The Real Estate Philosopher


Fail Dammit!!!

Aug 4, 2016

I was reading this morning about a superstar Olympic hopeful. A woman named Simone Biles (check her out). She is the top gymnast in the world right now – and the United States has high hopes for her in Rio. During her rise to greatness, she fell a lot (off the balance beam and in other places), but she kept on winning because she kept on doing things – and taking chances -- that no one else could do, or dared to try. Maybe she fell a lot because she was pushing the edge of possibility in gymnastics rather than playing it safe. Maybe that is why she is the top gymnast in the world – because she was not afraid to fall – and to fail?

To move closer to the business world, in recent years I followed Ron Johnson’s attempt to revamp JC Penny. He was running a company that had only one certainty and that was that if they kept on doing what they were doing the company would slow and inexorably die off. It was a dead husk of a company that was slowly succumbing to irrelevance and everyone knew it. So Johnson, who had previously started the incredibly successful Apple store, joined up as CEO to try something completely different. He up-scaled the stores and brought in brands and created a completely different shopping experience. The idea ended up backfiring. Customers were lost and it just didn’t work, or at least it didn’t work quickly enough. In other words, it failed! Johnson was fired in early 2013. After that, everyone jumped on him. The media was relentless. The guy who had created the half trillion dollars of value in the Apple store had now blown it with the JC Penney store. Fortune wrote an aftermath article – writers Marty Jones and Susan Kramer -- they ended the article with these words:

“It’s impossible to know if Johnson’s reforms could have succeeded but he does leave one legacy: Nobody will be attempting something similar for a very long time”

Wow. Think about this. The company was dying. Someone had the guts to try something new to save it and it didn’t work out. So let’s not only damn him for eternity but let’s publicly humiliate him and, for good measure, make as sure as possible no one ever tries anything like it again. After reading this would you want to take a chance like Johnson did? The downside of failure is so huge!

Consider this basic emotion we have, which is fear of failure and maybe even worse, fear of being humiliated and laughed at. Every time we try something new we have this fear. It is a natural emotion. And if this is what happens when you fail, there is good reason for this fear.

So how would this work in (most) organizations if someone has a new idea that no one else has done before?

First – she would bring the idea to management – to investors – to lenders – to partners. What would they say? Well, in most of these situations, you know exactly what they would say. They would come up with every possible objection. We are all awesome at that. They would poke holes and say “but what if this happened” [as a result of your idea]? We could be laughed at – we could lose money – this could harm our reputation – we wouldn’t be able to get future lenders, partners, deals – or (gasp) it could hurt the vaunted track record we have that we tout all the time and we can’t risk that – etc. The list of concerns would be endless and the more the idea was outside of the parties’ comfort zones the worse it would be.

Second – if she had major guts, she would fight everyone on this. She would point out that the issue is not whether there was a risk of failure, but whether the rewards outweighed the risks, coupled with the probability of a successful or failed outcome. Maybe after a great deal of back and forth, expenditure of political capital, and alienating the most fearful parties (maybe permanently), she would finally get her way.

Keep in mind that she doesn’t know if the idea will work. It is a new idea and by definition risky.

Third – she tries out the idea and – bummer – it flops completely! Now what? You know what happens next. All of the parties involved have different versions of “toldyaso”. They bring it up forever and ever. They roll their eyes. They say they “knew” it was a bad idea. They were naysayers and triumphantly proved right. The humiliation is complete and never-ending. The various people she confronted along the way are pleased, although they might not publicly admit it. Those who supported the idea are chagrined and think “that’s the last time I do something like that.”

Fourth – it gets worse. The person who brought up the new idea will certainly not bring up another one. Even if she had the guts to take a risk of the foregoing again – and how many of us have that much fortitude – she would never be able to win the political capital to make it happen. So she is out of the new ideas game for good. And maybe even out of a job….

Fifth – and to make it worse yet – everyone else who is watching from the sidelines, how are they going to feel about trying out something new? I think we know the answer to that too, and that is that there is no way they would make such an attempt, because the downside of a failed idea is obviously so high.

Now the organization has created a culture of no one ever doing, or even suggesting, anything new! No one ever innovating or trying things out. Certainly no cutting edge thinking will go on at this organization.

So I ask you, does the foregoing describe the company you work for – or the company you run – in the real estate world. We all know the real estate world is changing, and maybe even dramatically, what with all the technological changes and the increasing sophistication of the various counterparties with whom we all deal. No one can afford to have an organization that crushes the spirit of someone with the “guts” to push for trying something new.

As an aside, I note that my point here applies to new ideas as small as trying a new brand of coconut water in the cafeteria fridge to changing the “usual” place you go to lunch to moving your company into a new line of business. Big and small changes always make people nervous and ruffle their feathers.

I came to this realization many years ago for my law firm. If I tried to make my law firm just like all the other law firms, but better – there was only one thing for sure – and that was that we would fail – we would fail slowly – we would never realize why we were failing – we would just slowly go out of business – but the good news is that we would never be embarrassed along the way.

I didn’t like that outcome and decided we would have to try new things, and try a lot of new things, and when we tried them we would certainly fail. Indeed, the list of failures at my firm with new ideas I have tried out is endless. But there were a lot of successes too – and it is now possibly a surprise to many that little firm that few have heard of outside NYC is now one of the largest real estate law practices in NYC.

People often ask me – at interviews and otherwise – what is the secret to my success? How did I get where I am? I always answer the same thing and it is 100% true – that is that for some reason I just don’t mind making a fool of myself. In other words I am happy to try – again and again – and fail!

I can’t tumble like Simone Biles – although I can do a cartwheel – but one thing I share with her is willingness to try things neither I – nor anyone else – has ever done before. The bottom line is that it is awfully hard to have great success without a whole string of solid failures along the way.

So next time someone throws out a new idea at work – maybe timidly – treat the idea with respect. Thank the proponent heartily. When the new idea is evaluated, consider the risk and the reward of the idea, rather than everyone ganging up to poke holes in it. Then when the idea is ultimately tried out and turns out to be a complete flop, throw a party for the colleague who had the guts to try the new idea and make it clear how thankful the group is that she really took one for the team.

And maybe – just maybe – your organization will become one of the great players in the real estate world. Maybe – just maybe – you will always be on the cutting edge and out ahead of your competition, with new ideas that are rewarding to your employees and to the counterparties you deal with.

I will end by noting that John Wooden (one of the greatest coaches of all-time) is famous for saying that the team that makes the most mistakes is the team that is likely to win.

So go ahead – make some mistakes – and fail! Who knows what will happen.


Specialty Practice at Duval & Stachenfeld – Real Estate Tech

The theme of my article – failure – is a perfect segue into a reminder about our Real Estate Technology Practice – known as D&S Dirt Tech.

Our view is that real estate technology already is, and will continue to be, a major disruptor of commercial and residential real estate worldwide. We created this practice to be at the forefront of this revolution.

At this point, we are doing the following, or able to do the following:

  • For real estate technology players, both large and small, we have introduced them to our numerous real estate clients.

  • We have collected a group of real estate technology funds that are interested in, or solely focusing on, real estate technology, and we have introduced these funds to real estate technology players.

  • We have a major real estate client focusing on testing out real estate technology platforms on its extensive real estate portfolio (with the business plan of investing in, and seeding and backing, those companies that prove successful after testing) and have made appropriate referrals.

  • From the legal point of view, we have real estate technology companies and Venture Capital type funds as clients and are representing them in their venture capital transactions.

  • We are able to provide – free of charge – office (incubation?) space for real estate technology players who can benefit from this assistance.

  • For select real estate technology companies, we will be willing to allow them to circulate information about their technology in future issues of The Real Estate Philosopher.

We expect Duval & Stachenfeld to be a major player in the real estate technology space. If you think you might benefit from any of the above services please do not hesitate to contact me.

If you are wondering, we do not take any fees or other direct or indirect compensation for introducing and connecting people along the lines outlined above. This is all part of our core mission:

To Help Our Clients Grow Their Businesses

This mission is the special “value-add” that has propelled us forward, as it distinguishes us from other law firms.

 

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As the Managing Partner of Duval & Stachenfeld – a 70-lawyer law firm in mid-town NYC known as The Pure Play in Real Estate Law – I am inviting you to join The Real Estate Philosopher™. This will consist of my thoughts and also thoughts of friends and colleagues.

It will not be published in any traditional media – it will go only to friends of our firm. The purpose here is very simple – to put forth thoughts in the real estate world that are different, provocative, and challenging of accepted wisdom. Hopefully, nothing said here will be mainstream thinking.

You may be wondering how I am qualified to write on these topics since I am “just” a lawyer. However, I have an unusual place in the real estate world. As the managing partner of The Pure Play in Real Estate Law (one of the largest real estate law practices in NYC), I interact with an incredible number of real estate players. This ranges from small real estate shops with nothing but a gleam in their eyes, to some of the largest real estate institutions in the world, and everything in between. This gives me a unique and global perspective and allows me to act as an amateur philosopher in the real estate world. This has always been my hobby and it is what I love doing.

Regards,

Bruce Stachenfeld
a.k.a The Real Estate Philosopher™

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