Issue #17 - The Discipline to Say No

Letting Go Is Hard

I love to learn. Discovering something new, connecting to an idea in a new way, or finally grasping something that had previously stumped me gives me a rush. That's one of the reasons I so enjoy the work I do as an investor in small companies. Every day I'm learning about a new niche industry or an entrepreneur's journey and I have an unlimited number of excuses to indulge my curiosity.

Unfortunately, my time and resources are limited, so I have to say no to many things I would otherwise like to investigate. Sometimes, passing is easy. But most of the time, because my intellectual brain likes to solve hard problems and, within my areas of understanding, I'm usually pretty good at solving them, I'm frequently tempted to spend time in areas that my more logical side knows I shouldn't. For example, a broker might send me a listing that highlights a company in an industry with which I'm unfamiliar. If the company and industry characteristics appear to fit our key investment criteria, I can easily persuade myself to spend an hour or two doing some quick online research. Multiply that investment of time by the large number of new companies and ideas our team is encountering each week and the hours sunk into even cursory investigations can become material.

Now, consider cases where that investment of time has already been made: the first few hours of work have been completed, things are looking good, or the LOI has been signed and excitement is high for a potential acquisition. At this point, it becomes even harder to say no and walk away because of the perceived and real sunk costs. The myriad human biases that kick-in, even from very early on, are hard to recognize and resist. But, that's exactly what is required. As an investor, remaining disciplined and committed to a process and controlling one's emotions are critical. Over the past couple of months, we've done extensive work on a few ideas that ultimately failed to meet our criteria. Letting go was painful and at every turn, I felt the tug to rationalize why the negative discoveries weren't as bad as they appeared or how they could be mitigated by our superior abilities. Wrong. I frequently had to snap myself back and reorient to the facts.

Seeking truth is a journey and the road is far from clear, but even when the results are at first disappointing, once I've gotten over the sense of loss for what might have been, I quickly realize the satisfaction that comes from haven't done the work to build conviction in a decision. Over time, those memories become cemented and make each subsequent rejection a little bit easier. And, I like to think, delaying the gratification of a closed deal or a green light on a new industry ultimately leads to better outcomes for our community of investors and operators at Majority Search.

Happy New Year

This is our last issue of 2022 and we just crossed the 1,000 subscriber mark. We never take for granted that when you read each issue you are giving us some of your most precious resource - time. So, thank you for your readership and support this year. I hope you enjoy a splendid holiday season and we will be back in 2023 (though likely on a different platform since Twitter recently announced they are shutting down Revue, the email newsletter service we've been using. I guess even we have not been able to escape the gravitational force of Elon Musk!).