Luke Cage’s Bar, Coca-Cola and a Lazy Business Owner
Updated: Oct 25, 2020
Marvel’s Luke Cage (on Netflix) not only has superhuman strength and unbreakable skin but was a small business owner before becoming a superhero full-time. After getting out of jail, for a crime he did not commit, he invested his money in a bar in New York City. It was nothing special but it paid the bills. He lived above the bar in a small apartment. It was a regular hangout for Jessica Jones, a private investigator who also possessed superhuman strength. She was a heavy drinker. The two later started dating. A girlfriend who is also one of your best customers. This has the potential to end very badly.
Who doesn’t want to be their own boss someday? Walk into any library or do a Google search on entrepreneurship you will be overwhelmed by all the information available on the topic. It is as endless as the ocean. You will drown in it. Small business owners are the economy since they provide the majority of all jobs. This is why at least one political party will always be talking about them on their TV, radio or social media ads. The goal of a small business owner is to make profits by buying low and selling high. In Luke Cage’s case, he needs to pay as little as possible for his drinks and sell it for as much as possible. This will ensure he has high profit margins unless Jessica isn’t paying for her drinks. She drinks like a fish.
You don’t need to have a degree in business to be a successful entrepreneur. If you want to be your own boss one day then I recommend starting by enrolling in a few Computer Science, Sales & Marketing, Economics and Accounting courses at a local college or university. You need to know the basics especially Accounting terms.
Before starting any business or making an investment, an individual should know the difference between an income statement and a balance Sheet. EBITDA is not the name of the exotic lady you met last night at Starbucks. It stands for Earnings Before Interest, Taxes, Depreciation and Amortization. It is a measure of company profitability used by investors and bankers. Successful entrepreneurs pay close attention to their balance sheet as they are interested in growing their equity. They understand the importance of cash flow. Cash flow can make or break a small business. It’s stressful to be in a business where it takes many months to receive payment from customers yet the bills keep piling up daily. This could result in severe premature ageing for the business owner.
Imagine being a small business owner without having to worry about customers, employees, competitors, suppliers, complicated tax reporting, sales, inventory, equipment, legal issues, banking, cashflow, landlords (or tenants) and government regulations. This takes it to a whole different level if you are in the bar/restaurant business. Mistakes there can make your customers sick and could shut down your business for good.
There is no work/life balance for an entrepreneur. When you think about it a lot of them don’t have control over their lives or time. If you sell your product or service out of a physical location like a bar then you have to be at the place everyday and on time. It now makes sense why Luke Cage lived above his bar. I don’t know any successful small business owner who takes a sick day and doesn’t open up their business. Many entrepreneurs work seven days a week for many years to establish their businesses. This is the price of admission to the show.
Could simply buying and keeping dividend paying stocks for the long term be considered a legitimate business? Could you generate money to cover your annual personal expenses? From the research I have done you can and many people are doing it.
“Buy stocks the way you buy groceries, not the way you would buy perfume.”
- Ben Graham, father of value investing
The quote basically explains that you need to look for “Sales” or “Deals” and not be swayed by hype and marketing. Grocery shopping is done consistently so the shopper is aware of prices. If you regularly drink Diet Coke and it happens to be 70% off this week then it’s a good idea to buy in bulk and stock up. This is the smart financial thing to do.
Warren Buffett is arguably the greatest investor of our time and is a student of Ben Graham’s style of investing. He bought his first stock when he was 11 years old. He is famous for buying quality companies on “sale” and holding them for long periods of time (think decades). It’s worked for him as he has made billions. His current net worth is about $80 billion. Dividend stocks such as Coca-Cola are a major reason Buffett has been so successful for so long.
The Coca-Cola Company is one of the world's largest beverage companies with more than 500 brands. It has 21 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, Powerade, Minute Maid and Simply. I was also surprised that Fanta is a billion dollar brand. Brazil is the largest consumer of Fanta in the world.
Warren Buffett bought about $1.3 billion of Coca-Cola shares in 1988, making it the largest position in his portfolio at the time. Coca-Cola stock price dropped because the stock market crash and many thought the company was done growing. To outsiders it seemed like a huge risk to invest in Coca-Cola but Warren did his homework on the company.
Warren, like a true entrepreneur, saw a great opportunity to invest. Using basic accounting skills he discovered that Coca-Cola was generating serious cash flow: 60% gross profit margin which was incredible. Similar to Google today but Google doesn’t have any factories or delivery trucks. Coca-Cola’s return on equity in 1988 was about 33% (same now) when the average US corporation’s was about 12%. Return on equity is one of the most important metrics for investors. It's a measure of overall profitability and of how well the company's leadership manages its shareholders' money. The higher the gross profit margin and return on equity numbers the better. Coca-Cola also had a strong brand name and the world's largest beverage distribution system. There were places on earth where you couldn’t get clean drinking water but you can buy a can of Coke. Warren knew this.
Looking at the numbers it made perfect sense to buy Coca-Cola stock. Since 1988, the Coca-Cola dividend has increased by almost 1000%. In 2020 Coca-Cola is expected to pay Warren over $640 million in annual dividends. Based on Coca-Cola’s dividend history the dividend will continue to grow. Warren’s initial $1.3 billion investment is worth around $22 billion today. It still remains one of Warren's largest holdings today. Let that sink in for a minute. As our site states there are two ways to make money off stocks: dividends and capital appreciation.
The Coca-Cola Co. CEO James Quincey’s 2019 pay was $18,701,149. He is the highest paid employee at Coca-Cola. In 2019, he worked around the clock, travelled the world making tough business decisions and being the middleman between 700,000 employees, largest institutional investors in finance and millions of customers including McDonalds (39,000 restaurants). If he made several major business mistakes or lost market share to Pepsi, investors would lose patience quickly and demand a change. The company’s board of directors would give in and replace the CEO. According to Investors Business Daily, “If it feels like there's a CEO revolving door, you're right. CEO turnover in 2019 is at all-time highs.” So much for job security.
Since 1988, Warren Buffett has basically done nothing but drink five cans of coke a day. He made over $640 million in annual dividends off Coca-Cola stock. That is the difference between an investor and highly paid employee.
Let's use the Coca-Cola 1988 investment as an example of how a regular person can profit. After graduating from college and working for several years you decided that you wanted to be your own boss. Like all young people you thought it would be a good idea to open a bar. It was the 80’s and that's where everyone hung out after work. You managed to save up and borrow $130,000 from family and friends.
While doing research you learned that most bars fail before their fifth anniversary. Scary to think you most likely would lose your entire investment in less than five years. This is why it’s tough to get a bank loan to start one. While looking for suppliers you discover that Coca-Cola or Pepsi are pretty much in every bar/restaurant in the world. Rum & Coke, Vodka & Sprite, Whiskey & Club Soda, etc... Coca Cola brands are popular mixes at bars/restaurants. Even if you don’t drink alcohol, any beverage someone is going to drink in a bar or restaurant will be either Coca-cola or Pepsi product. That’s marketing and brand power.
Your research has uncovered that Coca-Cola also owns Columbia Pictures. Yes, Coca-Cola is in the movie business. It has produced some of your favourite movies such as Ghostbusters and The Karate Kid. They also own popular and profitable TV shows such as Wheel of Fortune and Jeopardy. Now you are really interested in investing (In 1989 Coca-Cola sold Columbia to Sony Corporation).
You changed your mind and decided to buy Coca-cola stock with the entire $130,000 in 1988. If you didn’t sell any stock, today you would be earning $64,000 a year in dividends. You don’t have to do anything to get that dividend. You can play video games all day every day if you want. Dividends are taxed much lower than salary income so you would have kept most of the $64,000. That is equivalent to making $100,000 a year working full-time. Income taxes take a huge chunk of your gross pay. The total value of your Coca Cola stock today would be worth $2.2 million. If you bought the stock in a tax-free or retirement account then you could sell and not pay any tax. Investing for the rest of us.
It can be done in real life. Vermont-based janitor and gas station attendant Ronald Read died at age 92 in June 2014. Read had quietly amassed an $8 million fortune, thanks to smart spending and investing habits. Mr. Read owned at least 95 stocks at the time of his death, many of which he had held for years, if not decades,” The Wall Street Journal reported in 2015. Some of his stocks included Procter & Gamble, J.P Morgan Chase, J.M. Smucker, CVS Health and Johnson & Johnson. Solid blue chip companies that had a history of increasing their dividends. He left $6 million of his fortune to his local library and hospital. His donation had a serious measurable impact in his community. This example proves that anyone can do it.
What happened to Luke Cage’s bar? Kilgrave loved Jessica Jones but couldn’t control her mind anymore. She was happy with Luke and this angered Kilgrave. Kilgrave then took control over Luke Cage's mind and ordered Cage to blow up his bar with him in it. Luke survived but the bar was destroyed along with his home. This is an example of a business owner literally destroying his own business. Sometimes it makes sense to just invest in solid companies and collect your dividend cheques. It's much harder for your partner’s ex to destroy that.