William Danforth—He founded Purina Mills, the company that would soon become Ralston-Purina, in St. Louis, Missouri, during the summer of 1894. As of the early 2000s, Ralston-Purina is now a part of Nestle, combining two of my favorite companies (the only other merger of equal beauty during my lifetime occurred when Procter & Gamble picked up Gillette).
The reason why I like William Danforth so much is because he understands the connection between business and the rest of your life (I have a tendency to gravitate towards the investor/philosopher types). He is the gentleman that wrote the book “I Dare You”, which I plug on this site as the summer read of 2013.
In I Dare You, Danforth explains what he believes to be the key to successful. He argues that a successful life is essentially about balance a four-square: our economic interests, our physical health, our intimate/social relationships, and our relationship with God. When one of those four areas is neglected, Danforth argues, our happiness and general contentment in life begins to take a hit.
To illustrate this concept, Danforth would often draw a red and white four-square to illustrate the point (in fact, if you have seen the red and white checkerboard logo for Ralston-Purina, you now where it came from). When you wake up in the morning, Danforth argued that you should spring out of bed and honestly assess which aspect of your identity needs the most work: Do you need to get your financial house in order? Do you need to get in better shape? Do you need to improve some of your relationships with others? Have you neglected thinking about the higher purpose of your life?
Danforth was perceptive in pointing out that most people focus on one or two areas of their lives exclusively, neglecting the other components, and this is the cause of misery. You could be rolling in $15,000 Coca-Cola dividend checks four times per year, but if you are morbidly obese and have no friends, you’re probably not going to be all that happy with your financial independence.
To make the example more concrete, there was a prominent personal finance blogger that wrote about living a lavish lifestyle, working out all the time, and he would document his exploits with waitresses on the weekends. The whole time, though, he was living above his means and eventually lost his house. If he scaled back his spending a bit, he likely could have avoided the economic problems that brought him misery.
When Danforth discusses business and life, I appreciate the fact that he does not focus on economic success as an ends to itself. The point of turning Purina Farms into a pet-food powerhouse was not so that William Danforth could become the richest dead man in the cemetery. In his case, he used his wealth to become a philanthropic powerhouse and spend his end days vacationing around the world with his wife. The animal-food empire gave Danforth the resources to take control of his time to find his own happiness and leave this world in a better place than when he entered it. That’s why I’m a big fan of his.
Henry Parsons Crowell—This is my favorite American icon that most people do not even know existed. Crowell was the founder of Quaker Oats cereal. What I find fascinating about his life was this—he was born into a very affluent family, and could have avoided work his entire life if he so chose.
However, he had a religious fervor that I do not believe has a mainstream equivalent in American business today. With a strong belief in Jesus Christ, he believed that he had the moral imperative to work tirelessly and endlessly because he did not believe he could handle telling Jesus on his judgment day that he failed to reach his potential.
For the final four decades of his life, Crowell donated 70% of his personal and business profits to charity. However, because of his business savvy in running Quaker Oats, the profits kept increasing 15-20% per year, and he was able to die in Chicago in 1943 as one of America’s richest men, despite his almost comically high donation rate during the second half of his life. I find that remarkable—when Crowell was born, he could have chosen to indulge a life of Billy Madison-like leisure, never lifting a finger a day in his life. Instead, he built a breakfast juggernaut that continues to fund extensive charity work in America to this day.
If you get a chance, read the book about his life “The Cereal Tycoon.” He is one of the most impressive American businessmen that does not have the lasting reputation that he deserves.
By the way, this is another reason why I could never own ETFs: I love the stories behind the individual businesses too much. If I were to own 100 shares of Pepsi, as of writing this in the summer of 2013, I would receive $227 in annual dividends. About $25 of that $227 would come from Crowell’s life work, Quaker Oats. I love knowing the stories behind these iconic American companies, and how Pepsi shareholders today continue to benefit from the sweat of Crowell’s brow.
Charlie Munger—There is probably nothing I could write here that would do Charlie Munger justice. It would be like trying to explain the beauty of Bruce Springsteen’s The River album to someone. You would just have to listen to it. In the case of Charlie Munger, you need to read Janet Lowe’s biography of his life “Damn Right: Behind The Scenes With Berkshire Hathaway Billionaire Charlie Munger”. It is the only way you can appreciate the full trajectory of his life.
When he was in his early 30s, he heard the following three phrases in a short sequence of time: “Your son has died”, “I want a divorce”, and “Your pay and hours will be reduced.” For those of you familiar with Munger’s life, you know I am referring to the death of his eldest son Teddy, the divorce from his first wife Nancy (note: his second wife was named Nancy as well), and the fact that he was worse than broke in the aftermath of his divorce and son’s death.
This is what makes Munger more accessible to average person than Warren Buffett—Buffett’s dad was a Congressman, and Buffett never felt a day of economic insecurity in his life. The low point of Munger’s life was probably lower than, or at least equal to, the low point in the life of anyone reading this blog.
Munger was able to pick himself up and pull himself together by throwing himself at his work after his life fell apart. In particular, he would wake up an extra hour earlier so that he could give “one hour of the day to himself” with the sole focus on self-improvement, be it in the form of mastering investing or acquiring worldly wisdom. He began making lucrative investments in real estate. He began making successful, concentrated bets on publicly traded power companies in Canada. Substantial income started flowing into his bank account, and his partnership with Warren Buffett at Berkshire Hathaway turned him into the kind of guy that became the richest man in the room (assuming Warren Buffett wasn’t in it).
Not only did he go from absolutely nothing to billionaire-status over a 4-5 decades, but he had a fantastic second marriage that resulted in several children that laid the foundation for a Munger dynasty to be among us for generations to come. When Munger was in his early 30s, he could have given up. When Munger talks about overcoming adversity, he has street cred. He once lost it all, and then he went on to live one of the greatest lives in American history.
But that’s not why I like him so much—the reason I gravitate more towards Munger than Buffett is because Munger seems like the more complete person. With Buffett, every decision in his life has placed a premium on the economic considerations of a given decision. Once Munger became filthy rich, he began to think beyond economic considerations. He once joined a zoning board because he knew it would be a tiring, thankless job, and he felt that he was the only person in the community that could do it competently. If you look hard enough, you can find his artistic side in the dozens of aesthetically pleasing homes he has designed in Southern California. He owns legal newspapers, speaks candidly on politics, sits on the board of Costco, and has all of these side interests and pet projects. He has lived such a…robust life.
He gets what financial independence represents. Munger became wealthy so that he could speak bluntly even when it was unpopular (he pointed out the dangerous banking practices that preceded the savings and loan crisis of the late 1980s and early 1990s, and because he was not beholden to the big banks, he was one of the few prominent voices that was able to speak out on the situation honestly). When he wants to take a vacation, he gets on his boat and does it. When he wants to engage in politics, he cuts a check. When he wants to build a subdivision, he draws up a layout and gets it created. When he wants to build a dormitory at Michigan with quirky strings attached that he believes will improve the civilization, he writes a check and gets his vision built. To all of you reading this blog, I hope you get to experience that kind of freedom at some point in your life.