Books have been the foremost way of transmitting knowledge since the beginning of time. In this first installment in a four part series on “Literary Lessons Learned” we’re going to review some profound thoughts from great business books and how they relate to the purchase and management of mobile home parks. This podcast condenses down thousands of pages of books into some important points on success.
Episode 88: Mobile Home Lessons Learned From Great Business Books Transcript
Webster's defines business as, "Any activity that is entered into with the goal of making a profit." That's definitely true of mobile home parks. What can we learn about reading about business? How can we get into some of the great business theories? Well, in this our first of a four-part series on Literary Lessons Learned, we're going to talk about some business books I've read, what I thought the big meaning was from those books. Let's start off with the Army book. The Army, yes, built a book on business. It's called Hope Is Not A Method. It was used to take some of the Army's theories, and to propel those theories more to the business realm of what you can learn from what the Army teaches its leaders. One big one I came away from that book with is the 70% solution. Now what does that mean? What's a 70% solution?
Well, in the Army, sometimes you're faced with life and death, and you have to make quick choices, and you don't always know what to do. The Army tries to teach their leaders that if you are stuck in one spot, and the enemy is nearing in on you, the worst thing you can do is to stay there. If you stay in that spot, you will die. Because over time, they will get their mortars, and their other weapons all focused right on where you are, and blow you up. So what do you do? Well, you gotta move. They've actually modeled this using war games and such. They found that if the people that moved from the spot where they were stuck, had a 70% chance of survival as opposed to those who would refuse to move, which had 0% chance of survival.
So they called that the 70% solution. What it means is, "Don't stick doing the same things that are not working over, and over, and over, because it isn't going to work for you." So if you're in a rut at the mobile home park, if you're not getting the homes sold, if your collections are not good, whatever's happening to your mobile home park, you need to do something different. The same when you're trying to buy a park. If you're trying to buy a park, and you follow the same brokers, and the same things online, and it's not going anywhere, don't keep doing that. That's not going to get you anywhere. Instead, adopt the military 70% solution and try something entirely different. That's your best chance of having success.
Another book I like to read is Sam Zell. Sam Zell is a great business person. He's the only type of person in history to ever be the largest owner in America of three different segments of real estate. Largest in apartments, largest in office, and largest in mobile home parks. He wrote a book recently, and it's called Am I Being Too Subtle? The big point of the book, if you've read it, is that over and over in his life what's guided him to making decisions is a simple rule that he always enters into deals that have low risk and high reward. He never enters into deals that have high risk and low reward. He looks at everything in that manner. So before he'll do something, he tries to weigh what the odds are of success and failure. Then additionally, what he stands to win if he takes that gamble.
So what does it mean? Well, if you're looking at a mobile home park that has a high level of risk, let's just say it's got a packaging plant that's 50 years old or 60 years old. It could fail at any moment, and it might cost you hundreds of thousands of dollars to fix, and it only is a so-so deal with so-so returns. You wouldn't want to do that because your best case scenario is an average deal, but your worst case scenario is perhaps economic disaster. At the same time, if you had a different mobile home park that had very, very low risk, and you had the ability to then push the rents up, let's say $50 over time to a more reasonable number, then you would do that deal because that deal offers very, very high levels of reward, very low levels of risk. But it's a great lesson to be learned for all park owners and park buyers. You never want to mess with deals that do not have a healthy relationship between risk and reward.
Now, let's move on to Warren Buffet. Anyone in business would have to have read at least one business book by or about Warren Buffet There's a few things about Buffet that I find to be the most interesting pertaining to successfully buying and operating mobile home parks. The first is that Buffet, one of his great strengths, if you read the books about him, is that he was extremely diligent on research. This guy wrote the book virtually on doing due diligence on a company before he would invest in that. Of course, you know where I'm going with that. If you're going to buy a mobile home park, you have to conduct great due diligence because that takes all of the potential misfortune out of the deal.
In fact, that's why the famous quote came up from Benjamin Franklin that, "Diligence is the mother of good luck." What he means is, if you do due diligence, people who do that, they just seem to always win. So I think that Buffet is the king of diligence, at least in business as far as buying stocks. I think there's something to be learned from that because it was his diligence that really took him to the top. The next item from Buffet would be the concept of a moat. One thing that Buffet never really buys into are businesses that don't have a moat. Now you might say, "Well, what is a moat?" Well, there was a quote coined I think by Mark Cuban on Shark Tank that "First you have the innovator, and then you have the imitator." The problem is, if the imitator can produce the same product that you're producing at a much lower price because they don't have any of the learning curve in building the prototype, that's the sign of disaster.
So Buffet always chooses businesses that it's really hard to get into. That are protected for some reason. Well, there's no business that has a bigger moat on it than mobile home parks. It has several different moats. One big moat it has is, cities have not allowed you to build new mobile home parks in about half a century at this point. Another giant moat it has is the cost of moving the homes. It's about $5,000 to move a home from point A to point B, so as a result the customers tend to stay where they are. Another issue is that some homes just can't be moved at all. Some of the older homes, pre-HUD homes, which means homes built before 1976, and even homes from the '80s, are simply too old to be moved, and that gives you very, very consistent revenues.
Now, another interesting business book is that written about Apple and Steve Jobs. I think the big thing from that book ... It's a gigantic book. It's that giant white book that you see at the bookstore that has no markings on the cover. It's about a thousand pages long. I read the book from end-to-end, and the big thing I came away from is the very, very important issue of partnerships. That's what I read out of the book. Yes, Jobs did a lot of interesting things with technology. Clearly he invented the iPhone and many other items, but the big key was the relationship in the early days between Steve Jobs and Wozniak, who was the engineer that he met at a circuit board fair somewhere on a weekend.
What was interesting was Jobs was a master marketer, but he wasn't that good with technology. He was never really the guy who developed the technology. He was more of the visionary of what the technology should be than the master salesman to sell it. The person who was really the person who could do the stuff was Wozniak. Now, Wozniak who had an entirely different temperament than Jobs. Wozniak just liked to do his science stuff. He didn't like to have any arguments with people or problems. He hated selling stuff, and he hated talking to people in general. Separate, what did you have? You had Jobs who probably might have ended up as a salesman at some large company, and Wozniak who would probably have spent his entire life going to these little trade fair things on weekends selling circuit boards. But when you put them together, they were much more powerful as a team than they were individually.
I think this is an important lesson. If you're looking to buy in mobile home parks, or growing your portfolio, there's nothing more powerful when you can find somebody, that when you combine them with you, you're more powerful than you were separately. That means typically partnerships where the people have two entirely different skillsets are more powerful than partnerships when two people are identical. What it means is, if you're a people person but not maybe a numbers or detail person, the best partner you could get would be someone who is a numbers and detail person. That allows you to do your strengths, and they use their strengths. Together, you're almost like a superhero combination. So I think partnerships can be very, very valuable. Particularly when you start growing things to even a larger scale it's often good to have two people instead of one. Particularly when both people combined as one unit are more powerful.
Another interesting book is The 4-Hour Workweek. I remember when that book first came out it was kind of odd for people, particularly baby boomers like myself, because we were always taught that you don't want to do things other than work. You should work every day from nine to five, eight hours a day, and to say you didn't want to do that was almost heresy back then because everyone wanted to work. If you didn't even like work, you wanted to pretend you liked to work because it was kind of demeaning not to be working. Out comes this book, The 4-Hour Workweek, where it says, "Hey, it's okay not to work eight hours a day. It's okay to work just a few hours a week if you get the job done and produce the money that you want to produce." What's the lesson learned from that book? Well, quite a lot.
There's some interesting things in that book. That's the first book I ever saw that had the concept of virtual assistant. These are people which today are commonplace. Different websites like Fiverr, F-I-V-E-R-R, many other sites. You can find virtual assistants now to do virtually every task at an insanely low amount of money. Even better, here in America where we have so many labor laws today, and litigation, it's always refreshing with virtual assistants, that you don't have to mess with any of that. Typically, the person you're hiring, and it's just on a contract basis, is often not even in the U.S. It can be many, many different countries across the globe. But the 4-Hour Workweek really emphasized the concept of efficiency. It also emphasized the concept of using technology as part of your labor force, and so there really is quite a bit to learn from the book.
Now, I don't know if you can buy mobile home parks utilizing the 4-Hour Workweek. Perhaps you can, but I do know what's interesting is, if you talk to many of the people who own mobile home parks that we interview on our lecture series events, that's about what they spend per week on their park. Roughly about four hours a week is actually what the normal average is that they tell us. What it means is, people are working very efficiently today and operating even in mobile home parks. How do they do it? Well, the computer has helped enormously on accounting. You have HD videos, so you can have your manager take your real-life videos of your park any time you please. You have smart phones to show you what's going on at a glance. Do you have the water leak? Did the grass get mowed? So technology has really changed our lives.
It's amazing today how much you can do with just a cell phone. You can literally operate a giant business with just your cell phone or better yet a laptop and a cellphone. Isn't that amazing? You could never do that before. Having the email capability, and the ability to send and receive photographs instantly, it's just mind boggling. But it all ties back to this whole idea that maybe we can get by on a little less work per week. Can you get it down to four hours a week? I don't know. Perhaps you can. I think if you're really good on efficiency, if you're really good at using technology, I don't know how low you can get your work week, but definitely a lot lower than we used to think back only a couple decades ago.
Finally, the book Win Friends and Influence People. Not typically what you would call a business book, but yet isn't that what business is all about? Isn't it all about the customers, and keeping the customers happy, and interacting with your managers, and interacting with other people? To me, there's two parts to that book that are a lesson learned for park owners. The first is, always give people respect. Over and over again in the book, if you see the reasons that people are unable to have friends or to sell, the problem is that they don't treat people properly. People like respect. There's no reason not to give it. Why would you not be respectful to people? Yet I see that's so wrong in the workplace constantly, particularly in mobile home parks.
You'll have the manager who acts very aloof, and doesn't really talk to the customers, don't address their needs because for some bizarre reason they don't want to give them any respect. You'll see the owners that do the same with managers. They refuse to be respectful to the manager, the manager's time. There are all kinds of stories in our industry of owners who treat their managers terribly. Refusing to even talk to them, take their calls, or return their calls, with this feeling that they're superior to them, which is absolutely untrue. Of course, who's really the boss? The boss is really the customer out in the field. You definitely need to treat people with respect at all times. The other key to what Dale Carnegie wrote in the book, is the idea of being happy, being outgoing, being friendly, having a positive attitude.
It's so important, because you can approach life in two different ways. You can be very, very negative, or very, very positive. What they found is that people who are positive go so much farther because it's infectious. People like to be around positive people. They like to make loans on positive mobile home park owners, managers like to work for positive owners who give them always a sense of uplifting feel, and of course the customers also like that positive attitude. So always treat people with the utmost respect, and always approach life in a positive manner. This is Frank Rolfe with the Mobile Home Park Mastery Podcast series. Hope you enjoyed this first in our four-part series on literary lessons learned. I'll be back next week to talk a little bit more, and this time about great military books. Talk to you again soon.