Optimism and Hope… and the Fine Distinction Between
Optimism and hope…while they sound similar and may be easily mistaken for one-another, I contend that they play vastly different roles when allowed to accompany a business decision. As defined by Merriam-Webster, optimism is: “an inclination to put the most favorable construction upon actions and events or to anticipate the best possible outcome,” while hope is defined as: “desire accompanied by expectation of or belief in fulfillment.” Optimism, generally an admired and even an encouraged quality, is a danger to sound judgement that when present, usually precedes and urges-along an action to move forward, often clouding important signals along the way. Hope on the other hand, is something that we don’t think of much until we need it – usually when things go awry.
It was the year 2004 and the real estate market was red-hot…but not where I happened to be living at the time. There the market remained pretty even. No ups…no downs. Having enjoyed years of prosperity that came from hard work and diligent saving, I was tired and looking for an adventure. Throwing caution to the wind for this rare and unusual moment in my life, I flew to Florida with one objective; to purchase a condominium on the Gulf of Mexico and take advantage of the sure growth opportunity. And boy, I found a beauty in move-in condition. It was on a salt-water intrer-coastal with boat docks, access to a private community beach as well as a public beach, and all the amenities that go along with the easy carefree life. The price fit my budget so I bought it. Unlike lots of folks, when it came time to arrange payment, I had options; write a check or take out a mortgage. Since I was planning to sell it at a profit anyway, I decided to go the mortgage route and “take advantage” of the low upfront rates being offered.
Sign of danger #1: The young, buff, good-looking young man taking the mortgage application really couldn’t answer my questions about how the rates would adjust in the future. He just kept referring to how they were tied into the LIBOR (London Inter-Bank Overnight Rate) as he mumbo-jumboed his way around the question. He kept mentioning LIBOR, but couldn’t tell me what it actually was. Because I was a more tolerant person then and because I felt the interest rates wouldn’t matter much with relation to the anticipated price appreciation of the condo, I just got it over with and signed.
Things went well with that little condo. Every couple of months I would fly down and look-in on the place, hang-out for awhile, and watch in awe as the value rose on average; $5,000 per month. I especially enjoyed getting off the plane when I arrived, picking-up a rental car at the airport, tuning-in to some jazz and driving across Tampa Bay to my very-own place in Florida. No bags to unpack or hotel to have to check into…just push open the door and I was at home away from home with my own stuff and a closet full of the clothes I needed.
Sign of danger #2: On one of my trips down, I happened to be listening to a real estate program on the radio. The local real estate pro hosting the show mentioned that there were far too few available properties to meet the heavy buying demand. He was actually pleading with potential sellers to “please” list their properties if they were at all considering selling. Unfortunately, I let this obvious sign of a bubble fuel my optimism and instead, I began to think about building a house.
Sign of danger #3: In subsequent trips to the condo I began touring new subdivisions and gated communities of single homes. The rate of building was ferocious and knowing something about building and fine craftsmanship in general, I couldn’t help but see that some of the most unlikely people were doing the work on these homes, often in a most unconventional (and unprofessional) manner. One in particular that I remember was a skinny, scruffy, middle-aged man who was using a hand saw to cut a piece of interior trim while balancing it on a rock that was placed on the road in front of the mini-mansion he was working on. It all looked shoddy and totally unprofessional at best, and the fellow looked more like a day laborer than any carpenter I’d ever seen. But in spite of it, the house prices kept rising and buyers tended to accept the poor quality as being the norm.
Shortly after that, I joined the fools and placed a build order for a house of my own. I actually resisted the temptation to go all-out and instead ordered a copy of the basic model with three bedrooms, two baths, a den, and only two columns on the front entry area. In a neighborhood with more columns than the New York Times, this house is modest.
Sign of danger #4: The day that I toured the various model homes to help formulate the options list for my new home, was a hot and very humid one indeed. I remember standing and staring at the organic-shaped pool with the cascading waterfall, of one of the models and thinking: I am not building one of those (the house) without one of these (a pool). And just like that, I tacked-on another thirty-plus thousand dollars onto the price of my house. That was really the defining moment that in retrospect, marked the end of prudence for me.
And so construction began. And prices continued to rise; both for the condo and for my unfinished house. And I continued to fly down to see how things were going. And all seemed fine. And the neighborhood continued to be built-out as prices climbed higher and higher.
Sign of danger #5: One day while visiting and kicking around the construction site that I would later call home, I became curious about current prices so I took a trip to the area of the neighborhood where the three model homes were located. I thought I’d pick-up a price list and tour the models once again. Prices had risen very favorably and it looked like my unfinished house was worth about $60,000 more than when I signed the purchase contract. All was good until I reached the last model. There I noticed a rather large family sitting and standing around the dining room table of the beautifully decorated (staged) model house. The family appeared to be comprised of three generations, with the patriarch seated at the table as each family member took turns giving him his or her optimistic version of what life would be like in this beautiful, new, gated community. I observed as he suddenly pounded his fist on the table and declared with foolish courage that he would buy! All cheered in happiness.
Viewing that event was a blessing in that it helped me to realize, through seeing it take place with my own eyes, that big decisions should not be made on the spur of the moment, or from an emotional platform. And certainly not by blind optimism. Shortly afterward, I decided to lessen my exposure to risk by placing my condominium on the market. The quick sale I was optimistically anticipating didn’t quite happen. As optimism faded and was replaced by hope for a sale, I dropped the admittedly lofty asking price a couple of times before a buyer appeared with cash and purchased it. In spite of the price drops, I still made a tidy profit and was now able to concentrate on selling my permanent home and moving into the new-build to enjoy the easy life.
Sign of danger #6: The price increases were slowing down. Phase II of the neighborhood had opened-up to orders, but sales were softening. Phase II was planned for the highest point of our hilly community and boasted panoramic views that stretched for miles around. It was also to command the highest prices yet for the subdivision. On one specific trip down, I recall observing the start of Phase II. It involved cutting-in roads and moving earth to carve-out the lots, elevations and contours that the planners had designed. This called for heavy equipment. One subcontractor in particular had six brand-new dump trucks proudly lined-up ready for their very first job, which was to haul-out the rocks and excess earth in order to shape those roads and prepare the area for the next phase of construction. Each of of the new trucks was bright red and showroom clean. I remember thinking that the contractor had taken a significant risk in buying six new vehicles all at once on the optimism…or was it hope…for further growth and continued building.
Yes, things were beginning to turn. My house was eventually completed and I moved in. I successfully sold my previous residence and settled into the Florida lifestyle. I now own only one home which is worth about $100,000 less than what I paid for it. And I’m not including the extensive remodeling I did to bring the level of craftsmanship up to the standard I wanted. Fortunately, I was prepared financially to weather the mistakes I had made. Further; I am lucky to have moved into a neighborhood that was at least completed before the downturn took hold. While I am still quite comfortable financially, I have watched as families all around me have lost their homes only to have them occupied by stronger hands. I now have a renewed respect for money, only this time I consider that to be gold and silver. Owning it nicely tempers any impulse I have to spend or invest without carefully weighing the risks. I leave optimism at home when entering any business dealings. While I am generally upbeat, it’s pretty hard for me to feel optimistic for the immediate future, given the signals that I now clearly see. I still have hope though. Hope is good. It keeps you going. I hope that a strong real estate market returns so that I can recoup some of my losses on this house. I’m just not optimistic about it though. And there’s the difference.
Written by GreeneWave contributor Pablo Ortiz. “Become the Media” contest submission.