An interview with William Cowie

D Bnonn Tennant interviews personal finance expert
William Cowie

William Cowie

William Cowie, financial consultant & founder of Drop Dead Money

This week’s interview is with William Cowie of Drop Dead Money. William has more years of experience in finance than he cared to disclose to me, and has seen many recessions — a fact which may surprise you.

He has a Bachelors and Masters in business, has done some work towards a PhD, and he’s been either a CEO or CFO for more than 25 years. In other words, he has spent his entire adult life immersed in finance, and has a lot of interesting and useful things to say to entrepreneurs.

DBT:

Give us a brief idea of how Drop Dead Money is different from all the other finance blogs out there. Why should we listen to you when there are so many other people dishing out financial advice?

WC:

Let me answer this in two parts: First, how is DDM different, and second why should anybody listen to an old windbag like me?

Part 1

There are many blogs in personal finance, and their advice boils down to 4 basic strategies:

  1. Earn more
  2. Spend less
  3. Get rid of debt
  4. Invest

Long term financial success takes all four. No surprises there.

But… There’s a fifth area almost nobody talks about. That’s a shame, because overlooking it can sets back people’s plans 10 years or more. That’s the negative imperative.

If you pay close attention to this fifth dimension, it can dramatically shorten the time it takes you to make your drop dead money. That’s the positive imperative.

What is this fifth dimension? It is timing your decisions based on the economic cycle.

Here’s an example: buying a house is a good decision generally. Buying a house at the top of the market, right before the crash, well, that’s not a good decision. Buying it in a recession, that’s when you pick up the bargains. Same decision, different time, very different outcome.

The Economic Cycle

We have all heard of the economic cycle. The economy has ups and downs, and when we look at those ups and downs over several decades, we clearly see a cycle pattern.

Here’s a chart that shows the U.S. economy since World War 2.

The dates in red are the bottoms of each of the recessions. Now look: how far are they apart? A lot shorter than you would think!

Okay so that’s all interesting, but … so what?

How does it help you?

It starts with understanding that one complete cycle, top to top or bottom to bottom, has four phases, much like a year has four seasons.

  1. The bottom is the winter of recession,
  2. the initial upswing phase is like spring,
  3. the phase with most growth is like summer,
  4. the phase of greatest abundance is like the autumn harvest,

…which brings us back to the winter of recession.

Of the four phases, the winter of recession is the “make or break” season. If you’re not prepared, recession will wipe you out, or at least cause severe damage.

However, if you’re prepared, recession is the time when you can make the biggest quantum leap in your net worth (AKA Drop Dead Money). How? That’s when prices are their lowest.

But to reap the benefits a recession brings, you have to be prepared. That preparation takes time. That’s why it’s important to pay attention to this now!

The USA gets a recession every 7–10 years. This has been happening for as long as our readers have been alive (even me) and yet almost nobody has noticed that. Remarkable, but true.

Recessions are inevitable, not random. And they’re surprisingly predictable.

Simply knowing when the next recession will hit will enable you to escape most of its devastation. With proper warning, we all can greatly reduce the damage of any disaster, from hurricanes and tsunamis to recessions.

My blog will help you build your wealth by giving you:

  • A basic understanding of the economic cycle
  • A more detailed understanding of the 4 phases/seasons of each cycle
  • An idea of where we are in the cycle
  • Strategies for each season
  • The perspective needed to weld it all together

The Drop Dead Money approach doesn’t supplant any of the wisdom and knowledge existing PF blogs provide. Rather, it is a multiplier add-on.

Part 2

I’m old enough to have lived through several recessions. I’ve been hurt by a few, prospered in a few, and I’ve figured out the difference to where I’m eagerly awaiting the next one.

I have a Bachelors, Masters and partial Ph.D. in business, and I’ve been a senior executive, either CEO or CFO, for more than twenty five years, so I’ve spent my entire adult life immersed in these issues, both practically and academically.

The turning point for me came in the mid-eighties. While attending graduate school at UC Irvine, I was on a research project and my assignment was to get as good an idea as anybody could about the future of business. One way of doing that is looking at the past, and one of the charts I remember seeing was published by Ameritrust, and it showed the economy clear back into the 1800s. And it showed how consistently the cycle kept going up and down, up and down… for hundreds of years.

Every time when the cycle is on an uptrend, “everyone” thinks it will always go up. And when we are in a down cycle, “everyone” thinks doom and gloom will be our lot for ever. The charts show there is always an up after a down and a down after an up. That’s when the importance of not going by what “they” say struck me.

DBT:

Okay, let’s get the obvious question out of the way — why “Drop Dead” money?

WC:

I’m a late arrival to the blogosphere party. Hey, I’m 60, what do you expect? :) So all the good names in finance are already taken. Get Rich Slowly is my personal favorite as far as names go, because it really resonates with what I stand for. But J.D. beat me to it, so we had to come up with something catchy. At first I had a pretty lame name picked, something with recession in it. But everyone I told about it got this deadpan look on their face: “Dude, I don’t want to hurt your feelings but, man, that name truly sucks!“

So Danny Iny and I sat down and brainstormed. This is how it went: I threw out name after name while he typed them into the Google and, one after the other, kept saying, “Nope, that one’s taken, too!” Where are all these blogs, I thought? Why are people selecting all the cool names and doing nothing with them? Danny set me straight: there are these dirtbags who register sites and then try and sell them to whoever wants them. I’m just way too cheap to do that, so we kept plugging along.

Suddenly I remembered a book I read a long time ago. It was written by James Clavell and it had a character who wanted a million dollars as “drop dead” money — enough money to tell everyone to drop dead. Those were the days when a million dollars still got you a farm in Napa Valley. (Nowadays, it doesn’t even buy the living room furniture there.)

So I said, “I know this one will be taken, too, but let’s try Drop Dead Money.” He looked at me with a puzzled expression.

“What?”

“Drop Dead Money. C’mon, you’ve heard of that? Remember the book?”

Blow me over with a feather: Danny (who knows everything) had never heard of the book. Being too polite to tell me I’m an idiot, he looked it up in the Urban Dictionary. Well, blow him over with a feather, there it was. And what’s more, the reference was clearly too old for the whippersnappers who hijack cool names and hold them to ransom, so they missed it.

So short story long, that’s where the name came from.

If you drill down deep enough, what’s driving the website is a deep seated anger. I’m angry at the needlessness of the suffering recessions cause. I saw friends lose homes and businesses. I saw families, who got along before, split apart because of the financial stress recessions bring. Money is one thing, but love and dreams are higher dimensions of humanity. There is no need to lose those over money. I saw recessions blow through money and ravage the dreams and hopes of people I care for a lot. It hurts to see the lives of people you love get washed over a cliff’s edge and you can do nothing about it.

The worst part of it is it’s so needless and preventable. All it takes is some knowledge and more informed decisions.

When my wife and I came through this last recession in surprisingly good shape, we almost felt guilty. A turning point came when I had lunch with a friend. We have known each other and done business together for more than eight years. A few years ago, Vic (not his real name) was going strong. He went from renting to buying his own building, he took over two other related businesses and he became established as one of the leaders in his field locally. He and his wife did an awesome remodel on their home and it truly became a dream house. He lost it all. Everything. How do you describe in words when your dreams are wiped out and you are powerless to do anything about it? Seeing the light go out in people’s eyes is murder. I hate it!

Anyway, we were having lunch and I mentioned to Vic this idea that I had. Several friends and acquaintances suggested I share the principles behind my success. I didn’t even know what a blog was, but someone suggested I look into it. Well, Vic knew a lot about blogging and he shared some thoughts. Then he asked me what knowledge I had to offer. I spelled out my perspective of keying financial decisions off of the economic cycle, knowing when to and not do certain things.

I eventually finished. Vic just sat there, silent for a long while. With some moisture along the bottom of his eyelids he finally said, slowly and softly, “Man, I sure wish I had known this four years ago!”

That is why I’m doing this: to stop every Vic I can from having to go through the destruction of their hopes and dreams, all because nobody told them.

DBT:

You are, if you will pardon me for mentioning it, somewhat more venerable than a lot of financial gurus. So you’ve had time to build up expertise about economic cycles — maybe even witness a few first-hand. But you’ve also had a successful career before the internet came along and changed it all. How was it, adjusting from a few decades of using traditional business techniques to selling a product online? Tell us about how that worked for you.

WC:

Thanks for the compliment! It reminds me of Ronald Reagan, at 73 being harangued by Walter Mondale in the 1984 Presidential election. His response: I won’t exploit for political purposes the youth and inexperience of my opponent.

The biggest change I see is the shift in perception from medium to content. In the past, when we bought a record (anybody know what that is?) or CD, we thought of the medium, i.e. the physical thing in its cover that we put on or in a player. Now we think of what’s on the CD or record, the content. Same with a newspaper. We bought and read “the paper.” Now we read the same content, but the medium has shifted.

I believe the biggest shift is about to start. Brian Clark [the founder of Copyblogger] talks about teaching, and how teaching sells. The main reason I quit academia was I learned that at the higher echelons of universities, they make a distinction between what they call knowledge creation (research) and knowledge dissemination (teaching). And of the two, research is the only noble calling in their view. To me it explained the general pathetic status of teaching in higher education. But that’s a rant for another time.

The important issue here is once again society is discovering that the medium (colleges) is separate from the content (knowledge). The only thing holding traditional education together is the fact that society in general still values the degree as something of intrinsic value. When employers discover that the internet delivers knowledge with much more focus and precision than traditional education, that last bastion will crumble and higher education as we know it will follow the path of newspapers.

That will be a while, but in the meantime we will see significant growth in knowledge packaging and delivery through the internet.

Some products are unaffected by the internet, such as cars, stoves and sofas. My previous business is likewise unaffected.

But my career (such as it is) is profoundly affected. Before the internet, it would have been very difficult for me to help others to turn recessions from disasters to opportunities.

There is another area you and I are experiencing first hand: entrepreneurship. Twenty years ago it wasn’t possible to start knowledge-based businesses such as ours and (best of all) do it from home.

Working from home is a lot more profound than you may realize. In the entire recorded history of mankind, the concept of commuting is barely 150 years old. Before the train, everybody lived where they worked and thought nothing of it. That was natural. To some degree we’re seeing that coming full circle. Even 10 years ago, admitting you were working from home branded you as a loser because you couldn’t get “a real job.” In a short period of time it has become the norm. Homeschooling is a growth industry, both because it has become feasible to have at least one parent home all the time and because content delivery has grown so dramatically in both quality and quantity. Have you checked out the Khan Academy? Here’s a guy working from his closet while changing the world of math education. Exciting times, indeed!

For me personally, the adjustment is still in progress. In all honesty, the change was from traditional business to sitting at home, looking retired. (What’s that, twice tired — re-tired?) So when I took up the cudgels (there’s your word for today, boys and girls) of content marketing, it was a fairly easy step.

DBT:

We’ve all heard that video is the new magic bullet, will double your conversion rates, yada-yada-yada. Your website is basically just a landing page with a two-minute video. Tell us your reasons for going this route — and how it’s working out for you. Do you get decent opt-in rates?

WC:

The reason for this is simple: I may understand some aspects of finance, but when it comes to the internet, I’m a rank beginner. So I did what any right thinking person should: I asked the experts. I signed up for learning from your good self, the aforementioned Danny Iny (firepolemarketing.com), Jon Morrow (boostblogtraffic.com) and a few others. Jon and Danny persuaded me to go this route.

Here’s their logic: hey dude, you’re unknown in the area of (fill in the blank). Nobody’s going to read your blog because nobody knows about it. So go blog on other people’s sites so they can judge if you know what you’re talking about or not. If you’re good, they’ll sign up for the basic intro you offer and wait till the blog goes “live.” Which hopefully won’t be too long.

Am I nervous about that? Absolutely! If I had my druthers, I”d be pumping content into the site faster than you can blink your eye, but since they know a whole lot more about internet marketing than I do, I am putting my pride in my pocket and doing what I’m told. :)

As for video, it’s easier to absorb than reading (see TV vs print media). The video on my landing page can be improved upon and it will. But I’ve learned through the years not to let lack of perfection stop execution. In a few weeks, the landing page will have a better video, and hopefully there will be more content and the site will look more like a “normal” blog. Since I like to talk (bet you couldn’t tell) I’ll probably have a greater video/written ratio than most financial blogs, but it will never be just video.

Opt-in rates? What are those? :) So far, it’s too early to tell if it’s working or not. We’re talking about an exercise that’s barely a month old. Ask me in a month or two and we’ll have a better idea.

DBT:

Finance writing can, let’s face it, be pretty dry and jargony. How do you keep your readers engaged?

WC:

I don’t know yet that I do. You nailed one of the biggest challenges right there. Verbally I know I can do it. When I taught accounting, it never ceased to amaze my wife that by the end of the course the class was usually about 20-30% larger than when it started because the students would bring their boyfriends and girlfriends to come and listen… to an accounting teacher!

I figured my biggest asset is I’m not as smart as the other folks in finance. That means I have to try harder to understand the concepts. And for me the best way is to break them down into simple language and stories. And, once I do that, I find others enjoy the transfer of knowledge more. We’ll see how that plays out. If I can locate a nice classroom with a big white board, I’ll be in my element and everyone will have great fun. Oh, and someone to take the video. Any volunteers in Denver, please ask Bnonn to connect us! :)

DBT:

Okay, let’s talk finance. I’m what many people might call a “creative” — a fancy way of saying arty, not practical. I’m so right-brained that I’m left-handed, which isn’t great for managing money. What tips can you give someone like me, who works for himself, has hungry baby mouths to feed, but is really quite unqualified to be his own finance department?

WC:

First step: don’t confuse left brain with discipline. The key isn’t left brain understanding. It’s discipline. It’s saying no to certain things. The simplest way is to pay yourself first. Make yourself a bill to pay. Every month you have the rent, the phone bill and your DDM bill (drop dead money). You pay that bill first. If you have a job, have your employer make a deduction straight into your savings account. Max out your retirement account.

If, after that, you can’t make a living, earn more money. Talk to Ramit Sethi or others like that. But don’t cut back on your drop dead money contributions!

Start with your savings goal, don’t end with it! If you’re right brained, you can really do something fantastic with this. Paint a thermometer on the wall with this year’s drop dead money goal on it. Have the family deposit the check into the savings account and make that the one night every month everyone goes to eat out. Make saving a celebration, not a punishment. Because every month you do it, you are scoring a victory!

Discipline also shows in managing your ego. During the dot com bust I worked with a guy (let’s call him Dave) who got a ticket one day for driving on bald tires. He asked me what to do. The reason he got the ticket was he couldn’t afford new tires for his Lincoln Navigator, to which he had added special rims. Car looked great, but the tires were several hundred dollars each. To replace them all would be well over a thousand dollars. And he didn’t have even a few hundred dollars. He and his wife had bought a huge mansion in one of the tony suburbs of Orange County. We’re talking like 5,000 square feet for two people. They had both lost their lucrative jobs and had to take what jobs they could, at significantly lower pay scales. They were behind in their mortgage payments, and falling behind further every month.

What could I tell him? I told him to sell everything and scale down. What else? Of course, they would lose their shirts because they would be selling low after buying high. But they did and, a month or two later, he arrived at work in a little used Corolla. (Which cost him only a little more than the aforementioned tires!)

Here’s the significant thing: Dave had a huge smile on his face. I asked him about it. Didn’t he kinda feel down after trading his fancy Navigator for the Corolla? Oh no, he said, he traded a millstone for freedom. I never forgot that.

And as I thought about Dave’s situation some more, it struck me that in the long run, we’re going to do “Corolla time,” one way or the other. We can either do it on the way up as we scrimp while saving a bunch, or we can do it on the way down, when we’re forced to sell our excesses at a loss.

We have a choice.

Most people don’t know they have a choice, though. Adam Baker of Man vs Debt gave a fantastic talk about this at a TED conference.

Smart people are not just left brained. But they are disciplined. There are no free lunches. Your Drop Dead Money comes a lot faster if you set yourself a goal and make performance as non-negotiable as the phone bill.

And finally, consider handing the reins of the family finances to your wife. I hate to say it, but… I was a CFO for many years, yet in our house my wife still runs the finances. She simply does a better job of it than I do. I don’t know if there’s any scientific study been done about this, but in our circle of acquaintance, that seems to be the norm, rather than the exception.

DBT:

All right, you must have at least a few heartwarming success stories. Got any that also have important morals to them?

WC:

I have several. I am reluctant to get started, because you’ve no doubt noticed I can ramble with the best of them. The most important moral I’ve observed is that denying your short term indulgences is good for the soul as well as for the pocket book.

One of my favorite stories: a good friend of mine had a small business. In the late eighties I persuaded him and his wife these ideas of mine had some merit. When their industry went into overheating mode (autumn) he wanted to get a larger facility and hire more people. His wife and I strenuously objected. The pressure on him was enormous. On one hand he finally had what every businessman dreams of: customers beating his door down. For him to tell them no, he can’t take any more orders, was torture, sheer torture. His wife kept the books and she just dug in her heels and refused to allow them to get a bigger lease. So his solution was to increase his prices so customers didn’t feel rejected. And he made some great extra profits. Which she squirreled away into a savings account.

Then the (inevitable) recession struck. Two of the big names in the industry went under. He assumed one’s lease and tripled his square footage for only a little more than he had been paying on his (by then) month-to-month lease. He went to the bankruptcy auction of the other and picked up their best employees (for free, of course) and some of their equipment and assets for pennies on the dollar. Some of those people still work for him. And when the next recession rolled around, he was almost ten times bigger than at the time of the previous one. Simply because he planned his expansion around the economic cycle.

He still buys me lunch! :)

Being generous comes easy if you have enough to give. Also, it feels good — ironically, it feels a whole lot better than to have to accept money because you need it and they know!

Different people have different belief systems and political persuasions, so I tend to stay out of those areas. However, one thing is constant: money is not like any other item in your life. It either owns you or you own it. There is no middle ground. The test is how easy you find it to give it away or say no to. Making do with less while one parent stays at home to give their kids a better education — that’s a huge moral statement, but only if money doesn’t own you.

DBT:

One final question before we wrap up — and I’m sure you hear this one a lot…but…what’s your dissertation about?

WC:

Haha — it’s the first time in twenty years anybody has even mentioned it! Nobody cares a lick. It was going to be about business strategy, and it never got done. The world suffered no loss with that decision, trust me! :)

DBT:

Thanks so much for taking the time to share your expertise with us. If people want to learn more about William Cowie and learning to make "drop dead" money, how can they go about that?

WC:

Interview me! :)

I’d like to take this opportunity to thank you, Bnonn, for taking the time to interview someone like me who is just getting started. I have nothing to offer back to you — I’m not even a paying customer! And I just wanted readers to know what a standup guy you have been to me!

For those that don’t know, I’ve peppered Bnonn with questions and he never came back with the line that “Hey, dude, that’s where I make money from. Give me your credit card and we can talk.” I find your emails very informative — I recall that I went back and totally rewrote a few of my follow up emails based on your information. Clearly you know what you’re talking about and I’m honored to have this time. Thanks again! :)

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