In times of crisis. . .Defense AND Offense

Threats trigger defenses, and bigger threats trigger bigger defenses. That hard-wired response of the reptilian brain, though, does not lead well.

The gift of fear is safety. It sounds an alarm so that we know to protect ourselves, and current commodity prices certainly present a flashing, screaming siren for our businesses and livelihoods. Even so, nearsighted fear often makes for terrible decisions.

“Be fearful when others are greedy and greedy when others are fearful.”

- Warren Buffet

Years ago, a consulting gig trip took me away from the house for a couple of days. We had started the new business a few months before, and we were not yet receiving any kind salary. My wife was alone at home with two hyperactive kids and an infant. Meanwhile, I was driving a remote highway in another state when my wife called, crying. A minor injury precipitated our own private, petite crisis.

Perhaps because the scenery calmed me or perhaps because I was leaning into the risk of starting a new business or perhaps by pure grace, I asked myself, "What opportunity does this create?"

For several years before that day, I had been max'ing out my 401k and investing it "prudently." Young and newly rich since college graduation, I saved assiduously. Aware of the risk of the Y2K bug, I put all of my 401k into cash equivalents while watching from the sidelines as stocks carved a historic arc upward. When D-day came and went without a hitch, I finally entered the market with more money than I'd spent on my college education. Within six weeks the bubble burst, and my account was worth half of the dollars I'd earned and saved.

Like that Y2K loss, I've made far more and larger mistakes by trying to avoid risks than by taking risks. Perhaps I have now have over-compensated in my private life, but I do know that research shows that the companies that do best in times of crisis are those which adopt two strategies simultaneously: protection and opportunity.

Inescapable that companies must take steps to try to stay solvent without the benefit of hedging at $50 /bbl, and that is no short order with this crisis close on the heels of the last halving of oil price. But, as they say, "the cure for low oil prices is low oil prices," and prices cannot stay this low forever. (For how long the separate commodities stay low will have to wait for another discussion.)

What we do in this part of the cycle sets us up for the next part. Companies are made in the hard times, and they are destroyed in the good times. You just don't know it until conditions change. Now is the time to make decisions and take actions that will set you up for success when the world inevitably turns.

As you look for opportunities, I'm here to help as a sounding board or as substantive analysis. Or, if you think that uphole potential in the Delaware basin could fit into your strategy, I've got my own ideas to contribute.

That day when my wife called crying over our minute emergency, it gave me an opportunity to show her that I love her, to send her flowers, and to prepare us a little better for the crises that came along next.

Kick butt this year,

Dwayne

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P.S. If you need help to find and execute on the opportunities created, feel free to call. From analysis of investment decisions, to supervision of junior engineers to litigation support, my decades of experience are at your service. Please feel free to call for a friendly chat, or I'm pleased to help with more substantial work.