In this story, he recalls a mistake he made involving his investment company, Narragansett Capital.
AQUARIUS CORPORATION
Aquarius was a company that a group of investors financed in Albuquerque, New Mexico. They...had a wonderful-sounding plan to convert the job shop printing plant that they had taken over into a highly sophisticated operation that would do quality color work for large industrial users throughout the Soluthwest.
In addition, the states of New Mexico and Arizona, which had to go as far as San Francisco or Chicago to get good color reproduction work for all their tourist folders and other promotional materials, were excellent prospects. This type of business ran into very substantial volume and we were told that once the plant was equipped with new machinery bought with our money, there would be no question about their getting continuing orders from the contacts they had made in the area.
The principal investor, who was president of the company, was really a spellbinder in his presentation. I personally went out to New Mexico to see the plant, which had excellent floor space and was well located, and met the group of key personnel that had been assembled, some of whom had experience in this type of operation, in other parts of the country. I remember saying to the promoted, "How in the world do you get a group of people who have had wide experience to work for you for lower salaries than they were getting in Chicago or New York?" He said, "Roy, this is a wonderful part of the world to live in. These people will work out here for two-thirds of the pay they were getting in other parts of the country. We have a great opportunity to build a most important printing business here and all of this group have put up some money to show their confidence in the venture. I can assure you, Roy, that this could be one of the finest investments that Narragansett ever made."
When this investment was brought to the board for consideration, my son, who had met the principal and thought he was too much of a promoter, tried to persuade me to take it easy and not rush the board into approving this transaction. In my usual manner (once I was sold on something, I insisted on getting the board to act on it that day), without having any consultant like Arthur D. Little, Inc., investigate the situation and check with the states of Arizona and New Mexico to see if, in fact, they were prepared to give millions of dollars in printing business to this new company, I rushed ahead. Believe it or not, without further investigation we made a total investment of $830,000....
Within one year, the venture went broke and Narragansett took a complete loss.
ADVICE: don't let a super salesman con you into making an investment. This company was formed and named at the height of popularity of the musical "Hair." Just the fact that someone would name his company after the principal musical hit of that show should have been warning enough.
[pp. 224-225]
Excerpted from How to Lose $100,000,000 and Other Valuable Advice, by Royal Little, (c) 1979 by Royal Little and the Harvard University Graduate School of Business Administration.
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