Saturday, October 20, 2007

Learn From Professor Risk

Wall Street Journal, October 20, 2007 by Collin Levy
Interview with Sam Zell contains a number of important lessons and is worth reading.

1) How do you know when to sell?
First, evaluate the value of something you have or might acquire. Referring to his decision in February, to sell Equity Office Properties to Blackstone for $39 billion in cash,"Somebody made an offer that was wide ( far higher) than my own valuation. So I'm looking in the mirror, and any day you don't sell, you buy, and I wasn't willing to buy at the price they were willing to pay, so I sold it."
2) Understand and evaluate risk as a "professional opportunist"
"..people take all kinds of risk all the time and don't know it." Make risk-assessment a part of everything that you do. Estimate the value of the potential gain and of the cost of being wrong.
3) Have your own perception of value versus risk.
Do a professional analysis, and always be willing to proceed, even if no one else agrees with you.
4) Standing still has risks.
Realize that NOT taking an action also has risks.

Lesson: Stay focused and consider "risk versus rewards" in a professional manner, rather than just making decisions based on "intuition" or vague "gut feelings." Then- Have the courage of your convictions.

Tuesday, October 16, 2007

Be OPEN to New Ideas and Things You Don't Understand

Innovation requires that we remain open to ideas that are new, unfamiliar and may even seem impossible. So.. last week, in order to drive home this important point, I brought 2 thin metal rods, bent into "L-shape" to school. I asked my class of freshmen in PDI Studio #1 at RPI, how many thought that I could use these rods to "find water underground". Some were skeptical, but to their credit, a number thought it possible. So.. I led the class outside to the football field.

As I walked slowly with the rods held loosely and pointed straight ahead, they rotated. I was standing over an underground water pipe and the rods were now aligned parallel to the pipe. Later in the week, Bob Lobdell and his son brought their excavator to my nursery. We need lots of water to irrigate the plants we grow, and this Fall has been very dry- Our stream is dry and our pond is down 5 feet. So I wanted to find a reserve source of water.

I used to rods to map out underground water. I found a main vein, with several lateral veins feeding it. That's were I asked Bob to start digging. And guess what? 15 feet down, we found water. It tested out at 35 gallons per minute, much different than the well at our house, 300 feet away, that is drilled to more than 500 feet deep and produces less than 1 gallon per minute.

So how do the rods work? I don't know. I do know that:
1) They do work. I have used them to find buried water lines and septic.
2) If I touch my 2 hands together while searching, the rods do not move.
So.. some sort of electric/ magnetic field is generated by water underground.

Lesson: Don't dismiss what you do not understand. Be open to ideas that are new to you. You just might hit something big! One student said, "too bad it's not OIL!"