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Friday, March 12, 2010

Optimization or Maximization?

Last week we competed in the Amateur Rum Internationals in Nassau.

Went diving with a couple from England. Chris had been a dairy farmer for over twenty years, then ten years ago he looked at the economics of dairy farming in England and decided there weren’t any.

Took his buildings and converted them into “workshops.” Took two years to figure out the business, another couple of years to pay back the loans. Now he’s a prosperous landlord.

I asked him what was the best thing he had learned while changing his business so completely.

He answered right away. “The secret is optimization, not maximization.”

I was blank.

He grinned and continued, “It’s more important to keep the properties occupied than it is to get maximum payout on the occupied units. I concentrate on keeping my tenants.”