Frederick Peters is not the type of man you would expect to have financial problems. He owns Warburg Realty Partners, which sells some of the most expensive apartments in Manhattan to people with unimaginable wealth.
Peters was born into this world, although you wouldn’t guess that, either, at first glance. Dressed in a black shirt and black pants, with close-cropped hair gone thin in spots, he looks like an avant-garde musician, not a business owner and certainly not a descendant of a trifecta of banking families — Warburg, Rothschild and Schiff. Had I not been told, I would have never guessed that a few months before our meeting in March last year he had been forced to make decisions under extreme pressure to keep his firm afloat.
“My business pretty much ran into a wall on Lehman Brothers Day,” he told me.
That day — Sept. 15, 2008 — was when the once-great trading house ceased to exist. While it shocked the global financial system, the firm’s collapse had a more personal effect for Peters. It caused his otherwise wealthy, savvy clientele to immediately think they were broke when they were far from it.
In November 2008, Peters said he was feeling anxious when he went into a meeting with his board. Instead of talking about the prospects for a recovery in the coming year, the chief financial officer ran through doomsday scenarios: What would happen if the business went down 30, 35 or 40 percent? When he heard the answers, Peters was shocked not only by how much he could lose, but also by how quickly he could lose it.
“I told my CFO [chief financial officer], ‘Let’s see where we are at the end of the first quarter,’” he said. “A week later, he came to me and said, ‘I know you don’t want to have this conversation, but I don’t think we can wait that long.’”
From his headquarters in Manhattan, Peters had added four locations to become a dominant player in the city’s luxury real estate market. Making the hard choices his CFO demanded was too much for him to bear.
“I needed to think about it,” he recalled. “I went out for a walk.”
What Peters struggled with was not entirely a financial decision. He was not going to be living on the street if his business failed. He was wrestling with something that inhibited clear Athinking much more — and causes people across a range of professions to choke under pressure.
“The biggest problem for me was pride,” he admitted.
Most people associate clutch performances with a triumphant sports moment: the home run that wins the game or the basket at the buzzer. However, each of these contains an element of luck, and clutch is not luck. Being clutch is the precisely executed series of plays down the football field, not the Hail Mary pass. It is also something that goes far beyond the world of sport, to business, politics, war, any area where a person’s individual actions under pressure can mean the difference between success and failure. And while it has a mental component, it is not a mystical ability. Being clutch is the ability to do what you can do under normal conditions under extreme pressure.
Peters had run his business well in the 30 years he had owned Warburg Realty. Now, through no fault of his own, he found himself in a financial crisis that threatened the future of his firm. This was the definition of a clutch situation. Over the next few months, he responded well because his actions were guided by the five traits of people who are great under pressure: focus, discipline, adaptability, being present and a mix of entrepreneurial desire and fear of losing his business. He also avoided the three traps that cause most people to choke: He took responsibility for what needed to be done, he did not overthink the situation nor grow overconfident when his business stabilized. Yet none of this was preordained on that day in November.
During his walk around some of the nicest streets in New York, Peters thought his way past his reservations. It was then that he realized he could not only close the Harlem office, but also the one in the West Village.
“I realized I could retain all of my income production with fewer people and less space,” he said.
Peters’ decision may not seem remarkable — cutting costs is an obvious way to save money — but it was, because so many people cannot think that clearly under pressure.
Small-business owners and consumers saddled with debt showed the same inability to recognize their problems in the recession, let alone deal with them. They looked for ways to hang on to what they “owned” when in reality they were barely renting all of those flat-screen televisions, luxury cars and condos in warm locales. They should have cut, not tried to renegotiate.
Peters had been primed for what he did by a lunch with Alec Haverstick II. The two men had been friends since the third grade, but they happened to get together just as the stock market was falling and Peters had begun to worry. Haverstick had recently been a co-founder of Boxwood Strategic Advisers, a firm that focused on clients’ debt more than their assets. And he began to counsel Peters on an Old World notion of discipline and thrift as the only way to extricate himself from a tough financial situation.
“This is about structuring and restructuring,” Haverstick told me. “It’s about, how do I pay my bills? Those who capitulate early, seek help and get out early live to fight another day.”
While said in the heat of the Great Recession, it was something anyone struggling under the weight of personal expenses can benefit from.
Still, the public reaction to wealthy people who found themselves in financial straits during the recession was some combination of anger, scorn and mockery. However, that missed Haverstick’s point: In a recession unlike one that anyone had lived through, people who were overleveraged needed to act quickly.
In Peters’ case, he said his apartment and business were the only things sacrosanct, and he was willing to do what needed to be done with the rest of his assets.
Under financial pressure, most people do not and cannot think dispassionately until it is too late. They choke because they wait too long to sell, thinking their situation will improve. When it does not, they have burned through their reserve funds and are still going to lose what they were struggling to keep.
Haverstick provided a tool that could take the passion out of financial decision-making. His rule was that when you have less than 12 months of cash left to cover your debt payments, you need to start selling assets. His prescription applied to anyone because the advice was not based on having a lot of money so much as being smart with the money you have left.
Peters knew there was nothing he could do about the magnitude of the financial crisis. He could only control the decisions he made, and he knew they would be crucial ones. So he listened to Haverstick and began to restructure his business. He managed to do this before the real estate crisis deepened, but he couldn’t have known that.
What mattered was his reaction under pressure: He focused on the problem. This is the first step for anyone who wants to be clutch regardless of the situation.
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