Warning: Long Post


Talking with clients and business owners, lots of them make comments about the value of having some gray hair (and I have lots). Some of this value is just building up a store of experience over time, some of it is in recognizing patterns we've seen before.

There's two things you learn when you're getting you're pilot's license. The first is to learn from the mistakes of others because you won't live long enough to make them all yourself. Closely related is the concept that good judgment comes from experience, experience comes from bad judgment.

Given that I fit squarely in the "older" demographic in this ecosystem (no snide comments ^Searchfunder member‌), I thought I might share some of this "wisdom and experience" with you. I've got better things to do with my time than start a podcast, but I thought a series of semi-regular notes from my observations in the search fund ecosystem might help at least one of you out there. So, with that, here's the first in a series I'm going to call Grumpy Old Man.

Do let me know if you find this content useful/insightful. If you think it's a waste of time and keystrokes, let me know that also and I'll go waste strokes on the golf course instead of my keyboard. And with that....

Grumpy Old Man #1

Bottom Line Up Front (BLUF): Spend a lot of time thinking about risk management, especially how random events may impact you in strange ways

I was catching up on podcasts recently and I listened to ^Searchfunder member‌'s Acquiring Minds episode with ^Searchfunder member‌ and his experience in hail repair. John, thank you so much for being willing to share that story because I think you did the listeners an amazing service.

I would highly encourage each and every one of you to listen to this episode, maybe 2 or 3 times, and commit it to memory. You may say to yourself "wow, that's a black swan event, won't happen to me." This thought pattern is so common that the FAA has a term for it - Hazardous Attitude: Invulnerability. The prescribed "antidote" for this Hazardous Attitude is to say to yourself "it can happen to me." Repeat as necessary.

The reason I bring this up is because this exact scenario has happened before. As soon as I heard John's story I had flashbacks to 2006 when I was a brand new pilot flying beat up trainers and dreaming of owning a new, fast plane. One of the hottest planes on the market at the time was the Columbia 400. It was the fastest single engine fixed gear airplane available and it looked amazing.

Columbia Aircraft was based in Bend, Oregon (great place to visit!) and had several hundred team members building fast planes. In early 2006 they were switching their new aircraft to the Garmin G1000 glass cockpit system. The FAA certification for this new combo was delayed, so Columbia continued building their planes and parking them on the ramp awaiting FAA certification. As soon as the FAA certified the program, they could deliver the planes to the customers (and get the associated revenue).

Enter Mother Nature. In June 2006 a freak hailstorm hit Bend. Columbia had 60+ finished aircraft parked on the ramp and they were damaged in the storm. Columbia moved their staff into repairing these planes and filed with their insurance carriers for compensation. The insurance carriers responded with a version of "we didn't insure you for that much risk, just normal operating and delivery volumes, sucks to be you."

At this point, Columbia had turned a lot of cash into finished goods inventory that they couldn't sell and was turning more cash into repairs so they could sell what they had (once it was certified). Their private equity sponsors, a foreign technology investment fund, refused to pony up any more cash. Eventually, the company went into bankruptcy, was bought out of bankruptcy by Textron for a valuation we here could probably have made happen, and placed into their Cessna division. Cessna muddled along with the brand for another decade or so before shutting it down completely.

Now, we're not throwing shade here. There's no reason any of you should know about a random airplane company that got done in by a hail storm 17 years ago. The larger point is that freak things happen more often than you think and you need to be thinking about how these freak things might impact your business.

So how do you do that? When I was a staff officer for a Navy Carrier Strike Group, we used to "Red Team" our battle plans. What would we do if the enemy didn't react like we supposed? What would change if the weather was bad and we couldn't launch aircraft to support the ground troops?

I would encourage you to "Red Team" your business plans. Find friends that are smart about business and have them throw you curve balls. The more off the wall, the better. Don't assume away the scenario by saying it would never happen, engage with the topic and really think through what you would do. Do you have a recovery plan? Are you insured? Will your customers stay with you?

I'll throw you the first curve using a somewhat positive scenario. You come in one morning to find one of your longest and most critical employees standing in your office with the keys in his hand. He informs you that the office lottery pool, including all of your key employees, just won a $1.5B jackpot and are all resigning effective immediately. What's your plan?