Great investors have skills to seize opportunities and get into good situations. Equally as important can be the skill at “scrambling out of bad situations,” as Charlie Munger would say, or “dodging bullets” as it sometimes feels when helping companies solve challenges. At the Berkshire meeting this year, Charlie mentioned a few times how “scrambling out of bad situations” was an under-appreciated key to Berkshire Hathaway’s long-term investment success.
This year has been a year where several of my investments dodged bullets. The companies are doing well, we are creating great value, and there are always challenges being thrown at us. We sometimes need to dodge a bullet. A bullet is usually not a life or death thing for the company, but it can be. This summer, I also read this book about Elon Musk, Tesla, and SpaceX — it was fascinating to read about the company-threatening bullets Musk dodged with Tesla and SpaceX. The stories about Travis Kalanick, founder of Uber, also have many tales of the bullets he dodged in earlier start-ups and business situations before he hit on Uber (plenty of bullets there as well).
Dodging Investment Bullets
Here are some things I have found helpful in dodging bullets (with still plenty to learn) with private company investments:
- Identify the bullet — do not fool yourself. It may be uncomfortable to face a difficult situation, or admit it is there. The first step is realizing a bullet is in the air and not trying to kid yourself about whether it is flying toward you or not.
- Keep calm and be rational. It is important to keep emotion at bay, focus on the task at hand, and make rational choices.
- Intention, attention, no tension. Once the bullet is identified, it pays to work hard on the challenge, but also not to work so tightly that you paralyze yourself. This is a phrase used by Marci Shimoff in her research on happiness and achieving goals. It is effective to state your intention, give the goal plenty of attention, but also make sure one does not have too much tension around it.
- Put in the effort to create options. Nothing is more valuable in business than having options to choose among. Running out of options is truly when you can get stuck. Thus, I have always found that it pays off to create options, no matter how much work it requires (often double/triple/quadruple the work). Sometimes the process of just doing the work of creating options is helpful as it feels better to be doing something than just sitting around and hoping things work out.