A Postcard, from the Land of Risk By Brad Thomason, CPA
The other day I ducked out a little early for lunch. I’d skipped breakfast , and had the basic outline for a pretty grueling session at the gym later in the afternoon. Felt like I need more than just a bite to eat. Felt like I needed a meal.
Just down the road from our office is a restaurant that’s similar to a type I would guess you could find most places. It’s been there for ages, sort of a local institution. The family that owns it is of some sort of Mediterranean descent. On one menu you’ll find Greek food, Italian food, seafood, steaks and lamb. Put it this way: if you can’t find something you want to eat, it certainly isn’t their fault.
I was well into my lunch. I’d hit the point where I’d abandoned the sides and was focusing on getting to the end of my steak; not so much because I was still hungry, but because I was taught that being wasteful is tacky. Then, out of nowhere, boom.
A literal boom. A single bolt of lightning which hit so close that the thunder followed immediately. The lights flickered. The lights went out. We were dead in the water. 11:58, a.m.
I surveyed the room. There was a long table of about 15 seniors who had been congregating in pairs and singles for the last few minutes. Somebody’s birthday. At another table there were a half a dozen ladies who had gathered for “lunch with the girls.” Probably four or five more four-tops. And the restaurant had two dining rooms.
Not much happened at first. Then the wait staff started to circulate. Yes, unfortunately the power was out, and they were – at the moment – unable to cook anything. Conversations turned to “where should we go instead?” Those just arriving reported that the entire block was down, even the traffic lights.
The population quickly divided along a singular line: those of us who had already gotten our food, and those of us who were going to have to go elsewhere to get fed.
I’d guess there were 40 or 50 folks who probably had to go elsewhere. Typical ticket for this place would run about $20 a head for lunch. $900 or so walked out the door.
That’s money that won’t come back: being hungry for lunch doesn’t carry over. That day’s receipts will be low, and they won’t get made back up by future lunches.
My waitress, sort of sheepishly, asked if I had any cash when she brought me the check. Which she’d hand-written on an order pad…
Outside it was cloudy, but there wasn’t any rain falling. I drove around the area just a bit before going back to the office. There’s a movie theater nearby. People were milling about outside (in 95 degree heat…) clearly unsure what to do next. Other restaurants in the area had similar crowds buzzing about the doors. This little random outburst of electrons, it turned out, had altered the plans of a lot of people.
Sometimes, in both business and investing, stuff happens. It may be something no one ever thought of. It may be things that aren’t that novel – like a lightning bolt landing right in the middle of your friendly neighborhood transformer – but are also completely unavoidable, impossible to protect against.
We have an old expression here in the South: It ain’t the snake you see that you gotta worry about.
I’m prepared to bet that the number of people who expected to have their mid-day interrupted in such a fashion was, adjusted for rounding, zero. Numerous business owners lost money; maybe not world-ending amounts, but certainly meaningful amounts.
Risk, by its very nature is rather feral. It can show up anytime. No warning required. Nor is it obligated to take on any particular form. It happens when it happens, and the fallout is what it is. Rationally, we understand that this should be our expectation. Yet, almost always, we’re surprised and maybe even shocked (no pun intended) when it comes along.
Modern regulations, and the markets that have grown out of them, are designed to protect against as much as possible. Which is good. But it is vital to understand that such man-made contrivances can only go so far. If we let ourselves get too impressed with what we as a society have done to insulate ourselves from chaos, we end up becoming more susceptible to its bad effects when it actually shows up. If you think you are protected and you get whacked, it’s de-stabilizing. But if you are comfortable with the fact that complete protection was never on offer in the first place, it’s easier to view that eventual blow as just another day at the office. And after it passes, you get back to doing what you were doing before the bolt out of the blue.
Our office is apparently on different service. The lights were on, and I got to spend a predictable afternoon doing my work and wishing I hadn’t eaten so much. These things come, and then they go.
But when you are making your plans, please just remember that they do in fact come. Maybe you can protect against them, maybe you can’t. After the fact, it is usually a good idea to reassess. Beyond that, it is important to just get back to what you were doing and keep on keeping on. These things happen, you know? They are just part of investing, whether your capital is tied up in a business, a piece of real estate or a financial instrument. Successful navigation of the investment waters is much more likely if you understand what’s really out there. Even if you can’t know exactly what form it will take, when it will occur or completely prepare for it, you might be able to recover from it quicker.