The Kennon-Green Family Method for Managing Life and Business: How We Arrange, Evaluate, and Oversee Our Home and Companies
With the weather turning cold, the temperatures reaching barely above freezing at night, we’ve switched over to fireplace heat, I’ve broken out my favorite Tiffany & Company holiday coffee mug, and begun my usual habit of working from home this time of year so as to enjoy the weather from picturesque windows instead of having to venture out into it.
Right now, I am sitting in our kitchen about to pick up a copy of Steven Pinker’s The Blank Slate, which I’m working my way through, snacking on Cherry Cordial Hershey’s Kisses, and thinking about what I need to accomplish today before I let myself get back to Elder Scrolls: Skyrim prior to family nacho night this evening. This flexibility makes me glad we started migrating everything to cloud-based severs or software-as-a-service platforms last year. Telecommuting fits with my role as chiefly being concerned with strategy and capital allocation.
There has been a higher-than-usual influx of messages asking about the specifics of how we run the life reorganization, upgrades, and revamps every few years. Long-time readers have seen me go through at least two of these, I believe. It is during these programs that some of the most unique, useful ideas are dreamt up and put into place. Most of the time, the result saves significant money, providing greater streams of cash to invest, spend, or give away to our family foundation. Other times, it improves our quality of life.
I’ve already explained how I organize and structure my day, which was (and remains) a hugely popular post, giving me reason to think some of you might benefit from a walk-through of the program. It also saves me a considerable amount of time by writing the details once and then sending a link to readers who want to learn more. Here, in a broad sense, I’m going to break down the process to help you understand how we manage a longer-horizon. It might give you greater clarity into our operating methods and let you understand some of the reasons we have been able to accomplish more than most people.
The Kennon-Green Family Method
Since founding our first company, Aaron and I have evolved a system we call the Kennon-Green Family Method. This system helps us clean up, upgrade, reorganize, and restructure our lives and businesses every two or three years. It borrows heavily, with modifications, from other management philosophies and schools, and was tailored for our personalities and temperaments. It works for us. Your job is to take it and turn it into a form that works for you.
Phase 1: Identification of Frustrations
The first thing I do is purchase sets of Moleskin notebooks, the large size, which usually come in packs of three for $18.95. You can pick them up at Barnes & Noble or directly from the company. I prefer the lined versions, but they also make graph paper and blank styles, as well, depending upon your preference. (I actually bought three packs of three notebooks during the rainstorm when we were out in Overland Park the other night, one pack of red, one of navy, and one of black so I could track my personal life and some of the businesses separately).
Next, we begin the frustration identification process. I take a pen and, working with Aaron, we write down every frustration, no matter how small, in our life. This started after reading a psychology study back in college that found minor irritations, such as a squeaking door or broken gas cap on a car, lead to greater emotional trauma over long periods of time than big life shocks because our defense mechanisms kick in for the later, whereas the small stuff wears on us like Chinese water torture. The conclusion of the study was that happiness was just as much about removing the things that made us unhappy as it was about finding the things that make us happy. That is a profound insight.
After the frustration is identified, we think about solutions that will eliminate the frustration. If there are multiple options, we look at the opportunity cost of each. For example, one of the items on the frustration list had to do with lighting in our home. The entry looked like this.
Frustration: When sitting at the bar or around the dining room table, the light is far too bright, making it feel harsh. On the other hand, we, as a family, prefer 100 watt output equivalent bulbs.
Solution: Restaurants face this problem all the time, leading to the creation of chrome-bottom light bulbs that block the light from the bottom so the people sitting under the fixture aren’t blinded, while still lighting the room fully.
None of the local vendors had the type of bulbs we needed so I special ordered them on the Internet. They arrived yesterday. The lighting situation is now crossed off the list (or, in this case, highlighted in a dark color as I find that easier to track visually). Now, none of our mental capacity or focus will be spent thinking, “this is too bright” while sitting at our kitchen counter or in the dining room, which frees us up to think about more important things.
That might seem unimportant but on a cumulative basis, the increase in aggregate happiness is enormous. This phase is designed to remove disutility from your life.
Phase 2: Identification of Big Wins and Small Wins
The next phase of the project is to identify opportunities for big wins and small wins.
- The big wins are the things we could accomplish that, if well-executed, could have an outsized impact on our lives, careers, and businesses, leapfrogging us significantly ahead of where we are now and the existing projected schedule.
- The small wins are the things that normally start by either of us saying, “Wouldn’t it be great if …?”
During the last go-around, one of our businesses, the letterman jacket awards company, identified a major big win by realizing that we could reach into an untapped market and offer wholesale pricing to team dealers and other clients by launching a team supply division. With very little additional investment, we were able to leverage our brand name further, expand our market reach, increase profits, and enjoy even greater economies of scale. All of this was possible due to our low-cost structure that allows us to sell letterman jacket awards for less than most chenille manufacturers can produce them in the United States.
One useful technique for identifying big wins is to use the Jacobi method of inverting the problem and working backward, essentially reverse engineering your life. That is, imagine you wake up and your life is everything you desire. How do you spend your time? What type of clothes do you wear? What does your family look like? Do you have kids? How many? Are you in great physical shape? How do you generate income? Where do you live? What are your hobbies? Your skills? Paint a picture that is so real that you can step into it in your mind’s eye, feeling as if you were physically there. See yourself in that situation, and living that life. Pay close attention to the details. Now, start systematically working your way backward and identifying how you got there in the biography, if one had been written about your life and career.
A small win could be something like redesigning a bedroom suite so overnight guests felt like they were in an upscale hotel. There is no source of irritation per se, but the final product would be a source of joy in your life. A small win could be signing up to take regularly scheduled, annual trips to Walt Disney World with your kids. A small win could be learning to cook so your recipes improve. A small win could be breeding your own genetically modified roses, if you are a passionate gardener. What defines a small win is going to be different for everyone. A small win could be ways to get free stuff by paying all of your company expenses on a rewards points program that lets you cash in thousands of dollars in gift certificates every Christmas.
This phase is designed to add utility to your life.
Phase 3: Examining All Existing Procedures and Processes
A lot of things make sense at the time but conditions change, inputs change, outputs change, society changes, your tastes change. Your processes and procedures need to reflect this so you enjoy maximum utility and minimum cost in everything you do.
The next phase is to look at every process and procedure in place at home and at the office and ask the question, “If I were setting up the ideal system today, would I still be doing it this way?” If the answer is “no”, it is weighed against the opportunity cost of change and, in most cases, modified. Sometimes, we work the question from a different angle and ask, “Is there a better way to do this?” and if the answer is “yes”, it is measured against opportunity cost and, in most cases, modified.
On many occasions, I’ve shared with you about the phone switch over. Since some of you are familiar with it, here is what the entry would look like in a notebook:
Procedure: Customers call the customer service center, a phone representative answers, and then helps them. Projected 10-Year Cost of This Method: $xx,xxx to $xxx,xxx
Is There A Better Way?: Two modifications could lead to significant improvements in customer experience, work environment for staff, and financial results for owners. The cumulative savings could be tens of thousands, or hundreds of thousands, of dollars in the coming years depending upon the options we select.
1.) We could introduce a Live Chat feature that allowed a single representative to help multiple people, scaling their labor and making their job easier.
2.) We could move the phone systems from traditional land lines to Voice Over Internet Protocol (VoIP), allowing us to connect calls for pennies on the dollar.
During the third phase, we even get down to looking at energy consumption and use, time schedules, financial structures, business structures, vendors, software programs, operating systems … we look at it all.
Phase 4: Identifying Dangers and Threats
At this point, we begin to ask ourselves, “What could go wrong? Where are we vulnerable?” and then finding solutions to strengthen ourselves against, or eliminate, the vulnerability.
Several years ago, we realized we didn’t have a sufficient backup system in place for our digital assets and, if the physical building housing the office burned down, we would have lost a lot of information. Programs were written to automatically backup and store archives off-site through an Internet connection.
We go through each key individual in our family, business, and/or life and ask, “What happens if he or she died tonight?”. We go through customers or clients and say, “What would happen if they left?”. We look at real estate leases and holdings and ask, “What if the landlord doesn’t renew the lease?”. We look at product lines and ask, “What is the inherent liability?”. We look at ownership structure of assets and ask, “Is there a better way to hold these in a self-contained entity?”.
We imagine the most horrific, hellish scenarios, many of which are extremely unpleasant to contemplate, and then inquire, “If we woke up in such a world, what would we wish we would have done to make it more tolerable?”. Then we compare the answer to the opportunity cost of solving it relative to the risk of it happening.
Phase 5: Executing the Notebook
The best plans or goals in the world mean nothing if you don’t execute them. As the saying goes, great ideas that are poorly executed always lose to good ideas that are well executed.
With your roadmap in hand, look down at the notebook, give yourself a time frame (I prefer six months; my current program, the first one in two or three years, runs from November 1st through April 30th), and then do something. Go through your list and start crossing off items. Just do it. Get up, step away from the computer or television, and go do it. It is that simple. If you find it necessary, start with the small stuff so you can generate some momentum and rack up accomplishments.
Think of the notebook you’ve written as a software program. Your job is to run it; to execute the code. You have to do it yourself. Nobody can live your best life for you. You are the central processing unit of your life. You are the CEO of your life. Make it happen.
A few things to consider:
- Make sure that your entire program is geared toward reinforcing and strengthening the primary mission of your life.
- All changes should be weighed against opportunity cost. If you hate your car but are in the process of paying off your student loans, taking on additional debt to buy a new car is probably a mistake because you’d just be switching one source of frustration and disutility for another; an economic game of kick-the-can-down-the-road, not permanent solution. You are looking to permanently solve problems, not temporarily fix them.
- Not everything requires money. Sometimes, you might be surrounded by negative, horrible people who constantly make you feel bad about yourself. Removing them would be a huge start in getting your life together. Other times, you might want to reorganize your garage, which might not take much capital. If you have the time and want to wear $400 cashmere sweaters but can’t afford them, you might decide to invest in sewing lessons so you can begin buying the raw fabric and manufacturing the garments yourself in your spare time, paying very little. Using a lack of money as an excuse for unhappiness is short-sighted. You can often get what you want for pennies on the dollar. It requires being creative.
- Constantly add new items as you discover them to your notebook. The plan is on-going during the time parameters you establish. The deadline date adds a sense of motivation by giving you a measurement line. Some of your best ideas might happen in the home stretch.
- Name your project. Give it a code word. In your mind, constantly be thinking about “Project XYZ” or whatever it is you call it. There is a reason the military and other highly organized institutions use this technique.
When I first began this process, the lists were much longer than they are today because there is often more to correct when you are implementing a strategy like this for the first or second time. Once you get going and put these types of programs in place every two or three years, the changes aren’t as numerous because you learn to screen out things that make you unhappy before they become an issue.
That is it. That is our system. I could expand from there – we have certain software programs that help us organize the work once we move beyond the notebook stage, for example – but I’m pressed for time and we are already over 2,500 words.
Update: On May 29, 2019, I released this post from the private archives as part of a special project. In the early years of the blog, this was one of the essays I wrote to help people by sharing the tools and techniques that had allowed my husband, Aaron, and I to become financially independent and spend most of our twenties effectively semi-retired despite having to put ourselves through college, receiving no inheritances or material economic support, and essentially being first-generation everything, all in the midst of the worst recession since the Great Depression.
In the eight long years that have passed since it was first written, a lot has changed in our lives. We relocated from the Midwest to Newport Beach, California in order to have kids through gestational surrogacy. We divested the operating companies we owned at the time in order to launch Kennon-Green & Co.®, a fiduciary global asset management company through which we manage money for other successful individuals and families, including doctors, engineers, entrepreneurs, academics, and executives. As a result of the latter, when re-releasing this post, it was necessary to make a few non-material edits. For example, the post originally referred to this as the “Kennon & Green” method but to avoid confusion with our new eponymous wealth management firm, I changed it to “Kennon-Green Family” in order to reflect the personal nature of the site.
Despite these changes, the core approach as laid out in this post is still the heart of how we go about improving our lives and businesses; making everything work work for us so that we wake up every day and feel like two of the most fortunate men in the world. Yes, most of it is now done digitally and when I do use paper, it is a different type of notebook but the heart is the same. It has taken us from a dorm room with little to no capital to our name to financial success and having complete freedom over our time. I believe it is effective because it trains your mind to look at the things you don’t like in your life and ask yourself, “Why do I tolerate this? What am I doing about it? Specifically, what steps am I taking to mitigate or reduce this? How long will I permit it to remain?” Likewise, it causes you to behave in a way so that you systematically add more sources of comfort, joy, exploration, and serendipity to your life. Those two forces can compound, creating a truly amazing environment. It is possible to love your life. Getting there, though, rarely happens by accident. It is designed. It also requires being uncomfortable, and, sometimes, in pain for extended periods as you improve, discarding behaviors and beliefs that may have formed a core part of your identity in the past. Everything comes with a price and, in this case, that is the cost of admission.