Value - Part 3

Cost and value are tricky things because they won’t stand still.

Last year, when all of America was complaining about the price of a gallon of gas there were at least two groups who weren't.

Those who read that, adjusted for inflation, a $4.00 gallon costs less in real terms than the 28 cents charged in 1958.

And those who spend enough time in the United Kingdom buying petrol at $10.00 a gallon to think that $4.00 is a pretty good deal.

For most of us, doubling the price of gas had little impact on our habit of driving everywhere. That was because the convenience of driving was more valuable than the extra expense. But it was also because habits have value too. One of which is not having to think about them. A potential change first has to cross the threshold of being worthy of thought. A value system in and of itself.

We had stopped thinking about what it cost to belong to Loch Lomond about a second after the gatekeeper greeted us that first day. And by the time we returned for our third visit, Loch Lomond had become a habit. For the next five years, we showed up Spring and Fall. And in between thought only of the next time.

We met Loch Lomond’s owner, Lyle Anderson, briefly in our second year. Doing so confirmed that the vision articulated in the Club’s written correspondence was reflective of Lyle’s personal love of the place. Limited and sensitive development that would create long term economic viability, while maintaining the intimate atmosphere we valued so much.

Lyle owned a number of big U.S. golf resorts. Truthfully, the kinds of places that have never appealed to us except occasionally as someone else’s guests. But their success
reassured us whenever we started to wonder how Loch Lomond’s economics could possibly work.

The Club sits on 1000 acres on a 999 year lease from the Clan Colquhoun. The definition of a long term strategy. The course had been built before Lyle bought the place from the bank of Scotland, its previous developer having gone bust.

Lyle saw value in the ground that had been laid, figured out what it would take to restore Rossdhu House, the Carriage House and the Garden Cottages, added antique furniture, luxurious fabrics, a high powered management team, first-class marketing and administrative support and must have come up with a huge red number. Huge. And very red.

For the first six years of our $5,000 membership, the annual dues were $1,800 and the 23 rooms cost between £250 and £400 a night. We were conscious of all this because the Club was clearly costing a lot more to run than the revenue that equation could generate. ‘It’s a loss leader for Lyle.” “It’s where he wants to retire.” “He just loves the place. Money’s not important to him.” Rumors abounded among members and staff alike. In every case we all wanted reassurance that this magical place could go on just as it was.

The truth, of course, was it couldn’t. And in early 2004 it was announced that a membership Conversion Plan was underway.

It came in the form of the single most beautiful sales piece I have ever seen. A cloth bound, membership book in its own presentation box containing some of the most stunning photographs of Loch Lomond. Interspersed among the pages were details of the new membership structure.

The Club offered two choices. Pay $75,000 and convert into a full equity membership that in theory would provide a return on your investment in five years.

Or enjoy one final year at the Club and leave.

I know we talked about it. But not for very long. We couldn’t imagine life without Loch Lomond. Our business was doing well. The Club would finance the payment. We’d get a return on our investment. And there’d be half as many members. It would be better than ever.

In six years, an angst ridden $5,000 decision had become a no-brainer at 80 grand.

Inflation and relative economic circumstances play a big part in determining value. But as you get older, how and where you spend your time has a bigger role to play. As does with whom. And in today’s world, privacy comes with a price. I value privacy more than exclusivity. It’s an important distinction in building a business. Particularly one selling a service.

Emotional forces are powerful drivers of value as well. And giving something up requires humility as well as discipline. But in a competitive world, humility is a scarce resource.

To be successful requires a healthy amount of self confidence. Without humility that can turns into short-sightedness. And sometimes arrogance. Bad traits in business and life.

If you bring humility to work with you every day, taking its restraining forces with you on vacation can be hard to do. And perhaps unhealthy. ‘I deserve this,’ is powerful fuel for the entrepreneur from time to time. Payment for some of the challenges faced and overcome.

Leaving Loch Lomond would on some level have been a statement of failure. That we couldn’t afford it. Or didn’t deserve it. Whatever the matrix of value we used to decide to convert, the ticker tape output said “do it.”

So we did. And the results were spectacular.

Over the next three years the Club opened beautiful new rooms in hidden parts of the grounds. A world class spa was built in the Walled Garden. An amazing, sanctuary of a place with a water treatment pool that I quickly dubbed ‘the womb’ for the security and tranquility it provided. The service got even more personal, the result of a bond formed with some of the people who helped us through 9/11 which we watched live on CNN from our room in Rossdhu.

Connections like that are hard to quantify. So we didn’t. We just acknowledged their value and were grateful to be able to come back.

Funny how things change.