Excerpt: An intellectual friend of mine suggested the meditations of Marcus Aurelius to help put the current turbulence into perspective. He was Roman emperor during periods of plague, famine and war. His wife died prematurely and he was absent for years from Rome while fending off hordes of barbarians. His stoic outlook serves as a useful reminder of just how lucky most of us are: “Loss is nothing else but change, and change is Nature’s delight.”
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Bosses need courage to survive this turmoil
By Luke Johnson
Published: November 4 2008 21:01 | Last updated: November 4 2008 21:01
I met an acquaintance this week whose transport empire has been reduced to rubble by the downturn: 20 years of work destroyed in a matter of months.
His company was made bankrupt just a few weeks ago; collapsing demand and soaring costs did for it. So now he sits at home in his leather armchair, hitting the vodka by 11am, mired in boredom, self-pity and regret. His existence has gone from one of frantic activity to complete emptiness – no money, no confidence and no energy.
Of course, losing a business is not a matter of life or death, but for a founder it can feel like a bereavement. Often their self-belief and career never recover. Perhaps there are no second acts in business, either. Each ruin can be a minor tragedy, littered with collateral damage to family, staff, suppliers and the like.
Should we feel pity for a defeated entrepreneur? Not really – there are more deserving victims all around. After all, business without the chance of failure is like heaven without hell: somehow the concept doesn’t work.
Each builder of every business knows that their enterprise might one day be shut down. Those who speculate to accumulate must understand the consequences of losing. But few dwell on this possibility – otherwise the fear would eviscerate them. By nature they believe in an optimistic future, so caution and risk avoidance are not part of their psychological make-up. They are competitive to the core, and winning is the only option.
A handful of British entrepreneurs were astute or lucky enough to cash out before the music stopped. Characters like Jon Hunt of Foxtons estate agents and David Wilson of housebuilders Wilson Bowden were wise enough to see that the boom times could not last for ever, and took some cash off the table when it was available.
They were sufficiently pragmatic to stifle any emotional urge to hold on to their creation, and swapped it for liquidity. They knew that even great businesses can peak and that timing is all in commerce. Meanwhile, right now virtually every single estate agent and housebuilder in the UK is losing money.
At this point in the cycle there are almost no buyers for anything, but those still in the game have to keep managing, even while their assets depreciate by the month. It isn’t easy being a corporate cheerleader when the economy is having a heart attack.
Yet there is no choice but to soldier on, focusing on short-term survival, so that you are still standing when the recovery eventually takes hold. All the time the dreadful mechanics of operational gearing in reverse apply: for every 15 per cent off the top line, the bottom line falls by 50 per cent or more.
It is vital to retain a sense of humour during these dark times. Unsurprisingly, comedy always sells well during slumps. But downsizing is never fun: the unpleasant choices about what and who to cut are dehumanising.
Meanwhile, motivating staff can be a titanic challenge if they are afraid for their jobs and see their bonuses stripped away, their overtime cancelled. It requires real strength of character and courage to captain the ship during such turmoil. And persuading a nervous bank to stay supportive takes a rare and delicate mixture of charm and steel. I recommend you try to stay healthy by taking exercise to release endorphins and relieve stress. And you may want to avoid the media, because even the most sober and reliable of publications contains such a barrage of grim news that it can only dispirit anyone trying to hold the tide.
An intellectual friend of mine suggested the meditations of Marcus Aurelius to help put the current turbulence into perspective. He was Roman emperor during periods of plague, famine and war. His wife died prematurely and he was absent for years from Rome while fending off hordes of barbarians. His stoic outlook serves as a useful reminder of just how lucky most of us are: “Loss is nothing else but change, and change is Nature’s delight.”
lukej@riskcapitalpartners.co.uk
The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm
Copyright The Financial Times Limited 2008
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