26 Rules for Recessions
I spoke last Friday to the Pacific Coast Builders Conference—those left standing remain at the heart of a Perfect Storm. One solution to passing my 90 minutes would have been a prayer meeting. Passing on that due to lack of leadership qualifications, I decided, at the urging of the conference chairman, to talk about "excellence in tough times." I began with a list of assertions, which I reproduce here. The ones which were totally limited in scope (remarks about Barry Bonds, Sandy Koufax, Port Hueneme CA, et al.) have been excised. Though some of what follows is still narrow in focus, most of the "assertions" have reasonably widespread applicability. I have only lightly annotated my simple statements:
**That which goes up also comes down.
**That which goes waaaaaay up also comes waaaaaay down. ("It was in the Beginning and now and ever shall be. Amen."—maybe I could have led a prayer meeting after all.)
**IQs rise as markets go up. (Isn't it amazing how smart we all were 18 months ago?)
**Why have we done this s%^# over & over & over?
**Why will we do this s%^# again & again & again?
**The "madness of crowds" is the most profound statement of truth ever.
[Sooooooo many "smart" people get conned over and over and over. This is the second time in a single decade—dotcom crunch time was 2000 more or less. Near the end of the dotcom era, I admit that I tossed a few bucks at the market. I'm not all that interested in stocks—real estate is my indulgence. But my irrational side said, "Sure, it's overpriced, but you can't sit the whole damn thing out." So I invested, and a year later got about 2 cents back on the dollar. Timing is, of course, everything—but that's not enough to explain our chasing markets whose valuation is nutty-squared to the naked eye. The dotcom cycle was even more absurd, if lower in impact—companies valued at fives of billions of dollars, without a penny of revenue in sight. It is plain madness, the provenance of shrinks, not economists.] [And, alas, forewarned is definitely not forearmed.]
**Bigger is almost never better.
**Big mergers are stupid.
**Big mergers spring naturally from big egos.
[At times of market uncertainty, the biggies, even the so-called "good" biggies, bulk up to defend themselves. We've seen it in financial services, consumer goods, pharmaceuticals, steel—you name it. The strategies invariably lead to the loss—rapid loss—of even hundreds of billions of dollars in market cap. And yet we do "it" again and again, and the perps are often our most "heroic" execs.] [And, alas, forewarned is definitely not forearmed.]
**It doesn't get any better than this—the likes of U.S. Grant, Abraham Lincoln, and John C. Fremont were born for moments such as this. There is no such thing as a good-great leader who has not confronted, been battered by, and stumbled through-overcome a catastrophe. The Upside for the resilient and gutsy and creative is as high as the downside is low for those who attempt to hide in the closet until the fur stops flying.
[Find me a single example of someone who made the history books who hadn't had the crap kicked out of him-her—typically time and time again. Adversity is the soil of great accomplishment—period. Which doesn't make getting kicked around any more fun at the time. I'm at a bit of a loss here for pragmatic ideas—assuming you are not the boss of bosses, perhaps a good bet is to form some sort of offensive support group—The Resilience Rambos? The idea is to dwell on the opportunities that doubtless lie amidst the wreckage.]
**Take advantage of others' timidity; tighten the belt with a mighty tug, but in a key area or two, double the strategic project budget rather than halve it.
[When the dotcom implosion occurred, most IT budgets were slashed and slashed again—but Sysco's CEO saw a once in a lifetime opportunity in others' timidity, and pulled in the reins very hard in general to free up money to act hyper-aggressively on IT. Some others in this wee wise wedge have taken advantage of slower times to juice up the training budget, hence increasing the quality of the workforce.]
**Women rule. And make (almost) all the residential real estate decisions.
[Tom on his high horse again—women make the purchase decisions, yet my audience was mostly male. Stupid. In talking with folks afterwards two themes emerged: First, women are less ensnared by competition for competition's sake; their drive for excellence is as high as any man's or higher, they are just less inclined to try and prove themselves by outbidding "the other guy" for an already overvalued asset. And second, women simply are better listeners—which makes them particularly more effective in the homebuilding world, where the customer's decision is one of the most important in her life. Listening is also a miracle strategy when times are tough—e.g., the Great Listener is far more likely to get the loan extension!!]
**Decency must not be sacrificed in tough times.
**Decency is more important than ever in tough times.
[Insanely, great numbers of businesspersons, panicked by rotten market conditions I suppose, resort to shortcuts and churlish behavior to last out the day. In fact, bad times are the best times to behave well—for pragmatic as well as philosophical reasons. At the very least, if you go under, your personal reputation will be in tact—which is the ultimate cornerstone for a comeback.]
**Painful decisions must be made—make them as gracefully as possible; doing so is the best investment in the long term possible. Your reputation will be shaped by the long memory of how you behaved when the fan was covered with yogurt.
**Tough decisions mostly affect other people's families. You must still make the tough decisions, but the minute they cease to be agonizing, resign—you're not worth saving.
**Character rules in adverse times.
**Now is when investment in relationships pays off—and now is when you pay the full price of not having invested in relationships when times were good and you didn't "need to be nice" to others.
**Keep good people—if it kills you.
[Don't mess with your franchise players. Nurture them as never before.]
**Practice transparency to a fault.
[People in the know—from receptionist to EVP—are far more likely to be positively engaged and supportive during a nasty downturn. "In the know" means "the works," not just a few breadcrumbs of sanitized info.]
**If your world is in relatively good order do not be tempted to use this "opportunity" to "consolidate" by acquiring questionable assets at firesale prices—you are not good enough to turn cow pies into gold; only your ego thinks you are, and your ego is, as usual, wrong.
[For example: We'll see, but the Bank of America seems to believe that it can sprinkle some sort of pixie dust on the remaining Countrywide staff, and create a real estate powerhouse down the road. I, instead, see a washout and 6,000-foot drop at road's end.]
**Smaller but really good is a better place to be.
[As always, in my remarks I referred to Germany's "Mittelstand," its middle-sized, focused stars that propel Germany to the top spot in global exports. I am the unabashed fan of the smaller or middle-sized focused enterprise. The Mittelstand Spirit and commitment to Excellence are also the best defense against hard times!]
**Work out more and harder in bad times—get high or less low on chemical cocktails generated by killer workouts.
[Bad times are killers, literally, especially if you respond with strings of 20-hour days. Among other things, your judgment goes to hell in a handbasket—and your inevitably irritable disposition is an inspiration to no one, starting with your 9-year-old.]
**You will be remembered in the long haul for the quality of your work, not the quantity of your work—the quantity part is just your defective ego talking—no one evaluates Picasso based on the number of paintings he churned out.
**Take advantage of tough times to realize that in the long haul you will be remembered for your humanity not your net worth—think Tim Russert.
**You, too, God willing, will be 65 some day—and when you look back it's never the easy times that pop up in the viewfinders; it's the valiant struggles and adversities suffered and occasionally overcome that fill the highlights tape.
**If not Excellence, what? If not Excellence now, when?
[Pursuing Excellence in all we do is the ultimate turn-on, and the ultimate source of resilience in difficult times, in particular. And, as I see it, there is literally no way to lose. All that "stuff" about "the journey is the reward" turns out to be 100.00% right.]