Ep. 120 – Family Inc. A Roadmap To Financial Security With Doug McCormick

Steve: Welcome to our “Becoming Your Best Podcast” listeners, wherever you might be in the world today. This is your host Steve Shallenberger.

We have a terrific guest with us today. I’m so excited to have this conversation. He’s very talented, with a great background in finance, and managing money. Both at a professional level and at a personal level. That I believe would really give you and me some stimulating thoughts on how to be your best in this area. So welcome, Douglas McCormick.

Doug: Hey. Thanks so much, Steve. Really appreciate being on your show.

Steve: Oh, you bet, been excited about it. Well, before we get started, I’d like to tell you a little about Doug’s background.

Doug McCormick is the author and creator of “Family, Inc.” And as a professional investor, he has spent two decades managing money for institutional clients such as insurance companies, pension fund, entrepreneurs, and high net worth families. And his own journey to achieving financial independence began at the age of seven. Way to go, Doug. This is when his dad helped him purchase AT&T stock. Now that’s a learning experience right there.

And during his professional career, he’s gone from active duty Army officer with a young family, to grad student, to an employee at a Wall Street investment bank, to a private equity investor, and finally, entrepreneur, co-founding HCI Equity with his partners. And so as the managing partner at HCI Equity, Doug oversees all the aspects of the firm’s strategy, investments, operations with his partners.

He holds a Masters of Business from Harvard Business School, and a Bachelor of Science in Economics from the United States Military Academy at West Point. Way to go. Great going. Thanks for your service and your preparation, Doug.

Doug: Well, thank you, Steve. Again, really, really appreciate the opportunity to have the conversation with you.

Steve: You bet. At the academy, Doug actually graduated at the top of his class while serving as the first captain, and co-captain of the Army wrestling team.

So, his personal passions include his family dogs, hunting, and outdoor activities. So there we have it.

And let’s just start off with learning a little bit about maybe your background and including any turning points in your life that have had a significant impact on you. So, tell us a little about yourself.

Doug: Sure, Steve. Well, you mentioned some of them, but I’ll give you a little more context. The first is this whole journey of financial security, and understanding, kind of, the principles of personal finance. As you mentioned, started very early for me, at age seven.

My dad was a stock enthusiast or an investor in terms of a hobby, and also a teacher. And so, the combination of those two things created an environment where he was always trying to teach me about it. And so, he didn’t really help me buy my first stock at age seven, he gave me that stock for a Christmas present at age seven.

And I share that with you because, A, it highlights that I’ve been kinda at this a long time. I got started very early. And, B, at age seven, I was not at all enthusiastic about that Christmas gift. And so, you know, it took a little bit of prodding and pushing, and education from my dad to start to allow me to see the benefits of it. But it was kind of a funny story.

So I got that gift at age seven. I was not at all excited. I put it in a drawer somewhere. And three months later, my dad pulled me aside and said, “Hey, that gift I gave you has gone up by 10% or something.” And, you know, nothing like success to prompt interest, and so, somehow, I turned that gift into thinking that I had a knack for investing. And so, in any case, it’s been a long journey that started early with the support of my father.

You know, you also kinda mentioned my transition from service. So, I was active duty Army officer. And that was a great experience for me. But I decided it was not a career, it was more of an experience. And so, I decided to make a transition and found that going back to Business School was the best way to do that. And so, the interesting kind of aha moment for me was, I graduated Business School from Harvard, and I was trying to transition to get down to Morgan Stanley to take my first job at a business school, and I was so broke, and had so much debt, that I actually had to borrow money from a friend to move my wife and my eldest child down to business school, or down to Manhattan.

And it really was kind of an aha moment for me because it made me appreciate that, you know, financial security is not about working hard, it’s not about working smart, or being smart, it’s about understanding the drivers of, you know, kind of financial security. And so, that really prompted me on my journey over the last 20 years, of really trying to study the choices people make, and how they can lead to financial independence.

And, you know, I was fortunate enough to basically work as a professional investor for the last 20 years. And what I’ve noticed is that, many of the tools that businesses use can really be applied to our personal finance decision making. And so, that’s really, you know, kind of the premise of the book. And how I’m trying to talk about this topic is, learning how to use best practices in corporate America, and take advantage of those on a personal level.

And the last thing I’d tell you is, I think this is a huge problem in America that very few people are really talking about. And not only am I, you know, trying to spread the word broadly, but now I’ve got young adults, and teenage kids, and so I’m trying to pass that experience, and hopefully, insight along to them as well. And so I’m living it both for myself, but trying to translate that into other people’s decision making as well.

Steve: Now, well, thank you for that background. And we have a lot to talk about in this area that you’re just referring to in the finances, and how it applies to us personally. As a matter of fact, that’s one of the biggest concerns that people have, is how can they get ahead of the game? But if you don’t mind, before we talk about some of those issues, and I’m really looking forward to that aspect, would you mind sharing with our listeners maybe a significant setback that you could share in your life? And how did you deal with it, and overcome it, and what was the impact for you of that experience?

Doug: Yes. So, you know, I guess in all candor, I think the transition from military service to the business school, to corporate America, was very humbling, I think on two different ways. The first was just the financial challenge of getting that accomplished, you know. And I think the second was learning how to effectively articulate my experiences and my skills in a way that other people could understand. And candidly, I struggled with that early on in that transition.

And so, you know, I think for me, it was just the failure associated with many interviews, not getting good reception in those interviews, and really becoming, A, humble, in understanding how competitive the job market is. But then, B, really, I think that caused some growth on my part, where I had to come back and kind of reposition myself, learn how to better articulate the things I had done in the Army, and how they could translate to the benefit of an employer, which was something that I think I was pretty bad at first coming out.

Steve: Well, thank you for sharing that, because you know, going through transitions in life, and I’m sure that many of our listeners are either experiencing that now, or have experienced it in the past, so how do you make it through those transitions, Doug? Like I said, I appreciate you sharing that. Like it can get discouraging, so how do you keep your, you know, your wits about you, and keep you know motivated, and keep moving forward?

Doug: Yeah. Well, so I think the first thing in my mind is that I think people need to appreciate that transition in today’s economic environment is not the exception, it’s the norm. And so, there’s been a real sea change in this area. So, for example, when my grandfather, or probably my father even, when they would think about a career, a 40-year career, they may transition employers two or three times.

Today’s millennial is likely to have, you know, 10 to 12 different careers. And so, it’s become a much more dynamic environment where job mobility is so much greater. And so, I think that’s a real opportunity, but it’s also a real risk and challenge. And so, I think the best way to deal with transition is to plan for it, prepare for it, expect that it’s gonna happen. And, you know, we’ll talk about career management later, but I think one of the key elements of career management in today’s environment is, you’re not just competing for compensation, you are competing for skills and brand. And if you think about it that way, I think you’re just much better prepared to navigate that transition.

And then, the last thing is, you just gotta get comfortable with rejection. That’s the nature of the game. And, you know, you step up to the…You can’t hit the ball if you’re not in the batter’s box, and you’ve gotta expect you’re gonna miss a lot of balls.

Steve: All right. Great advice, great advice.

Let’s jump right into “Family Inc,” and your book, and what…You’ve really developed much of your expertise around, and sharing that, and translating that to us as individuals, within our families, in a way that we can teach it also to our children. I’m glad you mentioned that. And as a grandparent, I’m also interested now in a whole another level. So here we go. So, what is different from “Family Inc,” your book, from other personal finance or investing books? What sets it apart?

Doug: Sure. So, I think the first thing, I’m an avid reader, and so I’ve spent a lot of time reading what’s out in the market. And I know, in my own personal experience, what I found is that most personal finance books are kinda written on one of two extremes.

One is, they’re very tactical, they’re very focused, or technical and focused on a specific endeavor, like how to use real estate as a way to invest, or how to buy equities. Or conversely, they’re very general, and they’re very simplistic, and they end up feeling, to me, more like goal-setting books.

And so, what I’m trying to do is strike a good balance there, where it’s written for professionals who are trying to take control of their lives financially, have not had a formal education in personal finance. So it’s in everyday speaking language, but it’s intellectually rigorous such that you’ll come out of it with some real tools.

Steve: You know, that’s a tough balance to achieve, isn’t it?

Doug: It is. It is. And candidly, I think this is a tough topic, and so, I think people need to expect that they’re gonna have to invest in developing these skills. And they take a long time to really get good, I’m still learning after, you know, 30 years of working at this. And so, it is truly a life skill and a life journey I think.

Steve: Okay. Good. So what’s the basic premise of “Family Inc”?

Doug: Well, so I think it evolves from my own personal experiences as a personal investor where I was studying businesses. And what I continue to see is that good businesses, many of the skills that they use to manage their business, could be applied in my own personal life. And so the basic premise of “Family Inc” is that you can view your family as a business, and that as a business owner, we all have two different kinds of businesses, we have a labor business, and we have an asset management business. And the goal of labor business is to convert that lifetime of labor into capital as efficiently as we can. And the goal of the asset management business is to save that capital, and manage that capital, such that when I’ve depleted my labor, and it’s time to retire, I’ve got that nest egg that I can manage to fund my consumption.

And so, that to me is a very powerful paradigm because it allows every person to individualize or customize their choices and it also allows you to manage the various competing demands. And so, for example, I always find it’s interesting when people give you advice, they say, “Oh, you should invest in equities,” or, “You should invest in your education.” But the challenge is, those are both great suggestions, but how do I manage the competing demands, when I’m trying to raise a family and manage my life, and consumable a little bit? And so, I think it can be a powerful framework to allow people to prioritize the different choices that they have.

Steve: Okay. Good. So in the business world, of course, we have CFOs, Chief Financial Officers, and you’re making these great analogies or connections to the family. So why does every family need a CFO?

Doug: Well, so if I told you I’m a business owner, and then I said…and I have this great Chief Financial Officer that helps me run the business, you would say, “Of course, that makes a lot of sense. Of course, that business needs somebody at the helm that’s managing all the financial affairs.” And I would say, “Well, that same logic applies in the family environment.” And I think, many people, when I say, “You need a Chief Financial Officer,” they immediately think about the very mundane or tactical things that the person running the family finances does such as balance the checkbook, or, you know, ensure that you’re investing in your 401k.

And my pitch to people is that the family’s CFO responsibilities are really much broader and much more strategic. So, for example, the family CFO certainly does manage the family cash, they manage the family balance sheet, they manage the budget, but they also make really…or should be making, or helping the family make really important decisions around labor.

So, what kind of education are you gonna invest in? Are you gonna invest in education at all? And if so, what skills do you hope to acquire? How do you hope to sell those skills in the market, i.e., what kind of professions do you want to pursue? Do you want to pursue entrepreneurship? How do you think about managing risk through products like insurance? How to think about your asset allocation, how to think about entrepreneurship as an attractive way to combine both your labor and your capital? So those kind of responsibilities, I think are much more strategic, but equally important to the family ultimately achieving financial independence.

Steve: Right. So, on a practical level, Doug, I’d love to get your thoughts on how this works in a family, in today’s world. You have, of course, a much higher percentage of single parent families. You also have, for those that are married, for those 50% divorce rate, give or take a little, and much of that is attributed to finances, having challenges with finances. So, how do you create a good communication, or what have you found a way to mesh these responsibilities within a family dynamics?

Doug: Yeah. So first of all, you’re on to a great point. And so, candidly, there’s no silver bullet for this, but I’ll share with you my own personal experience which is, there’s a part of this that is about bringing the right framework and the right conversation to the table. And I think that the “Family Inc” approach does a very good job of that. It helps illuminate the big choices, and it helps provide some context to evaluate the impacts of those choices. And then, on top of that, you’ve got the family dynamics that you just talked about, which is kinda the, who gets to make the decisions, how those decisions are made. And candidly, that’s the harder…That’s the part that I have less good advice for you on. And it’s the part that I think everybody must navigate in their own.

But if the family Chief Financial Officer can be the one to educate him or herself on the key concepts and bring the conversation to the family in a way that it can be discussed, you know, then I think everybody gets to make their own priorities, and their own choices based on their own family dynamics.

And I guess the last thing I would say is, in terms of single families, and divorce rates, you know, listen, there are a few major choices in life from a financial perspective that are challenging. You know, bankruptcy is really hard to recover from. Divorce is pretty challenging as well. Again, I don’t have any good advice about how to avoid it, other than to highlight that, you know, a separated family is a real financial liability, it’s a very challenging dynamic to get through.

Steve: Okay. Those are really good answers. I was thinking while you were just mentioning this, that becoming your best, and “Family Inc” would be good books side by side, because they help you think about your vision. And the importance of the Golden Rule, and trust, and “How do we do this together?” You know, we actually communicate well, and then use our imagination to come up with the solutions of how to do this. I can’t wait to get your book, frankly.

Doug: So for what it’s worth, I totally agree with you. I looked at your 12 Principles, and I like the way you kinda break them down into the three aspects of the pyramid. And I think, you know, candidly, I need some work on the third aspect of that pyramid, in terms of how I hold myself accountable, and how I get that work-life balance. So, it seemed like a very disciplined approach to managing competing demands, which is the same as “Family Inc.”

Steve: Well, thank you. Yes. And we all need it, that’s for sure. Just as what you’re talking about today. And one of the very first books I got, and this is one of the questions I wanted to be sure to ask is, what age level would you…is this book for? In other words, who can I give it to? If I wanna give it to grandchildren, or children, what are your thoughts about that?

Doug: Yes. So it is probably, I think someone that is either in college, or recently graduated from college will have the skill set to be able to understand the book. It’ll be a challenging read, but I think will have the skill set to be able to understand it and apply it.

Now, there’s a different question of whether do they have the interest? And I find it, it’s such a challenging dynamic where arguably the single most important decision that people make in a lifetime regarding their finance is the educational investments they do or don’t make, and the professional careers they pursue. And so, if we could begin to have this conversation with high schoolers, as they’re embarking on that significant investment, in that real meaningful career choice, that’s the right time to have the biggest impact. But I think in many cases, those young people are not in a position to really be interested in this. So my advice is, I think, parents and family members should be reading this as a way to engage with their young adults as they’re navigating these big choices.

Steve: Okay. Good. Thanks for that perspective. When our children were growing up, they’re all grown now, and having a lot of fun, they’re all married, I used to bribe them to read books, Doug. You know, I’ll give you $50 if you’ll read, “How to Win Friends and Influence People,” or “The Greatest Salesmen in the World,” or “The Magic of Thinking Big.” You know, they thought, “All right, fifty bucks.” And all they have to do is write a little book report. Well, I think I have a new book to give to them.

Doug: Good. I like it. I like it.

Steve: “Family Inc.” Only, I’ve got to up the ante.

Doug: Yeah. I know that. That’s good.

Steve: Fifty bucks isn’t what it used to be.

Doug: That’s called inflation, right?

Steve: It is.

Okay. Well, let’s switch just a little bit. This is a great resource. And you talked about building a brand, building your own assets of what you can do in the labor force. Do you mind talking about that? How do you manage your career like it’s a financial asset? And what does that mean, and what’s the impact?

Doug: Yes. I think, first of all, let’s talk about why is your career, or why is labor an asset? You know, think about it as a perishable asset. So, you know, basically, you graduate from college, and you’re 25, and you know, you’ve got forty years of labor potential ahead of you. And if you take a year off to go vacation or you take a year off, or you to go school, you’ve essentially used a year of that potential in some endeavor, and you’ve got a year or less of earning potential.

So, I think it’s an important way to think about it because all of a sudden, the goal changes. And I think young people go into the marketplace, and they think about, “How much can I get paid today?” And the right question is, “How do I maximize my lifetime labor value?” And when you start thinking about it over a 4-year period all of a sudden education becomes even more compelling than most people think it is, because I’m getting the benefit of that investment upfront over a 45-year period, not just looking at it as, you know, “I went to college four years, and I got a starting salary of 60,000 versus 40,000.” You know, you get that you get see the long-term return on that investment.

And then the second thing is, I think you start to ask yourself more important questions about the choice you’re about to make. And again, it gets back to is, “Compensation is important, but if I think about lifetime compensation, and the fact that I’m likely gonna have many jobs…” then all of a sudden, you start asking questions like, “What skills will I develop in this job? What kind of brand will I develop in this job? Is this job located in a market that when it comes time to change, there are likely other jobs that are gonna interest me in that same market, so I don’t have to move?” Those are the kind of…that’s the kind of thinking that I think comes about when you think about your labor as an asset.

Steve: Okay. Yeah. That’s invaluable. That is invaluable. What a great perspective and an advice to everybody, really, regardless of where you’re at in life. Go ahead, please. Share a little bit more.

Doug: Just on that point, I think, you know, we talk about this as having the biggest impact on young people, this framework, because they’ve got the most remaining labor available. But I think the skills and tools and the thought process is relevant, you know, regardless of where you are, kind of, in your own journey.

Steve: Okay. Well, that’s great. Well, I’m always, like, in shock of how fast these interviews go. And our time is about up. So, in this book, “Family Inc,” you’re gonna find a lot of really great information, even how you…an approach to investing, how you approach it individually. So this is gonna be a great resource.

Before we finish, do you have any final tips, or thoughts, or recommendations, for our listeners today?

Doug: Yeah. I think, I would say, first and foremost, keep your eye on the prize, right? Personal finance is one of those things that, it’s always important but it’s rarely timely. And so, these decisions that you make today, pay out over a 50-year career, or a 50-year time horizon. And so, being able to kind of step back, and see the big long-term picture, I think is really critical.

We didn’t capture it, or cover it today, but I think more and more, especially in this economy, we all need to think of ourselves as entrepreneurs. Whether, you’re an employee, I would argue, if you’re an employee you’re basically an entrepreneur with one customer, your employer. But when you think about it in that framework, and start to use the tools of an entrepreneur, I think you’ll be well served as well.

Steve: Yeah. And I’ll tell you, I love it when we have employees that think like entrepreneurs.

Doug: Absolutely. That’s a win-win.

Steve: Yeah. That sure is.

Okay. Well, Doug McCormick, how do people find out about what you’re doing?

Doug: Well, listen, first of all, they listen to your podcast. And you’ve been very generous with your time today. The book is listed on Amazon, and Barnes & Noble. Again, it’s “Family Inc: Using Business Principles to Maximize Your Family’s Wealth.” And I also have a website and that’s And you can learn more about the philosophy, you can also see the book and its information there.

Steve: All right. Well, that’s great. Well, Douglas had the chance to go over, becoming your best. And so, for our listeners, of course, leading with the vision is a big part of what highly successful leaders do. And so we articulate what finances look like for that. In other words, I am financially self-sufficient, or what’s your vision? How do you see it?

And then each year we set goals of what we’re going to do. Our goals might be, of course, physical, but mental development, part of that really needs to be financial, and sometimes these intermesh.

So I can tell you, right now, one of my goals this year, coming up, 2018, is going to be part of my goals, Doug, is to read “Family Inc.”

Doug: All right. Steve, I look forward to hearing back from you when you’ve been through it. And I appreciate the investment.

Steve: Yeah. It’s going to go further than that. I’m gonna invest in one for each of our children.

Doug: I like that. That’s where the big impact comes.

Steve: So we’re on it.

Well, thank you, Doug, for being a part of this show today. What a great and productive visit this has been. We certainly wish you all the best as you’re really making a difference.

And to all of our listeners, remember, you too are making a difference every single day of your life.

I’m Steve Shallenberger, with Becoming Your Best Global Leadership, wishing you a great day.

Family Inc: Using Business Principles to Maximize Your Family’s Wealth
The Transformation Challenge
Becoming Your Best Website
Becoming Your Best Podcast
Becoming Your Best Blog
Becoming Your Best

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