George Mason and Me…

With all the excitement swirling around the NCAA “Cinderella” Team of the Decade, I too have gotten caught up in “George Mason Fever”.

In addition to (also) being excited about GMU’s meteor ride into the final four, and the attention it is bringing both to the Washington DC Region and the very competitive Colonial Athletic League (go Towson!), the recent national exposure of GMU Basketball has caused me to remember my 3 year association with GMU when I served on the faculty of the Business School.

Being on the faculty at George Mason was a critical part of my ability to successfully launch my first business in 1993.

It is this “stroll down memory lane” that has caused me to really remember what it was like to successfully make the transition from Employee to Entrepreneur, and if it is o.k. with you, I’d like to share some the “Lessons Learned”, or more importantly:

“If I Only Knew Then, What I Know Now, The Five Most Important Things Every Full Time Employee Must Know To Successfully Make The Jump From Employee To Entrepreneur… My George Mason Story:”

Yes, its true. It was during my time as an Adjunct (non-tenure) Faculty Member at George Mason that I laid the foundation for a successful $25+ million dollar a year business, with 85 employees and incredible cash flow. Yup, working out of an 8 foot by 10 foot office with florescent lights and linolium floors I started my vast “Empire”.

But before I get into the “Five Most Important Things”, let me share with you how I even came to become a faculty member at GMU. Prior to accepting a job at George Mason, I too was one of those people who subscribed to the saying: “Those who can do… and those who can’t teach…” and since I am an “Action Jackson” kinda guy, the thought of being a “TEACHER” was not of the slightest interest to me at that point in time. I’ll show you later in this post why that frame of thinking is DEAD WRONG!

But, back to the main point.

I had graduated with an MBA from one of the nation’s top business schools in 1986, and quickly took full advantage by getting married, buying a toney town-house in Old Town Alexandria, VA (on an adjustable 14% interest rate loan) and entering into leases for two super sweet, late model year automobiles. All the while also giving all the gold cards in my wallet an equally “robust” work out. In short, racking up over $100,000 in consumer debt and taking on a choking house payment less than one year out of school. Or as Robert Kiyosaki calls it: “REDLINING” Big time!

Living in Old Town Alexandria was great – It was like living in an outdoor shopping mall, complete with water amenity and 120 choices of restaraunts within a five minute walk – awesome. Or, a quick train ride to a financial train wreck. Allthough we claimed we “did not see it coming” (stupid is, as stupid does), within three years of “bulking up” my credit cards, the Ferris Wheel STOPPED!! Within three of my wife (at the time) quitting her job to enter her first year at George Mason Law School, my employer announced that our company was shutting down. Normally not a huge deal, except it was my second layoff within 8 months, and the industry I had entered right after grad school was suffering an implosion of “Epic Proportions”, and simply stated – there were ZERO jobs in what I had been trained to do. After several weeks of twisting arms with head hunters it became clear that my only options for maintaining (anything close) the salary I was making was to move clear across the country. An idea that was DOA with my wife (at the time) who was going through her own challenges as a first year, first semester law school student.

After weeks (more) of going to interviews (for jobs at a greatly reduced price tag) for jobs available in the DC area, I made a “last ditch effort” and sent my resume to all of the colleges and universities in the area that had schools of business, in the hope that my MBA from a fancy school would get me in the door. For what, I really was not sure because at the time I did not even have a clue as to what college professors made. I just knew that I had to stop the financial hemorrhaging.

To my great surprise and delight, the then Dean of George Mason called me in for an interview and three weeks later I became a part-time faculty member on a short term six month contract, and at the end of the semester I did well enough to be offered a two year contract.

It was during that crucial first six months that I began to see how important a job can be for a “budding business owner”, and not just because of the obvious “pay check” issue.

Since I had only “bought myself” six months (initially), I had to be very focused on getting my business concept up and running. George Mason (to me) was a life preserver, not a ship.

I have already gone on too long for this post.

Come back Monday, and I’ll share with you step-by-step the five things every employee must know to successfully make the transition to entrepreneur…

p.s. I don't "work" on Sundays, and neither should you <- another post for another day...

Donald Trump's Mentor - Back by Popular Demand

A number of people have been asking me to share the link to the interview I did with George Ross late last year.
Thought this would be as good a time as any, and place as any to once again share this FANTASTIC interview.

George is a wonderful inspiration and great source of knowledge.

Back by popular demand the Sr. Vice President & Legal Counsel, The Trump Organization, and all around classy guy, Mr. George Ross...

Cut and paste the following link into your browser to listen:
http://audio.federalnewsradio.com/weekends/ritr/ritr_09_17_05.wma?sidelines=1

The "All Time Great", Real Estate "Blue Ocean Strategy"...

"...But first, a word from our Sponsor"

"Fast and Fresh - 30 Minutes Guaranteed, or its FREE".

Yes, this is an old slogan from Dominos Pizza. And if you have children, you probably know that they no longer offer the "30 minutes, guaranteed or its FREE", pitch. But in the very early days of Dominos Pizza, the "30 minutes, guaranteed or its Free" was the very core of their "Blue Ocean Strategy".

For us "old guys" who actually remember when pizza was not delivered, Pizza night, meant a "night out". Oh yeah, Pizza could be purchased by the slice at the window on the boardwalk in the summer time, or at the Orange Julius in Wheaton Plaza. But for millions of Americans, Pizza meant going out to one of a dozen or so mom and pop pizza joints. They were local and you could find them listed in the Yellow Pages, covering two and three pages in their own little section - PIZZA.

In 1960, along comes this guy Thomas Monaghan, who decides to turn the Pizza Parlor world, UPSIDE DOWN, by redefining what Pizza was all about. Rather than going out, and making the choice based on who had the "BEST" Pizza, up in Detroit, this guy Monaghan decides that to "compete" he won't compete at all. His entire business model revolves around this crazy idea of satisfying people's desire to have a fast meal, brought to them so they can stay home in front of the TV. So, he has to create a business that is designed from the ground up to get a pizza out the door and into the hands of the customer in 30 minutes, or less, or he was buying dinner that night for hundreds (and ultimately millions) of customers. 30 minutes, fast, fresh, or "I'm Buying"!

For anyone who remembers their first visit to a Dominos, during the days of the old Pizza Parlors, a Dominos was a "strange thing". No seats for customers. Boxes piled from floor to ceiling - everywhere, and an assembly line process that started with the phone area and phones which had this "strange thing" called Caller-ID, which then tied into the computer systems and brought up a map showing where the customer's lived. Yeah, I know, you can do this on the Internet today. But let's not forget, prior to 1995, the Internet was a baby in diapers and no one had even heard of something called a "web browser".

But for Dominos, 1995 was the peak of their business - 35 years of going strong with their "Blue Ocean Strategy". A strategy that redefined Pizza, from a "going out meal" to a "If you don't want to cook, and be sitting down to eat in 30 minutes, guaranteed you have no other choice, meal". And a strategy that made them #1 in the category of Pizza and Thom Monaghan a Billionaire too.

Had it not been for a lawsuit filed by a pedestrian hit by one of their drivers, Dominos would still be offering "Fast Fresh Pizza, Delivered in 30 Minutes or Less, or its FREE". As a result of the lawsuit Dominos no longer offers the 30 minute, or its FREE - Guarantee, and how without it, it is not the same company it use to be.

Yes, I could keep on going, talking about another famous "Blue Ocean Strategy" deployed by a guy named Fred Smith, who got a "C" on his Business Plan paper in Graduate School describing the concept. How he would change the package delivery business by Guaranteeing Delivery within 24 hours, and how he would go on to build an entire company around the slogan, "When it Absolutely Positively Has to Be There, Call _______". But you don't want to know how FEDEX both created its own "Blue Ocean Strategy", and made Fred Smith a multi-Billionaire, along with making several members of his management team and early employees multi-millionaires...

NO, You want to know how to Make this "Blue Ocean Strategy" thing work in the world of Real Estate - Don't you...?

Well, quite simply the ALL TIME MASTER of the "Blue Ocean Strategy" is none other than Donald Trump!

"Say what..."

Yes, DONALD TRUMP, "THE DONALD", The stud with the Golden Hair...

Those of us who are old enough to have actually grown up watching Donald come into the forefront of being a modern day ICON, and remember getting the first printing of his very first book, The Art of the Deal back in 1984, also probably remember what the world of real estate was like - BEFORE TRUMP.

Before Trump, there had not been any successful Real Estate "SUPERSTARS". No one, outside of real estate, knew who Harry Helmsley, Sam Zell, or Donald Bren were. In Fact, most people only know about Harry Helmsley because of his second wife Leona, who went to jail for tax evasion shortly after he died.

Prior to Trump, the only person who had ever attempt to raise his visibility to the same level as say, Mick Jagger, was a man named William Zekendorf. Zeckendorf was responsible for L'EnFant Plaza in DC and the United Nations Plaza development in Manhattan, amongst many other famous real estate landmarks. However, ultimately Zeckendorf died bankrupt. <- another lesson for another day... Zeckendorf was no Trump. In fact, he did not employ a "Blue Ocean Strategy". Zeckendorf simply attempted to get visibility, there is a HUGE difference between "getting publicity", and becoming a celebrity to redefine your market place.

Question: What Business Is Donald Trump in? Again, a hard question to answer, but if you look at his core business, he is developer and broker of high end residential condos in Manhattan. But to look at how he markets you would of course say, "No way! Trump is a Big Time Celebrity Himself!" Exactly - that's the point. Donald was not just going after publicity, he was redefining his market. Anyone who wants to buy a high end condo can get out the New York Times and start "shopping" based on square footage and price. But anyone who wants to be in a Trump property must get on a waiting list, and pay what ever The Donald says its worth.

People who employ a "Blue Ocean Strategy" not only increase the profitability of their company, by increasing their opportunities to demand significant profits, they also get the publicity that comes from being unique. Again, going back to yesterday's example of eBay. For a period of time you could not watch the evening news without hearing something about a new and novel thing being offered on eBay. The free publicity eBay got by being unique would have cost hundreds of millions of dollars in paid advertising. But by deploying a "Blue Ocean Strategy" eBay never had to pay a dime, and in the same way neither does Donald Trump. The very rumor that Donald Trump is looking to do a project in your town is enough to drive land prices sky-high as it did in DC in the late 80's, when it was rumored that Trump was moving into the DC market.

In fact, the saying in New York real estate circles prior to Trump coming on the scene was, "You Make Money In the Dark!" Even to this day there are many who do not care for Trump bringing so much attention to the world of commercial real estate, and how much money can accumulated in all facets of real estate in just one generation.

At the time Donald (and his ghost writer) wrote The Art of the Deal, he had only completed a small handful of real estate projects in Manhattan, and with the exception of his first deal (the Grand Hyatt) they were all residential condos. And to this day, the very core of his real estate activities revolve around developing and marketing high-end residential condos.

I have to admit, I have personally read everything ever written by, or about Donald Trump. (One Day I'll give you my top 5 picks), and I also get the chance to talk with George Ross <- true, I get some insider stuff from time to time.

But back to the Blue Ocean thing...

Trump's strategy of making himself appear larger than life is a classic "Blue Ocean Strategy". More importantly, Trump came to realize early on that there was significant value in creating "mystique" around the TRUMP name. From early on, and to this day the only person Trump competes with is Trump. Because he has defined himself and his market, he is able to command HUGE premiums for anything with his name on it. It was even the central thrust of his comeback from the downturn of the late 80's. In the early 90's when Trump was still "putting the pieces back together" financially, two major real estate companies (GE and Galbreath), with very deep pockets, approached Trump to do a deal in Mid-town Manhattan and basically offered him the exclusive rights to market the property, a significant slice of the equity and absolutely no (as in ZERO) investment on his part in exchange for one thing. His name (TRUMP) on the building.

While everyone in the 80's had assumed that Trump had lost his mind by putting his name on an airline, and an ice skating rink and casinos, Trump knew precisely that by making the Trump name synonymous ("same as") glamour and glitz, that he could charge more for his condos. Trump was perfecting his "Blue Ocean Strategy", as many people outside of real estate who thought Trump was into office buildings, land and hotels. He wasn't (not then), he was simply a condo developer. That is, a condo developer operating in one of the most competitive ("Red Ocean") markets in the entire world. By redefining the marketplace, he created his own Blue Ocean. A Blue Ocean, where today no one can touch Trump on price. His waiting list is too long for him to have to haggle with anyone.

Unfortunately, what worked for Trump in the 1970's probably will not work for you, at least not in the same way it worked for Trump.

There are many ways to create a "Blue Ocean" strategy in your market. It starts with finding a niche, or something truly unique to capitalize on and getting out of the business of head-to-head competition and ME-TOO-ISM.

Most importantly, get the book and start creating your "Blue Ocean Strategy" today...

Blue Ocean Strategy, "How to Create Uncontested Market Space and Make the Competition Irrelevant" by W. Chan Kim and Renee Mauborgne

What is Your "Blue Ocean" Strategy...??

This past weekend I attended an event put on by my good friend Yanik Silver.

Yes, THE Yanik Silver of surefiremarketing.com!

Yanik actually lives just across town in Bethesda, and as you know, has literally minted millions from his desk-top by mastering the art of Internet marketing.

Yanik and I have another friend, Bill Glazer, who is THE Master of Marketing. Bill comes from a family of retailers from Baltimore. After a conversation with Bill late last year I accepted Yanik's invitation to the event as I re-think my own real estate business strategies. Yes, real estate a decidedly "low-tech" industry.

Because Yanik is so talented, and willing to share what he knows with others, he has a huge following of people who share his interests in creating businesses that utilize the Internet as their major platform. In addition to Yanik sharing his own success secrets, he also was able to twist some arms of folks who shared what they were doing successfully online. This was no easy task as many folks would much rather remain "Underground", for fear that other Internet marketers who practice Metooism, that would be "Me-too-ism", will simply copy their ideas and attempt to do what they do at a lower price.

Metooism is a lousy business model, please read on to see why...

Once again, don't believe what you read in the main stream media. While I would not use the term "Dot Com", the reality is that well thought out Internet businesses are alive and well, minting lots of money for all kinds of people with great ideas, or at least very good ideas coupled with great implementation (Learning how to implement was why I was there). "Underground" entrepreneurs such as AskTheBuilder.com, and Dr. Mercola of mercola.com (the #1 site for natural solutions to health care issues), were presenters this weekend who clearly demonstrated how to leverage offline businesses with technology.

To my (great) surprise what was most impressive about the entire weekend was that it was really more about "GREAT IDEAS", then technology. Or more specifically, "HOW TO IMPLEMENT GREAT IDEAS", through technology.

One particular member of the "Underground Millionaires Club" referenced a book called: "Blue Ocean Strategy", and he made it sound sooooo good that I walked across the street during the lunch break and picked up a copy at Borders(r) <- Yes, despite how much I rag on people who foolishly attempt to learn how to make money investing in real estate by simply buying books at Borders(r), I do frequently go into the place... Yes, Sherman can read...

This book blew me AWAY. Could not put it down all weekend!

I do not want to reveal everything, but the core concept is:

... Businesses today either operate in a manner that puts them in Head-to-Head competition with others, in which case they operate in a "Red Ocean", -or-

They intentionally choose to operate in a manner, whereby they redefine what they do, or who they serve and in doing so create their own "Blue Ocean Strategy".

And if you recall from reading the Millionaire Next Door by Thomas Stanley and William Danko, Entrepreneurs and Business People who engage in Head-to-Head competition have a tough time gaining and maintaining "Millionaire Status". Whereas, business owners who carve out their own turf tend to enjoy higher profits and higher profits leads to a significantly better quality of life as well as creating the opportunity to enter millionaire status sooner and stay their longer. Creating an environment with limited competition is significantly better to your financial health, than simply choosing to just "work harder than the next guy".

So to illustrate this "Blue Ocean Strategy", please let me give two quick non-real estate examples and then a solid demonstration on how this "Blue Ocean" strategy works EXTREMELY WELL in real estate:

eBay - Without a doubt eBay is one of the all time great business models. No inventory, no distribution chain, no Customer Service Department staffed with highly paid employees handling returns and credit card issues. Hundreds of Millions in Profits, Billions in Market Value, Billionaire status for its founders and Multi-millionaire status for its key employees and management team. "So at the end of the day, what is eBay"...? In which Industry Group do you place eBay...? An online Garage Sale...? An electronic auction...? A virtual coffee clutch...? It is impossible to pigeon hole eBay!

Yet, from its initial concept, eBay was designed to replace the way people get rid of their "old stuff".

Think about it, prior to 1995, people traded their old stuff two ways: 1) Sell it in the paper, or 2) sell it out of their home on a weekend in their garage and front lawn by placing an ad in the paper. eBay took an age old problem and applied a then "emerging" technology. More importantly, eBay redefined the marketplace around themselves.

Those of us who had a "front row" seat at the revolution remember that at the same time Pierre Omidyar and Jeff Skoll founded eBay, there was another company that had a similar idea, but approached it in a decidedly "Red Ocean" manner. Remember Auctions.com...? Of course not, they died a quiet death in 1998, taken out back and shot in the head like Old Yeller, by the folks who poured millions of dollars into the thing. Auctions.com had some of the deepest pockets in the business world behind it including The Chicago Tribune, the Washington Post and LA Times. All were early investors in Auctions.com. Auctions.com and eBay were founded under the same concept and within months of each other, and Auctions.com offered the same service as eBay (Selling stuff using an auction format online).

eBay approached the market in a completely different way by focusing on the marketing. Specifically, redefining how it was viewed in the marketplace and emphasizing the creation of communities (such as the Bennie baby collectors, etc.) while Auctions.com simply viewed itself as an alternative to classified ads. Auctions.com went head to head with all of the other online auction sites - most of which no longer exist, while eBay carved out an entirely different position in the market by defining itself as something other than an online auction site. To this day, you never hear the word "auction" in any of eBay's advertising.

Cirque Du Soleil - Anyone who has ever been to a Cirque performance instantly knows what I am about to say. Is it a Circus, or is it a Broadway performance...? If it is a Circus, then where are the elephants...? How come they only have One Ring...? Don't Circuses have Three Rings...?

There are zillions of Circus Acts and thousands of circus producers operating in a head-to-head "Red Ocean" environment. Beating each other up for diminishing market share, but there is only one Cirque Du Soleil! Much like a Broadway Performance, there is a story to each of their shows, which has a beginning, a middle and an end.

When asked, what is it that you are creating, Guy Laliberté, Cirque's founder never used the words circus. He simply replied, "Cirque du Soleil began with a very simple dream. A group of young entertainers got together to amuse audiences, see the world, and have fun doing it. Every year, the audiences get bigger, we continue to discover new places and ideas and we're still having fun." And, of course, each year his bank account grows by another BILLION too! Cirque Du Soleil is privately held, 100% by Guy Laliberté.

O.K., so you say, "Sherman, this is all very 'enlightening', but what the heck does it have to do with Real Estate...?"


...Tune in tomorrow and I'll Share with you one of the ALL TIME GREAT Blue Ocean Strategies Ever!

In fact, I would even have to say it is the SINGLE GREATEST BLUE OCEAN STRATEGY - EVER!

and it happened in Real Estate, yeah Real Estate...

Real Estate "Bubble" -or- Acres of Diamonds

"Is Now the Time to Bail on Real Estate...?" "Are We In The Bubble...?"

I get these types of questions a lot, lately.

So, I decided to share the following, which is in response to a post I recently answered in the forums section of the Realinvestors.com website.

[Original post located at: http://www.realinvestors.com/forums/read.php?f=1&i=10006&t=10003].

Right now, a lot of folks are running scared thinking real estate is collapsing and they need to get out before they get stuck holding the bag. The media has hyped "the bubble" at the precise moment in time where we are in both:

a) The "natural" season of slow sales for real estate naturally (Holloween, till Spring) and
b) An overall market slow down for all markets (including DC) are slowing down to either a "normal state", or in many cases, less than normal due to the rise in interest rates. But this slow down for most markets is like The Enterprise or Millennium Falcon dropping out of Warp, or hyper-space. The ship, however, is still moving forward at a very fast pace, just not at "blinding" speeds.

But in addition to these two things, there have been a number of really stupid strategies pushed on unsuspecting newbie investors by the "Overnight" Guru's, who happen to have discovered real estate along the path of their other adventures such as: Selling snake oil as new the new cancer wonder drug, and their "OVERNIGHT INTERNET MILLIONAIRE" kits. Strategies such as buying pre-release condos in markets where there is already an over-supply of condo properties. Or, land development in Central Florida, as in under 5 feet of swamp land, or simply overpriced deals in markets that had been slowing before the last round of interest rate hikes.

Bottom line: STUPID IS AS STUPID DOES. If you fail to take the time to learn this business, then you will not be happy with your results, or worse.

So, what has this got to do with your post?

Many folks out there right now are thinking that now is the time to "DUMP" real estate and move on to something else. And for many people, and in many markets, they are probably correct. Deals that were never any good in the first place, but looked good in a hyper-inflating market, should be dumped. Markets where there is serious implosions in the major industries and will see thousands of people leaving to find new industries (like Detroit today) should be carefully examined. This is not to say, however, that they should be abandoned all together. From the mid 1970's to just recently, the City of Baltimore lost hundreds of thousands of jobs and almost as many residents as the steel making and ship building industries imploded and replacement jobs (for these industries) were created in the South (initially) and then overseas (mainly in Asia). HOWEVER, investors still made money in Baltimore. That is the smart investors did.

Those who simply employed "traditional buy/hold" got smokkkked! But those who used creative strategies made out like fat rats. Today, with the job growth predicted for Baltimore over the next 12-15 years, if you do not make really stupid mistakes, the marketplace will make you rich. The same is true for the entire Washington, DC region. Why...? Simple, after 9/11, the Bush Administration changed everything with regards to Federal Government spending. AND IT DOES NOT MATTER WHO ENTERS THE WHITE HOUSE or Congress in 3 years. The budgets are set and can not be changed overnight. In fact, with the major spending plans currently underway, there will be massive growth in the region.

You have heard it said that real estate comes down to LOCATION, LOCATION, LOCATION - that is only 1/4th correct!

Real Estate can be broken down into 4 basic "Food Groups":
1) Residential
2) Retail
3) Office
4) Industrial
** Land is simply a commodity, like steel and concrete that goes into the production of the four "food groups" above.

"Location - Location - Location" is a simple way to describe the MOST Important thing for the 2nd "Food Group" - retail. However, when it comes to Residential real estate the key phrase is "Jobs - Jobs - Jobs". Most people when looking for a place to live think about schools, quality of life, what they can afford, etc. BUT THEY MAKE THEIR FINAL DECISION ON ONE THING: "acceptable commuting time to work" and for most people in the United States today, this number is 60-90 minutes. 60-90 minutes by Car, Train, or Rickshaw. Therefore, it comes down to knowing what is happening in your local (as in a 60-90 mile radius around the center point of the major employer) for your region. Any real estate investor who does not recognize this as a fundamental principal for decision making will never make real money in the residential real estate business.

If we were in Detroit, we would ALL be paying attention to what was going on with the big 3 automakers and paying close attention to the 60-90 mile radius around GM's headquarters. If in L.A., we would be doing the same for the major tv/movie studios, and if in San Francisco, we would be looking to what is happening 45 miles to the South in Silicon Valley.

Yes it is that simple!

If job growth is strong, you will have a good (residential) real estate market. If job growth is strong, and the available supply of "affordable" housing is constrained, you will have a fantastic (residential) real estate market. THIS PRECISELY WHAT IS SHAPING UP IN THE BALTIMORE-WASHINGTON MARKET.

Yes, you can make mistakes, yes you can take the natural advantage the market gives you and mess it up. But, the biggest mistake anyone can make, right now, is getting out of this real estate market simply because of something they read in a book, or heard on the news.

Nothing wrong with diversification, except diversifying beyond your area of both expertise and control. If you do not know what you are doing, and you have little to no control over what happens with your investment, then you guaranteed yourself that you will lose. Might as well go to Home Depot get a 2" paint brush and some bright red paint and start painting a big red target on the back of all your cloths - cause baby, if you don't do your home work, and the investment you picked gives you little to no control, then you are GOING DOWN!

Bottom line, nothing wrong with Gold, Platinum, Oil futures or any other investment out there - if you know how to make them work for you. But anyone thinking of walking away from the best real estate market in the country to go pursue someone else's "Pot-O-Gold", really needs to read a copy of Acres of Diamonds first.

Did it work

Does this stuff really work...?

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