Beating The FEAR

Fear is Contagious

Believe it – fear is more contagious than the bubonic plague. And it can spread just as fast.

You know the feeling – it’s like a twisting in your gut. Your palms are clammy, your skin feels at first cold and then burning hot. Your breathing is shallow — very shallow. You might remember this sensation when you were called on to speak in front of your class at school. Or when you asked that special someone for that first date. “Butterflies in the stomach,” doesn’t even come close to expressing the awful sensation you felt.

Fear can paralyze the decision making processes of any person, of any financial standing, of any background. Fear is an emotion known to all mankind. We know there is a healthy fear – that fear that keeps you from running out onto a busy four-lane highway with the traffic bearing down. That is healthy fear mixed in with common sense.

The fear we are talking about here is the first cousin of the twins called anxiety and worry. All together they can rob you of your fullest potential in any endeavor. It is fear that derails many would-be real estate investors.

My question is, has the recent bad news regarding the real estate market given rise to a sense of fear and dread in your heart and mind? Have you allowed fear to rule your decisions (or your indecisions)?

Are you afraid that because of the soft market you’ll not find any motivated sellers? Are you afraid to step out because you think there are no investors out there to work with you? Are you afraid there are no more bargains? What are your fears?

Once you realize that fear has no life of its own, only the power you give it, and once you realize that everyone on the planet must deal with fear, it should greatly empower you. You can learn to face any fear in your life and overcome it.

Warren Buffett, Afraid?

If ever there was a person who you might think never had to deal with fear, it would be the investment mogul Warren Buffet. To look at him, it would seem he lives a charmed life. Not that he didn’t have to work. He’s worked harder in his life than three or four people put together. But he always seemed to have that Midas touch.

The story is told of the six-year-old Warren Buffet purchasing 6-packs of Coca Cola from his grandfather’s grocery store for twenty five cents. He then resold each of the bottles for a nickel, pocketing a five cent profit. As a child he scoured golf courses finding the golf balls and selling them. In high school he had newspaper routes in large apartment buildings, and later he and a friend had several pinball machines set up in prime locations.

By the time he was twelve, he was already reading stock reports and calculating compound interest – a concept that never lost its fascination for him. Buffett was a millionaire by age 32, and today he is the second richest man in the world – surpassed only by Bill Gates. He’s worth billions, so surely he would have no fears to face. But an incident occurred in the life of Warren Buffet that virtually terrified him.

Bad Choices

It came about because he had made a business decision that was totally out of character for him. On September 27, 1987, Buffett spent $700 million to purchase convertible preferred stock of a company known worldwide as Salomon. This purchase equated to a 12% holding in the company. This purchase staved off a takeover from another entity which is what the Chairman and CEO of Salomon, John Gutfreund needed at the time. This was the most of Berkshire’s money that Warren Buffett had ever handed over for one transaction.

Throughout his career Buffett had “preached” to others about the folly of deals that provided huge fees but that were turkeys for their clients. And yet he was doing that very thing. Having no idea what was ahead, Buffett still thought this was an “okay deal” as he later described it. And he felt that Gutfreund could be trusted.

Four years later, Buffett’s world quite literally fell apart. The year of 1991 looked to be a great one for Salomon. The only cloud on the horizon was a Treasury investigation into a May T-bill auction in which Salomon was thought to have artificially manufactured a short squeeze. In spite of that little “cloud,” Salomon’s stock was now at $37 a share. Buffett’s conversion point was $38, at which point he would have been out of Salomon’s altogether.

When Buffett got a phone call from Gutfreund on August 8, Gutfreund simply said they would need to talk later in the evening. Buffett assumed his friend had found a buyer for Salomon in which case Buffett would be free of this whole deal. He was looking forward to that good news.

Totally unbeknownst to Buffet, behind the scenes managing director of Salomon, Paul Mozer, had been breaking the rules for the Treasury’s bidding. This had happened more than once throughout 1990 and 1991. This is a criminal act. And even though some of the executives of Salomon knew of this, they did not disclose it either to Treasury officials, to the public, or more importantly, to Warren Buffett.

Additionally, Buffet did not know that a letter had been sent to Salomon from the Federal Reserve Bank of New York containing a dire message that could mean the demise of Salomon.

As with all incidences where the truth is being hidden, sooner or later it comes to light. As more information leaked out, a run began on Salomon with investors trying to grab quickly and get out.

World confidence in the company was eroding, and Salomon directors were resigning. So Buffett, feeling it was his responsibility to do, stepped in to take over leadership of the company.

However, before 10 A.M. on a Sunday, a phone call came from the Treasury stating that an announcement was forthcoming saying that Salomon was to be barred from bidding at Treasury auctions, both for its own account and for customers. This spelled the end for Salomon. And with Buffet’s deep understanding and knowledge of world commerce, he was convinced it could profoundly affect the entire world economy in an adverse way.

For the next four hours, Buffet fought hard for a reversal of that decision, extending to several conversations with Secretary of the Treasury, Nick Brady. If the ban went through, Salomon would file for bankruptcy, and if that happened, Buffett had already decided he would walk out. And if he walked out, he would forever carry the stigma of “deserting the sinking ship.” He was up against a wall.

A Faced Fear is a Conquered Fear

Have you ever in your life faced a situation that could disrupt the economy of the entire world? Is there any fear in your life that is that big? That earth shattering? Put your fears into perspective and see them for what they are. A faced fear is a conquered fear.

The showdown with the Treasury was resolved, squeaking through with half of the concessions given to Salomon. Buffett stepped in as head of Salomon and piloted the company through the stormy seas of the next few years.

While negotiating on the phone with Secretary Brady, Buffett – this highly successful man who always seemed to have that Midas touch and could do no wrong – made the statement with no little anguish in his voice: “This is the most important day of my life.”

When you face your fears, push through them, and move forward with decisive action, you will experience “the most important day” of your life as well.

In fact, each time you conquer any of your fears, it will be a very important day. So determine to make today that important day in your life.