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Business Philosophy

The Value of Good Business Partners

By At Work, Business Philosophy One Comment

I've been an investor in a local San Dieo nightclub for the past five years with three other partners.

All started well, and we made mo' Benjamins. But, as other hot nightclubs came onto the scene, our bar lost some of its cache.

Eventually, we had to do capital calls and placed the business up for sale. Luckily for us, we found the right buyer. But getting the business sold turned out to be a royal pain in the ass. Each time we thought we were clear, there was always another road block.Liquor license transfers, lease negotiations, tenant improvements always make the sale harder.

Finally… we got the deal done, and all of us were relieved.

When I look back on the business, through the good times and bad, everyone kept their composure, paid their money during the capital calls, and took care of business. Each partner was professional and treated the other partners with respect and decency.

I didn't make a lot of money on this deal, but I learned the value of good partners. Anyone can be a good partner when things go well, but it take a person with character to be a good partner when plans go south.

When you find these people, make them your life-long friend and work to do business with them in the future. They are rare. They are mature. They are gentlemen. 

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The Purpose of Strategy

By At Work, Business Philosophy, Start-Ups No Comments

I am reading a quick note from Phil Rosenzweig, Wharton and Harvard guy:

"High performance comes from doing things better than rivals, which means that entrepreneurs have to take risks. Decisions must be made where there isn't 100% accuracy. Thus, strategy involves making decisions under uncertainty.

The goal of strategic analysis should therefore be one of gathering accurate information and subjecting it to careful scrutiny, not in the false hope of guaranteeing success, but in order to improve the odds of success. Wise managers know that business is about finding ways to improve the odds of success—but never imagine that it is a certainty."

This is similar to a book that I am reading on equity market timing (called Trend Following). The essence of Trend Following is that you are simply using momentum and price action as a means to give a slight edge in statistical probability that you are choosing correctly. In fact, you expect to lose 60-70% of the time. But you cut your losses early and let the winners run. Those winners produce enough profit to overcome the losers.

In business process, it is called "Seed, Select, Amplify".

Plant a lot of idea seeds. See which ones start to grow. Select them, and Amplify the amount of sun, water, food you give them.

Thus since high performance is dependent on the decision making process, it is important that the process is learned and taught at all levels of the company. In fact, there is not a direct correlation between the actions of the decision and the outcome. Sometimes, due to events not within our control, those actions do not lead to the most favorable outcomes. It becomes important that the company applaud those that work through the decision-making risk assessment with strategic clarity.

No matter what the outcome, executive should be asking: Were the full range of options identified, or were some overlooked? Did we gather the right information or had some important data been overlooked? Did we make our calculations accurately, or were some in error? Did we properly anticipate obstacles and remedies, or did we not think about ensuing challenges?

The purpose of strategy is to weigh the probabilities of outcomes based on the information we have. Then, to adjust the strategy according to the results we see.