What can we learn from the Rudd vs Gillard leadership battle as property investors?

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What can we learn from the Rudd vs Gillard leadership battle as property investors?
By Bill Zheng, February 2012

Now before you think I am going talk about politics, I am no expert in politics, I can only draw on some business examples with the understanding that there are vast differences between politics and business, as they are motivated for different purposes. Most importantly, I want to see how we can learn from this as property investors.

The basic idea that I get from my limited reading, is that Kevin Rudd is very intelligent and more popular with the voters in the opinion polls and Julia Gillard is very disciplined and more popular with her colleagues.

If the Labor party is not in trouble, Gillard can easily beat Rudd to be the party leader, as party leaders are decided by internal popularity. But if the Labor Party is in serious trouble to lose the next election, then whoever can lead them to victory will be more likely to be made leader of the party. I know I am not telling you anything new here.

This reminds me of the two typical types of people in business namely the entrepreneurs and the managers. The entrepreneurs are usually a little bit crazy and creative, more visionary but often more egotistical, the managers are usually more level headed and can get things done with more support from their colleagues.

We are talking about two different types of people here: entrepreneurs who mostly live in the future and thrive on chaos and uncertainty, and managers who are usually more in touch with the reality, prefer stability and have better people management skills. Great entrepreneurs are usually more admired by people outside of the business because their visions and their ideas of the future can be very inspiring but not necessarily the easiest to work with. Great managers on the other hand, are usually better listeners and more in touch with reality, they are easier to work with and less demanding as they are usually more flexible with future direction, their flexibility on future direction comes from the fact that finding and holding a longer term vision is not their strength as they don’t usually live in the future.

A good example that came to mind is Steve Jobs and Apple Computers. He was pushed out of the leader’s position by an excellent manager (recruited by him) to manage the company during a time when the company saw that its survival could do without Steve’s egotistical behaviour, as majority of Steve’s colleagues (including his board members) found him impossible to work with, this was partly because very few people could see far enough into the future to share his vision and also because he can be very unreasonable with his demands and no one could keep up with his work ethic either.

When Apple Computers were a few months away from going bankrupt the company had no choice but to bring Steve back, only his crazy ideas and visions could save Apple. Fortunately Steve also became more mature from his major setback and learnt to respect the importance of good management and let his managers do what they were good at, while he stuck to what he was good at.

I am not here to compare the Labor party to Apple Computers, or Kevin Rudd to Steve Jobs, or speak about which party should be in government at the moment, as business and politics have very different rules. But what I am trying to do here is to help us better understand ourselves.

Let’s look at both sides of the coin within the business context:

Imagine a great manager sees all the shortcomings of an entrepreneur (e.g. egos, unpredictable behaviours, unrealistic optimism and unreasonable demands) and decides that he wants to take over the entrepreneur’s role to lead rather than manage. Because a manager’s focus is more present with current reality and is less inspiring, you will find that the business starts to lose direction along with its appeal to the customers.
This is one of the main reasons why so many great business managers fail to do well when they start to run their own business as an entrepreneur. They have always assumed that they can do a better job than their boss, as their boss’s flaws are so obvious to them, but never learn to appreciate the critical contribution of an entrepreneur.

Imagine a great entrepreneur sees all the shortcomings of a great manager (e.g. they are usually more pessimistic about what can be done, continually pour ‘cold water’ on your great ideas and they also tend to sympathize with their colleagues to slow things down), he decides that he wants to manage the business himself as he can make it happen faster. Because of the entrepreneur’s nature of living in the future and thriving on chaos, you will find that the entrepreneur will not listen to others and starts to create enough chaos to cause the business to be dysfunctional, and less and less of those great ideas can ever be implemented.
This is one of the main reasons why so many great entrepreneurs with great vision and practical ideas fail in business, as business organizations do require better team work spirit and superior management skills that they never appreciated in the first place.

Everyone has a bit of both entrepreneurial and managerial capacity within us, but we are often more endowed with one or the other. If we are not aware of our own tendency and strength, we can be unhappy and unproductive due to the mismatch of our ability to our roles.

It is much easier to be bad at both of these roles, but it is extremely hard to be great at both at the same time. This is because you either spend most of your time in the future, or most of your time in the present. You will need to have enormous capacity to be able to switch between the two at ease. There are only a handful of people who can do both well and even then they often still have a hard time convincing others.

For example, if you are given only one narrow viewpoint to observe the Labor leadership battle within the context of these two roles, you may say that the 71 MPs that voted for Julia Gillard believe that she can be both a great entrepreneur (i.e. visionary, inspiring and forward looking leader) and a great manager (i.e. realistic, disciplined and ‘get things done’ manager) and the 31 that voted against her believe that she is a great manager only and still not sure if she can lead them to victory in the next election.

I have found a great example of someone who can do both of these roles well at the same time, that is Abraham Lincoln after he became the US president. He was clearly someone who could lead and manage at the same time, the proof is in the fact that he didn’t criticize any of his colleagues after he became the president.

When someone stops blaming others, he is taking full responsibility of his own role and also accepts other people’s roles and lets them take their responsibility at the same time. I have found this incredibly hard to practice; all you have to do is to ask the people around me how often I have to blame someone for something. It got so bad that I had to put Lincoln’s picture on the wall in my office to remind myself: ‘if someone running a country doesn’t have to blame others to justify himself, what excuse do I have to blame others for anything?’

Let me explain the logic behind this.

If you are more of an entrepreneur type, it is the entrepreneur’s responsibility to make sure your vision and ideas are manageable by the managers, simply blaming the manager’s inability to manage is to admit your inability to lead.
If you are more of a manager type, it is the manager’s responsibility to manage the entrepreneur and the team to get things done; simply blaming the entrepreneur is to admit your inability to manage.

After all, human beings only blame something they can do something about. When was the last time you saw someone who tripped over a chair start blaming gravity? He is more likely to blame the chair, someone who puts the chair there or himself, because he knew he couldn’t do a thing about gravity, but he can do something about the chair, the person who puts the chair there, or himself.

You may wonder why I have been spending so much time talking about this, because I have found incredible similarities in just about everything we do as long as it involves two or more people.

Let me give you a list of examples to consider:

You will find that between a husband and a wife, the chances are that one of you will be more entrepreneurial and the other more managerial, but often we only focus on what the other person needs to improve on ☺, rather than letting the other person be the best they can be with what they are good at, whilst taking full responsibility for our own role.
You will find this in property projects and syndicate investments, the developer or promoter with the most creative ideas and the biggest vision may not necessarily be able to get it done profitably, unless they have an excellent team under good management that can execute it.
You also find some troubled kids at school turn out to be great entrepreneurs if they are lucky enough to find some great managers to support them.
You also find some troubled employees that no managers want to manage, because they always come up with crazy ideas that mess up the stability of management. Some of them can end up becoming very successful as entrepreneurs.

I would also like to point out:

Just because someone is a trouble maker and can be crazy sometimes, doesn’t necessarily make him a great entrepreneur in business. Great entrepreneurs usually have something in common: great intellect and intuition as well as the capacity for original thought and the ability to inspire. They are the ones that tend to see direction from chaos and uncertainty that others don’t see.
Just because someone is organized and risk adverse, doesn’t necessarily make him a great manager either. Great managers usually have superior people skills, they are disciplined and consistent in setting great examples for others.

How do you apply the above understanding in property investing?

If you are not an entrepreneurial type who thrives on risk and uncertainty, then higher risk type property activities may not be suitable for you.

For example, you need to be extra careful going into any of the following property activities:

Property development and major renovation;
Land subdivision;
Strata title single block into multiple units;
Using options on properties and development sites;
Overseas property transactions that you have little control;
Mining town properties that are more speculative;
Student accommodation that requires a business operation to support it;
Holiday or resort type properties that are more seasonal and less predictable;
High end or luxury properties that are more volatile during bad economic times;
Serviced apartments and display homes that depend on the business performance of the lessee;
Properties in remote or isolated booming areas that can also go down quickly if the story goes away or the market becomes irrational after the initial overheating period;
Wrapping properties (vendors term, rent to buy or purchase leased option type transactions) that is very much a full on business;

But you may feel more compatible with the following property activities:

More affordable with no strings attached type investment properties in highly populated areas, i.e. properties that can be rented out every day and sold every day, and it is affordable to majority of the tenants and buyers during good times and bad times.
Simple and easy to understand houses or apartments that suit the surrounding environment and demographics, be it off-the-plan, new or established, depending on your tax break and whether they are over-supplied if you are concerned with the short term return.
If you are an entrepreneurial type person, you then have two options:
If you are willing to put a lot of effort and time into properties to learn from your own mistakes to become more capable, then going into some higher risk and higher return property investing activities can be a thrilling experience for you. You know you can’t stick to something easy or simple for long anyway, and you have no interest in smaller and more consistent returns, you are willing to lose a lot to gain a lot, then why not go for your passion? You can become very wealthy or very poor through this process, but at least you have fun doing it ☺. To improve your chances of success, it would be smart for you to find a great manager type person to help you along.
If you can’t afford to put too much time into property activities or have no interest in developing further property related skills because you have other priorities in life such as business, career or family, then you need to ensure that you find an outlet for your entrepreneurial appetite outside of properties so that you don’t casually put your money into high risk and high return property strategies, because all higher return property strategies potentially involve higher risk and will require more of your attention and demand better control and experience from you. So your property investing activities can remain similar to those listed above for people who are not entrepreneurial by nature.


Summary

I guess if you are more of an entrepreneur type, it would be a great idea to work with someone with great managerial capacity; if you are more of a manager type, it would be a great idea to work with someone with great entrepreneurial capacity.

Unfortunately we are often criticized for what we are not good at and rarely receive recognition and appreciation for what we are good at. Hence most of us spend too much time trying to improve our weakness to keep our critics happy. In other words, we can try to be everything for everyone, but in the end become nothing for no one.

The price of not knowing ourselves is always very expensive.

Until next month, happy investing.
 
Thanks Rick - fantastic article in many ways.

You only have to look back on the successful government pairing to see the corrolation - Hawke/Keating, Howard/Costello - if they don't have one, the other doesn't function (as shown when Keating ousted Hawke).

I wouldn't say Gillard/Swann are a great pairing as they are both managers - and neither is Abbott/Bishop as both are neither managers or entreprenaurs.

However, gives me hope - I am married to a manager - my work is surrounded by very proficient managers ... means I can be the nutty, crazy, thinker upper of fantastic ideas :D ... as long as I am nice
 
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