Resilience

This week, our thoughts and prayers go out to all those affected by the Texas winter storm. If there is one lesson we've learned (over and over) during the last year, it is the importance of optimizing for resilience.

Optimizing for resilience is hard because it grates against every fiber of our being. Why not lever up when times are good? Why build that extra supplier relationship when the current vendors are just fine? Why have any slack in the system when the organization is running at peak performance? After all, what is average is normal. What is normal is expected. What is expected is what is modeled. But what isn't expected is what breaks the model.

Optimizing for resilience requires us to invert and ask the question - what could break the model? Resilient organizations consider non-average events as equally important as the status quo and thus willingly reduce current 'performance' in order to survive the most adverse circumstances. In Nassim Taleb's words, they are anti-fragile.

The Texas grid, by no fault of any person in particular, isn't set up to maintain power when every house in the state is running its heating system at full blast. It isn't designed for this kind of stress, because it isn't normal, and frankly prior to last week wasn’t thought to be possible.

We have written at length about our preference for the long-term over the short-term - in capital, in relationships, and in decision-making. For example, optimizing for longevity by using low levels of debt relative to the overall private equity industry may have cost us our share of deals and reduced our short-term returns. But we built our model around long-term resilience so that we would be able to absorb shocks, many of which we have experienced over the past year. And, because survival is a prerequisite, staying in the game and having flexibility is fertile soil for higher long-term returns.

Maintaining some contingency in mission critical systems - liquidity, debt, employee capacity, inventory, suppliers, and the list goes on - lowers the overall risk of organizational death, but will cost you in the short-term. Are you optimizing for the long-term (and thus resilience) or for the short-term (and thus expedience)? It is this question that politicians and owners alike have to continue asking to build a resilient system that will last well into the future.

How beloved Texas grocer H-E-B became the ultimate catastrophe brand (Marker Media)
+ "H-E-B’s vaunted status — perhaps especially as a kind of catastrophe brand — seems to boil down to something quite apart from the romance of place: raw logistical prowess. It turns out this isn’t the first time in recent years that H-E-B has stood out for its response to a disaster. Back in 2017, Texas Monthly compared the chain’s efforts in responding to Hurricane Harvey to those of the Red Cross and similar first responders, noting that it employs a full-time director of emergency preparedness and had several “relief units,” including three mobile kitchens, a disaster relief unit, and a pair of water tankers. “Even the staunchest H-E-B enthusiast might have been surprised,” the magazine observed, “to see the convoys of trucks, mobile kitchens, and other relief units branded with the store’s logos making their way to the affected areas” in Harvey’s wake."

How Gary V built his marketing empire - a case study (Better Marketing)
+ "To communicate, influence, or sell anything to a customer, you first need their attention. Without their attention, your business or ideas are guaranteed to fail no matter how good they are."

Blue-collar jobs boom as covid-19 boosts housing, e-commerce demand (Wall Street Journal)
+ "Nationally, employment in residential construction, package delivery and warehousing now exceeds pre-pandemic levels. Manufacturers have steadily added back jobs after slashing payrolls last spring, though employment remains down about 5% from February 2020, according to Labor Department data. Job openings in many blue-collar occupations broke above pre-virus levels last summer and remain significantly elevated, figures from the online job site Indeed show."

Warehousing, trucking, and technology: the future of work in logistics (Frank Levy, Arshia Mehta)
+ "Between 2000 and 2019, the output of the general freight trucking industry (as measured by the U.S. Bureau of Labor Statistics) increased by roughly 20%. One-quarter of the increase came from more drivers: 1.62 million in 2000 compared with 1.75 million in 2019. Threequarters of the increase represented a more efficient use of trucks—for example, fewer long distance deliveries where the truck would make the return trip empty, less time spent waiting at a loading dock to pick up an order, and so on."

From exec roles to board seats — lessons for the startup C-suite from Zendesk, Guru, eBay, & more (First Round Review)
+ "The most successful executives are adaptable — meaning that they’re successful in multiple places and multiple settings, not just at one brand-name company. They stay curious and while they might have a ton of amazing applicable experience, they don’t come into a situation trying to apply a playbook."

What went wrong with Texas’s main electric grid and could it have been prevented? (Texas Monthly)
+ "Our electricity system is built around meeting our summer peak demand: the hot August afternoons when everyone wants air conditioning. Why are we able to keep the air conditioners on but not able to keep the heaters on? On the hottest summer day you can imagine, say it’s 105 degrees outside, and you’re trying to keep your home at 75 degrees. That’s a 30-degree difference. If it’s 10 degrees outside and you’re trying to keep your home at 70 degrees, that’s a 60-degree difference. While homes that are built up north are designed to hold heat in, our homes are basically designed to keep heat out and get it out as fast as we can. So, we’re not designed for this."

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