A friend said business can be compared to boating. I love boating and I love metaphors. So here goes: He said the body of water is akin to the industry. It could be a vast ocean or a small pond. The weather is the present business climate. The vessel is the business. It could be a canoe or an ocean liner. Finally, the captain of the vessel could be compared to the leader of the business. A canoe in an ocean storm could be sunk despite even the best captain. Conversely, a speedboat in a smooth lake with a toddler at the helm could become problematic quickly.
A wise investor places capital at risk with a particular captain, vessel and target destination. The investor must judge his or her ability to deliver on time and within budget –assuming conditions are not always perfect. I like to say that I am an entrepreneur turned investor. I began my investing career by placing resources within a vessel I piloted myself. Today, I still do this, but I also aim to command a fleet –although today they may be more akin to a school of jet-skis.
This week, Mikel will meet up with a number of searchers at the Entrepreneurship Through Acquisition (ETA) conference in Chicago. Some captains of industry are going down market (upstream) to whoop up on the canoe pilots. Other canoeists are begging for a shot at the speedboat. I doubt there will be any ocean liner captains at this confluence.
This whole metaphor got me thinking about Adam Smith’s “Wealth of Nations” and how Smith suggests navigable waterways as one of the most enduring reasons for industrialized success. A nation with navigable waterways can ship both raw commodities and finished goods more inexpensively than transmission over land. There is not a mode of transportation cheaper than floating down stream. As the streams get bigger they adjoin the coasts… and so too does the industry exponentially increase.
If I blend these metaphors together it does not take much imagination to propose main street, small business are comparable to our nation’s rivers. They are numerous and fragmented. Navigating them is more like piloting a kayak than an ocean liner. But, to be fair, the kayak is the sole proprietor freelancer in an extremely niche or small market. Whereas, small business is more akin to the waterways that are too shallow for the industrialized, shipping container; but are still deep enough for a strong propellor and a small crew. They are the portions of rivers upstream from the first set of locks. The crafts and pilots that traverse the locks can probably travel upstream a short distance but would soon run aground. So, they opt not to go there in their standard vessel. It is too risky for the value. Conversely, the crafts that frequent the upstream region can also travel down through the lock. However, they rarely conduct heavy commerce downstream of the lock. They are out of their element. So, in my metaphor, perhaps small business is more like a working pontoon than a barge.
I grew up in Connersville, Indiana which is about as far upstream of the Whitewater River that a canoe can float. It made for a trader-trapper town prior to the formation of the state. The city grew up this way. I now live in Lafayette, Indiana, where the Wabash was joined to the Eerie by a canal, and later displaced by the railroad… and thus, became home of the Boilermakers. I too grew from a kayak to a working pontoon, was displaced by a railroad and am now rebuilding a fleet of pontoons. Some day, I may attempt to pilot a barge. I own minority interests in a few ocean liners.
I realize this is heavy on the metaphor. What the heck am I trying to say?
I think what I’m trying to say is that the craft, captain and waterway must match. A captain of any craft, when out of his element, can probably guide the boat when conditions are modest. However, when times get hard, he needs to be able to approach the shoreline with the suitable technique for his craft, conditions and crew.
As an investor, I think it is wise to judge your captains, crafts and conditions. Are they matched to the mission?