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Internal Rate of Return and the Cultural Divide of Cash Flows

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Plus how John D. Rockefeller Jr. continues to exemplify success.

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The atmosphere at Ludlow was anything but calm; it was incendiary. But that didn't mean a thing to this dedicated and morally determined philanthropist. He was going out there to deal with these ordinary people who worked the mines, people unlike anyone he'd ever known or associated with in his family's rarefied ranks. Against all advice. The family lawyers and other advisers told him he'd get shot if he went there. He went anyway. He went right down into the mine, all by himself, and he talked to them. What happened after that, the accord that was reached, is still looked to by modern management and union leaders alike as the gold standard of labor relations.

I can only surmise, but I think that's when John D. Rockefeller, Jr., first felt like he was his own man worthy of examination by the Creator without worrying he hadn't done enough to justify his life. I bet he felt pretty good, just like I do right now sitting among the buildings he left us, munching on my falafel, and watching busy New Yorkers and foreigners from distant lands stream by on this overcast day in early summer 2010.

On a concluding note, regarding my observations of Rockefeller, while he was a deeply religious man, and that was the centerpiece of his philanthropic interest, that didn't mean he considered making money to be an evil thing. I'll leave you, the reader, to investigate on your own how this is a part of the moral framework of Protestant beliefs of that time that live on to this day.

So What the Heck Does This Have to Do With Investing?

The point is that great enterprises aren't built by people who live the far more conventional lives of most investors. Great enterprises are built by people who hang in there during extended lean years and crises that test your soul; who sacrifice everything, who go bust -- often more than once -- because they're immovably dedicated beyond rational explanation. No, John D. Rockefeller Jr., never went hungry and never went bust, but I'm confident he would have had he not happened to be Senior's son. How do I know that? I just do. Right now I'm reading his greatest piece of writing, and it's right here on a tablet in Rockefeller Center so you can read it too, etched into a polished granite tablet far more grandiose than those handed to Moses.

These are the ideals that drove John Rockefeller Jr., and if you ever attend an analyst meeting on Wall Street for ExxonMobil (XOM), there isn't an ice cube's chance in hell anybody will mention it:

I Believe

  • I believe in the supreme worth of the individual and in his right to life, liberty, and the pursuit of happiness.

  • I believe that every right implies a responsibility; every opportunity, an obligation; every possession, a duty.

  • I believe that the law was made for man and not man for the law; that government is the servant of the people and not their master.

  • I believe in the dignity of labor, whether with head or hand; that the world owes no man a living but that it owes every man an opportunity to make a living.

  • I believe that thrift is essential to well-ordered living and that economy is a prime requisite of a sound financial structure, whether in government, business, or personal affairs.

  • I believe that truth and justice are fundamental to an enduring social order.

  • I believe in the sacredness of a promise, that a man's word should be as good as his bond; that character -- not wealth or power or position -- is of supreme worth.

  • I believe that the rendering of useful service is the common duty of mankind and that only in the purifying fire of sacrifice is the dross of selfishness consumed and the greatness of the human soul set free.

  • I believe in an all-wise and all-loving God, named by whatever name, and that the individual's highest fulfillment, greatest happiness, and widest usefulness are to be found in living in harmony with His will.

  • I believe that love is the greatest thing in the world; that it alone can overcome hate; that right can and will triumph over might.


Am I attempting to say these are the driving beliefs of all capitalists shaping the great enterprises you need to look for when investing? Hardly. I'm saying they were the deepest beliefs of just one such man who did some of the most amazing things free enterprise, and philanthropy made possible through enormous wealth created by free enterprise, have ever produced, and that the organization(s) he built made a lot of ordinary people who led ordinary lives and saved and invested in ordinary ways a lot more comfortable in their post-career lives than they otherwise might have been.

Great capitalists -- and some lesser noticed ones, I'm also quite sure -- are nutcases who shun ordinary lives, and that's why we need to know how to analyze uneven cash flows, what happens while young entrepreneurs are hanging in there through thick and thin before they're out of the woods: the reality of yet-to-be-great enterprises when they're in their formative years.

No positions in stocks mentioned.

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