by Phil Harkins

I would like to explore with you why getting to resolve at the bottom of this downturn is the gateway to discovering transformational opportunities. In order to consider this, keep in the back of your mind what resolve is and is not. Resolve is simply the firm decision to make a decision. It is a moment in time when one decides to not settle for the status quo. Resolve is getting out of the assessment mode and into the transformation mode. It is important to get to resolve because it releases energy and creates passion needed to discover the pathway to a better future state.

Before presenting this, I decided to go back and study what happened in 2007 through 2010. That 38- month period of time has been described by many as the worst macroeconomic hardship the world had seen since the Great Depression nearly 80 years prior. Please look at the diagram below that traces this period of time. A ten year run up with unprecedented GDP growth. Notice that it was V-like on the down and the up, although not a clean V, as it had a longer recovery up which made it feel like a U. The length back from the bottom took almost three years. I refer to this as “the painful ride back.” For many it seemed like the good times would never return. They did—with winners and losers. The winners were those that found resolve at the right point as shown below.

Making the right business decisions in dramatic downturns requires understanding three types of economics. The first is macroeconomics. Think of macroeconomics as the big picture. It is a reflection of the behaviors of the masses. The public markets keep score. The second, microeconomics, is the study of the puzzle pieces. For example, trying to determine what is going to happen to retail. Will mobility ever be the same? Already life insurance companies have put limits on how much risk they will absorb. Will social change result in people saving more and spending less—the rainy day syndrome?

Behavioral economics, the third type, is the study of human behavior in decision making within cycles. In drastic downturns we need to think macro- and micro- with a heavy emphasis on behavioral economics. This requires getting up on the balcony and looking down as if watching a play. I have done this exercise recently with leaders who found it helpful. From above they could clearly see the confusion and worry. Some confessed that they were feeling that everything just seemed too risky right now to make big decisions.

Previously I have described the five specific behavioral steps that go into decision making to stay ahead of the rising market. In short, it infers that it is a failure to put off decision making.

Here are the five:

Thinking—in a reflective way
Studying—trying to connect the dots
Resolve—making the decision to make a decision
Discovering—a deep dive into possibilities —a deep dive into possibilities
Moving—creating unstoppable goal-oriented momentum

Here are a few things to think about. If you are still thinking and studying, you are in the assessment phase. It is more than likely time for you to get resolve so you can planfully go after possibilities. If you are at resolve make a decision to look for transformational opportunities. If you are moving without discovery you might be on dangerous ground and prone to make the wrong decision. Jumping steps, such as moving without resolve can send one back to thinking and studying again—less inclined to ever get to resolve.

If you have not moved yet to resolve, it is not too late. It is the most important step. Organizations that have followed this successfully in recovering from the ’08 econcomic crisis include what Andy Grove did at Intel and Lou Gerstner did at IBM. Lou Gerstner tracked these steps well and changed IBM from a mainframe company to the world’s largest professional service company. It took 6.5 years to get there. Rivals like DEC (Digital Equipment Corporation) jumped steps, never got to real resolve, lost the opportunity to discover, and stayed in place hopelessly as the world had changed. 88,000 employees lost their jobs.

**What does resolve do?**

Resolve releases a powerful overflow of appreciation for the possibilities ahead. It creates a discharge of emotion that lifts the spirit and nourishes the body and mind so that it can entertain choices. Others have reported that it provides more restful sleep and inspires excitement and a positive sense of the future. When a leader gets to resolve, cycles matter less. One leader with whom I work closely recently said, “I’ve had it with this cycle; it is what it is! I’m now preparing to get going.” I knew she had reached resolve, taking charge, and fortifying with a will to find transformational opportunities.

Case in Point

Recently Warren Buffet sold all four of his airline stocks—approximately $5B was added to his war chest. He is now sitting with the airline cash alongside another $137B that he has horded over the last few years. Sound like a plan? Hoard cash in an inflated market—that is his usual formula. Yet, his portfolio value has gone down by $50B. Not many bet against Warren Buffet’s ability to recoup losses.

The obvious question asked by many, “Why is Warren Buffet selling at the low point?” The reality is he is known to do that; yet it is not obvious. I dug deeply into this question and found that this is exactly what he did in 2007-08.

On December 31, 2009, his company shares had slid 35%—a similar drop in value as this time. The Berkshire Hathaway A share price dropped to $96,600 per share. How much value did Buffet create over the next ten years? At the peak, before the pandemic crisis, Berkshire Hathaway share price was at $345,000 per share. Interestingly, since its inception, Berkshire Hathaway has returned to investors on average 20.5% per year over forty years—more than two times the S&P average. I came across a great article “Don’t Guess What Buffet is Buying, Buy Berkshire Hathaway Stock.” It is worth a read.

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I believe that Warren Buffet is the best example of resolve at the bottom of cycles. At his famous annual shareholder meeting, for the first time ever in 2019 there was negative press for the amount of cash he had hoarded. He just smiled. It is helpful to reflect on his number one principle of investing: do not lose money. He plays defense at the top of markets (he hoards cash). I conclude and firmly believe that he will take the $5B from the sale of the airline stocks and place it in bigger, better bets and get all his value back in better places. No pun intended—he will find more runway.

In reading this if you do not quite understand what behavioral economics is about, just look at some of the more recent YouTube videos on Warren Buffet. Watch his body language. To me, his facial expressions had a strong look of confidence and he seems quite happy. My guess: he has found resolve and he is about to play offense.

Here are simple steps to go from resolve to discovery transformational opportunities:

Meet with your leadership team to discuss and identify best potential transformational opportunities
Use this simple map to organize best opportunities for transforming
Get agreement from your most trusted colleagues on the best opportunities to go after
Identify and assign passionate champions (A+ leaders) to build plans and roadmaps
Appoint an executive sponsor to ensure nothing happens to the good ideas

Summary

Very often in down cycles hard luck can be good luck. As mentioned, getting up on the balcony one can see the big picture. Important points to remember:

It is okay to spend time thinking and studying on the way down
At the bottom get to resolve
Do not make decisions of what to do

Simply, make the decision to make decisions in discovery

Do not let too much time pass between discovery and moving. When the good ideas have proven to be potentially transformational, get the right people around those transformational opportunities and clear the path so they have nothing in their way. Inspire them to “Play to Win and Refuse to Lose” while questioning all assumptions.

Advice: Do not allow this cycle to hold you back from possibly transforming the way you work and live. Leaders do not want to say at the end of this cycle, “We could have, should have, or would have if only we had moved sooner.”
The time is now to find resolve.

Resolve: Make the Decision to Make a Decision