Only then will you know what the sea is about...
By February 26, 2023– Published on
I have written and spoken at length about the utility of confidence and how it relates to optionality. For example, having the confidence to know you can weather the storm gives you the option of patience when everyone else is losing their mind.
This principle holds value inside and outside of investing.
During a steep market correction, we get to watch human behaviour at its least confident.
People run for the exit, experiencing what it feels like to be overexposed with money they can’t afford to lose.
Others rush in just as frantically, throwing money at the dip - often an equally short-sighted, reactive action.
But there is also a tiny minority of people who are doing neither. Instead, they are sitting on the sidelines, watching the chaos, waiting. They are waiting for loose hands to shake out and for the noise to settle - instead of chasing the action, they are waiting for the price to come to them. They are exercising the most important trade in finance - patience.
Patience comes with a cost. The cost is dormant liquidity. At my recent conference in Vancouver, the VRIC, patience, and liquidity were the most common holdings of my guests. Any pros that joined me on stage who had a few decades of market cycles under their belt had large allocations in Treasury Bills, GICs, cash and gold.
The boring stuff - options on liquidity.
But excess liquidity removes the obligation to do something in the face of crises. It gives you the option of patience when the high-risk stuff gets volatile.
This strategy is as valuable in business and life as in the markets.
Before 2020, I didn’t have the media business I run today - the podcasts, YouTube channels and newsletter. I was running an event and trade show company. We had investment conferences in the commodities and technology sectors, with shows in Vancouver, Toronto, California and Las Vegas.
When Covid shut down the event industry, my employees demanded that we pursue the virtual trade show model - it seemed like the safest bet - the direct virtualization of our business model. This was the obvious Covid pivot for most event production companies.
Frankly, I had no interest in pursuing this model - I had never enjoyed attending a virtual trade show.
So I refused. I told them we would go in a new direction and build something fresh.
Fearing the unknown, everybody quit.
So I onboarded a new, hungry crew, and we built the media company that is our core focus today. It is an agile, fun and steadily growing business. I love it. During the first year, almost everyone worked six days a week to get our new venture to a place of sustainability.
But as a consequence, when live events came back, post Covid in 2022, we had the option, but not the obligation, to resurrect the event business. Why was this important?
The event business can be lots of fun but comes with significant risks. The cash outlay is extensive and often begins 12-18 months before the event. For events in speculative investment sectors like mine - this creates massive financial exposure. The volatility of the industry can change significantly in 12 months, altering your forecasts in real-time after you’ve committed your budget.
For example, in 2017 and 2018, we had blockchain investment conferences in Vancouver and Toronto. They were packed to the ceiling with hungry investors. But by 2019, we couldn’t pay people to care about blockchain. The market had shifted, and interest was gone.
In 2012 we had nine junior mining conferences spread across North America. However, by 2014, the commodities market had crashed, and 76% of our clientele had evaporated.
Massive shifts can happen very quickly.
Had we spent 2020 and 2021 pursuing the temporary band-aid of virtual trade shows, staying exclusively in the event business (instead of building something new), we would have had the obligation, not the option, of going right back to where we were three years earlier.
But because we used that time to build something new - we had the option, not the obligation. Having the option decreased our urgency, increased our patience and created much healthier energy in my team.
We spent more time discussing if we were to go back to live events, how we would go back. We discussed as a team where we knew we could be the best in the world versus where we were just average.
We created more innovative processes with a more efficient organizational chart. We leaned harder into our strengths and took more considerable risks where we knew we had a competitive advantage.
We became clear on what we did better than anybody else and focused on that instead of trying to please everybody.
And not everyone was pleased.
We had some historic clients that made unreasonable demands for “how things used to be,” so we let their business go. We had some keynote speakers with incredibly abrasive egos, so I revoked their invitations.
When you have options, you operate with confidence. When you have confidence, you stick to your principles, despite what others ask of you.
We operated from a place of power, and the result was fantastic. Our decade-old clients told us we’d become better than we’d ever been.
All of this was because we were operating with the confidence of having options, not obligations.
But - here is the curious part of this that I can still not reconcile.
We ended up with options in 2022 precisely because, in 2020, we had none.
In 2020, Covid mandates shut down my business. My team quit. I had no idea how to move forward. In hindsight, I recall knowing that the media business was the obvious choice. But in reality, at that moment, I had no idea what to do next.
I had just purchased a house, I had a third son on the way, and I had just lost my business. My back was against the wall. The wolves were closing in.
My lack of options ended up being the driving force of the media business. Working 24/7 isn’t hard when you look at your kids and wonder if you are about to lose your house. Desperation is a powerful fuel source.
When we built our event business back, we built it better than ever - because we had options. But the only reason we had options - was because of the day when we had none.
Which begs the question, where is there more utility - operating from a place of confidence and patience? Or operating from a place of back-against-the-wall-desperation?
It is unclear to me.
This question, like most, is absent of a “correct” answer. It is dependent on context.
The fire in the belly that comes from a lack of options is one of the most creative, productive and amazing things in life. This has been the foundation of many of my favourite memories - having my back against the wall and fighting my way out. It might be the sweetest part of life.
But equally rewarding is knowing that your cunning, hard work and preparation have set you up with a competitive advantage, and you now have options your competitors do not. This, too, could be the sweetest part of life.
There are no absolutes. Having options can be good. A lack of options can also be good. Options make you comfortable and confident. But getting too comfortable can be dangerous.
Enjoy your Sunday,