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The world is full of hard businesses like steel mills. As a general rule, it is best to avoid them if you want to make a lot of money given that they tend to involve more risk due to lower returns on capital, weaker balance sheets, higher indebtedness, and a host of other factors.
As I’ve explained in my two bucket theory, time is one of the most important, if not the most important, commodity you have. To a large extent, your life represents how you’ve invested your time thus far. Whether you are rich or poor, in shape or overweight, successful or a failure, well put together or a…
When I was first starting out, I found the world was full of general philosophy articles, essays, and commentary about finance, investing, saving money, and starting a business. Very few people offered nuts-and-bolts here-is-how-we-are-structured explanations, though, which is what I valued more than anything else. As I began to approve my monthly banking transactions this afternoon, I thought it might be useful for some of you to see how I setup our cash management system in the early days. The basic structure stays with us, even though it is necessarily more complex.
There are three ways to make a lot of money in business. Typically, most businesses that are successful at making money do it in one by focusing on one of three models. They either: Sell many things at a low price Sell few things at a high price Sell many things at a high price By way of example, let’s look…
We’ve talked about how a holding company works in the past, provided a beginner’s explanation of holding companies, and even looked at two high profile private holding companies owned by America’s richest families, Walton Enterprises, LLC and Cascade Investment, LLC. I even gave a very basic explanation over at About.com as to how family members can invest together through a limited liability company. Tonight, I thought I’d go over a very basic, very simplified explanation of a much more advanced concept that isn’t appropriate for most people but will show how a family holding company can be used to gift millions of dollars tax-free to heirs and others, while retaining control of assets and binding a group together economically. This is a high-level, conceptual explanation. Do not act on any of this without consulting with your own tax attorney, tax accountant, and other qualified advisers. None of this is investment advice. None of this is tax advice. None of this is legal advice.
I started thinking about people who lose everything, or what Charlie Munger calls returning “to Go”, as in the Monopoly board. Once you are rich, your primary motivation shouldn’t be to get richer, it should be to avoid wipeout risk, or returning to go. But as a training exercise, I decided to contemplate what I would do if I woke up tomorrow and the last ten years had been a dream. What would my first course of action be to rebuild until I got my financial affairs in order?
There are a lot of things you can take from corporate America and apply to your personal life. One of my favorites is a cost/impact analysis. If you are having difficult sorting all of the work and projects you need to finish, one way to make the decision easier is to draw a box and…
How a Holding Company Works A holding company is a special type of business that doesn’t do anything itself. Instead, it owns investments, such as stocks, bonds, mutual funds, gold, silver, real estate, art, patents, copyrights, licenses, private businesses, or virtually anything of value. The term holding company comes from the fact that the business…
There is a traditional Chinese proverb that goes something along the lines of, “Do not take the seeds and throw away the melon”. Though there are many ways you can approach this, and multiple lessons that can be extracted from reflecting on it, it can be particularly sage when it comes to running a business and allocating the cash flow from that business. One of my favorite examples comes from The Coca-Cola Company.
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