Dave Sather's Money Matters: A $2,500 Loan Becomes A $2 Billion Business
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After World War II the Van Den Berg's moved to the United States. The war was over, but its effects were not. Arnold Van Den Berg struggled physically and academically, but never quit. He recognized that no matter how tough things get, if you stick it out, you achieve a mental breakthrough.
Van Den Berg's mental toughness was inspired by the stories his parent's told of surviving Auschwitz. The Nazis marched captives 20 miles between camps in sub-zero temperatures. Twenty four hours of marching: no breaks, no water, no food. If you fell or your knee touched the ground, you were executed.
During the grueling marches, Van Den Berg's father focused on locking his knee, one step at a time, ignoring the pain, hunger, thirst and fatigue. Eventually, he realized his mind had powers beyond anything he thought possible.
In time, he recovered from the malnutrition incurred during the war. In high school he joined the gymnastics team. He visualized what he wanted to accomplish and reinforced that vision every day. Eventually, the skin-and-bones-kid realized his vision, becoming a top ten gymnast in his specialty in the nation. Later in life, Arnold recognized he had tapped the power of his subconscious mind, allowing him to persevere and overcome.
As an adult, Van Den Berg still faced serious obstacles. He could not communicate well, had no money and no formal education. He tackled these challenges head-on, enrolling in a communications class. On the advice of his teacher, he volunteered for every assignment in class. In 1968, he earned his securities license at the peak of the market - but no investment firm would hire him.
Undeterred, Van Den Berg borrowed $2,500 and started his own firm - Century Management. By the look of things, his timing could not have been worse; people were reeling from high unemployment, high inflation and plummeting stocks.
With his trademark tenacity, Van Den Berg read everything he could on financial analysis. He observed that investors who followed the teachings of Benjamin Graham (the father of value investing) did well during this difficult time. It was 1974 and the stock market sat at a six year low. Blue chip stocks were down 45 percent and the average stock had fallen 75 percent. He thought this was a great opportunity to launch his business.
Van Den Berg learned rapidly and took good care of clients - but business was tough. He stressed to my students that you must have faith to build a business - "the key is faith." He continued that people must see "the goal" and know what they are working towards. Furthermore, Van Den Berg told my students you must "overwhelm your goals with positive thoughts as the smallest negativity can sink you."
In establishing his fledgling firm, Van Den Berg recalled advice from his mother. She told him if you don't take a risk, you'll never make progress. As the firm grew, he realized these risks must be intelligent ones, as the job of the smart investor is to reduce risk and preserve capital.
In the field of investing, Van Den Berg emphasized discipline over genius. Century Management doesn't use complex formulas. It is all basic math. Despite the simplicity, Century Management has earned 13 percent per year for the past 38 years!
He then changed topics, asking my students "Where else but in America can you make something from nothing? Human ingenuity is the most important factor to society today. Ingenuity and capitalism in America creates something out of nothing."
Making observations about the greatness of the United States, Van Den Berg pointed out that we have the universal currency. Unlike other nations, there are no currency restrictions. We have democracy - "a system that corrects the persistence of error." We have property rights, the largest capital markets and the strongest military. We have the opportunity to create anything we want in our lives.
These characteristics attract people, talent and capital.
Given these things, he said "The only thing you are owed in this country is an opportunity - that doesn't exist everywhere. In Germany, my parents couldn't own land because we were Jewish; in Holland we couldn't be citizens -we weren't Dutch. But in America you can own land and become a citizen after living here only five years."
As Van Den Berg concluded, I realized that the speaker, at age 73, he had spoken for three and a half hours - and had the energy and enthusiasm to go three and a half more.
I'm not sure I'll ever come close to Arnold Van Den Berg's accomplishments as an investor or businessman. However, he is the kind of man I aspire to be.
Dave Sather is a Victoria certified financial planner and owner of Sather Financial Group. His column, Money Matters, publishes every other Wednesday.