I chose this story because the examples of property market are well understood. It is a true story, from when I was involved in developing areas of marketing and sales for property developers during the boom years. It is a story that begins in 1994 and ends in 2012.
Tom (real name) a promoter, and a promoter as any. Begin modestly developing small projects during the nineties. In the mid- nineties, Spain still crawls, recovering from the impact of the crisis of 92, we pay spree late eighties. In this crisis environment our promoter works hard building garages. He didn’t have yet economic capacity, or neither can he access funding streams to undertake projects of larger size, such as housing developments or industrial buildings.
During these years, Tom works hard, selling is hard, but he was able to sell some, and got profit. The year is 1997, and our country we finally begin to recover from the crisis, the credit starts and begins to encourage consumption. Tom begins to access credit for the promoter and begins developing its first residential developments. These do not take a long time to be sold with acceptable benefits. This begins to create a virtuous cycle that involves our hero. Banks end up queuing outside your door to offer credit with which to finance their purchases of land and property developments which are sold within a minute. Tom is on the top. A Tom is getting face in every shoot of the coin. He is the king of mambo. We are in 2006.
In 2006 Tom is a small potentate, lives in a three billion € in a luxury development. Do not miss anything. This year Tom asked me what else he can do. I reply that the best thing to do to stay in the property market is to sell everything and go home a few years (I’m trying to say back to square one voluntarily). I replied to him part of the success was luck. Accumulating many lucky rolls, and you are betting more than you can lose (then its debt is already creepy). He looks at me like I had gone mad.
- Look, all I have achieved is thanks to my efforts, hard work and my vision – he told me – If I’m here is because I’ve worked, I’ve earned it .
I reply that I do not doubt about it, but it has also been fortunate to be in the right place at the right time, I repeat that in addition to hard work has had an ounce of luck (the small difference that makes when you throw a coin air the percentage of heads or tails is not 50%). That may seem beyond logic, it is best to sell everything now, retire, and buy it back for a tenth when spending a few years (which I do). In short, it is too long getting face on each shoot.
He would replied me that this has nothing to do with luck. That luck does not exist, and that his life has no place the fate. I think it is a lucky fool.
- It’s all about hard work and vision – he told me. He immediately rescinds my contract (He thought I was an asshole). I am loosing this client.
Fall 2008 Lehman Brothers bankruptcy. 2009 all explodes. It caught me sitting comfortably on my couch watching the show. Tom, on the other hand went bankruptcy in 2011. He did not understand anything and he pay for it. Now bemoans his luck. Now it seems that luck exists, but only in one direction, just bad luck.
Note: The story of the lucky fool can reproduce professionals in other sectors, and most prominently in the financial sector. Sector with glut memos. In fact what Lehman and the whole financial system is the same story, we must only change bricks with credits, and banks with property developers.
Obituary: It is almost impossible for Tom to return to square one. Its debt level was stratospheric. He risked more than he could lose, and literally popped out.0