April 1st will mark the third birthday of Endurance Corner LLC. This week I’m going to outline the decisions that cost us the most money in our start up phase. These themes pop up in many areas of my life so, I hope, you can learn from our experience.
The original concept for starting EC was to help people. I'm not sure if I've ever told you but a personal goal is, over my lifetime, to reach one million people with a message about using personal athletics to change the direction of their life (one article at a time).
In wanting to help people, I need constant reminders that making things "easy" isn't a help! Most of the money that I have wasted so far (I'm sure that more mistakes are to come) is due to a misunderstanding of human nature.
This week's article covers: (a) thoughts on how to run a camps business; (b) my trip report from our Fall Canyons and Deserts Camp; and (c) tips that I picked up from a master of people skills.
A few months back Robbie Ventura (RV) asked me what we were going to do together this year. I suggested hosting a training camp together - RV was going to be in Vegas for Interbike so we built a route that started/finished from there.
Tip - Be willing to travel to your teachers.
Other than having fun (which is important), I like seeing Robbie each year for two reasons:
Being an extreme read/write learner and communicator, I am at a disadvantage when it comes to improving my people skills. To make improvement I need to get out there and interact! The coaching business has helped because I have a lot more telephone interaction than the past.
RV on the other hand is the opposite - I suspect that he spends most of his time dealing with the person that is right in front of him. So if your success depends on his help then you'll need to figure out how to get face-to-face with him. That leaves you with two choices... travel to Chicago or attend a training camp with him.
The advice, "don't quit your day job" is a common refrain, this week I share ideas about creating the life you want to live.
The photos this week are from our most recent training camp. I'd like to get a few more sign ups for our St George Ironman Weekend in November.
If you know an athlete that might benefit then please have them contact me.
Three days of training, including hotel/breakfast/dinner for $475. That price includes hotel/meals.
A bit of advice on making-it-happen.
Know what you want, specifically.
First... Which camp? With whom? Be specific.
Second... Observe the people that are living the life you (think you) want to lead. What have they done over the last TEN years and are you will to make the changes required in your own life to replicate their long term work. Understand the long term habits of successful people.
The second point is one that Marilyn made at the camp. She was asked what the difference was between success and failure in athletes - I'll paraphrase - Successful people are the ones that are willing to change their approach to achieve their goals.
Greg Bennett made a similar point - When I realized that I was competing against athletes with superior genetics, I realized that I had to be willing to do the work that others find too hard.
These themes return to me in all areas of my life.
I bumped into my buddy Ed this past week on the road to Ward - we'd been trying to catch up for a few weeks and it was an appropriate place to see him. With highly focused athletes, you either catch them training or at a meal. It's all about time management!
Ed asked me a great question about Endurance Corner, "so let's assume you hit the plan, does that cover your family's expenses?" The quick answer is "no", the business isn't a quick fix to my personal P&L. However, that's due to my expenses more than my revenues.
Ed's question got me thinking about the "why" of Endurance Corner as well as a few lessons that I've learned so far. At least a couple of these are broadly applicable so I'll run you through them in case you can apply them to your own situation.
Before we kick off, a couple of announcements.
Epic Camp is going to ride the length of New Zealand in January 2010
This week's letter is going to focus on finance and the economy. As Bernakne says, we don't have the sensation that the economy is falling off the table anymore but I doubt we are close to being out of the woods. I'll explain why after I bring you up to speed on a few items that I wrote about previously.
Green Beret Challenge Update: Captain Weathersby (it's official, he's back in) and I did our APFT for the second time. I scored 276/300, which was much better than my first attempt but FIVE points short of my ranger buddy! I was dominated in the sit-ups and, despite a solid two-mile run, couldn't bridge the gap. Suppose that real Rangers do lead the way. I'm looking for a rematch around Memorial Day. You can follow my progress on my twitter page.
Not sure where my Ranger buddy will end up but if you, or a friend, might end up in Afghanistan then I highly recommend two books, The Seven Pillars of Wisdom and The Places In Between. Coming from a Western society, it is impossible for us to understand the baseline standard of living of our adversaries. My definition of suffering is above the Taliban's standard of living. Lawrence's book provides particularly good insights into a tribal society fighting a fluid war.
I am back at my desk after a two-day trip in the Rockies. If you click the photo above then it blows up to have a look in more detail.
This was my second hut trip and, as you can see, it was a sunny day. Sun plus warm temperatures meant that I had snow balling under my climbing skins. If you have ever had mud stick to your hiking boots then imagine what it would be like if your boots were 181 cm long and you were hiking above 10,000 feet. I arrived at the hut at 2pm and was asleep (very) shortly thereafter!
This week we are talking business and the lessons I have learned so far with Endurance Corner. If you ask a finance guy to create a business then, generally, he will draw up a list of functions then head out and hire a person to fill each position. A classic mistake of cost base leading revenue -- that approach probably killed more than a few tech start-ups over the years. Well, it didn't kill us but it did cost "Gordo Incorporated" some bucks.
This week I am going to share some ideas that will, hopefully, save you from a large financial loss at some stage in your life. Over the course of your life people will steal from, mislead and generally attempt to swindle you -- if you hit 50 and think that this has never happened to you then you might not have been paying attention!
Skill-based, achievable, wealth creation stems from two principles:
If you do those two points consistently then your net worth will rise over time. Sounds easy but it is seldom done effectively. There are always temptations to cut corners.
I suppose a lot of us are talking about Wall Street, greed, CEOs, bankers, bonuses... much of the discussion that I read, and hear, centers around a lack of ethics on the part of people in positions of leadership. With crisis comes opportunity. We have a unique opportunity to improve our financial system.
I am going to write about business but this could just as easily be a piece on doping.
A lot of poor decisions are rationalized by a belief that the action was justified by the actor being a good person. Given that we each have to live with ourselves, it is reasonable to believe that nearly every poor decision is followed by a post-fact rationalization.
Once we start living a lie, even a small one, we can find ourselves on a slippery slope that eventually leads to moral ambiguity. Far easier to stay a mile away from "the line" then risk the public humiliation that comes from high profile ethical lapses.
During times like these, one can easily see the costs from ethical lapses but it important to remember that our current situation started with a series of small decisions where the benefits appeared to out-weigh the costs. Step by step, the situation progressed until we have a crisis caused by lack of enforcement, excessive leverage and skewed incentives.
So now society, as a whole, pays the price. People are upset and human nature will seek vengeance. I suppose this article is my attempt to help channel that vengeance towards productive progress.
I like to remind myself that we win (individually, and collectively) by maintaining high ethics. Over a lifetime, there is much financial gain to be had by being reliable and extremely trustworthy. Greater than finances alone, there is much love and friendship to be received. There can appear to be short term trade-offs but there is no long-term cost to avoiding false gods (easy money, sex, alcohol, pride, false performance...).
As humans, we need to be wary of situations that screw up our ability to think clearly:
As citizens (coaches, managers, leaders), we also need to consider the incentives that we are putting in place. Are we creating systems that reward cheating? When we experience a lot of undesirable outcomes then it is more effective to change the incentive structure, rather than punish a never ending line of cheaters.
It's for this reason that you'll never get the drugs out of a big money sport, until the money starts to leave because of the drugs. The money is the incentive and sport rewards performance. Speaking from experience, Investment Banking faces a similar challenge.
It is also why draconian penalties don't work all that well to clean up a corrupt culture. The people on the inside have spent years justifying their actions and likely see the rules as the problem. You don't need a code of silence to enforce a corrupt culture because human nature does the enforcement for you. By increasing the all-or-nothing nature of the outcome, massive penalties can make it more difficult, not less, to break the chain.
To really change a dysfunctional culture, one needs to change the incentives.
So what were the incentives that appear to have created our financial crisis:
Top of my list is leverage -- we had plenty of warning that allowing companies, and investment vehicles, massive amounts of debt was systemically risky. We tolerated laws and investment structures that created a massive shadow banking system. LTCM happened about ten years ago. However, we didn't recognize the need to change back in 1998. You'd have be be a fool not to see it now.
The regulations are going to come. If your livelihood, or business model, depends on plentiful leverage then you had better start thinking about your back-up plan. Industries that rely on easy leverage are going to be decimated. I wouldn't be surprised to see laws making hedgefunds illegal. There is going to be coordinated global re-regulation.
Once you reduce the leverage in a system, you immediately reduce the profits available from gaming the system.
I also suspect that we will see laws banning many unregulated financial instruments as well as statutory limits on personal and corporate leverage.
Next is lack of transparency and disclosure. The act of telling the whole world (or at least your board of directors, bankers, employees and shareholders) what you are doing can help clear the mind. Disclosure needs to be compelled because human nature works to keep most of us pretty quiet in group situations.
Compelling disclosure can protect highly motivated people from themselves. Make it a crime (punishable by fine) for a company to have off balance sheet vehicles. If you are not willing to hold an asset on your main balance sheet... then should you be holding it at all?
In the UK, it is a crime (punishable by fine) not to share conflict of interest information with fellow directors. The law goes even further in that one needs to share the conflicts of other directors, if one has knowledge. I suspect that the US has similar laws on the books. So I don't think that a bunch of new laws are required. Rather, I think that consistent application of a straightforward code of conduct is required.
Next is enforcement. How much money does a white collar crime need to involve before there is a legal obligation to call the cops? I asked that question the other day and a lawyer couldn't tell me. A manager could misallocate hundreds of thousands of dollars and there isn't any obligation to call the police. I was amazed.
There is too much judgement given to directors in how they handle ethical issues. The upper echelon of any industry (or pro sport) is a club, the key players know each other and many outsiders are keen to get a seat at the table. If society has a problem with the culture of that club then we need to provide incentives for insiders to clean it up.
Which brings me to public humiliation, the single best deterrent available. While it might be fun to "win" -- letting down our peers and being disgraced... human nature sees that as HIGHLY unattractive. Elites pay attention when those around them are caught in ethical violations. Imagine how Eliot Spitzer's kids felt -- one really needs to be drunk on hubris not to think through how that situation had to end up.
Forgiveness and rehabilitation -- I'm not from the ban-them-for-life school of ethical punishment. My preference is to disclose; criminally convict (where appropriate); fine; ban for a reasonable period; and log the information on the public record.
Coming back to where we started this article, good people can make bad decisions and a lot of good can flow from a crisis that resulted from ethical lapses. Some examples:
Campaign finance reform -- McCain's actions on reform appeared to flow from the Savings & Loan crisis. Regardless of one's politics, you have to admit that John McCain has achieved tremendous good for his country. Did you watch the video? They should open each session of Congress by having the legislature watch the Obama campaign's "documentary". The 13 minute clip scared the crap out of me and I'm not even a politician.
Cycling reform -- David Millar (our photo this week) has become an advocate for cycling reform. He was caught, he did his time, his actions are on the public record -- now he appears driven to change the direction of his sport.
There are many more examples of good people getting caught (or not caught), coming clean then becoming a positive force for change (via personal foundations or crusades).
I suspect there are many CEOs and bankers that want to do the right thing for themselves, and their country. What we need to do is reduce the leverage they have available; limit their ability to sell unregulated products; enforce existing regulations; and publicly pursue/ban those that choose the break the rules.
Finally a few specific items that have been swirling in my head.
Mark to market accounting waivers -- John Mauldin is calling for the government to waive the obligation for companies to mark asset values to market. He is making his case by selecting certain assets that are clearly trading below long term value. We are in this mess because of a culture of non-disclosure, hiding bad assets and moral hazard from companies not having to live with the results of their decisions.
Advocating changing the rules, hiding the problem, giving banks time... that is how we got into the mess in the first place. John is a great writer, I read his letter every week, he has most things right, but I think he's got this one wrong. If you don't want to mark assets to market then don't buy those assets.
Compel full, and open, disclosure to create trust. If banks are allowed to hide their problems then we will never get the interbank market going again. Get everything out in the open and, where necessary, grant short-term waivers for capital adequacy ratios.
Government investments in bank equity -- our governments are shortly going to guaranty all our banking deposits as well as invest massive sums of capital into the balance sheets of our banks. I was amazed when Secretary Paulson said that the government wasn't going to seek board representation, or other rights. Would Goldman Sachs invest $700 billion without board representation, veto rights and disclosure requirements?
I suspect that the government is going to get taken to the cleaners on its investments. I couldn't invest $700,000 effectively if I had to rush -- $700 billion? It is likely to be a mess either way.
The money is the incentive, we must drive change at the same time as investment. As an investor, your power is strongest the moment before you invest. Once you've got a couple billion in a company, human nature creates massive inertia. This is a unique opportunity. There will be zero change if not driven by the governments that are saving these institutions. I take a lot more comfort in the British approach, so far.
Next week, I'm going to change direction and talk about Fit Pregnancy! Monica says that she really appreciated reading articles that athletic women wrote about their baby experiences. She's not a writer (but she makes really nice handmade cards...) so you'll have to read the story second-hand from Papa G.
Before we get into the BMP, a couple of announcements:
It's my brother's birthday today. Happy Birthday Chuck! Relevant to the US elections, there is a clip about the Canadian Health Care system -- not exactly G-rated, you've been warned.
Brooke Davison just won the overall female AG title at Nationals in Portland last weekend. She's interviewed (with her 2 year old) over on Endurance Corner Radio.
Coffees of Hawaii now have decaf. Albert was kind enough to send me a sample bag and I'm hooked. Out photo this week is from the plantation on Molokai. When you grind the beans, they look the reddish color of the earth (seen in the picture). Enter "EC" at checkout for a 20% discount.
It's amazing what we can get done when something _really_ matters to us. My main client in the UK is working through its business plan with banks, shareholders and suppliers. As part of this process, we have been having a series of meetings with people that are fundamental to a successful outcome. Separate from content, I have found that my approach has a BIG impact on outcome. So here's my Big Meeting Protocol.
I had eleven days of preparation for the Big Meeting this past week.
I undertook independent discussions with senior managers; key shareholders; and lenders. I wanted to speak with people one-on-one because it reduces the tendencies we have in crowds -- peer agreement, avoiding bad news, consistency bias, deferral to authority. As the listener, I need to be aware of my own tendency to use these conversations to confirm, rather than to learn.
Prior to our meeting, I wanted to have a clear idea on the position of each of the company's projects. Our final internal meeting was a top-to-bottom review of every project on the company's books -- took three hours and we already knew the deals. We might not have identified all the issues, but we did our best to make sure that we all knew the same issues. This enables clarity in communication.
Finally, I believe that it is essential to have a clear understand on the cash position of a business. Running out of cash is not a good thing. I probably spent a full day considering the very short term cash position for the business. As I wrote last week, a buffer of liquid assets provides time -- in business, as in life, time can be very valuable.
Visualization is not just for Ironman swim starts! Throughout my business career, I have used visualization to prepare for, and rehearse, important meetings. While things rarely go as mentally (or actually) scripted, having mental and written plans increases your chance for a successful outcome. It also increases relaxation during your competitive event (in this case a business meeting!).
I have the exact same routine that I use for Big Meetings.
If the meeting is in the afternoon, or evening, then I will leave the office early to get my training done. I'll eat my pre-meeting meal and return to the office.
The routine makes sure that I am alert, relaxed, stress-free and fueled. Generally, key meetings don't last more than 3 hours.
In an important, or crisis, situation... it can be tempting to skimp on nutrition, sleep, or exercise. For me, that is always a mistake. My productivity and clarity are far higher when I stick with my routines. As well, I do my best problem solving when exercising (a meditation of movement, perhaps).
Big Meetings are stressful. When work stress increases, my caffeine intake halves. Clear decisions require us to slow our reaction time. Pausing, before acting, is tough enough when stressed, near impossible with a quad-latte coursing through our veins.
I didn't have a wingman this past week but have had one on the past.
In the UK, they have a habit of placing a small plate of cookies on the table at business meetings. Quite civilized, one meets for tea, cookies and business discussion...
If you have a wingman, ideally one with a low emotional attachment to outcome, then your wingman can "offer you a cookie" if you start to freak, or get off track. The pause to eat your cookie, could enable you to reset. You don't really need a cookie to use this technique... what you need is a calm friend and a pre-agreed strategy for signaling a need to pause. I suppose that is the role that an attorney takes in many situations. However... if you turn up with a lawyer then you might freak the other parties at the meeting!
If you don't know... ...then just say so
Kind of sounds like something Johnny Cochran would say. He really was a character.
Managing serious situations is about trust -- you might get away with spinning things in normal times but it is a poor strategy when faced with important decisions.
For my meeting this week I had two computer screens running (three spreadhseets); two reports open on my desk; and a hard bound book containing a year's worth of notes. With all that information, days of preparation and over ten years of advising the client... I was STILL stumped a few times!
If the stakes are high, and the quality of the decision relies on the accuracy of information, then people don't mind waiting a couple of minutes (or even another hour) while you calculate the right answer.
A commitment to accuracy/transparency is an attractive trait in a trusted advisor.
You'll see that I use a lot of "race tactics" for my Big Meetings. In reality, these are performance tactics. High performance in business, athletics and academics is all the same.
Take time to learn from successful outcomes and remember that the toughest situations are ripe with opportunities for learning.
Next week, I'm going to share specific ideas for managing through a recession. As I predicted last spring, we are moving into the action phase of global liquidity shock which was triggered back in August 2007.
As we saw with the demise of the American Investment Banks, it is a lot better to take action, than be acted upon.
Until next week,
Our photo this week is my buddy, Chris McDonald. Much of this article has come from considering his approach, as well as observing myself. I think he'd admit that he's taken himself far, far beyond what he thought possible even a few years ago.
Simplicity -- Whether you are considering an investment portfolio, new project development, sales strategy, or how to complete a stretch week of triathlon training. Increased simplicity improves your probability for success. Remove as much as possible from your life.
Specifically, to achieve top success requires the capacity to outperform your competition, daily, for a very long time. Some of the competition are more talented, more experienced, better funded, smarter... simplicity is an edge that you can give yourself.
Dilution of effort -- every item, thought and obligation added to your life dilutes your ability to fully commit to what is required for success. Single minded obsession is often a recipe for a future crisis -- still... if we are having a discussion about performance... then alternating obsession with recovery can be an effective strategy.
For any task requiring high quality, focused output (creative, technical, athletic) the periods when you are doing nothing are equally important to the periods where you are following your vocation. In athletics, periods of unstructured training (easy days, transition periods) can fulfill this role but you will still need some time where you are free to sit in a chair and chill out.
So when you are laying out your plan for breakthrough performance, I would encourage you to plan, and protect, your rejuvenation periods. I have watched some truly great athletes destroy themselves by trying to hold their athletic "high" a few months too long.
Stability -- there are a lot of areas where we dilute performance with instability:
Financial -- assuming that you have shown aptitude for your passion, you should allow at least five years to see what's possible in terms of performance. Being able to stay the course is very important -- you are looking at 10,000 hours worth of effort to see what's possible. Consider your out-goings and in-comings, the athletes that get this "right" follow a clear written plan.
If you are following a high-pay vocation then be wary of spending "because you can". A high burn-rate limits flexibility, personal freedom and can leave you beholden to the company, or person, that signs your pay check. I also believe that it makes ethical purity much more challenging.
If you are forced to ratchet down an expensive lifestyle that never generated incremental happiness then you will feel _real_ pain and loss.
Alan wrote a recent article on athletic periodization -- as I read it, I realized that it is a parable of my approach to life -- moving between business, investing, marriage, spirituality, triathlon and coaching. For each "run" I take at Ironman excellence, there are months, sometimes years, of careful preparation -- Base training for life!
So... I will offer some specifics that are proven for triathlon success.
Finances -- a minimum of three years living expenses, in cash, in the bank and a plan for maintaining your financial security. Financial stress drains performance. Figure out your personal financial weak link and create a simple plan to improve it.
Geography -- no more than two training bases, one VERY low cost, the other in an environment that makes it easy to address your key personal limiter, whatever that might be. Access to at least eight months of pleasant outdoor riding; and access to at least four months of long course swimming. Altitude isn't important. Watch what you spend on airfares.
Approach -- early in your athletic career, your #1 focus should be building your capacity to absorb steady-state training load. If you aspire to be a top Ironman athlete then progress gradually until an average training volume of 25 hours per week can be achieved within a five month span. Just focus on the training, you'll learn a lot. Once you can handle that load then increasing the average speed will offer a lot more gains than cranking the volume even further.
Note, the time requirements for athletic success imply very flexible part-time employment, or unemployment! With meaningful work obligations (that require analytic capacity), it simply isn't possible for me to move much past 12-18 hours per week. Even then, I need to be HIGHLY organized.
Timelines -- Five years of dedicated endurance training would be a fast progression to where you need to worry about your specific protocol. In the early days, any reasonable protocol will show progress. Train every day and avoid doing anything too silly.
Be very wary of seeking an intensity-driven short cut. You will make gains but you will limit your ultimate development. Running is a great example where "run easy every day" can result in fantastic gains, for years, for all new runners. It is also my preferred protocol for elite swimmers/cyclists that must give their connective tissues years to catch up to their aerobic engines.
Competitive Exposure -- Maintaining a challenging, but not overwhelming, competitive environment is important for motivation and progression.
I recommend that you podium at agegroup World Champs before racing elite. If you can't podium then the best decision may be to develop as a fast amateur. This will free you to consider options, and opportunities, that present themselves outside of athletics. Realistically, until you can podium at agegroup World's then you are unlikely to be able to survive as an elite athlete. Even then, the road is a fun, but tough, one.
Pulling all of that together. The big things that I have observed over the years:
Next week, I am going to shift back to investing, specifically the process that I go through when deciding how to allocate capital.
All my best,
This week’s letter is about taking the time to consider the long term implications of our current choices as well as offering some insight into how I approach my personal planning.
The photo above has me thinking about some additional adjustments to my TT position - I will be tinkering this winter!
If you haven’t been to the Alternative Perspectives page in a while then you might enjoy two articles from Coach Kevin Purcell. The most recent was a thought provoker for me and very enjoyable.
2009 Boulder Camp – I am very happy to confirm Joe Friel and Bobby McGee as guest coaches at our Summer Triathlon Camp. Joe and Bobby have been instrumental in my athletic career and share more than fifty years of collective coaching experience.
As a reminder, the camp will run from July 20 to 25, 2009. By letting you handle your accommodation and morning meals, we have been able to set the cost at a very affordable $1,250. This camp is open to all abilities, all-distances and will have a balanced focus between skills development, triathlon training and athlete education. To confirm a slot, please drop me an email.
Two book recommendations for you: FIASCO is a great read about structured products and investment banking – it fits with my observations from a career inside the financial services industry.
Website Optimization is a good read for anyone that runs a web driven business, or brand. The book made me realize how little I know -- lots of easy ways to improve the reach of my writing. I read the book with pen, paper and a high speed internet connection. I approached the read like a "workbook" taking notes and making changes to my website outline.
I was walking around Edinburgh this week and noticed that it is impossible to see a credit crunch. The buildings don’t know who owns them, or the prices that we place on them. That realization settled me down at the start of a very busy week. The UK faces challenging economic times.
My trip to Scotland confirmed suspicions on the state of my personal NAV. Long time readers may remember that I sold my UK property exposure in 2005/2006 and used a portion of the proceeds to help establish a Scottish residential property developer. While the development business is stable, the market outlook for sector is weak.
I’ve seen a big reduction in the upside component of my personal portfolio and a stack of paper profits went up in smoke. My marked-to-market net worth went down significatly in 2008. No wonder investment banks are looking for a way to avoid reporting the true market value of their illiquid securities. It was a (very) good thing that I am not personally leveraged -- I would be toast if I was a hedge fund.
Interestingly, prime residential rents are way up in Scotland. We have seen a 50% increase in our portfolio yields over the last three years and, I suspect, there are more rental increases to come. The upward yield shift gives comfort to our bankers (in a time when they aren’t hearing a whole lot of good news).
We haven’t seen any evidence of forced selling by developers. This could change if the main lenders take a hard line but, to date, all the key participants seem content to sit-it-out until market conditions improve.
Times like this are potentially volatile because if everyone is doing nothing then there is substantial downside risk if assets (at the margin) are forced through the market. Prices always move at the margin and, in a thin market, the actions of a few can impact the balance sheets of the many.
The Tri Biz
Over the last three years, my largest single expense category has been “triathlon”. In 2005, I downsized my sources of triathlon revenue to create space for a big increase in my financial consulting business. The net cost of doing that was probably on the order of $100,000. I suspect that is a much smaller cost than many athletes bear when they downsize work commitments to focus on qualifying for World Champs. A single year off as a doctor, investment banker or CEO can cost a multiple of my figure.
I’m fond of saying that the easiest way to increase net income is to reduce personal expenditure. I remind myself of this because the consumption treadmill is a seductive trap, constantly marketed to us through the media.
In my annual review, I look at my expenses (current, projected, core and surplus) as well as my revenues (current, projected, downside, potential). I would encourage you to do the same.
Why? Because we always underestimate the large effect that small changes have over the time lines of our lives.
$33K per annum, for seventeen years, at 4% is $782,000.
By taking action to eliminate my net triathlon cost (today), I can finance my unborn daughter’s college education (tomorrow). Of course, all this is contingent on not spending the money elsewhere, or being miserable with the change. We can take cost control too far.
For me, starting a business helps spending discipline. My accountant tells me that the IRS will "help" further by disallowing losses if we lose money for three consecutive years. As well, I have considered bringing in a financial partner to create social, and profit, pressure. There are a lot of benefits to 100% ownership (see Raising the Bar) but I also benefit from having obligations to people I respect.
My game plan for personal expenditure control:
***Focus on the training camps that I am hosting Tucson (April); Epic France (June); and Boulder (July). Last year, I attended nine training camps and only one made a positive contribution to Gordo Incorporated.
***Consolidate the best of my writings into a single location for you (the reader) to access easily. The best marketing lesson from my triathlon experience is “give away good information for free”. Helping people is fun and creates massive goodwill. I have a stack of content spread between five websites. My content is underutilized and tough to access.
***Place my library within a website where I will be able to combine: (a) my coaching skills; (b) my writing skills; and (c) my enjoyment of helping people learn from athletics.
My financial consulting business has (effectively) total concentration with a single client. I am a big believer in the value of concentration (and the illusion of diversification). However, small things matter over long timeframes… one, or two, additional relationships will make a difference.
The benefit of my business model is it fits with my desire to main freedom of location and schedule. Commitments given to clients limit my freedom of occupation (somewhat), but I love working and there is a fair exchange.
An up-coming letter will discuss (in detail) my current personal portfolio strategy. While my outlook hasn’t changed, my portfolio structure changed (due to those paper profits evaporating).
The Truly Precious
There are clear requirements to a long term focus on elite athletics. These requirements have associated costs that can increase over time.
Financial – outlined above.
Structural – to run well in triathlon, I need to maintain a high level of annual run volume. Having spent most of 2007 walking around my house in fluffy slippers (to comfort bruised feet), I know that the required level of volume is wearing my feet out.
Emotional – I don’t know about you… but I am not a whole lot of fun from three to eleven weeks out from a key competition. I used to get around this by living alone in the spare room of a fellow endurance athlete, or hibernating upstairs at my house in Christchurch. The IronMonk-gig worked for athletic performance but lacked in terms of emotional well-being. I have increasingly found that I can’t be the husband I want be while spending 20 weeks a year on the knife edge of human endurance.
Monica is so completely loyal that she’d back me for another five years of relentless focus. She respects me too much to offer the soft option of backing off to please-the-wife. I didn’t truly understand the brilliance of doing that for your husband until this year. If you are married to somebody like me, it is the best way to ensure peace of mind in your man. I’ve got a couple buddies that have managed the freedom but haven’t (yet) found their peace. Don’t think that I’ve necessarily found any!
Addicts come up with all sorts of ways to justify their actions. Generally, I am only able to fool myself for five to fifteen years at a given vocation. Increasingly, I find better and better things to focus on. Fatherhood represents another opportunity for self-knowledge.
I have been truly fortunate to have the opportunity to spend much of the last decade living as an elite athlete. It has been a tremendous experience and worth all the overtraining, financial costs and other occupational hazards. I rarely regret the past, even my mistakes and “hard times”.
One of the main hazards of objective decision making is caused by a combination of consistency bias, overvaluing what we own and overweighing sunk costs. “I have given up too much to change course” is a common thought pattern that can skew clear judgment. There are also tremendous social pressures that we place on each other to remain consistent in approach. We have an in-built bias against “flip-floppers”. This is a bit odd in a world where most of our key decisions are made against a background of incomplete, and changing, information.
I have always enjoyed “doing what it takes” and, I suspect, that most obsessed folks are excellent at getting the job done. Seeing this trait, could be why Monica likes me to have a project. Too much idle time leaves me short on endorphins.
It’s an interesting time for me. With my sport, increasing costs are reducing my enjoyment from doing what it takes. Frankly, I’d rather be a world class person than a world class athlete. I am fortunate to have been exposed to role models that manage to do both.
Since 2004, I hoped that winning Ironman Canada would give me a fairy tale ending. Just like Monica, Life doesn’t appear to have offered me an easy way out.
Back next week,
The photo above contains more of "me" that most photos of me but, maybe, that's just the way I like to see it. You can pretend that I'm the candle...
I learned a lot this past weekend at the Business of Coaching Clinic. That quote above was a salient reminder that often we have the greatest positive impact on clients by giving them the confidence to chose a more positive path than the one that they are on.
Over the last fourteen years, I have used endurance athletics to avoid dealing with important issues in my life.
Some of my greatest successes as an adviser have been helping clients choose an alternative path for their lives.
Bobby challenged us to pick one thing from the clinic and apply it on Monday, noting that "people that go to conferences often collect information without applying it". The same applies with self-help books -- Mike Ricci noted that the most successful people that he sees are the ones that manage to apply 5% of the good ideas they come up with.
What did I apply? I decided to apply Mike's advice about considering, specifically, to whom your company is selling.
Since last year, the target Endurance Corner customer has been shifting in my thinking. This week, I sat down with Alan/Mat and we reviewed what everyone _really_ likes to do. As the lead adviser to the business, I thought about what I really don't like to do as well as what I do best.
We're still working on it but we've made a decision that we are going to be about selling value-added advice, and services, that are a product of our unique mix of skills (strong technical knowledge mixed with very deep real-world experience and access to the best minds/protocols/facilities in our sport).
Running a coaching business... other people (such as D3, CPC, CF, CTS, Ultrafit, VQ...) are able to do that better than us -- so we'll focus on supporting them, and their athletes, and their potential customers.
We will do a limited amount coaching to make sure that we remain practical in our application of our experience and continue to learn. It's essential that we walk-the-walk and follow our own best protocols.
That's a start.
There was a lot of talk about "what coaching clients buy." Many thought that clients are buying "results." While clients are attracted to results, what I see is people buying...
...access to excellence (exemplified by the coach);
Coaching is as an aspirational purchase for many people -- if you aim to position your self (your firm) at the top end of the market then you must ensure that your personal positioning is consistent with your target market.
Why do former Marines make excellent coaches? They have been trained in excellence -- it becomes who they are and apparent to their customers -- honor, ethics, excellence.
As Bobby said, you don't need to be an excellent athlete relative to others -- you need to be an excellent person relative to yourself.
Mike challenged us to consider our differentiation as well as the areas where we can be world-leaders.
Two areas came to mind for me:
In listening to Mike, I wondered how many of us spend our time on what the client truly values.
Do we know what our clients most value?
How often do I make myself more busy, rather than more successful? Early in my coaching career the answer was... most of the time.
Bobby/Mike/me -- we acknowledged that every single thing that we do reflects on our brand, ourselves, our company -- every single act is a form of marketing.
We also shared our experience that we under-valued ourselves early in our careers. Bobby encouraged us to make the case that ours is a legitimate profession.
Linda mentioned that we have 100,000 USAT members // with the correct business structure, a market share of 0.01% is enough to provide most coaches with a satisfactory income. This is a wide open industry. Even the established players have small market shares with clients that are easily persuaded to change.
Mike commented that one of his advisors cautioned against being in a non-scalable business... I highly recommend a copy of The Black Swan to that adviser.
Donovan noted that there are over 1,000 coaches on TrainingPeaks. What that tells me is that running, cycling and triathlon coaching are rapidly growing industries with highly fragmented and inexperienced competition -- ripe for standardization and consolidation // This is an opportunity for someone else -- we have made a strategic decision not to attempt to sort the market out.
There is tremendous value in the coach (or company) that creates a system for generating referrals and client inquiries. There is also value added in the coach (or company) that structures appropriate contracts, payment terms, legal protections and administrative assistance. But... how do you control quality? how do you retain your best performers?
The coaching industry will become more professional -- I expect that companies like TrainingPeaks will grow ever more sophisticated each year. The bottom end of the market will access their systems via web/iPhone. The top end of the market (companies like D3) will sell value-added services that go far beyond building training plans. The (current) middle market will get squeezed.
The key financial metric (to me) is revenue per relationship. This is different than "per client" -- you could have a low revenue client that generates a ton of referral and associate business. That is a high value relationship -- look beyond the dollars when you assess the key people in your network. Also look to the non-monetary benefits that accrue when you take on an assignment.
Bobby challenged us to consider what we want to leave as our coaching legacy. The normal way to do this is to do an exercise where we write down our eulogy.
I don't need to pretend that I am dying to be honest with myself (although it does help). Daily, I consider my legacy as a person up to this point -- my flaws and failings providing fertile ground for self-improvement!
Some explicit tips that I wrote down from Bobby's presentation:
Bobby noted that he's not sure that training protocol makes much of a difference for Ironman triathlon -- he did this by contrasting with marathoning. Molina/Hellemans have said, essentially, a similar thing.
As a coach (or successful athlete)... if you think that your training protocol is essential for success remember that you are extremely biased by two effects:
(a) survivor bias -- you survived it; and
(b) silent evidence -- we are (mostly) unaware of the athletes that the protocol destroyed along the way.
More on the way we fool ourselves with "evidence" in The Black Swan.
Boil it down...
One of the last talks of the weekend was my presentation on Personal Planning. I love giving this talk to groups of people and had been looking forward to giving the talk for WEEKS.
It is my favorite topic in the world because I passionately believe in the method that I have developed over the years.
I need to constantly work on my #1 point for 2008 which is listening. In the Q&A, I really struggled to shut myself up enough for us to learn from the other panelists.
During my planning presentation... I was in full flow -- really fired up...
I gave myself the mental combination of contrasting my love for Monica and the disappointment of failing to win IMC. What wasn't apparent, or explained, was the link between IMC and an expression of our love for each other.
Monica gave me total dedication this past year so that I could give 100% towards my goal. IMC is the only thing in my entire life that I have _truly_ worked towards yet failed to achieve (most my other successes are due to a combination of chance and natural ability).
I was wide open and had to pause because I was about to meltdown in front of 40 people (!)... it was a "good room" and they got me back on track. However, it took me days to 'recover' from being that open. Powerful stuff.
Monica likes to tease her Dad because he is known to get fired up; blow his circuit breakers; and cry -- all the while being wide open to the person he's talking with.
She may have married the same sort of guy...
Files for Endurance Corner Radio
Alan's Talk on Zones -- Part One is on Alan's Blog -- Part Two is the PDF below, look at Page One of the scan... that is how many ways there are to say the same thing... just on Alan's desk!
Our photo this week is a shot of me dragging a tire after a 21-mile run at the Boulder Reservoir. My technique needs improvement for next time.
Why do I drag a tire around? I could give you reasons based on human physiology but the truth has to do with human psychology – I see value in doing things that other people aren’t willing to do.
I’ll probably be the only athlete on the Ironman Canada start line with ten weeks of tire pulls under his belt.
I love stuff like that.
We've got Baron Part Two over on Alternative Perspectives. Next week we will have Lydiard Part Two -- Alan's done a great follow-up article that I think is worth your time.
In the meantime, Alan wrote up his action plan from the USAT Coaches Clinic. If I remember then we'll follow-up with him in a few months on how implementation progressed. Personally, I find change implementation a greater challenge than issue identification.
On November 2nd and 3rd, I’ll be hosting a USAT Clinic on Building Your Coaching Business. We’ll start Friday (after lunch) and run through Saturday. The program will include case studies; practical tools for increasing revenues; financial planning tips/tools; branding/marketing tips/strategies as well as the opportunity to share ideas with each other.
Location will be the Olympic Training Centre in
My most recent book is Ubiquity, Why Catastrophes Happen. It's a worthwhile read. If you pick up a copy then consider two elements of the author's hypothesis:
Fingers of instability -- when I think about the challenges of terrorism as well as the structure of the Middle East conflict; I see deep fingers of instability. The implications of a small further stress on (any one of) these fissures, is very difficult to predict. If you are a worrier, then this book will give you plenty of fodder. I spent a lot of time thinking about the likelihood of WMD being employed.
Critical State -- whether the subject matter is earthquakes, financial markets, human conflict or iron atoms, the author talks about the conditions where one small action is a trigger for further subsequent results. This had me wondering about the critical state within the human brain -- the ability of a single neuron to impact the entire brain.
Extending that neuron consideration to what (little) I know about quantum mechanics. The ability of a single neuron, within the observer, to change the reality of what's observed. At that point my head started to swim... the author did warn against taking physical science concepts into the social sciences.
In the last two weeks, three smart people have shared ideas with me about growing their businesses. While their current positions vary in terms of scale, the challenges that they face are similar. So here are some thoughts on coping with growth. The specifics pertain to the coaching/consulting industry but, I think, they are widely applicable.
Branding – in many consulting businesses the founder is the brand and your team is a reflection of you. When you are growing rapidly then, clearly, you are doing something “right”. It’s worth considering what that “thing” is. In a small consultancy practice, often the magic-ingredient is you. Your time, your knowledge, your personality, your efforts – this matters because…
…if you take on people to service your clients then it takes more time (initially) to train them. Do you have that time? Do you want that job? If not then you’ll need to recruit, then train, the trainer. After you've trained the trainers and coaches -- you've effectively trained your future competition.
…if you refer clients then there is an element of endorsement and you’ll want to ensure that your brand/reputation is protected. There are very few coaches that I’ll endorse via a referral.
Reputation takes years to build – protect it with everything that you do, everything you say, everything you write, everyone you endorse/employ… I take this to a an extreme and extend it right through to suppliers; clients; sponsors; coaches; mentors. There are companies/people that I would love to work with (and could teach me lots) but I’ve been unable to become comfortable with their ethics – so I’ve had to pass.
The theme of saying “no” to attractive opportunities is a recurring one. You need to be willing to turn down attractive offers in order to sustain your brand. Financial stability goes a long way towards building ethical integrity – more on that in a future letter on success factors.
Quality Control – I have considered building an international network of consultants (to the point of drafting a business plan). However, I wasn’t able to get comfortable that:
…remote coaches would be able to represent my brand appropriately. For this reason, everyone in our company (Alan, Mat, Monica, me) works “here” in
…remote coaches would gain enough from “HQ” to justify a mutually beneficial long term relationship. We’d have to work extremely hard on retention for minimum return on our efforts.
Retention – How do you keep your best people? Even working with friends, I haven’t (yet) come up with a business model that is sticky enough to keep "remote" coaches/consultants together for the long term. The effort required at HQ is greater than the return that we could fairly charge the remote offices.
When I ran the numbers on the “take” that would be required for an attractive return on investment – it didn’t stack up (for the investors, the coaches, or me). My return on effort/capital was far greater by giving away our intellectual property, selling high value services and operating in a managerial capacity.
What keeps people in a network?
***Success – friendship is great but nothing builds teams like sustained, meaningful achievement. I want everyone around me (clients, athletes, friends and training buddies) to succeed. Talking about this with Jeff this morning, I noted my success obsession (to go with my controlling obsession).
***Fairness – there needs to be a fair exchange of efforts. What’s fair? I don’t think that there is a fixed answer and fairness changes over time.
***Value – if you take anything from someone (revenue, product, goods, time, thought…) then there needs to be adequate compensation to them. Personally, I work hard to make sure that everyone close to me receives a little bit more than I think is fair. That doesn’t always mean that they see it that way but it has been an effective strategy for me.
People within my circle that don’t operate in a similar manner tend to move away over time. It’s an interesting paradox that when everyone gives a little extra to another, there is more for all.
***Challenge – probably related to success. Challenge is the ability to actively participate in success; learn and apply that knowledge. “Winning” is fun but “meaning” derives from active participation in the daily process of success.
Where does all this leave me? Yet another list of goals!
Help people – I’ve set a target of 1 million athletes over the next thirty years – sounds like a lot but I estimate that I’m well on the way there (over 25,000 copies of Going Long have been sold).
High return per hour invested – “return” defined in terms of personal satisfaction, rather than dollars (but they do help).
Learn through teaching – our new lab will greatly improve my knowledge, that’s fun for me
Improve communication skills – more public speaking
Grow our reach – we will be launching podcasting (slowly) after IMC; vodcasting will, likely, follow that.
Build the brand – I lead my family’s financial leadership and my personal brand is our safety net.
Within our new business, Endurance Corner, we are building:
A central hub of excellence (coaching, training, testing, consulting, sports medicine, rehabilitation);
Knowledge sharing via camps, clinics and our on-line presence;
Single location to enhance mutual learning; maintain quality; enhance communication; build personal ties; and have fun together.
One specific question that I had – that triggered this article:
Q – What is a normal share of revenue for me to earn on a coaching referral?
A – Instead of thinking about the “take” – consider… the value that you add to the client (and coach); also consider if you have the time/desire to manage the relationship. If I refer an athlete outside of our network then that is a favor (to the athlete because I am careful where I point people // and // to the coach because it is a potential order). If I refer an athlete within our network then we need to ensure that our brand is protected and value is delivered to the client.
Overall compensation – within our business the basic package includes items that are important to us (health care; retirement savings; training; certification; education) – monetary compensation depends on a mixture of the value added (not merely revenue added) to the coach’s main client as well as the individual’s capacity to work effectively.
We provide infrastructure with opportunity.
Alan and I started a "book club" here at GordoWorld HQ. The first one that he offered me was "de Castella on Running". I will give you a chance to read it before I offer up my book review -- well worth the time to read. My book for him was "The Richest Man in Babylon". Mat has joined us for the summer so, perhaps, he'll throw in a good title.
I had a quote sent to me from Vern Gambetta's Blog -- I surfed the blog and found a great post on success that he linked up from three articles -- Really Good Stuff.
More than being smart, what's helped me is the ability to learn from smart people. Thank you to all the readers that share their "good stuff" with me.
My buddy Ken is doing his MBA at Berkeley. He is kind enough to keep me in the loop on the latest developments in entrepreneurship as well as what's happening in the Bay Area. I've been developing a business plan for a new company and we have been sharing ideas covering technology, coaching, on-line communities and what's 'happening' on the internet. Much of what follows is a reflection of various ideas that Ken's shared with me -- perhaps there's value outside of Harvard after all... ;-)
This could be a bit choppy as I'm still working through my ideas . Writing is, part of, how I think and develop concepts/strategy. In addition to Ken's tips, Alan has been surveying the wider coaching, community and training applications market -- he's put together some surprising briefing papers that have been really helpful to my Advisory Board. When it comes to fact-finding and analysis, he does a far better job than I could. I tend to "rush to judgement" -- Alan's the other way, he'd still be doing research if I hadn't put a deadline on him...
...we're a good fit.
On-line coaching (triathlon) is a bit unique on the internet in that clients pay for content. Other successful content models that spring to mind are WSJ-online and The Economist. In those cases, I pay for timely, specialist content, written by smart people. The content (for now) is superior to what's available on the free sites.
But perhaps triathletes aren't paying for 'content' -- perhaps they are accessing an application for peace-of-mind and to make contact (on some level) with the founder/creator/moderators of the site. Perhaps they _want_ to pay to feel like they are doing something positive for their athletics -- I know that this is a big driver for the urge to "get a coach" or "join a club".
With web technology, it is tempting to over-invest at the front end to increase the "gee whiz" factor with clients and, therefore, justify the subsciption fees that are charged. Personally, I'd want to attract people with a reasonable, free beta version -- let them debug and help me design my vision.
Another approach is to be a follower of technology and focus on creating a simple, effective application. A low overhead front end where you plow a decent chunk of revenues into direct marketing to your clients -- late summer/early fall advertising, free articles and booths at key expo locations.
Both of these models are operating successfully in the triathlon marketplace. What struck Alan and me was that in other sports 'coaching' applications are given away for free -- equipment manufacturers develop them to build their brands; shift product; and attract traffic.
If you are shifting millions of dollars of merchandising, then fifty thousand (per annum) on programming is merely a portion of your marketing budget. Fifty grand per annum across five years would wipe out (the technical edge) of all the existing players.
I've had two smart companies approach me to build a coaching business for them but they wanted me to do it, essentially, for free. Why would a coach:entrepreneur build a brand for free? Within a branded goods business, it is straightforward to calculate the increase in equity value that can be created from a successful web-marketing strategy. I'm sure that many people see the opportunity -- however -- we are all busy folks. Someone will need to get on with it.
When I think about what matters in an on-line training program -- Basic Week Generator; Log; Season Planner; Reference Articles -- these components manage themselves once built. The founding team can sit back. I don't see sustainable advantage from a content, or application, driven business model.
The structure of athletic success // consistent, variable overload across time // that doesn't require constant revision of reference material and application drivers. It's a lot like coaching -- once you've "taught" your athletes your protocol then client retention is down to: (a) whether they like hanging out with you; (b) whether they are proud to be associated with you; (c) non-athletic value addition (life skills, career management); and (d) the team/community aspect that you create within your business. There could be more -- that was off the top of my head.
So I've been thinking how all the above will impact the new business. Four things that I've come across and have been thinking about for the new business:
A -- Good brands market themselves
When those components mix in my head I get the urge to strip away the endless complexity that is conjured up to market products & services. Complexity in goods to make you pay for more gizmos. Complexity in services to make you pay to look inside the Black Box.
Why not offer a simple program and spend time supporting clients in a manner that enhances success?
Some people just want a plan -- give that for free. Others may want interaction, personal advice, a deeper understanding (the complexity behind the simplicty) -- they can purchase consulting services or join an on-line community. This level of interaction requires: judgement; share of mind; and experience. Specialist advice that requires human capital -- providing sustainable advantage within the advisory team.
A key question -- "How would you respond to a new entrant offering your application for free -- what is your sustainable advantage?"
Looking ahead on the technology, I expect that we'll see "coach-in-a-phone" shortly -- PT On The Net as well as Dave Scott's site are laying the foundations for this next step.
Mark asked me my thoughts on the best video feed; I thought about that for a bit and advised him to wait until the market sorted it out. Just like podcasting gave all of us the ability to become radio broadcasters; I'm sure that vod-casting (or its equivalent) will be worked out in 12-24 months.
Similar to PT On The Net -- I expect that we'll get PT-down-the-wire with workouts coming directly down the internet into plasma TVs -- there are people doing this already via DVD. I don't think that their current pricing models are sustainable as new entrants will enter the market and give it all away for (close to) free. If a company has a subscriber base of several thousand readers then you can pump the workout down the line for 25c, or give it away for free by selling an advertising header/footer.
The personal training market is going to split into low-end (cheap and cheerful) and high-end (relationship/high value added) -- the people in the middle that are charging $50-80 per hour to hang out with clients -- they will get squeezed.
A bit of an aside... I've never been able to figure out tech-valuations -- given the rapid change; the tendancy for competitors to give away applications for free; the near-zero site loyalty... why the large valuations? I'm sure there is an army of investment banker writing reports on "why" but I don't see sustainable, long term cash generation. I'm a long term cash-flow kind of investor.
Video coaching -- I was riding yesterday and thinking that it must be possible to combine GPS, key workout structure, and coach video into a handbar mounted device. You could have Coach Gordo along for your ride -- in my dream, I had Dave Scott telling me not to slack off with my twenty minutes standing on the flats!
Some of the more nimble triathlon entrepreneurs are starting this process with Computrainer's group training product -- Mark joked that it was the perfect combination for overtraining... twelve triathletes; loud music; head-to-head video monitors and sixty minutes on your lunch hour... you don't even get a chance to "sit-in" -- hammer down the whole way!!! :-)
Video consulting and conferencing -- watch the weekly or daily briefing where the expert panel discuss questions that were sent in by their clients. Personalise the concept with high quality "face-to-face" interaction with the smartest minds in your sport, or industry.
If we look to the hourly rates in law, taxation, accounting, finance then the best of the best will be able to greatly leverage their knowledge. The challenge faced by many highly skilled people is that they are tied to their office and local geography -- that's going to change. You'll have the world on a plasma screen in a few years, if you want it. I see it starting with live video feeds into "success conferences".
The question, "How do we position our team, and create the reach, so that we'll be able to access the clients that will want these services?"
From my own point of view...
>>>front end costs should be incurred to leverage personal human capital
>>>a model focused on traffic / reach generates a return via an increased premium earned on personal human capital
>>>follow technology via the widest, established channels -- let MS, IBM, Yahoo, Apple and Google battle it out. Sit under the technology umbrella of the market leader(s).
>>>consider how to address the 'entertainment' factor -- 'gee whiz' is how a lot of people have fun // very important in coaching as it is recreation for the target market (as well as distraction at the office!)
>>>focus on increasing specialist knowledge and experience -- entire team must be dedicated to continual study // human capital, connections, networks and real relationships. While the basics remain the same, the ability to appear at the cutting edge is good marketing. Looking at it another way -- race results attract clients; delivering success keeps them.
>>>share expert information/experience constantly and as broadly as possible.
>>>invest assuming that your application can be wiped out in 12 months. The established players are better funded (essentially "free" equity) and have the ability to crush you whenever they feel like it.
That's a tough way to end it -- good thing we sit on the fringe of a niche sport.