CINCINNATI BUSINESS COURIER
June 13 – 19, 1988
INVESTMENTS
by Charles D. Vaughan
“Serving Men,” Rudyard Kipling Tells Us How to Handle Junk
“I’VE JUST READ that I am dead. Don’t forget to delete me from your list of subscribers.” That is supposedly the text of a note written by Rudyard Kipling to the editor of a publication which had just reported his death.
In today’s deluge of junk mail and unsolicited publications, that approach might well be the only way to get off most of the lists. The great barrage of junk mail and junk phone calls continues for only one reason it works. So many businesses operate on the “numbers game” principle. That is, if you send out enough mail or make enough calls the small percentage that responds will develop into a volume of business sufficient to turn a profit.
Nowhere, it seems, is this more evident than in the financial services arena. As the markets begin to show measurable signs of recovering from the debacle of 1987, perhaps more and more investors will again begin to respond to such appeals. If so, the pace is likely to accelerate. Fortunately, our late friend Mr. Kipling left us with a bit of wisdom along with his wit:
I keep six honest serving men
(They taught me all I knew);
Their names are What and Why and When
And How and Where and Who.
Just So Stories (1902)
“The Elephant’s Child”
We are told that there are really only two great motivators for investors: greed and fear. Prior to the October Crash, greed was obviously in control. Since then, fear has been dominant. Whether this is completely true or not, there is some validity to the point that investors tend to get caught up in a form of mass psychology. To protect ourselves from ourselves and others who seek to profit from our instincts, it might be worthwhile to enlist the aid of Mr. Kipling’s “serving men” who are available to us all. When we are considering any major changes in our financial program it is worthwhile to call these fellows in turn to help in the evaluation.
What should ask the nature of the proposition being considered. Is it consistent with our long range goals? Is it a radical departure from existing or familiar investments? What is the economic basis for the enterprise and what is the source of the expected profit? What is the downside?
Why should ask the reason behind the recommended strategy. Does it serve to reduce or increase risk? Is the projected reward substantial enough to justify such risk? What is the motivation of the person making the suggestions?
When should next ask the timing of the decision. If it has to be done immediately, what is the rush? If I miss this one, won’t there be another along soon enough? Can I make the commitment in stages or is this an all or nothing deal?
How should in turn get an explanation of the steps required to complete the contemplated transaction. Is it something that is likely to happen smoothly or does it require special handling? Does it involve anything that is potentially contrary to public or taxation policy? And most importantly, how do I get out and at what cost?
Where next should raise two questions. Where will the transaction be done and what legal jurisdiction will it be under? Where will my assets be kept and how safe a place is that?
Who finally should address the credibility of those making such recommendations. On what authority is the adviser making them? Who is actually going to execute the transaction and who is going to monitor it in the future? What is the total cost involved and who is getting paid what?
Admittedly, calling all these guys into action takes a lot of time and effort and sort of spoils the fun of impulse buying, but good information is probably the only real defense the investor has. It is much easier to obtain before the transaction than afterward and may save a lot of grief later.
After all, the real hustler and numbers game player does not want to waste time on those who have a lot of questions; it slows down the number crunching too much.
Besides, it’s a much more pleasant way to get your name taken off a list than Kipling’s.