Almost exactly when The Year of Reflection had ended, I received a call from an old contact, Tim.
He wanted to know what I was up to these days, and whether I might be interested in helping him out. Over the phone, I couldn’t really process what he was saying. He spoke of taxes and property values excitedly. I know how that sounds. But yes, he was excited.
From what I could make out, it was evident that this was an opportunity that had risen because property values had crashed.
One thing did stand out, though, and that was the word “ridiculous”. Tim was using the word “ridiculous” quite liberally to describe the situation, the money, and the job itself.
If there was anything I had learned about myself in my career so far, it was that I was a ridiculousness hunter. Intrigued, I accepted his invitation to come in and check out their operation.
Indeed, when I arrived at their “offices” in Manhattan Beach, I found the situation a little ridiculous. The office was a two bedroom apartment off Manhattan Beach Boulevard with no natural lighting, and seven people were working in it. Files were scattered everywhere, like debris from a bomb explosion. I met Jason, who worked with Tim in the master bedroom. Gary, the owner, worked in the second bedroom. Everyone else worked in the living room. Files were stored everywhere, including in the kitchen cabinets and in the oven, which no one used.
The operation was one that appealed property taxes. This meant going down to the assessors’ office of the California counties and
argu-, demonstrating that our clients’ properties were not worth the inflated prices they had purchased them for.
Jason, Tim, and Gary explained this to me as I surveyed the wreckage of an office, and asked me when I could start.
That weekend, I moved to Manhattan Beach and came into the office the following Monday.
Bureaucracy causes pain, and pain causes opportunities. This whole operation was there, because dealing with the county assessors’ offices was a bureaucratic and logistical nightmare. If my experience at ERA was like being in a time capsule from the 1970s, the assessor’s offices were dated at least a few decades earlier. They communicated only by phone, mail, or through in-person hearings, the latter of which gave it the flavor of judicial and legal proceedings.
All this is to say the following.
Challenging the roll value of a property in California, in most of the counties, [was] free. Free.
But like most things taxes, people hired us to do the job for them because they couldn’t understand the process. Or even if they did, the psychic pain of having to be put on hold and transferred through the various departments of the assessor’s office, having to search for information on values retroactively to the assessment date, or attend hearings in the middle of the day scheduled months in the future, caused them to hire us.
The business was unglamorous, taxing, under the radar, and operated out of a master bedroom with soiled carpets. And at Property Tax Advisors, we were discreetly generating ~six digit sums in fees, per week.
This is when I learned that a real business eases pain. A real business is not the storefront, or the colleagues, or business cards, or a website. A real business is where someone pays you to do something they can’t or won’t do themselves. At real scale. And sometimes you can create a profitable business out of something that is already free.
Don’t be afraid of boring businesses. I’m sold on boring businesses.
The substance of the work was scouring through reams of data, photos, and assembling a case. The actual analysis didn’t take long, but it was time-consuming, carpal-tunnel inducing, and after working out of the cave of a master bedroom for about a month, I noticed another something.
I was losing a lot of weight quickly. People have a misconception about Southern California. They think if you live by the beach, it’s balmy and tropical. It’s not, especially in the South Bay. Most of the time it’s under cloud cover, and if you’re not under the direct sun, there’s a sea-cold to it. I lost 10 pounds the first month I worked there, just from the ambient bone chill.
The cold and the enormous workload brought something out of me that had lain dormant for a few years. It was time to dust off my Excel macro skills.
Over a few weeks, I made a program that automatically valued our cases at the rate of one every two minutes, which was a vast improvement over the 45 minutes it took to do it manually.
Because in order to win a case, we had to present a preponderance of evidence that proved the house was overvalued. “Preponderance” meant that often we pulled together hundreds of pages of evidence for a single property, replete with pages of full color photos. We took this burden of preponderance seriously, and made sure that our cases were also preponderantly heavier, in actual weight, than the appraisers we faced.
Sometimes I could see a visible sigh from the appraisers when they saw the buckets of paper we hauled in during hearing days. It was a psychological tactic. Because when I saw those sighs, I knew that we were winning.
And you might think that it’s weird I use the word ‘winning’ in conjunction with something like a valuation. But I discussed this before; the concept of value is a vague one.
What is value, really? Value is a consensus arrived at by subjective opinions. Everyone starts with the same facts. Your value is what you choose to emphasize and omit out of those facts.
The assessor’s office was biased towards preserving the roll value. We were biased towards lowering the roll value, to alleviate taxes for our clients. And it was a clash of opinions and wills.
But whatever side you’re on, bias takes its toll. For instance, when you believe that values are too low and are going to go higher forever, like a broker does, you’ll start making yourself susceptible yourself to frauds and bubbles.
This is just as true on the other side. Exhibit A was our owner, Gary.
There are people you’ll encounter who seem absolutely suited for the work they do. Sometimes this is because when you do something every day, it can’t help but influence the person you become. And sometimes it’s the other way around.
For Gary, I couldn’t tell if he was always the way he was, or it was the 20+ years in the tax appeals business that had shaped his entire worldview.
To back up, our work involved looking for direct evidence that our clients had overpaid. Every case needed to be presented as, “our clients made a mistake and bought at the top of the market and everything is worth about 30-50% less.”
And repeating this story thousands of times over a few decades, I can’t help but think it influenced Gary a little. Because Gary categorically believed that everyone in the world was overpaying for everything.
From $20 million megamansions in Bel-Air to gym memberships at Equinox, Gary opined endlessly on the ways not to get f**’ed, how to not buy at the top of the cycle, and how to save money.
To him, any debt of any kind was idiotic, even mortgages, and he railed against buying any car new. One summer when I dropped by to say hi, riding a rented Audi (a free upgrade from the Chevy I had reserved, which was out of stock), he had some choice words.
He was the type of person who, as a Manhattan Beach millionaire, thought nothing of sometimes walking across the street to the motel and helping himself to the free continental breakfast, with a wink and a nod to the staff.
Or walking into the gym with free passes and registering multiple times under different names to extend free trials for months.
Or on Tuesdays, skipping a place for lunch because on Fridays, that’s when they had a promotion and it was 15% cheaper.
Or expounding on the exact depreciation schedule of items like sofas, automobiles, cutlery, and researching gas stations miles away, where prices were pennies cheaper than our local one.
At the time, Gary was going through a lot. The financial crisis had halved his net worth from $20 million to less than $10 million (I know). And he was in the middle of a bitter divorce. All this, I’m sure, conspired to make him feel poorer than he really was, but part of it was probably also in his makeup. The son of a mailman in Hawthorne, he had always looked at the society people in the towns around him like Palos Verdes, and wanted to be them.
But now he was them, but I don’t think he ever felt like them, nor wanted to be them.
He always had some words about the overpriced nature of the houses around us, and the fallacy of the dual-income homeowners who had taken out million+ dollar loans for them. How can it be worth it to live like that, and slave for decades just to pay off the mortgage on a property, he would rail. Why would he buy that car when he’s a [enter profession here] and making [enter salary here], he would exclaim. Why do people feel like they have to keep up? He would rant for the entire 40 minutes it took to drive to downtown LA for a hearing.
And slowly, I began to take on his mentality too. I couldn’t help it.
This was in the ashes of the financial crisis, and still shell-shocked from the previous year, I began making it a game to see how frugally I could live.
For a time, I slept on the carpeted floor of my apartment on a sleeping bag because I didn’t want to buy a bed. I proudly clipped coupons and returned to my old trick of asking people in restaurants if they were going to finish their meals. I needed to regain those 10 pounds, after all.
The irony, again, is that the year was turning out to be my best yet, financially. Again. I was drawing on two sources of income, and making consulting calls to clients in Russia and Arizona alike, stepping outside on the patio.
Anyway, Gary was shameless in a way with his frugality. And Jason, who handled sales and collections, was just…shameless. And shameless about his shamelessness.
Shameless people are an object of fascination in our society. They have their role. And in our office, Jason was the id. He was the walking manifestation of the things we wanted to say and do, because he had no filter.
If you’ve ever worked with real good salesmen, you’ll understand they’re a different breed of person. Until I worked at the Harris Group, I’d never met real good salesmen, even at Wharton.
Jason had more energy than anyone I’d ever met. This wasn’t drug-addled energy. This was just raw male energy, like he was a wind-up toy that was just always…on. If you stood next to him it became uncomfortable from waves of enormous body heat, like some sort of constant metabolism of targets was taking place.
This extreme energy had him going through a hundred phone calls a day, with no let up in pace.
Like all good salesmen, he didn’t care about rejection. And unlike other good salesmen, he was completely honest. He was almost honest about everything he believed and felt, and that made him good on the phone.
Being honest and tireless also made him good with girls. Bear with me through this section because there is a point.
Every weekend he went out and found himself another girlfriend. He hooked up with a girl who was going door to door selling magazines, who he invited in to his apartment. He hooked up with a girl who was selling hats on 3rd Street Promenade. He had hooked up with the woman who he had purchased his used car from, offering a lower price and a steak dinner.
When he was at bars, he was completely straightforward about what he wanted. If a girl he was pursuing had a boyfriend or a husband, he didn’t hesitate to say the conversation was over. He didn’t want a relationship, and every Monday, the endless stream of text messages from his weekend romances bounced in, letting up only around Wednesday.
You may or may not condone this. I regarded this then with a mixture of wonder and grudging respect. If nothing else, he was honest.
That honesty extended to the office. He was not above hanging up violently on clients after calling them dishonorable scumbags for not paying, or calling out people within the office for not working hard enough – and he was right.
For him, what was right was right, what was wrong was wrong, and he knew exactly what he wanted and did not want. And it always struck me, seeing someone so honest, that people do not really respond well to honesty.
Clients who had been through the Jason treatment didn’t pay until Gary called them back and apologized, assuring them that they were not dishonorable but just “forgetful”.
People in the office who were slacking did not step up their game when called out. They shut down, and resisted the idea that they were fallible.
And the endless stream of girls (I’m using girls instead of women deliberately) who he had warned in advance and made clear all throughout the duration of their 36 hour romance, that he was not interested in anything longer than a weekend, texted him endlessly.
It’s just a point to consider. People don’t listen to the ‘what’, they listen to the ‘how’. Jason knew the effect of never filtering himself, but he accepted the consequences and lived as he did.
Also, back to the energy point. It’s hard to win against or resist someone who has higher energy. 10 pounds lighter and feeling lightheaded from my endless working, I found it hard to ever win an argument against Jason, no matter how hard I tried. He kept coming. And I would definitely never even have a chance after lunch, when I was soporific and for some reason he was going the same speed as at 10 in the morning.
It was then I realized that energy levels are an underrated part of success, especially when you’re working for yourself, and need to be cultivated as carefully as other resources like money or time.
The work was interesting, the growth in revenues was inspiring, the money was lucrative. But midway through the year, I decided it was time for me to go back to business school. Reasons to be discussed in a later post.
If I had stayed, I would have earned my way into a relatively easy few million dollars over the next few years. I knew that. And I still gave up my equity. To be clear, I did stay involved with the business over the next few years. It was one income stream. But I gave up ownership in order to be free, and have time to do my own things.
People ask me all the time why I did it. And for a long time I found it hard to articulate. It just never felt like my thing, or my destiny. It was Gary’s thing. It was Tim’s thing. It was not my trade. Does that make sense?
Also, maybe it was just hubris again. Still, I believed that I would find that few million dollars somewhere else, in the future.
Finally, maybe because I just wanted more…adventure?