Half knowledge is a dangerous thing
2nd December 2017
In business and life, we are often reliant on experts’ opinion and advice. This is because we cannot know everything about everything. We are limited in our knowledge and perception; after all, according to science, we can only see less than 1% of what actually exists.
Fundamentally, we are flawed, even within the 1% in our range of perception there are many contradictory opinions, not always fueled by the right intentions.
Currently, we are in a live situation where one planner’s opinion is contradicting another. An investor who is reliant upon the instruction of others, will often be led totally by their opinion.
This is an unwise stance to take, many professionals are not commercially minded. They often do not know how to quantify and take risks. This is why they do what they do. More often than not, they take the more conservative option, which is if there is any element of risk then to advise the client not to do the deal. This way they protect themselves from any future liability. In principle, inaction is better than action; it’s the safer option.
A few years ago, when we were purchasing a block in Kilburn consisting of 23 units, an hour before the exchange deadline the lawyer pointed out a flaw in the building. There were some illegal works that had been done to the property, which would affect the ability of a lender to lend. Also, this meant we were risking action both from the council and the freeholder.
We had to take a call as we were in a contract race, and we expected if the deal was not exchanged on the Friday evening, over the weekend the competing party will have lined up their ducks and would be in a position to exchange first thing on Monday morning. Often having another party in the race makes One laser focused, despite dragging One’s feet previously for several months. Our investor, understanding the risk involved, took the call to do the deal, and consequently made 40% per annum on their investment. Not all calls have been successful in recent years, there have been some losses as well. This is the nature of investment.
Going back to our live situation, our planner and team who have been involved in this site are extremely confident of getting planning for over one hundred units. The investor considering the deal has got his planner to double check the conclusion. His planner has done a very prima facie analysis and concluded not to do the deal.
This advice, if incorrect, will cause the investor to potentially lose about £12m in profit. There are many flaws in his planner’s analysis. Firstly, he is not qualified in terms of his experience, his experience seems to be focused in London, the piece of land in question is well outside London. Secondly, he has not taken the time to look into the detail, choosing instead to ride off headlines. When the deal is this lucrative One needs to get into the nitty gritty, or be confident someone else has done so on One’s behalf.
So, what’s the conclusion? Professionals are there to give their advice and opinions, keeping in mind they will always be looking to cover their behinds. One needs to ensure they are holding the reins to take the final decision, and that the decision is not clouded by fear.