The Real Con: narrowness of mind

“In my martial art, we dislike such one-sidedness and narrowness of mind. You should investigate this thoroughly.” - Miyamoto Musashi, The Book of Five Rings, The Wind Chapter

The essence of due diligence is assessing risk. In acquisitions, true professionals enter the diligence phase with the mindset of discovering blindspots, of testing their assumptions, of validating or proving wrong their underwriting.

Amateurs in an acquisition look to confirm what they think they already know. They race through diligence worried that their shaky assumptions will be found out. Amateurs try to avoid discovering new information that may cause concern for their underwriting.

This kind of amateur thinking ignores the risks of any new deal and creates a narrow, one-sided approach to the acquisition.

“Warriors need to study and gain an extensive understanding of the principles of things.” - Taira Shigesuke, Bushido Shoshinshu (Bushido for Beginners), 18th century

Risks change depending on the location, the people, the purpose of your investment. To understand risk, you must read and learn as much as you can about the dangers that lie in wait.

“Do large and small forces not meet in battle? There are many examples of small forces defeating larger ones.” - Miyamoto Musashi, The Book of Five Rings, The Wind Chapter

Regardless of how large your team is or how big the deal is, you can be overcome by a small but mighty force. Yet too often we notice organizations and individuals that rely on their size. Bigger is not always better.

“A warrior who wears two swords at his side but does not put the spirit of combat into his heart is nothing but a peasant or merchant wearing the skin of a warrior.” - Taira Shigesuke, Bushido Shoshinshu (Bushido for Beginners), 18th century

The key to any good fight is in the preparation. Due diligence and uncovering unknown risks in an acquisition are fights worth getting into. You must have the right mindset, otherwise you are a peasant masquerading as a professional. You must believe that you can and will uncover any challenges. You must believe that you have the process and the professionalism to deal with an uncooperative seller or unscrupulous broker.

“life is here today, uncertain tomorrow. Therefore he realizes every day that he has this one day to serve, so he does not become bored and does not neglect any of his duties.” - Taira Shigesuke, Bushido Shoshinshu (Bushido for Beginners), 18th century

In diligence, in work, and in life our days are not unlimited. We do not know when our day is done. Each day requires a sharpness of mind, a clear pursuit of our main duty.

“when you think you will be on the job forever, then trouble starts. You get bored, so you become inattentive and lazy. You begin neglecting even urgent matters, to say nothing of less pressing affairs, putting them off to the next day or claiming that they’ve already been arranged, or fobbing them off on colleagues or flunkies. Since no one takes personal responsibility for taking care of them, tasks pile up and there is nothing but snafus. These are all mistakes that come from counting on having time in the future. You should be most wary of this.” - Taira Shigesuke, Bushido Shoshinshu (Bushido for Beginners), 18th century

Bushido is not just a word. It is a way of life. It is a way of thinking. It is an understanding that our time is precious.

In the end, what if you think about diligence not just in real estate but in all aspects of your life?

You might even be able to avoid narrowness of mind.

Stay sharp,

Michael

#062

The Real Con

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