The formidable Hetty Green, 19th century millionaire, was a woman after my own heart. Indeed, she was reputed to have a rather tricky personality to say the least*… yet in the cold light of the records of her deeds, and looking at evidence almost a century old, I can comfortably say she is someone to look up to. Hetty Green, miser or not, seems to not only have been an independent thinker; she was also someone who made her difficult personality work for her. Having read about her life, I think there were a couple of tricks up her sleeve that are worth learning.
Despite the 174 years since her birth (today), her established presence in the financial world has meant that there is plenty of evidence to draw some conclusions about how she was worth some 100 million when she passed away in 1916.
It appears that Mrs Green had the clarity to look into the financial world around her and see it for what it was. She had the confidence in her knowledge (she was reading financial reports since she was six years old) to identify and go after the potential opportunities that a turbulent market invariably generates. And last, but by no means least, she had the means necessary to convert opportunities to profitable ventures. My favourite quote of financial wisdom comes from one occasion when she reportedly said that “next to my own dear children, I love nothing more than a good panic”.
Mrs Green did indeed love a panic as much as her children, and so do a few people that can afford to look for the opportunities it brings.
A market panic is full of characteristics of an emotional reaction (yes, that is why they call it a panic, I hear you say). We all know that we had at least a couple of those in this year and we all understand how they fuel what it appears to be emotional reactions to the entire world economy and business.
Although the individual decisions in their majority are cold and usually inevitable choices relating to the way a company or a department can adapt to a new financial situation, the company-level behaviour, when examined from outside, is in essence emotional. We know it and feel it with our business every time it happens…
Bans on travel usually come in two stages. First, a reduction and eventually stopping in participation to large events. Large teams of employees will not be submitting travel expenditures as they did the same time last year. Good decision for the person who is going to be explaining in a few days what he is doing to help cut costs.
Transient travel comes next. No more luxury hotels, business or premium economy flights. Yet another tick in the box for that all important cost saving report.
Naturally, there is a fundamental flaw here. If you were letting people go to all these events, were you just spending good company money for no reason last year? And if there was a reason, how can you argue that it is not there today?
There is a lot to be said about the individual desire to “be seen to do what is right”. A manager who is asking to employ staff today is not going to be the run-of-the-mill individual. Asking for money in this environment is difficult – especially if your department is dependant on other departments to generate money (and therefore there is no direct ability to show profit generation and ROI to employing someone). The same goes for your hotels. In a market that will suffer for several months to come, it is difficult to justify investment in people, marketing efforts, or anything without tangible and quick results.
Spending money in a recession is difficult. It goes against the grain as it were, and it requires satisfaction of certain criteria.
First, all this ability to act when everyone is freezing up, requires very deep pockets. Having the money available in the first place is – and will remain – the single most important factor in any business decision of our times. This is the single caveat that is both an insurmountable difficulty if you happen to be on the side of the non-haves, and a massive competitive advantage if you happen to be on the side of those that have it.
Interestingly thought, the actual size of the pockets is relative to the control of the funds (lets call it “having long hands” – as everyone is making up clichés these days, I can’t see why we shouldn’t).
So the second ability you need, is to reach this cash and be able to use it as you see fit. A board of directors in a company that is uncertain about its future (where things may or may not be bad) is probably waiting for the next term reports to find out what the future looks like before they even make a decision. They are naturally likely to be more reluctant in investing than the single company owner who has closer control and understanding of his business. So, access to the funds is key.
The third ability in question is to see and understand the opportunities around and ahead. A hotelier who manages to choose the right time to contract and refurbish his property when a supply of contractors is abundant and simultaneously worried about their cash-flow, is going to get a good deal. If he manages to time the completion of the refurbishment with the end of the crunch, he has minimised opportunity costs generated by the refurbishment. And that is opportunity costs not only with the suppliers but also with reduced room-stock in an environment where he would need them again. Nobody has a crystal ball of course, but nobody is talking about surgical accuracy in the timing either…
Look around you today. These are indeed hard times, but they will pass. If you are a sceptic that is worried about catastrophic downturns, think of human nature – not always pretty, but the single point of stability and continuity that we can all count on. The western world is now used to good times. We have tasted holidays in the Caribbean, Asia and Orlando, and we are not really prepared to give it up. We will cut down on the distances of our travels, but Turkey, Greece and Spain are only perfect for repeat holidays for a certain type of traveller. Most of us will long to see the world again.
So people will travel again, and with the passing of the hard times, there will be companies that will come out on the other side stronger. It will be those that you see today spending on longer term projects. Companies that are currently employing the best people, not because they really, really need them right now, but because they know they will do soon. These are managers that understand what counts, and drive improvement and increases in efficiencies. People who know what advertising in a quiet market can do for their product, and how far their dollar will take them in these times.
Today, normal business activity, sales efforts, removal of travel suspensions, and visiting of clients face to face, are very likely to not be signs of indulgence. They are signs of efficiency and potential.
So, if you do have cash for a long term investment, and you want to buy stocks that will perform better than average in the next few years, just look at your future reservations. The companies that you see there, are the ones that will be in the stock markets next year. And the year after that.
* I will indulge in a small deviation here to declare my genuine respect. I usually don’t have very much time for difficult people. Yet, Mrs Green was a one in a million, and one guesses she had to be tough in a tough environment. Also, I think that anyone who chooses to talk about her children when addressing economists, and particularly some 150 years ago in a world where women were generally expected to not be seen in business, is showing signs of brilliance. This isn’t just a lady that proved herself to be an independent thinker. She became an independent thinker in a world where she – as a woman – was expected to not personally manage her vast wealth. In fact, I would go as far as arguing that this quote is summing up her personality best, because it shows an underlying, sublime sarcasm directed to the male establishment. There she is, telling them that she is having the time of her life, exactly when they are absolutely not having fun, and – oh yes – she is a mum too, and what she does so much better than all the men, is not even what she loves the most… brilliant!