Mistakes Were Made: Lessons Learned from the 80s Recession
“A smart man makes a mistake, learns from it, and never makes that mistake again”-Roy H. Williams
Make no mistake. A recession is coming. It’s just a matter of when. And, now is the time to learn from past mistakes so we can avoid them.
The Trammel Crow Company is one of the premier developers of the last century. When the recession hit in the mid-80’s they got walloped. The value of their developments fell from $2.2 billion to under $100 million in just six years.*
In 1989, managing partner Gary Shafer sent a request to his regional partners asking them to share mistakes they’d made so they could collectively avoid them in the future.
Gary Shafer’s intro to the final memo shared with Trammell Crow’s leadership.
As we face a similar inflation-driven recession, we can learn a lesson or two from their experience. You can read the 100+ page memo here (highlights not my own) or you can leverage my notes.
Here were the most common themes ranked from most to least frequently cited:
- Talent matters in a shifted market! It’s all hands on deck and who you have matters more than ever. “The tougher the market the better the person needed.”
- Cut expenses fast and stay lean! And the best time to start is in a good market. “Stay lean even when you can afford to be fat.”
- Debt can be deadly. Don’t take on too much when capital is cheap. “Avoid personal liability like the plague.”
- Get real and act quickly! “Do not follow the market down – lead the market.”
- Don’t be greedy. Take your winnings while you can. And stop speculating that things will improve. “Be willing to make the tough decisions on projects and personnel. The first markdown is the least expensive.”
- Develop your bench. Even in bad times, don’t stop interviewing. “In a tough market, it is fairly easy to upgrade your mediocre employees with better qualified people at lower prices.”
- Build your war chest before going into battle. “Cash is king.”
- Communicate with your team and partners and engage them to find solutions. “Let your employees work together…to create cost-saving ideas.”
- It can always get worse. “Worst-case projections in one quarter tend to become best-case projections for next quarter.”
One of my favorite short books is Managing Oneself by Peter Drucker. My big takeaway was his concept of “feedback analysis.” When facing a big decision, Drucker counseled to journal why we made it and our expected outcome. A year or so later, go back and review your decision in light of the actual results. You won’t be right as often as you like, but that isn’t the point. Purposeful analysis makes us smart. “Follow effective action with quiet reflection,” writes Drucker. “From the quiet reflection will come even more effective action.”
Shafer’s time capsule from a past crisis gives us a wonderful opportunity to take more effective action in our present market slowdown. Don’t waste it.
One question to ponder in your thinking time: What lessons can I learn from Shafer’s team and start implementing today?
Make an Impact!
Co-author of The One Thing & The Millionaire Real Estate Agent
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