'I trust my gut.'
That sounds so alpha-male cool, I know. It's also a very dumb approach to running the major aspects of your business.
Here's the problem: The concept of gut feeling contains the word "feeling." It often feels uncomfortable when you're on exactly the right track. Stick with me here as I explain this important concept by way of four rules:
Rule No. 1: Don't succumb to 'surface logic.'Some of the best opportunities seem to be the worst at first glance. In my case, I made more than a billion dollars by buying loans that multiple collection agencies had written off as "uncollectible."
It was a multi-billion-dollar opportunity in plain sight for anyone to pursue, but very few people did. Why? Because most people succumbed to surface logic. You can tell that kind of reasoning because it often starts with "Everyone knows that." or "It's always been true that.
You may be headed toward a great opportunity if you can discern some excellent potential underneath a layer of logic that repels your competition from trying to pursue it.
In my case, I had been on the receiving end of debt-collection calls for years. I knew from personal experience that the conventional collection-agency approach made me never ever want to cooperate with those abusive people, even if I had some money to pay back their loan.
Therefore I created a company where we took the unconventional step of treating delinquent borrowers with dignity and respect. They responded by paying back the debt they owed us--usually before they paid anyone else.
Rule No. 2: Thicken your skin.
Let's say you decide to pursue something where you see opportunity and all anyone else sees is problems. Get ready to be ridiculed.
Some of your closest advisors, friends and even family may think they're doing you a favor by saying things like:
"It'll never work."
"You're kidding, right?"
"Don't you know it's been tried before?"
"What makes you think you can pull it off? Do you think you're so much smarter than everyone else?"
Oh, it gets better. If your venture doesn't work, you'll hear "I told you so, but you wouldn't listen!"
If your plan does in fact work, don't expect to gloat: Your former detractors will merely say: "He got lucky."In my 40 years of running businesses, I've found that the greatest comfort is often found in the middle of a vast herd of sheep, all moving in the same direction. They can all console themselves that their judgment was no worse than everyone else's. However, the greatest opportunities and profits are found on paths least traveled--or where there was no path at all before you came along. Are you in business for comfort or for profit?
Rule No. 3: Sometimes it feels wrong because it is wrong.
I just finished saying the most profitable course of action may be uncomfortable and lonely. Make sure you don't justify a purely emotional decision by thinking: "It feels wrong, so I must be on the right track."
You can get too comfortable with being a contrarian. I built a company that was so utterly different from the rest of the collection industry that it was tempting for me always to be different, just for the sake of making another splash. Instead, I retained some industry-standard structures like accounting, and innovated only when truly necessary.
Bottom line: Follow that unpopular path only for the right reason.
Rule No. 4: Trust your brain, not your gut.
When I bought my Gulfstream IV jet with $30 million in cash, I made sure it came with a pilot who was "instrument rated." That meant he could fly in almost any weather.
He had developed two skills: First, he knew his instruments cold. Second, he was trained to follow those instruments even when his gut feeling was deadly wrong about which way he should steer the plane.
You must become instrument-rated in your own business.
Make no mistake, I trust my gut all the time for certain business decisions like which of two candidates to hire or how far to push a negotiation.
But I had bigger decisions like how much to bid on billion-dollar loan portfolios. In those situations, I was so familiar with bid prices that my numbers told me when the market was "bidding crazy" for loans. I knew the facts and economics cold, so I had no problem letting someone else outbid me.
Take the time to build a great instrument panel you can trust. On the really big course changes, study those instruments and trust them. They'll protect you and allow you to fly above your hand-wringing competitors.