The eighth wonder of the world
A Minneapolis native, Anderson, arrived in Los Angeles in 1936 to play ice hockey for UCLA. After graduating with a degree in business administration, he headed east to Harvard for his MBA, then returned to California for law school.
While his law library experience at Loyola solidified his belief in others, it was his Midwestern upbringing that laid the foundation for his well-grounded outlook on life.
"It is a great honor to be trusted," he says. "If you can convey that to your employees — that you trust them — it goes a long way."
Trust, in turn, builds loyalty, he says, which leads to longevity and stability in an organization. And stability builds faith in the business from vendors and customers, which is the primary driver for growth. Anderson says a critical part of the process is compensating people fairly, which doesn’t always mean paying top dollar today.
As an example, he points to something he did about a decade ago with the 15 car dealerships he owns, something that has since become standard business practice with all of his ventures.
"I’ve made it a habit of having four key players," Anderson says. "At the dealerships, it was the parts manager, service manager, sales manager and general manager. I called each of my dealerships’ [management teams] together and said, ‘I want you to go home and talk with your wives. As of the first of the month, none of you are going to have a salary.’"
The announcement took his management team by surprise. But Anderson, who became legendary for not taking lavish salaries out of the companies he owns or runs, explained that he would open the company’s books and, with nothing to hide, restructure how they were paid to let them share in the profits.
"I told the parts guy, ‘You’re going to be paid at the bottom of the parts department. And in the interest of the overall business, the same would go for the service manager, sales manager and general manager,’" Anderson says. "After everybody else has been paid, you’re going to have 20 percent of what’s left over. They were very apprehensive at first, but they’ve all more than doubled their original income."
Anderson says getting key employees to buy into his philosophy — take what you need and invest the rest — proved critical to his ability to grow his companies and, at the same time, build loyalty. Part of the promise included setting up a structured deferred-compensation system that allowed for compounding the interest every month based on his money cost.
"That was when I owned a bank," he says. "I ended up doing the same thing with the bank’s chairman, president, operations officer and chief credit officer … and since then, with the four key people at every company I own. There are seven wonders of the world. The eighth is compound interest. I have a number of people on my team that are compounding, every month, over a million dollars.
"I love to see people accumulate capital. I have a secretary that’s been with me for a long time who has accumulated over a million dollars."
