Playing “Not to Lose” Usually Loses

Warren Buffett has been trying to buy Heinz, the king of ketchup, for 33 years. He finally got the deal by partnering with a Brazilian firm named 3G that will do the tough managerial surgery on Heinz, which will make it a cash cow for Buffett’s Berkshire Hathaway.

I have studied Warren Buffett’s approach to business and I try to apply it to my business and my life.

Make the deal. Play to win.

The Heinz deal was out there for many years, but nobody could figure out a way to make it work at the numbers Heinz’s Board demanded. But, Buffett would not give up on the idea of buying the company because it has such a great brand and could throw off a ton of cash if managed well.

Turning around crotchety companies like Heinz is not Berkshire’s strength. Enter 3G. They are good at using the hatchet, which by most accounts the old stodgy Heinz needs. If past performance is our guide, the 3G stormtroopers will swoop into Pittsburgh and cut overhead by 30%. Buffett will get a terrific return on his investment and go on to the next big deal like he did with his investment in Goldman Sachs and GE when Wall Street was falling apart in 2008.

Buffett figures out how to make the deal, because he will accept a deal that isn’t the perfect deal.

If Heinz had wonderful management, the company would not have been on the block. If Goldman wasn’t worried about its survival, it never would have needed Berkshire’s cash.

No deal is perfect. Every deal carries risk.

When I buy flawed 40-year-old National Acme Screw Machines I am taking on a myriad of risks that I can assess, if I do my research properly. I am also taking on product liability risk, which is hard to assess, and market risk, which is very unpredictable. But to me, it comes down to MAKE THE DEAL, if it feels right.

Which takes us to the second lesson from Buffett. PLAY TO WIN. If you play to win, rather than play not to lose, you put yourself on the line. You take on extra anxiety.

When my wife Risa was competing in taekwondo she was in the top four in her age division in the competition to become World Champion of her federation. For several years she could not get over the top because she was afraid to “go all out” to win. Finally, after reading Chuck Norris’s book The Secret Power Within and overcoming her fear of giving it her all yet still falling short, she was able to get her title in 2002.

In business I am constantly fighting my fear of being wrong, of losing money, of being shown up, of just being dumb. This is the attitude that holds me back – that makes me “play not to lose,” which is a good formula for rarely winning.

I think business people must understand that they are in the game to take risk. They must constantly teach their trusted employees that it is ok to be wrong sometimes if they are trying to move themselves and the company forward.

I think most of us struggle with the anxiety of being a loser. We need to find cheerleaders of risk-taking to support us when we take a risk, and when we strike out.

I applaud Buffett for finally making the Heinz deal after 33 years of trying, and accepting the possibility that after all those years of plotting to make it happen, it could still be a stinker.

Question: What in your life has been worth waiting for?

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7 thoughts on “Playing “Not to Lose” Usually Loses

  1. AvatarJohn

    Serenity: If I had accepted things as they were and been complacent in my younger years, I wouldn’t have become a business owner. Thank goodness I had an incessant need to “measure up”

     
  2. AvatarChris B

    Long-time reader. First-time poster. Great article. Manufacturing companies are often stuck in the old ways. We do things because “that’s the way we’ve always done it.” People fear change and especially making mistakes. You put yourself on the line when you challenge the status quo, but you don’t make waves with “business as usual.” It would be nice if more companies thought that way, especially in our industry.

     
  3. AvatarSteve

    When business goes through a downturn or a challenging situation for whatever reason, the first reaction is to draw back and close ranks. This is the opposite of what needs to be done, and opposite of what built success in the first place. Getting back on track often only requires the right cheerleader to get you confidence up to make the right decisions that got you to where you are.

     
  4. AvatarBob

    Your article reminded me of the board game RISK. If you just play to not lose you will eventually be beaten by another player. Each turn presents possiblities which must be assessed and at times a player must seize the opportunity to try and win even when the outcome is far from certain. Sometimes falling just short of your goal can be a valuable
    lesson in itself which makes you a stronger person in the future.

     
  5. AvatarJohn "Jack" Frost

    “Carpe diem” Seize the day. Trust tomorrow as little as you may, “Horace”. That little bit of latin carries a load of golden advice. The opposite is kick the can down the road. Don’t do today what you can put off until tomorrow. History is replete with events of failure due to delayed decisions. “Bengazi” more recent is a good example. The victims will not get the opportunity to carpe diem. Failed leadership has its consequences. But the drive that made America powerful is being diluted with the promise of a dumbed down middle class as the promise of the future. Depression and challenge, it seems, has taken vigor out of the drive for excellence and greatness. We were a nation of producers with the goal of every worker a millionaire. Hey you out there. Raise the bar. It is a hell of a lot better and more satisfying than living with what the government can do for you.

     
  6. AvatarHarold A. Voshage

    Lloyd,

    Late in 2011 I heard of a 50 man shop who wanted to retire. His broker hadn’t had any
    success in selling the very successful contract shop for a year or more. the seller gave
    me permission to help make a sale. The first client I introduced, a very successful shop
    with over 100 employees nearly closed the deal after almost 6 months. Then the seller
    walked away. My next client, owner of a larger co. was interested, but turned down the opportunity after a month. The third client showed serious interest from the start
    and almost 6 months later the deal closed on Oct. 2012. It was a cash deal. I never thought I could put together an M & A. This on is very successful. The seller retired
    and the buyer obtained a premium account. The seller, the buyer, the broker, and
    the erstwhile machinist acting as the referral agent; we are all happy!
    Harold A Voshage

     
  7. AvatarJim Goerges

    Interesting you refer to Warren Buffett and you believe your the same, that one man’s opinion. A question, remember the blog you wrote about hiring someone to fix a machine you to in on a trade, and wondered how to handle the situation, how did you handle the situation? Tell me that and I will let you know if I think you are like Mr. Buffet!

     

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