Notes

Evaluating Investment Opportunities: Strategy Versus Tactics

It’s become even more important to pay attention to what you are investing in. During the recent Bull Run years you could make just about every mistake in the book, still make money, and look like a genius.

That may not be the case anymore. Crypto and banks have already been crashing. Many local governments are facing huge deficits which may put assets like municipal bonds back in the danger zone as well.

According to some, the recession and housing market dip have already come and gone. Others may think that we haven’t seen more than the tip of the iceberg yet. A shift that would definitely hammer tech startups, public stocks, and more.

Whatever your perspective, it just seems to make sense to pay a little more attention to what you invest in.

Strategy versus Tactics: What’s The Difference?

Strategy is the overall idea or general plan.

Tactics are the specific details or tasks required to achieve the strategy.

Applied to investing you can think about this as the concept of the investment versus the actual execution.

Not all great ideas and strategies really pan out as expected when it comes to actually making it happen and achieving the results.

Like Elon Musk wanting to go and inhabit Mars. It sounds exciting. Yet, actually doing it is a whole other deal. You’ve got to build and test the rockets to get there, train the people, and be able to create an environment that is habitable. All of which is clearly taking a lot of time and dollars. It’s not something that every aspiring astronaut is going to be able to pull off.

Just like in the last major recession Warren Buffett said he would love to buy up hundreds of thousands of distressed single-family homes. Yet, he knew the management would be too much even for him.

In this case, it may be far more feasible to tactically execute on acquiring multifamily apartment complexes for long-term passive income, fixing and flipping those single-family homes, or investing in the mortgage debt on them.

The Ability to Deliver on What’s Being Sold

We all love great sales pitches and big inspiring ideas. Though in addition to, or perhaps even more important than evaluating the individual assets being invested in through a fund or syndication, it’s wise to first look at the strategy and tactics. If they aren’t going to work, then the physical bricks and mortar or patch of dirt are almost irrelevant.

Different examples of this may include WeWork and Zillow. We Work’s strategy was completely flawed from the beginning. Any amateur investor from pre-2008 could see that mile away. They were too leveraged, and running on fumes.

Then you have Zillow. Perhaps they had good intentions of creating a convenient home value tool. In the application, they not only completely failed to be able to value properties (often not even with 50% of their true value), but did almost incalculable harm to so many buyers, sellers, owners, and businesses. Their business sales tactics may have worked, but their technology was tactically broken.

Tomorrow we are likely to see a large number of failures due to AI, poor rent collection tactics, and customer service strategies.

Three Tips For Evaluating Opportunities
1. Is the strategy simple? Does it make sense, and is easily understandable?
2. Does the operator or manager have the experience and track record to succeed in the tactics and execution?
3. Are there any red flags as you go through the steps as a customer that suggest they may not be able to retain customers well?

Investment Opportunities

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