I stood stunned, as if someone had punched me in the gut. Before I could even mutter a word, the huckster had packed up his make-shift table with an additional $100 bill from yours truly. It was the first time I had been ‘taken’, and it left a mark that sparked what I feel to be a healthy skepticism to this day.
It was a weekday, and my father and I were walking the streets of Paris. He had come for business and, as an early graduation present, I was his traveling companion. The museums and dinner parties were a blur, and to this day I can only remember a few highlights; however, the following event ended up being, by far, one of my most memorable experiences.
A small crowd gathered in a circle across the street. Unlike a street performance, they were huddled close and that did not allow any onlookers or innocent bystanders. I was intrigued and, without permission, strode over to see what was afoot.
I’ve replayed this a thousand times in my brain, wondering whether the entire production was a setup from start to finish. Were all the onlookers a part of the scam? Was I the only sucker? Was it simply a coincidence that I was there, or was my gullibility noticed from afar and the rouse set up for my costly entertainment alone? I will never know.
As I approached, I noticed a small table, no bigger than a dinner tray, set up with a gruff looking man shifting three upside down cups, clearly hiding something underneath. A second before stopping, he accidentally hit one of the cups and a white ball became visible. Within a moment someone handed over a $20 bill and quickly pointed at the obvious choice. It was the very cup I would have chosen because it was clearly the showman’s mistake. The cup was turned over, the ball appeared and a laugh spread throughout the small crowd. With a bit of shock, and the sigh of a good sport, the showman handed over the original $20.00 and an additional $20.00 bill. The first contestant smiled and proceeded to place his quick cash into his left pocket.
Immediately, the showman went to work again. Placing the ball under the middle cup he began his rotation. This way and that, circle to the right, circle to the left, where is the ball? His speed accelerated and it was clear that this time he meant business. There was no way I was going to fall for such a trap, but then it happened. A brief moment before stopping, once again he ever so subtly made a mistake and hit the cup displaying the ball. It was ever so quick and I was convinced that I saw it. I almost felt sorry for the chap because I certainly was going to profit from his misfortune.
As quickly as I could, I placed my hand in my pocket and opened my billfold. Since I had been saving for the trip, I only had large bills, and I thought why not lay down the largest for this easy win. I removed $100, eagerly handed it over and without hesitation pointed to the far right cup.
Over the past 20 years in business, I have seen this scenario play out in different forms. While it may not be as rudimentary as a cup and a ball or Three-card Monte, the lesson is the same, there is never a free lunch.
At the end of each podcast, I conclude the show by saying that the secret to wealth is simple, live on less than you make, invest the rest and do so for a very long time. The reason I say that is that I believe it with every fiber of my being. Yet, I see so many folks trying to circumvent the process and take shortcuts to achieve goals.
Take the person buying an annuity for instance, when someone is promising a 6 or 7% return. One would assume the person might ask why he or she is able to get this amazing return, when the entire world is getting less than 2%. Are they just special? Do they see what others do not? Sadly, these folks don’t realize the catch is that this return is often in reference to an income bucket that, when annuitized, is done so at much, much lower rates. The money is locked up for decades and, once again, there is no free lunch.
What about the person who looks at Amazon shares and says, “I should never have sold!” This always looks easy in the rear view mirror, but the facts are that Amazon declined 95% from February of 2000 to November of 2001; dropped 55% from November 2003 until August 2006; declined 66% from November 2007 through February 2009. The reality is that most people, barring a complete lack of discipline, would never hold through these dramatic declines, yet they are so often led into believing that stock ownership is easy money.
How about the real estate venture, the great business opportunity or the sure thing? Yes, I realize there are many ventures that do, in fact, work and produce solid returns; however, I can tell you that most ventures fail and fail miserably.
In hindsight, I could swear he turned the cup over in slow motion as the next several seconds seemed to span minutes and even hours. The cup was lifted and there was no ball to be found. A heavy sigh spread throughout the crowd and, within a moment, the cups were gathered, the table folded and the showman disappeared. I stood motionless, speechless. A lot of shoeshine money, up in smoke.
Over the years my father hasn’t been perfect. I’m learning, as a dad of three, that it’s impossible and, somehow, my flaws become magnified in my young boys. At that moment however, he stepped in and gave wise counsel. When everyone else disappeared he remained. He had been watching the entire time allowing me to learn this painful lesson. He kneeled down, almost eye level, and simply said the following words, “This is a lesson. You have just learned there is never a free lunch.” He reached in his pocket and produced a $50.00 bill. He placed it in my hands and said, “We’ll eat this loss together.” Nothing more was said, it wasn’t necessary.
To my detriment, at times, and to my safety, many others, I have remained a skeptic since that very moment. I’m always wondering what is the angle, where are the holes, how do I or my clients lose?
Sadly, this caution has kept me from some incredible opportunities; however, I believe, it has also kept me from making horrific mistakes. It certainly doesn’t mean I’ve been perfect; but, there’s one thing I can tell you for sure, I never again imagined something could be gained without hard work. As my father said, “There never is a free lunch.”