Ep699: Steven Wilkinson – Your Success Is 100% Dependent on You

Andrew Stotz 00:01
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community. We know that to win in investing, you must take risks but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives to join me go to my worst investment ever.com and sign up for the free weekly become a better investor newsletter where I share how to reduce risk and create grow and protect your wealth. Fellow risk takers this is your worst podcast host Andrew Stotz from a Stotz Academy and I'm here with featured guest, Steven Wilkinson. Steven, are you ready to join the mission?

Steven Wilkinson 00:42
Absolutely take it away.

Andrew Stotz 00:46
Let me introduce you to the audience. Sir Steven Williamson is the founder and CEO of good and prosper and has been involved in business finance and investment for the best part of 30 years having started working for Merrill Lynch investment bank in Munich, Germany, in 1987. At the tender age of 24. Good and prosper is an advisory and investment company through which Stephen acts as a thinking partner for business leaders and owners supporting them as a generalist business expert across the fields of finance, leadership, and culture. Good and prosper is also a Knowledge Platform teaching finance to entrepreneurs with a focus on small and medium sized businesses primarily in the English speaking world. Steven founded the publishing business pitch for press and publishes a weekly essay pitch for papers via substack to a rapidly growing and diverse international audience. Oh, that's a lot of stuff, Stephen, take a minute and tell us the unique value you are bringing into this wonderful world.

Steven Wilkinson 01:54
Good job, I knew that that question was coming because it gave me a job. So think about it. I think that it's a blend of a natural affinity I have for stories and narratives. And, and an ability to relate to people, particularly business people, individually in their contexts. And at the same time, bring in a skill that I had to learn. And it was difficult for me to learn at the beginning. But I think I've also mastered the craft of understanding and interpreting financial statements through the concept of numbers as a language, I am a good linguist. I was not a natural. I was not naturally oriented towards numbers, words were always more my home. But at an early age working for Merrill in 19. The 1980s When I had to get numerous as well as literate, I had to get numerous. And the idea of, of numbers being a language. I don't know where that came to me from but it came and allowed me to read the stories behind numbers. And it was interesting that I don't know 2025 years later, I met a a superb industrialist, a guy called Jack stack, who, who wrote the book, the great game of business, who told me that the way he thinks about numbers is that every single entry in a balance sheet or ledger is representing an activity. And the sum of those activities are the character of the business. They're sort of this idea that everything you do is based on a habit or a thought or a conviction. And there is not a single ledger entry in the accounts of a business that doesn't represent some habits or characteristic character decision that in total, creates the character of the business. And I found that a very useful confirmation of my own thinking around numbers telling a story about people basically.

Andrew Stotz 04:30
That's fascinating. I mean, I know for me, I didn't really like accounting and stuff. And so I was kind of tried to muscle my way through it. And it didn't have much meaning until I set up my own factory. And all of a sudden, like, inventory became a significantly painful thing sometimes and it gave me but when I looked at the inventory on my balance sheet, it gave me a picture of what we're doing. And I started, you know, thinking more carefully about and I didn't understand all of the accounting guidelines, but I tried to understand what is this telling me? You know about the business. I think there's a great example of this that I teach in one of my classes. My valuation masterclass is a company called Fastenal in America, and Fastenal makes, you know, they, they, they basically buy fastener fasteners and screws and bolts, and they might tape and safety helmets, and they sell this stuff to businesses. And what I do is I teach students about, you know, here's the ratios and all that and stuff. And so naturally, when we say that inventory is high and accompany it's tends to be a bad sign, you know, there's too much inventory. And then I show them this company Fastenal, where inventory is five times higher than any of its competitors, which then immediately pulls them into bad, this is bad. But when they learn about what Fastenal is doing, which is they got rid of most of their outlets. And they moved their staff into the facilities of their clients. And they set up bins and vending machines with all the parts that the client needs right there. And so they take over the whole handling of those companies inventory, so that a company then can go to literally a vending machine or a bin. And when they pull that piece of inventory that you know that thing that's going to be used in the manufacturing process out, it's only a very tiny amount of time that they actually own it. In other words, Fastenal owns it up until that moment in the customers factory. And then I show them okay, the typical company in Fastenal, this place is making about a 30% gross margin. Fastenal is making a 50% gross margin. And so that's a great one to kind of understand the story of how, oh, wait a minute, the amount of inventory that we have held is a choice. And it could be a strategic choice. And

Steven Wilkinson 07:05
I've got a matching story for that a German company that's been around for 113 years, 115 years now. And they've never had, they've never had a penny of bank debt. In all the years they've been in business. They make industrial, they make an industrial needles for textile industry. And they have around about a 70% market share globally. And the reason and I was it was a private company. And in 2008 or nine, maybe beginning of 10, I got a visit from their CFO who had been sent to me by their chairman, who I knew it said talk to him look into the data, because he might be able to give us some advice on an issue and which was that they were thinking about taking on some debt for an acquisition since 2009 10, global financial crisis crash. And we don't know how to do it. So I said, Okay, we'll come along, we'll sit down, have a chat, bring your financials, lumps of financials, it was sort of all equity of apart from working capital was all equity, accumulated profits, and an enormous position in inventory. Enormous and it's something like 40% of the entire balance sheet was inventory and the rest was machinery and plant plant and equipment in cash. Huge. And I looked at so what was this? And he said it is very interesting. This has been this is a fundamental part of who we are. And I said, Well, why he said because we've as a family if we've lived through it, well, recessions. And we've understood how recessions work. And recessions work in that everybody is stripping down inventory, playing down cash that they have to in order to survive a downturn. You're stripping down working capital to its absolute minimum, and you're gutting the business, and the longer the recession takes, the more you're sort of burning the furniture to keep the house on one. And what we have found, he said is that as we come out of a recession, and people are rebuilding, when we accumulate market share as a quasi monopolist for about eight to 12 months depending on how deep the recession has been. Because banks are slow in accepting that the challenge the turn has come. people's credit has been impaired. They don't have the inventory, and we can deliver. So we don't know when And when recessions are coming, but we do know that they come regularly. And when they come, we know we have to survive them. And we need to have the fullest stocks to be able to deliver the customers who weren't working with us before the recession. And once we've got them, we keep them. And that's how they've accumulated something like a 70% global market share of their business by having the inventory strategically ready for 12 months to give them a monopoly on delivery. That is fascinating. Well, I guess that's the family's conviction.

Andrew Stotz 10:35
They also have the capacity to give credit terms to, to the new customers that are potentially struggling as they come out.

Steven Wilkinson 10:44
Yep. Yep. And so they are Excel, they're accelerators, and they've visited. And we all know this, the most dangerous time for businesses is not the recession itself, it's coming out of it. Because that's when when liquidity is constrained, constrained when working capital requirements are at their most aggressive, but where you have the least capacity to deal with them, and he has, and

Andrew Stotz 11:12
so what was your advice? As far as debt was concerned with them? I'm sorry, they kind of didn't do it. They didn't they didn't

Steven Wilkinson 11:21
do it. Yeah, they didn't do it. They saw, it's too complicated. And they decided that there were cheaper ways of cheaper and less risky ways of doing what strategically in the market, what they thought they were going to be doing with the competitor that they were going to entail.

Andrew Stotz 11:43
You mentioned something about, like DNA or the way that they are. And I guess one of the lessons I take from that story is to the if it was any other type of kind of financial person, they probably would have said, Yeah, bring on debt. Why not? Come on, here's your opportunity. You know, and you got a good balance sheet and here's your chance, but with, uh, you know, with a deeper understanding, I think the advice, I was just thinking the whole time, like, don't do it, don't do it. Don't be true to what you are. And, you know, it just it makes much more sense, you know?

Steven Wilkinson 12:21
Well, the fundamental difference between a business that thinks like that, and the normal business that perhaps doesn't, or if you take too extreme private equity, is that the family business, or the business that's set up for longevity has one primary goal, and that is survival. And not growth. Growth is not the goal, survival is the goal. And if you happen to grow while surviving, well, that's, that's life. That's how life works like life seeks growth. But it primarily seeks survival. And if survival is your primary objective, you do things differently. You do not change your values with the cycle. You see the cycle as being something that you need to get through in its entirety.

Andrew Stotz 13:21
Optimize for survival. Yep, I have a factory here in Thailand, we had about 100 employees, we're roasting coffee. We've been existing since 1995. My best friend, who you could say is like my brother runs the business. He and I each own about, you know, about half of the business. We have a couple of other shareholders, but generally, you could say about half. And our families also, you know, own a little bit. But the thing is, when the COVID time came, we were actually not in a great position. Just prior to COVID. We had been expanding and our margin was down a bit and we were vulnerable. And then in Thailand, which depends we're supplying hotels that are supplying, you know, that are providing coffee to tourists. We go from 40 million tourists to 3 million tourists in 2020. Almost all of our customers were shut down. Coffee shops that we also supply are shut down and offices, which is our other third channel of our business was were shut down. And we weren't equipped. We wanted to go online and you know all that and do the retail but it wasn't in our DNA. And we realized we just can't we just didn't feel like we could pivot to that with the resources that we had. So our worst months our revenue was down 80% from the normal time prior to the 2020 COVID time and it was all about survival for a couple of years and we needed more cash coming in. In that, we had to figure out how we extract that from the business. And how we bring that in if we need to from others without losing control of the company, because it is to us like a family business. And we, but now we just had a regular weekly meeting this morning, going through the financials, and the recoveries is slow. You know, I mean, it's actually pretty big. Well, if you compare first quarter last year, the first quarter this year, you know, we're up probably 30 30% or so, for revenue. And if you look at the first quarter of this year, compared to the second quarter of this year, it's kind of flat. So it's like, it's trying to get back up. But you were, when you were speaking, it reminded me of that you're, you're burning the furniture, in the house, like everything that can go has got to go, everything that can be cut must be cut, which then also explains why the Recovery out of a recession can be a fantastic time to make a lot of money, because companies are either dead, or force to cut to the bone, and then the operating leverage that's there as it's recovering. You know, so you made me think of that story. I know that story very well. And it's been painful. So we've survived, we've optimized for, you know, survival. So that's fascinating. Let me ask you just tell tell us a little bit about what you're doing as far as the newsletter and you know, the other stuff that you're doing, just so that the audience knows also, yeah, we're gonna get more,

Steven Wilkinson 16:42
it's a ties in to the main focus of our conversation, which is worse than investment ever. I got into restructuring in 2001. Two. And I have always, I've always been interested in the small business markets, more medium sized businesses. So we're looking at up to 250 employees and up to, I don't know, 50 to 100 million in revenue, mostly around a sort of 15 to 30 is the sweet spot. And I moved to Ireland from Germany, I spent 30 years of my life 28, all together in Germany. So the bulk of my time was away from the UK. I made a deliberate strategic decision that was, but that was half strategic, because I've felt that Germany was moving into a uncomfortable place and wasn't, wasn't going to be a place that I wanted to be. economically. But even more importantly, I was getting really homesick for my language, I wanted to go back to an English speaking country, I didn't want to go back to the UK came to Ireland. And I was still involved in a number of businesses, as an investor in Germany. So I needed to be close enough to be able to fly back, which I did. And then COVID came, in fact, I'd literally just got back from the US. War, I've been speaking at a conference, literally the week that everything shut down. And I think COVID changed the world for a lot of people, but it sort of gave us time to think. And I've one of the reasons for going back to the English speaking part of the world is because I wanted to reconnect to my writing. And I'd written a lot as a younger man, and a boy I constantly writing. And as I got into business and my career in finance, I'd sort of stopped doing that, on reflection. Looking back, I used to write it expressed itself through memos, and writing letters to my investors and partners. And that's how it expressed itself when I look back on it. But I wanted to be very specific about writing. And so COVID stripped those people who wanted to write of any excuse not. And at the same time, I was very keen to just stop traveling back for Germany. And so to get rid of the last investments that I have in the what I would call real businesses, rather than portfolio investments. And I did that started writing no idea really what I was doing, other than just committing to a shedule of publishing something every week, and the first ones were awful. And they and as I found my voice that became such an integral part of my week, it became my favorite part of the week, the Fridays, the Friday morning that I would sit down and just writes, and then publish. That was I started looking forward to that, more than almost anything else that showed me that I was on the right track for something and I just had no, no expectation that anybody reading it had no expectations of him feedback, of course, it's wonderful, I started getting it. But the move to substack and I was publishing on MailChimp, because I didn't know any better. And I think people would set up a website and hooked it to MailChimp, I didn't know what that was. I started publishing on there. And I think I had a an email list of about 12 people. And that's basically how it started. And I found that to be an extraordinarily powerful way of figuring out what I was thinking. And as I really didn't care whether anybody was reading it or not, but people started to. And when you ask me what I'm doing, so the writing is just a, it's, it's not it's a bit more than a hobby, and not quite a business. And sort of, I'm trying to

Andrew Stotz 21:26
realize it's something like that. Yeah.

Steven Wilkinson 21:30
It's like it. It's in his teenage years at the moment, and it keeps me occupied, it keeps my brain sharp. And I like it. I mean, I just wouldn't, I couldn't miss it. But, as I was divesting my businesses, I mean, I've, one of the things that I have, always wanted to be, is a great owner. I'm a crap manager, I couldn't manage my way out of a wet paper bag. I really couldn't. And I don't like it. I can't do it. But I'm a really good owner, to a good manager. I'm a good sparring partner. I'm a good Chairman. I'm a good owner, a, because I have spent my life my adult life, particularly since my worst investment ever thinking deeply about what it means to be an owner? What's the responsibility of an owner? What's their job? How do you? How do you create a safe space? How do you hold a safe space for bad for the value creation process as a business owner, because I recognized, and I think it was one of the most freeing moments of my life when an entrepreneur who I admired deeply a gentleman called Nam Brodsky, who is an author himself, sold his business in New York is a New York Jewish lawyer. He turned 18. This year, I have enormous admiration for him. And he said, The day that I realized that I wasn't a manager, and that I should just stop managing, because it was getting, I was getting angry, and I was shouting, I was a shouting manager. Because effectively, I wasn't good at it. The moment that I realized that, and that I had to do something different, as an entrepreneur was the most freeing moment of my life. And that conversation gave me permission to admit that I wasn't one either. That didn't mean that I had nothing. To give quite the contrary, it meant that I should just stop doing it. Just stop even pretending that I could, you know, I have enough trouble of running a secretary. That's, that's the maximum of my ability, I have a very good bookkeeper operations and a very good assistant. And that's all I need to run my world. Because as an owner, you don't need much infrastructure. And I've always been deeply influenced by Buffett and his model. And his thinking and, and what he has done deeply influenced by, by it. And it is, it is nothing short of extraordinary to see how he has boiled down the essence of ownership to two or three things that that ownership requires the owner to do. And to as he puts it, delegate to the point of abdication. Absolutely everything else. And I've learned a great deal from that and attempted to apply it in my own life and everywhere where I've tempted to manage it's just been because I can't and I shouldn't either. It's not what God, that's not what God put me on earth for,

Andrew Stotz 25:03
which is a good lesson. Good lesson for all of us. If you've had that seven area that's just not working, you know, you don't have to keep pounding on it.

Steven Wilkinson 25:12
Yeah, you know, did it. Have you ever seen the wonderful Bob Newhart? Do you know, Bob Newhart? You look a little bit like Bob Newhart. Right?

Andrew Stotz 25:21
Yes. Thank you. Thank you very much.

Steven Wilkinson 25:23
That's The Bob Newhart. He has. He has the he has the sketch of the way he's a psychologist or a psychotherapist. Have you seen that comes out ahead. And the woman comes in, and he says, it'll take five minutes and it cost $5. And that's all you need is $1 a minute. And even if it does take less, you'll be cured. And but I keep the $5. And she slips into it, really? So yes, it works. They put some $5 She puts the pays the $5. And he says, Well, what's your problem? And she says, she has this terrible fear of small spaces. And, and she's can't go out at night, and she can't go anywhere to her house. And it's taken her enormous effort just to come here. And, and she sort of describes this Agra phobia and, and he looks at her and he said, Okay, give me advice. And she gets out of pencils, you don't need pencils, very simple. He just said, stop it. Just stop it. That's it. There's a stop it stop, though, whenever I get into this idea that I ought to be possibly managing something. And then I take up new hub, new arts advice, and just stop, stop, don't do it. Pretty simple. Into the as I was getting out of my investments in Germany, and to winding that down completely. A nature abhors a vacuum. So I had no ownership role directly for an operating business. nature abhors a vacuum, as I say, and within literally a week, I got a call from a friend in the states who said, I need your advice, can you give me some advice? I said, Oh, of course. And they said, no, no, I want, I want you to come on, and advise me properly in a program and I want to pay for it. And I said, Well, I don't know how that works. How do you do that? And it was just make up a number. And I said, Okay, well, I go number. And they said, Well, why do you want me to Why do you wanna pay for is because they want to know that you're committed, I want to know that you're going to do it rather than just giving me an hour, and then I left by myself again. So. And that was very interesting. So I said, Okay, I'll do it. I don't never saw myself as an advisor. And I realized very quickly that what I was doing was stepping into the same role. I was acting as a chairman to an entrepreneur, operational entrepreneur, and doing exactly what I would be doing, if the role were a more formal one. And I love that absolutely loved it. And it was a great relationship with somebody that I don't admire greatly. And I have no idea how it sort of evolved. But over the COVID years, 20 and 21. As I couldn't go out and be doing any business, I found, actually, I quite like sitting at home with my books, and writing. And doing this advisory work acting as a thinking partner and a supportive, strategic thinker. advisor to people running businesses at a level that they understood, tended not to be very small businesses, but sort of medium sized businesses that I was very soon running a what I suppose will be called advisory business without actually wanting to do it, and figuring out how that works. And that's a role that I enjoy enormously. And I've learnt to transform my previous experience into something really valuable for them. And I enjoyed enormously. it

Andrew Stotz 29:19
interesting, you know, I'm thinking about the way I think about things I'm formulaic, I'm logical, unstructured, I'm all of that. So my, my natural feeling in that type of situation, is it okay, how do I come up with a system of format or something like that, whereas when I listen to you talk, I, you know, think that you're, you're coming at it from a very different perspective, where you're not under the shackles of linear thinking that, you know, I'm just curious, the opposite. Yeah. Tell me more about

Steven Wilkinson 29:51
quite the opposite. Because I'm, I'm, I'm an Enneagram seven, if that means anything to you and I have a very strong One on one. Focus. So Enneagram is a typology system. It's a dynamic typology system, its roots in, in ancient Christian thinking, even before that, actually Desert Fathers were looking at ways of figuring out whether they were whether human beings can be classified by certain types or appetites or ways of seeing the world, against my boy with the details, because that's not the purpose of our conversation. But I, the sevens are. sevens are very future thinking, we think a lot about the future, what we're doing is escaping the pain and the boredom, of reality. So we when, when things get boring for us, or when we're or uncomfortable, our escape strategy is to fantasize or to think about the future or to do something else, just something that's better and more fun, because we're terrified of being stuck into routines and systems and because life would be just so uninteresting if we were to do that, anyway. And one of the, there's a typology, that if you break it down even further, there are people who have a very high self preservation, motivation, people who are very social and people that have what's called a sexual or one on one requirements. And that's me, I'm very, very focused on individual conversations, and empathizing with the person sitting opposite me. And that, and my sense, my how I define what I do is, I bring slowness, to people whose lives are full of speed. I do the reading, they can't. I read further. For them. I see myself as using my slowness, in the slowness that I've built into my life as an asset for people who don't have it. So when are my my perspective, people who are on the ground floor fighting every day in their business, I working with me allows them to escape to 40,000 feet. And to look at things holistically and to bring in different perspectives without a

Andrew Stotz 32:32
look without a lot of effort, because you're putting in the effort to kind of think it through them, when they get together with you. It's like, Let's go

Steven Wilkinson 32:43
without any effort, without any effort on their part. And that's valuable, because when they then go back down into their world, they don't go down to zero feet, again, they stay at maybe 1000. And then slowly sort of come back down again, and as life takes them, but that, that ability to, to, if you like delegate that to somebody who just thinks with them, which is the owners role, the owners role is to think strategically about the business. And in order to do that, a very engaged entrepreneur who is also running the business needs to treat that strategic time as preciously, as they do any other leadership meeting or whatever else they do, they're doing. So booking that with me is, and having someone that they can go into that space with is an investment in their own strategic leadership and ownership function. That's because I spend most of my time thinking about that. And history and economics and sort of the generalist perspective, which lateral thinkers like to do. Over, that's just a small section of my library. And as I imagined this is with yours. I read eclectically across as many different disciplines as possible, because I'm constantly populating my mental model. And because I think this has no, I don't drink alcohol, and I don't put any substances in my body because it keeps my brain sharp because I have an exceptionally good memory for stuff. I will be in a conversation and I will remember, oh, wait a second. I remember reading a story or piece of information in a book 10 years ago, and I can go and get it and use that information to pay later, an example or a story that I'm telling and then I think that that's the value in it. So I don't have a program or a system. I'm very good at this something I'm very good at empathizing with the position. And then I bring the novice through ragbag of treasure house, stuff that's in my library and in my head to bear in a way that makes sense for that individual. So in their language and in their metaphors and the way that they think about the world.

Andrew Stotz 35:23
When I was thinking about my coffee business, we set that up in 1995. And I was working as an analyst, and I had a research and my business best friend, and you know, business partner, he just said, Well, I'm gonna run this, and he's been running it now for nearly 30 years. So I'm, you know, a significant owner, but I've never been an employee in the company. And we did have some opportunities where I could have done that when I was in between jobs or think about, you know, and we could have probably, you know, grown the business faster, or in a different way. But it just never, I never really felt like and we both kind of agreed that it's probably better for me to stay in the world of finance, and make sure that we've got good relationships there. And bye, bye, you know, because of that, one of our shareholders is the former four former permanent secretary, Ministry of Finance. Now, once he retired, you know, that he joined as a shareholder. And so, you know, we've, we've gotten benefit from that. But what I was going to say is that it's a dance, you know, here I have my best friend. I mean, our whole lives are intertwined. You know, people say you don't don't do business with your friends, but we managed to survive it. And, and he's running it. And I'm looking at the financials, and also giving him feedback and support, you know, on a daily basis, and we talk and, but I'm not, I'm not there to put out the fire. And he knows that. And that basically leaves me as a sounding board or discussion. But the thing I was thinking about as you were talking is it's a dance, because I may think I know what's the right thing. But once I start kind of pushing on that, if I get a lot of resistance from him, I always back off, because I'm like, I, I don't see what's going on in the workaday world that he's facing. And it's more critical that we continue to have these good conversations that have given us the longevity of our relationship in our business, then, to try to, you know, say this is the thing that really matters. And I think also, when you add in the Thai, in Thailand, people just are not rewarded in any way for confrontation, that he and I both become, you know, that that you can't help but that rub off on you in Thailand that, you know, you know, we're not going to go into a heavy confrontation on something I just thought about that, as you were talking about the role of the owner and your relationship and stuff. So it's fascinating.

Steven Wilkinson 37:59
And it's a, it's a really important issue, particularly in today's world where ownership is being replaced or ownership is being assumed by people who have no interest in anything other than extraction. There are trillions of dollars of private equity money, the main focus of which is to keep the time of ownership as short as possible to maximize the extraction because that's how the IRR function works.

Andrew Stotz 38:38
They're not optimizing for survival.

Steven Wilkinson 38:41
They're not optimizing for survival at all. And, and once once you take that, once that becomes a a feature of a system that is dependent on the quality of ownership in order to protect the rights of ownership and property rights, which are fundamental to the way our system works, it gets very dangerous, because if owners are not doing their job, the German constitution the very shortest sentence in the German constitution is two words. In Article Seven, I think article seven two is able to perfect it and agony. Afflicted means there can't even get it to two words in English. It means property brings with it responsibilities. That's it. That's all they have to say about property. They say that actually, it's three articles. Number one is property exists. So we are recognizing that there is such thing as property, and that it can be owned by individuals and it can be passed on through inheritance. Number two, that it brings us one's abilities with it and number three, the state can take it away if it's Estelle which is eminent domain basically. But that question of, of what, okay, what are the responsibilities of ownership? What does it? What does it? Is it a social good? Or is it does ownership, confer on the owner a responsibility for the thing own, not just in the context of the sort of society, but for the thing owned, you've got to if you own something, you've got a responsibility for it, to look after it. And that's an interesting, it's not something that is discussed much by constitutional scholars, because it never gets to the there were very few cases that have ever made it up to the Constitutional Court to say, Well, what does that actually mean? Because it's not something that you find the heart of a suit. But for me, it's a fascinating question. It's a social question. Ownership brings with it responsibility for the thing owned it, and then you have to define what it is.

Andrew Stotz 41:05
So it reminds me when I bought my 63 Lincoln here in beautiful Bangkok, I just was really enthralled with this car, and I bought it. And I was a steward of it for 10 years. And, and then there came a point of time where I just didn't want it anymore. I didn't need it. And an opportunity came where someone came along and said they valued it. And so I pass it on. And I think that my business partner Dale and I to look at our business now as we've gotten older and realize we are stewards of this idea that we created. And now how do we make it a more lasting thing? And that's, I think, where we're feeling like, you know, what an awful situation it would be to walk up to leave a company that you built and watch it fall apart. Then what are you doing the whole time? So yeah, breaking. Yeah,

Steven Wilkinson 42:04
heartbreaking, and it's killed. I'm thinking very strongly a gentleman called Arnold Weinstock, Lord Weinstock, who ran a business called General Electric company in the UK, which has nothing to do with GE in America. And he was a very cautious businessman, he kept a public company, one of the largest in the UK. He was renowned for his huge cash hoard that he would accumulate and keep on his balance sheet, which gave him opportunities. Is it safe to call option on opportunities when they come? During the sort of gogo years of the 19? Was it 1990s? I think it was the 1990s. Or maybe it was even 1986 87, sort of in the, in the post. In the post. What was it called Big Bang phase in the City of London. He retired. And they brought in this guy called Lew Simpson, who was everything that won't stop wasn't, he changed the name to Marconi. He had consultants come in and do a sort of complete makeover of the corporate identity. And within three years, the whole pile was gone. And I think it was the end of the 90s. That there all this happened. And in the crash of 2001. He just he was over leveraged. And the company just bust basically, and Weinstock died a year later, a broken heart. Yeah, he was in his mid 80s. And he could he watched this one city superstar, the city of wanting him. The banks had wanted him because he was going to do all these amazing things with his cash pile and reform the business. And he broke it took him three years to Arnold Weinstock, 40 years to build it up to one of the most powerful industrial conglomerates in the UK. Took Simpson three years to break it.

Andrew Stotz 44:04
Incredible. Well, what a great intro to this podcast. And I appreciate you taking the time to explain you know, your own background and what you're doing and all that. I found that fascinating. And now it's time to share your worst investment ever. And since no one goes into their worst investment thinking it will be. Tell us a bit about the circumstances leading up to it then tell us your story.

Steven Wilkinson 44:33
Yeah, well, I'll keep it as brief as possible. Given that we've not been brief so far. I spent a long time thinking about how I was going to respond to your invitation, and I decided that my worst investment was my best. It was certainly the one that generated the largest return nine fear Because I was coming ahead of I started my own little investment business in 1998. I wanted to run my balance sheet didn't have a lot of capital but enough to start. And I had a really good first couple of years for the simple reason that as a value investor, I had no interest in any of the sort of new economy stocks, I could see what was happening. I was in fact reading Edward Chancellor's book, devil take the hindmost in 1998, I think. And it was so apropos because you could see exactly what was happening. It was a it was the railway, the railway boom of 1847 all over again. So I had a, an in the stocks that I was always I was in public markets, because I couldn't afford anything else. And there were some really interesting, you know, one, two times earning value plays available in the old economy in Germany. That were, they were mind bogglingly good investments, and everybody else was looking in the old direction. And so I did quite well. And the capital increased substantially over the next years into the crash. And I met a gentleman who, who invited me onto a board of a company that he was thinking of setting up to, he was an American. He was an American working for one of the more famous German companies that have profited enormously from the new economy boom, publishing company, and he had been in charge of managing what was a promiscuously bought portfolio of new economy businesses. And he's sort of, we share the same tax advisor. And he said to me, at a meeting once, these are all going to hell in a handbasket. They're all they're paying ridiculous prices for them. But there's value in that. So when it goes down, I want to be in a position to pick up some assets cheaply. Would you be interested in joining my board nothing, of course. Sounds like value investing, intelligence, a sort of kubin approach to retirement approach to asset valuation. And the invited to others invited lawyer, senior partner of a law firm, and a guy who was had deep experience in restructuring. And had made a fortune himself. So there were three of us. And he invited us to a board meeting, sort of initial board meeting to, to get to know each other. At this lawyer's office. There were three of us sitting that I want somewhere afternoon, somewhere lunchtime, and it was meeting was set for 12. And we're going to have sandwiches and a chat and get to know each other. And he didn't come the guy. I have never seen him since that was. So there were three of us were sitting there, the lawyer had to go off to do some lawyering. And because the restructuring guy and I sat there, and we found each other interesting. He found my story interesting. I found him fascinating. And we promised to keep in touch. And we did. And he was looking, he left a partnership and was looking to do what he'd been doing beforehand, but at a larger scale with other people's money. That was basically his premise. He was reorienting himself, he made a great deal of money with his previous partnership. And now he wanted to see what he could do on a bigger stage. And that's how our partnership started. And he, I think what he wanted from me or saw of me was a sort of capital markets, intelligence and have a very good network. And what I saw in him was a absolutely focus, money maker, and restructuring genius, which he undoubtedly was. So he had this. He had a requirement. He said, I don't like this private equity model nonsense as an 8020. Because if any, if I'm going to do it, I want 80 And they can have 20. I don't know how much money I'm going to need an evac know if I'm going to need any money. And above it, I don't want and I don't want to be working for people. I'm a business owner. I'm an entrepreneur. I don't work for people that they can invest with me, but And so let's figure out how to square that circle. And the idea we came up with, and I'm not quite sure whether he came up with it or I came up with it, but we came up with the idea of buying a shell company. So an empty Stock Exchange listed quoted company, but empty, buying as much as we could 90% 95 or whatever, whatever was available. Because my thinking was, if you are right, that we are coming into a time when there is when you can buy assets cheaply. And if you can generate the sort of returns that you think you can return, then the share price should reflect that fairly quickly. And then you can determine through rights issues or shares choose how much money you take in and how much control do you give up. And so we did it, we bought, we found one, we bought 88% of it. And then I picked up a few more shares, literally, we literally went to a hotel in this little village, it was a company that had been formed for a spa. In a time in Germany, when all these companies spars went public, complete ways. And you know, the mayor own some of the town council own some of the local bank, and so on. So when I put an advertisement in the newspaper, so I'm gonna be in town for two days, if anybody's got share certificates they want to get rid of, it was 50 cents per share our pay anywhere between 50 cents and a Euro, I'll be in the hotel lobby just come in. And I'll take them off your hands. And literally within an hour after breakfast, the mayor and the head of the local Savings Bank came in and said will you go looking for them and they bought a box and they wanted to know what we're going to do anyway ended up taking another three or 4% back home. So we own 90% between us. And the deal was that he would take 60 And I would take 40 Because he was gonna do all the work. And I was just gonna sit back and be as chairman and help with thinking and investors and networks. And it was, this was 2002. And it was phenomenally successful. And we took that share price from 50 cents, which is what we paid to at the peak 400 euros, you can imagine it turned into one of them . It was worth 1.2 billion in debt. Five, six years later. And you can imagine what that phase was like, and we had, you know, we were buying companies hand over fist we had a soup program built a big company up and he was really aggressive. really aggressive. Brilliant. There's no doubt is brilliant, too clever for me. Because I was not ready for that. That sort of success. And the reason that it was my worst investment as well as being my best investment is because I had no system for dealing with the wealth that that created. I've always felt like a fraud in the investment business anyway, because I studied medieval German, and I was a poet and not I just happened to take this job at Merrill Lynch because it was the summer of 1987. And, and they were looking at the Americans were all over Europe and trying to sort of capitalize on Big Bang and expanding and saw Europe is an extension of the UK, which was nonsense. And they were basically hiring anybody with a who could tie a tie and had a pair ads. And it was reasonably well spoken. And could speak a bit of German. So I fitted that build and it paid. It paid and it paid well. And so I was caught in this world of finance, which was which I thought I was I come from a business family and doing well financially is a sort of value. I've listed I thought was that was what was communicated. So I wanted to be x we do things to gain approval from our fathers and parents and infrastructure. So, you know, I was doing what I thought would gain approval. And because it was intellectually challenging for me to sort of get my head around this finance stuff I found that an intellectual challenge I've sort of stuck with it. And I never really found a way out. So when this happened in my late 30s, early beginning 40, I think I'm just turning 40 When it happened, there must have been because I was 14 2003. So I must have been no 38 When it happened, and I was still 38 is a time for Richard Rohr talks about the true self and the false self, and that we need to go particularly as men, we need to go we go through this crisis of the false self, when all the things that were working beforehand suddenly stopped working. And you have to move through that to experience maturity of the on the other half. And men who don't tend to be very depressed after their mid 40s. And even, you know, we see it in suicide statistics that that men between the the highest incidence of suicide in the western world at least is between sort of 48 and 58. When men are coming on the other side of this, this collapse of their false identity, and moving into a more mature identity. And this, this, this great success happened to me at a time when I really, I was starting to feel the limits of what I call the false self or what Richard Rohr calls the false self. And it just, it gave me a false sense of security that the way that I was and the things that I were doing, were obviously successful, because we were obviously brilliant, and I was obviously brilliant, because that's how I've because look. And it led to some disastrous decisions on my part disastrous, and I wasn't paying attention, I had no system for keeping the money. I was probably unbearably arrogant, because look at me, and I did all the things that 40 year olds do with when they've had too much money dumped on them. And I let other people take it off, me. And I invested in all sorts of things. I had partners in a different business at the time, again, the investment banker types, because I had an inferiority complex that I wasn't really an investment banker, and they knew more than I did. And they loaded me up with so much risk going into 2007 that I had, and I never, I've never used it ever, but in in aspects of my little empire, there was a lot of it, because they had this genius idea of setting up a warehouse for mezzanine financing for this, and it just blew up 2007 It blew up, all those partners left quicker than ship through a goose. And I was left with a huge non recourse, at least that but a wealth destroying amount of debt in an in a market, which was hell bent on destroying every last penny of equity in the structure. And so I lost not only its, and all the money that I'd made beforehand. I also had at that point of very aggressive tax investigation, which was awful for somebody who's just sort of always taken care of doing things properly. If you're chairman of a big company, and very prominent, and it was doing all sorts of deals, and there was a craze, a lot of wealth was on the radar. They weren't sort of much after me as after partners, but they were they could get and that lasted for nine years. And that in the very in a very visceral sense, almost killed me the shame that I felt from my own immaturity that was sort of handed to me on a silver platter, the shame and the grief that took I'm going to save almost a decade to work through because I From being extremely comfortable, I was suddenly in a situation where my family was at risk. A, any thought of that as a consequence, and, and the grief the grief was this, you grieve for wealth that's lost grief for it, it's literally it takes on its own persona in your, in the drama of your life and you you weep for it and you want to get it back in the you can't it's a bit like Greek tragedy, you know the the Euripides looking back on certain looking back and, and being turned to stone and just for that you want to reconstruct it go back and say, Where did I go wrong? At what point should I have done something differently? And why didn't I do and you spend so long stirring in your own shit that you it just drives you, you and everybody else mad?

Andrew Stotz 1:01:07
And you're never going to get it back? You know that?

Steven Wilkinson 1:01:10
You're never getting back. George Soros says money has no memory it doesn't. It has doesn't have memory. It doesn't. You had it, you blew it. That was your chance. And yet,

Andrew Stotz 1:01:24
can you remember the specific moment when you were finally free of it?

Steven Wilkinson 1:01:31
I can, I can. And as I say it almost killed me because I couldn't get if you have a if you have a you have a vivid imagination as I think I do, and a good vocabulary, you can create a story in your head, that for all for all that you can use language positively, you can also use it to catastrophize. And my confidence in myself, in my ability to in my ability to make rational decisions was shattered because it was absolutely shattered. And I'd had one and one thing that I hung on to which was in the tail end of the catastrophe of it was the great financial crisis when things were really bad for me. And I knew that the next couple of years were going to be very hard. I was thinking through with another partner, what was going to happen? What were the logical consequence of what was happening in Germany at the time. And I said to the partner, who was a real estate investor had small Real Estate Investment Partnership. And I said to him, that residential real estate they were experts in and I said the Germans have just had to do two experiences in 2001. And now in 2008, have disastrous Stock Exchange, activity and volatility. They hate it. lost money, new market, they've lost money in the great financial crash they hated rigged domestic residential real estate. But the government's and are pumping money into the economy as nap central banks are creating money in a way that Germans recognize as being potentially disastrous from their history. They absolutely and they've been monetizing government debt is, is what used to be an anathema don't get us anymore, but it used to be. So that's the second question, though. So they'll be looking at inflation. So they don't like paper and they hate inflation. Where are they going to put their money? And the answer was very simple. They're going to put it in bricks and mortar. And the asset class that they were most comfortable with was residential, existing built residential properties. I said to him, and who's going to be the big loser, the big loser are going to be the wealth managers, the wealth managers are going to see a huge influx so not only have they lost money now twice, in a decade substantially, you know 30 40% drawdowns, but as the German sort of wealthy individual moves to inflation hedge in property, you will see money disappearing out of the wealth because where else is it gonna go from now? They're gonna take it away from the people who are creating stuff and, and I said to him, Okay, we need to set up a real estate fund that invests exclusively in residential property, not new property, but existing properties. And we looked at the market and there wasn't one. There wasn't one that exclusively focus on German. And so we set it up, and it was phenomenally successful. For the past 15 years, that has been the single most successful German property fund in the market. I've under a million assets. And that, that gave me the confidence to know that my thinking was still clear, I could still think, clearly. And you asked me the question, when did it finish? I don't think it finished until 2018. I didn't think I came through that until 2018. But I think I was functionally depressed at the time. I was told that later. Very, very sad. Morning, unhappy, still ashamed. And I went to the island of Iona with my wife for a trip, which is a place with a simple lumber built his Abbey in the northern in the Hebrides, just off Scotland, north of Ireland. And, and I used to sing as a young boy as a chorister. And I've always sung. I sang as a young man and I was up to university time, then I stopped, I didn't sing anymore. And we went to a place called fingers cave, which is a little island. And there's Kevin, in the rocks, and it looks like a cathedral. And I thought I was alone with my wife there, and I said, it would be fun to test the acoustics of this place of this place. So you could imagine it's sort of like a, there was water in it. And there was like this great, cavernous rock formation like a cave, but it was huge dome thing. And I can help from when we were talking how resonant it was. And Brett, I said, Well, he just sings that nice, okay, well, to make sure there's no listening. And I just opened up and sang. I have a good baritone, tenor voice actually. And, but it wasn't practice. And we were with a small group from my children's boarding school. And the vicar who was with us or the chaplain of the school, who was around the corner, he was listening to me singing in the chat in the fingers cave. And that afternoon, we were due to have a little church service in the abbey of Iona, which is an absolutely beautiful, medieval, it's a very sacred place. And we'd sort of booked it for the afternoon. And we could we were having a one hour service, and he came to me. So would you say, I've just heard you would you sing something at the service? And they were about 2530 hours? And I said, Yes, as long as I can choose what it is? And he said, Yeah, go ahead, just choose and there is a hymn by a tizzy, which is called a Lord hear my prayer, which is a beautiful incantation. I remember going into the church and saying, you know, do my maker. If you never let me sing again, just let this one be a good one. And it was an incredibly powerful moment. For me. I mean, credit, just my voice in this sacred building. And I gave it everything I got, that's when I came out. It was like a cleansing, something lifted off me. And if you if I had to put a point as to when the recovery started, it was that

Andrew Stotz 1:09:14
that's amazing. And, you know, I was just thinking as you were describing it, like how you would start from I mean, in my case, I'm sure it would have broken down as I was trying to sing that because, I mean, I was just in a spinning class, you know, riding a bicycle, and they turned off the lights at the end of it. And the lady said, you know, slow down, whatever you're fighting out there, you know, just you know, you know, just you're good enough. Just you know, do your best you know, and I was like, sobbing as I was listening is like I don't know how you made it through that without you know breaking down

Steven Wilkinson 1:09:54
because that the singing was the thing that it was, that was what was being taken out of me.

Andrew Stotz 1:10:05
It had to come out.

Steven Wilkinson 1:10:06
It the singing was the process. It that needed to be completed before and it was it drained me completely. And I was not capable of speaking for another six hours afterwards. And I definitely didn't want to leave the island, I remember thinking I thinking feeling very, very vulnerable, as we left the island, a little ferry over to the Isle of Man, and then sort of back off home again, through Scotland. And, but that was the point that was when it started, you free your feet. It was the beginning of freedom. It was the beginning of I don't know how to put this. It was, it was the revelation of grace. Yeah, very powerful. For me anyway, it was.

Andrew Stotz 1:11:01
So to wrap all this up, maybe you can just try to bring it all together into kind of this whole experience that you've talked about, what would be the one or two lessons that you've taken away from all that, and you've explained a lot of you know, great.

Steven Wilkinson 1:11:24
Everything depends on you. Being successful in business, being good at investing, being a good owner is 100% dependent on you, as the owner, you have to be ready, you have to be deserving of wealth, you have to be in a position of giving, in order to receive it's all about you and working on you is the key to, to having whatever it is that you want to have. There's this little meme that says that it's the B do have. So you've got to be the owner in order to do the things that owners do. And therefore, thereby to have the things that owners have. If they're successful, you can't do it the other way around, you can't, you can't have the things and then do and then hope to be you've got to be for us. So it's all about whatever you experience is the result of your own level of self reflection, self development, and maturity as an individual, everything. Everything feeds back from that everything. And so taking responsibility for that first is the key to accepting the results that come and if the results are awful, then you've got to start with you and figuring out what it is that you have to do differently in order to get for an outcome.

Andrew Stotz 1:13:22
And that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. What a great time. What a great story. This is your worst podcast host Andrew Stotz saying I'll see you on the upside.