First published in the Financial Times on 17th April 2012.
It takes courage to follow one’s instincts
Few things matter more in business than timing. Being too early or too late can be just the same as failing – even if the idea itself is correct. But if you get your timing just right, you can make a lot of other mistakes and still succeed.
In terms of timing, it’s hard to beat British technology entrepreneur Michael Birch. He and his wife started working on the social networking website Bebo in January 2005. It grew rapidly and just three years later, he sold it to AOL for $850m.
Yet a mere two years after the purchase, AOL proceeded to dispose of Bebo for an undisclosed amount thought to be less than $10m. As he said afterwards: “Obviously, the timing was good for us and bad for AOL.”
Did Mr Birch predict the financial crisis and the rise of Facebook? I doubt it – but he saw a fashion, obtained sound advice and knew when to take some cash off
Now and then I get my timing right. One occasion was backing retailer Topps Tiles just as the boom in floor and wall ceramic tiles started to take off in homes across Britain. Another was founding Integrated Dental Holdings immediately before the wave of consolidation in dental surgeries.
I wish I could say that I knew these trends were in motion when I became involved and was certain that they would prove profitable. In truth my investments were probably more intuitive than scientific – a vague gut instinct that those bets made sense – but probably not a lot more profound than that.
A woman with a pioneering sense of timing was Madame Clicquot, creator of one of champagne’s grandest marques. Towards the end of her life she wrote: “The world is in perpetual motion, and we must invent the things of tomorrow. One must go before others, be determined and exacting, and let your intelligence direct your life. Act with audacity.”
The widow Clicquot was as good as her word when she overcame a naval blockade to deliver 10,000 bottles of 1811 Veuve Clicquot to the Prussian city of Konigsberg, neatly in time for the British and Russians to celebrate Napoleon’s abdication. Within a few years she had become one of the first female leaders of a modern commercial empire.
A weakness of classic legal and accounting due diligence is that such analyses look backwards and are therefore less effective at predicting the future. For example, they cannot forecast changes in human behaviour, technological breakthroughs or regulatory and political upheavals. We can only make educated guesses about such factors – yet they often make all the difference between brilliant and terrible strategic moves.
Chance so often plays a major role. The very title of the autobiography of The Police guitarist Andy Summers – One Train Later – sums up how luck worked for him. A happenstance collision with drummer Stewart Copeland, alighting from the same London tube train at Oxford Circus, led to Summers joining the band and becoming a world famous multimillionaire.
Good timing is enhanced by a decisive temperament and a self-confident personality – two other important traits of entrepreneurs. Often such individuals appear to dither endlessly before taking the plunge; but in fact they may simply be waiting for the right moment. Then they will move like a whirlwind and seize an opportunity.
Very often those who possess great timing are nonconformists. Usually if you are selling at the top and buying at the bottom, you’re in a small minority. Indeed the life of a contrarian is frequently uncomfortable – it is a question of disregarding the crowd as it charges in the opposite direction to the path you have chosen to follow.
It takes courage and self-belief to follow one’s instincts in such circumstances. And of course victory tastes that much sweeter when one’s evaluation is proved prescient, and the herd’s is shown to be wrong.
The investors, inventors and entrepreneurs to watch are those who understand the zeitgeist, monitor the economic cycles and know which issues make a difference and those that are just noise. Committees and bureaucrats are not so sharp at timing, which is where freelance operators have an edge over giant organisations that might otherwise control everything.