Crystal balls are useless, but predicting future events and trends is not impossible. In this edition of Tough Things First, Ray Zinn describes what it really takes to predict the future.
Rob Artigo: Welcome back to another edition to The Tough Things First podcast. I’m your guest host, Rob Artigo, writer and entrepreneur here in California. Hi, Ray.
Ray Zinn: Hello, Rob. Good to be with you again today.
Rob Artigo: Ray, would you trust a weatherman who had no training or experience predicting the weather.
Ray Zinn: Well, he wouldn’t be called a weatherman, would he?
Rob Artigo: Hey, they’ll hire people to do anything these days. Who knows.
Ray Zinn: Yeah. Well, I would never hire a doctor who claimed he knew something he didn’t know. That’s for sure.
Rob Artigo: Yeah. In your experience, what does it take to predict what’s gonna happen down the road?
Ray Zinn: It takes a lot of knowledge, a huge amount of knowledge and even more importantly, experience. Experience is not a substitute for knowledge. It is, or vice versa. It is what defines your capability, is your experience.
Rob Artigo: Why is that kind of prognostication necessary when running a business? Why is it necessary to be able to forecast events down the road?
Ray Zinn: Because there’s always gonna be downturns, dips in your business. And having the ability to forecast those and then prepare for them, is what will determine your success. So the further you can look out, and in my mind, in my experience, being able to look out at least a year and a half to two years ahead of a dip or a downturn, will be crucial in your successfully running your business. So don’t minimize the ability to predict the future.
Rob Artigo: Have you ever been on a submarine? Let’s put it this way, any naval vessel, an actual US military naval vessel.
Ray Zinn: Well I’ve been on one of those sightseeing subs.
Rob Artigo: Oh, yeah. That’ll work. That’s a good example. Did they tell you to duck a lot? Watch your head?
Ray Zinn: Well, yeah. Well because I’m so short, I didn’t have to duck much. But yeah.
Rob Artigo: I think of these, if you’ve ever been on one and you’ve walked around for a while, they have very low doors and everything says watch your head on it. And you walk in there and smack your head on that hard metal. You learn something and you try not to do it again. There’s no guarantees you won’t, but you try not to do it again. But the way your mind works is, “Okay, I’m going to the sub, watch your head.” You’ve learned something. What you’re describing here is day-in and day-out of having these experiences where you hit your head on something, you stub your toe on something, you slam your finger in a car door, but metaphorically speaking here, any kind of experience where you learn something that, over decades of experience, you can’t replace that when it comes to looking down the road or seeing the dynamics in the world right now and going, “Okay, this is likely to happen in a certain period of time, and my business needs to be prepared for it.”
Ray Zinn: You know, it’s interesting that how many of us have seen somebody do something that you say, “They’re gonna regret doing that,” because we know from our knowledge and experience that doing what they’re doing is gonna be harmful to them down the road, whether it be a bad habit that they’re indulging in or whether they’re doing something stupid in their business. You’re gonna say, “I wouldn’t do that.” As my mother used to say, “Don’t run out in the street without looking both ways.” And don’t run out in the street period, but if you’ve got to cross the street, look both ways. That comes through experience, or knowledge and experience. But we still do dumb things, and the reason we do them is because we either forget the lesson we learned prior, or we just are not paying attention.
Rob Artigo: Is the environment different now than it was when you started Micrell. It was 1960, what year did you-
Ray Zinn: ’78.
Rob Artigo: 1978. 1978, you started Micrell and the dynamics of the business environment in Silicon Valley there, you had semiconductor work. Now look at the world today and way people in business operate. Are the younger people who are starting businesses, are you seeing that they’re having a harder time seeing, predicting the future, so to speak, as opposed to when you were a kid and you started Micrell?
Ray Zinn: Well, it depends upon the kind of business you’re in. In Silicon Valley, of course, high tech. That’s the business. When I started my company in ’78, things were a little different, but that’s what time changes. Time changes the difference between this year and last year. And so you just have to keep moving with the cheese, as they say. Things will change dynamically, and you’ll have to modify your plan or your strategy to match the conditions that you’re facing today. The conditions were different back then, but that doesn’t mean the principles or the things that are kind of standards, as you would, changed any of those. Those are still the same. But the conditions that you operate under are gonna change from time to time, as the world changes, as the world turns, as they say.
Being able to recognize how things are changing, the old buggy whip story. When the automobile came out, the guys who were making buggy whips soon found themselves in trouble because people had switched to cars. You don’t need a buggy whip for a car. So then all they had were people who recreationally were using buggies just to play around with, but those aren’t … The size of that market shrunk dramatically, so don’t be caught making buggy whips when there’s no demand for them.
Rob Artigo: Yeah, and you didn’t. Almost 40 years as head of Micrell and you saw several dips that your company weathered the storm. You used this knowledge base that you had to predict that certain dips were coming and do something about that.
Ray Zinn: Yeah, for example, in the ’98, ’99 timeframe when we had the dot com boom, I can see that inventories were beginning to bloom beyond what I considered normal because there’s always ratios that we look at. And I look at these ratios, look at what’s in balance and what’s out of balance. It’s kind of looking at a swimming pool and if it’s turning green, you know that you’re lacking chlorine, and you should add chlorine to get the pool back normal again. So I could see that these ratios were getting out of whack, and so I prepared my company in late ’99 for, well mid ’99, for this downturn that we experienced in 2001, when we had the implosion of the dot com.
And the way I caught that was I just looked at the inventory build-up, and I can see they’re building inventory faster than they were selling it. And so, we backed off. We got our inventories in line. Where other companies were building inventory to match the increase in demand, we were cutting back and that saved us. That allowed us to skate through the dot come implosion, which was one of the worst in our industry’s history. We came through very, very well. That’s an example of being able to predict the future and how it helped our company.
Rob Artigo: Thanks again for your time, Ray.
Ray Zinn: Thank you, Rob.
Rob Artigo: And find out more at ToughThingsFirst.com, Tough Things First on Facebook, and of course, you can find out more about the book on Facebook and ToughThingsFirst.com, but you’re also available on Twitter, and the book is available on Amazon.
Ray Zinn: And also share these podcasts with your friends. If they’re helpful to you, I’m sure they’re gonna be helpful to others. Please share these. This is how we’ll get the word out.
Rob Artigo: Good advice.