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…