book cover fables of fortune
Excerpted with permission from Fables of Fortune: What Rich People Have That You Don't Want By Richard Watts. www.fablesoffortune.com
Diminishing Returns
The newly rich perceive value because everything they ever wanted to purchase or own now seems cheap and easy. When money becomes no object, every purchase is a "deal." At first, every acquisition offers a sense of value because it was previously unattainable but no longer represents a significant expense. But over time, the sense of value diminishes with each purchase. They feed at the table of materialism without ever being satisfied.
When Peter was first referred to me as a client in 1996, he arrived with what he perceived to be a huge problem. He worked as an interstate truck driver for a large moving company. Every Friday he returned to his one-bedroom apartment in Westminster, Calif.. On the weekends, Peter worked as a handyman for several local homeowners.
An elderly woman named Annette lived in a ramshackle house on the Seal Beach waterfront. She was elderly and lonely. Peter had his hands full with service calls from Annette because her home was quite old. Peter was Annette's only real contact with the world. She always made him sandwiches and invited him in for visits. For five years he fixed her faucets, mowed her lawn, rewired electrical malfunctions, and spent time talking with her about unimportant and trivial things.
On a Monday morning, Peter sat in my office nervously awaiting a legal consultation. He had never been in a lawyer's office. And even though he had done his best to clean up for our appointment, his fingernails were permanently stained with dirt and his shirt needed a good washing.
"Annette is dead," he muttered. I remember thinking, Criminal law is not my area of practice, and it sounds as if Peter needs a defence attorney. Then I thought about the pocketknife I kept in the top drawer of my desk and pondered whether I could inflict much damage if this killer tried to assault me. Peter passed a torn piece of a brown grocery bag across the top of my desk. With two hands, he gingerly turned and centred the brown paper on my desk so the writing was facing me.
Nearly illegible handwriting was scrawled across the front in grey pencil. Each letter was an inch tall or more: "I, Annette Simpson, give all of my property to Peter Corin, dated May 5, 1996." She signed the letter in an even larger hand.
That was all. Annette had died of natural causes.
Peter inquired, "What does this mean?" He didn't seem to want the answer.
"Well, it depends on who Annette Simpson was and what property she had when she died," I counselled. He hadn't given me much information. "This is called a holographic will, and as long as it is dated and in the handwriting of the testator, it is as legal and effective as any will or trust."
Peter squirmed in his chair, "I was afraid you might say that. She owned an old house with a few sticks of furniture." He fidgeted with his car keys. "I'm just a simple guy with simple needs. I have never had anything worth much. I wouldn't know what to do with that house." His next question took me by surprise: "Do I have to take it?"
"No," I said. "You can just rip up this paper, and her property will go to either her heirs—if she has any—or the state of California."
"She didn't have any children," he reluctantly volunteered.
Peter didn't mention Annette's home was situated on one of the most expensive stretches of coastline in Southern California. After my staff completed a title search, we learned Annette not only owned the home and lot; she also owned three other oceanfront lots next door. Peter never thought about the "lots next door," where Annette had asked him to mow down the weeds three times a year.
Peter became a multimillionaire in an instant. Oddly, his new fortune seemed to make him extremely uncomfortable. A more accurate word might be horrified. He started calling me every day with concerns about the properties. Peter told me he would gladly sell all of the property to me for $200,000. This was one of the greatest tests of integrity I have faced during my legal career; a multimillionaire was willing to sell me his estate for $200,000. Instead, I offered to find a listing agent who would assist him in selling the house and lots. Ultimately, Peter received a seven-figure down payment in cash and a promissory note secured by each of the four properties that would yield him a monthly income of tens of thousands of dollars for decades to come.
My job as his legal counsel was complete. Peter's present financial situation and future security was like Fort Knox. But his life was about to unravel. First, without asking anyone, Peter bought a Kenworth diesel big rig. He had never bought anything new before, but he had always wanted to pull his own cargo. Peter became an independent interstate trucker. He appreciated the realized value from his purchase; the truck met his expectations perfectly. Peter thought the salesman was sincere when he said the $125,000 list price on the tractor was the lowest the dealer could accept to sell the vehicle. Peter also assumed because he paid cash, he didn't need to insure the truck.
His brother-in-law Bill suddenly took a great interest in helping Peter with his money. Within a week of disbursing the funds, Peter and Bill came into my office. Bill had convinced Peter to invest $500,000 in his accountancy practice. Bill signed a promissory note – unsecured by any collateral – that entitled him to make interest-only payments for 10 years at an absurdly low interest rate. My hands were tied; Bill was a previous client, and giving advice to either party would have constituted a conflict of interest. I did share my opinion that it is never a good idea for family members to invest with one another. Bill took Peter to another lawyer, and the deal was done. Six months later, Bill convinced Peter to accept $50,000 as payment in full for the remaining balance owed on the note. Peter lost $450,000 to his opportunistic brother-in-law.
Next, Peter decided to upgrade his living standards. He could easily afford it. So he purchased a home on the beach and purchased not one, but two new cars to fill the garage. He paid retail for everything. Peter hated confrontation; he didn't want to ask for a deal.
Simultaneously, he began to purchase things he didn't really need. One day, Peter remembered his father had taken him hunting when he was a child. With great nostalgia for "the good old days," Peter started collecting expensive rifles. He planned to learn how to hunt again. But somewhere around the purchase of the fifth or sixth rifle, he lost interest. In the months that followed, he gave his rifles away. They didn't hold any value.
As he continued to manoeuvre for more and greater material gain and personal excitement, he forgot about the activities he used to enjoy – tinkering, fixing things, and taking hikes on the local mountain trails. The menu of acquiring more things was on the table, and he was busy letting the main course of materialism dictate his every move.
Twelve months later, Peter appeared in my office once again. He had bailed two nephews out of jail, given several supposed "friends" money to start businesses, and bought a new Harley Davidson motorcycle that had been promptly stolen because he left it out on the street at night. He had crashed his uninsured Kenworth while hauling cargo, damaging another vehicle and injuring the driver. He was being sued and was paying for the cost of an attorney because he had no insurance. His life had become hell.
In a panic, Peter sold the mortgages he held on the three oceanfront lots to an outside investor for fifty-five cents on the dollar. After he finished paying the legal fees required to get him out of trouble, he declared bankruptcy. Peter left my office on the verge of a nervous breakdown, unable to enjoy a moment of his life.
Sadly, I never saw Peter again. Bill, his brother-in-law, died of cancer six months later at the age of fifty-five. The strain of the $500,000 loan debacle had broken their relationship. Peter did not attend the funeral. The family was no longer on speaking terms. According to his sister Mary, Peter returned to the alcoholism of his distant past and left the state permanently.
Excerpted with permission from Fables of Fortune: What Rich People Have That You Don't Want By Richard Watts. www.fablesoffortune.com