Before the financial crisis, there was the 1980s real estate bust. The southwest part of the country was particularly hit hard.

Along with the bust, came the S&L crisis, many bank failures, and for one company, Trammell Crow, a post-mortem on the numerous mistakes different partners made during the boom times. In 1989, a memo was sent asking partners “to reflect upon the environment which lead to the collapse of the Southwest real estate markets.” The replies were pieced together into over a 100-page list, consisting mostly of mistakes made during the period.

If you work in commercial real estate or study it, it’s a great resource. Being real estate, excess leverage is a recurring theme. Diworsification is another mistake that pops up often. There’s the typical behavioral stuff too — overconfidence, overoptimism, greed, FOMO, etc. — that always surface in hindsight.

It’s interesting how booms, universally, push people to reach for things, lower their standards (while raising expectations), chase more and more investments (instead of staying focused on their top ideas), or do deals because money’s available. That belief that if they don’t do it, someone else will, and they’ll miss out, is like sitting on a time bomb with a hidden countdown during a boom. Continue Reading…