What keeps focus intact?
Successful executives stay focused during adversity by deciding what the business is for in advance and refusing to revisit that decision when conditions worsen. Choosing the purpose fixes most of the agonising choices from the outside. Late in 2023, when rates were rising and valuations were falling almost everywhere, Arif Bhalwani Third Eye Capital gave an interview that illustrates this. Banks had started reaching for liquidation as the simplest way out of a loan that had gone wrong. The firm had been set up years earlier to lend to companies in that exact position. So the rate increases did not force a rethink. They made the firm’s existing job bigger.
People tend to get this part backwards. Well-built businesses rarely change their purpose in the midst of a rough patch. This changes the business environment. It simplifies the second part of the strategy without having to argue from the beginning every time.
Why does noise multiply?
Noise multiplies in a downturn because every opinion suddenly has supporting evidence, and an executive who treats all of it as equally urgent is lost within weeks. Bhalwani mentioned that pension funds in that period had become noticeably pickier, asking for real distributions and cash rather than valuations on a statement. The same standard works for what a leader chooses to look at.
- A rate rise is a fact, and it changes the arithmetic on a deal. A column explaining what the rate rise means for the economy is commentary, and it can wait until the end of the week.
- When the business is struggling, executives track four or five numbers. When the worst months come, the rest gets ignored.
- A good deal of attention is saved by not attending meetings that exist to process worry rather than decide anything.
Treating conditions as information
Executives who come through a hard period in good shape read the difficulty as information about where opportunity has moved, instead of something to wait out. Bhalwani’s point in that interview was plain. Companies could not get financing the usual way, and that was the opening. The problem was the data.
This is a way of thinking rather than a method, which is partly why it is hard to teach. When credit tightens, most observers see the tightening and stop there.
- A focused executive asks who is now underserved as a result, and what that group will need over the next year or so.
- Nothing in the outside world improves after asking that question. What changes is that the executive is now looking at a set of problems that can be worked on, not a set of conditions that can only be complained about.
Staying patient with change
Patience is the last piece, and it is usually the first to go. Bhalwani described a long-held assumption that bank financing was the standard route for businesses, and said that assumption was only beginning to move. The firm’s thesis depended on that movement continuing. It had not finished. It may take years.
It takes time to prove that you’re right in the face of adversity. While the market is slow to adopt the thesis, they keep on working and are not discouraged. A leader’s hardest months are the ones where there is a good plan but no proof.
