Mind Your Own Business! An excerpt from Equity Happens

From Equity Happens, Part I: A Tale of Two Investors (pages 96-101)

Background:

Conrad Soomer goes to visit his long time friend and co-worker, Juan Tunavest, just after both men had been unexpectedly laid off from their jobs at Stone Cold United Manufacturing Company.  Conrad is distraught about his financial predicament and bewildered by Juan’s financial independence. Juan is explaining his perspective on the layoffs and how he achieved freedom from the 9 to 5:

“Conrad, what I’m saying is that you’re blaming the company for taking away the job, its income and the lifestyle the income provided you.  Let me ask you a question.  If a man gets out of school, gets a job and rents a house and then he lives in that house for twenty-five years, but never buys a home, is it the landlord’s responsibility to help that man – the tenant – buy a home of his own?”

Conrad looked at Juan.  Juan’s point was beginning to come more into focus, but it was still a little fuzzy.

Conrad answered, “No, I don’t think it’s the landlord’s responsibility to help a tenant buy his own home.  I think if the tenant doesn’t want to rent, he needs to go buy a house for himself.”

“I agree,” said Juan.  “Now, while the tenant is living in the rental property, who does the property actually belong to?”

Conrad thought for a few minutes.  He had taken a real estate law class once many years ago and he remembered something about different kinds of ownership.  He thought the tenant had some form of ownership, but it’s not permanent.  He wasn’t sure what to answer.

“Is this a trick question?” asked Conrad now feeling a little perplexed.

Juan responded, “No, it’s not a trick.  It’s pretty straightforward.  Think about it in simple terms.  Who does the rental house belong to, the tenant or the landlord?”

“I would have to say the landlord,” replied Conrad.

“Exactly right,” said Juan.  “The best test of whether you own something or not is to ask yourself, ‘Can I sell it?’ – or better, ‘If I sell it, who gets the money?”

That made sense to Conrad, but he still wasn’t sure how it applied to his situation at SCUMCO.  Juan could see the question was still burning in Conrad’s mind.

“When we worked at SCUMCO,” Juan explained, being careful to include himself in this example, “we were not owners, but renters.  We rented out our time, talent and efforts to the company.  The company used them to build its business, right?”

Conrad thought about it for a moment and then nodded in agreement.

Juan continued, “We have control over our time, talent and efforts.  We can ‘sell’ or ‘rent’ them out to others if we choose, but ultimately our time, talent and efforts belong to us, right?”

Conrad nodded his head once in agreement and waited intently for Juan to continue.

“The office, the responsibilities, the employees, the furniture, the computer, the equipment, the supplies, the customer relationships, the accounts payable, the receivables, all of that…did any of that ever belong to us outside of our roles within SCUMCO?  While it is true we were able to use all these things to perform work for the company, could we sell any of them?  Could we take any of them with us if we left?” Juan asked, growing more passionate in his delivery.  He stared at Conrad waiting for a reply.

“Well,” Conrad thought for a moment.  “No.  I guess not.  All those things belonged to SCUMCO.”

“That’s right!” exclaimed Juan.  “They didn’t belong to us.  And neither did our jobs!   Think about it.  The jobs we had, whether it was a low level job like mine, a mid-management job like yours, or a top level executive position like Ben Dover’s, it’s really all the same.  Our job was nothing more than a role and responsibility within the corporate structure and we only occupied it as long as its true owner, the ‘landlord’ of the job, SCUMCO, allowed it.  The Company has the right as the ‘landlord’ of the job, to sell it, or evict the ‘tenant’, people like you and me who are occupying the job, or do whatever they, as ‘landlords’, choose to do.  Tenants don’t expect to have those rights because they recognize they don’t own the property.  Employees shouldn’t expect ownership of their jobs because they are NOT the owners.”

Conrad listened in amazement.  It was as if he was staring at a large TV screen and the picture suddenly came into focus.

Juan continued, “SCUMCO didn’t owe us a future, or a paycheck for work we hadn’t done yet.  The only thing that was ‘ours’ were the paychecks we cashed, the experience we gained and the relationships we developed.  The rest of our life at SCUMCO, every bit of it, never belonged to us!  We were only there at the good pleasure of SCUMCO, the ‘landlord’ of the job.”

Conrad found himself nodding in agreement with each sentence leaving Juan’s mouth.

“Unfortunately,” Juan said, “most employees don’t realize this and are shocked when they lose ‘their’ job.  But it never belonged to them, so how could they ‘lose’ it?”

Conrad was astonished at Juan’s wisdom and insight.

“With all due respect, Juan,” Conrad exclaimed, “you’re blowing me away!  I had no idea you were so intelligent.  How is it that a sharp guy like you never made it to the top?   What happened to keep you from advancing?”

It took quite a bit of self-control for Juan not to laugh out loud.  Conrad was so trapped in his employee/consumer paradigm that he couldn’t see Juan was on top.  It’s just that he had chosen to climb a different mountain.  Juan decided to simply continue the explanation and hope Conrad would keep up.

“What’s worse is the false sense of security employees lull themselves into,” Juan continued, careful to assign the responsibility for ignorance to the employee.  “So once the paychecks start coming, employees go out and use this money to rent a lifestyle by purchasing cars, boats, dream houses, vacations and the like.  What they don’t realize is that when they pledge their future paychecks, which don’t belong to them because they are contingent upon a job they don’t own, they have assigned their lifestyle to their employer.”

Conrad’s mind began to tilt, but Juan did not want to slow down.

“When you told me the company took away your job, house, car, pool, your lifestyle – and they tried to do the same thing to me – I argued they did not take it from you.  You never owned those things to start with because having them all depended upon payments from future paychecks from a job you never owned.”

By now Conrad recognized the dilemma.  His emotions ranged from awe at Juan’s wisdom, to surprise at the new perspective, to anger at SCUMCO for seducing him for twenty-five years.  He was angry at Juan for pulling the curtains back, angry at himself for having been so gullible, angry at his parents, teachers, friends…everyone…for not having told him any of this earlier.

Conrad asked the obvious question, “What was I supposed to do?  What other choices did I have?  I thought I was doing the right thing.  I did what everyone thought I should do.  I went to college and I got good grades.  I got a job at a big company and worked hard.  I was loyal and put in long hours.  I thought about my work all the time!”  Conrad’s mind drifted to all the late nights and missed family dinners.  He thought of all the times he had only been present with his family in body because his mind was consumed with SCUMCO business.  He felt a lump growing in his throat as his heart pounded and his eyes filled with tears.  “What was I supposed to do?” he demanded.

“I can only answer some of that question,” replied Juan.  “I can only tell you what I did.  There are so many people who have done better, but Luv and I are happy.  When the layoff happened at SCUMCO, it was disappointing, but not devastating.  I realized many years ago that my job at SCUMCO, or anywhere else for that matter, was just like renting a house.  I needed it for a little while so I could get established, but my goal was always to have a ‘job’ or business of my own.”

Conrad was caught off guard.  “I didn’t know you had a business of your own!  When did you have time to run a business?  It seemed like all the time you weren’t at SCUMCO, you were off at seminars or looking at properties.”

“That is my business” Juan explained.

“So your business was real estate investing?” asked Conrad, stating the obvious, but trying to keep Juan talking.  Now that his mind was open, humble, and eager to learn, Conrad couldn’t get enough!

“Sure.  Real estate investing is still my business, though it’s more of a lifestyle than a job,” Juan said.  “I chose real estate because I knew I wasn’t clever enough to invent some fancy gadget everyone would want to buy.  I really didn’t care for corporate politics, so even if I was inclined to move into management, I don’t think I would have done very well.  The truth is, on those few occasions when I was offered a management position, I always turned it down.  When I looked at management, all I saw were long hours, more headaches, and less time to focus on building my real estate investing business.”

“One of the most important things I realized was that I did not have to personally earn all the money,” Juan said.  “I didn’t even have to earn very much.  I know you always earned more than I did at SCUMCO, but my properties eventually earned more money than you and I combined!  With every property I acquired, I got the rental income, some tax deductions, and most importantly, the appreciation.  As rents went up, so did my income.”  He smiled, then continued, “You know what it’s like Conrad?  When Luv used to work outside our home and bring home a paycheck, it was great, but we decided it was better for our family to have her home with the kids.  Sometimes it would get tight financially – and I’d wish we were living on a family farm somewhere and I could put the kids to work to help out.”

Conrad could relate.  He could recall several times he wished for a way to clone himself so he could earn more than one paycheck.

Juan continued, “In a way, that’s what my properties are like.  It’s like having a big family that goes to work every day and brings home a paycheck.  It got to the point where I really didn’t need to go to work for money any more.”

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