We talked about spotting and investing in the next big idea earlier this week. I got several calls from friends and colleagues who liked the blog, but asked me if I really thought this was all I needed to pick the next big thing. They asked me specifically if a person had these qualities, could I be certain they would succeed in business.
The answer is clearly no, I’ve known many people with these skills and they may be still living in their parents’ basement. You have to add one more critical element to the mix. What is that extra critical element?
Money, of course! Better yet, someone else’s money, if given a choice! I must admit it’s much easier to spend someone else’s money than my own. I’ve helped my clients spend and invest millions of dollars in new ideas and opportunities over the years. I prefer the term investment, but when it doesn’t always work out, it isn’t any easier to share with clients.
I’m sure many of you want to know how to evaluate risks when investing in new opportunities. I thought it might be interesting to share with you in hopes of helping you succeed. My rule is we are always investing our time and resources in every part of our lives. The better you become at investing time, the more likely you will be successful. For most successful people, you can always make more money, but you can never get more time. Time is your most valuable asset and should be invested where you receive your best return.
The first rule of investing is be interested in what you invest your money and resources in. Many people chase every opportunity available to them. They never really understand what they are buying and because they don’t understand it, they lose their money. Learn to invest in things you are interested in personally. The idea behind serving leaders is we invest our time where we can have the greatest positive impact on our family, friends and community. These key constituents are how we evaluate our leadership capabilities.
One of the people I went to high school with shared that he made his money because he was willing to learn about the things he invested in. He invests significant money in companies only after he understands them. He told me it might take him several calls to get the information, but he feels well informed before he makes his investment. He then goes in with his eyes open to future opportunities. He’s done very well on these additional investment opportunities. It’s not a surprise that he spends significant time doing the things he loves most when he not investing. Because he understands the things he invests in, he sleeps well at night.
The second rule of investing is to invest in the people you believe in. Most investments succeed or fail based on the people who lead the business. With all the material available online today, you should be able to find out almost anything you want about the people who are involved in leading the business you’re investing in. Don’t just look at the material on the first page of a Google search, but dig deeper. Take time to make some calls. You worked very hard to earn the money, you should be willing work hard to keep it. Too many people don’t do their homework and wonder why they keep failing the tests life throws at us. Decide that people you believe in are the kind of people you want to be associated with.
The third rule of investing is to avoid being greedy. More people lose more money because they think they’re getting a deal too good to pass up. If it’s too good to be true, it probably is. Know both what you’re investing in and the people with whom you are dealing. A quick side note; most successful people fail at what they do at least once or twice before they master the process. Don’t let a single failure stop you from investing your time or resources in new opportunities. However, know why they failed and what they learned from the failure. Sometimes people make the same mistake over and over and never learn from it. If they own it and they learned from it, they could provide you with a great opportunity for growth.
Finally, the bonus rule of investing is to learn when to walk away and when to run. Even when you follow the steps in this process, you will be unsuccessful most of the time. No one bats a thousand. This is when knowing your investment psychology makes a difference. Set limits on the front end to how far and how much you are willing to invest in a project before giving up. One of my favorite ideas from Dan Kennedy is, “If I wake three mornings in a row, dreading talking to you first thing in the morning and you’re not my wife. We shouldn’t be working together.” I think this is good advice when dealing with others.
Next week, we talk about the most influential person in Silicon Valley and what we can learn from him. See you then.