Jim Collins: But, volatility isn't exactly the same, as a climber would think about risk. The temperature in San Francisco can go from 85 degrees to 52 degrees in 20 minutes when the fog rolls in. Is there any risk? No, it's a high volatility virtually zero risk situation. You could be in another situation that is relatively stable, but it's really cold, and there if you just mismanage it, you could get killed. So, thinking about risk in terms of, what's the real worst case that would happen, even if it's low probability, and how do I make sure that doesn't enter into the set, as much as I can?
Most people think people who do risk events or risk sports, like climbing, are risk takers. No, you're doing something that is inheritably risky, by continually bounding your risk, and that's really the essence. And then you think about a great investor like, Warren Buffet, what does he do? The whole concept of Benjamin Graham’s margin of safety, isn't about volatility, it's about bounding risk. Benjamin Graham thinks like a rock climber, or thought like a rock climber.
Where's my margin of safety that in the event that I'm wrong about a, b, c, d, and markets do a, b, c, d, and e, I'm still ok. Climbing is part of where you learn that. Now, there's a very interesting thing, from climbing, which is the relationship between speed and safety.
And a friend of mine named, Hans Florine, holds the record for the fastest descent of El Capitan. And we had an interesting conversation. El Capitan is a 3,500-foot cliff, when it was first done, I think it took 48 days --, multiple weeks -- to do. Now, it's about a three to five day climb on average, a few do it in a day. But, Hans, had really worked on the speed descent and got it down to two hours, a little under three hours, for the climb. Incredible speed, in an incredibly lethal environmental. I started asking Hans; about basically, did he go faster by increasing his risk? And he said, "No." He went faster by decreasing his risk. And what they focus on, he says, "what we do, is we put a lot of time and energy into building systems that were really 'bomb proof' up there. So, we had these certain things... we put our anchors in such a way that allows us to go really fast, but they were, they had to be, they were kind of fool proof, that you could move quickly through them, and if you fell they would tighten up quickly and they take an extra second, or two, to put on, relative to some other systems, so you're slowing down." So, you slow down to speed up, because once that's there you've got a solid base and then you can go really fast. And those that tried to break his record didn't have the same safety systems. So, what's interesting, the team that tried to beat him, on the cliff, took more risks, but Hans holds the record. Why? Because, safe, systematic approaches enabled tremendous speeds.
Now, think about that relative to business, it's a fast moving world, being able to pivot and being able to really quickly see something. Well, actually if you have a strong, safe, solid, incredibly secure system, you can move fast. If you have great cash reserves, it increases speed. So, safety, conservative, enables speed and aggression. That's something that applies from the climbing.