Every seasoned and successful businessperson has had plenty of experience with deploying rapid, decisive action. My favorite example of the violence of action principle is the story of what my friend Amit Verma did with his parents’ luxury jewelry company during the Great Recession.
Amit grew up in the jewelry and diamond business; his parents, first-generation Americans, had built a company, East West Jewelers, that was one of the most successful on Long Island.
In 2005, Amit had just graduated from college and started his own wholesale diamond business in Manhattan’s diamond district, which was going fairly well. But his parents’ business was taking on water and sinking fast. Long before the public felt the first major tremors of what was coming, it was already shaking the foundations at East West Jewelers.
“Luxury markets feel the financial crunch before anyone else,” says Amit, “before the housing market, before anything else. By 2007 it was bad, and it got rapidly worse.”
On top of the overall economic slowdown, a sudden explosion in gold prices exacerbated their problems. They might buy gold from an overseas supplier, say from India, at $1,000 an ounce, but gold prices were increasing so rapidly that before they knew it, the numbers might have gone up to $1,500, $1,600, even $1,700. They would take delivery of what they thought was $100,000 worth of merchandise, based on $1,000 an ounce, and take out a loan based on that. But as the price of gold skyrocketed, the price of that merchandise delivery would explode, so that while they thought they owed $100,000 on it, they now owed a great deal more. They would arrive at a figure for what the business owed, but every day it would increase—3 percent, 5 percent, 10 percent. Talk about being kicked when you were already down.
At first, Amit didn’t realize how serious things were. Once he saw the extent of it, how many millions of dollars in debt they were, he and one of his brothers, Gaurav, stopped everything they were doing to jump on board with their business to see if they could help them recover and get back on track. By this time, the family business was close to $6 million in the red. They couldn’t sell their way out of this. They had to do something radical. What they needed was violence of action.
At the time, they were starting to meltdown some of their merchandise and resell it at a loss, just to generate enough income to pay their bills. If they took a piece of jewelry they’d paid $10 for, they might melt it down and get $6 for it. That meant right away they’d lost $4, but if that was the only income they could get, then they’d take the loss. To survive, you do what you have to do.
Then Amit had a thought. Instead of melting down their inventory of luxury goods, they could get their hands on some cheaper merchandise, then melt that down and resell it at a profit. Where could they get cheap merchandise? From the public.
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