Chapter Thirteen ~ IF YOU DON'T HAVE MONEY USE OPM! ~ Pilot No. 13
 

"Business? It is quite simple. It is other people's money!" said Alexander Dumas the Younger in his play, The Question of Money.

Yes, it's that simple: use OPM-other peoples money. That's the way to acquire great wealth. Benjamin Franklin did it, William Nickerson did it, Conrad Hilton did it, Henry J. Kaiser did it. And if you are wealthy, the chances are you did it too.

Now, if you are not wealthy, learn to read what is unwritten. In fact rich or poor: read what is unwritten into every platitude, axiom, or self-motivator. The basic unwritten premise in "Use OPM" is: that you will operate on the highest ethical standards of integrity, honor, honesty, loyalty, consent, and the Golden Rule and apply these in your business relationships.

The dishonest man is not entitled to credit.

And the self-motivator Use OPM implies repayment in full as agreed with an advantageous consideration or profit to those whose money is used.

Credit and the use of OPM are one and the same thing. It is the lack of a satisfactory credit system within a country that keeps backward nations back. Whereas it is the credit system as practiced in the United States that has developed such great wealth and progress in this nation. It has been singularly American.

Now the person, corporation or nation that does not have creditor does not use it for expansion and progress if they do have it is missing an important number in the combination for success. Therefore take the advice of a wise and successful businessman like Benjamin Franklin.

Good advice. Advice To a Young Tradesman written in 1748 by Franklin, discusses the use of OPM as follows:

"Remember, that money is of the prolific, generating nature.140

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Money can beget money, and its offspring can beget more," and soon.

Also, Franklin said:

"Remember, that six pounds a year is but a groat a day. For this little sum (which may be daily wasted either in time or expense unperceived) a man of credit may, on his own security, have the constant possession and use of an hundred pounds."

Now this statement of Franklin's is a symbol of an idea. His advice is as good today as when it was written. You can start with a few cents and have constant possession of $500 by employing it. Or you can expand the idea and have constant possession of millions of dollars. That is what Conrad Hilton does. He is a man of credit.

The Hilton Hotels Corporation recently obtained credit of 25 million dollars to build luxurious motels for air travelers at large airports. The corporation's collateral? Mostly, it's Hilton's name for honest dealing.

Honesty is one thing for which a satisfactory substitute has never been found. It is something which reaches deeper into a human being than most traits of personality. Honesty, or the lack of it, writes itself indelibly into every word one speaks, into every thought and deed, and often reflects itself in one's face so that the most casual observer can sense the quality of sincerity immediately. The dishonest person, on the other hand, may announce his weakness in the very tone of his voice, the expression on his face, in the nature and trend of his conversations, or in the type of service he renders.

So while this chapter might seem to be one about the use of other people's money, it also has strong overtones about character in it. Honesty and reputation, credit and success in business are all intermixed. The man who has the first of them is well on his way to gaining the other three.

Make investments with OPM. William Nickerson was another man of credit and reputation who found: "Money can beget money, and its offspring can beget more," and so on. He tells about it in his book. The title tells what he did. The book tells how he did it.

Nickerson's book is aimed specifically at how to make money with OPM in your spare time in the real estate field. But almost everything he has to say also applies to you in your efforts to acquire wealth by making investments with OPM.

How I Turned $1000 Into a Million in Real Estate in My Spare Time is the title of the book.

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"Show me a millionaire," he says, "and I will show you almost invariably a heavy borrower." To back up his statement, he points to wealthy men such as Henry Kaiser, Henry Ford, and Walt Disney.

And we will point to Charlie Sammons who, with bank credit, developed a forty million dollar business in ten years. But, before we do, let's talk about the people who help men like Conrad Hilton, William Nickerson, and Charlie Sammons by loaning them the money they need.

Your banker is your friend. Banks are in business to loan money. The more they loan to honest men, the more money they make for themselves. Commercial banks loan money primarily for business purposes. Thus loans for luxuries are not encouraged.

Your banker is an expert. And more important, he is your friend. He wants to help you. For he is one of the people eager to see you succeed. If the banker knows his business, listen to what he has to say.

For a person with common sense never underestimates the power of a borrowed dollar or the advice of an expert. It was the use of OPM and a successful plan plus the PMA success principles of initiative, courage, and common sense that resulted in an average American boy named Charlie Sammons becoming wealthy.

Like some Texans, Charlie Sammons of Dallas is a millionaire. In fact, like some other Texans, he is a multimillionaire. Yet at the age of 19, he was no better off financially than most teenage boys except that he had worked and saved some money.

One of the officers in the bank where Charlie regularly deposited his savings each Saturday took an interest in him. For the banker felt: now here's a boy of character and ability and he knows the value of money.

So when Charlie decided to go in business for himself, buying and selling cotton, the banker gave him credit. And this was the first experience Charlie Sammons had in the use of OPM. As you will see, it was not the last. He learned then, and has seen it confirmed since:

Your banker is your friend.

About a year and a half after he became a cotton broker, the young man became a horse and mule trader. It was then that he learned much about human nature.

And his understanding of people in addition to his knowledge to money soon developed in Charlie Sammons a very sound philosophy of a brand commonly observed in persons who are, or will be, successful. Charlie learned this philosophy at an early age. He has never lost it. Today he still maintains it.

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This brand of philosophy is known as: common sense.

After he had operated a few years as a horse and mule trader, two men came to Charlie and asked him to go to work for them. These two men had developed a reputation for themselves as being outstandingly successful in the sale of insurance. They had come to Charlie because they had learned a lesson from defeat. Here's how it happened....

It seems that after these two salesmen had successfully sold life insurance over a period of many years, they were motivated to form a company of their own. They were good salesmen all right. Bui they were poor business administrators. In fact, they were such good salesmen that they sold their company out of business.

Now it is not uncommon for salesmen to assume that financial success in a business is contingent only on sales. But this is a false premise. A poor administration can lose money as fast, or faster, than a good sales management and sales force can bring it in. Their trouble was that neither one of these men was a good administrator.

But they had learned their lesson the hard way. On the day they went to see Charlie, one of the salesmen told their story of defeat and said:

"Since our company went broke, we have paid off our losses from the commissions we have since made selling insurance. We also had to pay for our living. It has taken a mighty long time but we have done it.

"We know we are good salesmen. And we also know now that we should keep to our own specialty selling." He hesitated, looked into the eyes of the young man and continued:

"Charlie, you have your feet on the ground. You have good common horse sense and we need you. Together we can succeed."

And they did.

A plan and OPM developed a $40,000,000 volume. A few years later Charlie Sammons bought all of the shares of the company he and these two men had formed. How did he get the money? He used OPM plus what he had saved. Where did he get the large amount of money that he needed? He borrowed it from a bank, of course. Remember: he had learned early that his banker was his friend.

And then in the year that his company had produced an annual premium volume of almost $400,000, the insurance executive finall found the success formula for rapid expansion that he had long been looking for.

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He was ready.
It was this formula plus OPM that developed a forty million dollar premium volume in a single year. Sammons had seen that an insurance company in Chicago had successfully developed a sales plan through 'leads."

Now for many years sales managers had used what is termed the 'lead system" to promote a new business. And with sufficient good leads salesmen often earn exceedingly large incomes. Inquiries from individuals who indicate an interest are called "leads." These are generally obtained from some form of promotional advertising program.

Perhaps you know from experience that with human nature being what it is, many salesmen are timid or afraid to try to sell persons whom they don't know or with whom they have had no previous personal contact or communication. Because of this fear, they waste a lot of time that could be used in selling prospects.

But even an ordinary salesman will be motivated to call on as many prospects as he has leads. For he knows that many sales can be made even though he himself may have little sales training or experience when he is furnished good leads. And besides he has an address and a specific person to see there. He believes the prospect is somewhat interested before he interviews him.

Therefore he is not as fearful as he would be if he were forced to try to sell a person without any preconditioning whatsoever. Some companies build their entire sales program on such leads. And advertising is used to obtain them.

But advertising costs money.

Charlie Sammons knew where to go to get the money when he had a good bankable idea the Republic National Bank of Dallas. For it is well known in Texas that this bank helped build Texas. And it is in the business to loan money to men of integrity like Charlie Sammons who have a plan and know how to work it

Now while it is true that some bankers won't take the time to learn their client's business, Oran Kite and other officers of the Republic National do. Charlie explained his plan to them. And, as a result, he was able to employ unlimited credit to build his insurance business through the lead system.

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You see, it was because of the American credit system that Charlie Sammons was able to build the Reserve Life Insurance Company. And under such a system he was able to develop a premium volume from four hundred thousand dollars to over forty million within the short space of ten years. Again because he used OPM in his investments, he is able to invest and own controlling interest in hotels, office buildings, manufacturing plants and other enterprises.

But you don't need to go to Texas to use OPM. W. Clement Stone bought an insurance company with one million six hundred thousand dollars in assets, using the seller's own money. He went to Baltimore.

How W. Clement Stone bought a $1,600,000 company with the sellers own money. This is how he describes the purchase:

• • • •

It was the year-end, and I was engaging in study, thinking, and planning time. I determined that my major objective for the following year would be to own an insurance company that was licensed to operate in several states. I set a deadline as to when this was to be accomplished: December 31st of the next year.

Now I knew what I wanted and a date was set for its achievement. But I didn't know how I could get it. This wasn't really important, for I believed that I could find a way. Therefore I must, I thought, look for a company that would fulfill my requirements:

(1) that it have a charter to sell accident and health insurance, and
(2) that it be licensed to operate in nearly all the states. I didn't need established business. Just a vehicle.

Of course, there was the problem of money. But I would face that problem when it arose. Even then it occurred to me that I was a salesman by vocation and therefore I could, if it should become necessary, work out a three-way deal: a contract to buy «he company; reinsure the entire business with some large company; and thus own everything but the insurance in force. These other insurance companies were willing to pay a good price for established business. I didn't need established business. I had the experience and ability to build an accident and health business as long as I had the vehicle. I had already proved this by building a national insurance sales organization.

And then I made the next step: I asked for Divine guidance and help.

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While analyzing the immediate problems with which I might be faced, it occurred to me that I should let the world know what I wanted, and the world would help me. (Now this conclusion was not in conflict with the principles laid down by Napoleon Hill in Think and Grow Rich wherein he states that you keep your definite objectives a secret except to members of your mastermind alliance. When I found the company that I wished to buy, I would, of course, follow his suggestion and keep the negotiations a secret from the world until I closed the deal.)

So I let the world know what I wanted. Every time I met a person in the industry who might give me information, I told him what I was looking for.

Joe Gibson of Excess Insurance was such a person. I had met him on just one occasion.

The new year was started with enthusiasm as I had a big objective and I set out to reach it. One month passed. Two. Six months passed. At last ten months had gone by. And although I had checked into many possibilities, none fulfilled my two basic requirements. Then one Saturday in the month of October when I was seated at my desk with my papers pushed back, engaged in study, planning, thinking time, I checked off the list of my objectives for the year. All had been achieved but one the important one.

Just two months to go, I said to myself. There is a way. While I don't know what it is, I know I'll find it. For it never occurred to me that my aim could not be reached or that it wouldn't be reached within the time limit specified. There is always a way, I said to myself. Again, as on similar occasions, I asked for Divine guidance and help.

Now two days later something unexpected happened. I was again seated at my desk. This time I was busy dictating. The telephone rang a disturbing note at my elbow. I picked up the receiver and a voice said: "Hello, Clem. This is Joe Gibson." Our conversation was short, and I will never forget it. Joe talked rapidly:

"I thought you would be interested in knowing that the Commercial Credit Company of Baltimore will probably liquidate the Pennsylvania Casualty Company because of its tremendous losses. Of course, you know Commercial Credit owns Pennsylvania Casualty. There will be a meeting of the Board of Directors next Thursday in Baltimore. All the Pennsylvania Casualty Company's business is already being reinsured by two other insurance companies owned by Commercial Credit. The name of the executive vice president of Commercial Credit is E. H. Warheim."

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I thanked Joe Gibson warmly, asked him one or two more questions, and then hung up the phone. After a few minutes of thought it flashed into my mind that if I could conceive a plan whereby Commercial Credit Company would accomplish its objectives more quickly and with greater certainty than under its proposed plan, it shouldn't be difficult to persuade the directors to accept such a plan.

I didn't know Mr. Warheim, and therefore was hesitant to call him, but I felt that speed was of the essence. And then two self-motivators forced me to act.
Where there is nothing to lose by trying and everything to gain if successful, by all means try. Do It Now!

And without a second's further hesitation, I picked up the phone and placed a long distance call to E. H. Warheim in Baltimore. "Mr. Warheim," I began with a smile in my voice. "1 have some good news for you!"

And then I introduced myself and explained that I had heard of the possible action to be taken regarding the Pennsylvania Casualty Company and that I thought I would be in a position to help them reach their objectives more quickly. Then and there I made an appointment to see Mr. Warheim and his associates the following day at 2 p.m. in Baltimore.

At 2 p.m. the next day W. Russell Arrington, my attorney, and I met with Mr. Warheim and his associates.

Pennsylvania Casualty Company fulfilled my needs. It had a charter permitting it to operate in 35 states. It had no insurance in force as the business had already been reinsured by other companies. By making the sale, Commercial Credit Company accomplished its objectives quickly and with certainty. In addition they received $25,000 from me for the charter.

Now the company had $1,600,000 in liquid assets: negotiable securities and cash. How did I get the one million six hundred thousand dollars? I used OPM. It happened this way:

"What about the one million six hundred thousand dollars in assets?" Mr. Warheim asked.

I was ready for the question and immediately responded: "Commercial Credit Company is in the business of lending money. I will just borrow the one million six hundred thousand dollars from you."

We all laughed, and then I continued: "You have everything to gain and nothing to lose. For everything I own will be behind the loan, including the one million six hundred thousand dollar company that I am now buying.

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"Besides, you are in the business of lending money. And what better security could you have than the pledge of the company you are selling me? In addition, you will receive interest on the loan.

"What is most important to you is that this way you will solve your problem swiftly and with certainty."

When I hesitated, Mr. Warheim asked another very important question: "How are you going to repay the loan?"

And I was ready for that question too. My response was: "I will repay the entire loan in sixty days.

"You see, I don't need more than a half million dollars to operate an accident and health company in the 35 states in which Pennsylvania Casualty Company is licensed.

"As the company will be wholly owned by me, all I need to do is to reduce the capital and surplus of Pennsylvania Casualty Company from one million six hundred thousand dollars to five hundred thousand dollars. Thus, as the sole stockholder, I will receive one million one hundred thousand dollars which I can then apply to my loan with you.

"You and I know that a businessman is faced with the matter of income taxes on any transaction involving income or expenditures. But no income tax payments will be required on this transaction for the simple reason that the Pennsylvania Casualty Company has not made profits, and no part of the money I receive when I reduce the capital will, therefore, be from profits.

And then another question was asked me: "What about your plans to repay the balance of the half million dollars?"

Again I was prepared to answer and said: "This should be easy. The Pennsylvania Casualty Company has assets consisting only of cash, government bonds, and high grade securities. I can borrow the half million dollars from the banks with which I have been doing business by pledging my interest in Pennsylvania Casualty Company and my other assets as additional security to back the loan."

When Mr. Arrington and I left the office of Commercial Credit Company at 5:00 p.m., the deal was closed.

• • • •

Now this experience is related in detail here to illustrate the steps one takes to achieve his aims through the use of OPM. If you will refer to Chapter Eleven entitled "Is There a Short Cut to Riches?* you will see how the principles mentioned there were applied here.

While this story indicates how the use of OPM can help a person, credit can sometimes be harmful.

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Warning credit can hurt you. So far we have been talking about the benefits of the use of credit. We have been talking about the practice of borrowing money for the purpose of making money. This is capitalism. This is good.

But that which is good can be harmful to a person with a negative mental attitude. Credit is no exception. And credit may make a person who has been honest become dishonest. The abuse of credit is one of the main sources of worry, frustration, unhappiness, and dishonesty.

Now we are talking about credit given voluntarily by a creditor. He gives credit to a person who he thinks has the quality of being worthy, on whose truthfulness he can rely. The one who betrays such a trust is dishonest. Such a person is the one who will borrow money or purchase merchandise without the intent to make the payments agreed upon or to pay the loan in full.

Likewise, the honest person can become dishonest when he neglects to repay the loans he makes, or pay for the merchandise he buys, even though circumstances may prevent him from making a payment on the due date.

For the man under the influence of the PMA side of his talisman will have the courage to face the truth. He will have the courage to notify his creditors as far in advance as possible when circumstances prevent him from making a payment. And then he will work out some satisfactory arrangement by mutual consent with his creditor. Above everything else, he will sacrifice until his obligation is finally fully paid.

The honest man with common sense does not abuse credit privileges.

The honest man who lacks common sense will borrow or purchase on credit indiscriminately. And then because he sees no way to pay his creditors, the NMA influence of his talisman exerts such a terrific force on him that he may become dishonest. He may feel his situation is hopeless and he can do nothing about it. He realizes that he won't be thrown into jail for owing borrowed money. Although he thinks he is not going to be punished, in reality his worries, fears, and frustrations are a very real punishment.

And he remains dishonest until he comes under the strong influences of the PMA side of his talisman influences strong enough to cause him to clear his obligations in full.

The abuse of credit privileges has literally brought on physical, mental, and moral illness. Remember Necessity, NMA, and Crime in Chapter Three entitled "Clear the Cobwebs From Your Thinking.'

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But the use of other people's money has been the means whereby honest men who were poor became rich. Money is an important number in the combination to business success.

The missing number. A young sales manager, whose yearly earnings are in excess of $35,000, wrote:

"I have a feeling: the type of feeling one would have if he were standing in front of a safe which held all the wealth, happiness, and success in the world, and he had all the numbers to the combination except one. Just one number If he had it, he could open the door."

Often the difference between poverty and wealth lies in the employment of all principles in a formula but one. Just that one missing number makes the difference!

This can be illustrated in the experience of another man who had been successful in selling cosmetics for a manufacturer before he went into business for himself.

In his own business Leonard Lavin, like any man who starts from the bottom, was faced with problems. As you will see later, that was good. It was good because he had to study, think, plan, and work hard before he found a solution to each problem.

Bernice, his wife, and he formed a perfect mastermind alliance. And they worked together in perfect harmony. They manufactured one cosmetic item and acted as distributors for other companies. But they lacked working capital so they were forced to do the work themselves.

As their business grew, Bernice became an expert in office management and purchasing, and an excellent administrator. Leonard became a successful sales manager and efficient production manager. And when the business grew, they were wise enough to employ the services of a lawyer with good common sense the kind that gets things done. And they also benefited from the services of an expert in accounting and taxes.

The way to make a fortune is to manufacture or sell a product or service (preferably a necessity at a low cost) that repeats. They did both.

Every dollar that could be spared was plowed back into the business. Necessity motivated them to: study, think, and plan; make one dollar do the part of many; obtain maximum results from every working hour; eliminate waste.

Month by month their sales moved forward as Leonard aggressively sought to break each previous sales record. He became known in the industry as a man who knew his business. To many, he became known as a man who learned to go the extra mile.

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Going the extra mile in two instances completely changed the course of his career for the better.

In the one instance his banker introduced him to three of the bank's clients who had made an investment in another cosmetic company. They needed expert advice from someone with good common sense. And Leonard took the time to help them.

Leonard went the extra mile in doing a good turn for a buyer in a drug store in Los Angeles. And then one day the buyer showed his appreciation by confidentially informing Leonard that the firm manufacturing VO-5, a quality hair dressing, might be for sale.

Leonard got excited. For here was a 15-year-old company with a quality product that had leveled off. He knew, from his cosmetic experience and from the study of cycles and trends, that all this company needed was new Me, new blood, new activity.

He acted on the self-starter Do It Now! In fact that very evening he was in conference with the owner. Now ordinarily in a transaction of this type, where the buyer and seller don't know each other, it takes weeks and sometimes months to negotiate before there is a meeting of the minds. A pleasing personality and good common sense on the part of the buyer or seller often eliminate unnecessary delays. Because of Leonard's pleasing personality and his good common sense, the owner agreed to sell the company for $400,-000 that same night

Now it is true that Leonard had been doing well but it was also true that every dollar he could spare was being plowed back into his business. Where could he get $400,000?

In his hotel room that night he realized that he had all of the combinations to real wealth but one. Just one money.

The next morning, as he awakened, he had a flash of inspiration. Again he reacted to the self-starter Do It Now! For he made a long distance telephone call to one of the three men to whom he was introduced by his banker. He had helped them and perhaps they could give him the right advice. For they knew more about financing than he. Because they had invested in another cosmetic company, perhaps they would invest in his. They did.

And because these men were experienced in investing, they employed a successful investment formula which made it necessary for Leonard to agree to:

(a) Consolidate all his operations;
(b) devote his entire efforts to one corporation;
(c) have the corporation pay back the loan on quarterly installments over a five-year period;
(d) pay at the going rate of interest on the loan; and
(e) give 25% of the corporation's stock as a premium for the investment
gamble.

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Leonard did agree. He saw the value of the use of OPM. The three men used OPM, too. They borrowed the $400,000 from their
banks.

The missing number now Leonard and Bernice had it! They worked long hours. They put their hearts into the business. They found it a thrilling game.
It wasn't long before VO-5 was being used in every part of the United States and some foreign countries.

December is usually the slowest month of the year for the cosmetic manufacturer. But in December, a year and a half after Leonard and Bernice took over the management of VO-5 and another product which was acquired Rinse Away the factory had a dollar volume of more than $870,000. That was as much as VO-5 and Rinse Away together had received during their past years under previous management.

And Bernice and Leonard found the missing number. With it they found the combination to acquire wealth. For it was only three years after the acquisition of VO-5 that their equities in their company were valued in excess of a million dollars.

Now the numbers in Leonard Lavin's combination for success were:

No. 1: A product or service that repeats.
No. 2: A company that is making money with an exclusive product or trade name, but which has leveled off.
No. 3: A good production manager who operates the factory with maximum efficiency.
No. 4: A successful sales manager who constantly increases sales by adhering to a successful sales formula while simultaneously seeking better sales methods.
No. 5: A good administrator.
No. 6: An expert accountant who understands cost accounting and income tax law.
No. 7: A good lawyer with common sense who gets things done. No. 8: Sufficient working capital or credit to operate the business and expand it at the right time.

You, too, can use OPM for: "Business? It is quite simple. It is other people's money."

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Now if you choose to learn the principles in this chapter as well as those in Chapter Twelve entitled "Attract-Don't Repel-Wealth," you, like Leonard and Bernice Lavin, can find the missing numbers to unlock the door to riches for yourself.
But to be healthy and happy, you must find satisfaction in your job. When you read the next chapter, you will learn how.

11
Pilot No. 13
THOUGHTS TO STEER BY
IF YOU DON'T HAVE MONEY
USE OPM!
 

1. "Business? It is quite simple. It is other people's money!"

2. OPM: other people's money is the way to acquire wealth.

3. The basic unwritten premise in "Use OPM" is: operate on the highest ethical standards of integrity, honor, honesty, loyalty, consent, and the Golden Rule.

4. The dishonest man is not entitled to credit.

5. Your banker is your friend.

6. Where there is nothing to lose by trying, and a great deal to gain if successful, by all means try!

7. When you want to make a deal with someone, develop a plan that will give him what he wants, and in doing so get what you want. A good deal is mutually advantageous.

8. Credit used indiscriminately can hurt you. Abuse of credit is the cause of much frustration, misery, and dishonesty.

9. To unlock the combination to success, you must know all the necessary numbers. Just one missing number may keep you from achieving your goal.

10. You too can find the missing numbers and unlock the door to riches for yourself.

 

HAVE THE COURAGE
TO FACE THE TRUTH!