Marie and the Mule

“The inability to predict outliers implies the inability to predict the course of history.”

— Nassim Nicholas Taleb

Dennis is a miserable guy. A developer with bad breath and veneers that’s spent a career building strip centers. He’s made some money but his unique life skill is bringing out the worst in his wife. In any other relationship she might’ve been tolerable but Dennis has a way of grating on everyone and it all came to a head when the lovely couple went on a Grand Canyon pack trip.

They joined a group of families and retirees riding surefooted mules from canyon rim to floor. The trail is only a few feet wide and the mules walk along the outside edge, their wide bellies at times hanging over the drop-off.

A few hundred yards into the trip Marie started needling Dennis, as she did every other day of their life.

“Dennis there’s something wrong with this mule” Marie could pronounce Dennis’s name through her nose, mocking him in a most effective manner.

“No there’s not, Marie”, he responded. Every few yards Marie repeated her opinion, more shrill each time, and Dennis would counter her, adding a barb each time, souring the mood for everyone within earshot.

At the point of maximum exasperation, the lead guide turned backward in his saddle and raised his voice: “ma’am there’s nothing wrong with the mule. We’ve been doing this trip since the 1940s and never had a problem.”

“Well you’ve got a problem with this one” Marie said as she dismounted, pinned between the mule and the canyon wall with not much trail to share.

“Marie - what the hell - get back on the mule”, Dennis said.

The guide was more stern: “Ma’am listen to me. Get. Back. On. The. Mule.”

Marie, indignant, didn’t move.

A moment later, the mule tossed its head to the side and cartwheeled off the trail, bouncing to the bottom of the canyon.

When Dennis told me this story he ended with “the only thing worse than Marie not being on that mule was her standing safely on the trail watching it happen because for the rest of my life I knew I’d lose every disagreement. She would trump me for eternity by reminding me of that damn mule.”

In real estate, slow and steady doesn’t win the race. Staying in the game until an outsized event happens is the trick, but exciting things can happen along the way. A few things I’ve witnessed:

• A property manager making personal hard money loans with rent collections and returning them before closing the books at month end.

• A “partner” borrowing against tenant security deposits for side investments.

• A GP collecting off the books cash parking revenue without putting it on financial statements.

• A property manager getting 25% kickbacks from vendors.

• A 1031 intermediary leveraging custodial accounts and having them foreclosed.

• A “partner” withholding distributions to buy an airplane.

• A lender forced to sell high quality performing loans at half of unpaid balance.

Surviving this excitement allows time to get exposure to other unforeseen market events like:

• Having a multi billionaire need an adjacent property to protect the views from his primary residence.

• Having Apple move in next door.

• Having a Fortune 20 company need your property for a HQ expansion.

• Having the frontage property a large development needs access through.

• Having *exactly* what a high-flying REIT needs.

All the big things are unforeseen. The good news is they’re always coming.

Withstanding the constant buzzsaws - and improving because of them - allows the future opportunity to rejoice in a fat payday.

The best operators - including Marie - live to fight another day:

“Heads I win, tails I flip again”