Sometimes I get the sense that the editors of the New York Times don't read much of other sections of their own paper. If they did, why would the editors of the NY Times business section have focused on Carleton Sheets (pictured above) as they did in an article earlier this month ("When the Real Estate Game Cost $9.95"), when the Times real estate section published a much more damning article about a different real estate guru (Russ Whitney) two years ago, one that was more relevant to the recent credit and real estate busts? That article, from March 2007, was "Russ Whitney Wants You to be Rich", and I've actually been meaning to mention it for a while, because it's so good. Below are a few of my favorite excerpts from it.
On the cost of the program, and an accidental admission from Whitney:
Those who do call and who attend the first Whitney workshop find that it is mainly a sales event for another workshop. The fraction that agree to pay a few hundred dollars proceed to the second hotel workshop, where they discover yet another sales event, or what sounds from the description of participants like a Holy Ghost revival. A powerful speaker stokes passions until, one by one, about 20 percent of the audience rise from their seats — the number is reliable, according to the company — and consent to pay thousands of dollars each to learn how to get rich through real estate.
In staging some 4,700 free events a year, Whitney Information Network attracts some 280,000 people, of whom 22,000 go on to enroll as students in advanced courses. Last November at the Clarion Hotel in Louisville, Pat Yarbrough, a 56-year-old custodian at the University of Louisville, became one of them. “Fast money,” she explained later, “that’s all I’m interested in.” At the front of the conference room, a nice man had taught her how to raise her credit-card debt limit, she said, and when she made her way with a cane to the back, a nice clerk showed her what she could buy: three-day courses with names like Rehabbing for Profit and Keys to Creative Real Estate Financing. The courses cost $4,995 each, but less if you bought more. Yarbrough chose four, including the Millionaire U Real Estate Training. She had $130,000 in debt, some of it on her seven credit cards, and the clerk helped her to add $18,000 to it.
[...]
Whitney Information Network is now a public company [Pink Sheets: RUSS.PK]1 that employs roughly 475 people and that took in about $160 million in revenue in 2005, according to its annual report, all on the promise that anyone might become rich like Whitney, if he will only do as Whitney has done. The difference, though, between Whitney and those who come to WIN is that he bought his first real estate book for just $10, and they pay up to $54,000 a head for the full course package. When I asked if he would have enrolled in his school when he was starting out, Whitney said no. Then he added, “I shouldn’t say that,” and began trying to take it back.
Tips from the Advanced Class ("Millionaire U."):
Pacing before them was Tracie Taylor, a sleek African-American woman in red lipstick and dark business suit [one of Whitney's instructors].
[...]
She advised the students to cease identifying with the poor. There are more people making a little than there are making a lot, and those people, she said, need places to live. Expect to become landlords, she told the class. The neighborhoods they should expect to work in — “good cash-flow areas” — are indicated by the presence of laundromats, pawn shops and any boulevard bearing the name Martin Luther King, she told them on a tour of one such neighborhood.
[...]
Yarbrough the custodian, meanwhile, sat fanning herself with her notebook, asking for words to be defined, concepts repeated. She said she wasn’t getting much out of the presentations. She was mainly waiting, she admitted, for that lesson on how to buy houses without money.
When the students are ready, the master appears:
On the last day of the course Taylor rather grandly introduced “my mentor, my friend, Mr. Russ Whitney!” Whitney came bounding in carrying a water bottle, as though fresh from his workout.
[...]
He was soon strutting before them, saying again that real estate is “the simplest way to make a lot of money” but warning them to be careful out there, because “people don’t always have your best interests in mind.” In fact, he said “in 9 out of 10 cases they don’t.” And that’s why they needed more education — to learn what they could expect.
“We’ve got a lot of classes,” he went on. “You probably think they’re expensive.”
“They are expensive!” Yarbrough called out from the front of the class.
Whitney turned to regard her. Yarbrough stared back at him. He began to insist that his profit margins were reasonable, that he wasn’t gouging anyone, but Yarbrough quickly stopped him. “Let me say,” she replied, “that if we didn’t want to be here, we wouldn’t be here. Nobody twisted our arms.”
Whitney couldn’t help but snort. He said he’d fire the salesman who didn’t twist arms, and everybody had a good laugh.
The image above of Carleton Sheets comes from the New York Times article on him mentioned above.
1It's actually trading for less than its net cash, as of the end of December. I'll be interested to see what its Q1 numbers look like.
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