THE MAN WHO PROVED THE THEORIES RIGHT

My friend recently hit a major land mark; he is now one of the top 10 shareholders in a listed company trading on the Uganda Securities Exchange.

For my friend, let us call him Jack, that maybe a vindication of almost two decades of accumulation, but the bigger achievement is that from his investments he receives enough income to give him the option never to seek employment ever. And he is not yet 40.

I had lunch with him to celebrate this achievement and to hear his story, because though since I have known him for almost 15 years clearly, he has been moving in silence and surprised even me with his “sudden” achievement.

Here is what I learnt from him

1.       SPEND LESS THAN YOU EARN, INVEST THE BALANCE

To get to where he is now my friend Jack has always been frugal. This has been necessary because only weeks after he left university he was sacked from his job. Let us just say he and his employer had ethical differences. Without a job he bought a stake – with all of sh450,000, in a small fish trading operation.  A degree holder, he studied procurement, even his family thought he had lost his marbles, banishing him to the boy’s quarters of the family residence. He pulled out some equity from the fish trading operation, to buy a stake in an established private company.

2.       BE RICH, NOT LOOK RICH

Dazzled by his initial dividend from the company, which deals in construction materials, he had set his eye on a piece of land in the suburbs, just like all his contemporaries.  Fortunately for him he consulted with an older man whose main counsel was “The trick is to be rich and not to appear rich.” The older man advised him that spending all his net worth on a piece of land was foolish and would leave him poor. Comparing it with his own experience as a young man he advised Jack to buy land further out from Kampala, “The city will come to you don’t worry”. He also told him that no one should live in a house that is more than 15 percent of their net worth, it’s a sure remedy for poverty. Jack took his advise, went further out of town and bought a plot that cost about 15 percent of the dividend. The rest of the money he sunk into shares in companies on the Uganda Securities Exchange (USE).

3.       OPPORTUNITY IS FOUND OFF THE BEATEN TRACK, FOCUS ON THE LONG TERM

Over the last 15 years he has been accumulating positions in listed companies on the USE. He has found that the best performing shares are not those of the prominent companies, which everyone wants a piece of but of smaller companies that are financially disciplined and willing to share more of their earning with their shareholders. While it makes for good conversation in the bar that you own shares in this or that big company. 

The majority shareholders eventually bought out his minority stake in the building construction company. But it did not come easy. A six-year court process preceded his payout, which exponentially increased his working capital, allowing him more gun powder for his share buying business.

4.       ZIG WHEN OTHERS ARE ZAGGING

In most societies the greatest wealth is concentrated among the top five percent of the population. On further scrutiny the wealthy think differently from the majority of the population that’s why they own all they do. Because the rest are not switched on to their way of the thinking, the rest think the rich are crooks. And frankly the wealthy are too busy making money to stop and explain their ways to the masses, so the myth is perpetuated.

Jack’s fish trade him made him a contrarian when. His Old Boys during school reunions would make fun of his occupation, “What is that fishy smell?” they would wonder when he joined them for conversation. They stayed in their cushy jobs, which they were trained all their lives for, while Jack went off on his own way. He stopped going for reunions. His friends are still climbing the corporate ladder, Jack now runs his own schedule.

He is a contrarian; he does not just follow the crowd and is secure enough in himself to follow his convictions if logic tells him tradition is wrong. He thinks different from the rest.

 

5.       NARROW THE GAP BETWEEN KNOWLEDGE AND ACTION

It is true what they say, when you see some one who is an overnight success just know he has not been sleeping. Jack has invested a lot of his time in understanding how the stock exchange works, how companies create value and when to jump in or out of share. A lot of this is not taught in business school. But he has however used information that is in the public domain. In theory anyone who reads the newspapers could have taken advantage of the opportunities that have come his way.

During lunch he kept saying that with most people there is a big gap between the knowledge they possess and taking action on that knowledge.

His friends have recently learnt of his recent good fortune, which has been 15 years in the making, complained that he did not tell them what he was doing. But he says he tells anyone who is willing to listen what he is up to but either they do not see the possibilities or are not willing to take the leap of faith despite the logic being clear.

 

6.       WEALTH IS QUIET, RICHES ARE LOUD

And finally, while my friend’s income has increased over the years, we calculated that from his dividends he earns about sh336,000 a day, including weekends, you wouldn’t know it from the way he dresses – never in a suit and tie, living in a two roomed house and getting around on a car that is no more than three percent of his asset base.

What’s the point, I asked, “Freedom,” he replied.  “I want to do what I want without a fear of biting the hand that feeds me.”  Unlike most of us he does not have to report to work or to a business daily, he can do what he chooses. With steady reinvestment he wants to see his daily income rise to sh500,000, a million and then who knows.

And he is not yet 40.