You have no idea what will happen in a business!
That’s what I most learned as a distressed investor at the Carlyle Group.
Investing in public securities you convince yourself that the management team and you can somehow predict where this quarter or year is headed.
Yet, as a control investor, sitting on the board, with more information, you quickly see how little you know.
And the nothing you can actually predict.
The illusion of predicting the future
Yes, yes, we all know our world is based on guessing the future.
Revenue projections, all the way down to EPS.
It all seems smart and thoughtful and precise, and rationalized by data…
And then, well, for any number of reasons, the world doesn’t behave according to our models!
As we’ve seen this year…
Man, our predictions would have been right on if it wasn’t for Covid!!
For better and worse, btw. (e.g. Amazon vs. United Airlines)
I saw the same in 2008.
The credit crisis and recession blew up many businesses, and completely blew out all projections and cash flow models.
The question we were forced to ask is…
Where is this headed??
One thing I loved about distressed investing was that you never pretend to know!
Of course you do tons of work around business models and cash flows, trying to get precise around how the business will do.
But, in the end, you never rely on your future projection to invest.
You merely come back to what type of coverage you have, and whether you’re getting paid a sufficient return for the risk you’re taking.
See, you’re not trying to guess where the world is headed 10 or even 2 years from now, but on ensuring you’re well positioned for whatever comes next.
This gives you a healthy lens for investing and also for setting goals in business and life.
Where do goals fail you in business and life?
The first way goals fail you is not having them!
See, my point above isn’t—the world is unknowable, therefore don’t bother trying to set targets.
Goals are ESSENTIAL to rallying yourself and your team, and to planning resources, capital, and so on.
Yet where goals fail you is confusing the target with the process.
Meaning, goals never reflect where we “expect” things to come out.
That mindset is completely ignorant of the infinite things that you can never predict nor control.
Goals merely enable you to build a process that based on your best foresight of the future enables you to keep moving forward.
The model for setting goals
Stepping back from my own career, asking my question, “What Do I Want?” led me to develop a model for your personal goals that we apply to our business and with clients too.
It’s real simple.
We so often don’t know what we want or what to predict that we fail to set goals.
This of course keeps many people and businesses stuck, or at best drifting at a so-so level of performance.
Another problem you face with goals is making them too abstract, akin to Bezos simply dreaming to build the everything store.
This type of grand vision is extremely powerful in pulling you forward, but you see all the time those people who miss the trees for the forest.
Similarly, focusing on the trees right ahead, such as this quarter, can be real powerful, but the risk is that you miss the opportunities to grow the forest.
All this led me to see over many years that you want a simple, combined method.
Two steps for achieving massive goals
You want to start with your Grandest Vision.
For instance, a client wants to build the biggest company in the world.
Some people might laugh at that, they say, that’s silly or not even possible, but whether or not it’s possible, it’s a wonderful goal that aligns my clients with the scale of their vision.
And whether they ultimately get here or not isn’t relevant today, or any day before then…
All that matters is this Grandest Vision provides a guiding light for “Next.”
That’s the second step to my model for achieving massive goals in your life, and business.
Just focus on the next step right in front of you.
So putting this together for NOW
We are at a highly uncertain time in the economy and every business.
We’ve made it through a massive shock to the system.
None of us know where this is headed.
You have no clue what the rest of this year will look like, let alone the next 1, 2, 3, 10 years.
So rather than think you need to predict it.
And build out your 12 or 24 or 36 month plan that is full of unknowable variables.
Instead, you want to keep pointing towards the Grandest Vision.
Certainly, take the time to plan out as best you can for that 12, 24, 36, 5 year plan for all the reasons it’s valuable.
But then, become maniacally focused on Next.
Meaning, put all that future dreaming and scheming aside and simply ask yourself and your team—
What must you do to best lead and manage now and through whatever is coming Next?