Young and Foolish

My friend Sim’ asked

Paul, during your journey to earn a second fortune do you find yourself ever entertaining strategies that are similar to those which caused you to “foolishly misplace” the first?

Are you the type of person who is naturally drawn to “wild schemes” and “flights of fancy”? Or was it more of a “young and foolish” thing which you feel you have grown out of?

I foolishly misplaced the first fortune in 1991/1992. I was attended a meeting with my mentors and outlined an aggressive acquisition strategy. I closed the briefing saying “at first mortgage interest rates of 15% we make money, at 16% we make a bit of money, at 17% we lose a bit and at 18% I go bankrupt. No federal Labor government will allow first mortgage interest rates to hit 18%, so I think I should bet everything on this.”

Nella asked, “what’s the worst that could happen?” I told her we could go bankrupt but we were young and would recover.

The recession we had to have saw rates hit 18%, my bridging finance (with risers, premiums and penalties) hit 33%.

So I remind myself that I don’t have superior insight. That the worst can happen. Therefore I stay nimble and ready to exit if a deal goes against me.

One of the key factors in my first business disaster was not willing to lose $12,000 in 1989 on a deal that went sour while I was on my honeymoon. Had we taken that hit we would never have structured ourselves in a way that allowed our bank to control the sales timetable.

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