A couple of months ago, I had one of those restless nights.

I woke up again and again. Five or six times at least. Each time, I checked the time on my watch. 1:40. Then 2:25. Then 3:10. And on.  Every glance started the same quiet calculation. How much time was left before morning? How tired would I be tomorrow?

What surprised me most was not how often I woke up. I am of an age where waking up at night is fairly common.  What made me think was how hard it had been to fall back asleep. The more I checked the time, the more awake I felt.

I counted sheep.  I counted breaths. I tossed and turned.

By morning, I was not just tired. I was frustrated. It seemed I had spent as much energy worrying about sleep as I had actually sleeping.

That clock-watching thing had happened to me many times before, so it made me think.

Years ago, I had already made one change. I removed clocks from the bedroom after learning they could disrupt sleep. But I still wore a watch at night. First a Fitbit for many years, and now a Garmin. The time was always there, easy to see with a small movement.

The next night, I tried something different. I turned off the night light on my watch so I would have to make a conscious effort to see the time. Then I decided not to look at it at all. If I woke up, I would simply turn over and settle back in.

It felt like a small thing. Almost insignificant.

But it changed the night.

Without the clock, there was no calculation. No quiet countdown. The night no longer felt like something slipping away. It just was. And mostly, I just drifted back to sleep.

Over the past month, I have stayed with that simple practice. I still wake up some nights. They say it is an age thing.. That has not changed. But it is easier to rest again. The edge of frustration is gone.

After a bit of research, I learned there is actually a name for what I had been doing. Sleep experts call it “clock watching anxiety.” When we check the time, our minds engage. We start thinking, estimating, even worrying. That mental activity works against sleep rather than with it. In fact, one of the basic recommendations in treating insomnia is to avoid watching the clock.

It turns out a minor change I stumbled into by chance aligns with what science already knows.

There is something here that reaches beyond sleep. We often think improvement comes from adding more. More effort. More control. More awareness. But sometimes it comes from letting go. From removing a small habit that quietly works against us.

For me, it was not a clock on the wall, but a glance at my wrist.

I still wake up at night now and then. I just do not check the time. And more often than not, I fall back asleep easily.

A small change. A better result.  I’m grateful for adopting it into my daily routine.  Isn’t that part of what aging gratefully is all about?

As always, be well, and age gratefully,

Chris

I didn’t fall hard, but I was lucky.

My son and I were recently in Peru, working our way toward Machu Picchu, one of the Seven Wonders of the Modern World. After stops in Lima, Cusco, and Ollantaytambo (the Sacred Valley), we arrived at the base of the site.

One thing became clear before we ever got to the site.  There is very little level ground here in Peru, at least that we found, except, occasionally, in Lima.

The streets, paths, and steps are uneven. Stones are worn and irregular. Elevations change constantly. You have to pay attention to every step. This is not forgiving terrain.

I arrived at Machu Picchu already aware that my flatlander balance was not what it should be. Even so, I was not prepared for what we encountered.

My son and I had a guide and started on Circuit 2A. It begins with a steep climb, maybe three hundred feet on rocky, uneven stairs. With few exceptions, there were no handrails.

I have to admit, it was intimidating before I took the first step.

I was close to telling my son to go on without me. Instead, he handed me the walking sticks that my wife, Carol, had “made” me buy before the trip.

That changed things.

The start was wobbly, but I found a rhythm. Step by step, I managed the climb. In total, we covered more than four thousand steps. No falls. No trips. But by the end, I was tired and sore, and I knew I had been working at the edge of my balance the entire time.

Then came the final lesson.

One more obstacle. There was a transition from high, uneven stone steps to a set of stairs with a handrail. As I reached for the rail, I lost my balance.

In that instant, I had a choice. Try to grab the rail and risk a worse fall or let myself go down.  Muscle memory from Airborne Jump School many years ago kicked in. A rolling fall is usually better than a hard one.

I chose to go down.

It was a controlled fall with a soft landing. The only casualty was a broken walking stick. With some help, I got back up, grateful that it ended the way it did, at the last steps, not the first.

At the same time, I had learned that my wife, Carol, had fallen back home in Daytona Beach. Thankfully, she was not seriously hurt.

Different places. Same issue.

Balance is not just a mountain problem. It is a life problem.

And it is easy to ignore until it gets our attention.

One takeaway from this trip is simple. Balance is not fixed. It is something we either maintain or lose. And if we are intentional, it is something we can improve.

This fits squarely within physical stewardship.

We tend to think about strength and endurance. These matter. But balance is foundational. It supports everything else we do, often quietly, until it doesn’t.

So, I made a personal commitment.

I will work specifically on balance and core strength. Not in a vague way, but with intention. Simple practices. Standing on one foot. Stability exercises. Paying attention to how I move. It can’t hurt my pickleball game!  Carol and I will work on this together.

You might consider doing the same.

When was the last time you tested your balance? Not assumed it, but tested it?

I didn’t need a trip to Peru to find uneven ground. It is already part of daily life. We just do not always notice. Sometimes, until it is too late.

Machu Picchu made it impossible to ignore what I need to work on.

And being in Peru for nine days with my son, seeing things together that neither of us had seen, was simply the icing on the cake.

As always, be well, and age gratefully.

Chris

Many years ago, I was flying back to Memphis through Minneapolis and my inbound to Minneapolis was late.  I had already missed my connection but knew there was a later flight to Memphis that I might catch.

I was worried because I had what then seemed like a particularly important meeting in Memphis the next morning.  And I was very tired.  I don’t recall what the purpose of my trip was, but I do remember that it had been grueling.

We finally landed in Minneapolis and taxied, excruciatingly slowly, to the gate. When I got off the plane, I discovered that my possible connecting flight to Memphis was several concourses away and it was nearly time for the flight to leave.

Hoping for the best, I pulled my folding travel bag over my shoulder, grabbed on to my huge briefcase full of documents, and proceeded to navigate to the distant gate as fast as possible.

As I approached the gate, I saw and heard a passenger yelling at the gate attendant, disparaging her, the airline, and anyone or anything else he could think of.  He raised his voice, arms gesticulating, and continued to yell at the attendant. He then turned to me and did the same thing.

I can’t remember exactly what went through my mind, but it was probably something reflecting my frustration and impatience, like: “Will you just hurry up and do your business? I can’t do anything until you’re gone!”

What he thought I might be able to do to help I’ll never know. I just shrugged. He turned one last time to the attendant, yelling at her again, and then stormed off to wherever he went.

I walked up to the attendant and said hello. I then said something like this, as kindly as I could: “Well, based on what I just saw and heard, I guess I’ll be spending the night in Minneapolis.  I’m sorry you had to endure that guy’s tirade.”

She looked at me, smiled and said, “Let me see your ticket, please.”  I gave her my then paper ticket.  She took it and with her eyes on the keyboard, tapped through the many routines necessary back in those days to do whatever she was up to.  She seemed to be trying to do something, so I just stood there quietly.

She then looked up at me and smiled, reaching for the printer.  She pulled off a new ticket, handed it to me, and said: “Welcome aboard, Mr. Mercer.”

I took the ticket, collected my folding overnight bag, grabbed my heavy briefcase, and said to her: “I don’t know what you just did, but I appreciate it very much!  Thank you!”

Her parting words as I walked by were: “Have a nice flight, Mr. Mercer.”

Sitting down in my seat on that late-night flight to Memphis, I felt a wave of gratitude, appreciation, and relief.

I was going to sleep in my own bed that night. I’d start the next day at least reasonably fresh. And yes, I’d make that important meeting.

But over time, I’ve come to realize that the meeting wasn’t the most important part of that trip. In fact, I don’t even remember what it was about.

What I do remember, and clearly, all these years later, is that brief moment at the gate.

At that stage of my life, I was very much in “building value” mode. Focused. Driven. Moving from one obligation to the next. Like most people in that phase, I was often in a hurry, and likely more transactional than I would have liked to admit.

That night, I had every reason to be frustrated, impatient, even a little short with the person standing between me and getting home.

Instead, I simply chose to be… decent.

Not extraordinary. Not strategic. Just decent.

And in return, I was reminded of something that has stayed with me ever since:

How we treat people, even in small, fleeting moments, has a way of coming back to us in ways we don’t expect and can’t plan for.

That’s a different kind of value. Not the kind you measure on a balance sheet, but the kind you carry with you. The kind that shapes your days, your relationships, and ultimately, how you experience your life.

As I’ve gotten older, I’ve come to appreciate that more and more.

We spend so many years focused on building value in our careers, businesses, assets. And those things matter. But at some point, the focus shifts, or at least it should.

Living the value we’ve built often comes down to something much simpler than we expect.

Mom was right, of course.

“Chris, just be nice.”

It turns out that’s not simply good advice for getting through a long day of travel. It’s a surprisingly good way to move through life, and, I think, a meaningful part of aging gratefully.

As always, be well, and age gratefully.

Chris

A Walking Goal

On December 15, 2019, I made a decision that, with follow-through, has been life-changing.  I decided that I would walk 10,000 steps per day and hoped to bring my body back into more reasonable condition and health.

When I made this decision, my weight was 212 pounds, my cholesterol was too high, my blood pressure was too high, and well, numerous other blood statistics were also out of whack.  I was almost 72 years old, and knew I needed to turn things around.

After a time, I changed that daily goal to the slightly farther distance of five miles per day.  But that is inconsequential to the story.  The goal was to walk and exercise more.  I had been playing pickleball since early 2017, and that sport was a part of my plan.  Fortunately, my Fitbit Sense 2 measures steps pretty accurately when I am playing.  I also knew that a better diet, i.e., paying attention to what I eat and drink, would be an integral part of the overall plan.

A Wake-Up Call

Some 90 days into my walking program, and having not missed a single day of hitting my walking goal, on March 15, 2020, the Covid-19 Pandemic shutdown was put in place.  I had been walking at home, work, my club, the streets, and anywhere I found time and space to walk.  But we all were sent to work from home.

With the shutdown came some bad weather in Memphis and it snowed a good bit and was cold.  I remember being tempted to let things go, but I was experiencing favorable changes in my weight and physical (and mental) well-being, and did not want to stop.

I became even more intentional about my walking through the pandemic. I talked to people and read about what came to be called the “pandemic bulge,” or the fact that many people who were working from home began to gain weight.

The times caused me to reflect on ways to maintain physical and mental health in pandemic times.  On May 1, 2020, I posted a video titled A Dozen Things to Try to Maintain Physical and Mental Health in Pandemic Times.  (the text is transcribed)

I spoke about creating a good workspace at home, limiting work hours to a reasonable level (initially, many professionals were working longer than normal hours while at home), and a number of other things, including attending church services online.

The item on my list that has meant the most to me, however, was simple: Create a “one plate per meal” rule for all meals.  Of course, a small salad might come on a separate plate, but the essence of the rule is to eat one reasonable plate of food per meal.  And, an occasional small dessert is okay.

I did have a couple of negative suggestions.  First, try not to let oneself fall into the “I need a snack” trap.  And second, don’t watch too much television.  You can guess why for both of these.

A Balance of Exercise and Diet

Before writing another word, let me say that I am not a physician.  I know there are a number of issues that can make getting fit and losing weight difficult, or even impossible at times for some people.  However, based on what I have read and experienced in life thus far, the ideas and “rules” that I write about do apply to most men and women.

In the referenced post of suggestions for maintaining physical and mental well-being, I was alluding to what I call one of the “Great Equations of Life.”  The equations for weight are simple:

Calories Consumed > Calories Expended => Gain Weight at the Margin

Calories Expended > Calories Consumed => Lose Weight at the Margin

Calories Consumed = Calories Expended => Maintain Weight

About this time, I read about something called the Basil Metabolic Rate (BMR), which is defined at www.Calculator.net as:

“the amount of energy expended while at rest in a neutrally temperate environment, and in a post-absorptive state (meaning that the digestive system is inactive, which requires about 12 hours of fasting)”

Said another way, the BMR measures the calories one would consume while acting like a slug.  The same link provides what is known as a BMR Calculator, which, given one’s height and weight, calculates one’s BMR.  I calculated my BMR just now and discuss the results below the figure:

The calculator has three choices for underlying formulae for calculating BMR.  I used the first one and my BMR is about 1,650 calories per day, or roughly 70 calories per hour for upkeep alone.  Above the level of our BMRs, each of us has reasonable control over the total calories we actually consume and expend on a given day and over time.

At various levels of activity, my expected daily calorie expenditure ranges from about 2,000 calories per day for little or no exercise (sedentary) to just over 3,100 calories per day with intensive exercise (2 hours per day of elevated heart rate) or a physical job.  My primary takeaway from reading about the BMR is that our level of activity above above slug level determines the amount of calories we can consume to maintain gain, lose, or maintain weight.

It was time to begin to monitor my caloric expenditure over time.  Fortunately, my Fitbit Sense 2 watch estimates daily caloric expenditure based on its algorithm using my basic information.

I have never actually counted calories consumed for anything more than a day or so.  However, from a beginning weight of 212 pounds (December 15, 2019), my weight had dropped 16 pounds to 196 pounds by year-end 2020.

My average daily expenditure during 2020 was 3,286 calories per day according to calculations made based on Fitbit’s recordings each day.  As my weight began to drop, I became pretty good at guesstimating my caloric consumption, which was clearly less than 3,286 calories per day.

According to the Mayo Clinic, a pound of body fat is roughly the equivalent of 3,500 calories, so to lose a pound of body weight, one must consume, over some time, 3,500 calories less than one expends.

My 16 pound loss in 2020 meant that I consumed about 56,000 fewer calories (16 x 3,500) than I expended (1.2 million in the leap year).  Simplistically, I consumed about 4.7% less calories than I expended, or about 150 calories per day, on average.

Did I starve?  No.  The calculation is that I consumed about 3,133 calories per day on average during 2020.  No normal “diet” will allow one to eat and drink that much.

However, the combination of exercise (4.7 million steps and 2,236 miles during 2020) and eating and drinking reasonably well allowed for a significant weight loss in the first year of my walking program.  My doctor was pleased with other aspects of my health, including lower cholesterol, lower blood pressure, lower resting heart rate, and more.

The Real Program

The program that has worked for me is more than a walking program, although that is what I have called it.  The program is a combination of exercise (walking and other, including pickleball) and diet that, working together, have enabled me to get to more realistic weight and health levels than when it began in late 2019.

I have tried to keep a reasonable relationship between activity and diet during the more than five years since I consciously decided to walk 10,000 steps (or 5 miles) per day.  If my weight goes up a bit, I focus on exercise and diet to bring it back down.  The five year history includes first quarter of 2025 and is summarized here:

At some point, I realized that circumstances, sick days, and other interruptions occasionally made it impracticable to achieve my daily goal.  After some reflection, I accepted that there would be a few of those days along the way.  So I adjusted the goal to a minimum of 35 miles per week.  If I fall short on a given day, there are six other days in every week to make things up.

After such success during 2020, I got ahead of myself in 2021.  Although I expended 3,138 calories per day, I consumed more than that and gained five pounds.  I had averaged more than 6 miles per day in both 2020 and 2021 and knew that I would not reasonably be able to get back on track with more walking.  At that point, I realized that I would have to adjust my diet somewhat in order to get back on track.

I did that in 2022 and 2023, and my weight dropped from 201 pounds at the end of 2021 to 197 pounds at the end of 2022 and farther to 195 pounds at the end of 2023 (on somewhat lower mileage).

Unfortunately, I experienced a couple of injuries in 2024 that slowed my walking program a bit.  I did not adjust my caloric intake sufficiently to account for the reduction in activity, and my weight rose a bit to 197 at the end of that year. My walking dropped to 4.7 miles per day during 2024.  While that might not seem like a lot relative to a goal of 5 miles per day, the difference came in the mix of my activity.  Post-Covid shutdown during 2020, and during 2021, 2022, and 2023, a significant number of my steps came while playing pickleball and other exercising.  I was pretty much shut out of pickleball for a good bit of 2024, so the intensity of my activity was lower.  And I kept consuming calories at the pre-injury rate.

By late 2024, my injuries were healed and my pickleball and walking picked up.  Over the first quarter of 2025, my weight dropped to 193 pounds, or to a point I had not seen over any period of time — and not at my year-end measurement dates.  To lose that weight, I have had to adjust my caloric consumption a bit relative to my activity level.  There is no “diet,” but I do maintain my one plate per meal rule for the most part.  I often eat an appetizer and small salad when dining out, and I am aware of other sources of calories, including alcohol.

The great weight equations of life noted above hold true for me as is evidenced by the history shown in this post.  They may well hold true forIs you.

I0,000 Steps (or 5 Miles) Too Much?

According to the Mayo Clinic, a regular walking program can reduce the health risks associated with:

• Heart disease
• Obesity
• Diabetes
• High blood pressure
• Depression

But a number of studies indicate that walking about 7,000 steps per day, give or take, will provide all the benefits that walking 10,000 steps per day.  However, there is one benefit to walking the extra 3,000 steps per day — one will expend more calories than at 7,000 steps per day.  To me, that means I have a bigger and better dietary budget than I would have at lower step levels.  That’s important to me.  Walking alone does help to lose weight unless combined with a diet that balances with or is less than our activity levels in terms of calories.

If you are thinking about a walking/exercise program and are willing focus on diet as well, then my recommendations include:

• Obtain a smart watch that measures walking and other physical activities — and use it.  If you already have an Apple watch or another smart watch, then figure out where to look to see your daily results.
• Weigh yourself on a set of scales, preferably smart scales that will sync with your phone.  That’s your base weight.  Try to weigh at the same time each day.  For me, that is after getting up, walking the dog, and before any breakfast.
• Don’t try to think about a diet, but begin to become conscious of your dietary and liquid choices.
• Initially, spend two weeks wearing your watch every day and determine what your mileage (or daily step count) is before starting to focus on walking.  Assume, for example, your daily average is 4,100 steps, or just under two miles based on my personal stride (your stride may vary).  The average person walks about 1 to 2 miles per day (according to the Mayo Clinic) as a point of reference.
• From that base, set an interim goal — say 5,500 steps per day for a month.  I used to think that my goal had to be met every single day.  I now know better and seek to meet the goal on average over each week and month.
• At the end of a month, get on the scales and weigh again.  Your weight will be up a bit, down a bit, or about the same as your base weight.
• Based on the information you learn about your body in the first month, you can begin to adjust your walking goal and/or your consumption of food and drink.
• If you like your program, continue with it at the level that is comfortable for you.  But I do recommend weighing daily.  A little plus or minus on a given day or two or three can provide the incentive to make adjustments as you see fit.

Is there anything magic about 10,000 steps (or 5 miles)?  No, but my walking a five-year plus average of 11,880 steps per day (5.6 miles per day) has certainly helped me, and without injury from walking.  The injuries I mentioned earlier came while playing pickleball.

Wrapping Up

Why have I written about my walking/exercise and caloric intake watching program over the last five years?  First, it is helpful to me to talk about the results of this long-term program.  It helps to keep me motivated.  Second, a significant number of people have responded to my blog posts, the postings on LinkedIn and my speaking about walking from time-to-time.  Quite a few folks have said that reading or hearing about this program has been helpful and motivating to them on their personal journeys to fitness and better health.  That is a wonderful side-benefit.

What does the future hold?  I don’t know, but, as they say, “If the Good Lord’s willing, and the creek don’t rise,” I’ll keep on walking and exercising and watching what I eat and drink to maintain a healthy balance.

What I do know is that the Good Lord is willing.  He is willing, I hope, to allow me the opportunity to continue this journey for many more years.  But I have to maintain the program on my own.  As do we all.

Yesterday represented an important milestone for me.  It marked the fifth anniversary of a walking program I began on December 15, 2019.  What led me to that commitment was the result of too much travel, and too little regular exercise.  In the period leading to the start day five years ago, my weight had risen to a whopping (for me) 212 pounds, and my conditioning was not stellar.

The Covid-19 Pandemic Solidified My Walking Program

Everyone was sent home in March 2020 as a result of the COVID-19 outbreak. Thankfully, I took the time during those months at home to continue the walking that I had begun just a few months before.  Lots of folks experienced a “pandemic bulge” during the work-at-home phase of the pandemic.  However, as the pandemic progressed, I developed a few “rules” for maintaining physical and mental health during pandemic times, and they are pretty sound today.  In summary, they were (with current comments in parentheses):

• Set up a home office (it is still good to have one!)
• Use Zoom to communicate (my goodness do we use Zoom/Teams going into 2025)
• Connect with two to three people a day (that’s always a good habit)
• Coffee, water, water, coffee (the news re the goodness or badness of extra coffee is mixed today)
• Stop work at 5:30 or 6 o’clock (Still a good rule for the most part – there are always exceptions)
• 10,000 steps per day or exercise regularly (I now use 5 miles per day as the goal, which is a few extra steps over 10,000)
• One plate rule at meals (this simple rule has helped me maintain weight at a more reasonable level than when my walking began)
• Two drinks rule at night (well, I’ve broken that a time or three, but the point is be aware and moderation)
• Read a novel (good for the mind and the soul)
• Get about 8 hours of sleep each night (I’m still keeping this up – my average time sleeping has been 8 hours 7 minutes per night for the last year)
• Go to church services online (now that churches have been worshipping in person for a long time, I do prefer to attend services rather than view them online)

It will be rewarding.

And a couple of things I don’t recommend:

• Don’t fall into the “I need a snack” trap and (snacks are a great way to break the “one plate per meal” rule)
• Don’t watch too much TV (too much TV is mind-numbing, at least to me)

Overall Results

After five years of walking, one of the best results is that my weight is under control – not completely if I’m honest, but for the most part.  From the starting point of 212 pounds, my weight has dropped as low as 192 pounds.  But it has risen from those lows to 202-203 pounds.  When that happens, I focus more keenly on both diet and exercise.  Currently, my weight is stable at about 195 pounds.

The focus on exercise and weight has created additional health benefits.  Cholesterol and blood pressure were not in the appropriate ranges at the start.  Both are much better and pretty much normal (and my doctor is pleased).  All other blood work is “normal,” thankfully!

Little did I know when I committed to a walking program on December 15, 2019 where that program would lead me.  After five years, I’ve walked a fair amount, as summarized in the following table.

Lots of steps and lots of miles.  Rather than the original goal of 10,000 steps per day, I’ve averaged 12,263 steps per day, and 5.8 miles per day.  That’s better than originally anticipated.  Keep in mind that my Fitbit also picks up steps when I play pickleball, which I do with regularity.

Importantly, note that since August 29, 2023, my daily average miles is 4.88 and not 5.0.  On that day, I incurred an issue with the meniscus in my right knee.  That shut me down for awhile and slowed me down for a longer time.  Then, in April of 2024, I had an (assisted) fall on the pickleball court. I hit the floor with my left hip and my partner fell on me and crunched my right hip and right shoulder, not to mention bruising ribs.

That slowed me down a bit more.  Thankfully, all is better now with the exception of occasional pain in a hip.  But I still walk.

What these adversities have taught me is that a walking program is not about what we do today.  It is all about what we do over time.  Given the impact of a lingering sinus infection on my body and mind, I walked only 3.1 miles and 3.2 miles on December 14th and 15th.  What I’ve come to realize is that it is okay to fall short on a given day if I don’t lose sight of the longer-term goal.

I can honestly say that at the outset, I felt that failing to meet a day’s goal was a failure for my walking program.  I walked less than five miles only six times in the first 900 days.

Today, I have learned that the walking program is a long-term program in pursuit of long-term benefits.  If I fall short for a day or three now, I just get back up and walk.

A Few Thoughts for the Future

On this first day of the sixth year of my walking program, I’m thinking about a few things:

• I will keep walking with a longer-term average in excess of 5 miles per day.
• I hope to get a larger portion of those steps playing pickleball in Memphis, Daytona Beach, and wherever my travels take me.
• I plan to continue to exhibit moderation in my diet and alcohol consumption.
• With five years in the bag, I’m setting one more goal.  My scales are linked to the Feelfit app, which tracks weight and several other health-related indicators.  My Body Mass Index (BMI) is 26.1, which the app shows as modestly overweight.  I have that!  To get to the green (normal) range, my BMI needs to drop to just below 25.0, which would correspond to a weight of about 186.5 pounds, or about 8.5 pounds.  Here goes.

These “walking” posts have nothing to do with business appraisal, but writing them over the past five years has helped me maintain focus on my program and goals.  Many people have told me that reading these posts has encouraged them to begin walking programs of their own.

A Few Thoughts for Consideration

Is a goal of 10,000 steps or 5 miles the appropriate goal for everyone?  Probably not.  Some may want to set higher goals and others will set lower goals.  In an article published in 2019, the National Institute of Health summarized findings as follows:

After five years of regular walking, I can say that a goal of 5+ miles per day works for me.  Does it take time?  Yes.  Does it take intentionality?  Yes, again.  Does 3 miles, 4 miles, 5 miles, or 8 miles per day guarantee fitness and weight control?  Sadly, no.

Let’s talk about time.  When I started this program, I was almost 72 years old and I was still working way too much.  By being intentional about time, I was able to achieve my walking goals early on. I won’t comment on my current age, but age-adjusted, I seem to be in pretty good health and spirits!

Over the last five years, I have slowed down on the work front with the help of my colleagues at Mercer Capital.  My colleagues control our company through the Mercer Capital ESOP.  They have managed the company since 2009.  I now call myself semi-retired and work on interesting projects and am reasonably active in writing and speaking activities.

Interestingly, it is sometimes as or more difficult to maintain my walking with my reduced schedule than when I was overworking.  Other things seem to get in the way.  But I will keep my feet on the ground and walk on.

A regular walking program combined with reasonable control or food and drink will almost surely be good for health and fitness.  Remember the great equation(s) of life, which is the relationship between calories consumed (CC) and calories expended (CE).  This relationship holds per day, but it is best considered over time:

CC < CE = Weight Gain

CC > CE = Weight Loss

CC = CE = Weight Maintenance

I can tell from personal experience and my annual physicals that regular exercise and diet control have been good for my physical and mental health.  To reach my additional goal of a BMI less than 25.0, I will have to pay attention to the above equations.  Sadly, I’m not likely to exercise at a much higher level than above, so I’ll have to work some on the diet and drink side to achieve it.

If these posts have been interesting, thought-provoking, and/or motivational, I’m grateful.  Writing them has been all three for me over these past five years.

I’m looking forward to the next five years of my walking program.

Until next time, be well!

Chris

Introduction and Conclusion

My musings on the use of restricted stock discounts to estimate marketability discounts (or DLOMs) have led me to the conclusion: Restricted stock studies/discounts cannot be used to estimate DLOMs in any credible, standards-compliant manner.  Three of the first four Mercer’s Musings posts address this issue.

• Mercer’s Musings #1: USPAP and the Internal Revenue Service
• Mercer’s Musings #2: Using Restricted Stock Studies to Support Marketability Discounts
• Mercer’s Musings #3: Marketability Discounts re Two Hypothetical Minority Interests
• Mercer’s Musings #4: Factors to Consider in Valuing Partial Ownership Interests

This fifth post in the musings series takes a look at the usefulness of pre-IPO discounts in estimating marketability discounts.  Astute readers will know the conclusion of this musing at the outset.  To give the answer away: Pre-IPO discounts/studies cannot be used to estimate DLOMs in any credible, standards-compliant manner.

What is a Pre-IPO Discount? – 1

Begin at the very beginning.  A pre-IPO discount measures the difference between the price at which a transaction occurred in an illiquid minority interest of a company relative to the price at which it subsequently went public by engaging in an initial public offering (IPO).

Exhibit 8.21 (Mercer-Harms Business Valuation: An Integrated Theory Third Edition) (“IT3”) illustrates how pre-IPO discounts are calculated.  The hypothetical, pre-IPO transaction in this example occurred at a (split-adjusted) price of $6.50 per share, and the subsequent IPO price was $13.00 per share.

The calculated pre-IPO discount is 50% in the example, and is consistent with the medians and averages of discounts found in several older pre-IPO studies (which are cited in Chapter 8 of IT3.  The question is: What does that 50% pre-IPO discount mean or imply for the valuation of illiquid minority interests in private companies today?

Economic Information in Pre-IPO Discounts?

As with control premiums and restricted stock discounts, it is clear that the pre-IPO discount measures only the difference between two prices.  The information we can glean from this definition and example is limited to the following:

• A transaction occurred at some point prior to an IPO (perhaps three months, six months, nine months, or a year or more)
• The pre-IPO price was $6.50 per share
• The price at the subsequent IPO was $13.00 per share
• The pre-IPO price was $6.50 per share, or 50% lower than the IPO price
• The IPO price was $6.50 per share higher than the pre-IPO price, or 100% higher than the pre-IPO price

There is no direct economic information in this example of a pre-IPO discount that can shed light on the appropriate marketability discount for any private company.  Further, there is no direct economic information in any averages of groupings of pre-IPO discounts that can shed light on appropriate marketability discounts for any private companies.

As with the restricted stock studies examined in earlier posts in this series (linked above), there is no economic evidence in the older pre-IPO studies cited in IT3 (Emory, Willamette, Hitchner, etc.).  The older studies cannot provide help in developing marketability discounts today.

What is a Pre-IPO Discount? – 2

The disconnect between a pre-IPO discount and any bearing on valuing illiquid minority interests of private companies (and marketability discounts) becomes clearer in a picture.  The following figure is adapted from Figure 8.26 of IT3.

Examining the same hypothetical transaction, we find:

• A pre-IPO transaction occurred six months prior to the date that a hypothetical company engaged in its initial public offering.  That transaction took place at $6.50 per share.  See the left side of the figure above.
• Whether there was a formal appraisal or not at the pre-IPO transaction date, there was an implied  marketable minority/financial control (base) value for that entity at that date.  In the figure above, that is $10.00 per share on the left side.  This $10.00 per share value was likely unobserved unless the transaction was based on an appraisal. But it was there.
• The $6.50 per share pre-IPO price represented a 35% discount to the base price of $10.00 per share.  Whether the base price was $9.00 per share or $11.00 per share or some other price is irrelevant to this analysis.  The transaction almost certainly represented a discount to the marketable minority/financial control value at the time.  If it were not so, the pre-IPO transaction would likely not have occurred.  The purpose of many pre-IPO transactions is to enable insiders to acquire as much stock as possible at the lowest possible prices.
• Six months later, there was an IPO at $13.00 per share, as reflected on the right side of the figure.  We observed the pre-IPO price of $6.50 per share and now see the IPO price of $13.00 per share.
• The implied pre-IPO discount is 50% (1 – $6.50/$13.00).  However, the pre-IPO studies can make no comment about the implied 30% “IPO pick-up” in pricing that often occurs with IPOs, and which did occur in the example.
• The observed pre-IPO discount of 50% is actually a combination of the relief of the unobserved 35% marketability discount in the pre-IPO transaction and the unobserved 30% IPO pick-up.

A direct result of this analysis is that pre-IPO discounts are not “marketability discounts” at all.  They reflect a combination of factors as we have just concluded.  Pre-IPO discounts, therefore, do not provide “evidence” of marketability discounts at all.

There are more moving parts that the figure above does not take into consideration, some or all of which influence the difference between the pre-IPO price of $6.50 per share and the IPO price of $13.00 per share in unknown directions (see below).

The Valuation Advisors Lack of Marketability Discount Study and Valuation Ratios

The Valuation Advisors Lack of Marketability Discount Study is available at the link on the Business Valuation Resources website.  This study is introduced with the following:

Defend your discounts for lack of marketability with the most current data in the Valuation Advisors Lack of Marketability Discount Study. This robust, online database includes 18,700+ pre-IPO transactions, including 2,300+ non-U.S. deals covering 45 countries. This must-have tool enables you to reference actual DLOMs for companies with similar characteristics to your subject company and ensures you have the most convincing data available. (emphasis added)

The suggestion is that the Valuation Advisors Lack of Marketability Discount Study can be used, in effect, to conduct a form of the Guideline Public Company Method as defined in the ASA Business Valuation Standards in “Statement on Business Valuation Standards (SBVS) – 1.”  According to SBVS-1, valuation ratios from comparable public companies can be used, with appropriate adjustments, to apply to earnings or other metrics of a subject company in order to estimate the value of the subject entity.  I wrote about this issue at length in a prior blog post: RSD -4: Restricted Stock Discounts are Not Valuation Ratios, a part of a series I wrote examining restricted stock discounts and studies (available at this link).

The same analysis is applicable to pre-IPO discounts, which also are not valuation ratios.

SVBS-1 states the following:

V. Valuation ratios derived from guideline public companies (italics added with my comments in brackets [])

A. Comparisons are made through the use of valuation ratios. The computation and use of such ratios should provide meaningful insight about the value of the subject company, considering all relevant factors. Accordingly, care should be exercised with respect to issues such as:

1. The selection of the underlying data used to compute the valuation ratios [all that is available are the pre-IPO discounts, which are not valuation ratios at all]
2. The selection of the time periods and/or the averaging methods used for the underlying data [the data in the Valuation Advisors Study dates back to 1985-1986 timeframe (almost 40 years ago).  As with restricted stock data bases, much of the data is quite old and simply not relevant to valuations today]
3. The computation of the valuation ratios, which may be derived by relating prices of the guideline public companies to the appropriate underlying financial, operating, or physical data of the respective guideline companies [It should be clear that no valuation ratio can be calculated using a pre-IPO discount]
4. The timing of the price data used in the valuation ratios (in relationship to the effective date of the appraisal) [dated, as indicated just above]
5. How the valuation ratios were selected and applied to the subject’s underlying data

The International Valuation Glossary – Business Valuation defines a valuation ratio by defining Multiples:

Multiple — a ratio calculated as the value of a business or security divided by Economic Income or a non-financial metric. Also known as market multiple, pricing multiple, or valuation ratio. (bold in original, italics added)

The following figure replicates Exhibit 6-3 of IT3 (p. 182) and provides common examples of valuation ratios.

Pre-IPO discounts (and restricted stock discounts) measure the difference between two prices only.  These discounts do not relate the value of a public company divided by economic income or financial metrics as indicated in the definition of Multiple above and as illustrated in the figure above.  Take one pre-IPO discount.  Take the average of several or many pre-IPO discounts, regardless of how “comparable” the individual entities may be to a private subject company.  My conclusion is the same.

Pre-IPO discounts are not valuation ratios, and cannot be derived from public companies and applied to subject companies.  

Value is a Function of Expected Cash Flow, Growth and Risk

We know that the value of a business is a function of its expected cash flows, their expected growth, and the risks associated with achieving the cash flows.  In other words, the value of a business is a function of three important factors, expected cash flow, risk and growth.

The value of an interest in a business is a function of the expected cash flows to the interest (which are derivative of the expected cash flows of the business itself, the growth of those cash flows, including a terminal value at the end of an expected holding period, and the risks associated with achieving those cash flows.  In other words, the value of an interest in a business is a function of three important factors, expected cash flow, risk and growth.

The Valuation Advisors Lack of Marketability Discount Study provides limited information on the companies that went public.  That information includes (per the link from the Business Valuation Resources website):

• Industry or business description
• Revenues
• Operating income
• Operating profit margin
• Assets
• Date of transaction or IPO
• NAICS or SIC code

The data also includes the calculated pre-IPO discount for each transaction.  We query the data base for IPO companies in the same SIC Code as a subject private company that an appraiser is valuing as of a current date.

Valuing an Illiquid Minority Interest of a Private Company

The following figure illustrates available information regarding the averages of the assumed guideline company group from the Valuation Advisors Study.  The data shown are not from an actual run of the data base but are shown for analysis and perspective.  Also included are additional data points for reference and information about the subject private company.

The question that must be addressed is: How will information about companies that went public and had prior pre-IPO transactions (information on the left side above) assist the valuation analyst in developing a marketability discount for a private company (information on the right above) being valued in March, 2024 (or any current date)?  Assume that all of the IPO companies are in the same SIC Code as the subject company, and, like the subject company, they were all profitable, so they are “comparable” to an extent.

The average pre-IPO discount for the sample of 50 transactions in the figure above is 38%.  The range is from a low (premium) of (5%) to a high of 53%.

The appraiser has developed information about the subject company and the subject 15% interest.  The private company is profitable and has a 15% operating margin.  The WACC for the subject company is 12.5%, with an equity discount rate of 15% (not shown).  The private company is expected to pay a dividend that will yield 6.5% based on the marketable minority value of $18 million.  Based on her analysis, the appraiser concludes that the dividend can be expected to grow at about 5% per year over an expected 8 to 10 year holding period.

There is no information at all on the left side of the figure above that informs the appraiser about the value of the 15% subject interest.  For that to be true, the left side would have to provide insight into expected cash flows and their growth, and none is available.  It could also inform the appraiser about the risk associated with the subject 15% interest over the holding period, and none is available.

Assume that the appraiser concludes that the appropriate marketability discount should be 38%, or the average pre-IPO discount above.  That would value the company at the nonmarketable minority level at $11.2 million ($18.0 x (1 – 38%).  Given the expected dividend yield of 6.5% (based on the $18 million marketable minority value (or $1.17 million per year for the private company), the implied yield would be 10.4% ($1.17 / $11.2).  Is that reasonable?  There is no information on the left side of the figure to address the question.

Now assume that, based on a change of expectations, the appraiser believes that the expected holding period for the interest should be 3 to 5 years.  What is she to do?  Nothing changes on the left side of the figure and the facts have changed on the right side.  What should the marketability discount be?

Other Issues with Pre-IPO Studies/Discounts

There are a many moving parts to pre-IPO transactions and the pre-IPO discount in addition to the factors already discussed.   These factors include the following:

• The passage of time between the pre-IPO transaction and the IPO itself
• The further passage of time, perhaps years, between the pre-IPO transaction and the current valuation date for any appraisal
• Expected cash flow enhancements (at the very least, from earnings on cash raised in the IPO)
• Expected risk reductions as result of the new capital
• Higher growth expectations than before the IPO given the new capital raised
• Issuance of new shares in pre-IPO stock splits
• Sale of new shares to raise new capital for the company and resulting dilution for existing shareholders
• Ongoing access to the public markets

As with companies engaging in historical restricted stock transactions, relatively few companies that engage in IPOs were paying dividends or distributions.  Many companies that appraisers are called upon to value do provide such shareholder-level cash flows.

I wrote about these differences in Quantifying Marketability Discounts, which was published in 1997 (and no longer in print), concluding at that time that pre-IPO studies could not be used to help assess marketability discounts.  We reached the same conclusion in all three editions of Business Valuation: An Integrated Theory (2004, 2007, 2021).

These above characteristics are particular to each IPO candidate, and have nothing to do with the corresponding characteristics of any illiquid minority interest in any private company that appraisers might be valuing today.  In other words, they cannot inform appraisers about the impact on value of the critical factors of expected cash flow, risk and growth that define the value of illiquid minority interests of private companies at the present time.

Valuation analysts cannot reasonably expect to hold all these factors equal or account for them in a manner that enables the pre-IPO discount studies to offer valid evidence for the development of marketability discounts for illiquid minority interests in private businesses.

Conclusion

To restate the conclusion from the beginning: Pre-IPO discounts/studies cannot be used to estimate DLOMs in any credible, standards-compliant manner.

As always, comments, criticisms, or insights are welcome.

Chris

This post was originally written for Mercer Capital’s Family Business Director Blog and offered advice to family business directors based on my observations following the failure of Silicon Valley Bank on March 10, 2023.  This failure was followed by Signature Bank on March 12, 2023, and First Republic Bank on May 1, 2023.  All three banks failed because of deposit withdrawals in excess of the banks’ abilities to fund them.

• Silicon Valley Bank was taken over, or at least substantial assets and liabilities were assumed, by First Citizens Bank & Trust Company (Raleigh, North Carolina).
• Signature Bank was taken over by Flagstar Bank (United Community Bancorp)
• First Republic Bank was taken over by JP Morgan Chase.

As of today, May 19, 2023, the regional banking crisis may or may not be over but the SPDR® S&P Regional Banking ETF (KRE) remains almost 40% below its pre-Silicon Valley Bank high in early February.

Silicon Valley Bank was the first failure and, in many ways, offers some very important lessons for private business owners and directors.  With modest editing, I’ll repeat the original post now.

Introduction

The failure of Silicon Valley Bank will be talked about for years.  What really happened?  What caused SVB to fail?  Was it just the long-term Treasury Securities that everyone has talked about.  Well, no.  SVB was on a self-imposed path to destruction that had been in place and waiting for an adverse change in the economy or a rising interest rate environment to kick it into oblivion.

There are lessons to be learned for family business directors from this recent event.

A Short Digression from SVB?

This post comes from a different perspective than most who will write about the failure of Silicon Valley Bank.

In 1985, Mercer Capital was in two businesses, problem bank consulting and business valuation.  By 1987, we had worked our way out of the consulting business and were solely a valuation firm.  But there are some memories from our consulting days that are relevant to SVB.

I went to a board meeting of Park Bank of Florida in St. Petersburg in the latter part of 1985 to meet with its board of directors.  They had recently announced loan problems and losses and were seeking to hire a consulting firm to help them work through their problems.  Mercer Capital was retained.  Some recollections from that time include:

1. Park Bank had grown very rapidly, increasing total assets from $8 million to $750 million in eight years.
2. The bank went public in 1982.
3. The bank was “profitable” and attractive for those eight years, up to the time that they announced underlying asset quality problems.
4. Management and the directors prided themselves on being creative bankers and, in retrospect, thought they were smarter than other bankers.
5. The bank’s board and management were rather cocky, bragging in marketing campaigns about the bank’s sophistication and elitism.
6. The board and management literally “bet the bank” on their alleged creativity and ability to structure loans “better” than other banks.

The general attitude was different when I met with the board.  They were looking for help and Mercer Capital was retained.  I basically lived in St. Petersburg for several months while we attempted to help management address complex problem loans and to gain control over operating expenses.

Unfortunately, the problems were so deep that a workout was not possible.  In 1986, the FDIC closed Park Bank of Florida.  At the time, it was the sixth largest bank failure in history.

The Lessons

There are several lessons for family business directors from the failure of SVB (and Park Bank of Florida).  We summarize the lessons now, which include:

1. Don’t grow too fast.
2. Don’t grow staffing too fast.
3. Don’t smoke your own stuff.
4. Don’t make “bet the company” decisions.

 There are undoubtedly more lessons to be learned, but four is a manageable number.

Don’t Grow Too Fast

Unless you are a budding Amazon with almost unlimited and believing public and private funding, you cannot grow indefinitely without the prospects for reasonable returns.  Business value is ultimately a function of expected cash flow and its growth and the risks of achieving that expected growth.

SVB was in a race against the banking industry to collect deposits for its balance sheet.  Deposit liabilities are the major source of funding for most banks, and their deposits get deployed into loans, investments and other earning assets.  Let’s look first at total assets.

SVB had total assets of $209 billion at year-end 2002, making it the 16^th largest bank in the country (out of 4,116 banks) at that time.  SVB grew its total assets from $56.1 billion at the end of 2018 to $209 billion at the end of 2021, or at a compound annual growth  (CAGR) rate of 55% per year.  Those are just numbers, but let’s look at them.

SVB grew assets some $13.8 billion in 2019.  To put this in perspective, Sandy Spring Bank, the 107^th largest bank in the nation, had that many assets at year-end 2019.  But Sandy Spring Bank accumulated its $13.8 billion in assets over more than 150 years, not one year.

SVB grew its assets at higher rates and larger dollars in 2020 and 2021.  The bottom line is that SVB was growing its assets each year at amounts equal to some of the largest banks in the country after their many years of historical growth.

The nation’s 4,116 banks grew assets at a 12% CAGR in the three years ending 2021 (versus 55% for SVB).  The focus is on growth to 2021 because growth ceased for SVB in 2022 and slowed significantly for the banking industry as well.

When I was consulting, I talked about the “Law of the Double.”  When a company doubles in size, it is necessary for its management, accounting, finances, human relations, systems, and everything else to adapt to the larger size.

If a company doubles in size in ten years, or at a CAGR of just over 7%, change is evolutionary and occurs for the most part without much pressure.  When a company doubles in size in two years, as SVB did from 2018 to 2020, the internal pressures on systems are incredible, and those pressures got even worse when the bank grew its assets another 83% in 2021.

Silicon Valley Bank grew too fast to maintain proper controls at all levels of the organization.

Don’t Grow Staffing Too Fast

Hiring good people is difficult for almost all businesses when employment is tight or not.  Hiring many good people at the same time is even more difficult.  Take a look at the employment growth at SVB and think in terms of hiring at your company, regardless of its size.

SVB hired 322 net new employees in 2019, 623 employees in 2020 and 2,440 employees in 2021.  Imagine the internal resources necessary to identify and hire that many employees.  Given the numbers above, SVB hired 3,385 employees in three years and grew staff at a CAGR of 30%.  The banking industry staffing grew at a 2% CAGR over the same period.

Assuming no turnover in the 2,818 employees at the end of 2018, this means that employment more than doubled, that well more than half of all employees had less than 2.5 years’ experience, and about 40% of all employees had been with the bank for less than one year.

SVB had very little of what I call “institutional memory.”  How could management train so many new employees?  How could management instill any sense of corporate culture with so much change?  The answer is, they could not.

This kind of growth in a banking business is a precursor of future problems.

Silicon Valley Bank grew staffing too fast.

Don’t Smoke Your Own Stuff

Silicon Valley Bank was founded in 1983 and grew to become a $56 billion bank over the next nearly 40 years to 2018.  Assuming they started with $100 million in total assets, that represented an 18% CAGR over the period.  To put this growth rate in perspective, had SVB grown at 18% per year from 2018 to 2021, it would have been a $92 billion bank, rather than a $209 billion bank.

Management had to believe they had a better mousetrap than other bankers.  The board of directors had to have bought into that mousetrap to allow such uncharacteristic and unprecedented growth.

But money is all green.  Loan and deposit markets are competitive.  Loans are made on the basis of price, service, and quality.

1. Pricing relates to the interest paid by borrowers. Other things being equal, banks offering lower interest rates get the loans.
2. Service is defined by how bankers treat their customers. Service and relationships are important, but they only go so far.
3. Quality is a function of the structure and collateral for loans. Unfavorable structures and inadequate collateral from a bank’s viewpoint can help it gain loan market share.

The bottom line is that growing loans faster than the market for a sustained period of time (33% CAGR to 2021) increases the probability of future problems for a bank.  There has been little talk about loan quality issues at SVB.  It will be interesting to see how the portfolio performs under the new ownership of First Citizens, which needs to hope that the assets were purchased at a sufficient discount to preclude future losses.  Don’t be surprised if there are future problems.

A bank’s management and directorate had to be smoking some of their own dope to believe that it could sustainably outgrow its industry by a large margin.

Silicon Valley Bank’s management and directorate were smoking their own stuff.

Don’t Make “Bet the Bank (Company)” Decisions

Faced with interest margin pressures in the “zero interest rate environment” leading up to the end of 2021, SVB management had options.  Banks are required to engage in what is called “asset-liability” management.  They are required to consider the impact of future interest rate changes on their interest-earning assets and their interest-paying deposits.

When I was Assistant Treasurer of First Tennessee National Corporation in the latter 1970s (now First Horizon), we had to model the impact of interest rate changes for incremental strategies involving loans, investments, or deposit liabilities.  For some of the younger readers, this was before the advent of the personal computer, so we did this modelling by hand.  Strategies that the Finance Committee considered to be too risky were not approved.  The goal of asset-liability management then, as now, is to develop stable and reasonably defensive earning streams.

On October 1, 2011, the common stock of SIVB, SVB’s parent, peaked at $717 per share.  The price then began a steep decline, reaching a low of $230 per share before rallying to $302 per share at the end of 2021.  Management and the board were under tremendous pressure to generate performance that they hoped would stabilize the stock price.

They made the wrong decision.  They took the nearly $100 million in deposit growth from 2021 and put the majority of it into long-term term Treasury securities with maturities in excess of ten years.  At the time that SIVB’s stock price peaked in October 2021, the 10-year U.S. Treasury bond yield was on the order of 0.70%, just off the record low a few days before of 0.64%.

The pressure for yield at SVB and banks in general was historic in nature.  Over a fairly short time in late 2021 and early 2022, in the face of enormous margin and earnings pressure, management elected to invest more than $80 million in long-term (10-year or more maturities) Treasury securities at an average yield of about 1.75%.  The result is in the next figure.

SVB management bet that interest rates would not rise in late 2022 and into 2023.  And they made the bet with about 40% of the bank’s balance sheet.  When rates rose, the bank was not in a position to benefit from reinvesting shorter maturity securities nor in a position to avoid the earnings pressure of low rate, long-term investments in a rising rate environment.  To put things clearly, when rates began to rise, short-term deposit liabilities rose rapidly with no corresponding ability to offset increased deposit expenses by reinvesting maturing assets into higher yielding assets.

The offending securities in the figure above are called “held-to-maturity” and are accorded treatment such that they can be carried on the balance sheet at cost.  However, they do have market values and those are shown above.  The held-to-maturity securities had a cost basis totaling $91 million and a market value of only $76 million at year-end 2022.

There is an inverse relationship between interest rates and bond prices.  When rates rise, bond prices fall.  When maturities are long, bond prices fall a great deal.

The unrecognized loss of $15 million approximated SVB’s equity capital of $15.5 million.  When these financials were disclosed, as the old saying goes, “the jig was up.”

SVB “bet the bank” on an interest rate forecast that few believed in at the time.  And lost.

SVB Failed

The FDIC shut Silicon Valley Bank down on March 10, 2023.  There is talk about a “rush to justice” and that if SVB had had just a little more time it could have weathered the massive deposit outflows that ultimately caused its failure. You see, all the “friends of the Bank” who had massive amounts of uninsured deposits with SVB rushed to get them out as word began to emerge of potential liquidity issues.  Only 3% of SVB’s deposits were under the FDIC limit and therefore insured.  That means that 97% of the deposits were uninsured.  At First Tennessee, we used to call such deposits “hot money.”  It would move in a moment for a slightly higher interest rate.  And it for sure moved out of SVB at a pace that literally broke the bank.

From my perspective, the Silicon Valley Bank had already failed or had failure in its future regardless of the action of the FDIC on March 10^th.

That is not the case for the vast majority of family businesses.  Nevertheless, it is good to take our lessons from whence they come.

Recap for Family Business Directors

What are the lessons for family business directors who are not on the board of Silicon Valley Bank, but of a variety of kinds and sizes of companies around the nation?

We recapped them above, but in summary:

1. Don’t grow too fast. It is hard enough to keep eyes on the ball when growing at market rates for your industry.  The problems are exacerbated if your company is trying to grow at greater rates than your competitors or your industry.  And remember the Law of the Double.  Your management, systems and everything have to adapt to handle that growth.  If you double too quickly, you may not be able to adapt.
2. Don’t grow staffing too fast. This lesson is a subset of the first one, but it warrants separate attention.  Rapid growth of staff decreases average experience, requires substantial training, and dilutes the institutional memory.  It also makes it difficult to inculcate your company’s culture into the new staff.
3. Don’t smoke your own stuff. When things are going well, it is easy to begin to believe that your group is “above average” like all the children in Lake Wobegon.  When managements begin to think this way, it becomes difficult to bring your normal level of judgment and scrutiny to major decisions.  Recall that sage warning that “pride goeth before the fall.”
4. Don’t make “bet the company” decisions. Important decisions must be made, of course, and they always have some risk.  However, companies should avoid, to the extent possible, those individual decisions that can put the entire company at risk.  You’ll know one the next time you see one.

There are, indeed, lessons for family business directors and private company business owners and directors from the failure of Silicon Valley Bank.  Are we suggesting that you should not grow?  Of course not.  But good growth is planned growth that preserves markets or margins or both.  And don’t make “bet the company” decisions.

Comments are welcome.  In the meantime, be well.

Chris

My most recent post, titled Fair Market Value and the Nonexistent Marketability Discount, generated quite a discussion when posted on LinkedIn. In the last week or so it has received 5,600 impressions (whatever those are), 41 Likes, and 29 comments. Most of the discussion has been productive and welcomed!

The post provided a solid rationale that there is no such thing as a marketability discount for controlling interests of companies. One of the questions asked relates to the distinction between lack of marketability and lack of liquidity.  Some would like to say that companies are marketable – they can be sold, but they are not liquid.  And so a discount for lack of liquidity might be appropriate.

This post examines these two concepts, marketability and liquidity, or the lack of one or both in the context of fair market value determinations of controlling ownership interests of private companies.

Important Definitions

The Sixth Edition of Shannon Pratt’s Valuing a Business (with the ASA Educational Foundation) was published in late 2022.  Let’s refer to the book as Pratt’s Sixth Edition.  Chapter 19 is titled “Discounts for Lack of Liquidity and Lack of Marketability.” (p. 419)

The Introduction of Chapter 19 contains the following paragraph:

“These two concepts of lack of liquidity and lack of marketability are related but distinctly different.  As with all valuation adjustments, it is important to identify the base of comparison to which the adjustment relates.  The prior edition of this book defined how liquidity and marketability could be differentiated.  Since that edition, the discussion about these two concepts has evolved.  This chapter presents current thinking on the subject.  No doubt these concepts will continue to be refined.” (P. 420) (emphasis added)

A section of the chapter called “Liquidity and Marketability – Closely Related But Not the Same” introduces the discussion of marketability versus liquidity.  (p. 423)  There are two subsections titled “Liquidity” and “Marketability,” respectively.  Regarding liquidity, the text states:

“The cost of the relative illiquidity of marketable securities is embedded in its price.[1]  In most cases, there is no need for an analyst to adjust the price of a marketable security for the cost of illiquidity.  Indeed, it is embedded in the pricing information from this market, which often forms the basis of comparison in valuing a subject interest.” (P. 421)

[1] Transaction costs also rise with illiquidity.  However, in most circumstances, transaction costs are not factored into the appraisal of the subject interest since the pricing information of frequently traded comparable securities is not adjusted for these factors.”

The International Valuation Glossary – Business Valuation (“the Glossary”) provides definitions of liquidity and marketability and their related discounts.  These are quoted in Pratt’s Sixth Edition.

Liquidity — the ability to quickly or readily convert an asset, business or investment to cash at minimal cost. (P. 422)

Marketability — the ability to quickly or readily convert an asset, business, or investment to cash at minimal cost that reflects the capability and ease of transfer or salability of that property.  Marketability is also affected by, among other things, the particular market in which the asset is expected to transact and the characteristics of the asset. (P. 423)

Discussion of Definitions and Base Values

Both definitions begin with “the ability to quickly or readily convert an asset, business, or investment to cash at minimal cost”.  That is the entire definition of liquidity.

The definition of marketability expands on that concept by adding that marketability “reflects the ease of transfer or salability of that property.”  The definition is further refined to discuss the particular market in which an asset is expected to transact and the characteristics of the asset being valued.

The expansion of the definition of marketability is important in that it provides more than just the quick conversion to cash.  Looking at the entire definition of marketability, I believe that the likely meaning of the ease of transfer is the relative ease of transfer or salability in the particular market and given the characteristics of the asset, e.g., a controlling ownership interest, being valued in relation to the market for entire companies.  After speaking with one member of the committee that created the Glossary, I believe that my interpretation is on-point.

Many appraisers, including the drafters of Chapter 19, want to equate the “liquidity” represented by cash in three days with the “illiquidity” of the time it takes to sell controlling interests.  They suggest that a discount for lack of liquidity is needed because of the time it takes to sell.  There are problems with this reasoning, as pointed out in my last post.

• The definition of fair market value, the standard of value employed in most appraisals, calls for a hypothetical transaction to occur on the valuation date.  All marketing, due diligence and documentation has occurred before or on the valuation date and a hypothetical transaction occurs on the valuation date.  Importantly, the transaction occurs for cash and/or cash equivalent consideration.  There is no “marketing” after the valuation date.  It has already occurred. It is simply incorrect to suggest that a controlling interest should be discounted because of marketing time after the valuation date.
• The concept of marketing before the valuation date is analogous to the concept of exposure time in real estate appraisal.  Exposure time is defined in the Uniform Standards of Professional Appraisal Practice (USPAP) as the: “estimated length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal.”There are no concepts of  “marketability discounts” or “illiquidity discounts” in real estate appraisal because it is clear that a property has been assumed to have been on the market for a sufficient time and that appropriate effort has been expended before the valuation date so that the assumed hypothetical transaction reflected by the appraisal (for cash or its equivalent) can occur on the valuation date.The same holds true for fair market value determinations of controlling interests of businesses.  There has been (assumed) sufficient “exposure time” (marketing, due diligence, and documentation) and effort that the hypothetical sale contemplated by the definition of fair market value can occur on the valuation date for cash or its equivalent.  There can be no “marketability discount” or “illiquidity discount” based on time or expense to market companies after the valuation date. 
• As noted above, the cost of any illiquidity of publicly traded securities is reflected in their transaction prices.  When trades occur, we only see one price, the transaction price.
• The very same logic pertains to the sale of controlling interests in companies.  Appraisers use transaction multiples from transactions in similar companies with the guideline transactions method.  Only one price is observed when private company transactions close: the price agreed to by buyers and sellers.  If a transaction had noncash consideration, it is up to the appraiser to put that on a cash-equivalent basis before calculating multiples.  Any cost of illiquidity in the sale of companies is reflected in their prices, just as with publicly-traded securities.
• There is no relevant base value from which either a discount for lack of liquidity or for lack of marketability might be taken.  And no discount has any meaning unless the base value from which it is taken is defined.

Pratt’s Sixth Edition recognizes this fact and considers four possible base values.  I quote and then comment below each possible base value.

“If the appropriate standard of value is fair market value, the price ultimately expected to be reached between a willing buyer and a willing seller – before the costs and risks listed above are considered – is a benchmark from which the discount for lack of liquidity could be taken.” (emphasis in original) (pp. 457-458)

This first suggested base value does not hold water in fair market value determinations.  The price that (hypothetical) willing buyers and sellers agree on for a business is its fair market value.  It is certainly not the benchmark from which an illiquidity discount for a controlling interest should be taken.  Any effect of illiquidity is reflected in the agreed upon pricing.  The price agreed to by a willing buyer and a willing seller is, well, the price.

“The price one might receive in an initial or secondary public stock offering (i.e., the publicly traded equivalent value).” (p. 458)

The price in a potential IPO is simply irrelevant for the great majority of private businesses.  Most companies will never have the size or characteristics to make them attractive public candidates.  They may nevertheless be quite attractive companies.  Further, in IPOs, normally only a small portion of companies are offered to the public.  That is different than placing the entire company on the market.  This is not a relevant base value.

The “publicly traded equivalent value” is a hypothetical concept.  Appraisers value companies at the marketable minority level (financial control), which is also called the “as-if freely traded” value.  It is a hypothetical price at which appraisers assume would be the price at which a private company’s shares would trade if there was a free and active market for its shares.

The as-if freely traded value is not  a benchmark from which a discount for illiquidity for controlling interests might be taken.  The as-if freely traded value is coincident with financial control value, so there is no reason to apply any discount for lack of liquidity.  See the levels of value chart in a prior post.  And see both of the levels of value charts in Pratt’s Sixth Edition (at p. 55 and p. 389).  No such discount is reflected on either chart.

“The price achievable in a private sale of the entire closely held business enterprise.” (p. 458)

If a company achieves a price in a private sale of the entire business, That is the price and value of the business.  This value does not represent a benchmark level from which an illiquidity discount for controlling interests might be taken.

“A control transaction of a publicly funded company.” (p. 458)

Frankly, I am not sure what this means. But it is not a base or benchmark value from which an illiquidity discount for controlling interests might be taken.

None of the base values proposed in Pratt’s Sixth Edition (and in prior editions) will serve as a base value from which a discount for illiquidity for controlling interests might be taken.

Three Examples            

We can discuss the concepts of liquidity and marketability in the context of three specific examples.

The expansion of the definition suggests that marketability may differ for different assets that trade in different markets.  Consider three assets:

1. 1,000 Shares of META Platforms (Facebook). META is trading in the vicinity of $210 per share as I write. An investment of 1,000 shares would have a market value of $210,000.  An investor owning 1,000 shares could issue a sale order today and have cash in her brokerage account in a very short time.  An investor who wants to buy 1,000 of META could place an order and acquire ownership of the asset effective almost immediately.  With either of these transactions (buy or sell), I would pay no brokerage fees if I executed in my Schwab account.  I would not even have to worry about stock certificates since Schwab acts as a custodian for my interests.

What does an investor acquire when purchasing 1,000 shares of META?  He acquires a literal “stock certificate” representing a very, very small but pro-rata claim on all the cash flows of the company, and is the pro-rata beneficiary of any future dividends or stock repurchases.  The shareholders have collectively delegated to or allowed control by METAs management and the board of directors.

The current market price of $210 per share represents the current consensus pricing (per share) for all of META in the market today.  The market is highly liquid.  And META shares are marketable.  And current pricing certainly represents freely-traded pricing (marketable minority)  and financial control pricing.  It is the base price to which any strategic or synergistic premium might be applied — if a potential purchaser expected such benefits.

2. META Holdings, Inc. (the entire company). The market capitalization of META is about $550 billion as I write. I might be able to handle an investment of 1,000 shares of META, but I am not the market for the entire company.  That market is quite limited, but it exists, and is international in nature.  As big as META is, someone or ones would step up if META were “on the market.”If Mr. Zuckerberg were to decide to sell META, it would likely take some time to find a buyer or consortium of buyers.  But what would happen in the meantime?  The company would continue to operate and, hopefully, continue to create value for all its shareholders.  META shares would continue to trade, undiscounted because of any potential sale. There is no discount for lack of liquidity or lack of marketability. If Mr. Zuckerberg and the META board of directors were to talk with potential suitors, rest assured that no suitor would suggest that a discount for lack of marketability or a discount for lack of liquidity is appropriate.  Mr. Zuckerberg would laugh at such a suggestion.Is META, the company, liquid according to the definition of liquidity above? No, it would not be likely to be sold or converted to cash quickly in one day or two or three.  Does anyone care?  Not really.  To reiterate, there is no discount for lack of liquidity or lack of marketability.
3. XYZ Company (100% of equity).  XYZ is a successful professional services firm with revenues of about $25 million, an EBITDA margin of 16%, and no debt.  Earnings are about $4 million and have been growing each year.  There is little seasonality to its earnings and distributions are made on a quarterly basis to its owners.Assume that it will likely take about a year to identify an appropriate buyer and to negotiate and close a sale.  The board commences a sale process.  At the end of three months of “marketing,” the company makes a distribution of $1 million from its earnings to its owners.  At the end of six months and nine months, the same thing occurs. All of this occurs during the marketing period.Assume the XYZ board closed its sale one year after its “marketing” began.  Its owners would take their last $1 million distribution at or just before closing.  And they would receive $30 million cash at closing (7.5x EBITDA).What is the buyer purchasing?  Well, clearly, the buyer desires to step into the shoes of XYZ’s owners and enjoy the benefits of its expected cash flows into the future.  That’s what they just paid for.  There is no discount for lack of illiquidity or marketability.  And there is no basis, in an appraisal of the same company, to apply any discount for future marketing efforts.  In an appraisal, the hypothetical transaction occurs on the valuation date just as the assumed closing of the XYZ sale occurred on the valuation date.

Wrapping Up

In my last post, I concluded that no marketability discount is applicable to controlling the ownership interests of businesses.  In this post, I reached the same conclusion.  Further, there is no discount for illiquidity applicable to controlling interests of businesses.

If someone is able to define different levels from the base value of financial control/marketable minority in terms of differences in expected cash flow, growth, and/or risk, then we can talk about such a discount.

To date, no one has done so.

As always, I welcome your comments on this post. If you’re reading this on LinkedIn, please do comment there.

As always, be well!

Chris

This post provides a discussion of several implications of the definition of the standard of value known as fair market value.  We focus first on the definition of fair market value.  Next we examine the hypothetical negotiations conducted by hypothetical buyers and sellers in fair market value determinations, and the implications of those negotiations.

We then look at the implications for the so-called “marketability discount for controlling interests.” We look at this “discount” from the vantage points of the definition of fair market value, the integrated theory of business valuation, and recurring and incorrect rationales for the discount.

This post is the first in a series of posts in which we will discuss fair market value in more detail.

Fair Market Value Defined

Fair market value occurs at the intersection of hypothetical negotiations between hypothetical willing, knowledgeable and able buyers and sellers.  Therefore, in every fair market value determination prepared by business appraisers, it is critical that both buyers and sellers are present for the negotiation.  A fair market value appraisal should reflect considerations of both buyers and sellers and land at the intersection of their negotiations over the expected cash flows, growth and risks associated with receiving those cash flows, whether for a business or an interest in one.

Every appraisal involves the specification of the relevant standard, or type of value.  Fair market value is the most frequently used standard of value employed by business appraisers.  Many times, appraisers cite a definition of fair market value and list the eight elements listed in Revenue 59-60 in their reports.  For example, the definition of fair market value found in Revenue Ruling 59-60 is:

2.2 Section 20.2031-1(b) of the Estate Tax Regulations (section 81.10 of the Estate Tax Regulations 105) and section 25.2512-1 of the Gift Tax Regulations (section 86.19 of Gift Tax Regulations 108) define fair market value, in effect, as the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts. Court decisions frequently state in addition that the hypothetical buyer and seller are assumed to be able, as well as willing, to trade and to be well informed about the property and concerning the market for such property.

Then, the reports will list the eight factors from Section 4 of the ruling.  I call these the “Basic Eight Factors.”

• The nature of the business and the history of the enterprise from its inception.
• The economic outlook in general and the condition and outlook of the specific industry in particular.
• The book value of the stock and the financial condition of the business.
• The earning capacity of the company.
• The dividend-paying capacity.
• Whether or not the enterprise has good will or other intangible value.
• Sales of the stock and the size of the block of stock to be valued.
• The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in the free and open market, either on an exchange or over-the-counter.

Once the definition and eight factors have been listed, there is often little or no consideration of the implications of the definition in the remainder of many valuation reports, although lip service may be paid in report headers that appear to follow the outline of considerations.  These are relevant factors for consideration, but RR 59-60 also states that the elements of common sense, informed judgment, and reasonableness must enter the process of weighing those facts and determining their aggregate significance,

Fair Market Value Reflects Hypothetical Negotiations

The following figure provides a conceptual look at fair market value. The key elements from the definitions are highlighted around the figure.  Hypothetical willing sellers have different interests than do hypothetical willing buyers.

In the world of fair market value:

1. Hypothetical buyers are seeking to acquire expected business cash flows and negotiate price based on their associated risks and expected growth (from their viewpoints).
2. Hypothetical sellers, who, if a transaction occurs, are giving up the expected business cash flows that the hypothetical buyers are acquiring, must consider the very same risk and growth factors (from their viewpoints). They negotiate price based on these factors.
3. Hypothetical (or real) buyers desire to pay the lowest possible price, but that is not fair market value.
4. Hypothetical (or real) sellers desire to receive the highest possible price, but that is not fair market value, either.
5. Fair market value necessarily assumes that:
   • All hypothetical negotiations and marketing of the subject interest have occurred prior to the consummation of any hypothetical transaction, which occurs on the valuation date.
   • Each party to the hypothetical negotiations has taken into account all relevant information that is known or reasonably knowable as of the valuation date.
   • The hypothetical parties have agreed to and signed the documentation customarily needed for a transaction prior to or on the valuation date.
   • A hypothetical transaction occurs on the valuation date.

These above elements are important implications of the definitions of fair market value which are overlooked or misunderstood by some business appraisers, attorneys and judges.  They are necessary, however, for the next element for consideration, the hypothetical transaction itself.

Fair Market Value Assumes a Hypothetical Transaction on the Valuation Date

Fair market value assumes that both hypothetical buyers and hypothetical sellers are both knowledgeable, willing, and able to transact, and that neither acts under any compulsion.  The hypothetical parties negotiate at arm’s length and in their respective self-interests.  And they engage in a hypothetical transaction with the following characteristics:

• The transaction occurs for money or money’s worth, i.e., for a cash-equivalent price.
• The transaction occurs on the valuation date. This fact is critical to understanding fair market value. We address this issue in more depth below.

The hypothetical transactions of fair market value could not occur on the valuation date unless all hypothetical negotiations, including the marketing of the subject interest, had not been concluded on or before that date.  Similarly, the hypothetical transactions could not be concluded unless all customary documentation of the transactions had been completed.  We will focus more on the resulting implications as we proceed.

The purpose of an appraisal is to simulate the hypothetical negotiations of hypothetical willing buyers and sellers and to determine, in the form of an opinion of fair market value, the intersection of their negotiations.  In some appraisals, the hypothetical seller is not present and conclusions are too low to reflect fair market value.  In other appraisals, the hypothetical buyer is not present and conclusions are too high to reflect fair market value.

What brings hypothetical willing buyers and sellers to the intersection point of fair market value?  It is their respective assessments and negotiations regarding the expected cash flows, risks, and growth associated with the subject interest.  Both the interests of buyers and sellers should be reflected in fair market value determinations.

The So-Called “Marketability Discount for Controlling Interests”

The question of whether a marketability discount should be applicable to controlling interests of businesses has been around for a long time.  I addressed the question in an article in the Business Valuation Review of the American Society of Appraisers in 1994.  The answer to the questions was, and still is, of course, no.  I have addressed this issue in several books and numerous articles and blog posts since then.  Nevertheless, many appraisers and several business valuation authors still seem to want to hang on to this non-existent discount of convenience.

The Definition of Fair Market Value

Let’s first address the question based on the definition of fair market value, which represents a hypothetical transaction in a subject interest on the valuation date for cash or its equivalent.  If there is a hypothetical transaction for a controlling interest in a company, say Acme Manufacturing, on the valuation date for cash at fair market value, what possible reason could there be for discounting that value for “lack of marketability?”  It has just been marketed and the interest became fully liquid.

The Integrated Theory of Business Valuation

Next, let’s address the question of marketability discounts for controlling interests from the viewpoint of the integrated theory of business valuation – or just plain common sense.  Any valuation discount represents differences in expected cash flow, growth and risk between one conceptual level of value and another.  For example, the marketability discount, or discount for lack of marketability, represents differences in expected cash flow, growth and risk between the marketable minority/financial control level of value (V = CF_e / (R_e – G_e)).  CF_e represents the normalized expected cash flow of an enterprise (business), G_e represents the expected growth of that cash flow, and R_e represents the risks associated with the business and achieving the expected cash flows.  The familiar Gordon Model represents the value of a business at the marketable minority/financial control level of value.

The nonmarketable minority level of value can be represented conceptually by the equation (V_sh = CF_sh / (R_hp – G_v)).  V_sh is the nonmarketable minority level of value.  CF_sh is the expected cash flow to the shareholder of a subject illiquid minority interest.  CF_sh is almost always less than CF_e because of reinvestments into a business or agency costs imposed by controlling shareholders.  G_v is the expected growth in value of the illiquid minority interest over the expected holding period of the investment (including liquidity assumed at the marketable minority/financial control level of value.  R_hp represents the risks associated with achieving CF_sh, including growth, over the expected holding period of the investment.

Why does a marketability discount (or DLOM) exist?

1. CF_sh is most often less than CF_e
2. G_v may be less than G_e
3. R_hp is almost certainly greater than R_e

The lower cash flows of the illiquid interest and the greater risks create the wedge of lower value called the marketability discount.

Now, let’s try to conduct a similar analysis relative to a marketability discount for a controlling interest.  First, we know that the marketable minority/financial control level of value is defined by the Gordon Model, or V = CF_e / (R_e – G_e).  This is a summary statement of the discounted cash flow model in which normalized expected cash flows of the business are projected into the future for a finite period of time and then, a terminal value is calculated to represent the then value of all remaining cash flows beyond the finite forecast period.

Are the cash flows attributable to a controlling interest any different at the valuation date than those already projected in an appraisal?  Of course not.  It is the same business and the same interest.  It is not possible to define lower cash flows attributable to the subject interest, or greater risks, or slower growth beyond the valuation date.  After all, that is the date on which the assumed hypothetical transaction of fair market value occurs.

Recurring Faulty Rationales for Marketability Discounts for Controlling Interests

Let’s take the analysis a bit further.  Assume we have valued 100% of the equity of Acme Manufacturing, a manufacturer of parts for the automotive industry.  The initial financial control/marketable minority value is $30 million, and you, the reader and the other appraiser, and I agree that this is a reasonable valuation.  The question now is whether a marketability discount should be applied.  In the following figure, I address some of the typical arguments for such a discount and find that they are not correct or reasonable.

To those who would suggest that a controlling interest is “marketable and non-liquid” and therefore a marketability discount for controlling interests should be applied, let me suggest that they articulate what that means in terms of expected cash flows, growth and risks of achieving those cash flows.  Differences in these factors are the only sources of valuation discounts (or premiums).  It cannot be done, so those authors who try to create a fictional level of value are, in my opinion, simply wrong. No one has called me on this position credibly and in writing since 1994.

If you disagree with me, please do not hesitate to comment on this post.  Know, however, that my responses to comments will be in terms of the basic triumvirate of value: expected cash flows, their growth, and the risks associated with achieving them.

In the meantime, be well.

Chris

ChrisMercer.net is a blog where I talk primarily about things related one way or another to business valuation, but I also venture into personal topics from time to time.  Walking has been one of those topics.

Three years ago, on December 15, 2019, I began a journey and did not know where it would lead.  I had been traveling a great deal and working too hard.  While I have always jogged, ran, or played active sports, my schedule cut into my working out.

My weight was up more than ten pounds, my cholesterol was out of kilter, my blood pressure was too high, and I was just worn out.  I knew something had to change, so I made a hopeful commitment to walk at least 10,000 steps (now 5 miles, or about 10,400 steps) every day.  I say a hopeful commitment because I had made a few of those in the past, and things just didn’t last.  But I had a bit more faith in this commitment because, well, I was committed.  But the proof is in the pudding.

I posted progress on my walking journey on this blog at 50 days, 60 days, 100 days, 150 days, 200 days, 250 days, 407 days, 500 days, a 215-day streak after that, two years, 1000 days, and now at three years.

Three years is 1096 days.  During the last three years, I’ve missed my now five-mile-per-day target only 16 times.  I had a pulled groin muscle (4 days), a bout with food poisoning (2 days), one bad attitude day, and a case of some non-covid thing that almost completely sapped my energy for nine days.

Some statistics of this walking journey include the following:

• A pretty good record for 1096 days, or three years
• 14.3 million steps
• 6,700 miles
• 6.1 miles average daily walking (including off days)
• 13,100 steps per day average

Over this period of time, walking has progressed from something I wanted to do to something that I just do.

Why Do I Walk?

Commitment wears thin in the absence of benefits from almost anything in life.  I can list a number of benefits from my three years of walking, including:

• Losing about 14 pounds.
• Better focus on a good diet and portion control.  Early in the pandemic, I instituted my “one plate per meal” rule.  Basically, I quit eating seconds and only seldom have a small dessert.
• Lowering blood pressure to normal or very near normal range.
• Improving my cholesterol counts.  I can never remember the numbers, but they are good.
• Improving physical fitness and endurance.
• Improving my pickleball game.
• Longer and better quality sleeping, with an average of 7 hours 43 minutes per night (thank you, Fitbit!)
• Improving balance and flexibility.
• Improving my mental attitude towards each day. I’ve always had a pretty good attitude, but now I’m much more eager to get up and start each new day with some walking.

In addition, I know that many friends and acquaintances have started their own walking programs, at least partially motivated by my posts on this blog and LinkedIn.  That is gratifying.

Where and When do I Walk?

This next section borrows from a previous post, but it bears repeating.  The bottom line is that I walk anywhere and anytime I can.

• In my neighborhood in Memphis.
• On the University of Memphis campus, which is nearby.
• Around Sea Bird Island, where my Florida place is.
• On pickleball courts wherever I am.  Last Saturday morning, I got over 4,000 steps playing pickleball for a couple of hours.
• On a treadmill, if it is raining or the weather is too cold to walk outside comfortably.
• In the exceptionally large lobby of my office building.
• From a long way from the doors of restaurants, big box stores, or anywhere I go.  These extra steps add up and are easy to get.
• I’ve walked in malls in Memphis and in other cities where I have found myself near one.
• On the streets of New York (I averaged about eight miles per day while I visited my son a couple of months ago).
• Airports are large and spread out, so they provide opportunities to walk.  In addition, I walk when I’m waiting for the next plane instead of sitting on my duff.
• Around my office building.
• To nearby restaurants.
• Running in place.  This is not my favorite, but a few times, there has been little recourse but to run in place in a hotel room or wherever I happened to be.
• The five floors of my parking garage at home when it is pouring outside.
• On the beach near my Florida place.

In addition to all of these opportunities to walk, we all have opportunities to walk whether just getting around or going from place to place.

Benefits? Don’t Just Take it From Me