While it might sound old-fashioned, the virtue of prudence makes good business sense, according to Carl Medford. Find out why it should be a foundation of your business planning.

Author Craig D. Lounsbrough once stated, “A compass calibrated by my greed is a rather shrewd way to legitimize my agenda. However, true north on a compass such as this is a straight line to the edge of a really big cliff.”

To align your business to anything other than virtue can lead to disaster. Finding virtue, however, can be an elusive task.

We live in a world that, over the past 100 years, has moved away from a foundation of absolute values and a common morality and has instead replaced those with relativism.

Consequently, we have shied away from words such as “virtue.” Historically, the word virtue has had theological overtones linked with moral standards and, if you live in a relativistic society that has no common agreement on the definition of morality, it becomes even harder to nail down the concept of virtue.

I believe that a failure to understand virtue can lead to the inability to build a successful real estate business.

Virtue and the Realtor’s Code of Ethics

Virtue can be defined as moral excellence. Wikipedia defines virtue as “a trait or quality that is deemed to be morally good and thus is valued as a foundation of principle and good moral being. In other words, it is a behavior that shows high moral standards: doing what is right and avoiding what is wrong.”

We can all agree that “doing what is right and avoiding what is wrong” is a good thing, but thanks to relativism, we run into difficulty in defining the words “right” and “wrong.” That minor detail keeps armies of attorneys gainfully employed. Because this concept ties directly into the definition of ethics and the importance of ethics led to the creation of the Realtor’s Code of Ethics, it bears some discussion.

Philosophical foundations of virtue

We have struggled through the ages (going back as far as Aristotle and Plato) to define virtue. I would suggest we go back and examine the seven virtues that have helped frame a fundamental understanding of the concept.

Although there are a few different lists of “virtues,” the common list includes prudence, fortitude, faith, hope, charity, temperance and justice. This article will focus on the first virtue — prudence.

Prudence is one of the most misunderstood words in the English language. Most of us immediately associate the word with “prude,” which conjures all sorts of negative images.

Although at its most basic, prudence means “careful good judgment that allows someone to avoid danger or risks,” the full definition from Merriam-Webster states:

  1. The ability to govern and discipline oneself by the use of reason
  2. Sagacity or shrewdness in the management of affairs
  3. Skill and good judgment in the use of resources
  4. Caution or circumspection as to danger or risk

At its core, prudence includes discipline, the ability to effectively manage, good business sense and an ability to understand and manage risk. There is a lot to unpack here: The definition of discipline alone has birthed countless books.

The best discipline is self-discipline

Discipline evokes images of an external force coming to bear on someone to keep them in line with a specific set of behaviors. The corresponding negative connotation is punishment for behaviors that stray from acceptable norms.

The best discipline is actually “self-discipline” — instead of relying on an external force to keep things in order, self-discipline is the process of pushing yourself forward, developing internal motivation and choosing to act in a positive manner without regard to how you might be feeling.

Factor in the word “reason,” and it becomes the ability to set reasonable goals and then intentionally perform the behaviors required to achieve them, all the while avoiding distractions, obstacles and negative or unethical behaviors that could potentially derail your stated objectives.

The critical role of shrewdness in business

Shrewdness is also critical in business. Merriam-Webster defines shrewd as “marked by clever discerning awareness and hardheaded acumen.” At its most basic, it is common sense. Antonyms would include foolish, naive and even stupid. I have personally found that decisions I have made in a hurry without taking the time to fully analyze the implications — snap judgements — have often resulted in foolish mistakes.

By applying self-discipline to common sense, every decision you make, using self-discipline or self-control, should be carefully reasoned with your stated objectives in mind. If a seemingly good idea does not fit a person’s overall objectives, then a shrewd operator will move on to other opportunities that are more aligned with their business goals.

Good judgment in the use of resources

Good judgment in the use of resources is next. This begins with an attainable, realistic budget that is adhered to consistently. When I first tried to establish a budget for our business, I set pie-in-the-sky objectives and then formed my budget around those unrealistic goals. The consequence was a totally useless budget that got thrown out after the first month.

Models are critical in managing resources. An excellent source for effective business models in real estate can be found in the book The Millionaire Real Estate Agent (It’s Not About the Money, It’s About Being the Best You Can Be).

Ironically, because I am personally averse to using the word “millionaire” in advertising, I had a copy of the book gathering dust on my shelves while I was busy trying to come up with effective models upon which to run my business along with developing practical budgets. Once I cracked the cover and started reading, I discovered I no longer had to try to invent models on my own — they were already in the book.

Caution in the face of risk

Lastly is caution or circumspection as to danger or risk. Risk management is critical in every industry. In the construction industry, you see guardrails on scaffolding, protective orange caps on protruding rebar and extensive rules and procedures around safe construction practices. As a former union carpenter and then as a licensed general contractor, I witnessed, over the years, numerous accidents that could have been avoided had risk management procedures and safety rules been followed.

It is no different in real estate. At the core of risk management is our Code of Ethics, which provides the guardrails for our industry. Inherent in the idea of morality are definite rights and wrongs as prescribed by the code. I recently overheard a wise agent state, “No single transaction is worth a breach of ethics and potential loss of your license.”

While we cannot rule out the possibility of honest mistakes, there is a definite difference between a single mistake and a lifetime habit of skirting the edges of the law for personal gain. Prudence dictates that we live our lives in the real estate arena free from even the appearance of wrongdoing in any way.

There is a fundamental difference between living your life trying to keep the law and acting with integrity versus acting in such a way as to technically “not break” the law or acting with impunity. These two lifestyles are polar extremes.

Looking at this from a real estate perspective, prudence is the ability to set realistic goals, provide the self-discipline required to achieve those goals and effectively manage business affairs, all while exercising caution to effectively navigate potential risks and, in the midst of it all, build a business on a foundation of integrity.

Sounds to me like this is something worth pursuing.

Carl Medford is the CEO of The Medford Team.

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