How I Squandered a $1,000,000 Education

By Max Stein

Max Stein was born in Massachusetts and drank and gambled his way through Phillips Andover Academy, Harvard, Stanford Law School and Stanford Business School. He left law and business jobs with Manatt Phelps Rothenberg & Tunney and Bain & Company to start several failed entrepreneurial ventures. He has bought three companies, sunk two of them and the third one is circling the drain. He lives in California with his wife and two sons. Now that he is in his 50s and almost broke, what should he do next?

Follow Max as he spends his life going to Red Sox games, casinos, the dog track and poker games while putting as little effort as possible into his education and career. Read what goes on at some of America's finest academic institutions and corporations, and learn about the challenges of operating a small business venture.

• Language: English
• Publisher: Max Stein
• Release date: Jul 27, 2013
• ISBN: 9781301301317

Max Stein

Max Stein was born in Massachusetts and drank and gambled his way through Phillips Andover Academy, Harvard, Stanford Law School and Stanford Business School. He left law and business jobs with Manatt Phelps Rothenberg & Tunney and Bain & Company to start several failed entrepreneurial ventures. He has bought three companies, sunk two of them and the third one is circling the drain. He lives in California with his wife and two sons.

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Introduction

Summer 2013, California

It is Friday and the end of a very bad week. My family and I drove home last Saturday from our annual vacation at the University of California San Diego Family Vacation Center and the drive took much longer than usual. My younger son Robert, who is autistic and has asthma, had a coughing attack and we had to use a nebulizer on him while we stopped for lunch at In-N-Out Burger. Fortunately they did not kick us out. He is eight and sometimes wears Pull-Ups and we had to get him to pee in the Pull-Up to avoid stopping another time. I picked up a very bad cold in San Diego and we had to stop again for my wife Ashley to drive the last two hours.

When I woke up on Sunday I was so congested that I got dizzy standing up, but I still had to go into work at my business, Davis Industries, to clean up everything from the last ten days. Davis Industries is an importer and wholesaler/retailer of ceramic dinnerware and mugs. Sales have fallen by over 50% during the last decade. The economic downturn has not been kind.

Most of this week at home and work has been spent trying to figure out how to come up with the $30,000 cash that will be needed at the end of this month to pay for our next overseas container of goods. I have been juggling and maxing out credit cards, but Chase Bank has been one step ahead, declining charges and closing out three credit cards on me last week. We have been relegated to using my wife’s Choice Card that has a 29.9% interest rate. Our other ideas have been to sell items like our crystal, my old baseball cards and vinyl records, and other non-essential goods on eBay. John Donahoe, the CEO of eBay, twenty years earlier turned down my request to be promoted to manager at Bain & Company, a prominent management consulting firm. My wife Ashley has been looking for a job and trying to find business consulting projects for me on Craigslist. Even if we get past this cash crisis, the bigger discussion is whether we will have to sell our home of ten years to get out from under the massive debt burden we have accumulated.

Today I feel almost better and I get up at my normal time of 6:30am. I get the morning San Jose Mercury News paper from the driveway and go up to my exercise/work room, get on my Lifecycle, and turn on CNN with no sound and Howard Stern on Sirius Satellite Radio. I open the paper and read a story about Golden State Warriors owner Joe Lacob. Three years earlier Lacob led a group of investors who bought the team for $450 million. Thirty years earlier I knew Joe at Stanford Business School.

The key obstacle when Joe purchased the team was that he owned a minority interest in the Boston Celtics and he had to sell that ownership first before he could buy the Warriors. In 2001 the Celtics were purchased by a group of venture capitalists led by Steve Pagliuca of Bain Capital. I previously had worked with Steve at Bain & Company in Boston.

Today while John, Joe and Steve are figuring out the complexities of operating NBA teams and large multinational corporations, I also have to go to work. Here are some of the highlights of my day:

I print up the orders that came in on our web site overnight, some of which I will actually pick, although I do not pack. Unbelievably, the first order is from an employee of Bain & Company’s New York office.

I respond to the sixth email from a retail customer who keeps telling me that she refuses to pay the $65.00 charge for the items in her shopping cart and will challenge it with her credit card company. I have told her repeatedly by phone and email that a shopping cart is an uncompleted order and there is no order or charge. I tell her it is like going into a grocery store, filling up your shopping cart and then leaving the cart and the store before you get to the register. She still insists that we overcharged her by $7.00.

I take a phone call from a new wholesale customer who placed a $100 order and did not send us all the information we needed. I had called her at 11:30am on Tuesday and apparently woke up her husband. She tells me I was rude to her husband, rude to her later that day and rude to her today. This is not the first time I have heard this from a customer. She demands to know who the owner is. I refuse to give out this information because it is me. She wants to talk to my boss, so I have her speak to my office manager who pretends to be my boss and listens to what an asshole I am.

I graduated from Phillips Andover Academy, Harvard University, Stanford Business School and Stanford Law School. Now that I am in my 50s, why am I spending my day performing mundane tasks and juggling cash to keep my home and business?

Did This One Live?

My parents, Adam and Rachel Stein, were married in the 1950s, one day after my father’s 22nd birthday and three weeks after my mother's 20th birthday. They were young, but not abnormally so for the time. My parents very much wanted to start a family; however, my mother had several miscarriages and delivered stillborn children three times, including twins. She was diagnosed with an incompetent cervix.

I was born in Lowell, Massachusetts, an industrial city about 25 miles north of Boston. When my uncle and aunt told my eight year old cousin Robby that his Aunt Rachel had a baby, he asked Did this one live?

My parents called me a miracle baby, a label that came with high expectations. My mother had a hysterectomy after I was born and did not conceive again. My parents adopted a baby girl when I was six, but she was gone almost quickly as she arrived. I was told her mother wanted her back, an unlikely story given how adoptions worked in the 1960s. So I have been an only child pretty much my whole life.

Before we get into my story, let’s first find out more about Dad and Mom.

Dad

My father, Adam Stein, was born in the 1930s to Russian Jewish immigrant parents. My grandparents, Saul and Roberta Stein, immigrated around 1910 as children. Dad had a brother Joseph who was five years older.

Dad took the brunt of a lot of jokes over the years. He was born on Groundhog Day and his middle name was Sheldon, which gave him the initials ASS. On more than one occasion I saw clients give him monogram gifts with ASS on them that he promptly discarded. He did have a number of monogram shirts, but he preferred that they be simply AS.

Dad had health issues as a child and missed a lot of school due to hip problems. Despite these handicaps, he was a driven individual, eventually attending two years of college in Pittsburgh before graduating from Boston College Law School just before his 22nd birthday and his wedding to my mother.

Within a year he set up his own law practice in Lowell and continued to practice there until his death. He was a self made individual and a classic big fish in a small pond. If you walked down Main Street with Adam Stein, virtually anyone you passed would give him a big hello or Hey Adam. I once saw a bum (the term homeless had not been coined yet) give him a hello. He had an assortment of junior partners over the years, but everyone knew he was in charge.

Initially his practice focused on tort cases or accident suits, mainly car accidents. But in 1971, Massachusetts became the first no fault car insurance state, which killed that business. So he turned to real estate titles, a far less interesting and less profitable form of law. After that, despite no prior political experience, he decided to run for state office as representative from our district to the Massachusetts State House of Representatives. This was a part time position paying $12,000 per year. Part of the motivation was to help build his law practice from the added exposure and publicity.

We spent the summer at local fund raisers like bean suppers where people paid a few dollars for a buffet dinner of hot dogs and beans. It was all real grass roots stuff, far from the big time politics and glamour of national and statewide offices. One day when I was the only one at home, he got a call from one of the Democratic candidates for Congress in our district, a just back from Vietnam 28 year old named John Kerry. This would be the first of three failed presidential candidates to whom I have spoken.

Dad won and took office in the legislature the next January. There he met Michael Dukakis. When I asked him if he knew Dukakis, he told me he had told him to Go to hell. Dad had a deep dislike for Dukakis. He told me it was because Dukakis was arrogant and obnoxious, but it really had to do with Dukakis being involved with passing the no-fault insurance law. After two years he decided not to run again. The time away from the office was hurting business rather than helping through publicity.

Dad had a strange obsession with cars and clothes. Our family bought one new car every year, mostly Cadillacs. This meant my mother and father alternated getting new Cadillacs each year. In 1964 we got a brand new Mustang as a third car but he sold it within a month.

In 1973 the new car floodgates opened. Dad bought 13 new cars in 8 months. Some we had for a month before he traded for another color of the same model. He made a three for two trade with Peter Fuller Cadillac in Brookline where he traded a Cadillac and two other cars for two new Cadillacs, one of which was later traded in a two for one deal for two new Chevrolet Novas. When I got my license the insanity escalated, as we had three drivers and usually four cars, all large gas guzzlers. I didn’t help matters by wrecking three of them. Dad claimed that he had a lot of car dealerships as clients and he had to keep buying from them to keep them as clients, but this was bullshit.

On the day I turned 16-1/2 and got my license, Dad rewarded me instantly with a brand new Ford LTD. Most kids would be thrilled to get a brand new car when they get their license, but a Ford LTD? It was a ridiculous car to give a kid. It was a large fancy family car. It was like giving a kid a Ford Taurus today.

Clothes were a similar obsession. The house I grew up in had a cedar closet filled with dad's clothes. He was known as a snappy dresser, but much of his clothes were plaids, pastels and browns. The real issue was the volume of clothes. If I needed a new shirt, I got a case of the same shirt with the same color. If I needed socks, underwear, pants, whatever, same thing. My closets were filled with unopened clothes, particularly shirts. I could never understand it.

Dad did not drink or take drugs. I never saw him take one sip of alcohol. My parents once went to a party where there was pot and they were very uncomfortable and left. He did smoke, at first cigarettes, and then cigars and pipes, until he had to stop for health reasons. He had no tolerance whatsoever for anyone who did drink or take drugs, even in moderation. He had no interest in sports or gambling. Our