A middle-class lesson on money for his daughter.
I wrote a 432-page book of life lessons on money for my son that’s been translated into 6 languages. But today I was humbled by a simple conversation with Bob, a former employee who told me how he’d recently taught his daughter an important lesson of business.
His daughter just graduated from high school. Unsure of what to do with her life, she didn’t want to go to college.
“I told her she could go to a community college,” Bob told me.
“Sending a clueless kid to an expensive college,” I said, “is kind of like putting your hard-earned money in a paper shredder.”
We laughed. Bob is a handyman in the middle class. He’s one of the best repairmen in the business, but you wouldn’t know it by looking at him. He’s missing a few teeth. He’s bald and perpetually unshaven. He’s 70 lbs. overweight. And he’s worn the same dirty ball cap for the past twenty years.
“I put her to work for me until she figures it out,” Bob continued. “My daughter answers the phone, just brainless shit like that. And I pay her $8 per hour. The other day a homeowner called for a new hot water heater. My daughter asked me how much to charge for it. I told her a tank costs $350, and she could charge whatever she wanted for the installation.”
Bob grinned. “She told the caller it would be $1,000 total.”
“A thousand bucks?” I asked.
“A thousand dollars,” Bob laughed. “My daughter hung up and told me the lady wants it done. So we head out the door, stop at Home Depot for the tank, and install it in two hours. The lady paid $1,000 and we left.”
“So you made $650 in three hours,” I said.
“We did,” Bob nodded. He told how his daughter held the pile of cash while they drove home. I knew his normal charge was $600 to replace a hot water tank. This transaction was a killing, beating his regular profit by $400. And then he told me how he used the opportunity to educate his daughter about business.
“We did pretty good,” the daughter said, holding the wad.
“We sure did, and guess how much of it is yours?”
His daughter shrugged. “Half the profit?”
“Not exactly. Let’s do the math,” Bob said. “This job was a quickie, but I’ll round it up to four hours. You make $8 per hour. And so . . . you get $32.”
The daughter’s mouth fell open, speechless.
“That’s how it works,” he told her. “You signed up for a job. You agreed to hourly wages. In the real world, excess profits always go to the owner.”
I laughed out loud. “How did she take it?”
“She wouldn’t talk to me.”
Bob didn’t care. He was smart enough to keep the money. The lesson was more important to him than his daughter’s happiness. And she just learned a business lesson that has never been taught better at any college or university.
You need to become an owner to be wealthy.
In the real world, you can own your own business. Or you can own a portion of another business by investing in a stock. You can own rental properties. You can own patents. You can own a lot of things.
But only by being an owner can you get the excess profits.
