A couple of years ago, my friend Daniel and I were walking down an inconspicuous shopping mall having a casual conversation when we heard the words “Huan Yin Guang Lin (“Welcome” in Chinese) coming from a sweet female voice. A young girl with a polite smile stood behind the counter of a bubble-tea stand. Like the Sirens’ call for Odysseus and his crew, her voice had momentarily bewitched us, and the next moment we found ourselves earnestly studying the menu of a bubble-tea shop we otherwise would never have noticed without the “Huan Yin Guang Lin”.
Sipping on our spontaneously purchased bubble tea drinks, I remember Daniel and I speaking about the wisdom we had gained from the young part-time bubble tea saleswoman. She had boldly assumed that we would be customers by ‘welcoming’ us a priori, and in doing so had turned us into customers.
Her “Huan Yin Guang Lin” was an understated example of what the author Nassim Nicholas Taleb would call a “Positive Black Swan”.
A Black Swan is an unexpected event that carries a disproportionate impact, which is usually rationalised post-event. The term has gained wide adoption across the financial and political spheres. It is usually applied in a negative context (such as 911), but NNT explains that there can be positive Black Swans as well.
Positive Black Swans are asymmetrically weighted in favour of a positive outcome, with little or no downside risk.
The downside of the girl casually saying “Huan Yin Guang Lin” as we walked by is close to 0. She has nothing to lose if the call goes completely ignored.
The upside is that she might get our attention and sell us two sugary drinks.
Admittedly, this is a small Black Swan, but it can be strategically scaled. Assuming that the bubble-tea franchise has 1,000 stands across Macau, Hong Kong, China and Taiwan, I believe there would be a real and significant difference in their sales volume across time contingent on whether their salespeople regularly “Huan Yin Guang Lin” at passersby or not.
NNT explains that there are certain industries and activities that are more exposed to positive Black Swans:
- Saying ‘Hello’ to an attractive stranger. The downside is that you simply get turned down, but the upside could be a wild romantic adventure.
- This blog post. The downside is almost none, I am quite enjoying writing it and it just takes a bit of time investment. The upside could be it goes viral, or that someone reaches out to us having read the article and a positive business relationship is built.
- Venture capital. VCs know that most of their small (relatively speaking) ‘bets’ will fail, but just one positive Black Swan investment will have a disproportionately massive payoff that will cover all of their small loses and then some
- Scientific research. Edison filed for 1,093 patents. Yet, he is know him from his single positive Black Swan invention.
Naturally, NNT suggests that we limit our exposure to negative Black Swans while maximising exposure to positive Black Swans. ‘Huan Yin Guang Lin (welcome)’ positive Black Swan events into your life by increasing your exposure to situations and activities where such events are possible.
But do so while keeping these points in mind:
- Like negative Black Swans, positive Black Swans cannot be accurately predicted or controlled. I could write 1,000 blog posts with 0 effect, and suddenly the 1001st article goes viral. Edison understood this and continually increased his exposure.
- It should be remembered that like the negative Black Swan, positive Black Swans are often post-rationalised and can lead to ego inflation and the claiming of undue credit. “I always knew that it would happen” are the words we often hear post positive Black Swan, although the particular event occurred due to factors largely outside of the person’s control.
An example of this would be a teenager whose rises to instant stardom due to a funny interview with a news reporter going viral on YouTube.
As the spiritual text Bhagavad Gita says, “You have a right to your actions, but never to your actions’ fruits. Act for the action’s sake. And do not be attached to inaction.”
You can claim the credit for your actions (continued and increased exposure), but the fruits of your actions (specific outcomes) are often times outside of your direct control.
Applying the Huan Yin Guang Lin in Real Estate
One practical way to apply the ‘Huan Yin Guang Lin’ strategy to your real estate business is to continually make offers at price points where your investment criteria are met.
Sometimes it can feel uncomfortable making offers far below the asking price because of the worry that it will offend the seller by throwing him a “low ball”.
This is often down to how the offer is framed and presented. In reality, no matter how low the figure, simply having another option on the table never hurts the seller. He or she is at full discretion to entertain the offer or not.
Additionally, an offer that does not seem enticing at one point in time can seem reasonable with changing market and personal circumstances. We have even experienced some sellers coming back to us months after an offer has been made to negotiate.
Seen from this perspective, the more offers you make, the more exposure you have to positive Black Swans. ‘Captured Equity’ is Level I of the equity stack, and arguably the most important.
Who knows? You might just land a deal as sweet as bubble tea.