The Value of the Battle Never Fought

In his famous book, The Art of War, Sun Tzu makes numerous profound observations regarding military strategy – many of which have great applicability in the business world, and in the intersection between your business and legal matters. A couple of my favorites are the following:
• He will win who knows when to fight and when not to fight.
• He who wishes to fight must first count the cost.

I have always believed that there is great wisdom in these words – particularly in deciding how to approach (and equally importantly, how to anticipate and avoid) business disputes. After all, business is about making money, not winning battles.

Every business will find itself from time to time involved in disagreements. This is unavoidable and often outside your control – it’s just part of doing business. What is often (but not always) within your control, however, is how you anticipate, avoid (when possible), approach, evaluate, respond to and attempt to resolve these disagreements. Disagreements generally do not need to (and should not) rise to the level of adversarial disputes and/or litigation or arbitration – there is almost always another alternative which may or may not be acceptable, but should always be considered in a business-minded, even-tempered manner.

Owning and operating a business inherently involves risks, costs and uncertainty. However, with careful planning and conscious, deliberate strategies, you can generally predict and in large part control these factors and steer the company to a profitable outcome. Litigation, on the other hand, involves risks, costs and uncertainty that are often unpredictable, uncontrollable, and in some cases unacceptable. For these reasons I would urge you, the next time you find yourself in or approaching a possible business disagreement, consider all alternatives short of litigation, and only proceed with that alternative if you have considered the cost and made a reasoned determination that now is time to fight.

Understand What No Lawyer or Document Can Do For You

I was recently helping a client with a stock purchase in a deal that just felt wrong to me. Each time we asked a question or reviewed a document, it seemed additional issues, questions and concerns arose. Notwithstanding this fact, the investment bankers, company officers and selling stockholders assured us in each instance that there was no problem – usually with the excuse that it was simply bad record-keeping, a lack of attention to detail or a favorable related party transaction that would not adversely affect the company or my client going forward. In fact, they said, it was precisely because of these circumstances that my client had been presented with this amazing investment opportunity. I did not find these explanations to be persuasive or reassuring, even when the sellers agreed to provide a litany of warranties and representations, broad indemnification rights, and other contractual protections.

In this circumstance, I was compelled to explain to my client a very simple fact – while a lawyer can draft an all-encompassing contract in which virtually every possible risk is anticipated and addressed with detailed indemnifications, aggressive remedial provisions, escrows, etc., that does not turn a bad deal into a good one or provide the same level of protection as walking away from a bad deal.

The simple truth is, if your due diligence yields more questions than answers more uncertainty than certainty, and more risks than opportunities – and if you find yourself spending an inordinate amount of time and effort trying to protect yourself from known and unknown legal risks and possible bad behavior or misrepresentations by the other party (versus ordinary course business risks) – no amount of lawyering and no legal document can adequately protect you. In that case, you really only have 2 choices – (1) walk away from the deal, or (2) draft that over-the-top contract with all of the bells, whistles and protections and “hang on for the ride.” And if you opt for alternative 2, understand that a good lawyer and a good contract do not make a good deal.

The Pros and Cons of the “Just Do It” Mentality

I’m showing my age with this one, but hopefully most reading this will at least vaguely remember the old Nike ads urging you to, “Just Do It.” They were filled with pictures of great athletes “giving 110%,” “going the extra mile,” and otherwise living the “no pain, no gain” mantra. I’m a big believer in that portion of the message and note that it would seem to have equal applicability and validity in the business world as well as the sports world. After all, it’s not easy to excel or reach the top (or even your own best) in any activity – without extremely hard work and complete focus and dedication, you’re not likely to get there in sports, business or life.

However, the other message that some people got from the “Just Do It” slogan is extreme urgency – the need to move immediately, take unreasonable chances and bet it all to succeed – throwing caution to the wind in exchange for moving quickly. While that may (or in fact may not) be a reasonable thing to do in your sports and fitness training, I believe this approach is both imprudent and generally unnecessary in your business matters, and sometimes leads to disaster.

The bottom line is, I think “Just Do It” is a great mantra for buying shoes – and even for bringing out the inner athlete, inner entrepreneur, or inner risk-taker of virtually any kind in all of us. After all, great ideas, great people and great companies usually start with someone discarding the status quo and opting instead to take a risk by introducing some sort of “disruptive” idea or concept. However, I don’t think it is a great strategy for running your business. In that regard, I prefer one of the famous quotes by the late John Wooden – “Be quick, but don’t hurry.”