John Templeton’s doctrine of the extra ounce is particularly noticeable in professional sports. Some will give their very heart and soul on the baseball diamond, and they are highly rewarded for their supreme efforts. Pete Rose is a perfect example. He may not have been the most talented player on the field, but his genius lay in giving top quality day in and day out for more than twenty years. He has never given less than his total ability.
The same principle applies in the music world.
How many musicians are world famous? How many are wealthy? What is the difference between those chosen few and other musicians?
The answer? That tiny bit extra. The giving of that additional ounce—that seventeenth magical ounce—that, for those who can force themselves to give it, pays off a thousandfold.
Not only does this principle apply in art but in the world of business, too. In the mutual fund field, where John Templeton has made a mark beyond most other men, you can get by with a performance that is slightly above average. Get by, yes, but you won’t attract much attention. You will never enjoy the fruits of major success. If, however, you’re willing to give that extra ounce so that occasionally you have the top performance of all the mutual funds, then you attract a huge following and become a leader in the industry.
Even the overachievers, though, must follow certain rules. First of all, when you promise a result, make sure it’s realistic and that you can deliver. Even better, give more than you promised. This is especially true in managing corporations that are involved in long-range planning. If you are constructing a building or an airplane, you are going to have a budget extending two or three years or even more into the future. A budget is a powerful kind of promise. If your work comes in ahead of schedule and below budget, you’ve exceeded your promise. Then, on top of that, if your work is of the highest quality because you gave the extra ounce, you are a prime candidate to move ahead in your company.
Always underestimate what you can accomplish; this is a key success tactic. There is a temptation among ambitious executives to overstate their abilities and what they can produce. Even in risk situations, they will say, “Don’t worry. I will have this done in such and such a time.”
If there is any doubt in your mind, refrain from grandiose promises. Present the case factually and your ability to handle it realistically. Then work as hard as humanly possible to better your promise.
If someone asks you what you can do for them that John Doe can’t do, give a careful and reasoned answer. Big words, brag words, can come back to haunt you. Don’t say you’ll produce 15 percent a year in your mutual funds. Say, instead, that you will do everything within your power to produce a superior result. If you then do more than promised, everyone is happy. But if you make exaggerated claims, you will create a group of discontented clients, and that can hurt your career.
To put this problem in another context, we all know people who brag constantly. Every reader of this book has at least one such acquaintance. Their bragging soon takes the form of unrealistic claims and promises; they will tend to rush projects, thus producing inferior quality. Such people soon earn a reputation for unreliability. Destructive self-inflation has ruined many a promising career.
The secret to better quality is to never give less than your best—to give that extra ounce. Although you should be careful not to undertake more tasks than you can handle, commit yourself totally to those that you do take on. Work at them until you are satisfied. It is safe to assume that if you are honestly happy with your results, your customer or employer will be equally as happy.
Templeton believes that better quality and lower cost—fruits of giving the extra ounce—are fundamental principles of Christianity. The Bible teaches you to develop your talents to the utmost. Thus, promising what you can realistically accomplish and then delivering it are true ministries.
As an investment counselor, Templeton has found that it pays to search through thousands of corporations to discover which is the lowest-cost producer of each item. If you are going to select successful investments, you should study and analyze the available information. That way, you can be confident that a certain steel company in South Korea, for example, is the world’s lowest-cost producer of steel and that the sugar industry in Cuba is the world’s lowest-cost producer of sugar.
If you fail to gather your data, you can’t make an accurate assessment of which companies are likely to forge ahead, which companies are going to survive in periods of business depression, which companies are prepared to give better quality. And that is the kind of information—garnered through the doctrine of the extra ounce combined with solid preplanning—that leads to success, both for yourself and your clients.
To make others believers in giving the extra ounce and producing better quality, it’s imperative that you have high team morale. Your staff must be motivated to work together with pleasure and enthusiasm. Contrary to the popular romantic notions about business, the successful executive is not a loner. Give credit and praise to others. Be quick to point out how much help you’ve received from others and what a central role they have played in your accomplishments. Whenever any praise comes to you, that praise is due to all of your fellow associates. Make sure you’re right down in the trenches with them at all times.
In order to promote an attitude of the extra ounce, it has been John Templeton’s practice for more than thirty years to pay employees about 20 percent above the current trade salary levels. That is not the result of kindheartedness, Templeton is quick to point out. Rather, it is his belief that if you pay 20 percent more than normal, you will gradually accumulate a superior team; for 20 percent more money, you will field a team that is 50 percent more effective. “You get what you pay for,” Templeton says. “The old adage is true.”
However, there are times when you will make an error in judgment; you will find that some people on your team do not pull their own weight. In such cases, Templeton does not recommend that you adopt the charitable view and swallow your mistake, nor does he believe in taking a cutthroat, unloving attitude. Once having admitted the mistake, you should try to find an area in which those employees are proficient and shift them into it. If you can’t find such a spot in your own organization, find it in someone else’s. Then you can go to the employees and explain that while what they are doing presently is neither to their own or the company’s advantage, you have found a slot for them where they have a chance to become important and successful people.
Templeton is a great believer in the Japanese philosophy of management. Their companies study each employee as though he or she was a family member. They want to know where their employees’ talents lie, where they will be the most productive. If they are no longer needed in one area, the Japanese company will shift them to another division, or into one of their associated companies. If a place can’t be found for them anywhere in the organization, they try to retrain them for something they can work at until retirement age.
Templeton feels that the Japanese way is both intelligent and deeply ethical. They know how to get the extra ounce from their workers. He says: “I advocate the Japanese viewpoint wholeheartedly. By taking care of your employees, they will be devoted. They will work harder. The quality of the product will be superior. But what is especially striking about their method is the commitment and loyalty involved.
“Think of it in these terms. When you get married, you know your spouse won’t always be young. He or she may have problems later in life, but problems don’t end your responsibility. It’s the same way with your employees. They may give you valuable service for years and then, for a vast range of reasons, they may run into roadblocks. But your responsibility to them must remain steadfast. If you don’t give up on them, they will find a way to repay you with quality performance.”
They will repay you by giving you that magical extra ounce.
To summarize Step 11, you should absorb the following lessons on the road to success and happiness:
To be o
utstandingly successful you must work just a little harder than those who are moderately successful. Learn to give one extra ounce and your rewards will be all out of proportion to that ounce.
The extra ounce results in producing higher quality in all lines of work.
If you give the extra ounce, your morale will be high and the teamwork you can achieve with fellow workers is bound to be extraordinary.
As you study Step 11, ask yourself this simple, two-part question. Consider it from as many angles as possible and answer it as honestly as you can: Am I giving all that I’m capable of, or is there an ounce of effort that I’ve withheld?
STEP 12
CONSERVING YOUR RESOURCES TO BEST ADVANTAGE
WHEN JOHN TEMPLETON and his first wife, Dudley, got married, they made, along with the usual resolutions, a private pledge to put aside 50 percent of their total earnings for a personal investment portfolio.
For a full understanding of such a commitment to thrift, it helps to look again at Templeton’s Tennessee boyhood. In his hometown of Winchester, the honor and character of people were their greatest sources of wealth. And one of the major marks of character was thrift. People who didn’t save something—at least a few dollars of their weekly paycheck—were considered undisciplined and weak.
Thrifty people, on the other hand, were respected. So from the time he was young, Templeton learned that thrift was a character trait well worth developing. After the economic crash of 1929 the importance of thrift assumed a life-and-death significance. The 1930s gave ample evidence that to survive and prosper one had better save money and invest it wisely. Quite simply, conserving your resources to best advantage was essential to success and security. Those who saved received great rewards. Those who didn’t went under.
As tough as the times were, Templeton and his young wife stuck by their decision to set aside fifty cents of every dollar earned. It wasn’t an easy decision to carry out; it took willpower, perseverance, and total commitment to the future. It took the very qualities that spell success.
To make the personal sacrifices more tolerable in the early years, the young couple created a game out of being thrifty. And friends and neighbors often helped them realize their highly unusual financial venture. For example, friends found restaurants for them where they could eat a full, wholesome dinner for fifty cents. This was, of course, during the depression years.
Furthermore, Templeton never paid more than $100 a month for rent. He set a goal that rent would not exceed 16 percent of annual “spendable income,” defined as the money left over after taxes, savings, and investments. And he became so adept at finding bargain-basement housing that rarely was that percentage even approached.
The Templetons had no need for luxury, for posh surroundings. They could get along happily without them. They had something better—a vision, a goal.
Thrift was like a light shining on the path that would lead them into a successful future. For twenty-five dollars they furnished a five-room apartment. That feat—astonishing even for the impoverished 1930s—was accomplished by going to auctions and bidding on pieces of secondhand furniture when no one else offered a competing bid. As a result, at one auction Templeton bought a bed for one dollar and a sofa for five dollars.
Anything not available at flea markets or auctions, Templeton constructed from wooden boxes. The result, of course, was hardly high elegance. As one friend put it, “’Early attic’ was the basic style of the place.”
But their living quarters during those years were always warm and comfortable, mainly because of their shared long-term goals. Their pronounced thriftiness was more an adventure than a burden because they believed profoundly in what they were doing. They had a definite objective toward which they were saving—complete financial security—and they never for a moment lost sight of it.
The fact is, however, that John Templeton was not poor even then. He had a good income and a solid investment portfolio that was steadily growing. Some acquaintances might have regarded his approach to money, housing, and the conveniences of life as somewhat eccentric, if not socially unacceptable. After all, the circles that Templeton, the investment counselor, frequented were characterized by big money, big houses, big cars, and big consumer spending in general. But Templeton was not one to live by society’s more superficial values. He followed his own inner dictates and his developing religious beliefs.
And so a radical philosophy of thrift became a deeply rooted part of Templeton’s way of life. He became convinced that success was closely connected to saving, a belief that he has never stopped practicing.
John D. Rockefeller often spoke of what he called “the magic of compound interest,” a magic that anyone can practice so long as he first practices thrift. Although it may not at first seem there would be a big difference between investments that earned 15 percent per year instead of 12 percent, the facts are truly startling. Over a sixty-year period, each dollar at 12 percent would grow to $900, while each dollar invested at 15 percent would grow to $4,400!
To take advantage of compound interest, you have to be thrifty. You must be prepared, by virtue of careful financial management, to leave your money invested and let it grow. Then the magic, and the success that goes with it, can be yours.
Sometimes it is wise to borrow in order to build a productive asset that shows great profit potential, but, in general, heavy borrowing is unwise. In Templeton’s investment work, he has found that most companies without debt are able to ride through the stormiest economic cycles without trouble. However, the companies with high debt—even though, in other respects, they may be equally good—may sink because they can’t meet their obligations.
The horrors of debt were made obvious to John Templeton when he was still in high school. A friend of his worked for a dollar a day, six days a week, and on Saturday he would be paid six dollars. But time and again, he would borrow four dollars from young Templeton on Thursday by promising him his entire paycheck of six dollars on Saturday. In other words, he was so unthrifty that he couldn’t manage for two additional days and resorted to selling six dollars for four.
Templeton calculated the rate of interest his unfortunate friend was paying. It opened his eyes to the ways people could ruin their lives. It is best never to borrow—not even money to buy a home—and he rarely did. The two exceptions were the $200 he borrowed from an uncle to help finance his college education and the $10,000 to get him started in the investment business. They were exceptions to his general rule and in neither case did he borrow for a strictly personal expenditure.
One of the best examples of how deeply the trait of thrift is embedded in John Templeton’s character involves two cars. When barely a teenager, he was playing with friends in a hay barn about a mile from his house. During the horseplay he stumbled upon an old, broken-down Ford.
In a flash of insight about what that decrepit vehicle could mean to him and his friends, he approached the farmer who owned the barn and asked, “Do you want to sell that car?” The farmer answered that John could have it for ten dollars.
So John went home, withdrew some of his savings, explained the situation to his always supportive mother, and the car was his. That part went easily. The hard part was finding another Ford that could be used for parts to get the first one in working order.
So John searched all over the county for a second Ford that was the same make and model as the first. Finally, due to his persistence and a natural flair for ferreting out the best bargain, he did find the matching Ford. If possible, it was in even worse condition than the one he already owned, but it had the same virtue—it only cost ten dollars.
Some people might have scoffed that he was wasting his money by sinking it into two broken-down automobiles. But the scoffers didn’t know that he had a plan—a plan that he was confident would turn two useless cars into one reasonably functioning motor vehicle.
With his equipment and parts assembled and tools borrowed from his brother Harvey, young Templeton and hi
s eighth-grade friends moved to stage 2 of their plan—transferring the parts from one of the cars into the other.
They never lacked confidence that they were smart enough to put a car together. Nor were they lacking in youthful enthusiasm and energy. If they got stuck in their effort to assemble a workable jalopy, they ran down to the local Ford dealer and pored over his repair manuals until they were clear on the principles to follow. They got to know the mechanics around Winchester and picked up valuable tips to help them complete their project.
After nearly half a year of working afternoons and weekends, Templeton and his friends finally got one of the cars to run. They painted it orange and green and named it Esmeralda. And, surprisingly, with the help of constant and careful maintenance, the car they had rebuilt performed for four straight years, long enough to get the boys to and from classes and to out-of-town ball games in style until they graduated from high school.
John, always aware of the importance of thrift, had recognized a bargain in those two cars and, with the help of his friends, had turned his dream into a reality, for only a twenty-dollar investment. As a matter of fact, the first five cars owned by Templeton were secondhand and none cost over $200. He never paid more for an automobile until his net worth exceeded $250,000.
In 1940, when Templeton opened his office as an independent investment counselor, one of his first priorities was to acquire a reference library. As he researched the problem, he discovered that Fenner & Beane, for whom he had once worked, no longer had need of their library as they had merged with Merrill Lynch. Templeton went to the man in charge of moving and offered him twenty dollars for the research material, including twelve excellent bookcases. His offer was accepted. Any one of the bookcases would have cost $100 new, but Templeton caught his old company in the midst of a move when bargaining for unneeded books and furniture had no priority. Thus, by searching carefully for the best bargain, Templeton bought himself a library that he used for twenty years. All for twenty dollars!
The Templeton Plan Page 8