Brian Gubernick explores predictable surprises: known problems that worsen over time and explode into crises if ignored. He uses Fortitude Investments, a feeder fund for Bernie Madoff's scheme, as a case study of warning signs people missed. The concept applies to business, wealth, relationships, and health.
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Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Let's get into today's topic. Today I want to talk about predictable surprises. Now, what do I mean when I talk about predictable surprises? Well, I'll give you some backstory here. Last week I ran alongside my partner Ben, we ran our, our mastermind group, our Metrics Masterminds group. And I had 125 or so business owners in town. And one of the topics that we addressed was crisis management, specifically crisis management in your business. Now, what does that mean? It means how you respond to a crisis situation, likely something that you didn't intend to happen or plan for. Sometimes, you know, it's not great. It could actually be really bad, but how you respond in fact matters. What you say, how you behave, how quickly you move, how you communicate externally as well as internally. There's an entire process to managing crisis, including, by the way, how to maximize the opportunity if in fact it can give you a competitive advantage. In other words, if you respond the right way, maybe it does further your business as opposed to damage your business. Anyhow, the point is that during that conversation, there's a subsection around predictable surprises, okay? Now, what are predictable surprises? Well, predictable surprises are problems that at least some people— if we're talking about business— at least some people are in fact aware of. These are problems that there's some people within the organization that some people might be aware of, right? Uh, predictable surprises, surprises are also problems that are actually getting worse over time. Predictable surprises are problems that eventually will explode in crisis. But while some people may be aware of them, while they may be getting worse over time, while they may actually explode in crisis, they are not always recognized or prioritized by the key decision makers. And so it's a predictable surprise but it's a surprise nonetheless because we didn't mobilize. We didn't put some, some measures in place to, to curb what that predictable surprise amounted to. Predictable surprise is interesting, like achieving tremendous success in business is always of course desirable, but I talk about predictable surprises because avoiding disastrous failure is actually a necessary prerequisite. So an example of a predictable surprise— when I was running through this in our mastermind, I put a graphic up on the board where it showed a, a number of investment funds, and 4 of the 5 funds had a lot of volatility, a lot of volatility, a lot of up and down. So some years there was tremendous growth or return on that portfolio, And in some years on that fund, it had dropped dramatically. Now, all of them actually grew over the course of a 9-year period. One of which, by the way, was the S&P 500. We showed the S&P, it actually grew, right? Like over the course of a 9-year period, all of these funds grew, but there was one fund. So there's 4 or 5 that were volatile and grew. There was one fund that steadily grew every single year. That one fund was Fortitude Investments. So when I asked the room, of the following funds, which one would you recommend your parents invest in? Most everybody said, well, Fortitude Funds. I mean, it grows every single year steadily. Well, the hook here, the catch, is when I went to the next slide. I showed that Fortitude Investments was actually a feeder fund for a guy named Bernie Madoff. You may be familiar with Bernie, but arguably the greatest financial, dare I say, surprise to ever occur. The guy was a monster and ruined many, many, many families financially and beyond. One of the greatest scandals ever. Well, Fortitude Investments was in fact a feeder fund. So what's the purpose of this? What I was demonstrating was that this Fortitude Investments fund was actually a predictable surprise. Why? Well, because it's statistically impossible to consistently beat the market without volatility. And yet year after year after year, Bernie Madoff produced above-market returns. He actually had over 160 investment banks and charities and pension funds that trusted him. I think he had over $50 billion in assets under management. And when asked about how he did it, he would say things like, well, it's a proprietary strategy and I can't get into great detail. This is a predictable surprise. This is something we all could have seen coming, yet those that did see it didn't speak loud enough, and those that didn't see it didn't— did not even consider it a possibility and were caught by surprise, yet it was very predictable. So where am I going with this whole monologue today? I want to ask you, where are there predictable surprises in your business right now? Where are there things going on where some people within your organization, maybe they're aware of it, maybe there's something getting worse over time, but maybe you or others are in denial about it? Where is there a possible explosion of crisis? Take a look at your business. Take a step back. Let's try to look at it from a 30,000-foot level and be honest with ourselves. Are there things going on in your world right now business-wise that are, if you're being, you know, looking in the mirror, are a little riskier, uh, maybe, you know, do come with some challenges and you're kind of turning a blind eye to it? Maybe a different way to look at it: is there something that could happen in your business one day based on what's going on right now to where you'd look back and say, yeah, I saw that coming? Now, if that is in fact true, and it could very well explode into crisis. What could you do about it today such that it never comes to fruition? In addition, I think you could use this predictable surprise analysis and apply it outside of the office as well. Let's take wealth. Are there things right now that you're doing in your wealth journey that could definitely jeopardize the mission to where maybe fast forward a decade from now, if I told you, hey, X and Y happened and here's how it played out and it wasn't favorable, would you then say, yeah, I could see how that could happen? If that's the case, we might wanna reevaluate. How about relationships? Are the relationships that you have right now where the interactions of today, the actions taken by one party or the other, Can you predict that maybe it's not going to go in a positive direction? Maybe you're surprised that the relationship goes sour or sideways, but it's kind of predictable. If that's the case, what steps should you be taking today to fix that, if in fact you want to fix it? How about health? Same sort of thing. Are there things you're doing in your health right now that while you'd be surprised if something unfortunately negative happen in your health, you know right now it's rather predictable. And what should you be doing to take it, to curb it, to straighten it out today before it actually explodes into crisis? Lots of focusing questions there. Just something to think about. I think that we could be a little bit more active, a little bit more proactive, I should say, in managing the predictable surprises so that they never even come about. And that's in business and in personal. That's all I have for you today, the No Days Off Podcast. Thank you so much for listening. And remember, every single day brings a new opportunity to get better. So let's get after it. [MUSIC] [MUSIC]
