Experience Matters!

I will start by being perfectly blunt. The plantation and lumber industry in Central and South America is full of scammers and incompetent people. There is nothing easy about this industry and starting any project without the advice of highly qualified experts is destined to fail, or disappoint at best. I gave looked at many many business plans from various companies selling plantation investments. I have never seen a highly qualified timber expert involved in the management. I constantly see plantations at harvesting age that fall far short of the projected volume and values they were promised. And those promised were false from the start and are easy to spot if you have the expertise. There is a similar issue with many lumber company start ups in these countries. Most lack a true expert in the lumber industry with the connections and experience to do things properly. You need to have enough money and the industry experts to succeed. Lacking one of those 2 is a disaster. Lacking 2 of them will involve fraud at some point, if not at the very start. And expert in the species in that area. I offered to help a company in Ecuador around 2005. They were a softwood lumber company that was helping a mining company start a hardwood lumber company there. Both Canadian companies. I knew people at the lumber company ($300 million/yr operation) and they asked me to help them sell the wood. I looked at their plan and told them there was something wrong and I could not sell for them. I also said it was flawed. I offered to go there for 1 month for $10,000, plus travel expenses to help them fix the problem. They literally laughed in my face. 9 months later they rushed to the airport to escape arrest. They lost $2 million and were facing numerous lawsuits and jail time. They “saved” $10,000 at the start. Was it worth it? Softwood is a different animal than hardwood and there are many types of hardwoods. I have many more stories of similar situations. I offered to consult for a modest fee. They thought it was expensive and did not need it. Every one ended in failure and losing millions of dollars. The Harvard Endowment invested around $1 billion in plantations around 20 years ago. I had a friend who knew some of the people involved and asked for my opinion. I looked at their plan and said it would fail. He suggested that I talk to them. I said no, they will go with the guys in $2000 suits who write 100 page proposals who went to Harvard. They won't believe me. How could I know more than them? Well, they lost 100's of millions, but the management group they hired made many millions of dollars. I saw the species they planted and saw logistics problems and did not see a single lumber expert on their board. Took me an hour. What would my advice have been worth?

  So if you want to invest $100,000 or $1 million or even a billion into a lumber or plantation project, should you do it on the advice of the people asking you to invest? Or should you find an independent, qualified expert who knows where to find the flaws in the plan based on many years of experience?

Sadly, most people will not want to hear someone tell them the investment is bad. Everyone wants to believe the lie. But the lie always ends in disaster.