Grow the Cab Business Slowly
Will is a cab driver. He wants to move from driving to managing the business and expand without going into debt. Dave recommends growing more slowly than Will is proposing.
QUESTION: Will in New York City is a cab driver, and he and his dad share one cab. Will wants to move from driving to managing the business. He would like to expand without going into debt. He’s considered using some of the equity from the medallion to do so. Dave recommends growing more slowly than Will is proposing.
ANSWER: You would have to surrender the value of the medallion or pledge it in a loan. We don’t want to do that. We don’t want to put the whole thing at risk. I think you’re going to be much more satisfied 20 years from today if you will grow more slowly. Just save up and pay cash, and then the more cabs you have, the more cash you have and the faster you can save up and buy the next one. The first two new ones that you buy are going to be the most difficult. The next two are going to be easier. The next two are going to be even easier.
I’ve done that with real estate. The more real estate I buy that’s paid for, the more money I’ve got to buy more paid-for real estate, because it keeps creating more money. The first piece of property that made money I bought, it seemed like it took forever. Then I was able to get there and able to actually win.
I wouldn’t borrow, and I wouldn’t bring in a partner. I wouldn’t do all that. I would just be more patient. If you read the book The Tortoise and the Hare, the tortoise wins every time. He always beats the hare. Get rich quick does not work.