What principles have guided your business leadership philosophy?
Early on I set out three foundational rules to help me become an “owner,” rather than purely an “employee” working for someone else. I learned them from my great grandfather, James Hansen, who began these practices as a child, growing up in a dugout basement home in Redmond, Utah.
First, save or invest more than you consume. Even as a child, my great grandfather would put 50 cents of every dollar he earned into a jar and save it. He didn’t ever want to PAY interest to others but rather to BE PAID interest by them, and that guided all of his decisions.
I group all assets into these three classes:
It is critically important to separate your investments from your personal checking and saving accounts. Do not just bundle them together. Also, start investing early in life; develop the discipline to be putting a little bit of money aside for investment purposes from the very start of your work life.
Second, never borrow to pay for a “consuming asset,” like a car or house. I know it sounds difficult or even extreme, but I think one of the keys to becoming an “owner” — to having equity in an investment or a business — is to save money upfront for quite a while so you can buy a house or car for cash.
While it may sound counterintuitive, in my opinion, your home is not really a regular investment. Do you know that if you look back at the 100-year annual increase in home values, they have gone up by 1% per year on average? In addition, homes are more expensive to maintain than people allow for.
Also, if you sell a house for a lot of money, then you immediately need to buy another house — and the new house is likely to have risen in value as much as the home you just sold. So if you keep stepping up in that way, eventually you hit a market downturn, and then you’re stuck with having paid more for a house just before the downturn than it is worth after the downturn.
It is important to be aware of the economic cycle. I buy only at the very bottom of the economic cycle, every seven to ten years, when the housing prices are rock bottom, as they are right now — that’s the only time you should even think about buying a house purely for investment purposes.
Third, be true to your personal values system. In my business Wasatch Property Management, for example, we always think of our partners first, making sure those who have invested with us get the return we promised.
I think people need to be very conscious of their own internal values and not just let them remain unconscious and unspecified.
Part of that, in my view, is to trust your own instincts and analysis on financial decisions — the world is full of consultants and investment advisors who are ready to charge you for their advice. My approach is to say trust yourself and make your own decisions