In late summer 1999, I was enjoying a wonderful lunch at a local pub when I overheard a conversation that was going on in the booth behind me.  A man was lamenting to his companion that he had lost a very large sum of money on a technology stock.

As he described the fiasco in graphic detail, it became more and more apparent that the situation was serious.  This man had not only gambled a huge sum of money on this particular speculation, he had apparently done so with funds that he could ill afford to lose.

As I listened to his ramblings, I wondered what stock he was talking about – determined never to go near that particular equity if I could help it.  It took a while, but he eventually named his nemesis and I remembered being shocked when I heard the pronouncement.

What surprised me about that stock was not so much the name as was the fact that I had just closed out a position on that particular offering myself.  But unlike my unfortunate friend in the adjoining booth – I had watched with great fascination and glee as that same stock had tripled in value from my original purchase price.

As I left the restaurant that summer afternoon, I began to reflect on the conversation I had been party to.  I also started to think about the contrast between the man’s story and my own.  Remember, we had both owned the same stock – and yet our feelings about this equity were polar opposites.

As I sat there in the parking lot, I was reminded of the opening paragraph of Dicken’s Tale of Two Cities: “It was the best of times, it was the worst of times…”.  What I did not realize, what I could not have known at that moment was that I was about to discover something profound in the haze of that surely accidental experience.  Something that would eventually lead me to a startling conclusion about the world of business.  Something that would start a chain of events that would ultimately change the direction and the focus of my entire business life.

This is not the appropriate forum to get into the totality of that life changing event.  But I can summarize my discovery with this statement.  All profit is made on the day you buy – not the day you sell.  This is true in investing.  And it’s also true in just about every phase of business.

Let me give you an example in the world of marketing.  I create an advertising campaign for a client.  We decide that the best way to advertise is to buy a radio schedule on a popular AM Talk Radio station.  If the schedule costs $5,000 and it generates $4,000 in sales, you lose money.  And the client proclaims the advertising to be a dismal failure.

If, on the other hand, I’m able to buy the same schedule for $2,500 and it generates the same $4,000 in sales, you make money.  And suddenly you’re an advertising genius.  Now think about it. In the one instance you’re an incompetent.  And in the other instance you’re a wizard.   But all that has really changed is the price of the schedule.  I remember some guru saying once, “It’s not creative unless it sells.”  I would like to change that to read “It’s not creative unless it sells at a profit”.

Common sense?  Yes. But the truth is that common sense is not all that common.