26 September 2008

Big Meeting Protocol


I have been in a few big meetings over the course of my business career and had another this past week.  The meeting went as well as could be expected and I wanted to share the approach I took to give myself the best shot at a good outcome.  

Before we get into the BMP, a couple of announcements:

It's my brother's birthday today.  Happy Birthday Chuck!  Relevant to the US elections, there is a clip about the Canadian Health Care system -- not exactly G-rated, you've been warned.

Brooke Davison just won the overall female AG title at Nationals in Portland last weekend.  She's interviewed (with her 2 year old) over on Endurance Corner Radio.

Coffees of Hawaii now have decaf.  Albert was kind enough to send me a sample bag and I'm hooked.  Out photo this week is from the plantation on Molokai.  When you grind the beans, they look the reddish color of the earth (seen in the picture).  Enter "EC" at checkout for a 20% discount.

++

It's amazing what we can get done when something _really_ matters to us.  My main client in the UK is working through its business plan with banks, shareholders and suppliers.  As part of this process, we have been having a series of meetings with people that are fundamental to a successful outcome.  Separate from content, I have found that my approach has a BIG impact on outcome.  So here's my Big Meeting Protocol.

Be Prepared
I had eleven days of preparation for the Big Meeting this past week. 

I undertook independent discussions with senior managers; key shareholders; and lenders.  I wanted to speak with people one-on-one because it reduces the tendencies we have in crowds -- peer agreement, avoiding bad news, consistency bias, deferral to authority.  As the listener, I need to be aware of my own tendency to use these conversations to confirm, rather than to learn. 

Prior to our meeting, I wanted to have a clear idea on the position of each of the company's projects.  Our final internal meeting was a top-to-bottom review of every project on the company's books -- took three hours and we already knew the deals.  We might not have identified all the issues, but we did our best to make sure that we all knew the same issues.  This enables clarity in communication.

Finally, I believe that it is essential to have a clear understand on the cash position of a business.  Running out of cash is not a good thing.  I probably spent a full day considering the very short term cash position for the business.  As I wrote last week, a buffer of liquid assets provides time -- in business, as in life, time can be very valuable.

Visualization
Visualization is not just for Ironman swim starts!  Throughout my business career, I have used visualization to prepare for, and rehearse, important meetings.  While things rarely go as mentally (or actually) scripted, having mental and written plans increases your chance for a successful outcome.  It also increases relaxation during your competitive event (in this case a business meeting!).

Pre-Meeting Routine
I have the exact same routine that I use for Big Meetings.
  • Snack
  • An hour of aerobic exercise (no higher than steady)
  • Shower
  • Good sized meal with carbohydrate
  • Head to the meeting
If the meeting is in the afternoon, or evening, then I will leave the office early to get my training done.  I'll eat my pre-meeting meal and return to the office.

The routine makes sure that I am alert, relaxed, stress-free and fueled.  Generally, key meetings don't last more than 3 hours.

In an important, or crisis, situation... it can be tempting to skimp on nutrition, sleep, or exercise.  For me, that is always a mistake.  My productivity and clarity are far higher when I stick with my routines.  As well, I do my best problem solving when exercising (a meditation of movement, perhaps).

Stimulants
Big Meetings are stressful.  When work stress increases, my caffeine intake halves.  Clear decisions require us to slow our reaction time.  Pausing, before acting, is tough enough when stressed, near impossible with a quad-latte coursing through our veins.

WingMan
I didn't have a wingman this past week but have had one on the past.  

In the UK, they have a habit of placing a small plate of cookies on the table at business meetings.  Quite civilized, one meets for tea, cookies and business discussion...

If you have a wingman, ideally one with a low emotional attachment to outcome, then your wingman can "offer you a cookie" if you start to freak, or get off track.  The pause to eat your cookie, could enable you to reset.  You don't really need a cookie to use this technique... what you need is a calm friend and a pre-agreed strategy for signaling a need to pause.  I suppose that is the role that an attorney takes in many situations.  However... if you turn up with a lawyer then you might freak the other parties at the meeting!
If you don't know... ...then just say so
Kind of sounds like something Johnny Cochran would say.  He really was a character.

Managing serious situations is about trust -- you might get away with spinning things in normal times but it is a poor strategy when faced with important decisions.

For my meeting this week I had two computer screens running (three spreadhseets); two reports open on my desk; and a hard bound book containing a year's worth of notes.  With all that information, days of preparation and over ten years of advising the client... I was STILL stumped a few times!  

If the stakes are high, and the quality of the decision relies on the accuracy of information, then people don't mind waiting a couple of minutes (or even another hour) while you calculate the right answer.  

A commitment to accuracy/transparency is an attractive trait in a trusted advisor.

Summing Up
You'll see that I use a lot of "race tactics" for my Big Meetings.  In reality, these are performance tactics.  High performance in business, athletics and academics is all the same.  

Take time to learn from successful outcomes and remember that the toughest situations are ripe with opportunities for learning.

+++

Next week, I'm going to share specific ideas for managing through a recession.  As I predicted last spring, we are moving into the action phase of global liquidity shock which was triggered back in August 2007.  

As we saw with the demise of the American Investment Banks, it is a lot better to take action, than be acted upon.

Until next week,
gordo


Labels: ,

20 September 2008

Financial Security and Capital Allocation

Financial security and capital allocation are the topics for this week's letter. I have been wanting to write about these for some time. What a background in the capital markets -- a very rough week for people.

I am extremely busy on the business front.  As you can imagine, we face a very challenging time in UK Property.  If you are waiting for an email reply then I will get to you, just need some more time. Each day, I have had to parcel my energy, prioritize tasks and schedule recovery.

OK -- a couple of announcements...

***I turned on comments so that so we can interact. Take it easy on me. You'll find that moderation is 'on' so I need to review before they go live.

***
Endurance Corner Radio has podcasts from Joe Friel and Chris McDonald. Send feedback to D.J. J.D., who is leading our effort.  Joe is talking about his background (very interesting) and training. Chris explains how we can break Chris Lieto's course record at IM-Moo by using IM-Loo as part of our taper -- its easy if you just follow his point-by-point instruction for race week...

***Joe is going to be speaking at our Boulder Triathlon Camp next July. The camp is open to all levels/distances and will have a mix of hands-on instruction, training and discussions. Cost is $1,250 -- drop me a line for more details.  We've got some great speakers lined up.

++

Who knew the markets would melt down? Personally, I don't blame the short sellers. They are only acting on what insiders and smart researchers have been telling us for months... our financial system needs to be recapitalized. Massive global deleverage is tough. In my own ventures, it is the main cause of the difficult situation faced by friends and clients. 

What lessons can we learn?

++

Acquisition of capital is different than borrowing debt. Because debt comes from third party sources, we need to be wary of the tendency to view it as 'free' money. When I work with individuals, or companies, that run into trouble, it is often a crisis created by borrowing to the maximum extent permitted. Permitted under law, permitted under debt agreements, permitted by running X creditcards. An appropriate amount of leverage is well, well below the maximum that can be borrowed.

To me, capital in its most simple form is cash and liquid assets. Before we talk about how to allocate, let's consider how to acquire:

1 -- spend less than you make
2 -- pay yourself first


Physically, I have been overweight before. When I was heavy, I would often wish that I could wave a wand and "be thin". If I could just get a chance to start all over then everything would be alright. I would tell myself that I wouldn't make the same mistakes again.

Finances are a lot like that. When we have no capital, we can spend a lot of time wishing that we had capital.

Physical fitness is just like financial health. Until we take actions, and create habits, that change the direction we are heading... we will keep heading the same direction. We have to make the change.

The two tips that I shared above come from
The Richest Man in Babylon -- a good read on the topic of personal finances. I like that book because it doesn't make things too complicated.

3 -- Protect core capital.

What is core capital?  Put simply, it is capital that you cannot afford to lose.  Having no assets at 65 years old is a far different situation than being wiped out in your 20s.

At 40 years old, my view on core capital is ten years living expenses.  While the income from that capital doesn't come close to covering my living expenses, it does give me years to adjust when faced with an unexpected setback.  Across a full career in business, we can be certain that we will face multiple setbacks.  After the past 14 days, the importance of core capital has become very apparent. 

How do I protect core capital?

4 -- Be wary of leverage.

My core capital is completely unleveraged.  While this reduces my return, it greatly reduces the risk profile on my portfolio.

I go even further in that I don't care about my investment return on core capital, I care about safety.

Within my business projects, I am willing to use leverage but, these days, only with capital that is above my core capital.  Why am I so conservative?

5 -- You only need to achieve financial security once.

By following the basic principles in my book recommendation you can give yourself an excellent chance to achieve financial security over your lifetime.

Sure we are exposed to Black Swans but you can stack the deck in your favor if you educate yourself and stick to the basics.

It is surprisingly difficult to stick to the basics.  We let our guard down, we cut corners, we are less careful.  We need to be constantly vigilant!

++

For capital allocation, my first consideration is
where I will be living in the future.

This is important to make sure that I have assets (and currencies) that will balance my future liabilities.  While I don't trade currencies, I consider purchasing power parity when deciding about large investments which match, or don't match, future plans.

I don't have a lot of sophistication in my review -- I look at things such as daily living costs, relative prices of accommodation, interest rates.

When I think about property purchases, I am very specific -- seeking good value, in a specific neighborhood, of an appealing city.  I define value back to my long term currency.  For me, that means converting back to USD, the US is my likely home.

The cities that I really like are: Edinburgh (GBP); Paris (EUR); San Francisco (USD); Hong Kong (quasi-USD).  I don't have any exposure to those markets presently but I keep an eye on them.

Currencies that I like are USD (matched to long term liabilities); CHF/EUR (long term stability).  Some people like Singapore dollars but you only need to look at a map to see that there is real political risk in the neighborhood.  In terms of Asian exposure, my preference would be a moderate yielding real property investment in Hong Kong.

++

When I was starting out, I thought that it would be nice to "be rich" -- whatever that means.  Along my journey, I have realized that wealth is neither the goal, not the benefit of financial security.

The two main benefits are ethical reinforcement and personal freedom.  If the pursuit of wealth forces you to compromise your values, or ties you to unpleasant situations... then one really needs to consider if that is a benefit at all.

Following the events of this past week, a very relevant consideration.

gordo

Labels: ,

12 September 2008

Principles of Breakthrough Performance


This week I am going to shift back to a discussion of athletic performance. However, this article is also a summary of what's worked for me in academics, marriage and business.

Our photo this week is my buddy, Chris McDonald. Much of this article has come from considering his approach, as well as observing myself. I think he'd admit that he's taken himself far, far beyond what he thought possible even a few years ago.

Simplicity -- Whether you are considering an investment portfolio, new project development, sales strategy, or how to complete a stretch week of triathlon training. Increased simplicity improves your probability for success. Remove as much as possible from your life.

Specifically, to achieve top success requires the capacity to outperform your competition, daily, for a very long time. Some of the competition are more talented, more experienced, better funded, smarter... simplicity is an edge that you can give yourself.

Dilution of effort -- every item, thought and obligation added to your life dilutes your ability to fully commit to what is required for success. Single minded obsession is often a recipe for a future crisis -- still... if we are having a discussion about performance... then alternating obsession with recovery can be an effective strategy.

For any task requiring high quality, focused output (creative, technical, athletic) the periods when you are doing nothing are equally important to the periods where you are following your vocation. In athletics, periods of unstructured training (easy days, transition periods) can fulfill this role but you will still need some time where you are free to sit in a chair and chill out.

So when you are laying out your plan for breakthrough performance, I would encourage you to plan, and protect, your rejuvenation periods. I have watched some truly great athletes destroy themselves by trying to hold their athletic "high" a few months too long.

Stability -- there are a lot of areas where we dilute performance with instability:

Financial -- assuming that you have shown aptitude for your passion, you should allow at least five years to see what's possible in terms of performance. Being able to stay the course is very important -- you are looking at 10,000 hours worth of effort to see what's possible. Consider your out-goings and in-comings, the athletes that get this "right" follow a clear written plan.

If you are following a high-pay vocation then be wary of spending "because you can". A high burn-rate limits flexibility, personal freedom and can leave you beholden to the company, or person, that signs your pay check. I also believe that it makes ethical purity much more challenging.

If you are forced to ratchet down an expensive lifestyle that never generated incremental happiness then you will feel _real_ pain and loss.

Alan wrote a recent article on athletic periodization -- as I read it, I realized that it is a parable of my approach to life -- moving between business, investing, marriage, spirituality, triathlon and coaching. For each "run" I take at Ironman excellence, there are months, sometimes years, of careful preparation -- Base training for life!

So... I will offer some specifics that are proven for triathlon success.

Finances -- a minimum of three years living expenses, in cash, in the bank and a plan for maintaining your financial security. Financial stress drains performance. Figure out your personal financial weak link and create a simple plan to improve it.

Geography -- no more than two training bases, one VERY low cost, the other in an environment that makes it easy to address your key personal limiter, whatever that might be. Access to at least eight months of pleasant outdoor riding; and access to at least four months of long course swimming. Altitude isn't important. Watch what you spend on airfares.

Approach -- early in your athletic career, your #1 focus should be building your capacity to absorb steady-state training load. If you aspire to be a top Ironman athlete then progress gradually until an average training volume of 25 hours per week can be achieved within a five month span. Just focus on the training, you'll learn a lot. Once you can handle that load then increasing the average speed will offer a lot more gains than cranking the volume even further.

Note, the time requirements for athletic success imply very flexible part-time employment, or unemployment! With meaningful work obligations (that require analytic capacity), it simply isn't possible for me to move much past 12-18 hours per week. Even then, I need to be HIGHLY organized.

Timelines -- Five years of dedicated endurance training would be a fast progression to where you need to worry about your specific protocol. In the early days, any reasonable protocol will show progress. Train every day and avoid doing anything too silly.

Be very wary of seeking an intensity-driven short cut. You will make gains but you will limit your ultimate development. Running is a great example where "run easy every day" can result in fantastic gains, for years, for all new runners. It is also my preferred protocol for elite swimmers/cyclists that must give their connective tissues years to catch up to their aerobic engines.

Competitive Exposure -- Maintaining a challenging, but not overwhelming, competitive environment is important for motivation and progression.

I recommend that you podium at agegroup World Champs before racing elite. If you can't podium then the best decision may be to develop as a fast amateur. This will free you to consider options, and opportunities, that present themselves outside of athletics. Realistically, until you can podium at agegroup World's then you are unlikely to be able to survive as an elite athlete. Even then, the road is a fun, but tough, one.

+++

Pulling all of that together. The big things that I have observed over the years:
  • Maintain simplicity in weekly routine.
  • Follow a low cost annual plan that limits travel, yet makes it mentally easy to train.
  • Good training partners are golden -- they get you through the inevitable down periods and help you stay the course.
  • Focus on building your capacity to train. Stop doing anything that results in missing tomorrow's training.
  • Sleep lots.
  • Until you can beat everyone within a two hour drive from home, there is no need to spend money traveling to races.
  • Focus on executing your weekly training plan, not achieving weekly results. Progress can lay hidden for months. I've had plateaus that lasted years.
+++

Next week, I am going to shift back to investing, specifically the process that I go through when deciding how to allocate capital.

All my best,
gordo

Labels: , ,

05 September 2008

2008 Review, Part Two



This week’s letter is about taking the time to consider the long term implications of our current choices as well as offering some insight into how I approach my personal planning.

The photo above has me thinking about some additional adjustments to my TT position - I will be tinkering this winter!

+++

If you haven’t been to the Alternative Perspectives page in a while then you might enjoy two articles from Coach Kevin Purcell. The most recent was a thought provoker for me and very enjoyable.

2009 Boulder Camp – I am very happy to confirm Joe Friel and Bobby McGee as guest coaches at our Summer Triathlon Camp. Joe and Bobby have been instrumental in my athletic career and share more than fifty years of collective coaching experience.

As a reminder, the camp will run from July 20 to 25, 2009. By letting you handle your accommodation and morning meals, we have been able to set the cost at a very affordable $1,250. This camp is open to all abilities, all-distances and will have a balanced focus between skills development, triathlon training and athlete education. To confirm a slot, please drop me an email.

Two book recommendations for you: FIASCO is a great read about structured products and investment banking – it fits with my observations from a career inside the financial services industry.

Website Optimization is a good read for anyone that runs a web driven business, or brand. The book made me realize how little I know -- lots of easy ways to improve the reach of my writing. I read the book with pen, paper and a high speed internet connection. I approached the read like a "workbook" taking notes and making changes to my website outline.

+++

I was walking around Edinburgh this week and noticed that it is impossible to see a credit crunch. The buildings don’t know who owns them, or the prices that we place on them. That realization settled me down at the start of a very busy week. The UK faces challenging economic times.

My trip to Scotland confirmed suspicions on the state of my personal NAV. Long time readers may remember that I sold my UK property exposure in 2005/2006 and used a portion of the proceeds to help establish a Scottish residential property developer. While the development business is stable, the market outlook for sector is weak.

I’ve seen a big reduction in the upside component of my personal portfolio and a stack of paper profits went up in smoke. My marked-to-market net worth went down significatly in 2008. No wonder investment banks are looking for a way to avoid reporting the true market value of their illiquid securities. It was a (very) good thing that I am not personally leveraged -- I would be toast if I was a hedge fund.

Interestingly, prime residential rents are way up in Scotland. We have seen a 50% increase in our portfolio yields over the last three years and, I suspect, there are more rental increases to come. The upward yield shift gives comfort to our bankers (in a time when they aren’t hearing a whole lot of good news).

We haven’t seen any evidence of forced selling by developers. This could change if the main lenders take a hard line but, to date, all the key participants seem content to sit-it-out until market conditions improve.

Times like this are potentially volatile because if everyone is doing nothing then there is substantial downside risk if assets (at the margin) are forced through the market. Prices always move at the margin and, in a thin market, the actions of a few can impact the balance sheets of the many.

+++

The Tri Biz
While there isn’t much that I can (or want to) do with my personal balance sheet, I have taken a hard look at my personal profit and loss account.

Over the last three years, my largest single expense category has been “triathlon”. In 2005, I downsized my sources of triathlon revenue to create space for a big increase in my financial consulting business. The net cost of doing that was probably on the order of $100,000. I suspect that is a much smaller cost than many athletes bear when they downsize work commitments to focus on qualifying for World Champs. A single year off as a doctor, investment banker or CEO can cost a multiple of my figure.

I’m fond of saying that the easiest way to increase net income is to reduce personal expenditure. I remind myself of this because the consumption treadmill is a seductive trap, constantly marketed to us through the media.

In my annual review, I look at my expenses (current, projected, core and surplus) as well as my revenues (current, projected, downside, potential). I would encourage you to do the same.

Why? Because we always underestimate the large effect that small changes have over the time lines of our lives.

$33K per annum, for seventeen years, at 4% is $782,000.

By taking action to eliminate my net triathlon cost (today), I can finance my unborn daughter’s college education (tomorrow). Of course, all this is contingent on not spending the money elsewhere, or being miserable with the change. We can take cost control too far.

For me, starting a business helps spending discipline. My accountant tells me that the IRS will "help" further by disallowing losses if we lose money for three consecutive years. As well, I have considered bringing in a financial partner to create social, and profit, pressure. There are a lot of benefits to 100% ownership (see Raising the Bar) but I also benefit from having obligations to people I respect.

My game plan for personal expenditure control:

***Focus on the training camps that I am hosting Tucson (April); Epic France (June); and Boulder (July). Last year, I attended nine training camps and only one made a positive contribution to Gordo Incorporated.

***Consolidate the best of my writings into a single location for you (the reader) to access easily. The best marketing lesson from my triathlon experience is “give away good information for free”. Helping people is fun and creates massive goodwill. I have a stack of content spread between five websites. My content is underutilized and tough to access.

***Place my library within a website where I will be able to combine: (a) my coaching skills; (b) my writing skills; and (c) my enjoyment of helping people learn from athletics.

My financial consulting business has (effectively) total concentration with a single client. I am a big believer in the value of concentration (and the illusion of diversification). However, small things matter over long timeframes… one, or two, additional relationships will make a difference.

The benefit of my business model is it fits with my desire to main freedom of location and schedule. Commitments given to clients limit my freedom of occupation (somewhat), but I love working and there is a fair exchange.

An up-coming letter will discuss (in detail) my current personal portfolio strategy. While my outlook hasn’t changed, my portfolio structure changed (due to those paper profits evaporating).

+++

The Truly Precious
Because time is far more precious than money, I also do a time inventory. I have become provicient at considering my happiness return per hour. Still, it takes constant pruning to maintain a high quality life.

There are clear requirements to a long term focus on elite athletics. These requirements have associated costs that can increase over time.

Financial – outlined above.

Structural – to run well in triathlon, I need to maintain a high level of annual run volume. Having spent most of 2007 walking around my house in fluffy slippers (to comfort bruised feet), I know that the required level of volume is wearing my feet out.

Emotional – I don’t know about you… but I am not a whole lot of fun from three to eleven weeks out from a key competition. I used to get around this by living alone in the spare room of a fellow endurance athlete, or hibernating upstairs at my house in Christchurch. The IronMonk-gig worked for athletic performance but lacked in terms of emotional well-being. I have increasingly found that I can’t be the husband I want be while spending 20 weeks a year on the knife edge of human endurance.

Monica is so completely loyal that she’d back me for another five years of relentless focus. She respects me too much to offer the soft option of backing off to please-the-wife. I didn’t truly understand the brilliance of doing that for your husband until this year. If you are married to somebody like me, it is the best way to ensure peace of mind in your man. I’ve got a couple buddies that have managed the freedom but haven’t (yet) found their peace. Don’t think that I’ve necessarily found any!

Addicts come up with all sorts of ways to justify their actions. Generally, I am only able to fool myself for five to fifteen years at a given vocation. Increasingly, I find better and better things to focus on. Fatherhood represents another opportunity for self-knowledge.

I have been truly fortunate to have the opportunity to spend much of the last decade living as an elite athlete. It has been a tremendous experience and worth all the overtraining, financial costs and other occupational hazards. I rarely regret the past, even my mistakes and “hard times”.

One of the main hazards of objective decision making is caused by a combination of consistency bias, overvaluing what we own and overweighing sunk costs. “I have given up too much to change course” is a common thought pattern that can skew clear judgment. There are also tremendous social pressures that we place on each other to remain consistent in approach. We have an in-built bias against “flip-floppers”. This is a bit odd in a world where most of our key decisions are made against a background of incomplete, and changing, information.

I have always enjoyed “doing what it takes” and, I suspect, that most obsessed folks are excellent at getting the job done. Seeing this trait, could be why Monica likes me to have a project. Too much idle time leaves me short on endorphins.

It’s an interesting time for me. With my sport, increasing costs are reducing my enjoyment from doing what it takes. Frankly, I’d rather be a world class person than a world class athlete. I am fortunate to have been exposed to role models that manage to do both.

Since 2004, I hoped that winning Ironman Canada would give me a fairy tale ending. Just like Monica, Life doesn’t appear to have offered me an easy way out.

Back next week,
gordo

Labels: , , , ,