Today musing on patience and waiting, both personally and for business.
“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.”
Charlie Munger
“Time is a friend to a good business and the enemy of the poor business”
Shane Parrish of Farnam Street
Both of these quotes come from a Farnam Street post on the wisdom of Charlie Munger. My thoughts are first on a personal level, then for business
Can you stand to wait?
I came to that Farnam Street post today as I found myself musing on the power of waiting.
Why? Well, the property in the photo is my house in Cayman and it is on the market. Our agents are seeing some resistance from potential buyers for one simple reason. Traffic. Due to an economic boom, traffic has increased, so a journey of ten minutes to town become one of (Londoners will laugh!) forty minutes in rush hour. Seriously, that is enough to put people off 🙂
There are two core areas in Grand Cayman where such luxury canal front properties can be found. Go back only seven or eight years and the area where my house is was so much quicker to get to, the other side (along the West Bay peninsula) could easily take an hour or more to commute along. Fast forward to the last year or two and that side of the island has seen wider highways built and traffic flow smoothly, so we have seen more than one interested party decide instead to buy on that side.
Our side of George Town is seeing canal front properties having to be priced aggressively to move, whereas the side where the traffic has been speeded up are seeing prices booming.
It has been a little frustrating to see buyers take the short term view (the traffic issue will be addressed soon enough,2-3 years at the outside). I mean, a home like this on the end of a canal peninsula less than three miles from the centre of George Town, what’s not to like? 😉
So, in discussion with the realtors, we are adopting an attitude of patience. Yes, the property is on the market at an aggressive price, but as I sit here today I am considering simply pulling it from the market soon and renting it out for a year or two, ie deciding that I “can stand to wait”. Hmm
Time is a friend to a good business and the enemy of the poor business
I love the quote from Shane Parrish, derived I assume from “Time is the friend of the wonderful company, the enemy of the mediocre.” by Warren Buffett.
In addition to my core work with brave and transformative leaders of large businesses, I also have many years of experience supporting smaller businesses, so often mentor and guide business owners. For the last few years, one such business has had their struggles with the difficulties often found in this era with raising finance at reasonable rates of interest. This has placed a burden on them as they are paying frankly usurious rates of interest, turning a really healthy EBITDA into a continual struggle with cashflows.
That said, over these few years, in addition to supporting them with strategies around their finance, we have also focussed on their core business, which has, each year, seen growth in revenue as well as improvements in both gross and net margins. In short, their core business is a really good one, restricted only by scarcity of capital availability.
However, I said this has been going on for a few years. This takes me back to “Time is a friend to a good business“. Recently I had a regular meeting with their Finance Director and they noted that, over time, the fact that the core business is so strong means that their financial situation is improving. Within another 1-2 years more, this business will be in good shape both on the “P&L” and the Balance Sheet.
Now, if this was a “poor business”, time would not have been kind and they would inevitably have gone to the wall.
A lesson here is to focus on ensuring you have a good business, then (and only then) you may consider “can you stand to wait?”, ie be patient to see the fruits of having a good business.
On the flip side, if you have a poor business, no amount of time will help. To the contrary, things can only get worse, so, tough though it may be to consider, you cannot stand to wait, it may be time to let go.
PS If you can stand to wait a couple of years to realise an entirely predictable uplift in value, that gorgeous house in Cayman is still on the market at the time of writing (I haven’t pulled the listing yet!).