Yesterday, I had a conversation with DK, a fellow Miami Heat season-ticket holder and the president and CEO of a billion-dollar food-distribution business. DK is successful even by Boca Raton standards, but he’s also a laid-back, low-key guy — which marks him as an oddity among his more aggressive neighbors, though he’s very well-liked. We drove to Miami to inspect a building project in which we have both invested. EP, our mutual friend and general partner in the development, was showing us the progress.
On our tour around the property and in the meeting we had with key salespeople, DK was positive and polite — almost to the point of sounding gullible at times. I knew, of course, that anyone who could successfully run a billion-dollar, low-margin business could not be gullible in that way. His reluctance to challenge any of the optimistic projections put forward at the meeting had to be chalked up to something else.
In the end, I decided it was that he had taken a long-term, big-picture view of the deal. Like me, he had invested in the project because of his belief in EP’s abilities and integrity. (See Message #284, “Two More Ways to Invest With Experience.”) Since DK’s investment was based on that fundamental faith, he didn’t (apparently) believe it made any sense to challenge the particulars.
Problems would surely arise — as they do with all big jobs — and those problems would have to be handled on an ad-hoc basis. This might or might not result in a different bottom line. But whatever that bottom line would end up being, DK believed it wouldn’t get any better if he questioned some of the assumptions and decisions leading up to it. I’m not sure he’s right. My gut feeling was to make myself into a bit of a thorn in EP’s side.
I didn’t enjoy doing so, but I believe he’ll be quicker and more aggressive in responding to problems if they have been pointed out beforehand — even if he didn’t believe they were problems at the time. That said, I do think that in developing long-term working relationships you have to take a long-term, big-picture view of things. You can raise questions when the occasion presents itself (as it did during our tour), but you shouldn’t try to micromanage the job unless you are being paid to do so.
Generally, it’s not a good idea to invest a lot of money in a business you don’t control unless (a) you have a great deal of knowledge about how it works and believe it to be a very low-risk situation or (b) you have a long history of experience with the general partner and feel that you can trust him completely. Under either of those scenarios, it’s OK to make critical contributions when called for. But your general posture should be positive and supportive. That way, you can preserve what’s most important: a long term, profitable relationship you can invest in.