The Richest He'd Ever Been

Dennis sold his company at sixty three. Clean deal, the number he wanted. Every recommendation he got afterward was sound. Eighteen months later he called me the richest he had ever been in his life, and bored out of his mind. Nobody said no.

Dennis rebuilt industrial gearboxes for thirty one years. He sold at sixty three, and by Friday there was a line in his kitchen: attorney, CPA, two advisors, the buyer's wealth team, a brother in law. All of them helpful. All of them correct. Every one of them standing in the same posture, which was let's make sure you don't lose it.

Eighteen months later he was watching a balance.

Nothing went wrong. There is no bad call in this story, no loss on any statement, nobody to be angry with. That is what makes it worth an episode.

What I look at instead is a question. Not one nobody asked. One everybody asked, once, about the whole pile, in the language of spending: what is this money for? It is the right question. It gets a true answer. And a true answer can have an edge on it, always in the same place, because there is no field on the form that says what is this money supposed to build.

Some of your money has one job, and the job is that you never go back. Some of it was never given that job at all. When a room cannot tell which portion is which, it preserves everything.

In this episode:

• Why the sale is not the thing. The rollover, the pension election, the vest, the inheritance, the buildings you finally sold. Everybody gets a day when their money becomes a question
• The belief that does the damage, and why it never feels like a mistake: I did it right, so now the responsible thing is to preserve it
• Concentrate to build wealth, diversify to maintain it, and the three words that come after: diversification, past its job, becomes dilution
• Abundance is a level. Prosperity is a direction. Why you cannot save your way into the second one
• Jan, who carved out a piece before her sale closed, named it out loud, and was still the more conservative of the two
• The exercise at the end. Asset by asset, not the whole pile: is this one here so I never go back, or is this one still supposed to go make something?

I am in the industry. I would have been in that line. This is not an argument for taking more risk, and it is not a claim that anyone in that kitchen fell down on the job.

The Black Letter Private List is where these ideas keep going between episodes. CornerstoneRoscoe.com

Host: Josh Ryan

Provided for informational purposes only and not intended as investment or tax advice. No recommendation regarding the purchase or sale of any security is made or implied. Neither diversification nor rebalancing can ensure a profit or safeguard against a loss. Securities and advisory services offered through Harbour Investments, Inc. Member SIPC.

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Dennis rebuilt industrial gearboxes. Not the glamorous kind of business. There isn't a glamorous kind of gearbox. He started in a rented bay with one lathe and a guy named Petey who worked for cash. Thirty-one years later, he had forty four employees and a waiting list. Because when a gearbox fails in a rock quarry, nobody cares what your website looks like. They care whether or not you can have it running by Thursday. And Dennis could always have it running by Thursday. He sold the company at 63. The wire hit on a Tuesday morning in October, and he told me he stood in his kitchen and he looked at his phone and he felt absolutely nothing. Which surprised him. He'd expected to feel something. What he remembers instead is what happened next. By Friday, there was a line. Not a hostile line, a helpful line. His attorney, his CPA, two advisors, the buyer's wealth team, his brother-in-law, and every single one of them showed up with the same posture. And the posture was this. Let's make sure you don't lose it. Nobody sold him anything stupid. Every recommendation on its own was defensible. I have made the same recommendations. I would have been in that line. Eighteen months later, Dennis called me and he said, and I'm quoting him, I'm the richest I have ever been in my life, and I am bored out of my mind. He wasn't depressed, he wasn't broke, and nothing had gone wrong. He just wasn't building anything anymore. He was watching a balance. My name is Josh Ryan. I've been sitting with that sentence for a long time, because on paper there's nothing wrong with it. If you'd drawn his life on a whiteboard in 1991 and asked him what success looked like, he'd have drawn something pretty close to that Tuesday in October. So I've been trying to find the scene. Because nothing in it doesn't add up, and it isn't a mistake. That's what makes this interesting. If somebody had made a bad call, this would be a boring story. Bad calls are easy to talk about. But everyone did their job correctly, and the man is just bored. Now, Dennis sold a company, and I know what some of you are about to do with that. You're about to decide that this isn't your story because you don't have a company to sell. I'd hold off on that. Because the sale isn't the thing. The sale is just the loudest version of the thing. Here's the thing. There's a day when a pile of money stops being tied up in whatever it was tied up in and becomes yours to point somewhere. That's the day, and everybody gets one. For Dennis, it was a wire on a Tuesday. For somebody else, it's the morning the 401k becomes a rollover. And 31 years at the same company turns into a number on a screen and a form asking where to send it. Same Tuesday, same line. It's the pension election, it's the buildings you finally sold, it's the day the inheritance clears, and you're the one holding what your father spent his life on. It's the vest, it's the day you stop earning. Every one of those is the same moment in a different coat. Something that was doing a job stops doing it, and now it's liquid. And now it's a decision. And the second it becomes a decision, the line forms. So this isn't a story about selling a company. It's a story about the day your money becomes a question. Here's the belief I think that's sitting underneath all of that. See if it sounds familiar. I did it right. I did it right. So now the responsible thing is to preserve it. That belief doesn't feel like an error. That's the thing. It feels like maturity. It feels like the grown-up version of yourself, the one who isn't greedy, the one who knows that he got some luck along the way and just doesn't want to press it. It feels exactly like what a person should think after they win. Nobody defends a mistake that hard. People defend virtue, which is why I think this is worth examining. The beliefs that get us in trouble are almost never the ones we're embarrassed about. Before I go further, I need to say something out loud because otherwise you'll be thinking the whole time and you won't hear a word I say. I'm the industry. I'm the guy in that line. I'm licensed. I do this for a living. And there's an obvious version of this episode where an advisor tells wealthy people that their other advisors are too cautious, and then, what a coincidence, offers to help. I know what that sounds like. Let me foreclose the thing I'm not saying. I'm not telling you to take more risk. Not more stocks, not fewer bonds, nothing cute. If you hear be aggressive in the next 15 minutes, I've written this badly and you should stop listening. And I'm not telling you anybody in that kitchen fell down on the job. I keep saying that and I'm going to keep saying it because it's the whole point. Every person in that line was good at what they do. The advice was sound. If you handed me that file today, I'd have a hard time finding a thing to fix. What I'm interested in is a question that did get asked, asked properly by people who knew to ask it. Not a question about allocation. A question that sits underneath allocation and gets answered every time in a way that leaves something out. Let me start with something I believe. That also happens to be the thing I'm about to argue. Concentrate to build wealth, diversify to maintain it. I believe that. Has anybody in the history of the world gotten wealthy by owning a little bit of everything? In my experience, they got wealthy by owning a lot of one thing, usually a thing they controlled and pointing their whole life at it. Dennis owned gearboxes. That was the strategy. That was his whole strategy. And once you're wealthy, spreading out is how you manage the risk to it. Because the same concentration that built the thing could happily unbuild it. And that's not fear, that's arithmetic. And it's not a promise. Diversification does not guarantee a profit or a safeguard against losses. It manages risk. That's the whole job. And for one portion of your money, it's the right job. So the line in Dennis's kitchen was right. Watch what it actually did though. The company was gone. One asset converted a cash, and the cash needed a job. From an objective perspective, everybody in that room got that part correct. But the posture didn't stop at the money from the sale. It spread. See, Dennis had two commercial buildings he'd bought in 2004 that he still owned and still knew every square foot of. And there was a conversation about whether he should really be a landlord at his age. He had a nephew who'd been running a small install crew and he wanted to buy a bay and go out on his own. And Dennis was thinking about backing him. That got talked about as a risk to be evaluated rather than a thing to be done. He'd been half-sketching a business for 11 years about remanufacturing a particular part that everybody in his industry throws away, which is the kind of idea that only a man who stared at gearboxes for three decades would ever have. None of it happened. Not because nobody said no, it's just that the entire room had shifted into one posture. And once the room is in that posture, everything gets measured against it. The Nephew's Bay wasn't compared to the Nephew's Bay, it was compared to a bond ladder, and it lost. Because of course it lost. It's not a fair fight. That's not even the same sport. So the whole life got preserved. Not just a portion of it they needed preserving, but all of it. And that's the part I keep coming back to. Nobody in that room can tell which portion was which. Not because they were careless, they had everything they were supposed to have: statements, a balance sheet, a tax picture, a risk tolerance questionnaire Dennis filled out in about 90 seconds while thinking about something else. They even had an answer to what the money was for. Because I could sit here and tell you that nobody asked that question. That's the easy version of the story, and I'm not going to tell it because it isn't true. Somebody asked. Somebody almost always asks. It's on the form. It's in the training. I've asked it in nearly every first meeting I've taken for 20 years. And I'll bet three separate people asked Dennis some version of it that same week. The question gets asked. That's not where this goes wrong. It goes wrong because it gets asked once about all of it at the same time. Dennis, what's the money for? And Dennis, who's not a stupid man, tells the truth. He wants to be comfortable. He wants Karen taken care of. He'd like to help the grandkids with school. Maybe a place on the lake. Every word of that is true. And it's one answer about one pile. So it becomes one instruction. And one instruction produces one posture. And that posture goes out over everything he owns. Now look at what's actually in his answer. Comfort, caring, tuition, the lake. Every item is money going out. Because that's what the question is really asking, not what the money is for, but will the money be spent on? Which is a fine question. It's a necessary one. I ask it every week and I'll ask it again on Monday. It just has no room in it for the nephew's bay. The bay isn't spending, and neither is the sketch. Dennis doesn't want to consume those things, he wants to build them. And there's no field on the form that says what his money is supposed to build. So when the bay comes up, it doesn't get filed under purpose, it gets filed under risk. And right now it's in a fight with a bond ladder, and we already know how that ends. That's the theme. Not a question nobody asked, a question everybody asked about the whole pile in the language of spending. Now I've asked that question thousands of times, and I want to be careful about what I'm telling you, because I'm not standing here saying I've been doing it wrong. It's a good question. It's the right question. I got a true answer back every single time. Dennis is just the man who made me notice that a true answer can have an edge on it, and that edge is always in the same place. Because here's what I've noticed since money doesn't have one job. It has several. And they're different and they don't get along. Some of your money has one job, and that job is that you never go back. That's real. That job matters enormously. That's the money you never want to have to think about. That's the money whose whole assignment is that your spouse has somewhere to stand if you're not there. And that 31 years of work isn't resting on one number that you don't control. Preserve it. Spread it out. Be as boring with it as you can stand to be. That money is doing its job. Some of your money is the part that's still supposed to go make something. It isn't there to keep you still. It's the nephew's bay. It's the 11-year sketch. It's the building you understand better than anyone alive will ever understand it. That portion is a completely different assignment. And when you hand it the first job's posture, it stops doing its own. I know a woman I'll call Jan who did this differently. And not because she's smarter than Dennis, because she happened to say the thing out loud. Before her sale closed, she carved out a piece, named it, wrote a number on it, and she told everyone in her line in advance, this part isn't here to preserve anything. Don't manage it like it is. If it goes to zero, I'll be sad, but I'll be fine. That's the whole difference. She didn't take more risk than Dennis in any total sense. Put their balance sheets side by side, and you'd probably call Jan the more conservative of the two, and you'd be right. She just knew which part had which job. So nobody had to guess. Dennis never said that part out loud. So the room did what rooms do in the absence of an answer. It preserved everything. Now what did that cost him? Not money. This is the part everybody gets backwards. Dennis is not poorer. His statements are excellent. By every number anyone in that kitchen would have cited, he is a total success. He has abundance. He has plenty. He has more than enough forever. And that's not nothing. That's the thing that 31 years was for. That's not the same as prosperity, though. Abundance is a level. It's an amount. You can arrive at it and it will stay there. And a lot of people get there, and there's nothing wrong with that. Prosperity is a direction. It's the condition of still going somewhere. And you cannot save your way into it. Because saving is, by definition, the act of holding still. Dennis has abundance. He had prosperity for 31 years, and then he set it down in a kitchen in October, and nobody, including him, noticed he had done it. What it cost him is the nephew's bay, which somebody else eventually backed. It cost him eleven years of sketches that are still in a drawer. It cost him the version of the next decade where he was building something, and instead he got the version where he checks a balance he doesn't need to check on a phone in a kitchen at 65. 18 months after the wire he called me, the richest he had ever been, and he was bored out of his mind. Nothing on his statements explains that sentence. The explanation is in what he stopped doing. He didn't lose. That's what makes this hard to see. There's no loss on any statement. There's no bad quarter to point at. Here's the doctrine I'd put on it. It turns on three words. Diversification past its job becomes dilution. Past its job. Diversification has a job, and the job is to help manage investment risk and maintain what you've accumulated. And you should let it do that job on the portion of your money whose job is making sure you never go back. It manages risk. It does not guarantee a profit or safeguard against losses. That's fine. That portion of the money isn't asking for a promise. Applied past that, it doesn't stop working. And that's the trap. It keeps working. It just keeps working on things that were never supposed to be held still. In Dennis's case, it diluted the part of his life that was supposed to stay concentrated, and it did it quietly, and it did it with everyone's approval. Nobody in that kitchen could see it happen. Neither could he. The industry didn't do that to Dennis. Not exactly. The industry asked Dennis what the money was for. It asked him about all of it at once in the language of spending. And it got back a true answer with a hole in it. And it did the responsible thing to everything the answer didn't mention. If your day hasn't come, you're in the best position of anyone listening, and you probably don't feel like it. Dennis answered under pressure, in a kitchen, in six weeks, with a line at the door and everybody being helpful. Jan answered months early, in a quiet room, with nothing on the table and nobody waiting. Same question. She just got to think about it. You can see the day coming. That's the whole advantage. The rollover has a date on it. The buildings will sell eventually. The vest is on the calendar. You know roughly when your money becomes a question, which means you get to answer it while the answer still costs you nothing. So here's the one thing I'd leave you with. And it costs nothing. And you can do it standing in your own kitchen. Look at what you own now. Not the whole pile. Go asset by asset. And on each one, ask which job it has. Is this one here so I never go back? Or is this one supposed to go make something? The first question you'll answer fast. You've been answering it your whole life. The second one is where it goes quiet. And here's what I've noticed about that quiet. If you don't fill it, the first answer fills it for you. It spreads. It takes the whole pile because it's the only answer anybody in the room was ever given. And that's not the room's fault. A room can only work with what it's told. And I would know. I've been standing in that room for 20 years asking. Thank you for listening. This is the Black Letter Podcast. The Black Letter private list is where these ideas keep going between episodes. It's a quieter correspondence, and it's where I tend to work things out before I know what to think about them. You can find it at cornerstonerosco.com. The views and materials were created and intended to provide background assistance and education. No recommendation regarding the purchase or sale of any security is made, intended, or should be implied by these materials. Real estate investments involve risk and are sensitive to factors such as changes to real estate values, property taxes, and interest rates. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices can fluctuate like the value of any other investment. Neither diversification nor rebalancing can ensure profit or safeguard against a loss. This is provided for informational purposes only and should not be construed as investment advice or tax advice. Data and analysis do not represent the expected future performance of any investment product or strategy. Securities and advisory services offered through Harbor Investments Incorporated member SIPC. Harbor Investments Inc. does not offer tax or business acquisition services.