“Whom the gods wish to destroy, they give unlimited resources.” -Twyla Tharp
Baron Rothschild is quoted as having said “the time to buy is when there’s blood in the streets, even if the blood is your own.” This is similar to Warren Buffet’s practice of being greedy when others are fearful. The goal in both instances is to try to find the silver lining in a dark cloud.
In the early 1900s, the Wright Brothers weren’t the only ones trying to build an airplane. Many other groups were investing effort and resources to the same end. Moreover, the Wright Brothers were “disadvantaged” relative to most others trying to build planes. They had less financial resources, less man power, less formal education. The only thing the Wright brothers had more of relative to others in this pursuit was more limited resources. They were high school drop outs that built bicycles for a living. The Wright Brothers somehow scratched together about $1,000 to fund their efforts. This can be contrasted with some of the mega corporations on the same adventure investing millions. The brothers should have had their lunch fed to them by any objective measure. Yet, they are credited with being the first to create a flying machine. Why? How?
A key difference between the Wright Brothers and others has been noted that as under-resourced as they were, they were able to manage many more test flights. They were running more tests in a month than their competitors were in a year. They were managing thousands of test flights in a short period. They were outlearning their competitors by factors in excess of 10x. This, independent of the absence of resources. They constructed an early form of a test wind tunnel which helped their rapid iterations. They would run a test, make a minor adjustment, observe, learn, repeat. All while the well funded and smarter corporations would slowly plod and plan their way through committee meetings and extensive debriefs. The bigger ships were harder to steer and slow to respond. The Wright Brothers bias to act coupled with the absence of resources forced a focus to which the well fed and funded corporations couldn’t match.
We often bemoan our lack of something. We see scarcity as the dictionary suggests we should in that it indicates that we have an insufficient amount of something. Scarcity is seen as a weakness, a deficiency, we are missing something we need. In this note, I’d like to invite us to consider that scarcity is a secret strength. It can and should be seen as a gift. Having less really can be more.
Just weeks after being married in early 1998, I quit a well paying job I had in Toronto to move back to Calgary and start a business from scratch with a friend. Neither of us had any real entrepreneurial experience, nor were we experts in our newly selected field. Moreover, we were not starting the business with an injection of capital that would carry us perpetually. Our sole superpower was that we didn’t know what we didn’t know. Reality wasn’t front of mind. We got going with our own very limited resources. We bootstrapped and made personal sacrifices. My partner kept his day job and helped out evenings and weekends. I forewent any compensation at the outset. Our limited cash was spent on a small warehouse and some inventory. We did everything ourselves. We created a basic logo ourselves which was our sole marketing initiative. The rest we did by picking up the phone and knocking on doors. As we beat the bushes trying to drum up business, we became aware of the economic circumstances in which we were operating. Our business was trying to sell a specialized type of battery to directional drilling contractors in the oil and gas industry. The price of oil had just collapsed and had broken down below $12. Things were ugly and our customer base was reeling with its own problems.
During our early months while we struggled with our production and sales, our limited (as in zero) financial resources dried up. As we danced with the deficiencies of our dearth of finances and customers, we definitely felt sorry for ourselves and wondered what we had gotten ourselves into. However, we continued to plod along. Mike Tyson, the boxer, once said ‘True freedom is having nothing’. Well, we were certainly free. About as free as we could be. We took action where we could and having limited resources, had limited options. We were free (well forced) to make good choices with our rapidly retreating resources. We had no choice but to figure out to what to allocate our funds. We had no margin for error. There were no other investors to fall back on to seek additional funds. We couldn’t go to a bank and ask for a loan. We didn’t even have things ourselves yet in life to sell to convert into cash. We just had to make the right choice. This absence of resources, ironically, was a blessing and not a curse. It forced us to focus on what really mattered. We weren’t talking about pretty carpet or paint for our shop. Decorations weren’t a debate. We weren’t worried about the newest version of laptops. Technology wasn’t a temptation. Advertising wasn’t an argument.
It wasn’t hard to figure out that if we only had funds to pay for either inventory or shop space, inventory was a priority as this is what we could (or would hope to) convert into cash through sales perpetuating our existence just a little longer. We knew the essential things we needed were the materials we used to produce the products we sold. Everything else was frivolous. We came to recognize that the shop space we had committed to just wasn’t necessary. We talked with our landlord and found a way out of our lease. We “rightsized”, and put our funds into only things we had a hope to sell. The base of operations for our business then became the garage in my newly constructed townhome. Not the best place in the world to be working with explosive batteries or to showcase our production to prospective customers, but I definitely enjoyed the commute while the business enjoyed the lease expense reduction.
With constraints compounding we began to ask better questions. We considered, “how can we get our business in front of the customers we are trying to reach without spending money on marketing?” We asked, “what do our customers need that we haven’t yet figured out how to offer?” We worked harder to source materials used in our products in ways that saved a dollar here and there. We went to our customers and offered discounts for pre-payments in order to cash flow our production.
When resources are limited, we’re forced to make better choices as there are real and stark consequences for making the wrong ones. An absence of resources breeds resourcefulness. Our early business experiences could be countered by the exact opposite conditions of the dot com era. Investment funds flocked to internet companies which wildly spent money chasing business models that had no urgency to develop reliable revenues. Many, if not most, of these start up companies did not last and reality caught up with them around the year 2000. With abundant resources that seemed to be infinitely renewable, office space was overcommitted to as was staff. Expense control was a non-issue. Things were about scaling up to be able to meet what was anticipated to be some amazing demand for a yet unknown product in development. When investors began to realize that expenses were completely out of sync with revenues that either didn’t exist or couldn’t catch up with spiralling expenses, capital fled, and the dot com boom became a dot com bomb. What started with such “advantages” fuelled poor decisions. When times are tough, we can use them to learn to develop the right stuff.
If we consider this from our role in the insurance industry, perhaps, we’re feeling a little lament for not having enough markets. Maybe we’re blaming our brokerage for our inability to attract customers because we only have access to a few markets or we don’t have the ability to sell a specific market’s product? We look over at our competitors that do have the ability to distribute our dream market or that have access to a number of extra choices and see them cleaning house while we grouse. If we stop and give this some thought, we can ask ourselves a few questions. Are we actually disadvantaged with the markets we have to offer? Aren’t there any number of outfits distributing insurance with even less than what we have to offer? In fact, aren’t there any number of distributors that have just their own, single market? How’s State Farm doing? What would the Cooperators think about our excuses? Federated seems to be doing fine. TD’s on track. Lots of places are surviving and thriving with a limited set or even a single market. On top of others being able to do it, what are a few advantages we could conceivably have from distributing just a handful of markets? With less markets, it’s easier to select which of our available ones may be a fit for a given insured. The time spent getting multiple options from a myriad of potential providers is reduced. Moreover, with less markets, staff training is reduced. We can be better at using the portals and processes of our fewer markets. Both of these offer advantages that follow from having limited market access. We can be more efficient and respond to our customers faster. This is a key purchase decision for many insureds. We can also help our insureds avoid decision paralysis by not offering an abundance of choice. If all we have to offer is, as the classic SNL skit offers, “Cheeseburger, Cheeseburger, Cheeseburger”, then that makes choice pretty straightforward.
Success follows struggle while complacency follows comfort. In Harper Lee’s classic, To Kill a Mockingbird, Scout’s class puts on a school play called “Ad Astra Per Aspera”. This Latin phrase translates into “To the Stars from Difficulties” which is a great way to capture what we’re talking about as is the following offered as a definition of what is an entrepreneur: “Those who do more than anyone thinks possible…with less than anyone thinks possible.” This is the posture we’re trying to put forth. It’s applicable to any of us anywhere. Stepping back and striving to see limitations as an opportunity to sharpen our skills is, at worst, a helpful perspective to trying to control what you can instead of complaining about circumstances. All we can do is attempt to subscribe to Teddy Roosevelt’s urging of “Do what you can, with what you have, where you are…”