Like a lot of near 40 year old fathers, I’ve learned to use humor to cut through a tense situation. Of late, I’ve had extra time with three hormonal women in my house (wife and two daughters), and a seven year old daughter (#4) who likes to say, “Dad, where did I get my weirdness?” To which we both smile and argue some version of “it’s me, honey. I’m why you’re weird.” To the others in my life, I’m sorry I’m so weird. ‘Hug a bear’ is a bit weird.
The United States went tumbling into a recession –a face-plant of sorts no matter how you describe it. As I write today, multiple states are going into “lock down” which is a term we have to Google because it’s been so long since we’ve seen anything remotely close to this. Even in 2008/2009 we did not go into lock down. Is this worse than we can even imagine? Worse than 1929?
I don’t think so. I have a vivid imagination. It could be way worse.
However, I am opposed to fear mongering. It’s helps no one but the promoter. I’m also a planner by nature and nurture. And telling others about your doomsday plans just weirds them out. So, allow me to step away from that promotional weirdness and instead go to a place that I think can be helpful.
Hug a bear. What does that mean? Well, in a sort of humorous reminder, I’d like to propose that we give our businesses a bit of a hug. I’m personally thankful for our managers and teams who have elevated their leadership during the turbulent last few weeks. There are national firms and small businesses alike who are running specials, price cuts and deferring their legal rights to evict, collect and penalize –ahead of some government demand. For this, I am grateful.
I have personally witnessed employees offer to take pay cuts to assure no one on their team gets laid off. I’ve seen businesses donate inventory to competitors to meet a customer need. I watched two sibling doctors abandon their family vacations to provide aid to their communities. And, I’ve watched countless others unify around a common focus… the COVID-19.
I don’t think COVID-19 is the reason our leading indexes are getting rocked. It is part of the equation, but frankly, it’s a convenient excuse to exaggerate. Instead, I think we ought to focus on what we own, and what we could own, and what is the next most productive step. Think Big, Act Small.
At Little Engine Ventures, we own a diverse basket of boring businesses, most of which we have discovered (afterward) happen to be “essential” to our economy. We knew solid waste management, food production and overnight trucking were pretty core to life. What we didn’t know was the importance of beer, windshield repair and tooling to keep our country alive; albeit at a safe distance from one another for the time being. We have adapted each operating plan to maintain social distancing and/or changed our method of operation to keep services going and people safe. I realize not all businesses can do this. Fortunately, we can and have.
Thus far we have not shed any personnel, nor have we cut planned expenses. In a couple of cases, I authorized increases and even bought some public stock. Could I be wrong? Certainly. Are our customers and teams still in need of help and leadership from us owners? Absolutely.
I think it is important for business owners to revisit their policy toward exploration versus exploitation. What are the things you know well and can deliver reliably? What things might you shift, rethink or retry?
In my case, I am hugging this bear economy. If fantastic businesses are going to be offered at cheaper prices, I am glad for that. I am a long term buyer. I don’t want high prices.
As for operating challenges and disrupted supply chains, I am a problem solver. I like volatility because it awakes people to doing things in a better way. Bring on a bear market. I am going to hug this bear. Thank you. The last time we had a huge bear market, I greatly increased my business. Sure, some ideas got pummeled, and I lost money on those, but other ideas went to the moon. Anyone that was expecting a smooth ride up and to the right of the chart was clueless. Business does not work that way.
So, hug this bear. Find your investment ideas and love on it. Work on it, and it might start paying you back (in a few years… or more.)