Improvise, Adapt, and Overcome

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Improvise, adapt, and overcome is a well-known saying most commonly associated with the Marine Corps. This slogan embodies the idea that you can overcome anything if you are able and willing to adapt to new conditions and unexpected circumstances. Another well-known saying is “Survival of the Fittest.” While I don’t agree with how far Darwin took this concept, he was correct in observing the variations in animal species based on their environment. They had adapted to different conditions to not only survive but to thrive. 

In life, we are constantly faced with changing conditions and unexpected circumstances. From the moment we wake up to the time we go to bed and even while we sleep, change is occurring. We are especially aware of this in the south where one day it is 80 degrees and the next day it is 40 degrees. It would be foolish of us to walk outside in shorts and a T-shirt on the 40-degree day simply because that is the way we dressed when it was 80 degrees. Or to not wear a raincoat today simply because it was sunny yesterday. The world is ever changing. 

While the illustration of wearing shorts and a T-shirt in 40-degree weather may seem silly, it is not too far off base from the way people operate inside of an organization. We as individuals understand the need to adapt from day to day but when it comes to business many take the “set it and forget it” approach. 

However, those that take that approach are destined to be swallowed up by the changing world around them. Don’t believe me? Look at these well-known examples. 

1. BLOCKBUSTER (1985-2010)

Home movie and video game rental services giant, Blockbuster Video, was founded in 1985 and one of the most iconic brands in the video rental space. At its peak in 2004, Blockbuster employed 84,300 people worldwide and had 9,094 stores. Unable to transition towards a digital model, Blockbuster filed for bankruptcy in 2010.

In 2000, Netflix approached Blockbuster with an offer to sell their company to Blockbuster for US$50 million. The Blockbuster CEO was not interested in the offer because he thought it was a “very small niche business” and it was losing money at the time. As of July 2017, Netflix had 103.95 million subscribers worldwide and revenue of US$8.8 billion.

2. BORDERS (1971-2011)

Borders was an international book and music retailer, founded by two entrepreneurial brothers while at university. With locations all around the world but mounting debt, Borders was unable to transition to the new business environment of digital and online books. Its missteps include holding too much debt, opening too many stores, and jumping into the e-reader business too late.

Sadly, Borders closed all its retail locations and sold off its customer loyalty list, comprising millions of names, to competitor Barnes & Noble for US$13.9 million. Borders’ locations have since been purchased and repurposed by other large retailers.

3. KODAK (1889-2012)

At one time the world’s biggest film company, Kodak, could not keep up with the digital revolution, for fear of cannibalizing its strongest product lines. The leader of design, production, and marketing of photographic equipment had a number of opportunities to steer the company in the right direction, but hesitation to fully embrace the transition to digital led to its demise. For example, Kodak invested billions of dollars into developing technology for taking pictures using mobile phones and other digital devices. However, it held back from developing digital cameras for the mass market for fear of eradicating its all-important film business. 

Competitors, such as the Japanese firm Canon, grasped this opportunity and has outlived the one-time marketplace giant. Another example is Kodak’s acquisition of a photo-sharing site called Ofoto in 2001. However, instead of pioneering what might have been a predecessor of Instagram, Kodak used Ofoto to try to get more people to print digital images. Kodak filed for bankruptcy in 2012 and after exiting most of its product streams, re-emerged in 2013 as a much smaller, consolidated company focused on serving commercial customers.

This list goes on and on: Compaq, Tower Records, Pan Am, Toys R Us, Polaroid, just to name a few. Many of the people who led these companies thought that a particular product or service was what they did, and if they changed that it would jeopardize that line of business. We cannot be so focused on what we started out doing that we lose sight of the long-term goal: to be successful. Businesses are started with the intent to make a profit. If that means switching your product line to changing conditions, then that is what needs to happen. PayPal, Google, Facebook, Apple, YouTube, and Amazon are prime examples of companies who improvised, adapted, and overcame their ever-changing environment. 

The real estate investing world is no different. The environments that affect it are all around. The ever-changing debt market, cost of living, inflation, home prices, average income, changing political policy, and let’s not forget about concerns such as COVID-19. 

There are times when it makes sense to buy value-add 80s vintage multifamily deals. There are times when it makes sense to buy stabilized A-class multifamily deals. There are times when it makes sense to buy pre-stabilized lease-up multifamily deals. There are times when it makes sense to buy in a particular market, however, time could change the circumstances, and suddenly that market may no longer be favorable. This could be due to business closures and job losses. This could be due to migration patterns due to the cost of living, or it could even be due to everyone wanting to buy in that market and the prices go sky-high. 

There are times when it makes sense to invest in self-storage deals. There are times when it makes sense to invest in the single-family “fix and flip” market as a hard money lender. Even within those investment strategies, there are ever-changing ways of operating those investments. Changing technology and resident demographics must always be assessed to be sure we are tapping every potential opportunity. 

As a seasoned investor, you understand this concept. You understand that when we at make a change regarding submarket, asset class, or investment strategy, it is because that is the way we improvise, adapt, and overcome every situation that we encounter so that we all are successful for generations to come.