Lessons from IBM, Microsoft and KFC

There are a few things not included in the bio on my website that I would like to share with you. I have never lost a marathon. I have never had an unprofitable day in the restaurant business. I have never been cut from a basketball team in college or professionally. I have never lost a chess tournament or national spelling bee, and I have never lost an election running for public office.

This all may sound quite impressive until you realize that I have never failed at any of the above mentioned tasks because I have never attempted them. Success and accomplishment are not defined by a lack of failure. Failure is a part of life and learning. Even the greatest baseball players in the world fail more than they succeed. They fail to get a hit 7 times for every 3 times they do get one. Does a baseball player think about quitting the game every time he gets out? Is he afraid to go to bat because he might fail? No. He knows he will probably fail 7 out of the 10 times he goes to the plate. He knows that failing is a part of the game. We, too, must learn that failure is part of the game of life. Babe Ruth holds the record for the most strikeouts, but he is considered to be one of the greatest athletes of all time because of the home runs he hit. He struck out 1,330 times and hit 714 home runs during his career.

Tom Watson, Sr., IBM’s founder, called into his office an executive whose mistake had lost the company $10 million. The nervous executive entered the office and said, “I guess you want my resignation?” Watson replied, “You can’t be serious. We’ve just spent $10 million educating you!” (Warren G. Bennis, Burt Nanus, Leaders: Strategies for Taking Charge, (New York: HarperCollins, 2003) p. 70) We must come to view mistakes not as failure but as learning. Some seek to eliminate the chance for failure and by default eliminate the possibility of success. “Bill Gates, the founder of Microsoft, has said, ‘I like to hire people who have made mistakes. It shows that they take risks.’” (Michael Pearn, Chris Mulrooney, and Tim Payne, Ending the Blame Culture, (Brookfield, VT, Gower Publishing, 1998) p. 11–12)

Persistence and a Chicken Recipe
In the early 1950s, Colonel Harland Sanders was forced to sell his restaurant as a result of an interstate highway which bypassed Corbin, Kentucky and reduced the number of customers who came to his restaurant. Age 65, Colonel Sanders was reduced to living on his Social Security check of $105 per month ($791 per month in 2006 dollars).

While running his restaurant, he had perfected a recipe and cooking technique for fried chicken. Confident of the quality of his fried chicken, he decided to try and sell his recipe and cooking techniques. He drove all across the country from restaurant to restaurant cooking batches of chicken for restaurant owners and their employees. He was rejected 1009 times before he found someone willing to purchase his recipe. (Anthony Robbins, Unlimited Power, (New York: Simon & Schuster, 1986) p. 14) When we experience defeat and rejection, the easiest and most logical thing to do is to quit, but the successful have learned to persist. Colonel Sanders didn’t quit after 10 or 20 rejections but persisted through hundreds of rejections until he got a yes.

After his first yes, his franchising idea began to take off. To those who agreed to buy his recipe, he entered into a handshake agreement that stipulated payment to him of a nickel (36 cents in 2006 dollars) for each chicken the restaurant sold. By 1964, at age 74, Colonel Sanders had more than 600 franchised outlets for his chicken in the United States and Canada.

Colonel Sanders said of the beginning days, “I hand-mixed the spices in those days like mixing cement on a specially cleaned concrete floor on my back porch in Corbin. I used a scoop to make a tunnel in the flour and then carefully mixed in the herbs and spices. My wife, Claudia, was my packing girl, my warehouse supervisor, my delivery person – you name it. Our garage was the warehouse. After I hit the road selling franchises for my chicken, that left Claudia behind to fill the orders for the seasoned flour mix. She’d fill the orders in little paper sacks with cellophane linings and package them for shipment. Then she had to put them on a midnight train.” In 1964, Colonel Sanders sold his interest in the U.S. Company for $2 million ($13 million in 2006 dollars) but remained the public spokesman for the company. The company continued to grow and in 2004, KFC did over $12 billion in sales and now serves over 8 million customers daily in over 13,000 restaurants in 80 countries.

Conclusion
In seeking to achieve prosperity, there will be failures along the way. We must come to view mistakes not as failure, but as learning. God designed us to learn by making mistakes. In the Old Testament, the word “sin” is translated from the word “hattat” which literally means “to fail or miss.” In the New Testament, the word “sin” is translated from the Greek word “hamartia” which literally means “miss the mark” derived from the sport of archery. When an archer missed his target it was called “sin.” In archery when you miss the target it doesn’t mean it is over. You simply missed the mark or target with that arrow. You can attempt again and again until you hit the mark. So in life, there will be times we miss our target but this is not the end. We can learn from our mistakes and attempt again and again until we hit our target. Achieving prosperity is not a single event but a process. What matters more than where you are is the direction you are heading.

Growth of the Welfare State

With the tax filing deadline arriving on April 15th, I thought taxes would be an appropriate message for this week’s newsletter.

Our current federal government clearly violates the U.S. Constitution and the ideas of the founders of a limited government with low, indirect taxes. Thomas Pain taught that when government is just, taxes are few.[i] As government has expanded and grown in areas that are unconstitutional, so have taxes expanded and grown to support them. In 1901, the total spending of the federal government was $525 million. In the year 2000, the federal government spent $1.79 trillion. During those 100 years, federal government’s spending has increased by more than 3,000 times, while the population grew by only 6.5 times. Thus, the yearly cost per household increased from $32 in 1901 to $16,949 in 2000—over a 500 time increase in cost per household (see table). Much of this growth has been in welfare spending. Since 1971, more than half of all government spending has been for welfare.[ii]

The government’s future unfunded commitments show that this trend will continue. “By commitments, I mean things like unfunded promises for future Social Security and Medicare benefits. Our total accumulated fiscal burden is more than $46 trillion. . . The new Medicare prescription drug benefit represents more than $8 trillion of this accumulated burden. . . To put things into perspective, $46 trillion translates into a burden of $156,000 for every American alive today, or about $375,000 per full-time worker. . . The combined net worth of every American, including billionaires like Bill Gates and Warren Buffett, is only about $50 trillion. That means every American would have to hand over more than 90 percent of their net worth to cover the government’s current unfunded promises for future spending.”[iii] If this trend is not reserved, we will see the establishment of a complete socialistic government, the end of liberty and the collapse of the economy that will mirror the effects of the great depression.

Growth of the U.S. Federal Government [iv] (Be sure you read this footnote)
Year, Total Spending[v], # of U.S. Households[vi], Yearly Cost Per Household
1901, $525 million, 16 million, $32
1910, $694 million, 20 million, $34
1920, $6.3 billion, 24 million, $260
1930, $3.3 billion, 30 million, $111
1940, $9.5 billion, 35 million, $269
1950, $42.6 billion, 44 million, $977
1960, $92.2 billion, 53 million, $1,746
1970, $195.6 billion, 63 million, $3,112
1980, $590.9 billion, 80 million, $7,351
1990, $1.25 trillion, 92 million, $13,622
2000, $1.79 trillion, 106 million, $16,949

Restoring Freedom
The greatest way to reduce taxes is to reduce the size and scope of government. If the federal government only provided the services authorized by the constitution, the spending and cost to Americans would be a very small fraction of what it is today. If the current trends of government growth and the increase of government redistribution are not reversed, America will no longer be the land of the free and home of the brave, but the land of the slaves and home of the dependants. Action must be taken to freeze the growth and phase out all redistribution programs until the limited government created by the inspired constitution is restored.

The great men and women of this nation must again unite and work and fight for freedom as did our inspired founders. In a speech delivered to some who thought it better to have peace and bondage then fight for freedom, Patrick Henry said, “If we wish to be free . . . we must fight! . . . Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death!”[vii] And in the words of George Washington, “We must now determine to be enslaved or free. If we make freedom our choice, we must obtain it by the blessing of Heaven on our united and vigorous efforts.”[viii]

Education is one of the greatest tools we have to fight for liberty. In 1792, Thomas Jefferson wrote to Thomas Paine, “Go on then in doing with your pen what in other times was done with the sword: shew that reformation is more practicable by operating on the mind than on the body of man.” Please share the message of this newsletter with others to help people understand the dangers of growing government our country is facing and the true cause and purpose of inflation. Education will help move our country toward demanding less government and away from a willingness to give up liberty and freedom for government-provided benefits such as health care, prescription drugs and retirement. Slavery is the result of seeking the illusion of government-supported security. Any society that gives up liberty in hope of security will find they lose both. Freedom and security are only to be found in our own liberty, industry, and production.

Special Report: How to Achieve Financial Peace of Mind through Asset Protection
If you have not yet read this complimentary special report, I would suggest that you do so. Taxes are the number one expense for many Americans’. In 2007, Americans worked longer to pay for government (120 days) than they worked for food, clothing and housing combined (105 days). From this report, you will learn “5 Ways to Reduce Your Taxes.” Also, it is estimated that a lawsuit is filed every 30 seconds in the United States. From this report, you will learn “How to Protect Your Assets against Lawsuits.” Click on the Special Report link at www.DoesYourBagHaveHoles.org to download the report as a PDF.

Footnotes:
[i] Thomas Paine, Life and Writings of Thomas Paine, Volume IV, (New York: Vincent Parke and Company, 1908) p. 233
[ii] Social Security Administration, Office of Research, Evaluation and Statistics, “Social Security Programs in the United States,” SSA Publication No. 13–11758, July 1997, p. 108
[iii] David M. Walker, “The Challenges & Opportunities of Public Service,” Marriott Alumni Magazine, Fall 2006, p. 24–25
[iv] The numbers in this table have not been adjusted for inflation because inflation is a hidden tax used by the federal government to fund the welfare programs. In the words of Alan Greenspan, chairman of the Board of Governors of the Federal Reserve of the United States from 1987–2006, “The welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is affected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending . . .to finance welfare expenditures on a large scale. . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists . . . Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth” (Ayn Rand, Capitalism, (New York: Signet, 1967) p. 100–101). The value of the American dollar declined in its purchasing power from 100 cents in 1901 to approximately 5 cents in the year 2000. From 1901–2000, the value of the dollar has been devalued by inflation 95 percent—in effect a 95 percent tax. In the words of Ezra Benson, United States Secretary of Agriculture from 1953–1961, “There is one and only one cause of inflation—expansion of the money supply faster than the growth of the nation’s material assets. Whether those assets are gold and silver, or food, machines and structures, the creation of money more rapidly than the creation of tangible items of value which people may want to purchase, floods the market place with more dollars than goods and dilutes the accepted value of money already in existence. In America, only the federal government can increase the money supply. Only government can create inflation. The most common method of increasing the money supply today is by spending more than is in the treasury, and then merely printing extra money to make up the difference. Technically this is called ‘deficit spending.’ Ethically, it is counterfeiting. Morally, it is wrong. Deficit spending, and the inflation it produces, constitutes a hidden tax against all Americans—especially those who own insurance policies, have savings accounts, or who are retired on fixed incomes. Every time the dollar drops another penny in value, it is the same as if the government had counted up all the money that you and I had in our pockets, in savings, or investments, and then taxed us one cent on each dollar. The tax in this case, however, does not show up on our W-2 forms. It is hidden from view in the nature of higher and still higher prices for all that we buy.” Even if the numbers in the table were adjusted for inflation it does not change the trend of increased government spending and cost per household. Adjusted for inflation, from 1901–2000 the spending of the federal government increased by 174 times while population grew by 6.5 times. Thus, the yearly cost per household increased from $627 ($32 adjusted for inflation to 2000 equivalent) in 1901 to $16,949 in 2000—a 27 time increase in cost per household.
[v] Executive Office of the President of the United States, Office of Management and Budget, “Budget of the United States Government, Fiscal Year 2004, Historical Tables,” Table 1.1: Summary of Receipts, Outlays and Surpluses or Deficits: 1789–2008, p. 21–22
[vi] U.S. Bureau of the Census, “Historical Statistics of the United States, Colonial Time to 1970,” (Washington, DC, 1975) p. 43; U.S. Department of Transportation, Federal Highway Administration, Exhibit 1.1 National Summary Statistics: 1960–2000
[vii] Orations of American Orators, (New York: Colonial Press, 1900) p. 59
[viii] Jared Sparks, The Writings of George Washington, Volume IV, (Boston: Ferdinand Andrews, 1838) p. 38

10 Principles Parents Must Teach Their Children If They Ever Want to Get Rid of Them!

Since the release of my book, I have done numerous radio interviews across the US and Canada. I did an interview this morning in Ohio. Below is the topic of discussion from my interview this morning.

Question: How common it is for adult children to live at home?
Answer: Census figures indicate that more than 80 million so-called “empty nesters” now find themselves with at least one grown child living at home (Roberta Rand, “When Adult Children Move Back Home,” Focus on the Family). The common parental expectation of having an “empty nest” has given way to the reality of a “crowded nest.” A 2005 survey revealed that 25% of the college graduating class of 2006 expected to live at home after graduating (Sheila J. Curran, “The Adult-Child Comes Homes,” Duke University News, July 21, 2006).

Question: What do you think is the cause of the increase in the number of adult children living at home?
Answer: One reason is that often times parents give their children to much. Many parents make the mistake of provided damaging financial assistance to their children. Their motives are usually good. They want to help their children by paying for their college, and helping them get started in life or assist when a financial need rises. Unfortunately, the result is often opposite to the one desired. Instead of helping the children become self-sufficient, they become dependant. Instead of sparking initiative and discipline, the children become idle and indulgent. Instead of being achievement oriented, they become entitlement oriented. Instead of becoming grateful, they become demanding. “Children who always get what they want will want as long as they live” (Fred G. Gosman, Spoiled Rotten, (New York: Villard, 1992) p. 32). Research has shown that “in general, the more dollars adult children receive [from their parents] the fewer they accumulate, while those who are given fewer dollars accumulate more” (Thomas J. Stanley, William D. Danko, The Millionaire Next Door, (New York: Simon & Schuster, 1996) p. 142-143).

Another reason is that children are not learning to work. Since parents are providing financially for all their children’s needs, they no longer have to get summer jobs. In 2007, for the first time on record the majority of U.S. teenagers were not working or looking for work at the beginning of the summer. Only 49% of teens age 16 to 19 were working or looking for work in June 2007, a steep decline from the 68% of teens working or looking for work in June 1978 (Barbara Hagenbaugh, “More Than Half of Teens Forgo Summer Jobs,” USA Today, July 9, 2007).

Question: What do you suggest parents do when children ask for financial help?
Answer: Let me share with you a story. When I was starting one of my first businesses, one of my business partners and mentors was a multimillionaire. My business was growing but struggled to turn a profit. I continued to work hard but things were getting tougher and tougher for me financially. I went to my rich partner and asked for a small monthly salary or a loan to help me get by until the business was profitable. He declined to give me any assistance. I was frustrated and said, “You are making millions a year and I am struggling to stay alive. Please help me.” He looked at me and I could tell he wanted to help me. He was close to giving in to my plea when he replied, “If I take away your struggle, I will also take away your victory.” He then shared the following story:

“There was a young boy who came across a caterpillar hanging in a cocoon. He went to see the cocoon several times each day waiting for the butterfly to emerge. After a few days, the young boy began to see the cocoon move as the caterpillar struggled to emerge from the cocoon. The boy wanted to help the caterpillar so he ran home and got a pair of scissors. He returned and carefully cut open the cocoon and out fell a partially developed butterfly. This caterpillar would never fly as a butterfly. The young boy innocently killed the caterpillar he was trying to help.” At the time, I didn’t find this advice helpful, but today I am grateful to a wise partner and mentor who resisted the temptation to cut open my cocoon.

If you protect your children from struggle and responsibility, you will also prevent them from growing. If you help too much, you will make them helpless. Living off others is a form of bondage—for if you take from a person his responsibility to care for himself, you also take from him the opportunity to be free. Do not give your kids money, give them financial education. It costs a lot less and will develop the productive, self-sufficient children you desire.

Question: What are the 10 Financial Principles Parents Must Teach Their Children?
Answer: I have spent years studying the wealthy and have organized what they do into the Ten Habits of the Prosperous.

1. Clear Monitored Financial Goals
“If you put one hundred people in a room and ask them how many would like to be financially independent, all the hands will go up. If you then ask them how many have a personal financial statement detailing assets, liabilities, and net worth that is current in the last ninety days . . . ninety of those hundred people will not raise their hands. If you ask those remaining ten people how many have that financial statement laid out in a pro forma goals format for one, three, five, ten and twenty year periods, nine of the people will sit down. The one still standing will be a millionaire” (Charles A. Coonradt, The Game of Work, (Salt Lake City: Shadow Mountain, 1991) p. 16)

2. Delay Gratification
The prosperous have learned to resist the temptation to lose what matters most long-term for the short-term pleasure of something now.

3. Value Financial Independence
The prosperous enjoy the security and independence of owning their possessions more than social praise and status.

4. Live Below Income
For every $10 the prosperous make they spend $7. For every $10 dollars the poor make, they spend $13.

5. Save Money for Tomorrow
Many spend tomorrow’s resources for today’s pleasures. The financially independent save and invest today’s money for tomorrow.

6. Earn Interest
Interest is a very powerful tool that either builds or diminishes wealth. Those who understand interest earn it and those who don’t understand interest pay it.

7. Pay Themselves First
You can become financially independent simply by paying 10 percent of your income to savings and investments first, and then living on the rest.

8. Buy Wholesale
You can greatly decrease your expenses by learning how to buy items at wholesale and by always asking for a discount.

9. Create Gold-Laying Goose
The prosperous create a gold-egg-laying goose (assets with passive income) and then live on the eggs. Those who have reached the ranks of prosperity have learned that money is of a prolific generating nature.

10. Master of Money
A 17th Century Proverb states, “If money be not thy servant, it will be thy master.” The prosperous have their money work for them, while the poor work for money.