July 13, 2016 • Bookshelf

“Liar’s Poker”

For this past quarter, the team picked one of the first business books I ever read, Liar’s Poker by Michael Lewis. Published in 1989, one year after I graduated from DePauw University, and started my banking career at American National Bank and Trust Company of Chicago, it was a fun flash back.

Michael Lewis is a wonderful story teller – many of his books describing in colorful detail how large financial firms manipulate the system to create financial gain.  For the average reader, these actions seem immoral and illegal, however no one ever seems to go to jail, get fined or lose their jobs.  Eye opening and interesting.  In comparing my 1989 impression of the book to my 2016 impression, my thoughts simply go to “you can’t always trust the experts.”  I admit, this sounds cynical.  And over the last 27 years, I have certainly met and been inspired by true subject matter experts, they are out there, don’t get me wrong, however, they are few and far between. This is not to say that many of those that claim to be “experts” aren’t knowledgeable, intelligent individuals, however it’s important to acknowledge that your gut feeling as an entrepreneur does serve you well, and should be relied on to verify experience and intentions. Malcom Gladwell’s 10,000 hour rule comes to mind.

In Liar’s Poker, financial firms hired a very young, intelligent Lewis. His firm, Salomon Brothers, had a regimented program, worked young trainees very hard, paid them well and in return had high expectations.  These expectations unfortunately led trainees to sell crap securities to unsuspecting clients who were unwilling to question the supposed experts. While this example may be extreme, I think the important thing to note is trust, but, always verify.

At ScaleCo, our process, is based on best practices (yes, from some talented subject matter experts, including our own experiences and entrepreneurial journeys) that provide business founders and owners the information needed to support (or in some instances disprove) their gut feeling. It is rare for someone to be able to step into a growing business and understand it as well as the founding entrepreneur, however, we do know that with strong processes that support growth, the right people and information, the entrepreneur can elevate them self to a position to see around corners, know what’s coming down the pipeline, and be better prepared for the twists and turns ahead.  Advisers can certainly assist you to identify the right type of data to monitor to allow you to make better business decisions, but as the entrepreneur, you need to be prepared to not only interpret, but act on the data that supports or disproves your gut as to where your business should go next.

While not my favorite Michael Lewis book, it was a fun, quick read.  And as stated earlier, my punch line: trust, but verify!

About ScaleCo

ScaleCo Capital is a Cleveland-based lower middle market private equity firm that focuses on control-oriented leveraged buyout and growth equity investments in fast-growing companies based primarily in the Great Lakes region. ScaleCo partners with companies in the verticals of business services, tech-enabled services, value added distribution and assembly, and training, compliance, and education sectors, bringing operational expertise and strategic resources to scale their growth potential and build long-term value. To learn more, visit scaleco.com.

Ready to meet the team of investors that’s scaling companies locally? Let’s connect.