Wealth Creation: Keith Cunningham’s Log of Lessons Learned

Wealth creation expert Keith Cunningham talks about the lessons he learnt during the late 1980’s real estate market collapse in the South-western part of the US. This is a rare account of the invaluable lessons learnt by the property magnate through the financial adversity faced in that period.

Keith Cunningham’s Log of Lessons Learned – Introduction

In the late 1980’s, the real estate market in the South-western part of the US collapsed. As many of my friends and business associates were experiencing the inevitable catastrophic aftermath of one of the greatest real estate booms in the history of mankind, we collectively decided to record a log of lessons each of us learned.

We had made scores of millions in the preceding 6-7 years and subsequently had successfully lost every last penny we had, and then some. We truly had unmanageable debt loads, no cash or cash flow and personal liability which far exceeded the market value of our assets. Of even greater significance was the hit our egos had taken. We had our identity wrapped up in our financial success. When the success vaporized, so did our sense of who we were and what our place was. We were anxious to get this phase of our careers behind us, lick our wounds and get on with our lives, but we instinctively knew that if we weren’t careful, we would repeat the errors which caused the problem to begin with. We wanted to make sure that we accumulated twenty years of experience and not one year’s worth of experience twenty times. Without learning the lessons, we would be doomed to repeat them, which was an unacceptable outcome given the pain we were in.

History May Not Repeat Itself, but It sure does rhyme

Historians will tell you

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that history may not repeat itself, but it sure does rhyme. The economic reality of 2008-09 has many of the same characteristics of 1989-1991. Imagine over 3,500 banks disappearing in a four year time period, which is what happened in the late 1980’s verses fewer than 100 banks in the current meltdown. Imagine commercial property being sold for 20% of replacement cost and rents for Class A office buildings being less than the taxes/insurance and Common Area Maintenance fees. This was our reality in 1989. We wanted to be certain that we NEVER had to experience this kind of disaster again. The thinking was NOT that we could somehow control the economy or interest rates…. We can’t. But what we could control was the thinking and strategies that allowed us to get caught in the tsunami in the first place. As you read the lessons collected twenty years ago, you might be tempted to say this doesn’t apply to me because I’m not in the real estate business. I can assure you the lessons are applicable regardless of the industry. You might be tempted to think these lessons don’t apply because you didn’t really have any debt or investments during this current crisis. The best time to learn the lessons is prior to making the mistakes. Interestingly, most of us avoided repeating these mistakes in the ensuing 20 years…. Not because we were smart, but because the pain of the lessons twenty years ago was severe enough that we disciplined ourselves to avoid using our emotions to make what should be intellectual decisions. We established a set of rules and followed them maniacally. Herewith are a few of my favourite lessons on Financing as collected during the week of May 23, 1989…. Next: 1.Keith Cunningham’s Lessons on Financial Strategy…Read More Here 2.Keith Cunningham’s Lessons on Deals…Read More Here 3.Keith Cunningham’s Lessons on Financing…Read More Here 4.Keith Cunningham’s Lessons on Personnel…Read More Here 5.Keith Cunningham’s Lessons on Overhead…Read More Here    

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