What John Goodman Taught me About Finance, Dividends, and Life

I’m currently re-reading Titan, the excellent biography of John D. Rockefeller. Here’s a link if you're interested.

Rockefeller is one of the most polarizing figures in business history. Opponents charge he treated competitors unfairly and screwed over millions of consumers by conspiring to keep prices high and control every aspect of the oil business. Proponents look at Titan as almost a how-to book, soaking up information on how Rockefeller sought to control a chaotic industry to deliver himself greater profits.

We all know how that turned out. Standard Oil was charged with breaking anti-trust laws and was eventually broken up into pieces. Rockefeller had retired before all this happened, but was never quite the same after his beloved company was blown to smithereens.

Although all that stuff is interesting, it wasn’t what resonated with me. What really struck me was the similarities between a young John D. and young Nelson.

Thanks to a father that was always traveling around (William Rockefeller was essentially a snake oil salesman, moving from town to town selling his potions to unsuspecting locals), John D. was forced to grow up quickly. He became obsessed with money at a young age, and some of his adolescent friends recall Rockefeller telling them he’d be rich one day.

Young Nelson went through a similar transformation. He got his first job at 14, working at the local Dairy Queen for $4.50 per hour. He had fun that summer until one day when his debit card didn’t work. He didn’t have enough in his account for a Slurpee and a bag of chips. Embarrassed, he vowed it would never happen again and started saving with the zeal that only the newly converted can match.

My savings grew. First it was $1,000. Then $2,000. More shifts (I was always available if someone didn’t want to work) soon meant I was working about as much as I went to school. Soon I had $3,000 saved. And then $5,000. I was addicted to watching the balance creep ever higher in my little banking book, which they updated every time I took my cheque to the bank.

And then, during these formative years, something completely lucky happened. My dad broke his leg. A nasty break too. He was essentially immobile for upwards of six months.

He might not look back on those months essentially trapped in the house as lucky, but they completely changed my life. I was 16 and wasn’t too sure on how money worked. Did I need to chip in? How were we going to be able to afford to live when the main breadwinner of the family was incapacitated?

I started asking questions. Are we, like, going to starve? Cause I like to eat.

Don’t worry, my dad assured me. We’re fine. Remember all those rental houses we’ve been buying? They make enough to keep us afloat through this. Hell, they basically make enough to keep us afloat forever.

Wait. What? How was that even possible? 16-year-old Nelson couldn’t believe it. My dad patiently explained the basics to me. How to figure out your return on investment. How to keep your costs down. Why he paid for houses in cash, rather than arranging mortgages.

I learned it all, and was instantly hooked. You could turn money into more money just by investing it? I had to start doing this.

Like a young John D. Rockefeller, I became obsessed with money and working towards amassing a small fortune. I would tell my high school friends I was on my way to becoming a millionaire one day. No, not one day. I’d be a millionaire by the time I was 30.

After that, I’d have all I needed. It seemed like all the money in the world.

And like John D., I started making investments to grow my net worth. I bought my first rental property at 18, using a combination of my own savings and money set aside for university. Soon came another, and then another. I also started in the private mortgage business with my dad and another partner.

I also kept close tabs on the expense side of my personal ledger. I cut out golf because it cost too much as an adult. I worked at a grocery store and ate a lot of free donuts and cheap noodle dishes. I delayed getting a car for years, knowing how big a chunk of my savings it would eat up. I also stayed at home until I was 25, paying severely discounted rent the whole time.

I began to loosen the pursestrings, but only slightly. I always kept myself in a position where I had ample excess cash flow to invest. My interest eventually switched from real estate to stocks, and I started building that part of my portfolio.

My 30th birthday came and went. I wasn’t a millionaire. But I was pretty damn close. It was only a matter of time until I’d cross that threshold. I hadn’t technically reached my goal, but screw it. I called it a victory anyway.

What happened next?

Something interesting happened next. For the first time in my life I struggled with a few things.

It was obvious I could take my foot off the proverbial accelerator. I had accomplished more monetarily in my first 15 years than most do in a lifetime. Compound interest calculators all told the same story. It would be only a matter of time until seven figures turned into eight. I was making good money, was still investing, and could afford to do other things.

So I had a little fun. I followed my then-girlfriend to South Korea. She taught English. I hung out. I also embraced a non-traditional career, chasing a dream to write for a living. That worked out pretty well, actually. Even though I was once accused of plagiarism.

(Okay, story time. I wrote an article on the five biggest positions in Cascade Investment, which is the fund that manages Bill Gates’ money. An editor of an unnamed website said it was “awfully similar” to a Motley Fool article written on the same subject. Yeah, no shit. We both read the same 13-F. He refused to accept it and put me on some sort of probation for plagiarism. I quit on the spot.)

At around the same time, FIRE started becoming a thing. Mr. Money Moustache burst onto the scene and convinced millions of Americans that retiring at 30 or 40 or whatever age was not only acceptable, it was actually preferable to a more typical life. Naysayers charged writing a blog was actually work and MMM wasn’t retired. It was a big debate that your author heartily engaged in for some reason that now eludes me. It was a dumb thing to get mad about then and it’s a dumb thing to get mad about now.

Financial independence had a funny impact on me. I couldn’t quite believe the whole world was open to me. I dabbled in a more independent life, but just couldn’t let go of the trap of exchanging my time for money. Then I regressed again and took a traditional job at an organization that is excellent in a lot of ways but also keeps me incredibly busy. Perhaps too busy.

How this impacted my portfolio

I don’t think it was a coincidence my interest in dividends started around the same time I started getting interested in financial independence.

Dividends appealed to me for a number of reasons. They tended to go up over time, which is good for someone who wishes to live off them. They’re also much more stable than stock prices. There were certain tax advantages for someone who collects a lot of dividends and very little income from other sources. I liked seeing dividends roll into my account. And every time I put $10,000 to work I’d tell myself I just gave myself a $500 per year raise. For some reason that was more satisfying than investing $10,000. It was weird.

It was also time for a change in styles. I had a deep value contrarian portfolio that did really well coming out of the 2008-09 crisis. It took a major step backwards in 2013-15, including investments in a bankrupt retailer (Danier Leather), a Chinese fraud (Duoyuan Printing), Aimia right as they lost the Air Canada contract (but at least I made my money back and more in the preferred shares), and a few others I’d rather not remember.

I read all the anti-dividend arguments, especially in 2018 and 2019 when tech stocks rocketed higher and left old stodgy dividend payers behind. Was I barking up the wrong tree? Maybe I should put it all in QQQ and sell 4% per year.

Around the same time I discovered a one minute clip from an entirely mediocre movie called The Gambler, and it changed everything. At least subtly.

Take it away, John Goodman:

The video is called the Position of Fuck You, and it’s glorious. I highly encourage you to watch it, but if you don’t here are the good parts.

I love that video because it perfectly encapsulates what I want to do. I want to be in a position of fuck you. I always wanted to be in a position of fuck you. That was my motivation at 18 and that continues to be my motivation at 39. Dividends were just my way to get there.

Now what?

After years of carefully tending to our dividend portfolio, I recently hit a milestone. I can pay for our household expenses using only dividends. All other income (from our jobs, those rental houses from 20 years ago I still have, and various other investments I’ve accumulated) is gravy that I can use to reinvest, spend, or just light on fire.

This dividend portfolio is my fortress of solitude. It’s filled with boring blue chips, REITs, and other high quality stocks that don’t offer much in terms of growth but should provide plenty of income that increases about 3-5% every year. Even if I spend it all and don’t reinvest a penny.

Now that I’ve taken care of the base, I’ll make a few changes in how I invest any new capital. I’ll still insist on dividends, but I’ll look away from blue chips or bond substitutes and more towards companies with either big growth runways or to special situation value investments, cheap stocks that offer good return profiles.

In other words, you’ll likely see me have more interest in companies like BRP or DRI Healthcare and less in Corby Spirits and Wine. I’ll also start taking larger positions in companies rather than diversifying so widely. The base is in place. Subsequent investments will be a little different.

I’m still deciding how this will change the rest of my life. Will I continue to work a traditional job? Will I move the goalposts again? Will I suffer with the same one more year syndrome that so many others are struggling with? I can’t say. What I can say is I’m going to think about this critically and not make any rash decisions. Sometimes I make decisions too quickly and I want to avoid that here.

I promise is I’ll share that part of my journey on here. No matter what I end up doing, writing will be a part of it. Most posts will be just like you’re used to seeing. I’ll research a stock or a sector, always conscious to keep my write-ups to a reasonable word count. Your time is valuable, and I respect that.

The thing about writing is once you start it’s really hard to swear off it forever. Which means you all are stuck with me. Until next week.