This column is a deviation from my usual themes about how to be a strategic leader with an entrepreneurial bent. Instead, this month, I explore why executives may be effective at running businesses but frequently fall short in managing their own money. Like many businesses leaders, I thought I was a street-smart steward of my own portfolio of stocks, bonds, hedge funds and private equity. Then came a wake-up call, manifested by what I would characterize as a less than amicable separation between a double-digit percentage of my assets and me.
During recent market gyrations, assets that took most of us years to accumulate and build were significantly reduced in mere months. There were warning signs. One word kept popping up on prognosticators’ radar: subprime. This was quickly followed by dire predictions that some of the world’s more storied financial institutions could crumble faster, under the weight of toxic loans, than their counterparts did during the infamous 1906 San Francisco earthquake.
Sure, in hindsight, I knew there were troubles brewing. I read The Wall Street Journal daily and Barron’s Financial Weekly. In addition, just like President Obama, nothing comes between me and breaking news from my BlackBerry — nothing.
So why did I and the vast majority of other executives experience a precipitous and cataclysmic exodus of assets damaging not only one’s net worth but ego, as well?
There are apt comparisons between why the shoemaker’s children go barefoot, why the person who represents himself in court has a fool for a client and, yes, why business executives are many times pretty mediocre investment advisers to themselves.
The core issue gets down to priorities, energy and the fact that there are only 24 hours in a day. Business leaders in today’s environment must have an unrelenting laser focus on running their organizations. This, however, can result in one-dimensional thinking.
How many times has your spouse or significant other told you that you don’t listen? Case in point, at breakfast you review your previous day’s business results and your spouse asks you a question, as in, “What would you like to do this weekend?” and you respond by passing the sugar. This is simply an example of time and attention limitations, not lack of interest.
Certainly, you know the mechanics of the markets, you know where you have investments, but at the end of the day, after dealing with myriad business issues and opportunities, you just run out of gas. Because you may be good at making money doesn’t mean you have the discipline and expertise not only to preserve it but also to grow it.
What can we do differently to rebuild our assets, while not losing a beat in doing our all-consuming day jobs? Compartmentalize, compartmentalize, compartmentalize!
Just as you set aside specific time to focus on various aspects of your work, you also must compartmentalize your personal investments and then devote time to them on a regular basis.
Start by scheduling some solitary time with yourself to know what direction your portfolio is going and, more importantly, where you want to take it over the next three to five years. It gets down to something as simple as three sessions every two weeks or some sort of quiet time with yourself. During the first session, review whether your portfolio has been either up, down or sideways. In the second time slot, try to understand how and why it got there. Devote the third review to new investment ideas and consider any adjustments.
Managing a portfolio is much akin to playing a hand of poker, during which you must decide to call, raise or fold. Just like in business, if you hesitate too long, you may lose. Treat your investment reviews the same as you would an update with a subordinate. Establish performance parameters, make notes and always assign yourself follow-up action dates.
It’s going to take some time to rebuild our portfolios. Remember it took an astonishing 25 years for the Dow Jones Industrial Average to return to its pre-1929 crash levels. However, with some discipline, a plan and perhaps a decent adviser, you can at least ensure that your kids will always have shoes and you won’t feel like a fool whose investments deteriorate from passive neglect.
MICHAEL FEUER co-founded OfficeMax in 1988. Starting with one store and $20,000 of his own moneyduring a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annualsales of approximately $5 billion before selling it for almost $1.5 billion in December 2003 to BoiseCascade Corp. Feuer is CEO of Max-Ventures, a retail venture capital/consulting firm, and co-founder andco-CEO of Max-Wellness, a new health care product retail chain concept that is launching in 2009. Feuerserves on a number of corporate and philanthropic boards and is a frequent speaker on business,marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.