People absorb a tremendous amount of information and learn significant lessons from their earliest experiences. We begin our careers as almost empty notebooks, and as we progress our mind fills with notations and observations. The first pages of our mental notebook are filled with our first experiences.
The potential for difficulty arises, however, as we try to apply those early lessons to situations in which they are not relevant.
Take note of experience, but realize there are situations where your experiences no longer apply.
Schwinn Bicycle was the leader in the industry for a hundred years.
Edward Schwinn, the fourth generation of Schwinns in the business, took control in 1979. Thirteen years later, the bicycle company was on life support, having watched its market share fall by 60 percent.
Analysts attribute the decline of the company to a refusal to live in the present. Because it was family owned, and always had been, Edward Schwinn refused outside financing when the company began to show signs of weakness. Because Schwinn was the name in bicycles, Edward Schwinn refused to spend money on keeping the brand name in consumers’ consciousness. Because Schwinn was always the kind of company that operated on a handshake and long-term commitment, Edward Schwinn agreed to outsource all their manufacturing to the same Chinese supplier, Giant Manufacturing, without adequately protecting Schwinn’s long-term interests.
By the end, in 1992, Schwinn Bicycle was seventy-five million dollars in debt and losing a million per month. No investor would come near the company until it could be picked up for next to nothing in a bankruptcy sale. Product recognition among children dropped to close to zero. And Giant Manufacturing ended its deal with Schwinn and began producing its own bicycles in plants originally paid for with Schwinn money.
The company declared bankruptcy, and the Schwinn family lost all control over the family’s business. Edward Schwinn’s explanation for the fall? “We are where we are.” To which one family member responded, “Where we are is out of business because you were asleep at the wheel.”
Research on financial managers finds that 95 percent display a particular commitment to sectors in which they experienced their first success. Ultimately, this tendency leads to missed buying opportunities in other segments of the market and unrealistic enthusiasm for their chosen sector.
Goltz 1999