In 1954, a milkshake machine salesman named Ray Kroc drove out to San Bernardino to find out why a single hamburger restaurant had ordered eight of his Multimixers. Nobody needed to make forty milkshakes at once.
The restaurant belonged to two brothers, Richard and Maurice McDonald. Kroc watched them work and saw something he’d never seen before — an assembly line for food. Limited menu. Pre-cooked components. Customers walking up to the window and walking away thirty seconds later with lunch. The brothers had effectively invented fast food, though nobody called it that yet.
Kroc, ever the salesman, saw a national chain. The brothers saw their restaurant.
That difference is the whole story.
Kroc became their franchising agent and started replicating the system across America. The brothers, by all accounts, found him exhausting. By 1961 he wanted them out entirely and asked them to name their price.
They thought about it and came back with $2.7 million — calculated, with a kind of touching arithmetic, to leave each of them with exactly one million dollars after tax. Kroc, who didn’t have $2.7 million, went ballistic and asked if he could pay in instalments. The brothers said no. If it wasn’t cash, they’d just keep the royalty.
Kroc found the money. The brothers walked away.
You probably know what happened next. McDonald’s went on to become one of the most valuable companies on earth, and the half a per cent royalty the brothers had been quietly collecting — which Kroc had verbally agreed to continue, though somehow it never made it into the contract — would by some estimates have been worth $305 million a year by 2012.
Years later, somebody asked Richard McDonald if he had regrets. He did not.
“Taxes were killing us. We weren’t kids anymore. We had three homes and a garage full of Cadillacs, and we didn’t owe a dime to anyone… I have no regrets. Yachts on the Riviera were not my style at all.”
He elaborated, on another occasion, that if they hadn’t sold he would have ended up “in some skyscraper somewhere with about four ulcers and eight tax attorneys trying to figure out how to pay all my income tax.”
Three homes. A garage full of Cadillacs. No debts. No ulcers. No tax attorneys. The novelists Vonnegut and Heller, at a billionaire’s party on Shelter Island, are supposed to have had a similar exchange — Vonnegut needling Heller that their host had made more in a day than Catch-22 had earned in its entire run, and Heller replying that he had something the host never would: the knowledge that I’ve got enough. The McDonald brothers got there without needing the line.
This is the bit that’s hard.
Most of the financial planning industry is built around the question “how do I get more?” — more growth, more income, more compounded over more decades. It’s a useful question. It’s the one we spend most of our time helping clients answer. But it’s a means question, and at some point the conversation has to turn to the ends one: more for what?
Because the honest version of the answer, for most people we work with, is that there is a number that does the job. A number that funds the life, the gifts to the children, the holidays, the legacy, the Cadillacs and the three homes and whatever the personal equivalent is. Past that number, the marginal pound buys progressively less of anything that matters. And yet most of us don’t know what our number is. We’ve never sat down and worked it out. We just keep going, on the unexamined assumption that more is better, even when it’s costing us the thing we were trying to buy in the first place.
The work, then, is partly numerical and partly something else. Knowing your number is a financial planning exercise. Being willing to stop at it is a different exercise entirely — the one Richard and Maurice apparently found easy and the rest of us tend to find almost impossible.
The brothers sold for $2.7 million in 1961. The man who bought them, by all accounts, kept needing more, and went on needing more for the rest of his life.
The ones who stopped were the ones who’d worked out what they were doing it for.
Altor Wealth advises clients from our office in Hook, across Hampshire, Surrey, Berkshire, Sussex and Kent, and throughout the UK using the latest technology.