Elements: Jiufen, Taiwan

Jiufen is an old mining town in Taiwan and is famous for a traditional old retail street.  The street is a market that winds down narrow alleys, giving it a souq-like atmosphere.

On the weekends, the amount of people visiting gives it a feel like you’re in Downtown Disney – packed full of people walking in either direction, not exactly leisurely.

But it’s famous for a reason.  The elevation and its placement on the hillside also gives you charming, wonderful vistas like this one.

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So much so, that it was reportedly an inspiration for Miyazaki’s Spirited Away.  You might see the resemblance.

What is the essential element of this place that gives it magic?

1.  The stairways and elevation changes give it a lot of charm.  You don’t know what’s around the corner, and you have a lot of views that are uncommon.

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2.  Red lanterns: lighting is huge, and by stringing these everywhere, basically it gives the night market a special glow.  Warm, inviting, a little magical.  Lighting can be a huge signature, and you can really see the difference here when you compare the market during the day versus the evening.  So simple.

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3.  Vibrant tenant mix.  I’ve consulted on a lot of projects where clients try to artificially create this kind of retail entertainment.  There’s nothing wrong with that, but usually where projects like this fail, is that everyone spends time on creating an incredibly fantastic, magical environment and less time on the actual substance of the place – it’s great to have spectacular surroundings, but what will people actually end up doing?

Shopping, eating, being entertained – and that is delivered by the individual tenants themselves.  Ensuring a vibrant, authentic, sometimes irreverent tenant mix is the absolute key.

If you really think about it, and decompose Jiufen into its elements, that last one is really the secret to its success.  There’s nothing so crazy about stringing up red lanterns, or narrow alleys.  But the reason it’s like Disneyland on a summer weekend, with a crush of people walking in either direction, is because of the combination of all three of those elements.

The other place I’ve seen this is in Hongyadong, in Chongqing, which is arguably more fantastic and magical looking than Jiufen.  You can take the whole sight of Hongyadong in, at a glance, but you can’t put the architecture or structures of it into any category.  You can’t even tell where it starts or stops, or what anything even is.  It’s hands down the craziest piece of real estate I’ve ever seen.  Below:

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Do yourself a favor and Google ‘hongyadong’.  It’s really one of the most insane structures I’ve ever seen.

And inside, it’s much of the same.  Chongqing is a hilly city, and you need to climb narrow winding stairs to get anywhere.  Once inside, you’re greeted by a crush of people, restaurants, shops, like you’ve arrived at a magical floating island.

Back to Jiufen.  Teahouses are one of the essential places to visit in Jiufen.  And there’s a lot to be said about Chinese teahouses.

This is the one we visited in Jiufen.

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The apothecary-like counter and cabinets holding a variety of teas, accessories, paraphernalia imbues the place with a special, bespoke touch.  You get the feeling they’re sifting through all these pots and bottles for the tea that you and you alone ordered, mixing it in the exact proportions right for you.  They possess an arcane knowledge of teas, the depths of which are mysterious and a world to be explored.

The teapots on the counter look industrious.  You get the feeling that something is always brewing 🙂

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The individual seat compartments are divided by dark woods and stone, and spaced at perfect intervals.  Solid, subdued materials surround you and invite quiet contemplation.

One day I’d like to develop such a place, but it’ll be one dedicated to chocolate.

A Real Estate Career: Lessons Learned (2012-2015)

It’s weird the things that stick with you.  For the next few years, I worked three full-time jobs at a time.  I was in full execution mode as a property tax agent, international theme park consultant, and commercial property agent – and I don’t remember much about the period.

When I look back, I think it’s because I wasn’t growing.

There was little new to the jobs.  I was just executing on processes I had put in place years earlier.  I had become proficient, an ‘expert’.  And so the result was that financially, they were some of my peak earning years, but overall I’m not sure it was that fulfilling.

If you can find jobs where you get paid handsomely for personal growth, now that’s the holy grail.

But there were a few things that stuck with me.

I had a client who was an ex-Drexel Burnham Lambert banker.  He predated Michael Milken give/take by a decade, and had apparently made so much money that there was nothing else to do with it but plow it into real estate.

He worked out of one of his apartment properties in Brentwood, in a ground floor office strewn with papers and newspaper clippings.  He was in his 70s and his main tactic in any negotiation or even discussion was to immediately pretend he was slow.

Whenever you began speaking, he would tilt his head and look at you curiously before responding with a set of ‘is that right’s and ‘you don’t say’s.  He didn’t say much, but you could tell he was processing everything.  With so much office space all around LA, he offered free space to young brokers as a way of being plugged into deal flow.  Essentially, to listen.  He was always listening.  Sometimes his ‘you don’t say’s were sarcastic, as if he couldn’t keep listening to our stupidity anymore, but he was always listening.

We had another client who was a movie mogul.  Over a few decades, he had opened a regional chain of movie theaters and plowed the proceeds into real estate.  And about a mile down from our office, he owned 25 condos in the heart of Redondo Beach.  We brought him multiple offers on the property.  $18 million.  $20.  $22.  But he wouldn’t budge for less than his number, which was a million dollars per unit.

And although we had clients who probably would have bit at $22, he didn’t.  Something about his patience struck me, sitting in his office modeled after a miniature theater, cracking a grin at each new offer we brought him, and sitting back, a picture of consummate contentment, and telling us, if we could please try to get a higher number.

Years later, he was proved right.  Actually, the value of his condos probably exceeded a million dollars a unit.

The thing that both these clients had in common were that both owned and controlled more than $100 million in properties, each, both were well into retirement age, and both arrived at their offices at the crack of dawn.

This is just a sample.  There are people like this all over the country, all over the world.  It was just another lesson about wealth.  In so many ways, wealth is not the goal.

I wanted to be like them.  It would be nice to have the level of wealth they did, but I’m talking about their working for the purpose of their work itself.  And having a purpose that made them work harder than people half their age.

No doubt, it’s what made them great.

Then we had another client.  She had emerged as a buyer for another client’s property in Hermosa.

She made us work.

Among other things we had to do to close the deal, we had to chase down people to get them to sign estoppels.  The existing owner didn’t want to do it, because he preferred to be liked more than he preferred to sell the building.

This meant we had to camp out in front of all 12 units and try to get the tenants to sign a document verifying that they were paying, exactly what the rent rolls said they were paying.

Naturally, a lot of them were suspicious.  Was the new owner going to kick them out?  Was she going to convert the apartment into condos?  They were nervous.

No, no, I answered confidently.  I reassured them there was nothing to worry about, that the new owner had no intention of redeveloping.

But there was something else I had forgotten about.

After dragging the deal across the finish line, I felt a sense of relief as we pulled up to the new owner’s $10 million house in Palos Verdes, with a tennis court in the back.  In the living room, she proudly showed us a rent roll of the $80 million portfolio she managed, from her living room.

And later, she even more triumphantly emailed us to say that she had doubled rents, because the previous owner had been undercharging.

It left me with a bad taste for these kinds of deals and people in general.  All part of the industry, but I couldn’t help but think that while knocking on doors to get those estoppels, I had led some of those people astray.  Some of them, kids younger than I was.

It turned out to be my last deal there.  That, combined with the diminishing fortunes of the property tax appeal business, a countercyclical business if there ever was one, led me to other things.

One last reflection about wealth.  I spent half this time period in Hong Kong.

And in Hong Kong, a summer rite is the boat trip.  On the weekends the waters around Hong Kong and its myriad islands teem with junks and yachts that anchor off a secluded beach, then descend into drunken orgy-level partying.

One of our friends was dating a guy who was as close as you could get to Hong Kong royalty.  He was the scion of a billionaire tycoon, which made him one himself, but you wouldn’t know it to meet him.  Well-educated, low-key, soft-spoken, there is no way you could pick him out in a lineup, as is often the case with billionaires.

Anyway, this weekend we had use of his dad’s yacht.  For seven of us, a uniformed staff perhaps double that number helped us board, navigated, helpfully pointed out the amenities, cooked us a hot lunch, and generally gave us the kind of five-star service you would expect from what was basically a floating villa, way larger than my childhood homes, combined.

After anchoring, there are only a few things you can do.  We rode jet-skis.  We bounced off of inflatables.  Some of us read a book on the upper deck.  Some of us just floated in the water.

Which is what I did.  Bobbing, I could see all the other boats around us.  Some of them were like us.

Splendid, sleek yachts.  Barely any people on them, though.  There were kids on some of the nicer yachts, towards the front, and they looked bored out of their minds.

And, the people on the nice yachts were all looking in the same direction I was, which was towards the bacchanal boats, the ones thumping music that could be heard hundreds of feet away, with the people backflipping off the upper rails, doing keg stands, sliding headfirst and belly up down makeshift slides into the water, floating around the boat suspiciously in pairs.

Of course sometimes it’s nice to be alone.  But also sometimes I think that with great wealth comes great isolation.

I noticed this during my brokerage days in LA.  Sometimes it seemed like our richest clients called…just to talk.  Or when we went out in Hollywood – there is type of person, usually male, who buys drinks for everyone, is exceedingly generous, talks a lot, is best friends with everyone at the bar, is also exceedingly rich, and then at some point during the night…leaves alone in a nice car.

In the summers in LA, you can ride a bike from Venice Beach down to Redondo.  Over the course of 15 miles, the crowd changes.  Rowdy and larger up around Venice and El Segundo, Playa del Rey, huge barbeques with organized beach football games.  Then you reach the $10 million houses (at least) in the South Bay, along the Strand.  Nice organized picnics going on, some beach volleyball games, more individual, more rich, smaller.  Sometimes just a guy on the upper balcony of his home sipping coffee and looking out over the ocean.  Of course in some of the houses in between were always some frat antics going on, but still.  Richer, more individual.  In many ways, more alone, although there’s nothing wrong with alone.

But, now why is that?

A Real Estate Career: Lessons Learned (2010-2012)

The optics of business school are great because being a student gives you a halo – you appear to be “studying”, hard at work, transforming yourself.

Whereas if you took two years off to just actively look for, recruit, and interview for jobs in a new industry it would raise eyebrows, if you instead pay vast sums for the privilege of doing so, while paying even more in opportunity cost / lost income, it is more professionally accepted.  Ironic and backwards, but that is the imprimatur of business school.  That’s what people pay for.

Also, it’s a good two year break that looks good on a resume.

I entered Haas because I wanted a break.  I also wanted to be close to home, and the counties where Property Tax Advisors was appealing cases.  I wanted to be on the West Coast, because most of my consulting clients were in Asia – and I would have to fly there from time to time.  In case it wasn’t obvious, I still wanted to work part-time.  And also, to seal the deal, Haas gave me a scholarship, which combined with what Gary still owed me, made it an all-expenses paid, tax-free, two year vacation.

But I don’t want to make it seem like I didn’t take the whole experience seriously.  I did want to learn.  I wanted time to read books again.

The first thing I did when I arrived on campus was sign up for Mandarin classes, which I took with undergrads.  And then I signed up for some advanced real estate classes to try to figure out WTH had just happened in the world.

I took real estate classes every quarter.  And I read books on real estate history outside of it, outside of the classes.  At the end of it, I’m not sure I came very much closer to understanding the mechanics of what had happened, but I did gain an appreciation of how fragile things are in the world.

For our final project in a real estate financing class, we had to analyze a CMBS prospectus (commercial mortgage-based security), you know, those products that had helped bring down the global financial system.

I remember little about the product except that its supporting document was about two hundred pages.  Five of us pored through it for weeks.  All of us had come from real estate development, banking, or brokerage backgrounds.  One of us actually had a real estate lawyer for a father so we ended up asking him about the finer points.

But the prospectus was written so as not to be comprehended.  It was written in legalese, even though it was describing what should have been a fairly straightforward series of waterfalls in Excel.

And in the end, it couldn’t be modeled, because it was worded so ambiguously.  It was another lesson in what I had long suspected, which was that in business, maybe a small fraction of people know what they’re talking about, and the rest are just pretending.

I guarantee the bankers selling the junk we tried to model were in the latter camp.  Some of them were probably in business school at the same time as me.

Business school was also an opportunity to experiment.  I tried out different careers.  I interned for a hedge fund manager in San Francisco.  The first time I had a conversation with him, my mind almost exploded.

We began talking about a gold mining company, and his process of thinking out loud led the discussion into energy consumption requirements of the world, and caloric intake of Africans.  It all had a logic, but it was just beyond my grasp.  Just like, say, a college lecture that is beyond your head will make you fall asleep, this conversation had all the trails of making sense, but it was beyond my comprehension.  Struggling under the mental strain of it, I had to go home afterwards and just lay down for a few hours.

They say investing is the last liberal art.  It is the best cross-disciplinary, systems thinking training that anyone can get, I truly believe that.

In the summer, I interned for GE Capital Real Estate, the first big company I had ever worked for.  It also turned out to be a mistake.  Not the company or job itself.  As part of the Global Valuations Team, for the first time, I worked with people who were all exceedingly kind, competent, and able to regulate their emotions.  I had never worked with such nice people before.  I also had a boss that summer who was the best boss I had ever had up to then, and since.  She was patient and a great communicator.  I saw in all the ways what I had been missing by working only at small shops and with extreme people.

But at the same time, in order to take the job, I turned down offers from a resort development company (US-based), and a Mongolian conglomerate that wanted me to help them create a business plan for yurts, in Ulaanbataar.  There is no way I would have that kind of opportunity again.  It was a mistake to turn down adventure when I was still single and should have taken those kinds of “risks”.  It remains one of my regrets.

But the job was a revelation to me in other ways.  I came away from the internship and my classes at school with a more profound realization about the world.  Mostly, about the fragility of it.

You could see this clearly because GE Capital was such a high-level investor and manager.  By high-level, I mean that they invested in properties that were worth hundreds of millions of dollars, and purchased portfolios that were in the billions of dollars.  When scale gets that large, numbers become abstract.  When you’re evaluating a portfolio of hundreds of properties, the individual properties themselves also just become pieces of paper holding different lease terms and cash flow logic, encumbered by loan contracts that are themselves just other pieces of paper.

I looked at the stack of hundreds of pages we were poring through, which represented the several billion dollar portfolio we were buying.  And that was it.  Although we weren’t buying the pieces of paper, the pieces of paper held the agreements that held this entire thing together, all the terms and clauses and logic that would be transferred, on other pieces of paper, from a different owner to us, moved like you would a large boulder, carefully, so that at the end, someone could print out another, similar stack of papers with our name on them instead, and magically all the obligations and claims would belong to someone else.

Yet what was contained on these stacks of paper allowed us to borrow more money against it, allowed us to engage service providers and managers to service it, and served as the basis for the valuation of our company.  All around the world, balance sheets were being rearranged, title was being rewritten, people were moving, getting hired, fired.

You might note that this is just a larger scale, of the same type of transaction you would undertake when buying a car or getting a loan.  It’s true, but just think about those transactions too.  Do you ever read every word in a contract?  Do you really know every implication of every clause in a contract?  I doubt 99% of the world does.  Similarly, there were things in the contracts of our portfolios, and the leases, that if you read them carefully were questionable, or ambiguous at best.

But the whole thing was wrapped together by a system of trust.  Trust that people down the channel, the title officers, the lenders, the managers, the agents, the lawyers, everyone, was doing their jobs correctly.  No one at GE Capital was going to have time to review every single line.  Internally we all had to depend on each other, and us as an organization also depended on our service providers, suppliers, the governments and cities in which the real estate was, etc, to do their jobs.

At a scale that enormous, no one person has the whole complete picture.  And if you telescope out to the national economy, the world, it’s the same thing.  No one person has the complete picture.  It’s held together by trust.  And when that trust breaks, the system breaks.

And that, I think, was the main lesson I learned at GE Capital, and probably the main lesson of the financial crisis for me.

After my summer in Connecticut, I moved again.  Business school offered a semester abroad.  And I was going to study abroad in Hong Kong.

Living and studying abroad has been the source of some of my deepest relationships and experiences.  After studying abroad in Hong Kong, I decided I would have to live there.

Also, one night while eating hot wings at a place that prided itself on the scoville (spiciness) levels of its food, I found myself dry heaving, tingling, and in tears after half a bite of their vaunted apocalypse wings.

I began rubbing my eyes, which was a mistake because for some reason the XXL-killer-apocalypse-suicide hot oil had spread to the back of my hand, and now I couldn’t feel my face anymore.

It was at that moment, with fluids draining out of my face, that a girl in a white and black dress walked in smelling of spring, and sat down with me and my friends.

A few years later, she would become my wife.

Elements: The Best Theme Park in the World?

DisneySea is the gold standard of theme parks.  Most people in the industry who I ask will nominate it as their favorite, and as the best theme park ever constructed.  Just a few of the examples are here and here.

There are better guides and writeups on DisneySea out there, but this is my personal note of appreciation for it.

DisneySea is my favorite park too, although I think if you’re talking about the best park in the world, it depends on who you’re asking.

You’ll notice that the people declaring this is the best park in the world, are adults.  Most kids would probably not say DisneySea is their favorite theme park.  It has less rides and attractions than Disneyland and is a more subtle experience.

As way of background, Tokyo DisneySea is the second theme park at Tokyo Disney Resort.  It opened in 2001 on land reclaimed by the Oriental Land Company in the 1960s, and while Disneyland got the better, more stable land, DisneySea had to be built with as much attention to the subsurface because it was over a deeper area.

All sorts of fancy engineering was applied to the land to avoid problems of differential settlement, and the inevitable result was cost overruns.

All this is to say that in my opinion, Tokyo DisneySea is the theme park version of the Steve Jobs standard of crafting things to perfection, even the parts unseen.

First, this is perhaps the most beautifully themed amusement park in the world.  Parts of it do not resemble a traditional theme park.  They resemble an art installation, or a museum.

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This is Ariel’s Grotto, a visually spectacular masterpiece.

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This East Coast waterfront area is visually one of the most intricately themed experiences I’ve ever seen anywhere.  They put that much work into this ship floating in the water, and it cannot even be boarded or accessed.  Only appreciated from afar.

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Most things, when they are simulacra of another, suffer in comparison.  They can’t pass the authenticity test.

This is because too many details are missing.  Here, Tokyo DisneySea has the opposite issue.  It has MORE details and more features, I’m sure, than the originals.

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Gorgeous theming.  Not a brick out of place or corner cut.

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The park is filled with areas like this, in areas you can’t even access.  Here’s a dhow in the middle of the water, and it’s full of stuff – cargo, utensils, equipment – and the fact that it has this stuff in it deepens the mystery.  You want to go see it, but you can’t.

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Exquisite rockwork.  Bubbling water.  The water doesn’t have to foam and bubble.  But it does, because this is Disney.

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At DisneySea, they’ve recognized that food is an important part of the experience, and for many people, maybe the primary part of the experience.  Why other theme parks haven’t yet adopted this philosophy is beyond comprehension.

At DisneySea, you get multiple popcorn flavors spread out in different areas of the park.  It is a game to either find/taste them all, or find the one you want.  Here’s blueberry popcorn.

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Here’s milk chocolate popcorn.

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Here’s the line for the caramel popcorn.

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You have a food court that has a line of more than 30 minutes to enter:

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Operationally, it excels.  Every cast member has been impeccably trained.  On the kids’ rides, the cast members wave to you the entire time you’re riding.  Bonus points if you can catch them not smiling.

I can’t tell how much of this part is cultural; i.e., would you get the same frenzy and crowds in say, Orlando?  But in DisneySea, there are queues everywhere.  When I mean everywhere, I mean – at food kiosks.

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To take pictures next to a themed stall.

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And ride-equivalent wait times to take pictures with the characters.  Some of this is undoubtedly Instagram culture, which is worldwide, but I can’t shake the feeling that I’m not sure you would get a neat, impromptu lines like the above at Disney World.

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Then you get the Easter Eggs and minute details that are completely extraneous, but are the differentiator between a Disney park, and everyone else.

Plaque reads: “They That Go Down to the Sea in Ships, 1623-1912”.  This is taken from the Gloucester’s Fisherman’s Memorial; the original has the dates 1623-1923, but I will bet that the difference of the latter year has some meaning to it and is not an error.

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There are theme parks developed for a fraction of a Disney park.  You can have great theming, good hardware (roller coasters) that rival the best in the world, you can have rockwork and incredible landscapes, but there’ll always be something missing.

That something is internal consistency, but internal consistency wrought with a level of attention to details that would confound a rocket scientist.

Part of this internal consistency that most theme parks ignore is music.  Music in a Disney or Universal park is central to the experience.  Hidden speakers take you on a cinematic journey and evoke emotions appropriate to that land.  The audio quality is superb and makes it seem like you’re in a theater the whole way.  The transitions between the lands are seamless.

Instead, in most parks, what do you get?  Non-immersive, dim audio, sometimes tinny, and lots of areas that are just completely silent.  Soundtracks that are nonexistent, and instead, playing pop music unrelated to the park.

Here are some speakers hidden in a bamboo grove.

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And some others disguised into a building facade, all designed to create that seamless experience.

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Paying attention to the parts unseen, indeed.

If you decide to do something, to do it all the way, and to completely commit to the conceit that you’ve set up. 

This is DisneySea’s major accomplishment.  This is something worth considering and learning from.

A Real Estate Career: Lessons Learned (2010)

Almost exactly when The Year of Reflection had ended, I received a call from an old contact, Tim.

He wanted to know what I was up to these days, and whether I might be interested in helping him out.  Over the phone, I couldn’t really process what he was saying.  He spoke of taxes and property values excitedly.  I know how that sounds.  But yes, he was excited.

From what I could make out, it was evident that this was an opportunity that had risen because property values had crashed.

One thing did stand out, though, and that was the word “ridiculous”.  Tim was using the word “ridiculous” quite liberally to describe the situation, the money, and the job itself.

If there was anything I had learned about myself in my career so far, it was that I was a ridiculousness hunter.  Intrigued, I accepted his invitation to come in and check out their operation.

Indeed, when I arrived at their “offices” in Manhattan Beach, I found the situation a little ridiculous.  The office was a two bedroom apartment off Manhattan Beach Boulevard with no natural lighting, and seven people were working in it.  Files were scattered everywhere, like debris from a bomb explosion.  I met Jason, who worked with Tim in the master bedroom.  Gary, the owner, worked in the second bedroom.  Everyone else worked in the living room.  Files were stored everywhere, including in the kitchen cabinets and in the oven, which no one used.

The operation was one that appealed property taxes.  This meant going down to the assessors’ office of the California counties and argu-, demonstrating that our clients’ properties were not worth the inflated prices they had purchased them for.

Jason, Tim, and Gary explained this to me as I surveyed the wreckage of an office, and asked me when I could start.

That weekend, I moved to Manhattan Beach and came into the office the following Monday.

Bureaucracy causes pain, and pain causes opportunities.  This whole operation was there, because dealing with the county assessors’ offices was a bureaucratic and logistical nightmare.  If my experience at ERA was like being in a time capsule from the 1970s, the assessor’s offices were dated at least a few decades earlier.  They communicated only by phone, mail, or through in-person hearings, the latter of which gave it the flavor of judicial and legal proceedings.

All this is to say the following.

Challenging the roll value of a property in California, in most of the counties, [was] free.  Free.

But like most things taxes, people hired us to do the job for them because they couldn’t understand the process.  Or even if they did, the psychic pain of having to be put on hold and transferred through the various departments of the assessor’s office, having to search for information on values retroactively to the assessment date, or attend hearings in the middle of the day scheduled months in the future, caused them to hire us.

The business was unglamorous, taxing, under the radar, and operated out of a master bedroom with soiled carpets.  And at Property Tax Advisors, we were discreetly generating ~six digit sums in fees, per week.

This is when I learned that a real business eases pain.  A real business is not the storefront, or the colleagues, or business cards, or a website.  A real business is where someone pays you to do something they can’t or won’t do themselves.  At real scale.  And sometimes you can create a profitable business out of something that is already free.

Don’t be afraid of boring businesses.  I’m sold on boring businesses.

The substance of the work was scouring through reams of data, photos, and assembling a case.  The actual analysis didn’t take long, but it was time-consuming, carpal-tunnel inducing, and after working out of the cave of a master bedroom for about a month, I noticed another something.

I was losing a lot of weight quickly.  People have a misconception about Southern California.  They think if you live by the beach, it’s balmy and tropical.  It’s not, especially in the South Bay.  Most of the time it’s under cloud cover, and if you’re not under the direct sun, there’s a sea-cold to it.  I lost 10 pounds the first month I worked there, just from the ambient bone chill.

The cold and the enormous workload brought something out of me that had lain dormant for a few years.  It was time to dust off my Excel macro skills.

Over a few weeks, I made a program that automatically valued our cases at the rate of one every two minutes, which was a vast improvement over the 45 minutes it took to do it manually.

Because in order to win a case, we had to present a preponderance of evidence that proved the house was overvalued.  “Preponderance” meant that often we pulled together hundreds of pages of evidence for a single property, replete with pages of full color photos.  We took this burden of preponderance seriously, and made sure that our cases were also preponderantly heavier, in actual weight, than the appraisers we faced.

Sometimes I could see a visible sigh from the appraisers when they saw the buckets of paper we hauled in during hearing days.  It was a psychological tactic.  Because when I saw those sighs, I knew that we were winning.

And you might think that it’s weird I use the word ‘winning’ in conjunction with something like a valuation.  But I discussed this before; the concept of value is a vague one.

What is value, really?  Value is a consensus arrived at by subjective opinions.  Everyone starts with the same facts.  Your value is what you choose to emphasize and omit out of those facts.

The assessor’s office was biased towards preserving the roll value.  We were biased towards lowering the roll value, to alleviate taxes for our clients.  And it was a clash of opinions and wills.

But whatever side you’re on, bias takes its toll.  For instance, when you believe that values are too low and are going to go higher forever, like a broker does, you’ll start making yourself susceptible yourself to frauds and bubbles.

This is just as true on the other side.  Exhibit A was our owner, Gary.

There are people you’ll encounter who seem absolutely suited for the work they do.  Sometimes this is because when you do something every day, it can’t help but influence the person you become.  And sometimes it’s the other way around.

For Gary, I couldn’t tell if he was always the way he was, or it was the 20+ years in the tax appeals business that had shaped his entire worldview.

To back up, our work involved looking for direct evidence that our clients had overpaid.  Every case needed to be presented as, “our clients made a mistake and bought at the top of the market and everything is worth about 30-50% less.”

And repeating this story thousands of times over a few decades, I can’t help but think it influenced Gary a little.  Because Gary categorically believed that everyone in the world was overpaying for everything.

From $20 million megamansions in Bel-Air to gym memberships at Equinox, Gary opined endlessly on the ways not to get f**’ed, how to not buy at the top of the cycle, and how to save money.

To him, any debt of any kind was idiotic, even mortgages, and he railed against buying any car new.  One summer when I dropped by to say hi, riding a rented Audi (a free upgrade from the Chevy I had reserved, which was out of stock), he had some choice words.

He was the type of person who, as a Manhattan Beach millionaire, thought nothing of sometimes walking across the street to the motel and helping himself to the free continental breakfast, with a wink and a nod to the staff.

Or walking into the gym with free passes and registering multiple times under different names to extend free trials for months.

Or on Tuesdays, skipping a place for lunch because on Fridays, that’s when they had a promotion and it was 15% cheaper.

Or expounding on the exact depreciation schedule of items like sofas, automobiles, cutlery, and researching gas stations miles away, where prices were pennies cheaper than our local one.

At the time, Gary was going through a lot.  The financial crisis had halved his net worth from $20 million to less than $10 million (I know).  And he was in the middle of a bitter divorce.  All this, I’m sure, conspired to make him feel poorer than he really was, but part of it was probably also in his makeup.  The son of a mailman in Hawthorne, he had always looked at the society people in the towns around him like Palos Verdes, and wanted to be them.

But now he was them, but I don’t think he ever felt like them, nor wanted to be them.

He always had some words about the overpriced nature of the houses around us, and the fallacy of the dual-income homeowners who had taken out million+ dollar loans for them.  How can it be worth it to live like that, and slave for decades just to pay off the mortgage on a property, he would rail.  Why would he buy that car when he’s a [enter profession here] and making [enter salary here], he would exclaim.  Why do people feel like they have to keep up?  He would rant for the entire 40 minutes it took to drive to downtown LA for a hearing.

And slowly, I began to take on his mentality too.  I couldn’t help it.

This was in the ashes of the financial crisis, and still shell-shocked from the previous year, I began making it a game to see how frugally I could live.

For a time, I slept on the carpeted floor of my apartment on a sleeping bag because I didn’t want to buy a bed.  I proudly clipped coupons and returned to my old trick of asking people in restaurants if they were going to finish their meals.  I needed to regain those 10 pounds, after all.

The irony, again, is that the year was turning out to be my best yet, financially.  Again.  I was drawing on two sources of income, and making consulting calls to clients in Russia and Arizona alike, stepping outside on the patio.

Anyway, Gary was shameless in a way with his frugality.  And Jason, who handled sales and collections, was just…shameless.  And shameless about his shamelessness.

Shameless people are an object of fascination in our society.  They have their role.  And in our office, Jason was the id.  He was the walking manifestation of the things we wanted to say and do, because he had no filter.

If you’ve ever worked with real good salesmen, you’ll understand they’re a different breed of person.  Until I worked at the Harris Group, I’d never met real good salesmen, even at Wharton.

Jason had more energy than anyone I’d ever met.  This wasn’t drug-addled energy.  This was just raw male energy, like he was a wind-up toy that was just always…on.  If you stood next to him it became uncomfortable from waves of enormous body heat, like some sort of constant metabolism of targets was taking place.

This extreme energy had him going through a hundred phone calls a day, with no let up in pace.

Like all good salesmen, he didn’t care about rejection.  And unlike other good salesmen, he was completely honest.  He was almost honest about everything he believed and felt, and that made him good on the phone.

Being honest and tireless also made him good with girls.  Bear with me through this section because there is a point.

Every weekend he went out and found himself another girlfriend.  He hooked up with a girl who was going door to door selling magazines, who he invited in to his apartment.  He hooked up with a girl who was selling hats on 3rd Street Promenade.  He had hooked up with the woman who he had purchased his used car from, offering a lower price and a steak dinner.

When he was at bars, he was completely straightforward about what he wanted.  If a girl he was pursuing had a boyfriend or a husband, he didn’t hesitate to say the conversation was over.  He didn’t want a relationship, and every Monday, the endless stream of text messages from his weekend romances bounced in, letting up only around Wednesday.

You may or may not condone this.  I regarded this then with a mixture of wonder and grudging respect.  If nothing else, he was honest.

That honesty extended to the office.  He was not above hanging up violently on clients after calling them dishonorable scumbags for not paying, or calling out people within the office for not working hard enough – and he was right.

For him, what was right was right, what was wrong was wrong, and he knew exactly what he wanted and did not want.  And it always struck me, seeing someone so honest, that people do not really respond well to honesty.

Clients who had been through the Jason treatment didn’t pay until Gary called them back and apologized, assuring them that they were not dishonorable but just “forgetful”.

People in the office who were slacking did not step up their game when called out.  They shut down, and resisted the idea that they were fallible.

And the endless stream of girls (I’m using girls instead of women deliberately) who he had warned in advance and made clear all throughout the duration of their 36 hour romance, that he was not interested in anything longer than a weekend, texted him endlessly.

It’s just a point to consider.  People don’t listen to the ‘what’, they listen to the ‘how’.  Jason knew the effect of never filtering himself, but he accepted the consequences and lived as he did.

Also, back to the energy point.  It’s hard to win against or resist someone who has higher energy.  10 pounds lighter and feeling lightheaded from my endless working, I found it hard to ever win an argument against Jason, no matter how hard I tried.  He kept coming.  And I would definitely never even have a chance after lunch, when I was soporific and for some reason he was going the same speed as at 10 in the morning.

It was then I realized that energy levels are an underrated part of success, especially when you’re working for yourself, and need to be cultivated as carefully as other resources like money or time.

The work was interesting, the growth in revenues was inspiring, the money was lucrative.  But midway through the year, I decided it was time for me to go back to business school.  Reasons to be discussed in a later post.

If I had stayed, I would have earned my way into a relatively easy few million dollars over the next few years.  I knew that.  And I still gave up my equity.  To be clear, I did stay involved with the business over the next few years.  It was one income stream.  But I gave up ownership in order to be free, and have time to do my own things.

People ask me all the time why I did it.  And for a long time I found it hard to articulate.  It just never felt like my thing, or my destiny.  It was Gary’s thing.  It was Tim’s thing.  It was not my trade.  Does that make sense?

Also, maybe it was just hubris again.  Still, I believed that I would find that few million dollars somewhere else, in the future.

Finally, maybe because I just wanted more…adventure?

A Real Estate Career: Lessons Learned (2009)

I started my own boutique, real-estate focused consultancy, in the first week of September 2008.  You’ll notice that’s about the time the global real estate market – and everything else, by the way – came crashing down with it.

A lot of people have described that period as feeling like the world was ending.  It didn’t quite feel like the apocalypse, I never felt in physical danger.  But it did feel like the world order was shifting, that something fundamental was gone.

You can debate all day long whether or not that’s actually true, but for the end of 2008 and during 2009, I was in a state of confusion and loss.

You might think that given what I wrote about my previous job, I was crazy to branch out and start my own consulting company based on it.  Optically it is so.

But I had a lot of good reasons too.  I had cultivated some good relationships with who I thought were solid clients.  One of them, a savings bank that was running itself like a hedge fund, had promised me and my partners a retainer and guaranteed contract over the next two years, worth a few million dollars.

As it turns out, this particular client then went to jail.  I didn’t know yet that savings banks shouldn’t be running themselves like hedge funds.

Another good client of mine, an entrepreneur-turned-developer, wanted me to help them actually project manage the construction of their theme park.  Moving into an actual implementation and development role sounded exciting to me, after being in the world of theory for years.  I believed in this client, because they were one of the only ones that seemed savvy about the whole game – I was and eye-witness to them wrangling about $600 million in concessions for their project from the government.

It turns out a global financial crisis cuts off funding a little bit.  $600 million in savings means nothing when you’ve lost $1 billion in other commitments, I guess.

The third reason was that I felt that being an independent consultant meant I would be my own boss.  Meaning I could work on other projects on the side.  Because simultaneously with some other friends, I was arranging another partnership focused on real estate acquisitions and development deals in LA.

With my consultancy, I thought I would be making millions.  And with my private equity group, I thought I would be also making millions.  Pretty soon, in a few years, I would retire.  It was a neat little plan.

You might notice that even though I believed the world had gone insane in terms of real estate development, I was still fully committed to the field.

This might sound like a paradox, but it was a true blind spot.  I thought that for sure, the projects that the ‘other’ clients were working on were crazy and wouldn’t work, but for sure ‘my’ clients and projects would work.

This is classic bubble thinking, and you could also call it heavy commitment bias, youthful arrogance, delusion, maybe even a form of insanity.

Needless to say, things didn’t work out that way.

2008 closed out with weekly kicks to the face of bad news after bad news.  I learned all the verbal commitments had been worth nothing.  All the projects I had planned became mirages.  My romantic relationships were blowing up.  At one point, I was earning nothing, and it got so bad that I had to move home with my parents.  Back to the San Gabriel Valley where it all began.

At one point, I became so depressed that I decided to write myself a mantra.  It was about a paragraph long, and I wrote it every day for about two months until I felt like I could actually get up in the morning.  I wish I could find it now, which is another reason to keep a journal.

If you talk to people in my generation in the finance or real estate industries, the ones who were a few years into their career when 2008 happened, we are all a little shell-shocked, still.  It was a defining moment, when suddenly the rug got pulled out from under us.

Everyone still daydreams about another financial crisis.  We still think it might be around the corner.  And we have a huge portion of our assets stashed in cash, not equities, just in case something like this happens again.

This is also probably deluded thinking.

But, there are a lot of ironic things that happen in a complete meltdown.  Things reverse in more ways than one.

I gave up on the RE fund.  My partners there, were less serious, than my consulting partners.  And I needed to focus.

But what happened, ironically, was that 2009 turned out to be my best year financially, up to that point.  This, despite working far less.  This is just what happens when you remove overhead.

Despite all that, I didn’t feel any triumph or joy at the end of 2009.  It still felt unstable.  Besides, I was still working and living at home with my parents, and therefore what I was doing seemed illegitimate.

In the years since, I would reverse my opinion on that, but I was still insecure.  What I’ve realized in the years since, is that companies and structure fulfill many needs for people, but one of them is a feeling of legitimacy.  For me too, for a long time.

Being your own boss is not for everyone.  For some people, being able to go into an office, being surrounded by a corporate structure and procedures, and a predictable routine, just feels more stable.  Seeing all the people around you engaged in the same mission drives you.  And the office, the people, and the purpose, give you the sense that you are part of something stable.  Whether it’s true or not.

But all that is what I missed the most when I first quit to become an entrepreneur.  Being your own boss is hard.  You take ultimate responsibility for everything.  You are responsible for the sales, the marketing, the production.  You determine your own working hours, your work-life balance.  All this usually fills you with anxiety.

And the only thing I can recommend for anyone who is thinking about going independent is to install routines and protocols as soon as possible.  Carve out space for the work, away from your personal life, especially your bed.  Create a workplace, whether it’s real or virtual.  That way you will “go to work” and do professional things as a routine or habit, and not just when you feel like it.

Because you’ll only build a business with the accumulated, compound interest of putting in work every day.  This self-regulation was the single hardest hurdle for me.

With more time on my hands and the funds to do so, I started traveling more.

It’s true what they say about memory and learning.  You don’t know what will stick.  In an International Finance course, I had a professor who left us with some words of wisdom during the last day of classes.

I don’t remember much else about the class, except going to him during office hours with a newspaper of exchange rates, interest rates, and other financial news.  My question was that why was the exchange rate moving in the other direction than as predicted by the models we were learning about?

He smiled and just said it was price movement from trading, and that’s when I learned about how there was a force of human nature called trading that helped violate all neat theories.

Anyway, at the end of this class, he wished us well, and recommended that we should visit two places in the world before we died: Machu Picchu, and Angkor Wat.

And so during my consulting jobs, I went to Angkor Wat.  And as he recommended it to me, I will recommend it to you.  Archaeological sites are fascinating for many reasons, but I love them – and love Angkor Wat the most – because of its Ozymandias and memento mori themes.

An ancient kingdom in the middle of the jungle, rich beyond imagination as attested to by the sheer volume and intricacy of its stone buildings, moats, and storehouses.  Grandeur and glory, extravagance, reverence, arrogance, fear, and ultimately, life – you can feel all of these things in the ancient city, where humans once lived under a kingdom that believed it would last forever.  Built by people whose names we no longer know.

Anyway, so you’ll see that the year was a lot of soul searching for me.

And the last lesson I learned is that, whether it’s with yourself individually, or the world around you, in your darkest and deepest times is when the seeds are being planted for future growth.

You should rejoice and celebrate when you feel like you’ve hit bottom.  The journey down to the bottom is the demoralizing, hard part.

The good part – although it’s not easy – is when you’ve actually hit bottom, because that’s when you’re free.  Freer than you’ve ever been.

And likely, when you make it out again, you’ll be a different person.  You’ll be proud of who you became in the process because you’ll have learned how to fight.  And much, much later, you’ll look back at this young, hungry version of yourself in admiration and wonder what happened.  At least that’s how it was for me.

When I think back on this time, I realize that during that year, when I felt like I had no options left, I actually had the most options ever, since graduating.  I could have literally done anything, studied anything, become anything.  A world order had collapsed, and no one would have said anything to me about a career shift or transition into a totally new field.

I could have, but I didn’t.  I was too fearful – what would my resume look like, what would I do to survive, etc.  In hindsight, these were trivial worries.

I did know I wanted something new, something different.  And I would indeed find it in the years to come.

But at the same time, I was also scared to walk away from what I already knew.

A Real Estate Career: Lessons Learned (2006-2008)

Background: before I graduated from Penn, I was fooling around with searches on Google, which was this new search engine that my gf (at the time) turned me on to.  Before that, I was a Yahoo! guy.

On Google, I was typing in any combination of terms I could think of, that would lead to job openings that I thought were a fit.

As you might have figured out by now, I basically failed the on-campus recruiting system process, with 0 interviews and 0 prospects.  The reasons why are a subject for another and much longer post.  So I was on my own.

Using search terms like ‘analyst’ or ‘research analyst’ or ‘economic research’, I randomly stumbled on various consulting companies, think tanks, and research shops.

The particular search terms I used also led me to a company somewhat boringly called Economics Research Associates.  Despite the dry name, ERA was a theme park, resort, and casino real estate consulting company.  They worked worldwide in exotic locations.

It looked exactly like my type of company!  So I applied.

And this is nothing but a story of persistence.  At the time, I was told there were no positions available, but over the next two years I kept in touch.

Sometimes I called them to let them know I was still interested and had “built some skills” [lol].

And other times they called me.  One time a partner called me when I was in a car with a date and I had to drive erratically around and ignore her while doing an impromptu interview.  By the end, I was sweating profusely and not surprisingly, the date did not go well.  Struggles.

Midway through the summer of 2006, a partner of the firm called me and offered me an interview.  The interview led to a job offer.  I said I would think about it (ha!), and “accepted” a week later.

On the first week of the job, they put me in a business class seat and flew me to attend a presentation in Asia; at this presentation, the governor of a large province declared that he wanted to build an F-1 track, a few casino resorts, two theme parks, and twenty-thousand hotel rooms.  Actually, he wanted more than that, and said that the original plans were too small.

So…I had entered the peak bubble zone.

Now to understand what that was all about, you have to understand what ERA did.  ERA was a staid old consulting firm with partners who were in their 50s to 70s.

ERA was started by the original economic consultant to Walt Disney when he built Disneyland in 1955, and for the next 50 years, the firm was the official consultant of choice to any developer, government, or operator who wanted to build or expand leisure real estate operations.

Our job was to validate the financials and make sure the projects would work.  To perform feasibility studies.

That meant that over the next two years, I sat in a clearinghouse of insane real estate ideas.  Again, this was peak bubble.  This meant that every week, we would be bombarded with plans, sketches, and visions of any conceivable leisure entertainment land use you could think of.

If you remember back to this time, this is when Dubai was announcing a new ludicrous project every few weeks, from the Palm and World Islands, to the tallest tower in the world, to malls larger than cities, and mega theme parks larger than Disney World.

But what is less known, is that it wasn’t only Dubai back then.  It was everywhere, from Iceland to Cambodia, Korea, Mississippi, Spain, Cabo, Kazakhstan, Russia, India, and everywhere in between.

Everywhere but China.  China’s time would come after the financial crisis.

I saw drawings of 100 square mile theme parks, sphere-shaped casinos floating in water, and plans for assault rifle-themed or guitar-shaped theme parks.  I saw 100-story buildings in frontier market cities, biofuel farms, and resorts on deserted islands in the middle of the Pacific Ocean.  Every month, someone out of our Europe/Middle East office would send a Powerpoint deck full of pictures for projects in Dubai, with question marks and exclamation points and icons of oil barrels next to them.  At the risk of this sounding like a Ginsburgian “Howl”, let’s stop here.  But you get the idea.

I often think about why there was such a theme park craze during this time.  It seemed like any real estate developer or government was planning one.  I can only posit that it’s because every place in the world had borrowed the Dubai philosophy, which had borrowed it from Las Vegas – build it and they will come.

Before, I mentioned that the Marcus & Millichap San Diego presentation from 2004 should be enshrined somewhere in the Historical Annals.

Equally, any theme park, attraction, or real estate development presentation from this period should also be nominated for the canon.

I shuffled and sat through countless numbers of these: presentations featuring glossy color renderings of buildings that defied physics, and video fly-throughs set to cinematic soundtracks, all meant to hypnotize the viewer into submission; i.e. parting ways with their money.  If you can find them, I recommend sampling the 2007 vintage, which was a particularly ludicrous year.

According to my humble estimate, the total amount of mirages projects being proposed in this manner, coming through our doors alone, totaled more than $100 billion.  Just in Korea, where I was flying almost every month, more theme park projects were being proposed than existed in Orlando.

All this dreaming wasn’t free.  The cost for our services was in the six-figure USD range, so people were dedicating real resources to these projects.  And where was the money coming from?

Who knows.  It was like a spigot in the sky was turned on and the whole world was drinking from it.

Which brings me to the first thing I learned, which was a reinforcement of what I’d been learning since Marcus & Millichap.  Which is that once in a while, the world goes mad.  Actually, the world is probably always insane, and it’s your ability to recognize the lunacy that ebbs and flows.

Also, that there’s no one really in charge.  You think the adults are in charge, but they’re not, they’re nowhere to be found.  No one knows anything.

When I did the analysis for these projects, most of them simply couldn’t work.  It was impossible, unless you extrapolated out economic growth of 10% indefinitely, or you assumed population growth would double, or similar types of leaps of faith.

But, clients simply refused to believe us.  Entire teams of developers had bought into the notion that their fantastic visions were valid, and that they were going to make spectacular sums of money from it.  They had dug in already.  They had hired teams of analysts and drivers, rented out expensive office space, and already spent millions of dollars on designs and licenses and studies.  This is when I truly saw the fallacy of sunk costs at work.

So sometimes clients received our reports and turned it into a negotiation session.  Because they were going to present the report to the government and investors, they needed to juice the numbers past our single-digit return figures.

And it was during this time I realized the truths about Excel that I wrote about in the previous post.  Because they were being used on me.

All clients in some way would argue with us, but some more than others.  One client in particular, in response to our report, sent back a fifty sheet Excel workbook that had reverse-engineered the logic from the study, and plugged in so many variables and cross-linked assumptions that it took me a day to figure out that what they were really trying to say was: the project would make money in the 20%+ range, unlevered, because it would sell out enough villas and golf course memberships in the middle of nowhere, to fund a billion dollars worth of construction costs.

From the outside in, you could see the lunacy.

But maybe from the inside, it’s hard to just reel it all back in, isn’t it?  More on this later.

Also, again, money: money amplifies, it buffers, it can shield and hide a lot of things.  And during a bubble time, money expands like a balloon into cracks and allows you to ignore reality.

Everyone is making extravagant claims, and money allows you to delay the moment of truth.  Another thing I learned related to this.  Times like those breed a lot of crooks and swindlers.  But you don’t know who they are, because during bubbles they can keep financing their schemes and extravagant claims.  As Warren Buffett says about the tide and that only when it goes out can you see who is swimming naked.

It’s only when the bubble pops that you see it clearly.  Anyway, two of my clients from this time went to jail.

Don’t get me wrong.  I think more clients than that went to jail or got in trouble in their home countries.  But these are the only two I interacted with.

I think the common thread between them was that they were both good talkers.  Good talkers and sellers sometimes start believing their own…exaggerations.

Having interacted with both of them for extended periods of time, I don’t think either set out to commit crimes.  But when you start talking about visions that are outside your reach, and money is widely available, things happen.

Your exaggerations spawn fractally, and so do your promises.  It slowly creeps into the future, first one year, then five years, then ten years.  Your sums grow from 5%, 10%, to 50%.

In your own enthusiasm, hallucinating from your IV drip of capital, you start making promises you want to fulfill.  Not promises that you know you can.  It’s a fine line.

After all, what is a Ponzi scheme but an infinite daisy chain of claims that stretch far into the future?  It’s sustained by nothing else than belief, and sold by sellers who can persuasively sell others on their visions of the infinite future.  And cheap money delays and delays.  That’s one of its primary characteristics.

And that’s all I can say about that.

Personally though, about two years into the job, I hit a wall.  The work was not making sense and I was getting metaphysically anxious.

Beginning in 2008, I could see stirrings of economic fallout.  Bear Stearns had failed, and some of the economic news I’d been reading about mortgage brokers made me uneasy.  I had no idea what was going to happen, but I couldn’t help but think that this stuff was not going to last.

It’s hard to express my sentiments during that time.  I keep writing this, don’t I?  In 2007, it seemed like we were having an End of World Party.  Then in 2008, we started seeing the fault lines.

Simultaneously, ERA was getting acquired.  Talks for it started in 2007, and rumors were circulating about the implications.  Mostly about the bad implications, like restrictions and new evil overlords.

So during the summer of 2008, exactly two years after I began, I made the decision to leave and go independent with some partners.

I didn’t know that in the week I quit, Lehman would go under.  Sigh.  We’ll continue with that in the next installment.

To close this out though, let’s talk about what happened to the company, because I learned a lot from it.

After ERA was taken over at a high multiple, and the financial crisis happened, 29 out of 30 partners either quit or were fired.  The once-proud, established firm then just became a carcass of its former self within 2 years.

From the outside, I could see it disintegrating in slow motion.  Inexorably, but still happening.

Honestly, I was quite surprised when I left, and no one else left with me.  This is not me applying 20/20 hindsight.  You could see that 90% of our work was for clients who were chasing clouds.  You could see that there were cracks appearing in the real estate markets, everywhere in the world.

I didn’t know where I was going, but I knew I didn’t want to see what happened, so I left.

A few years later, I worked with an older investor named Larry who mused, often, that companies are hard to kill.  It’s hard to kill a company, he would say, shaking his head, as he talked about his failed businesses.  When he said this, I would always think of ERA.

I left because I thought the company would blow up.  But it didn’t.  It took a while. a year or two, before it all fell apart.  Companies are groups of people, and groups of people who are not nomads don’t just pick up and leave overnight.  Even when from the outside it looked like there was no way this company could survive the Lehman fail and the resulting financial crisis, people still hung in there.

From the outside, it looked like people were huddled.  Maybe out of fear.  Maybe because this is all they knew, and it was a family.  Maybe because from the inside, there was a sense of comfort in seeing that the same people in familiar surroundings.  In peoples’ heart of hearts, maybe they knew – but they didn’t want to face the reality.  Familiar chord, isn’t it?

It took a lot longer to disintegrate than I thought it would.  But its end came, and it was a long, sorry fall.  In its corner of the amusement park industry, ERA was a giant, a monopoly.  And because it was a monopoly, a lot of things had happened to the company over the years.  For one, there was widespread complacency.

For a company that charged McKinsey-level rates, I couldn’t believe that the company still didn’t have a central database or repository of knowledge.  There were relics in our office that again, I should have saved or asked for, because they should be enshrined in the Annals.

Typewriters from the 1960s.  Dewey-decimal card systems for a physical library of brochures, books, encyclopedias, and reports, many of them terribly outdated by decades.  Brochures from World Fairs during the 1960s and 1970s.  Reports and relics from failed Japanese theme parks of the 1990s.  Secretaries who took down dictations of reports and emails/letters by older partners.  On typewriters.  Older partners who off the top of their head could dictate 5 to 10 pages at a time.  Slide rules.  11×18 spread, sheets.  If you don’t know what that last one is, think a notepad of graph paper-like cells in them, except wider – basically like a physical version of Microsoft Excel.  And partners who would take a No. 2 pencil, do a cash flow, and do the sensitivity analysis by writing a different variable at the top and erasing/replacing each individual cell on the rows below it.

The office was a hybrid of a Mad Men set and a modern workplace.  The first day I joined, I introduced myself to a 70-year partner who guffawed, slapped me on both cheeks, and said it was good to have some young blood in the office.

But I mention all this because if nothing else, the company is a case study for the power of a brand.  Having a brand that was present at the creation myth (Disneyland) of the entire industry gave you immense value.

The value helped the company coast through a decade or two in a state of inefficiency.  This was the beginning of when I began to realize things about companies.  Like the fact that a larger a company gets, the more latitude there is for inefficiency.  Again, companies are groups of people.  Is it harder to kill 2 people working out of a garage or a band of 100?  Probability-wise, unless you’re a company like Instagram, I’m choosing the latter.

A brand markets for you while you sleep.  A brand allows you to charge hundreds of percent premiums.  A brand allows you to coast and smoothes over suboptimal product quality – although you shouldn’t do this.  But always do try to build a brand.

But, probably because of its brand, the company had become complacent.  Some of the analyses were trash, frankly speaking.  Some of the partners had checked out, a long, long time ago.

And maybe that was the biggest lesson of all for me.  And when I think about it, it’s perhaps the real underlying reason I left – seeing that complacency in a lot of the people, I realized it’s not what or where I wanted to be.