Lucky?
So, did you get to this point in your life by hard work, good (or bad) luck or a combination of both?
In my case, I worked hard but I think good luck played a big part in my life. Small things, small decisions, most of which turned out to be correct, played a huge part in my career.
Believe it or not, good luck has played a big part in the success of many businesses. Here’s a few.
FedEx
Fred Smith, the founder of FedEx, started the company in 1971 based upon a research paper he wrote while a student at Yale. In a couple of years FedEx went from a small eight plane company to a large nation-wide firm.
But by 1973, hammered by high fuel prices and massive debt, FedEx only had $5,000 in cash left. The company was limping along by asking pilots to pay for fuel with their personal credit cards and asking employees to not cash payroll checks. Smith tried meeting with his investors but had no luck. The company was about to fail.
What would you do? Probably not what Fred Smith did. He pulled the $5K out of the bank and went to Las Vegas.
24 hours later he turned $5K into $27K playing blackjack.
That money kept the company afloat long enough for Smith to raise $11 million. FedEx turned profitable in 1976.
Now a $60B global logistics behemoth, FedEx only exists today because 50 years ago, with his company's last $5,000 on the table, Fred Smith was dealt an Ace - 10.
Apple
In 1997, Apple was in deep financial trouble. With no more options to explore, Steve Jobs made a “Hail Mary” and approached Bill Gates of Microsoft. Amazingly, Gates agreed to invest $150M in his competitor.
Speculation is that Gates likely made this investment to appease the Department of Justice's antitrust inquiries about his company. Regardless, Apple lived to see another day and at one time became the most valuable company in the world.
Bill Gates
Bill Gates himself had a huge bit of luck. He attended a private school in the early 1970s that provided computer terminals to students. From this advantage Gates became interested in computers and learned programming. After college he and partner Paul Allen borrowed $50K from Gates’ dad and bought MS-DOS (the original software that made PCs run) from IBM. As a part of the deal, the duo negotiated a royalty payment from IBM for each PC sold that used MS-DOS, which all did. At the time IBM thought PCs were a fad and wouldn’t amount to much.
The rest is history.
Amazon
In early 2000, just one month before the Dot Com crash, Amazon sold $672M in bonds. Sensing a downturn in the economy, the CFO wanted to build a stronger cash position to protect against suppliers requesting quicker payments.
Had Amazon waited just two weeks later, it likely would not have been able to raise the cash and today would be remembered as another .com fatality.
Benjamin Graham
As the “father of value investing," (and Warren Buffet’s mentor) Graham took a strict, value-driven approach to investing. His rule was that no investment would be greater than 5% of his portfolio, and no investment would be held once it exceeded a target value he set.
Graham broke this rule one time when a $575,000 investment in insurance company GEICO grew to become a 20% holding in his vast portfolio. The company performed so well that he made an exception and held the company for many years.
In the end GEICO generated greater returns than the rest of his investments combined. Today GEICO is privately held but is estimated to be worth over $20 billion.
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I’m sure I could find many cases where bad luck killed businesses. In fact, I’m sure the bad outweighs the good by a large number.
But it’s nice to hear about the good.
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If you want to see the poor remain poor, generation after generation, just keep the standards low in their schools and make excuses for their academic shortcomings and personal misbehavior. But please don't congratulate yourself on your compassion.
- Thomas Sowell
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Say Cheese!
(And you thought curling was a weird sport!)
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