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CASE STUDY-THE TIME TO BUY
August 6, 2006
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Actual names of people mentioned in this story have been changed for the protection of their privacy. Through a referral from an attorney who had coincidentally hired me for some quantitative analysis to improve their odds on a legal case, I met Tony. Tony was one of the partners in this law firm and through the audit I was performing for the President of the company, I learned that Tony had recently purchased a boat in partnership with his brother-in-law, Bill. Consequently, I was conducting a consultation at Bill’s house and during the audit, it was brought to my attention that he had purchased a boat and that it had been purchased in partnership with Tony. Tony was the actual original owner of the boat, however, due to the fact that it was a considerably sized offshore power boat, he had recruited Bill for financing purposes. During my audit with Bill, after tallying up all the numbers and completing all his necessary overall calculations, I noticed that the purchase date for the boat was “not good” for the purchase of anything having to do with transportation. I told him my findings and became concerned because he had already “signed for” the boat and had completed the purchase. He asked me how he could fix it and I told him that he could not. It’s all based on timing and on odds of probability and since the purchase had already been executed, that was the date and there was nothing that could be done about it. The “purchase date” indicated all kinds of complications and problems relative to the boat. He still insisted and I replied that my advice was that he should sell the boat. We concluded that he would run it by the owner of the boat, Tony. I next received a call from Tony asking me what they could do to remedy their situation. I told him also that it was already done and that it couldn’t be fixed. I explained to him about the odds of probability and that it was no different than picking a specific car off an assembly line and the car then turns out to be a lemon among hundreds which turn out well. What happens is that since the timing (date) of the purchase was bad, based on mathematical odds, it almost guarantees that the boat will have problems, complications and issues relative to it.
I ultimately gave him the same advice which was to get rid of the boat. Even if he took a loss, he should just go ahead and buy another one. He asked me what type of complications and I told him possible accidents, mishaps and that the ownership of that boat was a potential nightmare. I gave him a 95% certainly based on my calculated odds and he said he would think about it. A month goes by and the boat had some detailed customizing work being done and fancy equipment being installed. The day comes when they are going to launch the boat and they decide to launch it in the Florida Keys. They prepare and head off to the Florida Keys - Tony and a few of his buddies. Along their way to their destination, they get pulled over by the Florida Highway Patrol Apparently they had overlooked that the tag on the boat’s trailer had expired although everything else on the boat was up to date. Since the boat is an offshore power boat, considered a high performance vehicle and able to outperform most Coastguard naval vehicles, it raised a flag and the Florida Highway patrol decided to run a criminal background check on him. He lost his cool with the police and based on that they arrested him and impounded the boat. Immediately upon his arrest, he remembered what I had told him and he called to tell me what had happened. It so happens that when they checked his record and the boat, the police realized that there was nothing wrong and that the boat was not involved in any criminal activity so he got his boat back. He asked me if that had been the complication I had told him about and had it then been fulfilled. I explained to him that based on the date of purchase, mathematically speaking, that he would continue to have problems. I again told him to sell the boat.
He decided to take his chances and he went ahead used the boat a few times during the next couple of months. Since there were no problems and everything was fine, he chose to disregard my recommendation. He normally kept his boat parked at the marina along with at least 50 other boats. The first Hurricane comes along and almost every boat in the marina suffers minor damage from being tossed and banged around by the waves with the exception of his boat which sunk. They salvaged the boat and had it repaired. This time, he chooses not to call me because he is embarrassed. He gets his boat repaired, they add more detailed custom work, upgrade their navigation equipment and engines. He takes it out and everything is fine. He decides to bring it in to the engine shop at the marina for some adjustments. The marina engine shop keeps the boat for a couple of weeks. He unexpectedly gets a call from the owner of the marina and is informed that there had been a burglary at the marina and that the only boat taken had been his. I received an apologetic call from him about having doubted me and he told me that he would get rid of the boat, if he ever got it back. The basic message here to learn from is the fact that timing is everything. Not only in our personal lives but also in our businesses. This is an actual example of what could take place if you purchase an item on the wrong date; but imagine if it would have been purchased on the correct date one.
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