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Bank of America, of course, is not a solitary example. The Japanese banking woes of the early ’90s gave numerous companies – including AIG, Ripplewood Holdings and Citigroup – a chance to pick up assets at attractive prices and enter a market that had long been closed to them. Those bets were made in a real doomsday-like environment. They also turned out to be big winners, as Japan recovered. Similarly, after the Enron blowup, billionaire Warren Buffet was able to take a position in its pipeline business at a deeply discounted price, a deal with a surefire payoff. General Electric, which Jack used to run, was also able to get a good price on Enron’s wind power assets, allowing it to jumpstart its alternative energy business. Indeed, business history is filled with stories of perilous risks that turned out to be prescient. The point is, anyone can invest in a trend, just as hordes invested in the sub-prime housing market over the past few years. Such bandwagon investing is easy. What’s so much harder – but so much more rewarding – is investing in the wreckage of a trend that’s been brought to a halt by its own excesses. Talk about a goldmine. Now, obviously, no one in business savours a downturn. The personal cost is always too high. People can lose their jobs and their homes. Sometimes they have to move or start again, or both. But the one incontrovertible fact of capitalism is that markets ebb and flow. Industries contract and collapse, bankruptcies occur. Cycles happen. Most companies take advantage of the obvious opportunities. That’s well and good. But the winners of tomorrow are often those who take advantage of every opportunity, including those that arise when – or because – the sky is falling.

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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