Avoid Financial Disaster

One of my “Chiseled in Granite” business principals is:  “Avoid Financial Disaster.”

I learned this lesson the hard way when I was seven-years-old.  At that time I listened to Major League baseball games on the radio. I did not realize that the broadcast started an hour or two after the game began and were a re-creation of the actual game.

One afternoon I was looking forward to a Yankees – Red Sox game.  Out of the blue, my father said, “I’ll bet you that the Yankees are leading one to nothing at the end of the third inning.”

What are the odds of that?  How many major league baseball games have a one to nothing score at the end of the third inning?  One-in-ten?  One-in-fifty?

“Even money, Dad?”

“Of course.”

I was certain that half of all Major League baseball games were not one to zero at the end of the third inning.  This bet was a no brainer.

“Sure, Dad.  How about a nickel each?”

“Fine.”

Ten minutes later the game began.  I listened with more than my usual interest.  I was going to win a nickel.  At the end of the first inning the score was zero to zero.

“Dad, how about raising our bet?”

“Sure.  Fifteen cents?”

“Fine.”

“But since one inning is already over, I think I should get odds.  Say my dime to your twenty cents?”

What a fool he was.  Even at two-to-one I had the better bet.

“Sure, Dad.”

End of the second inning.  Still zero-to-zero.  We increased the bet.  I gave better odds to lure Dad in.

Top of the third.  Yankees at bat.  One out.  A higher bet.  I was starting to imagine how many comic books I would be able to buy in a few minutes. Two outs. Higher bet.  I ended up risking a total of $2.40 to my dad’s fifty cents.  This was a sure thing.

“Going, going, gone.  And it’s over the fence for a home run.  Yankees one, Red Sox nothing.”

I hope you have never had your world collapse as much as I did when I heard that ball sail over the fence.  “Going, going, gone” was right!  Not just five comic books, but also $2.40, which I didn’t actually have.

When there’s life, there’s hope.  The Yankees could score another run.  They didn’t.  The Red Sox could score in the bottom of the third.  They didn’t.

When there’s life, there’s loss.  I was devastated.  I disappeared into my room to sob my eyes out under the covers of my bed.  That’s where my dad found me.  He said it was a few minutes later.  I say it was hours.

“Alan, I heard the third inning score on the radio before we made the bet.  You don’t have to pay me.”

That was when I decided:  “Avoid Financial Disaster.”

Almost sixty years later I purchased a beautiful property in Scottsdale, Arizona, with almost one-half mile of frontage on Scottsdale Boulevard.  Scottsdale.  That’s like Beverly Hills, California, or Park Avenue in Manhattan.  How could I go wrong?  Rents were below market.

I could go wrong.  I did go wrong.  In 2008 the property was foreclosed by the lender.  My investors and I lost millions.

Fortunately, I had invested conservatively in the property. Had the investment been three times larger, I would have faced bankruptcy.  Thanks to my dad, and the miracle of a delayed broadcast, I had decided long ago that I would never, ever put my entire financial life at the risk of a singled failed bet.  I mean a single failed investment.  Same thing.

Also, whenever I bet with my dad again I always asked, “Dad, do you have any advance information?”

Alan