Terminal Value

The Art of Preventing Stupid with Matt Davis

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Janine Bacani

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We have Matt Davis today. What’s on the show today from Davis business law. And we are going to be talking about the art of preventing stupid. And this is actually going to be from a kind it from a business legal perspective, but in order to really get to what you’re going to do from a legal perspective, you actually have to think about what are your threats from a business perspective. So anyway, Matt, I would love you to introduce yourself and talk us through how you came to the art of preventing stupid. 

Yeah, hey, thanks for having me Doug and I run Davis business law. We’re 13 lawyer law firm right now. We have offices from Kansas City down to Dallas. We’re growing. We’re going to add a couple more markets this year. But we love to be able to work with our clients on a proactive basis, which is pretty weird in the law business because guess what we’re just taught in law school. Hey, deal with the issues when they come. But I was raised by this mother of mine who was the only woman in her med school class and then practiced medicine here in our hometown. And she was one of the pioneers in breast cancer bringing back in the 70s, really hardcore about making her patients get mammograms and so on. And that ethic of from a professional basis, let’s get ahead of the problems was really instilled in me and it just stuck in my heart. And I’ve got more stories, but we got kind of a limited amount of time. But I came back here to my hometown, Zena Oklahoma, which is just a big wide spot on the plane. But I can’t tell you how many people come up to me over the course of my adult life and said, hey, your mom saved my life. She saved my life. That’s awesome. Yeah. And we’ve been able to do that for a lot of our clients and just help them navigate the growth trajectory of their business because our core clientele are ambitious business owners. Yeah. And we love working with them and we love helping them navigate, growing. And we’ve got one right now that’s really been fun to work with, which is a company that discovered a bunch of lithium over in Arkansas of all places. Oh, interesting. And we’re getting ready to take that to market. I got to call the owner here later today. But what we did is we developed systems that help business owners, managers get ahead of their problems and in effect, it dovetails in with strategic planning. A lot of the business coaches that we work with that use our systems and I wrote about one of them in The Art of Preventing Stupid. And as often happens, we’ve gotten better over time and we’ve put some other tools up on our website that we’re going to come out with in our next book, which is called The Strong Protected Business. Not nearly as much of a title, by the way. 

There’s only so many snappy title names that are out there.

 Yeah, but here’s the basic premise, okay? We’re all familiar with SWOT analysis. Yes. Strengths, weaknesses, opportunities, threats. I’ve sat through dozens of strategic business plannings, and they go, okay, here’s the fourth thing. But there’s nothing to it. What I’m saying, maybe there is something to it, but it’s weak because you’re just asking these sort of blank questions to the universe of what are our threats? Well, by the way, our expertise comes from the fact that we’re the ones that really end up dealing with the threats, or vulnerabilities, as we call them, when it hits the fan and they become big problems.

 Well, and especially because the traditional model, at least from a legal perspective, is that when something becomes a big problem, you’ll go into litigation, and then you end up having a geyser of billable hours.

the idea that we really bring to the table is that threat section, where, again, vulnerabilities, as we call it, and asking questions, brainstorming constructively around in the business immune system report around seven systems that run your business from your management, your personnel, your production, how you’re doing, your work, your facilities, your measurements, your marketing and sales.

 Oh, yeah. And we still do litigation. We still do all that. But we love working with our clients when we can get with them and work with them on an ongoing basis. And there’s some truth in the fact, too, that when they’re growing, we’re making money, too, but we’re adding value. And it’s a lot more fun for us as attorneys. We’ve got a charcuterie company that’s growing really quickly, and Kristen down in Oakland cities, their general counsel loving it. But

the idea that we really bring to the table is that threat section, where, again, vulnerabilities, as we call it, and asking questions, brainstorming constructively around in the business immune system report around seven systems that run your business from your management, your personnel, your production, how you’re doing, your work, your facilities, your measurements, your marketing and sales.

 Okay? Those are seven basic systems of your business. And one thing we identified is there are three sources of almost all the vulnerabilities to your business. One are just straight up catastrophes that going to hit you out of the blue. For instance,one if I die, that’s a big problem. It’s my business. Or we had a marketing catastrophe. Somehow our Tulsa web page became completely unhinged for a month. We got nothing out of Tulsa. Right? How do you prepare for this or for dinner? And then the other thing is ignorance. That’s another source. And the question is, how do you get ahead of figuring out what you need to know? Where are your learning curves? And then the third one is an ineptitude, which is where you’re slacking. So ultimately, what you do is you take, for instance, you go, where are our personnel? Ignorance? What do they not know? What do we need to teach them? Or what are we not measuring right? And when we ask those questions in a constructive way of brainstorming, you get a whole lot better handle on what your vulnerabilities are. 

Got you. Well, so can I walk you through how that process might work? Because I think this is an important part. It feels to me like of really doing strategic business planning. And I think that especially if you’re talking about business vulnerabilities that could involve legal cross sections, as you said, it’s a really good idea to engage proactively instead of reactively, because if you wait until there’s already a problem, it’s likely to be a very expensive problem. 

Yeah, okay. So the first level that we look at with your business immune system report is management catastrophe. So I went into the office, a friend of mine runs a quarter billion dollars a year company, and I said, hey, listen, you’re 52 years old. You’re not a spring chicken. You’re not super thin anymore. And I was a little meaner than that. And the next president of the company is going to be your son is at an Ivy League school who thinks he’s going to be president of the United States of America. And if you die, we don’t have anybody here who can run this company. What the hell is the problem? And he looked at me and said, you’re right. Okay. And so what we did is we went out and recruited two great new C suite executives, one of whom I just found wandering around my neighborhood. And that’s kind of funny story in and of itself, he’s now the heir apparent to the company. And we put them in place, and guess what? This is the next nugget.

. The companies that deal with their vulnerabilities are the ones that capitalize on their opportunities because they’re staying in the opportunity space. They’re not down in the problem. And so they’re the best players on the field.

They’re the ones that get the number one draft. And by the way, that company, what they were able to do is they went out and bought one of their main competitors and grew the company by 50% in a year. Wow. And it was because we had the brain power on the team to go do it. That’s how dealing with the management catastrophe a personnel ignorance. You asked that question. What do we not know? I was out with a company that was growing really fast, and it was during the last oil boom, and we drilled a ton of wells around here, and they couldn’t keep up. And they were just sitting there. They were fussing about it. And I said, guys, here’s the deal. You are ignorant in how to go recruit personnel. And they were like, yeah, we are. I said, yeah, that’s a huge threat to your opportunities, but we put that down as a priority to deal with, and we have a way that we go through and prioritize how you deal with these that dovetails write in with strategic planning. And of course, then they went out and dealt with it and came back and they were gloating because I was kind of harshing on them and they’re gloating at me and they’re like, well, okay, we figured this out. We got a recruiter and they pulled down a bunch of guys from Michigan. I said, okay, great, now here’s our problem. How are we going to train them? They’re like, touche, you win. I have a friend from just up the road from you that taught me the next level, next devil phrase. 

Well, then that’s the thing. Well, I suppose there’s lots of people who said this, so I probably don’t need to correctly try to attribute this quote to one person, but I was recently reading a post on LinkedIn where basically we were talking about dealing with stress and one of the things to understand is that it’s always going to be there. And so just because you solve a certain problem or get to a certain level or achieve a certain milestone, there’s always going to be something new that you have to worry about. Now, there are high quality problems, low quality problems. High quality problem would be, oh my goodness, we’re growing by 50%. How do we deal with it? A low quality problem would be oh my God, we’re going bankrupt. How do we try to stay afloat? Those are both problems. I’d rather have problem A than problem B.

 Yeah, and one of them really is more how do you dealing with the vulnerability? So you’re getting in the we just talked about it’s a binary choice. You are in the opportunity zone or you’re in the problem. And one of the companies we work with, they were all mad about a copyright here the other day and they’re growing so fast and they’re doing great. Before we, I think, started querying, I mentioned the lithium company, the lithium over in Arkansas, and one of their competitors just ripped off their maps and was using it on the internet to promote their prospect and they wanted to pick fight. And I’m like, do we want to, do we want to it’s such a cool deal and let’s not get in the problem.

 Well, yeah, the other thing too is that, okay, so let’s say you’re going to bring a suit or put a demand letter together over the copyright violation. What is your best possible outcome from your copyright violation? Most likely you’ll get a cease and desist and if you can prove real economic damages, which is hard to do, but if you can, you might get some fraction of that in a settlement at some point. But if the time you put into that means that you’re either going slower or stopping on this lithium deposit that presumably they’re trying to bring to market, that time is extremely valuable. And the value of what you get by going after a copyright claim is probably not going to exceed what the results of that time would be if you invest it in your prime opportunity. 

Yeah. And at the end of the day when we’re working with ambitious business owners, we want to help them deal with those issues in a constructive way and keep them steered towards the opportunity zone. And one way you do that is making smart decisions about which bites you pick. But then also, let’s get ahead of the vulnerabilities and then dovetail it in. And that’s one of the reasons that my firm has grown so fast. Our business coach, who we’re in the process of changing, because I like to change that. I like to change sense about every three years. And he’s like, you guys move so fast because you don’t make a lot of unforced errors. And in the next book, I talk about business being like a river, and you got to go navigate it. And I’ve spent a ton of time out kayaking over in the ocean. There’s some beautiful springfed rivers, kind of like the Cockamas. I think I said that right. 

You did. Nicely done. So, for reference, I’m from the Portland, Oregon area, and more or less, everybody who’s east of the Rocky Mountains mispronounces just about every river in half of the town in the Pacific Northwest. 

Yeah, it’s true. And I talk about look, once you’ve been down the river or have read and understand, you know, what the hazards are. And that’s why I talk about the art of preventing stupid. I mean, you’re going to hit a rock all the time, and you’re going to learn something new all the time. But the guys that make the least unforced errors, I think there’s a common denominator that those are the guys that win at what Jack Stack called the great game of business.

 Yeah. Well, because the way that I think about it, which is, I think which definitely gets to a similar point, but it’s just a slightly different angle of view, is that, okay, your own operations are completely within your control. Right. What happens in the market, out of my control? The market is the market. I don’t have the ability to steer it. The only thing I have the ability to do is survey it, figure out what’s there, and figure out where there might be opportunities. But what you’re saying, which I think is really extremely valuable and amazingly simple but excellent point, is that you want to make absolutely certain that none of your business problems are things that you can control, because that is 100% preventable. Sometimes you will have a market crash. Some people say you can see them coming. Generally speaking, I think it’s a lot easier to see market crashes coming than to tell exactly when they’re going to be. I thought there was going to be a market crash for the last six years. That means I was wrong. Five out of six years, yes, there will always be a crash. There will always be an expansion. But the question is when? Because the thing is, I can’t control that. I don’t know when that’s going to happen. I can control my internal operations. We can control the way that our own businesses run. And so what I’m really hearing you saying, which I think is extremely valuable, is make sure that everything that’s within your control is dialed in and running exactly the way you want it to. 

Yes, that’s what I’m saying. And with maybe a little negative twist and look at it in a negative way because at the end of the day, all law is about dealing with vulnerabilities. That’s why I say it all the time.

 In your defense, you’re probably one of the more positive attorneys that I’ve had on the show.

I hope so, because I believe that if we use systems and we ask good questions and that’s something we really strive to do. And again, all the resources are up on our website, davisbusinesslock.com and not only this, but we’ve got a strong protected business system, which is the business immune system plugs in there. We’ve just seen the power of helping businesses deal with these things and get in front of them and really size up their threats in an organized way rather than just looking out into the universe. Here I go and going, what are my threats? But if we go from the perspective of somebody who’s been down the river before. We go. That rock is going to get you. That root wide is going to get you. That current is going to do this. And you’re going to be the guy standing. You’re going to be the guy there. The strongest player on the field when that market crashes with cash in the bank. When everybody else is going broke.

 Yeah, and yes, precisely. I think that’s the thing that’s also going to lead to your business resiliency, which again, as you’re going through economic cycles, the thing is, if you have a resilient business and you have good contingency planning, economic cycles aren’t anything you need to worry about because what it’ll mean is typically you’ll end up having opportunities if you have stable operations and you have capital available. Because I remember in the 2008 financial crisis, I was looking at these great buying opportunities, but my retirement account is just cut in half. I’m like, okay, well, I’m already fully invested. I don’t have anything else to put in. Everything I had was in and it all fell down in half. It all got cut in half.

 Yeah. And I just mentioned Jack Stack and his book. Great Game of Business in there. He mentions, look, I love economic downturns because we’re cash solid and to me that’s just an opportunity. 

Exactly. Precisely. Well, all right, Matt, it’s been a wonderful conversation, really. I think some excellent, excellent gold just dropped on the ground waiting for people to pick it up. Give us one or two last thoughts and then make sure to shout out your website one more time. 

Yeah, again, our website is davisbusinesslaw.com and go to the resources tab. We just put it all up there for everybody to use because we want to see businesses prosper. And, look, we come to the table from a pretty generous place. A lot of people hate law firms, and then they look, I kind of do, too, because there’s a selection bias for sociopaths going to law school. You know how I know? Because I went to school. We really want to help people, and I see it as my duty. It’s something we’re really enthusiastic about. And I’m not completely altruistic, because when our companies that we’re working with are growing fast and growing rapidly, guess what? There are more deals for us to do.

Sure. Exactly. I think the thing, too, is that because if you have companies that are growing fast right. You can build from mergers just as easily as you can build from litigation. Litigation tends to be less fun. 

Oh, yeah. And you tend to be dealing with those sociopaths. I didn’t like them. 

Yeah, exactly. Matt, I really appreciate your time today. 

Hey, thank you. And best of luck. Have a great weekend. 

All right, you too. 

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