would respect me.” “I would love to have someone ask my opinion, but I’m not rich so nobody cares what I think.” “If I had money, I would feel better about myself.” “I’m smart, but I just can’t get a break.” “Why not me?” We have all had such thoughts at one time or another. I used to think them often, until I realized every time I place the rich on a pedestal, I put myself down.

  Don’t buy into the fiction. The rich—just like the rest of us—know when our opinion stinks. So do they. We know when we are guessing or when we have diligently constructed our thoughts. So do they. But when we are wrong, our friends, family, or coworkers generally call us on our inaccuracy or indiscretion. When we are challenged, we learn, we grow, we evolve, and eventually we hone solid knowledge and skills.

  A super-wealthy person may pontificate about politics, sports, or even fashion just because he can; the rich know we are listening, and they know we believe them based on what they have rather than on what they actually know. They often surround themselves with “yes” men who are paid to tell them what they want to hear. Before long, they secretly stop believing in their own opinions. Then they begin to distrust those who don’t care enough to challenge what they say is right. The super-rich end up like the emperor with no clothes—being ignored by the very audience they hope to impress.

  Being wealthy does not make you smarter. Admittedly, some individuals have increased their wealth by being demonstrably superior in one field. But my experience is, collectively, the rich yearn for honesty and objectivity. Clients complain they do not want people to compromise their real thoughts and opinions about a subject. They want the truth. They want to be challenged. They want to debate. They want to be right—when they really are.

  The next time you are in the presence of someone you are tempted to believe simply because of their wealth, try something. When they finish expressing an opinion you believe is incorrect, say the following: “Interesting … but I disagree.”

  Watch the individual’s face. You will see a flicker of shock and disbelief. Pause for a moment, and think carefully about your response. Speak your opinion honestly and boldly. I guarantee the other person will listen intently. Perhaps you’ll begin an argument or heated debate. Regardless, you will have earned their trust and respect.

  CHAPTER THIRTEEN

  MYOPIC VISION

  The super-rich often develop myopia, focusing much attention on small details rather than looking at the big picture. Their priorities are often skewed; their goals and desires are constantly shifting because there is so much available to them. Yesterday’s desire may be passé, replaced today with a new ambition or craving that turns in a totally different direction.

  A NARROW WORLD

  Before long, the super-rich can become nearsighted, seeing only what is right in front of them. Their world can become very narrow.

  Through this behavior, the rich rope themselves off from much of the world. Life becomes very limited. The super-rich may have plenty of material things, but they don’t get to hear the truly honest thoughts and ideas of people of lesser means. They miss out on the chance to learn from successes and failures, from winning and losing, from profit and loss. They wall themselves into an artificial world with a captive audience rather than a life lived in grimy reality and with genuine relationships. They rarely experience the richness and fulfillment of day-to-day existence, because they live on top of the world as opposed to in the world.

  There is a property on the beach in California. It is not buildable. Why? Because of a rock—actually, a small mountain. In the middle of this one-acre lot, a rock formation that reaches 80 feet into the air has prevented, until now, a home from being built at sea level or at the top of the rock, which has no access.

  Enter the local billionaire, named Layton. He and his third wife look at the property, and she says “It’s perfect! A place for the family to relax and enjoy sunsets!” The realtor, true to professional form, replies, “I can see your home now!”

  The property was listed for $22.5 million, including beach rights, if you could get to it. There wasn’t much haggling as the property owner knew the only offer he had received in three years had to be from a buyer who would pay anything. They settled on a purchase price of $21 million. The seller included a four-year-old $2,000 environmental study that indicated the lot was not buildable. Layton was willing to bet about $21 million it was.

  Layton then hired the most renowned architect in the region and went through his vision for the home. Unfettered by financial constraints, the architect amassed a list of details that were fabulous; for example, a swimming pool over the eight-car garage on the main part of the property was to be connected
to the home by a bridge entryway. The multilevel home on stilts would include a master bedroom suspended 80 feet above the ocean, with a glass bottom allowing the residents to keep a vigil on the tide (lighted at night with underwater flood lights, of course). The price and time for completion? Who knew? But that was unimportant. The vision moved onward, in increasing detail. The only limit to the design was the owners’ imagination.

  This is what I characterize as managing expectations from the top down. In other words, if I can dream it, then I can have it. Most people manage their expectations from the bottom up: How much can I afford to achieve something that will be as close as possible to my desires? If it is too expensive, then my expectations will have to decrease.

  To visualize what was going on in Layton’s world, let me use the design of the wine cellar alone. As a have not, if you were interested in storing wine, you would first entertain the purchase of a U-line Wine Storage model from Costco (price: $300) and put it in your garage. Expectations for wine preservation met. But Layton likes to preserve about 2,500 bottles of vintage wine, so his first requirement was a large room. Next, the room must be cooled to the perfect temperature. But the white wine may be chilled a little more if it is to be served immediately upon selection; hence, there will need to be two independent cooling systems, which requires a sealed divider in the room: a door. The door shouldn’t obscure the visual scope of the entire wine collection, so it must slide and be made of glass. But because glass doors transmit temperature, a double-insulated, vacuum-sealed glass door is preferable.