“Your Jedi mind tricks don’t work on me, only money.” Watto
A long time ago in the 1970s many of us lived through the excitement of what we thought was the first episode of Star Wars called, well Star Wars. Turns out we had actually been watching the fourth instalment called Star Wars IV: A New Hope – who knew?
With the release of (what we currently think is) the 7th instalment in the movie franchise, here are some important money lessons we’ve learnt over the years from magic powers, lightsabre duels, droids and space ships.
Aside: For those of you who like us enjoy Star Wars but are not among the crazies who know it all by heart, the “Watto” referred to above is not the retired Australian cricketer but rather a slave owner on Tatooine who ‘owned’ Anakin Skywalker (Anakin became Darth Vader).
Lesson: Pay your debts on time
“If I don’t pay off Jabba the Hutt, I’m a dead man.” Han Solo
While it’s highly unlikely that you’ll ever end up cryogenically frozen in carbonite, don’t ever think that payment dates for debts owed are mere suggestions.
You may recall the smuggler Han Solo owing a significant sum to the galactic gangster Jabba the Hutt, with Jabba setting his favourite debt collector (Boba Fett) on Han. Han missed his payments and so Jabba sought to collect his dues.
Think of any unsecured personal loan or credit card debt in a similar way. Pay them off with religious like zeal as and when they fall due.
Of course the best advice is not to borrow in the first place. If you do have to go into debt, we consider it fairly common sense not to borrow from murderous, intergalactic crime lords.
“Great, kid. Don’t get cocky.” Han Solo
It wasn’t just the Rebel Forces who skimped on supplies and armaments. Students from Lehigh University in the USA calculated how much it cost to build a Death Star. Yes, they clearly had way too much time on their hands. Regardless, they determined it would cost $852,000,000,000,000,000 to build a 140km diameter steel killing machine.
That number is so big we don’t even know how to say it. Clearly it involves billions and likely trillions. It’s a big number. A really big number. And don’t forget they actually built two of these things.
So, despite the fact the Empire spends an intergalactic fortune on the ultimate weapon, they leave a gaping hole in the middle of it flush through to the centre that fits a space ship. Not only was the Empire financially irresponsible leaving this hole in the Death Star but they did it twice! Two multi-trillion dollar Death Stars up in smoke because they skimped on cost.
The key lesson here is if you are going to be buying or building something incredibly important to your future, don’t scrimp by buying the cheapest available on the market. At the very least invest in a grate that covers up the hole. Like the Empire, you honestly do get what you pay for.
By the way, the Lehigh University students also calculated that, given current global steel production levels, it would only take 833,315 years to build a Death Star. Again, they clearly had way too much time on their hands.
On seeking advice
“Help you I can, yes.” Yoda
Seeking advice from professionals plays a key role throughout the Star Wars saga. The Jedi order is based on a master / apprentice (‘Padawan’) relationship. Luke initially seeks advice from Obi-Wan and later from Yoda. Obi-Wan in earlier times is master to Anakin, Luke’s father.
“Once you start down the dark path, forever will it dominate your destiny, consume you it will.” Yoda
Each of the above Jedis provide trusted independent advice with a value and ethics system in line with the Force. By comparison, the Dark Side is dominated by inherent conflicts and self-interest.
Likewise when it comes to your advisor, place your trust in an independent advisor who you know is on your side and who adheres to a code of ethics and professionalism.
In addition, we know that Luke only really starts to learn from Yoda when he opens his mind and is ready to both seek and receive advice. So if you know you need independent financial advice, be prepared to listen and act upon that advice.
A small % can add up to a lot
A long time ago in the 1970s two movie directors made a bet. A rather despondent George Lucas was visiting his friend Steven Spielberg on the set of his sci-fi movie, Close Encounters of the Third Kind. Convinced Spielberg’s movie would eclipse the movie he was shooting called Star Wars, Lucas offered to exchange 2.5% of Star Wars if Spielberg gave him 2.5% of Close Encounters.
It wasn’t a terrible deal – Close Encounters was a hit taking $303 million. Problem was, Star Wars was a phenomenon, the second biggest movie take after Gone With the Wind with close to $1.5 billion takings.
In this case, 2.5% of Star Wars equates to $37.5 million for a very happy little Steven Spielberg (on top of his Jaws, Jurassic Park, ET and Indiana Jones takings).
So the key lesson here is that even a small percentage can add up to a lot of money over time. If your advisor charges you old style based on a percentage of your wealth and also charges you platform/wrap fees based on a percentage of your wealth, then perhaps it’s time to leave the dark side.
Fully transparent fixed fees agreed up front are clearly the way of the future!
You get what you pay for
In Star Wars IV (or the movie formerly known as Star Wars), Obi Wan (Ben) Kenobi negotiates with Han Solo to travel to Alderaan. Han demands 10,000 credits up front. Impulsive young Luke interrupts stating they could almost buy their own spaceship for that amount. Calmly, Ben replies to Han with a counter offer of 2,000 credits up front and 15,000 credits when they arrive at their destination.
If you examine Ben’s counter offer, if the trip is successful this is a 70% increase on Han’s asking price. A Jedi knight actually negotiated upwards! In contrast, if the trip is not successful, it’s an 80% decrease.
Crucial to Ben’s negotiation position were a number of factors:
- He is clearly wealthy given he has access to such sums of money
- He recognises the potential for an excellent, made to order service provided by someone independent who he trusts (it helps when you have the Force to help you judge peoples’ character)
- He immediately faces concerns and worries that he needs a trusted solution for ASAP
So too when it comes to financial advice – you get what you pay for. Seek out an independent financial advisor who can show they will add more value in your circumstances than the fees they will charge you. Focus on the net value you receive rather than seeking the cheapest service possible.
Independence is strong with this one
In January 2015 George Lucas sat down for an intimate (yet public) chat with Robert Redford at the Sundance Film Festival. A concept that both men stated was at the very heart of their financial and creative success over their long careers was independence.
In the movie making world, the studios dominate the decision making and creative process. 20th Century Fox is owned by News Corp; Paramount is owned by Viacom; New Line Cinema is owned by Time Warner; and Universal Studios is owned by NBC.
George Lucas and Robert Redford both agreed their ability to work independently of these large institutions allowed them to flourish both creatively and financially. They controlled their destiny without the outside influence or conflicts these institutions created. As Redford said to Lucas:
“If you’re going to work independently, you get to work outside the studio system which is very restrictive in its thinking, but it means you have to be very creative. One of the virtues of independent film is that it forces you to be resourceful.”
You can take the same approach when it comes to financial advice. Like the movie studios, the Big Four banks with AMP and Macquarie Bank dominate the advice groups in Australia. Take control of your financial destiny and avoid conflicts by seeking out trusted independent financial advice.
We hope you enjoyed our lessons from the Star Wars saga and we also hope you enjoy ‘Star Wars: The Force Awakens’. As they say in the classics, may the Force be with you.