Making 'tough' calls.
In business, knowing which battles to fight is half the battle.
Warren Buffett - rock star investor, philanthropist and CEO of Berkshire Hathaway - is a household name. Far fewer people are so well acquainted with Berkshire Hathaway vice-chairman Charlie Munger - and that's a shame.
Although he tends to avoid the spotlight, those familiar with Munger know him to be no less shrewd than Buffett, and just as capable of pithy comments worthy of the refrigerator doors of enterprising young capitalists. One such quote describes how Munger and Buffett approach possible new ventures:
"There are a lot of things we pass on," Munger said. "We have three baskets: 'In', 'Out' and 'Too Tough'… We have to have a special insight, or we'll put it in the 'Too Tough' basket."
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In other words, when you're in the business of making money, the real money is often in knowing what not to do. Whether you're the CEO of a giant holding company conglomerate or the owner of a small business, there's tremendous value in knowing how to choose your battles.
Of course, identifying the appropriate battles in itself may seem "too tough" for some. But putting your resources toward doing so is essential if you don't want to waste them later on something that, in the end, wasn't worth fighting for.
For example, take the fast food chain Hardee's. In the early '00s, it was floundering. Franchises were closing all over the country. The outlook for the future looked grim.
Meanwhile, its biggest competitors, McDonald's, Burger King and Wendy's, had begun a discount war with $1 offerings. Had Hardee's executives followed conventional thinking and joined the war, Hardee's probably wouldn't have been long for this world. The problem is, at first glance, the conventional route appears to be the easiest. But in fact, it's just the laziest.
Hardee's executives realized that. They knew engaging in head-to-head competition with bigger burger chains would be "too tough." They searched for another strategy, and came up with a plan to target a market their competitors were ignoring: The premium burger market. Thus, the Thickburger was born.
While their competitors kept doling out lower-quality fare at a lower cost, Hardee's started selling all-Angus beef burgers at elevated prices. While others scrambled to offer healthier options, Hardee's unapologetically marketed it's large, calorie-rich sandwiches in a way that some critics referred to as "food porn." The upshot? After several years of decline, Hardee's actually began to grow.
Hardee's success can be credited to their executives successfully recognizing an unwinnable battle. They realized they couldn't afford to waste resources doing exactly what their competitors were doing. As Charlie Munger would no doubt agree, that would have been too tough. It's easier - sometimes surprisingly so - to find a way to please customers in a way the competition hasn't discovered yet. Find out what it is, and devote your time, energy and money toward giving customers something your competitors don't yet realize they want.
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